Major Events of Last Week

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Last week ended on a very positive note after the USA released a stellar labor report which surpassed economists’ expectations. Not only did US employers create more new jobs during July than predicted but Average Hourly Earnings also rose at a promising rate. These encouraging results could now provide the US Federal Reserve with sufficient evidence confirming that economic growth is currently accelerating at such a pace that an interest rate hike is definitely warranted before the end of 2016. The premier US indices surged upwards last Friday exemplified by the Dow Jones Industrial Average soaring 178 points higher; the S&P500 climbing by 17 points and the NASDAQ rising by 54 points.

Investor confidence was undoubtedly boosted late last week when the publication of the vitally important US Non-Farm Payrolls disclosed that over 255,000 new posts were generated during July compared to the forecasted figure of 180.000. June’s impressive 287,000 number was also revised higher to 292,000. However, the unemployment rate held steady at 4.9% instead of falling to the widely favored 4.8% primarily as a direct result of more job seekers entering the market. The US Federal Reserve will be particularly pleased that Average Hourly Earnings nudged upwards from 0.2% to 0.3% as this improvement will help inflation advanced towards the Fed’s designated target of 2%.

The outstanding labor report was unquestionably the fillip needed to inspire the markets after the USA recently recorded annual growth of just 1.0% during the second quarter of 2016. At its latest monetary policy meeting, the FED acknowledged this sluggish performance although it did advise that the US labor market continued to strengthen. Although the US Central Bank did hike rates last December for the first time in almost a decade, it has since adopted a more cautious stance amid sluggishly low inflation and global economic and political concerns. Nevertheless, analysts have now increased the probabilities of a hike before the end of this year following the encouraging labor statistics issued last Friday.

However, investors must be aware that any monetary tightening by the FED is by no way a done deal since the US labor market seems presently to be peaking and the economic recovery, since the 2007/08 financial crisis, now appears to be stalling. As such, expert consensus expects job creation per month to stabilize within a range of 150,000 to 160,000 during the remainder of 2016. Specific details disclosed that the Construction sector produced about 14,000 openings during July while Manufacturing generated 9,000.In contrast, Mining continued to weaken by losing 7,000 jobs last month.

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What to Expect This Week

After the dramatic events of last week, this one will be relatively quiet by supplying just a few major global data releases.

Switzerland will present its ‘Consumer Price Index’ (CPI) for July on Monday which should remain unchanged at 0.1%.

On Tuesday, Canada will deliver its ‘Housing Starts’ for last month which is expected to exceed its prior result of 218,333 units. If such an outcome is verified, then the Canadian Dollar should receive a welcoming boost.

Wednesday is devoid of any major global events or data releases.

On Thursday, Italy will disclose its CPI for July which is forecasted to hover about its 0.2% mark. Next, the USA will reveal its ‘Jobless Claims’ for the previous week, ending 7th August, which should validate that the number of Americans filing first claims for unemployment benefits remained within the longstanding range of ‘240k to 290k’. New Zealand will terminate the session by posting its ‘Retail Sales’ for July which should surpass its prior print of 0.8%.

The Eurozone is scheduled to publish a spate of important ‘Gross Domestic Products’ (GDP) for the second quarter of 2016 on Friday. The German economy should register impressive growth of +0.7% while the Italian GDP may slip by posting 0.2% or less. Economists are hoping that the GDP for the entire currency bloc will not drop below its previous 0.3% reading as a direct consequence of Brexit concerns. Finally, the USA will complete the week by releasing its ‘Retail Sales’ for July. An improvement on June’s 0.6% is needed in order to provide additional confirmation that the US economy is now definitely acquiring bullish impetus.

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