Economic events of this week

Join Anyoption and take advantage of the volatility of the markets ..Start Trading TODAY! Monday: Preliminary estimates on Japan’s Industrial production data are due and analysts expect an annual increase of 1.5%. In the Eurozone, M3 Money Supply data will be published. The U.K. will gain a glimpse of housing-price-fuelling Mortgage Approvals. Preliminary figures of June’s Consumer Price Indices throughout the Eurozone. Indications will be dispersed regarding the U.S. supply side, with the release of the MNI Chicago Business Barometer. Also due in the U.S., May’s Pending Home Sales and Dallas Fed Manufacturing outlook. Tuesday: The Tankan Business Conditions forecast will be released in Japan. China will see the release of the official and the HSBC’s, manufacturing Purchasing Managers’ Indices. The Markit Manufacturing Purchasing Managers’ Indices will be published in Spain, Italy, France and the U.K alongside the Eurozone aggregate figure. Additionally, labor market data will be released in Germany, in addition to aggregated Eurozone figures. In the U.S., final estimates of June’s Purchasing Managers’ Index will be published, as well as ISM Manufacturing data. Wednesday: Japan will publish data on its monetary base, recently indicating the number of Yens circulating in the economy to increase by an annual 45.6%. In the U.K., Nationwide House Prices data will be published. Labor market data will be published in Spain, analysts expect to see a 155K decrease in the number of Unemployed. In the U.S., the weekly MBA Mortgage Applications Index will be published, as well as June’s ADP Employment Change and May’s Factory Orders. Thursday: The day will kick off with a plethora of Purchasing Managers’ Indices for the service sectors from the Eurozone. The ECB is scheduled to announce interest rates. Analysts, however, expect no change of these, following the previous month’s drop of rates. In the U.S., May’s Trade Balance data will be published, following by June’s Change in Nonfarm Payrolls. Also due is June’s Unemployment rate, currently at 6.3%, as well as the weekly Initial Jobless Claims. Friday: In Germany, May’s Factory Orders data will be published, recently presenting a 6.3% annual increase. Join Anyoption and take advantage of the volatility of the markets ..Start Trading TODAY!

Not everyone is dovish in the E.U.

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The ECB’s decision to cut interest rates, on June 5th, helped push the notion that monetary stimulus has yet to become a thing of the past, and that the only monetary tone at the European Union is a dovish one. The dovish approach is willing to stimulate the economy through accommodative monetary policy, even at the expense of the risk of inflating a financial bubble or two. It also made global central banks, such as the Fed, more cautious in regards with dispersing hawkish forward guidance. Evidently, with the ever-more-important role monetary policy took in shaping economic activity in recent years, comments going against the stream are prone to be retorted with a violent capital market response. This premise, however, was countered last Thursday by Bank of England Governor Mark Carney, who delivered a rather hawkish speech At the Lord Mayor’s Banquet for Bankers and Merchants of the City of London. In his speech, Carney mentioned strong indicators regarding the United Kingdom’s economy, such as the Bank of England’s staff projection of an annualized 4% increase of GDP. On the other hand, Carney described the economy as "over-levered" and its housing market as having a potential to "overheat". Additionally, the weak Sterling was insinuated to lead current deficit to a record level. Deeming necessary a remedy to the above situation, Carney moved on to note of "great speculation" regarding the exact timing of the first rate hike. The tone then turned rather hawkish as Carney said that the decision for the first rate hike is becoming "more balanced" and that "it could happen sooner than markets currently expect".

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A new player

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The Dollar’s status as the world’s reserve currency knew its difficulties. Towards the late 1960’s, the number of dollars worldwide far exceeded the amount of gold at the Fed’s vaults. This led the Fed to announce it will no longer be able to convert dollars to gold at the aforementioned ratio, or any other, effectively departing from the gold standard. Another act often considered to counter the depart from the gold standard was an agreement signed between the U.S. and Saudi Arabia in 1973, by which Saudi Arabia's oil sales would be denominated in U.S. dollars. Naturally, this incentivized oil purchasers to hold U.S. dollars, thus creating the "Petrodollar System".


The Dollar’s status was further brought into question in recent years, as the Fed’s dovish monetary policy resulted in a surge of dollar notes entering circulation, or rather the vaults of various foreign entities. Primary central banks responded to the Fed’s actions and sought to weaken their own currency, in order to preserve their local industries competitive exporting edge. Most notable among these were the ECB and Bank of Japan. 

In 2008, at the beginning of the financial crisis, the People’s Bank of China chose to peg its currency, the Renminbi, to the dollar at a fixed rate. The Renminbi strengthened from 6.83 CNY to the USD in June 2010, to around 6.21 nowadays. Additionally, China increased the amounts of gold at its vaults in recent years, paving to road to speculation that the Renminbi could someday replace the dollar as the world’s primary reserve currency. Many of the worlds' central banks either already shifted portion of their reserves from USD to CNY, or are planning to do so. Nigeria and South Korea are two examples.

Many of China's recent deals to purchase energy, including the giant natural gas deal signed last month with Russia, are rumored to be denominated in CNY and not in USD, effectively circumventing Petrodollar. However, it is hard to imagine the Renmibi taking the crown as the world's top reserve currency without China further opening its capital market. A global interest in Renmibi could lead to its appreciation, which would work against Chinese exporters. That means that gaining the status of a reserve currency, which was very lucrative in the past, seems nowadays more as a honey trap. 

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Economic events of this week

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Monday: Japan’s Ministry of Finance will release data on Capital Investment during Q1. April’s Mortgage Approvals data will be released in the U.K. Analysts expect to see the boiling market slightly cooling down, with an expected 64.5K approvals, versus 67.1K last month. The final estimation of Markit Manufacturing Purchasing Managers’ Index for May will be released in the U.S. Also due is the Institute of Supply Management’s Manufacturing Index.  

Tuesday: More data will be provided regarding the U.K. real-estate market, with the release of the Nationwide House Price Index. Unlike mortgages, however, analysts see this indicator continuing its rampant 10.9% annual increase. The Eurozone’s April Unemployment rate, and preliminary May Consumer Price Data are also due. In the U.S., April’s Factory Orders data will be released. 
 
Wednesday: Preliminary indications regarding the Eurozone’s Gross Domestic Product in Q1 will be released. In the U.S., the weekly MBA mortgage applications report is also due, following a negative 1.2% decline released previously. Also expected in the U.S. is May’s ADP Employment Change and April’s Trade Balance.  

Thursday: April’s Factory Orders data will be released in Germany. Analysts expect the month to present a 1.4% monthly increase, following a 2.8% monthly decline in March. On the monetary front, the Bank of England is expected to announce its official bank rate, but analyst consensus tilts towards no change taking place. The ECB is also due to publish rates. Draghi’s dovish tone has certainly shifted analyst consensus to see the ECB to take SOME action. Concluding the day, the weekly Initial Claims will be released in the U.S. 

Friday: U.S. labor market statistics will be released in the shape of May’s change in Nonfarm Payrolls and Unemployment rate. 

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Economic events of the week

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Monday: The HSBC Services Purchasing Managers’ Index will be released in China. Later that day services PMIs will be released in Europe, namely Spain, Italy and France. All these figures will boil down the Eurozone’s Composite Index. More cardinal figures from Europe will be presented in the form of the German Consumer Price Index. Moving to the new world, the ISM Non-Manufacturing Index and Factory Orders will be published in the U.S.

Tuesday: Japan’s Monetary Base’s magnitude will be published. Market focus will then shift to Germany, which is due to publish both November’s Retail sales data, as well as Unemployment statistics. Later the day, the Eurozone’s CPI estimate for December will be released, followed by the U.S’s Trade balance.

Wednesday: Trade Balance statistics are due in China. Analysts expect exports to present a 5.2% Year over Year increase, and Imports to present a solid 5% Year over Year increase. Cardinal indicators will be released for the Eurozone, namely November’s Retail Sales and the Unemployment rate, currently at 12.1%. Additionally, Factory Orders will be published in Germany, with analysts expecting a 1.5% Month over Month increase. In the U.S., the MBA Mortgage Applications Index is due, as well as ADP Employment Change. The Fed will release Minutes from its December meeting.

Thursday: The Consumer Confidence Index will be published for the Eurozone. Additionally, November’s Industrial Production figures will be published for Germany. Still in Europe, The Bank of England will publish its official Bank Rate. The ECB will publish its main refinance rate.

Friday: A slew of Industrial and Manufacturing production data will be released in France, Spain and the U.K. The U.S. will see the release of some labor statistics, namely Change in Manufacturing and Non-Farm Payrolls and Unemployment. 

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When rumors appear brighter than the news

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EUR/USD trading last week was subject to breaking events from both sides of the Atlantic. New York Fed President Dudley, who is considered a member of the dovish set among FOMC members, expressed his hope that the U.S. economy had reached a turning point, hopefully leading to more substantial improvement in labor market conditions. Such thinking among FOMC doves was not evident in previous FOMC discussions. However, Dudley’s words did not convince markets of an imminent taper, as the USD traded mixed to lower against most major currencies.
Most of the weekly drama revolving the Euro was rumor-based. Rumors started surfacing on Wednesday and suggested that the ECB is considering a lower of deposit rates from what currently is zero to a negative -0.1%. The ECB did not confirm any of it, yet the rumor sufficed to see the EUR/USD immediately losing close to a cent. The rest of the day saw the release of the Fed’s October minutes. However, it is advocating the idea that advances in the job market would lead to tapering was already priced in the markets as those saw little change.
On Thursday, the EUR/USD has retracted from the previous day’s drop, as ECB President Mario Draghi attempted to slow down the rumor mill. At a speech in Berlin, when explaining what led the ECB to cut its main policy rates two weeks before, Draghi asked that the audience will not try to infer from his words on the possibility of negative rates on the deposit facility. Draghi added: “As I said in the press conference this was discussed in the last monetary policy meeting, and there are no news since then… because people tend to put things together and create their own dreams". 

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