Weekly Market Review —January 4–8 2016
Main Event This Week – The NFP Report
At the end of a shortened week last year almost all the major currencies showed a decline. The largest decline against the US dollar was shown by the Swiss franc (-1.17%). The Pound showed a smaller decline (-0.84%), the Euro (-0.64%) and the Canadian dollar (-0.12%). The JPY finished trading almost unchanged (-0.02%). The New Zealand dollar and the Australian dollar showed the only growth (0.27%) and (+ 0.69%). Market participants adjusted their positions before the New Year, which led to these dynamics. Meanwhile, some stabilization in commodity markets made it possible to recover some commodity currencies, especially the Australian and New Zealand dollars. The coming week will be filled with economic reports. On Monday, inflation data in Germany at 13:00 (GMT) and the manufacturing index of the Institute for Supply Management (ISM) in the United States in 15:00 (GMT) will be the most interesting events to watch. On Tuesday, the most important reports will be data on the labor market in Germany at 08:55 (GMT) and the report on inflation in the Eurozone at 10:00 (GMT). On Wednesday at 09:30 (GMT) there will be a report on the UK PMI Index in the services sector, and at 13:15 (GMT) the US will present data on changes in the number of employees from the ADP. Also on this day the Index of business activity in the service sector from the Institute for Supply Management (ISM) will be published, and US factory orders. At 19:00 (GMT) the minutes of the last Fed meeting will be published. On Thursday at 07:00 (GMT) Germany will present factory orders and retail sales, and at 10:00 (GMT) the same report will be published for the Eurozone. On Friday at 02:00 (GMT) China’s trade surplus will be published. A long-awaited NFP report will also be presented. At the same time, Canada will report on its labor market.
Last week the major US Stock Indexes showed almost zero change. At the beginning of the trading week, the US Stock Markets rose with positive statistics, but closer to the second half of the week went on to fall with less profit being taken by investors. Traditionally, at the end of the year, investors started to edit positions before the long New Year holidays, which led to some decline in Stock Indices. This week the dynamics of trading will depend on the conflict in the Middle East, as well as a huge array of economic statistics, including the main report of the week – The NFP.
European Stock Markets mimicked the dynamics of their American counterparts. The first half of the week they spent rising and at the end of the week the trend fell showing a downward spike. This was due mainly to profit-taking on the closure of positions before the weekend. This week there will be a lot of the publications of economic statistic and further dynamics of trading will depend on these publications. Also, the conflict between Iran and Saudi Arabia will hold investors’ attention.
Last week the quotations of the precious metal held in a downward trend, helped by a strengthening of the US currency. However, investors were cautious before the long New Year holidays. Gold is under pressure as the Fed plans to raise interest rates four times this year, which will put pressure on prices. However, the unstable situation in the Middle East supports gold’s price, as well as the negative statistics on the Chinese Economy. In such situations, gold is usually in high demand as a protective asset. This week, investors will impatiently wait for the main report – The NFP, which will assess the strength of the US Economy.