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Mar 5, 2018

FINANCIAL MARKETS REACT TO EUROPEAN ELECTION OUTCOMES AND CENTRAL BANK DECISIONS

Markets React

During the upcoming trading week European politics takes center stage, as financial markets react to the result of Sunday's crucial Italian election vote. German politics is also in focus, as some 460,000 members of the SPD are holding a referendum on whether to back a hard-fought accord for a government with Angela Merkel's conservative party. The euro currency is likely to experience a period of high-volatility on Monday, as traders and investors react and position themselves.

The macroeconomic calendar remains busy throughout the trading week, with the Reserve Bank of Australia, Bank of Japan, European Central Bank and Bank of Canada all meeting to decide on interest rates. The United States economy is also in focus, with the release of the key Non-farm payrolls job report for the month of February. Economists expect 190,000 new jobs to be created, with the wage earnings component of the report under particular scrutiny, as inflationary pressures grow in the U.S economy.

Monday 5th March, Eurozone Retail Sales

Eurozone Retail Sales measures the sum of goods and services sold monthly at retail outlets across the eurozone trading block. Retail sales can be taken as an economic growth signal, as an increase in the number of Retail Sales would fuel the eurozone economic recovery. Higher consumption however, leads to inflationary pressures which may result in economic instability.

  • The EURUSD pair remains bullish while trading above the 1.2278 level, further upside towards 1.2351 and 1.2440 seems possible.
  • If the EURUSD pair trades below the 1.2278 level, further declines towards 1.2160 and 1.1900 remains possible.

Tuesday March 6 th, RBA Interest Rate Decision

The Reserve Bank of Australia are expected to keep interest rates on hold, as the RBA Meeting Minutes recently revealed a number of RBA members have expressed concerns about the domestic economy. If the RBA are hawkish about the inflationary outlook of the economy, or discuss future rises the interest rates, it is seen as positive for the Australian dollar. Likewise, if the RBA has a dovish view on the economy and keeps the ongoing interest rate, it is taken as negative for the Australian dollar.

  • The AUDUSD pair is bearish while trading below the 0.7780 level, further downside towards 0.7715 and 0.7655 remains possible.
  • If the AUDUSD pair trades above the 0.7780 level, further upside towards 0.7848 and 0.7930 remains possible.

Wednesday 7 th March, BOC Interest Rate Decision

The Bank of Canada Interest Rate Decision is a decision of the governing council members on where to set the countries short-term interest rate. Short term interest rates are the primary factor in currency valuation, with usually makes the Canadian dollar volatile leading up to and after the actual rate decision. The BOC policy statement contains the Bank's collective perspective on the economy also ideas about future monetary policy, including future rate increases.

  • The USDCAD pair is strongly bullish above the 1.2915 level, further upside towards 1.3055 and 1.3130 remains possible.
  • If the USDCAD pair fails to trade below the 1.2915 level, a correction towards 1.2830 and 1.2770 remains possible.

Thursday 8 th March, ECB Interest Rate Decision

The European Central Bank rate decision greatly impacts financial markets, as the ECB interest rate is essentially the return investors acquire in possession of euros. The ECB are expected to keep interest rates on hold at this month's meeting, although the press conference following the rate decision with ECB President Mario Draghi will usually increase market volatility, impacting the short to medium-term direction of the euro currency.

  • The EURGBP pair remains bullish while trading above the 0.8700 level. Further upside towards 0.8885 and 0.9090 seems possible.
  • If the EURGBP pair falls below the 0.8730 level price-action will turn bearish, further losses towards 0.8678 and 0.8550 remains possible.

Friday 9 th March, U.S Non-Farm Payrolls Job Report

The U.S Non-farm payrolls job report is the most carefully observed indicator in the employment situation inside the American economy. The NFP job report is considered the most inclusive calculation of job creation in the United States, this characteristic causes the NFP headline figure to become highly significant, due to the great importance of labor in the United States economy. A strong headline figure is usually seen as positive for the U.S dollar, although traders pay close attention to the official Unemployment rate and Wage Earnings component of the report.

  • The U.S dollar Index remains bullish above the 89.90 level, further upside towards 91.00 and 92.30 seems possible.
  • Should the U.S dollar index fail to hold above the 89.90 level, a correction towards the 89.30 and 88.80 levels may occur.
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