Your Weekly Fundamental View (Jan 16-20)

Leden 16, 2017 13:30

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Need to know

This week's main focus is on the British Prime Minister's speech regarding the Brexit procedure. Other important events are the inflation rates from the United Kingdom and the USA, and the interest rate decisions by the Bank of Canada and the European Central Bank.

Coming up

UK Prime Minister Theresa May's Brexit speech on Tuesday, 17 January.

The British Prime Minister (PM) May is expected to discuss British exit (Brexit) plans to leave the European Union (EU). A court ruling will occur later this month whether the British government or Parliament are allowed to start the Brexit process.

Why should you care? The path of the exact Brexit procedure and timeline could potentially impact the Great British Pound (GBP). May is expected to share more information about the current status of the Brexit.

British inflation rate comes out on Tuesday, 17 January.

The inflation rate measures the change in price of goods and services purchased by consumers. The inflation data is used by the British central bank, the Bank of England (BOE), as the main inflation target to estimate interest rates.

Why should you care? Rising prices and inflation should lead to raising interest rates. The previous figure was 1.2% and the expected rate is 1.4%(*). A slight rise has been occurring over the past year (see image).

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Source: development of British inflation rate

British unemployment rate is out on Wednesday, 18 January.

The unemployment rate shows how many people are unemployed and actively seeking employment. This number is then compared to the total work force of the country.

Why should you care? Tight labour market conditions could lead to a rise of (expected) inflation, whereas weak labour market conditions could see a decrease of (expected) inflation. The current and forecasted unemployment levels are both 4.8%(*).

US inflation rate is released on Wednesday, 18 January.

The inflation rate measures the change in price of goods and services purchased by consumers. The main inflation target of the American central bank, the Federal Reserve (Fed), is set at 2%. Interest rates are expected to rise once the inflation rate passes 2% to combat growing inflation, whereas rates could fall if inflation decreases below 2%.

Why should you care? Rising prices and inflation should lead to raising interest rates. The previous figure was 1.7% and the expected rate is 2.1%(*). A rise has been occurring over the past year (see image).

inflation rate 2.png

Source: development of US inflation rate

Bank of Canada (BoC) interest rate decision, statement and press conference on Wednesday, 18 January.

This is the main interest rate of Canada's central bank, which is used to spur or combat inflation levels. The current rate is 0.5% and is expected to remain unchanged(*).

Why should you care? Changes in the interest rate impact the value of its currency in relationship to other currencies. An increase in the interest rate makes the currency more valuable in the long run, whereas a decrease has the opposite effect.

Australian unemployment rate comes out on Thursday, 19 January.

The Australian unemployment rate shows how many unemployed are actively seeking employment in comparison to the total work force.

Why should you care? Tight labour market conditions could lead to a rise of (expected) inflation, whereas weak labour market conditions could see a decrease of (expected) inflation. The current unemployment level is 5.7%(*).

European Central Bank (ECB) interest rate decision, statement and press conference on Thursday, 19 January.

The main interest rate of ECB is currently 0% and is expected to remain unchanged(*).

Why should you care? Changes in the interest rate impact the value of its currency in relationship to other currencies. An increase in the interest rate makes the currency more valuable in the long run whereas a decrease has the opposite effect.

(*) Admiral Markets Calendar