Weekly Market Review —January 18–22 2016
Main Events of the Week – Data on GDP, Retail Sales and Industrial Production in China
At the end of the week almost all of the major currencies showed a decline. The largest decline against the US dollar was shown by the Canadian dollar (-2.47%) and British pound (-1.81%). The Australian dollar came out at -1.20%, the New Zealand dollar -1.18% and Swiss franc (-0.76%). The Euro closed the session without significant change at -0.01%. Only the Japanese yen showed growth (+ 0.14%). Last week the US dollar started with positive growth against the background of a positive report on the labor market. During the second half of the week the dynamics changed significantly after the publication of economic statistics from the US, which led investors to doubt the strength of the largest economy in the world. As for commodity currencies, they spent the past week in a downward trend against a background of concerns about the Chinese economy, as well as declining oil prices. This week important economic statistics will be published on Tuesday with China reporting on changes in GDP, retail sales and industrial production at 02:00 (GMT). Inflation reports from the UK, the Eurozone and New Zealand will be published at 09:30 (GMT), 10:00 (GMT) and 21:45 (GMT), respectively. On Wednesday at 09:30 (GMT) there will be data on the UK labor market, and at 13:30 (GMT) the US will report on consumer inflation. Moreover, at 15:00 (GMT) the Bank of Canada will announce its decision on the basic interest rate. On Thursday at 12:45 (GMT) the ECB’s decision on interest rates will be announced. We round up the week with the publication of inflation in Canada at 13:30 (GMT) on Friday.
Last week the main driver of the US’ stock markets was oil. The negative dynamics of US stock markets is due to the fall in the value of “black gold,” and the negative impact exerted by Chinese data and US statistics. Meanwhile, the performance of some members of the Federal Reserve has had a significant impact on investor sentiment. For example, during speeches Fed officials have repeatedly set the moderate pace of further rate hikes, which will depend on incoming economic data. This week investors will pay attention to the publication of economic statistics from China, which has recently caused most of the financial problems on global markets.
European Stock Markets spent last week in a downward trend. This was aided by the negative statistics on industrial production in the UK and Germany, and inflation in the Euro area. Economic data from China also was important; this data once again confirmed doubts about the ability of the Chinese economy to cope with its current problems. In addition, there is constant pressure on the European stock markets, because of oil price’s falling, which makes energy companies shares cheaper. This week, in addition to meeting, the ECB will be closely monitoring data on GDP, retail sales and industrial production in China, which will be presented on Tuesday.
The precious metal’s prices showed volatile dynamics last week. The strong data on US labor market forced investors to get rid of gold amid expectations of a speedy continuation of monetary tightening by the Fed. But, on the other hand, the negative economic statistics from the Chinese economy, and even from the US, increased demand for the precious metal as a protective asset. The highest growth of gold over the past week was registered on Friday against the publication of statistics on retail sales and industrial production in the United States, which showed a negative trend for the third month in a row. Future prospects for the gold market, in addition to the world’s financial problems, will depend on the pace of monetary tightening by the US Federal Reserve, as well as their expectations.