Your weekly fundamental view (Oct 10-14)

Říjen 10, 2016 12:00

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Need to know

This week's main focus is the release of meeting minutes from the Federal Reserve's Open Market Committee (FOMC) on Wednesday, 12 October. The markets will attempt to retrieve more information about the future direction of the US interest rates during the last quarter of 2016 and the start of 2017. The FOMC might also take into account the US presidential elections which are set to take place 4 weeks from now, on Tuesday, 8 November 2016.

Coming up

German ZEW Economic Sentiment is released on Tuesday, 11 October. This is a survey of about 275 German institutional investors, who give their six-month outlook for Germany's economy. Any figure above 0.0 is optimistic, while figures below it indicate pessimism. Why should traders care? The forecast for the German ZEW index is 4, whereas the previous level was recorded at 0.5. If such a small bullish rebound did indeed take place, this could indicate a slow but positive outlook for the next 6 months in Germany.

FOMC meeting minutes in the US come on Wednesday, 12 October. The Federal Reserve System (Fed) uses employment figures and inflation levels to decide their monetary policy. Their report usually includes the FOMC's projection for inflation and economic growth over the next two years, plus a breakdown of individual FOMC members' interest rate forecasts. Why should traders care? The report reflects the economic outlook and offers hints on the outcome of future votes. It could also set new USD trends, as the USD is a safe haven currency. At the moment, December seems to be the earliest moment a rate hike could take place due to the US Presidential elections in November. However, it is also possible that a rate hike would not occur. Chicago Fed President Charles Evans mentioned on Monday that "December could be an appropriate time to do [a rate hike], but I don't see any urgency either." In his view, one of the main reasons was the fact that inflation remained below the Fed's 2 percent target. He continued by adding that "for risk management reasons, we need to make sure we hit our inflation objective at the same time we're at full employment."

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US unemployment claims will be released on Thursday, 13 October. These claims are the earliest national economic data, representing the number of individuals who filed for insurance for the first time during the past week. If the actual results came weaker than the forecast, it would be deemed good for the currency. Why should traders care? The number of unemployed people is an important signal of the overall economic health and could hint at the future monetary policy steps. The forecast for this week is 252k, whereas the previous figure was 249k.

Core retail sales and retail sales in US will is due on Friday, 14 October. Retail sales review a broad look at consumer spending data, whereas the core retail sales exclude automobile sales from the total. Automobile sales are removed because the numbers tend to be volatile and large (20%). Core retail sales, therefore, offer a different method of analysing the underlying trend of consumption. Why should traders care? Retail sales are expected to be released at 0.6% versus a previous level of -0.3%. The forecast for core retails sales is 0.4% versus a previous level of -0.1%.

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