07 / 11 / 2018 | Wiadomości Rynkowe

Fed likely to keep borrowing costs unchanged

The United States (US) economy is the world’s largest by nominal Gross Domestic Product (GDP) with a highly diversed industrial sector. The US Federal Reserve’s (Fed) decisions are playing a crucial role on how the global economic activity unfolds and are taken into consideration by investors and traders when forming their strategies. This week the Fed’s governing council will attract the attention of markets and analysts as it will convene to decide on interest rates. 

On Wednesday November 7th and Thursday November 8th 2018 the Fed’s board will be having a two-day meeting to discuss matters of monetary policy and announce whether it’s going to pick up borrowing costs or it will keep them unchanged. The Fed’s benchmark interest rate currently stands at 2.25%. The consensus among economists is that the Fed will keep interest rates on hold at the November 2018 meeting.  

The Internationale Nederlanden Groep (ING) published a report on November 2nd 2018 that forecasts a December 2018 rate hike by the Fed. ING’s analysts noted that “while no longer described as 'accommodative', monetary policy is far from restrictive. A strong domestic story means the Federal Reserve will continue to signal “gradual” rate hikes ahead, setting us up for a December move and then three more hikes in 2019.” Economists at ING forecast that the Fed will raise its rates three times during the first three quarters of 2019. However, they add that this will bring an end to the Fed’s policy tightening as trade uncertainty is creating a headwind for activity affecting the US economy. 

Nordea Markets’ research analysts suggest that as the Fed is preparing for a December 2018 rate hike, the statement to be released after the Fed’s November 2018 meeting will be closely watched for signs of sensitivity to the decline in the stock market. “The Federal Open Market Committee (FOMC) is universally expected to remain on hold and there will neither a press conference nor new forecasts, so all focus will be on the post-meeting statement. There is one question everyone wants an answer to: is the Fed starting to worry about the sell-off in the stock market?” was noted in the report. The Nordea Markets’ researchers believe that the decline in the stock market so far isn’t anywhere close to the point that it would force the Fed to change course. They stress that with the economic activity and job gains still very strong, “the Fed will be hesitant of sending dovish signals.”

In a report published by Westpac on November 7th 2018 it is suggested that the Fed will likely raise the federal funds rate to a peak of 3.125% by September 2019. “This profile is somewhat more hawkish than current market pricing which expects the federal funds rate to peak at around 2.9% by end 2019. While the FOMC’s “dots” envisage a peak of 3.4%, this assumes a continuation of above-trend growth in 2020. We instead expect growth to decelerate to trend in late 2019,” Westpac’s economists note.

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06 / 11 / 2018 | Wiadomości Rynkowe

RBA keeps interest rates on hold, RBNZ likely to follow

Some of the most important financial news updates are coming from Oceania this week. With Australia and New Zealand being two of the world’s strongest economies, any financial data release regarding them always attracts investors’ attention. Both economies are playing their parts in the global economic activity that has been disrupted in the last few months by the ongoing trade wars between the United States and its trade partners. 

Reserve Bank of Australia (RBA) keeps rates unchanged

On Tuesday November 6th 2018 the Reserve Bank of Australia (RBA) governing board convened to decide on interest rates. The RBA’s executives decided to keep the Bank’s benchmark interest rate unchanged at 1.5%. The last time that the RBA decreased its benchmark interest rate was in August 2016. Since then, the sluggishness in wages and Consumer Price Index (CPI) inflation forced the RBA to shape its monetary policy accordingly.  

Westpac’s analysts stressed the importance of the global economic conditions in the RBA’s rate decision. “The themes that have become familiar in previous statements were repeated in this one: continuing global expansion; China slowing a little; international trade uncertainty;” was noted in their report. However, Westpac’s economists added that the growth and unemployment forecasts were revised and will be confirmed in the statement on monetary policy that will be released on November 9th 2018. 

“The forecast growth rates for 2018 and 2019 have been revised up from 3.25% to 3.5%, while the 2020 forecast is for a slowdown, although the current forecast of 3.0% may now be revised up to 3.25%. With no real change in the wording, there is no clear justification for this upward revision, particularly for the faster expected growth in 2019,” said the Westpac report. 

Strategists at TD Securities wrote in their report published on November 5th 2018 that they expect the RBA to leave its core CPI inflation profile at 1.75% for 2018, at 2.0% for 2019 and 2.25% for 2020. “Consensus expects the cash rate to remain unchanged at 1.5% through to Q4 2019 (was Q2 2019 in August 2018) and implies no change to these statements for quite some time,” was written in the conclusion of their report. 

Reserve Bank of New Zealand (RBNZ) governing board meeting

On Wednesday November 7th 2018 the Reserve Bank of New Zealand (RBNZ) governing board will have its November meeting to decide on borrowing costs. Currently the RBNZ’s benchmark interest rate stands at 1.75%. A Reuters poll published on November 5th 2018 showed that the majority of economists expects the RBNZ to keep rates on hold at its monetary policy meeting. The last time that the RBNZ changed rates was in November 2016. Just two out of eighteen economists polled expect the RBNZ to hike interest rates in the third quarter of 2019 (Q3 2019) while the rest don’t anticipate changes in policy for 2019. 

The Reuters report comments on the country’s economic growth adding that “the RBNZ can take some comfort from surprisingly strong second quarter GDP growth. Yet, while inflation in the third quarter also accelerated closer to central bank’s target mid-point of 2%, some economists described this as a red herring.” Westpac’s economists seem to agree that the RBNZ’s board will keep rates on hold but believe that the accompanying monetary policy statement will more “hawkish” than the August’s 2018 one. 

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01 / 11 / 2018 | Wiadomości Rynkowe

US NFP figure likely to have risen in October 2018

The day that most economists across the world are waiting for in the beginning of each month has arrived. On Friday November 2nd 2018 the United States (US) Department of Labour will publish the Nonfarm Payrolls data for October 2018. The data releases won’t stop here as market analysts will also have the opportunity to scrutinize data regarding the average hourly earnings and the country’s unemployment rate in October 2018. 

Nonfarm Payrolls (NFPs) October 2018 figure

The majority of economists polled by Bloomberg on October 29th 2018 suggest that the US NFPs figure will likely come in at around 190,000 in October 2018. The figure is expected to surge after a disappointing 134,000 reading recorded in September 2018. The September figure was well below market expectations of 185,000. This has been the lowest reading in the last 12 months with analysts suggesting that the Hurricane Florence and the devastation it caused in the Bahamas played a role. 

During September 2018 the majority of new jobs was added in the professional and business services, healthcare and transportation. Nonfarm Payrolls data is released by the US Department of Labour and represents the number of new jobs created during the previous month, in all non-agricultural business. New farm employees are excluded due to the seasonality of their profession. NFPs are regarded as an important indicator of economic conditions because they move closely in line with the overall economy. 

Average Hourly Earnings And Unemployment Rate

Market analysts will be expecting to scrutinise data associated with the average hourly earnings and the unemployment rate. According to their forecast, the average earnings are likely to pick up coming in at 3.1% on an annualised basis in October 2018. If the forecast is confirmed, the reading will be 0.3% higher than the September 2018 recorded figure. 

Regarding the US unemployment rate in October 2018, economists suggest that it remained unchanged at 3.7% as in September 2018. The September figure was 0.2% lower than the July and August 2018 ones and below market expectations of 3.8%. This is the lowest jobless rate recorded since December 1969. Since January 2018 the unemployment rate has lowered by 0.5% in total. 

ADP Employment Report

The ADP employment report published on Wednesday October 31st 2018 surprised market analysts on the upside. The ADP employment report recorded 229,000 new jobs added in the US economy in October 2018, well above the 189,000 figure in the market’s forecast. The 229,000 new jobs reading is the best recorded since October 2014. Some analysts suggest that the correlation between the ADP employment and the NFPs final reports indicate that Friday’s data may surprise the markets. 

However, analysts at Nomura suggested in a report published on Wednesday October 31st that the ADP employment report and the NFPs final figure may not be in line this time. “Today’s report suggests some upside risk to our forecast of a 170k gain in private nonfarm payroll employment for Friday’s BLS report. However, ADP usually does not reflect weather disruptions. Given the impact of Hurricanes Florence and Michael in September and October, there is more uncertainty than usual around Friday’s NFP number and today’s ADP report may not accurately reflect the negative impact from Hurricane Michael,” is noted in their report. 

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Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.56% of retail investor accounts lose money when trading CFDs with AFX Capital Markets Ltd. 68.77 % of retail investor accounts lose money when trading CFDs with AFX Markets Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information about the key risks associated with CFDs, please refer to our full Risk Disclosure.

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31 / 10 / 2018 | Wiadomości Rynkowe

BoE likely to keep interest rates unchanged

The Bank of England’s (BoE) meeting will dominate the financial news headlines on Thursday November 1st 2018. The governing council of the BoE headed by Marc Carney will convene to decide on interest rates. As the Brexit date in March 2019 approaches the BoE’s decisions regarding the monetary policy that it would like to implement gain more and more importance. 

Economists suggest that the Monetary Policy Committee (MPC) of the BoE will keep its benchmark interest rate unchanged at 0.75% in its November meeting. They also forecast that all 9 MPC members will vote in favour of that. The MPC had voted unanimously to leave borrowing costs unchanged on September 13th 2018 with its decision coming in line with market expectations. The last time that the BoE raised its benchmark interest rate was in August 2018. 

A report by Nomura, which is one of the largest financial services group with headquarters in Asia, said that the BoE won’t likely alter its policy guidance in the upcoming meeting. Nomura’s analysts wrote in their report that “the CPI inflation has been volatile since the Bank published its August IR. Its forecasts for July, August and September 2018 had been for 2.6%, 2.4%, 2.4% but in the event the numbers came out at 2.5%, 2.7% and 2.4%. Despite this volatility, the most important point to note is the current rate of inflation for September 2018 is exactly where the Bank thought it would be three months ago – in other words, the point of departure for the Bank’s November 2018 forecast round is exactly as expected”. In the report’s end, they also note that Brexit remains a sizeable risk and that the weak global growth may put a strain on the effort to implement a more aggressive monetary policy. 

Economists at Internationale Nederlanden Groep (ING) believe that despite better economic activity over the past few months, Brexit is still the BoE’s number one priority. In an ING report released on October 29th 2018 it is noted that “in any other situation, we suspect the Bank of England would have been looking to increase interest rates pretty soon. Wage growth - something which has been at the heart of the Bank's rate hike rationale has been surprisingly strong over the past few months. But inevitably, Brexit remains policymakers’ number one consideration. That means we’re likely to see a unanimous vote to keep policy unchanged at Thursday's meeting, and we don’t expect a rate hike before May 2019.” The ING report mentions that “without the certainty that a deal will be in place in March, an increasing number of firms are likely to implement contingency plans, and this would inevitably put pressure on investment and hiring. If firms continue to become more vocal about the risks, consumer confidence could also take a hit.”

Rabobank’s economists seem to agree with their ING counterparts on the correlation between the BoE’s decisions and Brexit. “The MPC is ‘blinded’ by Brexit; the million dollar question is what kind of trading relationship will ultimately evolve from the negotiations. The Governor Mark Carney boldly stated that Brexit doesn’t handicap policy making, but this is a bluff. The economy has performed fairly well recently, yet no one expects the MPC to act,” they note in a report published on October 26th 2018. Rabobank’s research analysts continue to expect the MPC to act after Brexit in March 2019 and they forecast an interest rate hike in May 2019. 

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30 / 10 / 2018 | Wiadomości Rynkowe

BoJ rate decision, Australian and Eurozone CPI inflation attract investors' attention

Wednesday October 31st 2018 is expected to be a day full of economic data releases coming from across the world. Economists will be able to scrutinise the data and form an opinion about the state of the relevant countries’ economies. The release of such data is becoming more important as the trade war between the United States and its partners such as China, the European Union (EU) and others is escalating putting a strain on the global economic growth. 

Australian CPI Inflation

The day will be starting from Australia where the Australian Bureau of Statistics (ABS) is expected to publish the Consumer Price Index (CPI) inflation data for the third quarter of 2018 (Q3 2018). According to the economists’ forecast, the CPI inflation is likely to have risen by 1.9% in the third quarter of 2018 on an annualised basis. The estimate is 0.2% less than the 2.1% inflation reading recorded in the second quarter of 2018. On a quarter-to-quarter basis the CPI inflation is expected to have remained unchanged at 0.4%. 

Analysts at TD Securities published a report on October 26th 2018 on Australia’s CPI inflation. In their report, they suggest that the country’s CPI inflation is likely to have risen by 0.6% on a quarterly basis and by 2.1% on a year-to-year basis. “We also arrive at +0.6%/q in a 'bottom up' sense. While fuel prices have recently exploded (late September/early October 2018), a dip earlier in the quarter sees Q3 fuel prices rise by +0.9%/q (although early tracking for Q4 is +7.6%/ q)” TD Securities’ analysts noted.

Bank of Japan (BoJ) interest rate decision 

On Wednesday October 31st the BoJ’s governing board will convene to decide on interest rates. The majority of economists polled by Reuters suggests that the BoJ will keep borrowing costs unchanged. Economists at Internationale Nederlanden Groep (ING) wrote in their report, released on October 29th 2018, that the BoJ’s October meeting will be an important one. “The BoJ’s Governor, Haruhiko Kuroda, has been dropping hints about changes to BoJ policy. He has been sounding more positive about inflation, with core (ex-fresh food) inflation now at 1.0%. The elusive 2% level may still be the official target, but there is a sense that a more pragmatic 'good enough’ rate of about 1% could pave the way for the BoJ to start tweaking its policy stance,” is noted in the report. ING’s economists said it is possible to see “more stealth tightening steps to come this week - and this could be mildly supportive for the Japanese Yen.”

Eurozone preliminary CPI inflation data

Going back to Europe, on Wednesday October 31st morning, Eurostat, which is the official statistical office of the European Union (EU), will publish the Eurozone’s preliminary CPI inflation data for October 2018. According to a poll published by Bloomberg on October 26th 2018, the CPI inflation is likely to have risen to 2.2% on an annualised basis, 0.1% higher than the September’s reading. The core CPI inflation is expected to have ticked up reaching 1.0% on a year-to-year basis. Eurostat will also release data regarding the Eurozone’s September 2018 unemployment rate which is likely to come in at 8.1%, remaining unchanged since August 2018. 

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16 / 10 / 2018 | Wiadomości Rynkowe

Economists focus on EU and UK CPI inflation data

On Wednesday October 17th 2018 the Office for National Statistics (ONS) will publish a report regarding the United Kingdom’s (UK) Consumer Price Index (CPI) inflation in September 2018. On the same day, Eurostat, which is the official statistical office of the European Union (EU) will publish the Eurozone’s CPI inflation data as they were recorded by its services during September 2018.

UK CPI inflation

The most important of the releases is the UK’s CPI inflation data. The CPI is an indicator used to measure the rate at which the prices of goods and services bought by households rise or fall, which is the rate of inflation, referred to as the CPI inflation. Analysts are anticipating that the CPI inflation picked up coming in at 2.8%, on an annualised basis. In August 2018, the UK’s CPI inflation came in at 2.7% on an annualised basis from 2.5% in July 2018 and above the analysts’ expectations for a 2.4% figure. 

The ONS will also release data regarding the UK’s core CPI inflation in September 2018. Core CPI inflation is inflation excluding the prices of seasonally volatile products such as food and energy. According to analysts’ forecasts, the UK’s core CPI inflation is expected to have increased from 0.9% recorded in June 2018 to 1.0% in September 2018 on a year-to-year basis.

Nomura, which is one of the largest financial services group with headquarters in Asia, published a report on Monday October 15th 2018 forecasting a UK CPI inflation drop. “We forecast a fall in CPI inflation in September following its above-consensus print the previous month. Rises in petrol prices and utility bills could limit how far inflation declines in September 2018, however, which explains our forecast of just a one tenth fall to 2.6%. We look for CPI inflation to fall back towards its 2% target over the next six months,” said the report. 

EU CPI inflation

On Wednesday October 17th 2018 Eurostat is expected to release the Eurozone’s CPI and core CPI inflation finalised data for September 2018. Economists forecast that the Eurozone’s CPI inflation is likely to have picked up, coming in at 2.1% on an annualised basis. In August 2018 the annual inflation rate in the Euro bloc had reached 2%. If the forecast is confirmed by the statistics, the 2.1% inflation reading will be the highest recorded since July 2018. 

Annual core CPI inflation, which excludes volatile prices of energy, food, alcohol & tobacco and at which the European Central Bank (ECB) looks in its policy decisions, is likely to ease to 0.9% in September 2018 from 1% in August 2018, below market consensus of 1.1%.

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09 / 10 / 2018 | Wiadomości Rynkowe

IMF's "World Economic Outlook" report and UK GDP attract market attention

The report released by the International Monetary Fund (IMF) on Tuesday October 9th 2018 and the upcoming Gross Domestic Product (GDP) data release in the United Kingdom (UK) tomorrow are topics of conversation among financial analysts today.  The IMF’s “World Economic Outlook” report which is published twice a year in April and October said that the Fund will be cutting its global growth forecast because of the continued clash between the United States and China. 

“World Economic Outlook” report by IMF

The IMF’s analysts noted that the global economy is now expected to grow by 3.7% during this year and by another 3.7% during 2019. The new estimates are 0.2% lower than the forecast published in April 2018. The reason behind the downgrade as the IMF’s economists suggested is the trade tension between the US, China and other important trading partners. 

Maurice Obstfeld, the IMF’s chief economist, said in a speech that earlier growth projections appeared to be too optimistic as trade tensions have become more intense in the last few weeks. “The impacts of trade policy and uncertainty are becoming evident at the macroeconomic level, while anecdotal evidence accumulates on the resulting harm to companies. Trade policy reflects politics, and politics remain unsettled in several countries, posing further risks,” he said. Maurice Obstfeld added that “two major regional trade arrangements are in flux — North Atlantic Financial Trade Agreement (NAFTA) and the European Union (EU). US tariffs on China, and more broadly on auto and auto part imports, may disrupt established supply chains, especially if met by retaliation.” 

In its report, the IMF suggested that the two largest economies involved in the trade war, China and the US, are expected to grow slower than initially thought. More specific the US economy is likely to grow by 2.9% in 2018 and 2.5% in 2019, while the Chinese economy is anticipated to achieve a 6.6% rate of growth during 2018 which will slow to 6.2% in 2019. Apart from the trade tensions, the “World Economic Outlook” report focused on emerging markets that have come under strong pressure in recent months. As noted in the IMF’s report economies such as Turkey’s and Argentina’s are experiencing massive capital outflows as investors prefer to take advantage of the rising interest rates back in the US. 

UK GDP growth in August 2018

In the UK the Office for National Statistics (ONS) is expected to publish a series of financial data regarding the country’s economy. The report is going to include the UK’s GDP rate of growth as it was recorded by the ONS services during August 2018. Economists suggest that the UK’s GDP grew by 0.1% on a month-to-month basis, slightly lower than the 0.3% rate recorded in July 2018. 

Financial analysts will also focus on data regarding the industrial and manufacturing production in the UK in August 2018. Industrial production is likely to come in at 0.1% on a monthly basis, matching July’s 2018 reading. Manufacturing production is expected to have grown by 1.1% on an annualised basis, matching the rate of growth recorded in July 2018. 

In other news, the IMF in its latest “World Economic Outlook” argued that the UK’s government has the flexibility to boost public spending as the country is preparing for its exit from the EU. IMF’s analysts suggest that “the fiscal targets—which envisage the cyclically adjusted public sector deficit falling below 2% of GDP and public debt beginning to decline by 2020/2021—provide an anchor for medium-term objectives while allowing for flexibility in the short term. The pace of fiscal consolidation can be eased if risks materialize and growth slows sharply.”

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04 / 10 / 2018 | Wiadomości Rynkowe

Economists focus on US NFPs and average earnings

One of the most important moments in the month regarding the financial world is coming on Friday October 5th 2018. On that day the US Department of Labour will publish the September Nonfarm Payrolls (NFPs), the average weekly earnings and the unemployment rate in the country. Economists will pay special attention as the fourth quarter of 2018 (Q4 2018) kicked in and the US Federal Reserve board seems to be preparing to raise borrowing costs in December 2018. 

US NFPs in September 2018

These financial data reports are important for global market analysts as the US is one of the largest economies in the world. Nonfarm Payrolls data is released by the US Department of Labour and represents the number of new jobs created during the previous month, in all non-agricultural business. New farm employees are excluded due to the seasonality of their profession. NFPs are regarded as an important indicator of economic conditions because they move closely in line with the overall economy.

Economists anticipate a drop in the NFPs figure. More specifically, they expect the data to show that 185,000 new jobs were added to the US economy during September 2018. In August 2018, according to data published on September 7th 2018, NFPs impressed the markets coming in at 201,000. The figure beat market expectations of 191,000, following July’s 2018 downwardly revised 159,000. The reading was the highest recorded since February 2018. The accompanying report for August 2018, published by the US Department of Labour, mentioned that employment had grown in the professional and business services, healthcare and wholesale trade sectors.

Analysts at Wells Fargo, one of the largest banks in the US, noted that they raised their estimates for the NFPs figure from 185,000 to 210,000. They stress that the new forecast is based on the fact that the ISM non-manufacturing index hit a 21-year high in September 2018, according to data published on Wednesday October 2nd  2018. “The ISM non-manufacturing index hit a 21-year high in September, leaping 3.1 points to 61.6. Current activity, new orders and supplier deliveries all increased. Backlogs continue to rise, helped in part by elevated levels of export orders. The employment index jumped to an all-time high of 62.4. We have subsequently raised our September nonfarm payroll forecast to 210,000 from 185,000. Respondents noted, however, that labor shortages are beginning to weigh on growth and earnings,” was written in their report published on Thursday October 3rd 2018. 

US Average Hourly Earnings

The US Department of Labour is going to release data regarding the average hourly earnings in September 2018. Economists forecast that the average hourly earnings increased by 2.8%, on an annualised basis. If the forecast is confirmed, the figure will be 0.1% lower than August’s 2018 reading. On a month-to-month basis, average hourly earnings are expected to have risen by 0.3%, a bit lower than the August’s 2018 figure. Average hourly earnings are important because the US Federal Reserve takes them into consideration when the Federal Open Market Committee (FOMC) convenes to decide on interest rates.

US Unemployment Rate

The unemployment rate in the US is the last major data release on October 5th 2018. Economists are suggesting that the unemployment rate will likely come in at 3.8% in September 2018, 0.1% lower than the figure recorded in August 2018. 

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The US Dollar against the Euro, the US Dollar against the British Pound and the US Dollar against the Japanese Yen are just three of the major currency pairs that you can trade with on the STO platform. STO provides its clients with all the necessary educational material such as webinars to help them with preparing the suitable trading strategy.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66.52% of retail investor accounts lose money when trading CFDs with AFX Capital Markets Ltd. 64.84 % of retail investor accounts lose money when trading CFDs with AFX Markets Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information about the key risks associated with CFDs, please refer to our full Risk Disclosure.
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25 / 09 / 2018 | Wiadomości Rynkowe

U.S. Federal Reserve to announce interest rate decision

In the evening of Wednesday September 26th 2018 markets will be waiting for the announcement of the Federal Open Market Committee’s (FOMC) decision regarding interest rates. The US Federal Reserve (Fed) started its two-day meeting on Tuesday September 25th  2018 and will publish a monetary policy statement right after the end of the meeting. The FOMC is widely expected to approve a 25-basis point increase that will take the target range for its benchmark rate from 2% to 2.25%.

The CME’s (Chicago Mercantile Exchange & Chicago Board of Trade) FedWatch Tool which market analysts take into consideration when the Fed’s decisions on interest rates are imminent gave, on Monday September 24th 2018, 93.8% chances for a 0.25% rate hike. According to the CME’s FedWatch Tool, there was a 6.2% probability for the Fed to lift its benchmark interest rate to 2.50%. If the forecast is confirmed this will be the third time that the FOMC announces a rate hike this year.

With a benchmark interest rate hike highly likely in the September 2018 meeting, the number of hikes in the current monetary tightening cycle will reach seven. The Fed began pushing borrowing costs higher at the end of 2015, following seven years of ultra-low interest rates as a result of the financial crisis that erupted in 2008. 
Some economists believe that tempered increases in Consumer Price Index (CPI) inflation will allow the Fed to raise interest rates gradually. Headline inflation in the US has edged up in recent months, pushed up by higher fuel prices but the core CPI inflation which is closely monitored by the Fed’s board has advanced modestly. 

ING forecasts December 2018 rate hike

In a report published on Monday September 24th 2018, ING analysts suggested that the FOMC will proceed in raising borrowing costs by 0.25% on Wednesday’s meeting. “Growth is undoubtedly very strong, with high-frequency indicators suggesting activity likely accelerated in 3Q18 after the economy expanded at an already stellar 4.2% annualised rate in 2Q18. At the same time, all of the major inflation measures are at or above the Federal Reserve’s 2% target, wages are picking up, the unemployment rate is close to an 18-year low and asset prices continue to rise. All this points to further tightening of policy,” was noted in their report. 

ING’s economists added that “we are also seeing a broadening out of the reasoning for higher interest rates. For example, Boston Fed President Eric Rosengren has repeatedly warned that monetary policy should be tightened from a financial stability perspective. He and others worry that unduly low borrowing costs could be the trigger for excessive risk-taking, which will store up trouble for the US economy in the future. For that reason, we expect a rate hike this week and another in December. But markets will be watching closely for hints about the Fed's plans for 2019.”

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The US Dollar against the Euro, the US Dollar against the British Pound and the US Dollar against the Japanese Yen are just three of the major currency pairs that you can trade with on the STO platform. STO provides its clients with all the necessary educational material such as webinars to help them with preparing a suitable trading strategy. 

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19 / 09 / 2018 | Wiadomości Rynkowe

BoJ keeps rates on hold, UK CPI rises in August 2018

This week is one of those that keep investors and traders’ attention at the top level. As September is already reaching its end, the global markets are already warming up after the brief summer interruption. Last week, the European Central Bank (ECB) and the Bank of England (BoE) decided to keep their interest rates unchanged, a set of decisions that didn't surprise the experienced analysts. 

BoJ keeps interest rates unchanged

On Wednesday September 19th 2018 the Bank of Japan’s (BoJ) governing board convened to decide on interest rates. The BoJ’s policymakers announced that they would keep borrowing costs unchanged at -0.1%. The decision was widely anticipated by analysts. A report by Danske Bank published right after the meeting noted that “the BoJ also maintained its forward guidance and left its asset purchases unchanged. The BoJ has clearly shifted to autopilot mode after it announced some policy tweaks at the July meeting, and an unchanged signal from the BoJ today was fully expected. Hence, no reaction in the US Dollar/Japanese Yen rate or the Japanese fixed income market.” In their report, the Danske Bank’s economists stressed that they expect the BoJ to keep its current monetary policy intact until the end of 2019 at least. 

On Tuesday September 18th 2018, the Japanese Finance Minister Taro Aso made some comments regarding the BoJ’s meeting. Taro Aso, speaking on Reuters, said that the BoJ is authorized to decide on monetary policy matters and that he believes that the central bank’s target is to pursue the appropriate policy to achieve price stability. 
Japan’s Finance Minister continued his comments on Reuters noting that he is fully aware that the BoJ’s 2% Consumer Price Index (CPI) inflation will take a long time to achieve. Taro Aso mentioned that any debate on BoJ’s exit strategy would probably cause market confusion which he would prefer to be avoided. Aso also urged the United States (US) and China to continue negotiations regarding trade tariffs to prevent the fallout on other countries.   
   
The Reuters media agency published the results of a poll conducted earlier in the week. The survey was associated with the BoJ’s monetary policy. The majority of economists polled said that the BoJ is unlikely to unwind the massive stimulus until 2020 or later. The poll showed that most of them expect the BOJ to scale back on stimulus measures, not add to them. The economists’ forecast showed that the core CPI inflation is likely to remain the same for the following fiscal year (until March 2020). They also stressed that the expected sales tax hike would likely hurt the economy and would push Japan’s Gross Domestic Product (GDP) lower. 

UK Consumer Price Index inflation

On Wednesday September 19th 2018, the Office for National Statistics (ONS) published its August 2018 CPI inflation report. The report showed that the UK’s CPI inflation rose to 2.7%, on an annualised basis, from the 2.5% figure recorded in July 2018. On a monthly basis, the UK’s headline inflation ticked higher to 0.7%, 0.2% more than in July 2018. According to the ONS services, the core CPI inflation also jumped to 2.1% in August 2018 on a year-to-year basis from 1.8% in July 2018. 

The ONS accompanying report said that the rising transport, clothing and recreational goods prices drove the cost of living higher in August 2018 as the UK’s CPI inflation hit its highest level in the last six months. Right after the ONS CPI inflation report was published, the British Pound jumped to an eight-week high against the US Dollar as traders calculated that higher inflation would press the Bank of England (BoE) to raise borrowing costs earlier than previously thought. 

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Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66.52% of retail investor accounts lose money when trading CFDs with AFX Capital Markets Ltd. 64.84 % of retail investor accounts lose money when trading CFDs with AFX Markets Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information about the key risks associated with CFDs, please refer to our full Risk Disclosure.
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