The past week has not had many twists as we mentioned in the previous article. The market has moved a bit from mid-week, especially after the intervention of Mario Draghi, President of the European Central Bank.
It all started with the ECB that decided to leave interest rates and the amount of securities purchased within the Quantitative Easing plan unchanged in the October meeting.
The interest rates will remain stationary at 0% and the deposit rates will always stay in negative territory at -0.4%. The monthly amount of quantitative easing was confirmed at 80 billion Euros per month. Of course, this was not a surprise for the market.
To the ECB announcement followed the usual speech of its President, Mario Draghi, who began by saying that tapering was not discussed. For ‘tapering’ it means a reduction of extraordinary monetary policy measures implemented by the central banks.
At the opening of the press conference, the euro has accelerated reaching over € 1,1. When Draghi said that any update of the central bank program will be postponed to December, the euro suffered retracing down to the minimum of four months.
The euro quoted then 1,0945, a minimum not tested since June 24, the historic post Brexit day.
From the United States came the usual weekly data on the demand for unemployment benefits. The number of people who asked for the unemployment benefits for the first time during last week totaled 260 thousand units, a decrease compared to 274 thousand of the previous week, but still disappointing compared to the analysts’ consensus (250 thousand units).
In the meantime, gold prices rise again. In the last three sessions, gold has left the support area at $ 1.250 reaching a total of $ 1.270, with a daily performance of + 0,60%.
The motivation of the increase in the price of gold may be sought both in the disappointing macro data and even more in the unlikely rise in interest rates by the Fed.
The demand of gold in China remains strong around 900-1000 tons per year, confirming itself as one of the nations with the highest gold demand; while it is approaching wedding season in India, during which the demand for gold rise greatly.
After several weak weeks, the next one will be finally challenging from the standpoint of the Economic Calendar: from the 24th to the 28th of October 2016 it will be published a lot of market movers on the state of health of major economies of the world.
Above all market movers scheduled during next week, it stands out the GDP data of the United States and the United Kingdom. They will provide a more complete picture on the resilience of the US economy towards the next rate rise by the Federal Reserve in December and on the impact of the Brexit on the British economy.
To fill the macro data schedule there will be those on the inflation of Japan, Australia, France and Germany, along with the PMI data for the manufacturing and services sectors in the preliminary version of October.
After the stalemate from the October meeting of the ECB, on Tuesday, President Mario Draghi will deliver a speech titled “Stability, Equity and Monetary Policy” in front of the German Institute for the Economic Research in Berlin.
Monday afternoon there will be a flurry of speeches and public statements of the US Federal Reserve members. These will have all the attention of the market that is looking for further confirmation for a US rise of interest rate by the end of 2016.