What can we expect during the upcoming week 08.01-12.01.2018

The next week seems to start quietly, but on Monday, at 17:30 we expect the BoC to publish the Business Outlook Survey in the country. After the best employment data, unemployment in Canada fell to a 40-year low. This changes the plans of central bankers to keep interest rates unchanged, and traders have already set an 80% chance of a change in monetary policy as early as January 17. But it all depends on key business prospects. In recent years, this report has been widely used to send signals on the future of the economy and interest rates. If the next week we find that inflation is rising, it will free the way to raising rates. In an alternative scenario, markets will have to rethink their chances. Certainly, investors have lost confidence in Poloz in the last 6 months. He seems to be trying to build some kind of heritage behind him and believes that by offering less information on the market, he does his job perfectly. In reality, the central task of any central bank is to minimize volatility. By changing the rules of the game in this way, market participants are experiencing a real difficulty in drawing up a plan and being aware of what follows. After all, however, BoC will do what the economy needs, despite communication problems. The record labor market in the country, and the rise in global growth, talk of raising interest rates. As for USD / CAD, expect a downward movement to 1.2100 before the end of the month. Together with rising interest rates, raw materials are gaining momentum and the launch of the pipeline in the country should ease Canadian oil exports.

Market participants will be watching with enormous interest the outcome of the meeting between North and South Korean leaders scheduled for January 9th. There has been no communication between the two neighbors since 2015, and relations have been greatly exacerbated by Kim's regime. US President Donald Trump said the talks were unlikely to get through without his firm stance against Pyongyang. North Korea reopened its cross-border communications channel on Wednesday with South Korea for the first time in nearly two years. This move was a signal of a vital diplomatic breakthrough, as geopolitical tensions increased due to North Korea's nuclear capability. Trump raises concerns Tuesday when he said the United States has a "much bigger" and "more powerful" nuclear button than North Korea's Kim Jong Un. The president said the sanctions "are beginning to have great influence" on Pyongyang. The United States and its allies are putting increasing economic pressure on North Korea to hinder the development of its arsenal of nuclear weapons and ballistic missiles. Kim Jong Un proved last year that it can be very unpredictable and does not listen to anyone - so investors remain cautious before the meeting. In case of negative news from the event, strong growth in hedging financial instruments such as Reversed ETF's, Gold, JPY and CHF may be expected.

As for European markets in the new year, Citigroup strategists are the boldest in their predictions, expecting the Stoxx 600 to reach over € 460 this year. This is an increase of over 16%. According to Citi, European stocks have been underestimated throughout the 2009 period. If the promotion happens, it will also be the best indicator for the region than the US over the past 13 years. The bank's expectations are that the profits of the companies in the region will rise by 15%, which will help the producers oriented mainly to export, to overcome the strong euro. Citi's strategies have been particularly bullish over the past years, but have not yielded the expected results. For comparison last year the forecasts were for growth of 15%, but the real index only realized 7.7%.

In the US markets, the main indices are setting record after a record. The Dow Jones Industrial Average plunged over 25K for the first time in history and today it is traded around 25,218. The Dow idea to reach 25,000 was quite impossible even a year ago. And while symbolism is important, true history is not just about round numbers. The truth is in the exceptional economic power that pushes the markets up. The index jumped more than 24,000 on November 30, 25 days before writing this record. The DJIA took just 35 days to rise from 20,000 to 21,000 last year. The Fed is expected to raise interest rates three times in 2018, and the indexes are currently accumulating positive expectations. Banking shares that benefit from the news are at the forefront. There are no signs of reversing of the trends at this time. In the new week, we expect CPI data in the US to show whether inflation in the country is rising to 2 per cent as desired by the central bank. The Fed's Philadelphia Governor said two increases in interest rates this year are quite sufficient. With three rises expected in 2018, this news comes in extra weight and even the weak dollar. As the main reason for the smaller number of interest increases, Harker points to low inflation. If the US continues to publish worse economic data and inflation remains low, the US monetary policy committee is likely to think about the third rising interest rate.

Economic calendar for the upcoming week 08.01-12.01.2018

Monday:
09:00 Germany - Factory Orders
10:30 UK - Halifax House Price Index
12:00 Europe - Retail Sales
17:30 Canada - BoC Business Outlook Survey

Tuesday:
02:30 Australia - Building Approvals
09:00 Germany - Industrial Production
17:00 USA - JOLT's Job Openings

Wednesday:
02:30 Australia - NAB Business Confidence
03:30 China - CPI
11:30 UK - Manufacturing Production
15:30 Canada - Building Permits
17:30 USA - Crude Oil Inventories

Thursday:
02:30 Australia - Retail Sales
14:30 Europe - ECB Publishes Account of Monetary Policy Meeting
15:30 USA - PPI

Friday:
15:30 USA - Core CPI
15:30 USA - Retail Sales
22:30 CFTC - Speculative Net Positions

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