Next week, investors will turn their attention to the indices again, carefully monitoring whether the levels of support they are currently in will resist sell-Offs. Last week, key indices across the globe collapsed to a record low and are expected to close the week with a fall of between 6% and 7%. Market downs come as investors finally decided to pay attention to the fact, that the Fed will raise interest rates at least three more times by the end of the year. Upon, raising the base interest rate, commercial banks will receive FED funds at a higher rate, which in turn means that commercial banks have to lend their loans (to small traders, individuals, small investors) with higher interest rates. Large companies also very often lend their business. Like others, they have to pay interest on their credits. If the interest rate rises, interest on their credit will increase along with that. Which means that in order to compensate for the increase in the interest they have to repay, companies will transfer the ball into the hands of customers through higher prices. Hence reduced competitiveness and lower profits for companies. On Friday, Trump signed one of the largest budget bills and ended the US government's second interruption since the beginning of the year. This has been extremely good on the USD, and many Wall Street players think the dollar is no longer an obstacle, and the downward trend is already in the history.
Whether the world markets will recover or will suffer a further collapse, the data on US inflation next week will be key to the Fed's subsequent decisions and the strength of the dollar. The CPI is expected to reach 2.1% in January compared to a year earlier. This will have a very strong positive impact on the dollar as the Fed points to inflation as the main reason for the delay in raising interest rates. If inflation in the US accelerates, investors are likely to see bond yields above 3%, and this will surely weigh on the indices. But US inflation is not the only one we will receive next week. Already on Tuesday, Britain will release inflation data, with expectations for it to stabilize, falling below 3%. The Bank of England left the base interest rate in the country unchanged at 0.50% at the first meeting of the Monetary Policy Committee for 2018. While the monetary policy was widely expected to remain unchanged, the bank made a clear signal that it was ready to raise interest rates in 2018, commenting that it would "tighten politics earlier and more" if the economy continued to grow as forecasted . On Wednesday, investors will focus on the GDP of Japan and Germany. Expectations for both sides are negative and data worse than expected will strengthen the negative sentiment of JPY and EUR. During the week, we also expect retail sales from the United States and the UK to give a clear idea of how much they spend on households. Expectations for both countries are positive, with better than they will support national currencies.
Economic calendar for next week - 12.02 - 16.02.2018
Holiday in Japan
10:00 Switzerland - CPI
21:00 USA - Federal Budget Balance
02:30 Australia - NAB Business Confidence
10:15 Switzerland - PPI
11:30 UK - CPI
11:30 UK - PPI
01:30 Australia - Westpac consumer sentiment
01:50 Japan - GDP Q4
09:00 Germany - GDP
12:00 Eurozone - GDP
15:30 US - CPI
15:30 USA - Retail Sales
17:30 US - Crude Oil Inventories
Holiday day in China and Hong Kong
02:30 Australia - Unemployment Rate
02:30 Australia - New Jobs
06:30 Japan - Industrial Production
15:30 USA - PPI
15:30 United States - Philadelphia Production Index
Holiday day in China, Hong Kong and Singapore - Will lead to extremely low volatility during the Asian session
11:30 UK - Retail
15:30 United States - Building permits
17:00 United States - Michigan Consumer Confidence
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