Weekly Market Review — 3-7/08/2015
Non-Farm Payrolls Report Is the King of the Week
The main event of last week was certainly the announcement of the results of the two-day FOMC meeting regarding the change in monetary policy. As predicted by most analysts, changes in monetary policy have not been made. The Fed left interest rates unchanged for the 54th time in a row. At the next meeting, scheduled for September 16-17, the committee will have to take a hard decision on the key interest rates, which are at the lowest level since 2008, when the global financial markets have been shaken by the global crisis. In an accompanying statement, the Fed noted that there is a sustained recovery of the labor market, while there is no clear indication of the stable inflation. In addition, the committee was positive about moderate growth in business activity in all sectors of the economy. Also, the markets got a clear signal that in case of positive statistics on the US economy the FOMC will probably think about the rate hike at a meeting in September. Against this background, all the major currency pairs showed high volatility, with a range trading at times exceeded 150 points. At the end of the trading week, the British pound recorded gains against the US dollar by 0.74%, the euro strengthened against the US dollar by 0.09%. New Zealand and Australian dollars also showed an increase against the US counterpart by 0.45% and 0.43% respectively. The decline experienced Swiss franc, Canadian dollar and Japanese yen, by 0.45%, 0.25% and 0.08% respectively. The most important news of the coming week will be the publication of a decision on the basic interest rate in Australia at 04:30 (GMT) on Tuesday. Also this day, New Zealand will release reports on the unemployment rate and the employment change, which are scheduled for 22:45 (GMT). The same reports will be released in Australia at 01:30 (GMT) on Thursday. They will be followed by publication of the Bank of England decision on UK interest rates at 11:00 (GMT). Friday will begin with the announcement of the decision of the Bank of Japan on the basic interest rate at 03:00 (GMT). After that Canada will release the unemployment rate and the employment change at 12:30 (GMT). Finally, the most awaited event of the current week is a publication of data on the US labor market, scheduled for 12:30 (GMT) on Friday.
The past week for the major US stock markets was quite worrying. This was the result of the largest in the last eight years fall of the Chinese stock exchanges, which was caused by the negative statistics on the profits of large industrial enterprises in China. Investors began to sell shares amid concerns over a slowdown in the second largest economy in the world. The dynamics of indices also influenced by the US Federal Reserve decision on interest rates, published on Wednesday. On Friday, the index reacted to the negative dynamics of the Employment Cost Index in the United States. This week the stock markets investors will be focused on Friday’s release of data on the US labor market.
The dynamics of the major European stock exchanges, just as the American markets, was influenced by news from China that caused European indices to fall. Many analysts believe that the European stock market is not yet fully put the drop of Chinese stock market in its prices. Recall, China is a major trading partner of the European Union, and a slowdown its economy have a negative impact on the European economy.
Regarding the gold prices, the precious metal continues to be under pressure. The reason for this is the slowdown of the largest consumer in the world, namely China. Also, it is worth noting that the majority of investors expect the US Federal Reserve will raise interest rates for the first time in nine years at its meeting in September. Market participants came to this conclusion after the Fed published its statement. Meanwhile, on Friday, investors’ confidence fell slightly after the release of the Employment Cost Index in the United States. Investors focused their attention on Friday’s report on US employment, which should show how confidently this area is recovering.