According to Bloomberg News, retail sales probably improved for a second month in August as consumers overcame a lack of jobs and stagnant wages, economists said before reports this week. A 0.7 percent increase in purchases would follow a 0.8 percent July advance, according to the median forecast of 66 economists surveyed by Bloomberg News ahead of Commerce Department figures on September 14. Other reports may show inflation accelerated and manufacturing stagnated.
China’s imports unexpectedly fell and industrial output rose the least in three years, signaling more stimulus may be needed after the government last week said it approved subway and road projects across the nation. Inbound shipments slid 2.6 percent in August from a year earlier as exports rose 2.7 percent, the customs bureau said in Beijing today. Production increased 8.9 percent, the National Bureau of Statistics said yesterday. Inflation accelerated for the first time in five months, according to an article published by Bloomberg News.
Greek Prime Minister Antonis Samaras failed to secure agreement from his coalition partners on 11.5 billion euros ($14.7 billion) of spending cuts required by the country’s lenders to release funds needed to keep the country in the euro. Democratic Left leader Fotis Kouvelis, whose party is one of the three in Samaras’s coalition government, said no decision had been taken on the package and that poorer Greeks must be protected from more austerity. The three leaders agreed to meet again on September 12, two days before euro area finance ministers meet to be briefed on Greek progress.
German Finance Minister Wolfgang Schaeuble sees Germany’s highest court dismissing a challenge to the European Stability Mechanism, or ESM, when it rules on September 12, Schaeuble said in an interview with Bild am Sonntag. The constitutionality of the ESM was “thoroughly” probed at its inception, the newspaper cited Schaeuble as saying. The Federal Constitutional Court has never seen the course of European integration as being unconstitutional, Schaueble said in the interview.
EUR/USD: The EUR/USD touched a peak of 1.28163 (four-and-a-half month high) on Friday, after U.S. employment data came in lower than expected, fueling expectations for fresh easing measures by the Federal Reserve. In addition, the European Central Bank’s new bond-buying plan buoyed the risk sentiment.
Today, the pair was trading slightly lower at 1.27809 at the time of writing on market correction and profit taking, ahead of the Greece’s Prime Minister Antonis Samaras meeting with officials from the nation’s creditors, the European Central Bank and International Monetary Fund today. This week, lots of fluctuations are expected on the market, as the Germany’s Federal Constitutional Court will give its ruling on September 12 on the country’s participation in the European Stability Mechanism, a permanent 500 billion-euro fund that offers loans to member states and may buy their bonds to lower borrowing costs.
Moreover, the Fed will start a two-day policy meeting on September 12, where investors are expecting the Fed to give indication on the easing measures. Other events likely contribute to the volatility this week are:
- Monday: The eurozone will release data on investor confidence, while France will publish official data on industrial production.
- Tuesday: The U.S. will release a report on trade balance, the difference in value between imported and exported goods and services.
- Wednesday: The eurozone will release official data on industrial production, while Italy will publish individual data. Later in the day, the U.S. will release official data on import prices, followed by a government report on crude oil stockpiles.
- Thursday: The ECB will produce its monthly bulletin, Italy is to hold an auction of 10-year government bonds. While, the U.S. will publish government data on producer price inflation, as well as a weekly report on initial jobless claims. The Federal Reserve will announce its benchmark interest rate; the announcement will be accompanied by the bank’s rate statement.
- Friday: The eurozone will publish data on consumer price inflation. Meanwhile, European Union finance ministers will hold a first day of talks in Brussels. While the U.S will release official reports on consumer price inflation, retail sales and business inventories.
The Federal Reserve will also release data on the capacity utilization rate and industrial production, while the University of Michigan will produce reports on consumer sentiment and inflation expectations. Investors should be very prudent. The resistance level is at 1.28784 and the support level is at 1.26974 on the weekly chart.
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GBP/USD: The GBP/USD was significantly up Friday, after weaker-than-expected U.S. nonfarm payrolls data boosted speculation that the Federal Reserve will embark on a third round of stimulus measures. Moreover, U.K. government bonds fell last week, with yields climbing to the highest level in two months, as signs the economy is emerging from recession reduced demand for safer investments.
The pair was trading lower this morning at 1.59964 at the time of writing on profit taking and market correction, as investors awaits German court ruling on the constitutionality of the European Stability Mechanism on Wednesday and the Federal Reserve’s policy meeting on Thursday to get visibility on the market.
Other significant events in the UK likely to affect the market are: Tuesday, industry data on house price balance and Wednesday, official data on claimant count change and the unemployment rate. Speculations and sentiments will be driving the market throughout the week. Investors should be very cautious. The resistance level is at1.60651 and the support level is at 1.59334 on the weekly chart.
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Oil (WTI): Oil traded peaked at 96.704 last week on speculation that countries from the U.S. to China will add economic stimulus, countering signs of a slowdown that threatens fuel demand. The commodity was trading lightly lower at 96.090 at the time of writing on market correction and profit taking ahead of Federal Reserve meeting to discuss monetary policy and the German court ruling on the constitutionality of the European Stability Mechanism this week.
Data from China showed today, that net crude imports last month, the second- biggest consumer of the commodity, slid to the lowest level in almost two years amid slowing global demand for the nation’s goods, adding to hopes that more stimulus may be needed to boost the economy and specific measures to support and stabilize foreign trade. In the coming week, investors will be focusing on the outcome of the Federal Reserve’s policy meeting on Thursday as well as German court ruling on the constitutionality of the European Stability Mechanism on Wednesday.
In addition, renewed fears over escalating violence in Syria and lingering tensions between Iran and the West will continue to support oil prices. The resistance level is at 98.387 and the support level is at 94.111 on the weekly chart.