Friday Lookback – 25-11-2016

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 how much were expectations met or missed. A relatively quiet week so far with the UK budget statement, euro data and FOMC minutes not causing many waves in the markets.

Event: ECB President Mario Draghi’s speech

Date: Monday 21 November 2016

Markets affected: EUR/USD

Trending hashtags: #ecb, #usd, #eur

With EU inflation at 0.5% Mario Draghi committed to keeping interest rates low and monetary policy loose in an attempt to get inflation close to its target of 2% over the medium term. And he encouraged governments to support growth through investment spending. Draghi applauded the ECB’s policies that have supported recovery through credit creation as low interest rates have encouraged lending by the banks. Overall he noted that recovery for the region was moderate but at a steady pace with unemployment falling. His comments on continuing accommodative policies saw the euro drop to year lows against the US dollar, though the drop is probably also due to ongoing dollar strength since the US election result.

Event: EIA Crude Oil Stocks change

Date: Wednesday 23 November 2016 at 15:30 GMT

Markets affected: OIL/USD

Trending hashtags: #crudeoil, #usd

Oil futures increased following the EIA report showing a 1.3 million-barrel fall in US crude. Domestic crude supplies for the week ending 18 November dropped by 1.3 million barrels whereas analysts were expecting supplies to remain unchanged and some even predicted an increase of 800,000 barrels. The result was January prices increasing by 0.7% to $48.37/barrel. However, before the day was out, prices took a dip as OPEC talks stalled until 30 November. Loses were kept at a minimum as Russia indicated it would support an OPEC deal to reduce output.

Event: FOMC minutes

Date: Wednesday 23 November 2016 at 18:00 GMT

Markets affected: EUR/USD

Trending hashtags: #usd, #fed, #inflation, #fomc

A lacklustre FOMC meeting saw little movement in the markets. What does seem to be more certain is a possible interest rate hike that analysts are expecting for December. President-elect, Trump, is in favour of tightening policy but the data is also in support with employment reaching optimal capacity and durable goods orders increasing by 4.8% outstripping expectations of 1.5%. The EUR/USD fell to a low 1.0561 which has some expecting to see it reach parity.

Event: Autumn Statement – UK

Date: Wednesday 23 November 2016 at 12:30 GMT

Markets affected: GBP/USD, GPB/EUR, FTSE 100

Trending hashtags: #GBP, #UKbudget, #Autumnstatement

Chancellor Philip Hammond’s first Autumn Statement saw the pound rise against both the euro and the US dollar. The EUR/GBP dropped to 0.8544 and the GPB/USD rose marinally to 1.2410 on the promises of increased spending in infrastructure and innovation to help the economy. The Office of Budget Responsibility (OBR) forecast slow but stable growth with GDP at 1.4% for 2017, down from the forecast of 2.2% it gave in March of this year. The OBR also announced higher borrowing with 2016/17 at £68.2bn.

Event: German IFO – Business Climate

Date: Thursday 24 November 2016 at 09:00 GMT

Markets affected: EUR/USD

Trending hashtags: #usd, #eur, #ifo, #germany

This survey of 7000 German firms showed that business sentiment is healthy in the Eurozone’s strongest economy. The figure for November came in at 110.4 only slightly down from October’s report of 110.5 (the highest reading for the last 30 months). IFO chief Clemens Fuest commented that confidence in the German economy is still good, though firms are wary of the upcoming months. It seems that the election of Trump for the next president of the US has German businesses unfazed so far. Though with his protectionist stance on the US economy, it will be interesting to see how business confidence continues over the next few months. The construction sector showed the most positive and not-surprisingly, manufacturing which is more dependent on exports to countries like the US, was the least optimistic. On the back of this release, we saw little change in the euro and the DAX; the EUR/USD remained at 1.0562 and the DAX rose 0.2% to 10,683.

Sources:

http://www.cityam.com/254089/ecb-president-mario-draghi-maintains-central-banks-stance

http://www.marketwatch.com/topics/organizations/american-petroleum-institute

https://www.forexcrunch.com/fomc-minutes-confirm-december-hike-3-opinions/

https://www.poundsterlinglive.com/gbp-live-today/5786-gbp-to-eur-and-usd-levels-autumn-statement

http://www.reuters.com/article/germany-economy-ifo-idUSB4N0P502J

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