As anticipated in the previous article, this week has been full of important points for the market, first among all, the Federal Reserve meeting.
The Fed has decided to not raise interest rates and interest rates are unchanged at 1% in full respect of analysts’ forecasts.
President Janet Yellen’s speech on Friday did not provide any important insight, anything more than we already knew. The market awaits the promised increases, two to be exact, over the 2017.
In the monetary policy statement following the FOMC’s decision, there were all the reasons that led the congress to vote for a non-interest rate rise.
The reasons for such decision come from several factors. First of all the US labor market that continues to strengthen although growth in economic activity has slowed down. Household spending has grown only modestly as companies’ investment remains stable.
Inflation on an annual basis recently traveled close to the inflation target of 2%, but never touched that level.
After the announcement, the dollar reacted appreciating against the euro and EUR/USD came back to 1,0888. The dollar has responded also by continuing to strengthen against the yen.
Even after the publication of non-farm payrolls in the US the dollar has grabbed its daily earnings against other major currencies in the Forex and EUR/USD touched the level of 1,0980. The US economy has created more than 200.000 jobs last month, while the unemployment rate has fallen further.
EUR/USD has returned to its daily low (1,900) since the average hourly wage rose by only 0,3% on the month of 2,5% on an annual basis, below the reported 2,7% in March.
Moving over the ocean, towards Europe, it was published the Eurozone growth data of the first quarter of 2017. In the first three months of the year, the Euro area’s annualized Gross Domestic Product (GDP) marked +1,7% compared to the first quarter of the year, versus the 1,7% marked at the end of the fourth quarter of 2016 (the same variation predicted by analysts).
On a quarterly basis, the Eurozone’s GDP growth is 0,5% as expected by the market, up from + 0,4% of the previous quarter.
For the second time in a month, the elections in France will mark the event with the highest impact on the currency market in the week from the 8th to the 12th of May.
The balloting of French elections between pro-Europe candidate Emmanuel Macron and the No Euro-Marine Le Pen candidate will be on Sunday, May the 7th.
Macron’s expected victory will be seen to the market as a sign of falling geopolitical risk in Europe, a bullish factor for the euro and European stock markets.
Over the course of the week, the market will move on the wave of new US market movers which will provide new evidence of its health. So the focus will be on US retail sales and US inflation scheduled on Monday in view of a possible rise in interest rates next month.
Moving to the other side of the world, China is expecting the data on trade balance and inflation. These are two key market movers, as if they will be disappointing, they could create new fears about the sustainability of the second largest economy in the world.
On the monetary policy front, the Bank of England and the Reserve Bank of New Zealand will both report their interest rate decisions.