Central bank policy expectations drive markets

Market Overview Video Transcript

Hello dear traders, let us review how markets evolved in the past week. The US dollar index ended the week 0.5% lower as weak nonfarm payrolls dampened expectations of a rate hike at September 20-21 Fed policy meeting. The euro ended the week 0.6% higher and British Pound slipped 0.2% against the dollar. The SP500 finished the week 2.4% lower after Friday’s selloff as hawkish comments of Federal Reserve policy makers spurred concerns about a rate hike soon. US stock markets were closed for the Labor Day holiday on Monday. On Tuesday US stocks advanced after weak US service sector report was deemed as possibly delaying an expected interest rate hike by the Federal Reserve. European stocks closed lower. On Wednesday US stocks slipped as market participants deemed the release of moderately positive Beige Book report by Federal Reserve provided some support for a rate hike likelihood soon. The European Central Bank took a more hawkish stance on Thursday as it left interest rates unchanged, didn’t expand the stimulus program and declined to extend its program of monthly bond purchases past March 2017. The SP500 dipped 0.2% with 2.5% drop in Apple stocks weighing on market outlook after the release of new iPhone failed to impress investors. US stocks sold off on Friday as investors were shocked out of complacency by Federal Reserve officials’ hawkish comments. The Boston Fed President Eric Rosengren, who’s a voting member of the Fed’s policy committee, said a “reasonable case can be made” for raising interest rates. He was followed by Governor Tarullo, a known dove. Tarullo said a rate increase this year couldn’t be ruled out but he would like to see more inflation. SP500 lost 2.5%, worst daily loss since June 24 Brexit vote. The broad market index fell below the 50-day moving average. The dollar edged 0.03% higher. This week the most important data will come out on Thursday: US retail sales report together with factory data and industrial production for August. A strong retail sales figure may raise the chances for the rate hike at September Fed meeting. The Bank of England monetary policy committee meets on Thursday. No change in policy is anticipated. And US consumer prices together with consumer sentiment will be released on Friday. This was all for the past week, thank you, stay tuned and happy trading.