Major Events of Last Week
Prospects of an early interest rate hike by the US Federal Reserve took a dent late last week after the USA published a prominent labor statistic which missed analysts’ expectations. The Greek debt drama continued to monopolize investors’ attention by deteriorating at an alarmingly rapid pace. A vitally important referendum is now scheduled to be held on Sunday when Greek voters must decide whether they will accept further austerity in order to retain their membership of the Eurozone. The major US indices slipped lower at the end of a turbulent week demonstrated by the Dow Jones Industrial Average falling by almost 28 points; the S&P500 dropping by nearly 1 point and the NASDAQ recording ‘no change’.
The USA posted its keenly awaited Non-Farm Payrolls (NFP) last Thursday, which surprised economists by missing its predicted mark. The NFP confirmed that US employers created a disappointing 223,000 jobs during June compared to a forecasted increase of 230,000. The monthly report released by the US Department of Labor also revealed that Washington had significantly revised job growth for the two previous months lower. Investor sentiment declined even further by the revelation that wage growth had stagnated during June.
These gloomy results are now expected to persuade the US Federal Reserve to delay the instigation of its first interest hike rate in practically ten years. However, analysts concluded that the labor report was still healthy enough to support an increase by the end of 2015. The US Dollar responded to the weaker-than-expected NFP by paring a portion of the gains it captured against other major currencies earlier in the week. Thin trading volumes and concerns about the pending Greek referendum also prompted traders to restrict their greenback aspirations.
Investors adopted an increasingly cautious stance as last week progressed after Greek debt negotiations completely collapsed leaving this crisis in a very vulnerable condition. Greek voters are now confronted with the nightmarish task of deciding over this weekend if they want their nation to remain a member of the Eurozone by accepting a new bailout deal proposed by international creditors. Pressure was unquestionably mounting on them epitomized by Greek banks remaining shut for most of last week resulting in lengthy queues at ATMs.
Essentially, the Greek populace must now determine if they are prepared to accept more austerity which has imposed extensive hardships on them and their economy over the last five years. Although a ‘NO’ vote implies no new financial aid and a Greek exit from the Eurozone; polls are, nevertheless, currently favoring such an outcome.
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What to Expect This Week
The following major economic data is scheduled to be release globally over the course of the coming days.
Switzerland will commence proceedings by presenting its Consumer Price Index for June on Monday. Analysts are predicting that this key inflationary data will extend its gains for the second consecutive month.
The Reserve Bank of Australia (RBA) will launch Tuesday by announcing its latest interest rate decision and future guidance policies. Although no rate change is expected this time around, the RBA may indicate that additional cuts are imminent by confirming its present dovish stance. The USA will then disclose its International Trade result for June which is forecasted to slump to -$42.7B from -$40.9B. Such an outcome could cause the US Dollar to weaken across the board.
The pivotal event of the week will occur on Wednesday when the Federal Open Market Committee (FOMC) publishes the minutes from its last policy meeting. Economists will study accompanying comments very carefully in order to determine if last week’s disappointing US labor report will now sway the Fed into stalling an interest rate hike until later this year. Australia will complete the session by posting its Labor Report for June. Expect consensus expects that 42,000 new jobs were generated last month and that the Unemployment Rate will remain steady at 6%.
On Thursday, the Bank of England will declare any changes to its benchmark interest rates. As no alterations are anticipated, this could well be a non-event. Later, the USA will release its Jobless Claims figure for the previous week. Investors will be keen to discover if this data specifies whether last week’s weak labor report was either a major retraction or just a minor corrective dip.
Canada will terminate the week by issuing its Labor Force report for last month. Economists are hoping that employers succeeded in boosting job creation during June from its prior reading of 58,900 in May.
