Friday 12-05-2017 Lookback

Welcome to the easyMarkets weekly review where we look back over the results of some of the previous week’s economic indicators. It gives us the chance to reflect on how much expectations were met or missed and to examine a successful trade you could have made this week.

Event: Australian Federal Budget 2017

Date: Tuesday 09 May 2017 at 09:30 GMT

Markets affected: AUD/NZD, AUD/USD, AUD/GBP

Trending hashtags: #aud, #budget

The Australian dollar rose modestly following the Liberal Party’s budget announcement for 2017. Previously it had taken a dip to US$73.41 but rallied up to US$73.14 following the budget release. The fall from last night has been attributed to a fall in commodity currencies and at some point the previous evening touched US$73.55 before making its comeback. Budget highlights include a rise in Medicare Levy, a program to assist first home buyers, $18.6 bn increase to school funding, cuts to universities with student fee increases, a new bank levy for large-scale institutions, rise in tobacco tax, a reduction of taxes for bitcoin users, and a $75 bn investment for infrastructure including $10 bn national rail program that should help farmers connect easier with cities. Response to Malcolm Turnball budget is that it is a critical test for the Government as the deficit sits just shy of $40 bn.

Event: ECB President’s Speech

Date: Wednesday 10 May 2017 at 11:00 GMT

Markets affected: EUR/USD, EUR/GBP

Trending hashtags: #eur, #draghi, #ecb

The euro consolidated below $1.09 against the USD on Wednesday after European Central Bank President Mario Draghi’s speech where he commented that an accommodative monetary policy was still needed even with an improving economy for the Eurozone. In his speech at The Hague, Draghi said the region’s economic recovery is “becoming increasingly solid,” but that “it is too early to declare success.” The comments were welcomed by investors, who were considering that the ECB may look to reduce its stimulus program earlier than forecasted.

Event: Reserve Bank of New Zealand Interest Rate Decision

Date: Wednesday 10 May 2017 at 21:00 GMT

Markets affected: NZD/ USD, AUD/NZD

Trending hashtags: #nzd, #interestrate

With the aim of achieving inflation targets and growing the economy, the Reserve Bank of NZ kept the current interest rate at 1.75%. Bank Governor, Wheeler, noted that even with slower growth in the second half of 2016, the outlook for this year remains optimistic thanks to the easy monetary policy. Strong growth in migration, positive construction activity and higher household spending are contributing factors to economic growth. On the back of Dovish comments from the RBNZ the NZD fell to 11-year lows touching $0.6817 at one point against the USD before consolidating at $0.6832.

Event: Bank of England Interest Rate Decision

Date: Thursday 11 May 2017 at 11:00 GMT

Markets affected: EUR/GBP, GBP/USD

Trending hashtags: #gbp, #interestrate

The Bank of England kept the interest rate at current levels and was negative on the UK’s growth forecast as Brexit still remains of primary concern. The BOE trimmed its yearly growth outlook to 1.9% from a previous estimate of 2% made in February. In a 7-1 vote, the central bank decided to hold interest rates at 0.25%. The British pound declined Thursday after the announcement and was also put under pressure by weaker than expected economic data. The nation’s industrial output fell 0.5% in March, with manufacturing production falling 0.6%. London’s goods trade deficit also widened much more than expected to £13.44 billion from £11.45 billion.

Trade of the Week

Time in: Thursday 11 May 2017 at 11:00 GMT
Market : GBP/USD
Investment: $500 with 200:1 leverage
Time out: Thursday 11 May 2017 at 12:00 GMT

P&L: $527

If you had sold the GBP/USD with a $500 margin at the price of 1.29238 and closed the deal after the release of the BOE interest rate decision on Thursday at 11:00 GMT which saw the pound fall by 0.5%, you might have made $527. Note this example does not take into account spread.

Sources:

http://www.news.com.au/finance/markets/australian-dollar/aussie-dollar-gets-budget-bounce/news-story/628411f4b94d984a6bef9c226e85a7aa

https://www.theguardian.com/australia-news/2017/may/09/australia-federal-budget-2017-summary-at-a-glance-winners-and-losers

http://www.adelaidenow.com.au/business/jobs/federal-budget-2017-help-on-electricity-prices-housing-and-100-million-for-after-holden-closes-in-sa/news-story/b8eb848fddae092eaedda70952771d33

RBNZ Rate Decision: Reserve Bank of New Zealand Leaves Cash Rate at 1.75%

http://www.econotimes.com/Asia-Roundup-Kiwi-hits-11-month-low-as-RBNZ-stands-pat-dollar-touches-8-week-peak-against-yen-sterling-consolidates-ahead-of-BoE-policy-meeting-Thursday-May-11th-2017-695214

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