Flooded Global News

Daily Analysis - 09/03/2018

Flooded Global News


Trumps Tariffs, the effect of yesterday’s ECB Monetary decision, Trump accepted the invitation from the Kim Jong-un and February’s Jobs report dominate the headlines.

Draghis’ Effect

The European Central Bank hosted the monetary policy meeting on Thursday, dropping a long-standing pledge to increase the level of bond purchases it makes in size if needed. The ECB decided to keep interest rates unchanged and to continue its asset purchase program until September. Economists though, hold very different views regarding the future of the ECB’s quantitative easing program.

The ECB said it could still extend its 2.55 trillion euro bond purchase scheme beyond September if needed. Skipping the reference of bigger purchases, indicating that it remains on track to end a three-year stimulus scheme before the end of 2018.

The ECB has risen, its forecasts for real Eurozone’s GDP since its last forecasts in December. The ECB now expects real GDP to hit 2.4% in 2018, 1.9% in 2019 and 1.7% in 2020.

During the press conference, ECB’s President Mario Draghi said the euro zone could even grow faster than now expected, pointing to the biggest risks that are a global trade war and efforts to ease bank regulation, another U.S. policy initiative.

The meeting was seen as a hawkish movement from the central bank and as a result, the euro rose gained strength. Draghi said that the ECB is monitoring the exchange rate "with regard to their possible implications for the inflation outlook." A stronger euro could impact European exports and affect prices in the region. As a result, the bank could be forced to change its monetary policy.


NFP – February’s Jobs Report

The Nonfarm Payroll represents the number of new jobs added in the US, but with some exceptions. The monthly jobs report usually comes out on the first Friday of the month, but the February 2018 report is coming out on March 9, the second Friday. As the NFP is the most important economic event on the docket, it heavily depends on when the surveys behind the jobs report are taken during a short month.

The Labor Department will publish the February jobs report today at 13:30 GMT. The US is forecasted to have added 204 thousand jobs in February. Analysts forecasted the unemployment rate dropped to 4% in February, which would be a new 17-year low for the US tight labor market.

Together with the NFP release the report includes the average hourly earnings which are expected to have risen by 3%. Will markets go crazy again? Stocks went on a wild ride last month after the jobs report showed wages grew at the fastest pace since 2009. Concerns about rising inflation and interest rates in the United States. Dow Jones lost 667 points following the January report. If wages surprise investors again, markets could potentially face a rocky road.

Trade war fears loom over the markets and some economists estimate tens of thousands of job losses as a result of the tariffs. President Trump signed an order Thursday imposing tariffs on steel and aluminum from almost all countries. The tariffs officially go into effect in 15 days.


The meeting of Trump and Kim Jong-un

The North Korean leader, Kim Jong-un, invites US President Donald Trump. Trump has accepted the invitation to hold an unprecedented summit meeting in order to discuss the future of the regime’s nuclear and missile program.

The recent development follows months of tension, as senior South Korean officials appeared outside the White House to announce the news. The White House confirmed Trump was ready to meet Kim sometime in May, at a time and location yet to be determined. The historic meeting can potentially mark a major breakthrough in nuclear tensions with Pyongyang.

Asian stocks rose on Friday and the Japanese Yen slumped on news of the agreement for an unprecedented summit between the leaders of the U.S. and North Korea which fed the risk-on sentiment. The Japanese Yen fell the most in more than two weeks, even as the Bank of Japan stayed the course with its monetary stimulus on Friday.

In the US, Stocks closed higher on Thursday after President Donald Trump implemented steel and aluminum import tariffs excluding Canada and Mexico, two key U.S. trade partners. The S&P 500 closed 0.45% higher at 2,738, the Dow Jones industrial average ended 93.85 points higher at 24,895 and the Nasdaq composite rose 0.4% to 7,428.


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