Major Events of Last Week
At the end of a difficult week of continuous negotiations, Greece still felt confident that its new proposal for extended loan facilities will be accepted by Eurozone finance ministers. However, the premier leader, Germany, posted contradictory remarks by emphatically stating that this document needs to be significantly revised in order to be fully accepted by creditors. The USA published encouraging economic data last Friday disclosing that its manufacturing sector expanded at its fastest rate during February since last November. A Greek deal brokered late in the day prompted the leading US indices to surge higher exemplified by the Dow Jones Industrial Average shooting higher by 150 points; the S&P500 climbing by 13 points and the NASDAQ surging upwards by 32 pips.
The major catalyst dominating the directional movements of the financial markets last week was unquestionably the ongoing debate among Eurozone top officials to resolve the Greek debt crisis. However, the heavy involvement of brinkman tactics ensured that a successful outcome was always going to be a difficult objective to achieve.
For example, the contrasting stances of the premier negotiators, Greece and Germany, were still clearly evident last Friday. Whereas the Greek Prime Minister, Alexis Tsipras, issued positive statements; his German counterpart, Angela Merkel was not so upbeat. Tsipras advised that he now was very confident that the latest Greek proposal for a six month extension of bailout funds would be accepted. In contrast, Merkel stated that although the prevailing mood did not favor a Greek exit from the Eurozone, nevertheless the presented proposal still needed to be substantially modified in order to be acceptable by the German parliament and populace. A late deal was eventually stuck just prior to market close.
The USA posted impressive data last Friday adding credence to the viewpoint that its economic recovery continued to gain momentum. Specifically, the first reading of the Manufacturing Purchasing Index for February climbed from January’s reading of 53.9 to 54.3 beating market expectations of 53.6. Analysts summarized this development by advising that the additional growth in factory output should definitely help underpin the US economic performance during the first quarter of 2015. However, they also advise that escalating concerns about the Eurozone and Russia could restrict the hiring of new staff.
Another key event of last week was the release of the minutes from the last policy meeting of the US Federal Open Market Committee (FOMC). Investors were quite surprised to learn that this important document presented a more dovish tone than expected. Specifically, fresh concerns were listed about the potential adverse impacts of an early interest rate hike.
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What to Expect This Week
The following major global economic indicators are scheduled for release this coming week.
Great Britain will launch proceedings on Monday by presenting a key Trade Survey form the Confederation of British Industry. A disappointing showing could exert bearish pressure on the GBP/USD.
Mario Draghi, the President of the European Central Bank, is scheduled to deliver a speech on Tuesday. He could surprise his audience by providing revelations about the current Greek debt negotiations. The US Federal Reserve Chairperson, Janet Yellen, will then testify in front of the US Senate. A new Republican majority is expected to aggressively interrogate her on its first outing.
On Wednesday, China will disclose its Manufacturing PMI for this month which should contract for the third successive month. Later in the session, New Zealand will reveal its Trade Balance for January. Increasing prices of the Kiwi’s main export, milk, could help this parameter record a bullish rebound
Australia will deliver its Private Capital Expenditure for the fourth quarter of 2014 on Thursday. Expert consensus favors a decline of 1.3% which would register the worst performance since the first quarter of 2014, if verified. The United Kingdom will next announce the second update of its Gross Domestic Product for the Q4 of 2014. Any deviation for the initial figure of 0.5% could spark GBP volatility. Canadian will then declare its Consumer Price Index for last month, which is forecasted to print a 0.1% increase.
At the same time, the USA is scheduled to post the identical parameter for January. If this inflationary indicator misses analysts’ expectations of 0.1%, then such an outcome could persuade the US Federal Reserve to delay an interest rate hike until 2016. The US will also release its Durable Goods Orders for last month, which is anticipated to bounce back into positive territory by printing 1.7%. Japan will complete the session by issuing its Overall Household Spending for January. A better-than-expected result could provide the Yen with a much needed boost.
Germany will kick-off Friday by publishing its Consumer Price Index for this month. A second consecutive monthly decline could encourage the Germans to bolster their support for the recent introduction of a massive quantitative easing program by the European Central Bank. The USA will terminate the week by disclosing the second update of its Gross Domestic Product for the last quarter of 2014. Prominent economists are predicting that the original value of 2.6% will be revised downwards to 2.1%.
