Market Impact: Previous Week’s Main Events

Every Friday, the HotForex Analysis team provides you with a preview of the most important events of the coming week. In this publication series, the description of what was expected at the time is followed by a short overview of the events’ impact on the FX rates.

Monday (10 September 2018) 

  • Gross Domestic Product (GBP, GMT 08:30) – The UK’s monthly real GDP data came out lower than expectations last month (0.1% vs 0.2%) with the ongoing Brexit negotiations weighing on the Sterling and inflation. Consensus expectations stand at 0.3% for July.
  • Consumer Credit Change (USD, GMT 19:00) – Consumer credit measures the amount of money borrowed by individuals, not including mortgage loans. High figures can be either good or bad, depending on whether they are used to fuel growth or if consumers are living beyond their means. Forecast for July stands at $12.5 bln, higher than the $10.2 bln observed in June.

Market Reaction: The UK registered a stronger than expected reaction, on account of the improvement in the trade balance with non-Euro area countries. As a result, the Pound rose with respect to the USD (17 pips) and the CAD (18 pips), while it depreciated slightly with regards to the Euro (4 pips). Despite better than expected consumer credit change, the USD registered only a 4-pip reaction against the Euro.

 


Tuesday  (11 September 2018)

  • UK labour market data (GBP, GMT 08:30) –  Average Earnings excluding bonus is key short-term indicator of the level of pay and can also be viewed as a measure of cost-push inflation. Consensus forecasts suggest that earnings in July should move at the same pace as earnings in June, at 2.7%. At the same time, the unemployment rate, is expected to increase to 4.2%, compared to 4% in June.
  • Economic Sentiment (EUR, GMT 09:00) – Ahead of the industrial production numbers on Wednesday, the ZEW Survey measures institutional investor sentiment, reflecting the difference between the share of optimistic and pessimistic investors. A positive number suggests that optimists are more than pessimists. Consensus forecast stands at -14.9 in September, compared to -11.1 in August.

Market Reaction: UK labour data registered an increase in average earnings, perhaps also due to higher inflationary pressures. Reactions were mixed as the Pound rose against the Euro (10 pips) while it depreciated against the Dollar (4 pips). German economic sentiment was better than the forecast, albeit still negative, hence no significant change was recorded in the currency.

 


Wednesday  (12 September 2018)

  • Industrial Production (EUR, GMT 09:00) – One of the most important economic indicators, often serving as a proxy for real GDP developments, the index of industrial production measures the volume of production by factories. Consensus expectations suggest a growth of 0.8% MoM, compared to a drop of 0.7% in June.
  • Producer Price Index (USD, GMT 15:30) – The index measures price developments in primary markets of the US by producers of commodities in all states of processing. Higher PPI is a sign of a growing economy. Consensus forecast suggests that the August index should stand at 2.8% compared to 2.7% for July.

Market Reaction: Euro area industrial production decreased by 0.3% more than expected, with the currency registering a 14-pip decline against the Dollar. The reduction in the PPI value did not cause much of a stir, with the Dollar appreciating 6 pips against the Euro, with a minimal depreciation against other currencies.

 


Thursday  (13 September 2018)

  • Australian labour market data (AUD, GMT 01:30) – Labour market data are expected to show mixed signals as consensus forecasts expect the unemployment rate to increase to 5.4% from 5.3% in July, with participation rate expected to increase slightly as employment also increases.
  • Interest rate decision (GBP, GMT 11:00) – Event of the Week. BoE is expected to maintain the policy rate at 0.75%, although the decision will certainly weigh on the GDP and labour market data on Monday and Tuesday.
  • Interest rate decision (EUR, GMT 11:45) – ECB is not expected to change any policy rates, in accordance with the ECB minutes two weeks ago.
  • Consumer Price Index excl. Food&Energy (USD, GMT 12:30) – Inflation in the US, excluding the volatile food&energy categories.

Market Reaction: Australian labour market data were stronger than expected, with the Aussie Dollar appreciating close to 70 pips against the Euro and 16 pips against the USD. No change in BoE and ECB rates, as expected, with no significant currency reactions. US CPI came out lower than expected, causing the Euro to jump almost 60 pips upon announcement.

 


Friday  (14 September 2018)

  • BoE Mark Carney speech (GBP, GMT 10:00) – Mark Carney’s speech will be awaited by the market to assess the Governor’s attitude towards Brexit and even perhaps his own willingness to remain at the helm until 2020.
  • Retail Sales (USD, GMT 12:30) – The indicator is expected to show slower growth in August, with consensus forecast standing at 0.4%, compared to a realised 0.5% growth in July.
  • Preliminary Consumer Sentiment (USD, GMT 14:00) – Consumer confidence in the US economy is important as it presents an overview of the public’s willingness to spend. Expectations are that the index should climb to 97.8 in September, compared to 96.2 in August.

Market Reaction: Carney’s speech caused less stir than expected, given its topic, while lower than expected Retail Sales also did not cause much turbulence in the markets. Preliminary consumer sentiment data showed that confidence was much higher than expected, pushing the Dollar up against the Euro and the Pound.

 


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Dr Nektarios Michail

Market Analyst

HotForex

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