We start the report of the week from the 11th to the 16th of December with the news that has made the market move more, namely the rate change implemented by the Federal Reserve.
The Fed raised the cost of money to 1,50%, confirming the expectation of analysts.
For the third time in 2017, the US central bank raised interest rates thanks to the economic growth seen in the last period (+ 3,3% on a quarterly basis in the last survey) and the forecast of a continuation of the same during the 2018. Employment data were also crucial for the choice made by FOMC members. However, inflation remains unchanged below the 2% target, the only negative note.
For 2018 the FOMC intends to raise interest rates three times more than 0,25% each, while for 2019 are expected only two increases. The target to be achieved is therefore a + 2,25% at the end of 2018 and + 2,75% in 2019, unless a change in strategy.
These are the salient points discussed in the press conference by Janet Yellen, who also warned about the bitcoin by calling it a highly speculative asset as illegal and unstable.
The euro-dollar exchange rate went up, finally exceeding the 1,18 share, an hour after the Fed and its President’s statements.
In the following days, two other central banks had to take the same decision. First of all, the European Central Bank which kept interest rates unchanged, as well as the provisions on Quantitative Easing, which are however still uncertain, fully confirming the forecasts and revising upwards the growth and inflation estimates.
In the wake of Mario Draghi’s last press conference of the year, EUR / USD continued to travel upwards to 1,184 and then back down after just a few hours.
The Bank of England also left interest rates and QE unchanged. Interest rates remained unchanged at + 1,50%, while quantitative easing remained unchanged at £435 billion.
The Bank of England does not exclude increases in future interest rates to fight the inflation that is well above the 2% target imposed by the central bank. Members of the central bank argue that the cause is due to the depreciation of the pound sterling. Inflation in fact travels at + 3,1% and the BoE board would like to bring it closer to the target set in the coming years.
During the press conference, the BoE also focused on negotiations with the EU on the exit of the United Kingdom. Despite the progress made, the biggest uncertainty of the British central bank concerned the change in economic relations with the European Union.
EUR/GBP has gone slightly down by 0,03% to the sound of these statements, reaching the quote of 0,8812.
The market mover of the week from December the 18th to the 22th will allow traders to recover a bit from the strain of last week.
However, the Economic Calendar will be full of ideas on which to operate, but certainly less than the past week where the central banks were the most important subjects.
Among the most important market mover of the week there will be Eurozone inflation and a focus on the unemployment rate, the trade balance and the inflation of Italy, a country that is still trying to get out of the economic crisis.
The US will also be particularly exposed to the economic calendar, with surveys on the real estate sector, the inflation and labor market conditions. Attention also to oil prices and its fluctuations.