30.10.23 - 03.11.23
Results of the previous week
Last week, US indices were up after the results of the US Fed's meeting were released. The regulator kept its key interest rate unchanged. Markets thought that comments by Fed members hinted at the Fed taking a long pause in its monetary policy tightening and waiting for the effect of its previous actions to take shape. The stock market was optimistic about this.
The regulator's dovish stance was seen as disappointing news for the dollar, which weakened against most other major currencies. Even the Bank of England keeping its monetary policy unchanged didn't prevent the pound from correcting upward.
Brent oil traded mixed. At the beginning of the week, it declined ahead of the US Fed's meeting and amid easing concerns about the market impacts of the conflict in the Middle East. Subsequently, some support was provided by relatively soft comments from the US Fed, which provoked a rebound.
Key events of the current week
The UK. GDP growth rate
Despite all of the Bank of England's efforts, price pressure in the UK remains high. Nevertheless, the state of the economy raises serious concerns, leading the British regulator to leave its monetary policy unchanged at its last meeting. Global analytical agencies predict that the UK economy will see a year-over-year decline. This means that the country is one step closer to a recession and that the Bank of England will have fewer reasons to tighten its monetary policy. These developments are bad news for the British pound.
Germany. Inflation rate
Price pressure in Europe is declining, just as it is in Germany, the largest economy in the 20 members of the Eurozone. Global analysts predict a decrease in price pressure. On the one hand, this is a positive factor, as it potentially supports the largest sectors of the economy, which have recently experienced serious difficulties. On the other hand, lower inflation allows the European Central Bank to reconsider its monetary policy stance. That means the key interest rate won't be raised anymore. That's bad news for the euro.
The US. New jobless claims
The US economy is feeling quite confident. This applies to most key sectors despite the US Fed's rates being at their highest since 2001. The situation in the labour market, which the Fed considers along with the inflation rate when deciding on monetary policy, remains relatively stable. The unemployment rate and new jobless claims are slightly increasing. All this only convinces markets that there isn't much reason to expect the interest rate to start declining, at least not until after late 2023. This development supports the dollar.