[av_revolutionslider id=’32’ av_uid=’av-a1kbp3p’]
05 September 2022
- Investors are mainly focused on the movement of the base interest rate decided by the Fed, which is recently sufficiently transparent for investors, thanks to the relatively straightforward stance of central bankers. Less transparent is however quantitative tightening, which is the opposite of quantitative easing, which has doubled the Fed’s balance sheet from $4.2 trillion to almost $9 trillion in the last two years.
- And this week, the unwinding of the balance sheet will begin as the central bank starts to unload the securities it has so far been largely hoarding. It won’t be selling them but is rather letting them mature to shrink its balance sheet. This month the Fed will boost its monthly caps for the number of Treasuries and holdings of mortgage-backed securities that it will let mature to $60 billion and $35 billion, respectively.
- Although this is a fairly complex process, in simplified terms, it can be said that bank reserves are being reduced, and money is being drained from the financial system. For example, in 2019, when repo rates spiked following the decline in reserves, the Fed was forced to buy roughly $60 billion worth of Treasury bills per month and end QT.
- Now the Fed wants to avoid a similar scenario through a permanent repo facility that will allow primary dealers to borrow more reserves from the Fed against high-quality collateral. But even that may not be enough, according to some economists, and liquidity problems could again arise, complicating rate hikes and fighting inflation.
Indices
Stocks in both the US and Europe continued to fall last week as investors are still digesting hawkish comments from Fed chief Jerome Powell and monetary policy tightening is also expected to continue in Europe. On Friday, markets were buoyed by the news from the US labour market, which was received very positively. However, US stocks later erased their gains due to a report from Russia’s Gazprom, which expressed difficulty in resuming gas supplies to Europe due to an oil spill.
European stock markets finished trading ahead of the bad news, but the major indices ended the week mixed. The STOXX Europe 600 Index fell 2.37%, France’s CAC 40 dropped 1.70%, and the UK’s FTSE 100 lost 1.97%. Germany’s DAX 40, on the other hand, gained 0.61%.
 |
US30 -2.77% |
|
US100 -3.83% |
|
US500 -3.08% |
 |
GER40 +0.61% |
Commodities
Commodity markets have been under pressure over the past week amid growing fears of reduced demand as China reintroduces restrictive measures due to a surge in Covid-19 disease. In addition, the fall in energy prices has been driven, among other things, by the EU’s plans to adopt an emergency package to resolve the energy crisis and the introduction of a price cap on Russian oil.
 |
Gold -1.47% |
 |
Silver -4.59% |
 |
BRENT -5.62% |
 |
NATGAS -4.42% |
Forex
The British pound has had its worst month since October 2016 due to the worsening economic and political situation following the resignation of Prime Minister Boris Johnson. In August, the pound lost 4% against the dollar and depreciated almost 3% against the euro.
The Japanese yen continued to fall, in August, the price went above 140 yen per dollar for the first time since 1998. The weak yen is helping exports and increasing the country’s competitiveness, but on the other hand, it is increasing the cost of energy and food imports, which in turn is hurting the economy. Thus, the government is considering taking measures to reduce currency volatility, even taking into account that core inflation has been above the 2% inflation target for four months.
 |
EUR/USD -0.12% |
 |
USD/JPY +1.93% |
 |
GBP/USD -2.03% |
 |
USD/CAD +0.76% |
Macro
Friday’s NFP report showed that the US economy added 315,000 jobs in August, less than in July (526,000) but more than expected (300,000), while unemployment rose to 3.7%. Tuesday’s JOLTs data showed that more job openings were added than expected.
Eurozone inflation is accelerating more than expected, surpassing 9% in August and hitting a new high of 9.1%, mainly due to rising energy and food prices.
On the other hand, unemployment in the EA is at an all-time low of 6.6%, with the number of unemployed people in the Eurozone falling by 77,000 in July.
What to watch out for this week
- We will not see that much news during the upcoming week, but that doesn’t mean that nothing interesting will happen. On Monday, OPEC+ countries will meet to discuss possible production cuts that are pushed by Saudi Arabia.
- On Monday, the final Purchasing Managers’ Indexes in the service sector in Europe and the US and the UK will be published, while on Tuesday, the PMI in the construction sector and the PMI in the non-manufacturing sector in the US will also be published.
- On Wednesday, we will see how Australia’s GDP is doing, and in the afternoon, we will also see further refinement of GDP in the Euro Area.
- The most anticipated news will come on Thursday when the ECB will decide on the monetary policy settings, with another significant interest rate hike expected. Inflation is above 9%, so it is possible that we will see a 0.75% hike.
Day:
Impact:
Restrictions:
Description
Instrument
Dates
GMT +2
Forecast
Previous
Add event to calendar
Error: Your Requested widget "FTMO Start Challenge " is not in the widget list.
- [do_widget_area av_blog]
- [do_widget_area av_everywhere]
- [do_widget id="categories-6"]
- [do_widget id="categories-4"]
- [do_widget id="categories-7"]
- [do_widget id="newsbox-3"]
- [do_widget id="recent-posts-4"]
- [do_widget_area av_footer_1]
- [do_widget id="text-8"]
- [do_widget id="text-13"]
- [do_widget id="text-14"]
- [do_widget id="text-12"]
- [do_widget id="text-16"]
- [do_widget id="text-18"]
- [do_widget id="text-20"]
- [do_widget id="text-23"]
- [do_widget_area av_footer_2]
- [do_widget id="nav_menu-19"]
- [do_widget id="nav_menu-26"]
- [do_widget id="nav_menu-20"]
- [do_widget id="nav_menu-21"]
- [do_widget id="nav_menu-22"]
- [do_widget id="nav_menu-23"]
- [do_widget id="nav_menu-24"]
- [do_widget id="nav_menu-25"]
- [do_widget_area av_footer_3]
- [do_widget id="nav_menu-4"]
- [do_widget id="nav_menu-27"]
- [do_widget id="nav_menu-10"]
- [do_widget id="nav_menu-11"]
- [do_widget id="nav_menu-9"]
- [do_widget id="nav_menu-13"]
- [do_widget id="nav_menu-15"]
- [do_widget id="nav_menu-17"]
- [do_widget_area av_footer_4]
- [do_widget id="nav_menu-5"]
- [do_widget id="nav_menu-28"]
- [do_widget id="nav_menu-8"]
- [do_widget id="nav_menu-7"]
- [do_widget id="nav_menu-6"]
- [do_widget id="nav_menu-14"]
- [do_widget id="nav_menu-16"]
- [do_widget id="nav_menu-18"]
- [do_widget_area av_pages]
- [do_widget_area eckb_articles_sidebar]
- [do_widget_area eckb_articles_sidebar_2]
- [do_widget_area eckb_articles_sidebar_3]
- [do_widget_area footer-ftmo-left]
- [do_widget id="text-10"]
- [do_widget id="text-11"]
- [do_widget id="text-9"]
- [do_widget id="text-15"]
- [do_widget id="text-17"]
- [do_widget id="text-19"]
- [do_widget id="text-21"]
- [do_widget id="text-24"]
- [do_widget_area footer-ftmo-right]
- [do_widget_area post-loop-footer-author]
- [do_widget id="text-2"]
- [do_widget id="text-4"]
- [do_widget id="text-3"]
- [do_widget id="text-5"]
- [do_widget id="text-6"]
- [do_widget id="text-7"]
- [do_widget id="text-22"]
- [do_widget id="text-25"]
- [do_widget_area tet]
- [do_widget id="nav_menu-2"]
- [do_widget_area widgets_for_shortcodes]
- [do_widget_area wp_inactive_widgets]
- [do_widget id="custom_html-18"]
- [do_widget id="recent-comments-2"]
Disclaimer
All information provided on this site is intended solely for the study purposes related to trading on financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of FTMO and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity and it is advised not to risk more than one can afford to lose!
