Weekly Market Outlook: ECB Monetary Policy Statement and Brexit in focus
After last week's shocking US employment report which showed only 245,000 jobs were added to the economy against an expected 440,000, all eyes now turn to this week's European Central Bank Monetary Policy Statement and Press Conference on Thursday.
The bank is expected to deliver some more stimulus to aid the failing economy, however most of this has now already been priced into the currency with EURUSD soaring higher in recent weeks. The potential for a coronavirus stimulus bill in the US and the volatility that could develop in the US dollar is sure to create some fireworks this week.
The Bank of Canada also releases its latest rate statement report on Wednesday this week. Traders will be wondering if there will be a positive update considering last Friday's surprisingly bullish employment report which showed more than 62,000 jobs were added to the economy against an expected 22,000.
Of course, a few earnings announcements on the calendar and an ongoing deadlock in Brexit talks are sure to add to market volatility this week. Overall, there are some big themes happening in the market right now. You can learn more about them and how to capitalise on what's happening in the markets through this selection of recent education articles:
Weekly Forex Calendar
Source: Forex Calendar provided by Admiral Markets UK Ltd.
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Trader's Radar - ECB Press Conference
On Wednesday the European Central Bank releases its latest interest rate decision in the 12.45 pm GMT Monetary Policy Statement, which will be followed by a press conference at 1.30 pm GMT. These announcements can be market movers so be sure to maintain strict risk management principles.
In the last meeting, the ECB committed to delivering more stimulus in this meeting. As traders have been anticipating this the euro currency has surged higher across the board with the biggest moves against the US dollar. The problem now is that the central bank does not like a high euro as it can stunt growth and inflation.
However, investors like the growth story of Europe over the US right now which could keep the currency supported. The weekly chart below shows just how high the EURUSD exchange rate has risen since the March low after the coronavirus pandemic sell-off.
Source: Admiral Markets MetaTrader 5, EURUSD, Weekly - Data range: from Jan 20, 2013, to Dec 4, 2020. Performed on Dec 4, 2020, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
After breaking through resistance at 1.1610 (horizontal blue line), price subsequently retraced and bounced off the same level, turning the resistance line into a support line. Since then the price has continued to rally higher and currently shows a clear path towards the multi-year high of 1.2544.
The combination of a strong euro and a weak US dollar could be set to continue after last week's surprisingly bad US employment report. As yet, the failure to reach an agreement with the UK regarding a trade deal has not affected the euro. But, as the negotiations enter their final stages it could be a risk event for the euro but not as much as it will be for the British pound, potentially creating some interesting opportunities in EURGBP.
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Corporate trading updates and stock indices
Global stock market indices continued to edge higher last week with US stock market indices recording new all-time high price levels once again. This is a huge divergence from European stock market indices which have struggled to gain any momentum, most likely due to the high euro.
However, traders will be interested in global stock markets as we enter the traditional Santa Claus rally period. You can learn more about it and the exact dates for the seasonal rally in the 'What is the Santa Claus rally and how do you trade it?' article.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from March 20, 2020, to Dec 4, 2020, performed on Dec 4, 2020, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Past five-year performance of the S&P 500 circa: 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%, 2016 = +8.80%, 2015 = -0.82%, 2014 = +12.32%
The daily chart of the S&P 500 stock market index above recorded a new all-time high price level and continues to remain in an uptrend with the 50-period, 100-period and 200-period exponential moving averages all moving higher and separating away from each other.
However, the S&P 500 stock market index doesn't show the true picture within the sectors of the stock market. Some stocks are flying higher, while some are crashing lower. Identifying the individual sectors and companies within them can help traders identify higher momentum based opportunities.
Keep an eye out on earnings announcements this week:
- Monday 7 December - Ted Baker
- Tuesday 8 December - Ashtead Group
- Wednesday 9 December - Slack
- Thursday 10 December - Costco, Oracle, Adobe
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