The past week has been very fruitful in terms of macroeconomic and monetary appointments. From the US Federal Reserve decisions up to those of the Bank of England. In no case the market expectations were dashed and monetary policy remained unchanged for both of them.
Let’s analyze all the news specifically.
On Wednesday we witnessed to the first major event of the week: the monetary policy meeting of the Federal Reserve.
As expressed by analysts’ forecasts on Fed meeting, the FOMC decided to leave interest rates unchanged after the upward in December.
The US benchmark interest rate is confirmed, therefore, within a range between 0,50% and 0,75%, as expected by the consensus of the analysts.
The membership vote was unanimous: the US central bank is optimistic on the economy, the sentiment of companies and workers has improved but it insists the rise of interest rates will be gradual.
This decision, obviously, fueled the decline of the US dollar which began to rise again over the weekend in response to the publication of the report on the labor market of the United States for the month of January.
The non-farm payrolls have surprised the market with a record result: +227.000 new jobs. However the unemployment rate rose too and wages have remained more or less flat in the same month.
Despite the rise of the greenback there was no break of support on the EUR / USD exchange rate as it was predicted by analysts. Reacting to the employment data, served to EUR / USD to stop the descent fed started on Wednesday trying to leave the area 1,07.
The same decision of the Federal Reserve was also taken by the Bank of England that has not touched either interest rates or QE, but it has revised its estimates for growth and inflation.
Interest rates have remained at 0,25%, while the QE is always at 435 billion pounds.
The growth forecast of 2017 was revised: GDP will not grow more by 1,4% as originally planned, but 2%. In 2018 grow will be by 1.6% and not more at 1.5%. This means that the Bank of England seems quite positive about the future of the economy in the post-Brexit period.
As for inflation, however, the forecasts of the Bank of England thought to grow of 2% this quarter, to 2,7% in the first quarter of 2018 and then to 2,6% in early 2019. The previous forecasts were respectively: 1,8%, 2,8% and 2,6%.
EUR / GBP has had a reaction rather strongly after the publication of the decisions of the BoE and after the press conference held by Mark Carney. Little after the announcement of the Bank of England, it was traveling with an increase of 1,2%
The incoming week will be full of market movers on the economic calendar, but the operational ideas are actually quite limited since important macroeconomic news has been last week.
The market movers will focus especially on Tuesday, when the traders must be alert to the monetary policy decisions of the Australian Central Bank. Also a focus on Indian interest rates, because of the terrible situation that the country is experiencing after the ban of cash, and those New Zealanders.
On the macroeconomic front, main market movers will concern the Eurozone PMI and the preliminary estimates of the Italian GDP.