Major Events of Last Week
Traders adopted a vigilant stance late last week as they nervously await a key speech by Janet Yellen, the Fed chairperson, to be delivered at Jackson Hole, Wyoming, USA next week. She is expected to endorse and reiterate that the present state of the US economy only warrants a cautious pace of interest rate hikes. She is also very likely to stress that additional monetary tightening is still heavily dependent on additional economic data releases over the coming months. This viewpoint, however, does clash with the more hawkish tones presented by two other prominent Fed officials last week. Revered analysts summarized these developments by advising that they expect Yellen to deliver a dovish sentiment inciting investors to reduce their bets of any early Fed decision. Expert consensus is currently favoring a 43.1% probability of a rate hike in December.
The European stock markets continued to remain under stress by registering their largest weekly decline since the middle of June last Friday. Equities recorded a total weekly slump of 1% and have now declined by about 6.7% so far during 2016. One of the premier catalysts driving this worrisome performance is the recent low trading volumes produced by the summer lull. For example, last Thursday experienced the lowest levels of trading activity in almost three months. Some prominent economists are forecasting that European equities will now most likely just consolidate throughout the remainder of this year.
The Bank of England (BoE) hit the wires towards the end of last week by advising that the present stabilizing response of the British economy to the recent unexpected Brexit vote could well reduce the need for any further stimulus measures. However, the BoE did proceed to warn that the risk levels of new political and monetary stocks are still elevated which are capable of seriously impacting this fragile viewpoint over the coming months. This first BoE statement advised that the British economy has been specifically boosted by both buoyant ‘Retail Sales’ and reducing ‘Unemployment Claims’ during July.
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What to Expect This Week
No major global events or data releases are scheduled for Monday.
On Tuesday, the Eurozone will publish the first sighting of a spate of important composite ‘Purchasing Managers Index (PMI) for July. The French PMI is expected to remain in recessionary territory by falling below its critical 50.0 mark; German PMI should outperform its previous print of 53.7 while the PMI for the entire currency bloc is expected to extend recent gains by posting 53.0+. Later, the USA is scheduled to deliver a key statistic from its important housing sector. ‘New Home Sales’ needs to surpass its prior reading of 592,000 units in order to demonstrate that this vital trading segment is starting to acquire fresh traction.
The USA is scheduled to present a second major housing indicator on Wednesday. ‘Existing Home Sales’ will have to beat its last result of 5.57 million units in order to provide investors with new confidence.
On Thursday, the USA will issue its ‘Jobless Claims’ for the previous week, ending 21st August, which should once again verify that the number of Americans filing first claims for unemployment benefits remained within the longstanding range of 240k to 290k. At the same time, the USA will release its ‘Durable Goods Orders’ for July. Analysts are hoping that this crucial indicator can rebound from last month’s worrisome slump of -4.0%. Germany will next disclose an important ‘Business Confidence Survey’ which should confirm that sentiment continues to improve. Japan will complete the session by revealing prominent inflationary data. If ‘Consumer Price Index’ falls short once again by dropping beneath -0.5%, then such an outcome could encourage the Bank of Japan to consider implementing additional stimulus measures.
Great Britain will issue its ‘Gross Domestic Product’ (GDP) for the second quarter of 2016 on Friday which could provide vital insights into how its economy is coping with June’s unexpected Brexit decision. Growth of 0.6% or better is required to bolster trader confidence. The pivotal event of the week will then occur when the USA presents the second estimate of its own GDP for Q2 of 2016. An upward revision of the prior 1.2% is definitely needed in order to counter the recent release of disappointing economic data.