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Strong data on the US market and a restrained market reaction, Powell in focus

On Friday, there is a certain upsurge in the stock market sentiment, and assets that correlate with risk are trying to recover, benefiting from several drivers at once. Technical factors are also on the buyers side — in the first week, equities turned somewhat oversold. Today, futures for US indices are traded in the green, heralding a positive start of American market session, exactly like European stock indices, which are traded positively throughout entire Friday.

The markets focus on a US labor data for the last December, as well as hourly rate data, this data that is interesting for markets in the light of inflation expectations. Further, during the trading day, the market will expect a speech from the Fed chairman. The beginning of the current trading week as well as the beginning of the year for the markets turned out to be volatile. The economic risks of a slowdown in global growth have increased significantly. There are enough positive economic indicators continue to be released in the USA, but in Europe the most advanced indicators (PMI in the production sector and the service sector) begin to show negative sentiment.

Yesterday, US weekly initial jobless claims surprised with positive numbers. However, let's not forget that holidays bear the risk of data corruption. Assessment of jobs in the private sector ADP rose to 271 thousand. The report was slightly damaged by the November negative revision to 157 thousand. From 179 thousand.

Earlier services sector PMI in Europe also continued the downward trend, the previous figure of 51.4 points, the fact of December was 51.2 points. Preliminary data on inflation in the EU turned out to be worse than expectations, EU inflation fell from 1.9% to 1.6%, with the forecast values of 1.8%. The base index remained at 1.0%.

On FOREX, the trading week turned out to be very interesting, if not more, the first week of trading turned out to be crazy. The Japanese yen, the third most actively traded currency fell into turbulence on thin market as the retail traders closed positions amid higher risks. The US dollar fell from about JPY109 to just below JPY105 in a few minutes, a little more than an hour after the close of the US markets.

Market rumors suggest that Japanese retail investors rushed to close short positions in the yen / Australian dollar and short positions in the yen / Turkish lira. On this background, the Australian dollar showed a decrease of 300 points over two hours.

Some explain the massive short timed pressure on the Australian with the influence of US-Chinese trade issue. Everyone knows that Australia is China’s largest trading partner — a supplier of raw materials for powerful Chinese industry. On Wednesday, shortly after the close of US markets, Apple downgraded its forecast for sales due to an “unforeseen” slowdown in China. This is the first decline in sales forecast for the last ten years from the technology giant.

As for the data front. Amount of employers hired in the United States for December tuned out to be the maximum for 10 months amid raising wages. If the data proves to be correct this can ease the recent surge in concerns on the state of US economy, that alarmed global markets.

The number of new job positions rose by 312,000 versus 180,000 in expectations.

The unemployment rate rose to 3.9% from 3.7% with expectations of 3.7%.

Average hourly earnings rose by 0.4% compared with the previous month, compared with an estimate of 0.3% and 0.2% unchanged.

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