5 Things You Need to Know Before the Market Opens

China Trade Balance

China is expected to release its trade balance figure on Monday at 2:00 GMT. Estimations for the surplus to rise to $49 billion from last month $48.1 billion.

Chinese exports data will be released around the same time and expected to drop by 3% compared to a year earlier. Additionally, a decrease of 7% of Chinese imports is expected to be published.

On Tuesday, Chinese CPI for July will be published at 2:30 GMT. YoY is expected to grow 2.2% from 1.9% last year while monthly data is expected to remain at -0.1%.

UK Trade Balance & Manufacturing Production

On Tuesday at 8:30, GMT June, UK Trade balance deficit is expected to grow by 10.10 billion compared to 9.88 in the previous month.

The forecast for June manufacturing production is -0.2% compared to -0.5% for the previous month while YoY estimations for an increase of 1.3%.

Last week, the bank of England cut its interest rate by 25 bps to a record low of 0.25% and increased its stimulus program.

Reserve Bank of New Zealand Rate Decision

On Thursday, the Reserve Bank of New Zealand governor Graeme Wheeler is expected to announce a rate cut of 25 bps to 2% cash rate, an all-time low. Some analysts predict 50 bps rate cut by RBNZ.

German & Eurozone GDP

On Friday at 6:00 GMT, Germany will publish its second-quarter GDP. Forecast of 0.3% expansions in the second quarter by Europe’s largest economy reflects a moderate data compare to 0.7% previous quarter.

At the same day, the Eurozone economy is expected to grow by 0.3% for April-June compare to 0.6% for the previous quarter while YoY growth is expected to increase by 1.6% compared to 1.7% a year earlier.

US Retail Sales & PPI

On Friday at 12:30 GMT, MoM retail sales are forecasted to rise by 0.3% in July from 0.6% in June. Producer Prices Index(PPI) is expected to rise by 0.1%.

US data will be released post the Non-Farm payrolls data that was released last Friday. The Non-Farm Payrolls increased by 255,000 jobs last month, after an upwardly revised 292,000 surge in June. Traders and economists were looking for an 170,000 increase in July. The unemployment rate remains steady at 4.9 percent. Average hourly earnings rose 8 cents or 0.3% versus a 0.2% estimation.

Oil Below $40, Gold Rises; Markets Expect BoE Meeting

Crude Oil Settles Below $40 amid Oversupply

Crude oil is trading at $39.74 up 0.44% per barrel as oversupply continues to pull the black gold down. Brent oil gained 0.39%, trading at $42.08.

On Wednesday, U.S. crude oil found support following Tuesday’s API oil inventory data. The API data showed a 1.3 million draw the week-ending July 29, in line with consensus forecasts. However, the reduction was larger than the one reported the previous week.

The EIA stockpiles report will be released today at 14:30 GMT.

Gold Rally continues

Gold continues to climb on Wednesday as chances for another rate hike in the US decreased. Currently, the chance for a rate hike in September decreased to 12% according to Fed Funds Futures. Gold is trading at $1365.34, 0.24% from the previous day just below two years high.

Markets expect BoE meeting tomorrow and nonfarm payrolls data to be released on Friday to get more clues of further developments by policymakers. The ADP jobs report will be released today at 12:15 GMT and could provide an indication for the nonfarm payrolls data. Higher than expected data will breathe some life into a possible rate hike by the Fed in December.

BoE Meeting in Focus

The BoE meeting tomorrow at 11:00 GMT will be a major key for markets as investors expect further stimulus actions by the BoE. The Bank of England is expected to cut interest rates to record low of 0.25% on Thursday.

Additionally, investors will be watching Mark Carney’s speech as the possibility of reviving the stimulus program in the form of asset purchase come to action. The British Pound rose against the US Dollar on morning session, trading at 1.3365.

UK Purchasing Managers’ Index (PMI) dropped to 47.4 last month, the lowest level since December 2012. The data can add more pressure to the BoE meeting tomorrow.

The Week that Was and the Week Ahead

The Week That Was

  1. FOMC Meeting Disappoint investors – On Wednesday, July 27th, the Federal Reserve monthly meeting delivered what investors expected. The Federal Reserve Open Market Committee kept its overnight interest rate target in the 0.25 percent to 0.50 percent range. However, the Fed indicated that the labor market has strengthened and said other indicators were pointing to growth.
  2. BoJ Meeting, Yen Surges amid BoJ Fiscal Stimulus Program – On Friday, July 29, the Japanese Yen soared over 3% against the U.S. Dollar to close the week at $102.36 after the Bank of Japan expanded its stimulus program, but at a less than investors had anticipated. Traders were disappointed by the BoJ’s decision to double purchases of exchange-traded funds (ETFs). Japanese prime minister Shinzo Abe approved a stimulus package of 13.5 trillion Yen, both in direct government fiscal policy and loans.
  3. US & UK GDP Data Released – US GDP  grew by 1.2% in the second quarter, less than markets expectations of 2.6%. However, the US GDP rose more than the first quarter of 0.8%. UK gross domestic product (GDP) rose by 0.6% in the second quarter, a week after the decision to leave the European Union. The figure is above expectations, as estimates predicted 0.5% growth.
  4. Gold Rises, Oil Sinks  Gold climbed last week amid Fed announcement to leave interest rate unchanged and signaled that economic risks reduced. The Federal Reserve did not indicate for any rate hike at their next meeting in September. The chance for a rate hike in September decreased to 12% compared to 18% the day before and 22% on Tuesday according to Fed Funds Futures. Gold closed the week at 1349.62, $26 higher than the previous week. Crude oil closed last week below $42 at $41.23 per barrel as data released on Wednesday showed oversupply in the market. Brent Oil dropped $3.05 of its value, to close the week at $43.11. According to the report released by US EIA, last week crude oil inventories rose by 1.7 million barrels while total domestic crude production also scaled up by 21,000 barrels to 8.515 million barrels a day.

The Week Ahead

1. Australia Rate Decision & Rate Statement – On Tuesday, the Reserve Bank of Australia will announce its interest rate decision. The RBA is expected to cut the rate from 1.75% to 1.50%. The RBA will also publish its quarterly statement on Monetary Policy on Friday and, given the June quarter underlying inflation figures were in line with its previous thinking, no change in forecasts is expected this time around.

2. Shinzo Abe (BoJ) announce Fiscal Stimulus Package – On Tuesday, Japan’s prime minister will announce 28 trillion Yen ($360 billion US Dollar) fiscal package. This is the official figure to be released by Abe and reflects about 6% of Japan’s GDP.

3. Bank of England Rate Decision – On Thursday, the BoE is expected to cut interest rate to 0.25%. Additionally, BoE is expected to increase its quantitative easing by another £50 million pounds.

4. US Nonfarm Payrolls – On Friday, Nonfarm Payrolls will be released as the forecast stands on 175k. Last month, 287k additional jobs were added and the figure increased the expectations for another rate hike in September.

Oil Falls to 3 Month Low, Yen Surges Over 1%

The USD/JPY was trading lower on Tuesday as traders reacted in disappointment to Japan policymakers new stimulus program. On Tuesday, the Nikkei reported that an estimation of 6 trillion Yen will be injected into Japan’s economy. The amount would be less than analysts’ expectations. USD/JPY is trading at 104.36, a drop of -1.12%, Nikkei closed at 16,383, down -1.43%.

The Japanese government pressures the bank of Japan to ease the economy with a further stimulus program.

On Friday, the BOJ meeting will spread light over the Japanese economy. No change in interest rate is expected as the current rate in Japan is in the negative territory. There are speculations that the fiscal BOJ stimulus program will be increased from $130 billion to $390 billion.

“The market is cautious due to the risk of policy disappointment,” said Neil Jones, head of hedge fund sales at Mizuho Bank Ltd. in London. “The BOJ may do nothing and the Fed may take on a more dovish angle.”

Oil Sinks to 3 Month Low

Oil prices continue to fall as global production and high inventory levels push the black gold further down. Crude oil is trading below $43 support level at $42.43 per barrel a drop of 1.66% while Brent Oil is trading at $44.55 per barrel down 1.33%.

Additionally, natural gas loses 1.46% and trading at $2.67, gasoline is down 1.47% trading at $1.31.

“Supply continues to return from disruptions, refined products are severely oversupplied, crude demand is falling well short of product demand, and key product demand is decelerating,” Morgan Stanley said in a note.

3 Top Things You Should Know for the Upcoming Week

FOMC Meeting

Although the U.S. Federal Reserve is keen to leave interest rates on hold on Wednesday’s meeting, economic data released in the previous weeks showed improvement of the US economy, pressures US policymakers for an interest rate hike in September.

Federal Reserve estimation for a rate hike in September increased as the next move of policymakers should stabilize inflation rate. The question for a rate hike remains whether the Fed will have a single hike until the end of the year or a possible two rate hike before the end of 2016.

Investors in search for hints of the Fed plans, track the 30-Day Fed Fund futures trading at CME.

The meeting will take place on Tuesday-Wednesday, 26-27 of July.

BOJ Interest Rate Decision

The BOJ meeting on Friday might be a clarification for Shinzo Abe monetary policy plans. Abe won the elections on July 10th and as promised before, will continue his Abenomics stimulus program.

No change in interest rate is expected as current rate in Japan is in negative territory.

There are speculations that the fiscal BOJ stimulus program will be increased from 130$ billion to 390$ billion.

Europe Stress Testing

Europe stress banking test results will be published on Friday. The data could spread light on Italy and the European commission debt solution.

The Italian debt is currently €360 billion Euros and the data released on Friday might bring toa settlement of both sides.

On Thursday, ECB president Mario Draghi announced that ECB continues its stimulus program unchanged. However, Draghi hinted at the possibility of arrangement to Italian banks in order to improve their ability to lend funds.

ECB keeps Stimulus Program Unchanged

The ECB left its benchmark interest rate unchanged at 0.0%, as forecasts predicted despite Brexit concerns.

Draghi remarks that the Eurozone is resilient to Brexit effect so far, further decisions will be taken at the time of political developments occur. “Following the UK referendum, euro area financial markets have weathered the spike in volatility with encouraging resilience”. Says Mario Draghi.

Additionally, the ECB president mentioned further possibilities to boost the European economy. Draghi said the ECB ready to act using all tools in ECB mandate. He signaled that ECB policymakers are open to additional stimulus program in September but they are not committed to doing so.

Earlier today, the ECB left its key interest rate unchanged at 0.0%, as analysts predicted despite Britain’s decision to leave the European Union.

The ECB will continue to stimulate the economy with its monthly quantitative easing program at approximately monthly €80 billion.

In addition, the European central bank also held its deposit rate for commercial banks at -0.4% and its marginal lending rate remained at 0.25%.

In reaction to Draghi’s speech, the Euro rises against the US Dollar to 1.1050 from 1.0986. However, the pair dropped back to 1.0987 reflecting traders disappointment from Draghi’s speech.

Gold dropped $6 during ECB president speech, and was trading at $1314.88 before bounced back to $1322.01.

ECB Holds Interest Rate, Markets Attention to Draghi’s News Conference

The European Central Bank (ECB) leaves its interest rate at a record low level of 0.00%. Earlier today, the ECB left its benchmark interest rate unchanged at 0.0%, as forecasts predicted despite Brexit concerns.

The ECB will continue to stimulate the economy with its monthly quantitative easing program at approximately monthly €80 billion.

In addition, The European central bank also held its deposit rate for commercial banks at -0.4% and its marginal lending rate remained at 0.25%.

Markets expect Mario Draghi’s news conference at 12:30 GMT. Draghi will discuss the implications of Britain’s decision to leave the European Union. Investors will listen closely for any signs of the ECB to boost the economy with further quantitative easing program. Some analysts expect Draghi to adopt economy concerns after Brexit and to expand the bond purchase program.

In reaction to Draghi’s speech, the Euro rises against the US Dollar, trading at 1.1050 from 1.10 rate traded in the morning session.

“Following the UK referendum, euro area financial markets have weathered the spike in volatility with encouraging resilience”. Says Mario Draghi.