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Friday 09-12-2016 Lookback
Welcome to the easyMarkets weekly review where we look back over the results of some of the previous week’s economic indicators. It gives us the chance to reflect on whether expectations were met or missed and to examine a successful trade you could have made this week.
Event: EU Services PMI
Date: Monday 05 December
Markets affected: EUR/USD
Trending hashtags: #markit, #pmi, #eur
November’s Eurozone Composite PMI came in at an eleven month high. The output index came at 53.9, slightly lower than the flash estimate of 54.1 but still the best reading since December of last year. Ireland and Spain saw the largest increase, with Germany, due to its larger size, contributing the greatest increase of rate. Ireland had a 3-month high at 55.5, Spain a 5-month high at 55.2, Germany’s rate of 55.0 was a 2-month low, Italy’s came in at 53.4 a 9-month high and France at 51.4 a 4-month low.
Event: RBA Interest Rate Decision
Date: Tuesday 06 December 2016 at 03:30 GMT
Markets affected: AUD/USD
Trending hashtags: #rba, #aud
As analysts were forecasting, the Reserve Bank of Australia held off any changes to the interest rate as the current rate is seen as positive towards sustainable growth for the economy and helping to achieve inflation targets. Inflation is relatively low and due to slow growth in labour costs, it’s expected to stay that way. Low interest rates and exchange rates have supported local demand and been a boon for the trade sector. However, the following day, 7 December, saw the release of Australian GDP which showed the economy shrank 0.5% in the 3rd quarter, well below what analysts were expecting. This was its steepest drop in 8 years, before the 2008 crisis.
Event: EU GDP announcement
Date: Tuesday 06 December at 10:00 GMT
Markets affected: EUR/USD
Trending hashtags: #eur, #usd, #eugdp
Not many changes were expected for the third-quarter GDP revision and none came in. The Eurozone GDP grew 0.3% in Q3 with household consumption and public spending being the main drivers of growth. On an annual basis GDP remained stable at 1.7% for the quarter. The central bank’s easing programme and an improved labour market are contributing to economic growth for the region.
Event: Canada Interest Rate Decision
Date: Wednesday 07 December 2016 at 15:00 GMT
Markets affected: CAD/USD
Trending hashtags: #cad
The Bank of Canada kept its benchmark interest rate unchanged at 0.5%. BOC Governor Stephen Poloz commented that the bank is in no hurry to raise rates due to uncertainty with exports and business investments post- US elections. Contrary to their key trade partner, the US, the likelihood is of more cuts to the rate if there are any more set-backs to the economy. Canada’s economy seems to have fared the worst of the damage when oil prices fell through the floor. Output expanded at the fastest rate since 2014 but is yet to return to full capacity. With three-quarters of its exports going to the US, President-elect Trump’s protectionism has many concerned for the North American Free Trade Agreement which is holding back capital spending. After the release, the CAD rose 0.3% to CAD 1.3239.
Event: ECB Interest Rate Decision
Date: Thursday 08 December 2016 at 12:45 GMT
Markets affected: EUR/USD
Trending hashtags: #ecb, #eur, #usd
As ECB Chair, Mario Draghi spoke, the euro fell trading down 1% to $1.0642 and German 10-year bonds climbed to their highest since January of this year. The ECB announced it will continue quantitative easing via its asset purchasing programme beyond the March 2017 pegged end-date. It will reduce it to 60 billion euros per month instead of the current 80 million. There were no changes to interest rates as expected with the rate remaining at 0% and deposit rate at -0.4%. The bank’s actions are due to their outlook for inflation for 2019 which is at 1.7%, below its target of 2%. Currently it sits at just 0.6%.
The Trade of the Week
Time in: Thursday 08 December 2016 at 12:00 GMT
Market : EUR/USD
Investment: $500 with 200:1 leverage
Time out: Thursday 08 December 2016 at 17:00 GMTP&L: $2,608
If you had sold the euro with a $500 margin at the price of 1.08729 and closed the deal after Mario Draghi’s speech on Thursday at 17:00 GMT which saw a 2.6% drop in the euro you might have made $2,608. Note this example does not take into account spread.
https://www.markiteconomics.com/Survey/PressRelease.mvc/13113bdd828343bd80c061a189515ade
http://www.tradingeconomics.com/euro-area/gdp-growth
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