2016-09-19 18:07:23

According to the data released last Friday, US consumer price index (CPI) rose by 0.2% in August against the forecast of 0.1%. On annual basis, the index has grown by 1.1% against the forecast of +1.0%. Inflation data for August was above the forecast, which increases probability of the interest rate hike in the country in the near future. According to CME Group's, probability of the rate hike in December rose to 53% from 48% a day ago, although investors’ expectation of the rise in rate in September remains at the level of 15% probability.

The USD index WSJ, which shows the value of the USD against a basket of 16 major currencies, has grown by 0.8% to 87.17. The USD index ICE has grown by 0.9% to 96.10, which are the closing highs within a month. The USD rose sharply against the Pound, Euro and commodity currencies. The price of commodities and gold has dropped.

The Pound fell significantly against the USD amid increasing probability of the interest rate hike by the Fed. At the same time, the Bank of England indicated possibility of further decrease in rate. The pair GBP/USD fell by 1.8%, up to 1.2995, the minimum closing level since August 15

As often happens, with the opening of the trading day on Monday, the movement in the foreign exchange market is opposite to the movement last Friday. The USD is going down.
Attention this week will be focused on the meetings of three world's largest Central Banks – the Bank of Japan, US Fed and RBNZ. It is not expected that the US Fed will raise the interest rate. However, investors will try to see indications of possible interest rate increase before the end of this year in the official statement, which will be presented on Wednesday, September 21.

Weekly review: 19 to 25 September 2016.

Marco-economic data and news of this week are as follows.

17:00 (GMT+3) – house price index in the USA for September. 

04:30 – minutes from the last meeting of the ARB, which is published two weeks after the rate decision. If the RBA shows hawkish attitude towards inflation economic forecast, the markets will regard it as a high probability of the rate hike, which is a positive factor for AUD, and Vice versa. At the same time, (04:30) Australian Bureau of Statistics will publish house price index, which is considered a key indicator of inflation.

09:00 – producer price index in Germany for August. The forecast is 0.0% on monthly basis and -1.5% on annual basis. If the forecast turns out to be correct, the Euro will fall in the market.

15:30 – an indicator, showing the number of permits to construct in the U.S. in August, this index also shows the dynamics of corporate investments in the construction sector, which usually increases volatility in the USD. Building starts in the U.S. in August, which is also an important indicator of the state of the housing market.

19:45 – speech of the head of the Bank of Canada Stephen Poloz. Volatility in the CAD will rise during his speech.

23:30 – American Petroleum Institute (API) will issue report on changes to the US oil reserves for the last week.

Weekly review: 19 to 25 September 2016.

02:50 – foreign trade balance of Japan for August.

06:00 – interest rate decision by the Bank of Japan; press conference of the Bank of Japan, where the head of the Bank Mr Kuroda will speak about the current economic situation in Japan, and the future prospects of the Bank’s policy. Despite the measures to stimulate the Japanese economy, implemented by the Bank, inflation rate in the country remains low, production and consumption are declining and the Yen is increasing, which has a negative impact on the export-oriented Japanese production. Currently, the main interest rate in Japan is already negative, amounting to -0.1 per cent.
However, probability of the further decrease in the rate, as well as further expansion of the economic stimulus measures, is 50/50. The markets are in uncertainty. Earlier, Mr Kuroda repeatedly stated that the Bank was ready to implement the most drastic measures if necessary. If the measures will made introduced at the coming meeting, the Yen will decline significantly in the market, while the Japanese stock market will grow. In any case, during this period f time volatility is expected to increase not only in the JPY, but generally in the Asian and global financial markets.

11:30 – report on net borrowing of the British government (financial deficit of the national accounts of Britain). The negative index will means that the accounts of Britain are in surplus, which is positive factor for the GBP. Forecast is 10.3 billion pounds, which should have a negative impact on the pound.

16:00 – quarterly report of the SNB including the data on the monetary policy, business trends and exchange rates of currencies for Q3. Publication of this report is usually increase volatility in the franc.

17:30 – US Department of Energy will publish weekly report on stocks of oil and oil products in US stores.

21:00 – interest rates decision by the US Fed and Fed’s monetary policy comments. Probability of rate hike is 15% (current level is 0.5%).

21:30 – FOMC press conference, which lasts about an hour. The head of the Fed Janet Yellen will speak about future plans of the financial regulator in relation to the monetary policy in the United States. At the press conference the forecasts of inflation, employment, economic growth and interest rates in the United States will also made. If the comments by Janet Yellen will contain hints on the interest rate increase before the end of the year, the USD will sharply go up in the currency market. If the statements by Janet Yellen will be neutral, the USDr will decline. However, the decline in the USD is unlikely to continue for long. Probability of the rate hike in December is still 50%. This fact will support the USD until the end of this year.

Weekly review: 19 to 25 September 2016.

00:00 – interest rate decision by the RBNZ. It is expected that the rate will remain unchanged at the level of 2.0%. Volatility in the New Zealand currency is expected to increase.

11:00 – economic Bulletin of the ECB, which is published two weeks after the meeting of the Governing Council of the ECB.

15:30 – weekly data on initial applications for unemployment benefits in the United States.

16:00 – house price index in the USA for July. A month ago the index was at the level of +0.2%.

16:00 – speech by the ECB President, Mario Draghi. Volatility in financial markets usually increases during his speeches devoted to the monetary policy. It is necessary to be very careful trading in the foreign exchange market in the period of the speech by M. Draghi, who is famous by changing movement direction in the market by his comments.

16:30 – speech of the Deputy head of the Bank of England on financial stability, a member of the monetary policy Committee (MPC) of the Bank of England Mr John Cunliffe.

17:00 – US leading indicator index CB in August in the United States.

Weekly review: 19 to 25 September 2016.

03:00 – speech by the new head of the RBA Philip Lowe.

07:30 – activity index in all sectors of Japanese economy (Capex), which is a leading indicator of the increase in productivity for July.

10:30 – Markit business activity index in various sectors of German economy in September (preliminary release).

11:00 – Markit index of business activity in various sectors of the economy in Eurozone for September (preliminary release). It is expected that volatility in Euro and European indices will increase.

20:00 – report of the oilfield services company “Baker Hughes” on the number of active drilling rigs in the USA, which is an important indicator of the state of the US oil sector of economy. This index has a significant impact on the oil prices. Currently, the number of active drilling rigs is 416. Weekly review: 19 to 25 September 2016.