2016-07-18 12:48:08


The Bank of England did not change monetary policy in the UK last week. The rate was left at the level of 0.5% and asset purchase program was also left unchanged at 375 billion pounds. Decision by the Bank of England surprised investors, as it was expected that the Bank of England would lower interest rate after the exit of the UK from the EU.

The pound sharply went up after the decision of the Central Bank. The pair GBP/USD went up by 330 points, but then fell on the Bank of England statement that majority of the committee expects more easing policy in August. The pair GBP/USD went up by almost 200 points after the announcement of the Bank’s decision.
However, economic outlook for the UK remains uncertain after the referendum on Brexit.

The most important event of this week will be interest rate decision by ECB on Thursday, July 21 at 13:45 (GMT + 2).

At the meeting in June, ECB did not change monetary policy, leaving the amount of asset purchase at 1.8 trillion euro ($2 trillion USD) and keeping the key interest rate unchanged at the level of 0% and negative rate on deposit at -0.4%.

After the crisis in 2008, ECB has been constantly reducing the refinancing rate for commercial banks from the level of 4.25% to the current level of -0.4%.

A meeting of ECB on Thursday will be the first one after the referendum in the UK. Economic prospects for Eurozone have significantly deteriorated due to Brexit. At the meeting in June ECB President, Mario Draghi suggested to be patient and wait for the positive results from the ongoing extra soft policy of ECB, however, he also mentioned that the revision of economic stimulus measures might be also possible. Now, when risks for the European economy have increased significantly, market participants expect the Bank will expand quantitative easing program. At 14:30 GMT + 2 on Thursday press conference of ECB will be held.

Mario Draghi’s comments may cause unexpected movement in the foreign exchange market and in pairs with the euro.

Previous experience shows that, Bank’s decisions and comments could cause increase volatility in the Euro by 5%. The same can happen in the financial market this time.

This week the news and macro-economic statistics are as follows

Tuesday

British consumer price index (CPI)

03:30 (GMT+2) – Minutes of the meeting of the Reserve Bank of Australia, which, is always published two weeks after the interest rate decision. If the minutes show optimism in the prospects for the Australian economy and positive inflation outlook, the AUD will grow.

10:30 – British macroeconomic data, including the most important indicator of inflation (Consumer Price Index - CPI) for June. CPI index is the key indicator to measure inflation and changes in the consumer trends. It is very important for determining future monetary policy of the Bank of England. It is expected that the index will grow by 0.1% on annual and monthly basis.

11:00 – Business expectation index in Eurozone for July.

11:00 – German business sentiment index for July.

14:30 – Building starts in the USA for June.

22:30 – Report on oil reserves changes by the last week.

Weekly report for 18 - 24 July 2016

Wednesday

Weekly report on the US oil reserves

08:00 – German producer price index for June.

11:00 – ZEW index of economic expectations in Switzerland for July. This index is an indicator assessing business climate, situation in the employment market and other aspects of the business environment in Switzerland.

16:30 – US Department of Energy will issues weekly report on the US oil reserves.

Weekly report for 18 - 24 July 2016

Thursday

Interest rate decision by ECB

03:30 – confidence index of the Australian business environment for Q2.

06:30 – activity index in the large companies of all sectors of Japanese economy, assessing capital expenditure (Capex) excluding financial sector. This is a leading indicator of the industrial output.

10:30 – retail sales index in the UK for June. This index is an indicator of consumer spending.

13:45 – Interest rate decision by ECB. It is probabe that ECB may lower interest rates and expand QE program in Eurozone.

14:30 – press conference and comments of the ECB. Usually, such comments have a strong influence on the market. Volatility in the market and in the pairs with Euro can increase.

14:30 – initial claims for unemployment benefits in the US. For the previous week, Fed Philadelphia business activity index for July.

15:45 – ECB’s decision on Deposit rate for commercial banks of Eurozone (the current level is at the level of -0.4%).

16:00 – US leading economic indicators for June, assessing economic outlook in the United States. It also evaluates stability of the U.S. economy. It is expected that the index will grow by 0.2% vs. -0.2% in May).

Weekly report for 18 - 24 July 2016

Friday

Business activity and consumer price indices

09:30 – Markit preliminary business activity index in various sectors of German economy for July. If the index exceeds 50, it will indicate improvements of economic situation in Germany.

10:00 – Markit preliminary index of business activity in various sectors of European economy for July. If the index exceeds 50, it will indicate improvements in the economic situation of Eurozone. 

10:30 – Markit preliminary business activity index in various sectors of the UK economy for July (pre-release) from Markit. If the index exceeds 50, it will indicate improvements in the British economy.

14:30 – Canadian consumer price index (CPI) for June. This index assesses the price movement and inflation in the country. A high level in this index shows possibility of the increase in the interest rate.

19:00 – report of the Baker Hughes, (oilfield services company) on the number of operating drilling platforms in the USA. This index is an important indicator of activity in the oil sector of the U.S. economy. It has a strong impact on oil prices.