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17.12.2007 - Currency and Stock Markets Weekly Outlook

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Date: 2007-12-17 15:44

Last week’s decision of the FOMC to cut interest rates by 25 basis points caused equities markets to tumble. This week there are a couple of reports that investor will need to pay attention to.


On Tuesday, we will learn more about the US housing market. Both, housing starts and building permits, are forecasted to decline. Those would be the lowest levels in years. In Europe, worth attention will be the Swiss retails sales, UK’s CPI and Euro zone’s Trade Balance publications.

On Wednesday, the Bank of England’s meeting minutes will be released. Also on that day European Central Bank (ECB) President, Jean-Claude Trichet, will give an introductory statement at the Quarterly Testimony before the EU Committee on Economic and Monetary Affairs, in Brussels. Investors expect to hear some news about the future monetary policy of the ECB. Inflation in the Euro zone is increasing and a possible interest rate hike in the near future might be possible. Also Wednesday is the day when the last of the big central banks will announce the level of interest rates. The Bank of Japan is forecasted to keep interest rates unchanged at 0.50%, keeping carry trade transaction very attractive to investors.

American GDP and deflator publications will not have much effect on the markets since most numbers are already known. As usual on Friday a couple of reports should get attention. In the US, the Core PCE Price Index will the most important but also personal spending and personal income reports will be published. At the end of the day the University of Michigan Index will be released. It measures consumer attitudes concerning both the present situation and future expectations. Friday will be important fore investors betting on the CAD since the Canadian GDP and retail sales reports will be published.

Investors in Poland can follow some news from the local market. The Polish Monetary Policy Council start its meeting on Tuesday and on Wednesday is expected to make a decision regarding interest rates. Another interest rate hike is possible (currently rates at 5.0%) and such decision will strengthen the Polish Złoty. On Friday, investors expect news regarding retail sales (forecast: 18.5%, prior: 19.4%), unemployment rate (forecast: 11.2%, prior: 11.3%) and net inflation (forecast: 1.5%, prior: 1.4% Y/Y).

We are approaching Christmas and volatility on the markets should decrease. Investors should not expect big movements and should be getting ready for the holidays.


Adam Narczewski