[av_revolutionslider id=’32’ av_uid=’av-a1kbp3p’]
10 October 2022
- At times when most central banks in the developed world are fighting inflation by aggressively raising interest rates (with the exception of Japan), the Reserve Bank of Australia is one of the few exceptions with a different approach. Indeed, the RBA did raise its key interest rate last week, but only by 0.25% to 2.60%, when markets were expecting a 0.50% increase.
- Such a dovish approach is somewhat surprising and unusual given the struggle against the rising inflation, but the RBA wants to fight inflation without sending its economy into recession that could have even worse consequences than high prices. In any case, the RBA wants to continue raising rates until inflation returns to around 2-3%, but slowing the pace of rate rises will allow it to “assess household spending, wages, inflation and global economic developments to inform its path of rate hikes to come”.
- “In any case, it will be interesting to see which approach will be the more successful and acceptable in the long run from the point of view of the economy and households”, Governor of RBA Philip Lowe said.
Indices
US stocks started the week exceptionally well, with the major indices adding over 5% after two days, the third-best start to the third quarter since 1930. Stocks were helped by poor PMI data that gave hope for a slowdown in the pace of rate hikes by central banks. However, Friday’s labour market data definitely buried those hopes, and the indices gave back most of their gains.
European equities also did well at the start of the week, but as the week progressed, speculation about Credit Suisse’s problems began to permeate the markets. The US labour market data eventually meant declines at the end of the week here as well. The Pan-European STOXX Europe 600 Index ended the week 0.98% higher, France’s CAC 40 put on 1.82%, Germany’s DAX added 1.31%, and the UK’s FTSE 100 Index added 1.41%.
 |
US30 +1.99% |
|
US100 +0.62% |
|
US500 +1.48% |
 |
GER40 +1.31% |
Commodities
One of last week’s winners among commodities was oil, which strengthened virtually from the beginning of the week thanks to the speculation about a possible significant cut in oil production by the OPEC+ countries. And although the speculation of a production cut by a million barrels a day seemed overblown, the OPEC+ eventually surprised the markets with the decision to cut production by up to 2 million barrels a day from November. The actual reduction will not be that significant though as many producers are already producing below their capacity.
 |
Gold +2.11% |
 |
Silver +5.86% |
 |
BRENT +15.45% |
 |
NATGAS -2.31% |
Forex
With the risk of the rising economic recession and the US dollar near its all-time highs, more and more central banks worldwide have decided to increase their dollar reserves in case they need to intervene in favour of their currencies. As a result, central banks around the world are exchanging their positions in US Treasuries for cash.
After the Bank of Japan intervened in the FX market in favour of the yen in late September, the Reserve Bank of India probably had to take a similar step after the rupee fell to record lows. Moreover, several other central banks, especially in Southeast Asia, will likely have to take similar actions as the strengthening of the US dollar is probably not over.
 |
EUR/USD -0.67% |
 |
USD/JPY +0.41% |
 |
GBP/USD -0.70% |
 |
USD/CAD -0.64% |
Macro
The start of last week brought a batch of PMI data, both in the US and Europe. European data in both the manufacturing and services sectors were mainly disappointing confirming a drop below the 50-point level (indicating contraction). In the US, only the manufacturing PMI from S&P Global surprised positively, while the ISM reading fell to its lowest level since 2020.
Under the slogan “bad news is good news”, the news on the JOLTs job openings was also positively received, falling to the lowest level in over a year. With the bad PMI data, investors sensed that inflation was no longer a concern. This optimism then held through the end of the week.
We had to wait until Friday for the week’s main news when the Labor Department reported that the economy had added 263,000 jobs in September, while the unemployment rate had fallen back to the multiyear lows of 3.5%. The sensitivity of the markets to the data was evident in that although the figure was only slightly above expectations (250,000) and was the lowest number since late 2021, the markets took it as a signal that the Fed would not relent in aggressively raising interest rates. The ADP jobs figure was also slightly better (208,000 vs 200,000).
What to watch out for this week
- Next week will be relatively poor in the essential data, but that does not mean that we will be bored. The most critical number will probably be the US inflation, which, if it comes out similarly strong to the labour market data, will only confirm to the markets that the Fed is unlikely to stop its aggressive approach soon. Markets expect a slight slowdown in inflation, with core inflation expected to accelerate slightly.
- This will be compounded by retail sales data on Friday, which should rise mainly due to the improving car sales.
- Investors will also hear from several Fed officials during the week, providing more insights into the policymakers’ view of where the inflation stands and the outlook for the future path of interest rates. Speakers will include Vice Chair Lael Brainard, New York Fed President James Bullard, Cleveland Fed President Loretta Mester and Chicago Fed head Charles Evans.
- In Europe, we will hear about the data from the UK labour market, followed by GDP data. Then on Thursday, we will see the final inflation data from Europe’s largest economy, Germany, where annual price growth is expected to be confirmed at a record 10%.
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!
