Markets will be focusing today, Wednesday, July 12, 2017, on a number of announcements scheduled on the economic agenda, which results usually moves prices. Therefore, until these results are known, traders should be careful in making the right trading decisions.
UK Unemployment Data: The most recent data about from the UK about the workforce, unemployment and number of those seeking unemployment insurance, will be released today, although, most of the focus will most likely be directed towards the wage average data. Bank of England was very shocked to know that the earning data remained very week despite narrow labor market.
Week wages data should make it harder for the Monetary Policy Committee to raise the rates on the short run, and there are also increasing fears regarding the consumer spending expectations, considering that prices go down in true value. However, if there was a proof that the average income is increasing, there will be another shift in expectations towards raising the rates on the short-term.
It is also important to note that the Statistics Bureau canceled the policy of pre-releasing data to government administrations starting from first of July. Until now, operating data in the UK was very obvious, but will now see a large drop. The GBP direction towards main data will drop significantly, but there will now be the risk of increased volatility on the actual announcement, which was witnessed after the release of the most recent manufacturing production data on Friday. The unemployment in the U.K was at 4.6% in April, however, the wages were stuck at 2.1%, below the inflation rate, which is now stands at 1.8% annually. The unemployment claims in May went to 7.3K, and it is expected to show another increase to over 10K.
Bank of Canada Interest Rates decision: in addition to the rate decision, the Bank of Canada will issue its last report on Monetary Policy, and the governor Poloz will have a press conference after the release. There is been a massive shift in the Bank of Canada during the last few weeks, with main officials suggesting especially positive expectations, epically with the presence of strong data. The central bank is confident that reducing rates in 2015 has done its job now, especially with the oil prices stabilizing. There is also increasing confident that the inflation will rise on the medium-term with the diminishing recession.
Governor Poloz suggested that policy normalization needs to start before inflation reaches the target. Therefore, there are increased expectations that the central bank will start raising interest rates during this meeting with the markets pricing in a chance of more than 50% in favor of the move. Rates could be 0.75% from 0.50%. These expectations are expected to increase after the release of the Canadian Job Report, which was much stronger than expected for June. The Lonnie will be subject to sharp decline if the rates were not raised, also, the general statement will lead to a high level of choppiness.
Testimony of Janet Yellen, Chairman of the Federal Reserve: Janet Yellen will testify in front of the congress today. Yellen’s testimony should always be audited thoroughly, because of positional hints on the monetary policy. However, the fact that the written testimony have already been issued, will mitigate the impact.
Evidence shows that Yellen will be looking forward to avoid subjective comments, with little new leads in the policy report. Markets will be looking for comments on rates and normalizing policies. Financial stabilities factors can be of the most important aspects of Yellen’s testimony, with questions around assists prices increasing, and prices and bubbles risks. Stocks will be pressured down if Yellen expressed fears regarding asset prices.
It is also likely that there will be big focus on whether Yellen will be willing to have another term as the chairman of the federal reserve, and whether there are talks with President Trump.