Weekly Market Review
16th September 2013
The Fed is forecast to begin dialing back its unprecedented stimulus program as early as this week. The Federal Open Market Committee will slow its monthly asset purchases to $75 billion from $85 billion at a two-day meeting that starts tomorrow, according to a Bloomberg News survey of economists on Sept. 6. Policy makers have pledged to keep the benchmark interest rate near zero at least as long as unemployment exceeds 6.5 percent and the outlook for inflation is no more than 2.5 percent.
A report due today is forecast to show manufacturing in the New York region expanded at a faster pace in September with a general economic index rising to 9 from 8.2 last month, according to the median in a Bloomberg News survey. Separate data may show industrial production grew 0.4 percent in August, according to a separate poll of economists.
Lawrence Summers’ withdrawal as a candidate for Federal Reserve chairman came after an unprecedented campaign to stop a Fed nominee even before he was announced, spearheaded by Democratic senators who took on a president of their own party. The decision by Summers, the former Treasury secretary and economic adviser to President Barack Obama, came as liberal and moderate Democrats on the Senate Banking Committee began publicly and privately signaling their concerns about Summers to the White House.
European Union lawyers gave the U.K. victories in fights over financial regulation that will boost the country’s standing in a power struggle over the future of banks and securities trading in the 28-nation bloc. Plans for an 11-nation financial transaction tax and enhanced powers to ban short-selling, both opposed by the U.K., were criticized by the European Council’s legal service and a senior official at the European Court of Justice. The EU executive arm also scrapped a proposal to hand oversight of London’s interbank offered rate to a Paris-based regulator.
EUR/USD: The EUR/USD was trading flat at 1.33613 at the time of writing before the European Central Bank President Mario Draghi speech today. Draghi said on Sept. 12 that policy makers are committed to keeping interest rates low for an extended period and the economy doesn’t justify the rise in some money-market rates. Other events likely to affect the market in the Euro area are the Italian Trade Balance (Forecast: 4.13B – Previous: 3.62B) and the CPI (MoM) in the Eurozone (Forecast: 0.1% – Previous: -0.5%). Later in the day, the U.S will release the NY Empire State Manufacturing Index and Industrial Production (MoM). The report are forecast to show that manufacturing in the New York region expanded at a faster pace in September with a general economic index rising to 9 from 8.2 last month, according to the median in a Bloomberg News survey and the industrial production grew 0.4 percent in August, according to a separate poll of economists. Investors should stay cautious and adopt a wait and see strategy on the pair. Ahead of the coming week, the events likely to affect the movement of the pair are; Tuesday; the ZEW Institute will release its closely watched report on German economic sentiment, as well as data on economic sentiment in the wider euro zone, while the U.S. will release data on consumer price inflation. Wednesday; the U.S. will release official data on building permits, as well as data on housing starts. Moreover, the Fed will announce its federal funds rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. Chairman Ben Bernanke will hold a press conference after the rate announcement. Thursday; the U.S. will release the weekly report on initial jobless claims, as well as the Philly Fed manufacturing index and data on existing home sales. Huge volatility is expected on the market throughout the week. Investors should stay very cautious and wait for data to get visibility on the direction of the pair. The resistance level is at 1.34559 and the support level is at 1.31557 on the weekly chart.
GBP/USD: The pound traded higher against the dollar on Friday as an unexpected decline in the unemployment rate and increase in house prices added to signs Britain’s economy is gaining momentum. Today, the GBP/USD was trading flat at 1.59501 at the time of writing as Investors jumped on the sidelines ahead of the European Central Bank President Mario Draghi speech today, which is likely to affect sentiments for risky assets. Later in the day, the U.S will release the NY Empire State Manufacturing Index and Industrial Production (MoM). The report are forecast to show that manufacturing in the New York region expanded at a faster pace in September with a general economic index rising to 9 from 8.2 last month, according to the median in a Bloomberg News survey and the industrial production grew 0.4 percent in August, according to a separate poll of economists. If better than expected data are released in the U.S it will be bullish for the USD. Investors should stay cautious and adopt a wait and see strategy on the pair. In the week ahead the events likely to affect the trend of the pair are; Tuesday; the U.K. will release official data on consumer price inflation, as well as reports on producer price inflation and retail price inflation. On the other hand; the U.S. will release data on consumer price inflation. Wednesday; the BoE will release the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective. Later in day; the U.S. will release official data on building permits, as well as data on housing starts. In addition, the Fed will announce its federal funds rate and publish its rate statement, which will hold a press conference after the rate announcement. Thursday; the U.K. will produce official data on retail sales, as well as private sector data on industrial order expectations. While, the U.S. will release the weekly report on initial jobless claims, as well as the Philly Fed manufacturing index and data on existing home sales. Friday; The U.K. will release government data on public sector net borrowing. Here again, lots of volatility is expected. Investors should stay very cautious. The resistance level is at 1.60362 and the support level is at 1.58225 on the weekly chart.
WTI (Oil): Oil prices fell on Friday amid speculation that the threat of imminent military strikes against Syria has eased as the U.S. pursues a plan to confiscate the nation’s chemical weapons. The Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov agreed Sept. 14 in Geneva on a framework for finding and destroying Syrian President Bashar al-Assad’s stockpiles of poison gas. The commodity was trading slightly lower at 107.250 at the time of writing as sentiments remain fragile and Oil traders are waiting for more news and data to get visibility on the market. A U.S.-led assault would widen the conflict and disrupt Middle East exports. Syria borders Iraq and is near Iran, which together control almost a fifth of the production capacity in the Organization of Petroleum Exporting Countries, Bloomberg estimates show. The Middle East accounted for 35 percent of global oil output in the first quarter of this year, according to the International Energy Agency. In the week ahead, investors will be keenly anticipating the outcome of the Fed’s policy-setting meeting on Wednesday, and a press conference with Fed chief Ben Bernanke will be closely watched. Investors should also keep an eye on the economic data and News in China the world’s second-largest oil consumer behind the U.S. The country will spend USD13.07 billion this year on oil and gas exploration and production activity, according to state media. Moreover, the latest developments in Syria should be closely monitored. The resistance level is at 110.493 and the support level is at 104.431 on the weekly chart.
Good Luck in trading…
