Market Overview

28 August 2015

WEEKLY REVIEW: The week of the extreme market turbulences is almost over – what to expect now

Stock markets seem to recover from a massive selloff on Monday. Concerns over a slowdown in the Chinese economy led to this selloff. Since then the People's Bank of China (PBoC) injected billions of yuan into the financial system and lowered its interest rates. The question remains whether these actions will lead to the desired result, or we might see the next yuan devaluation.

The situation around the interest rate hike by the Fed remains unclear. The recent drop in oil prices and a slowdown in the Chinese economy are pointing to the delay of the interest rate hike. But the U.S. economic data released this week was mostly positive. The U.S. durable goods orders and GDP data were better than expected by analysts. But this data does not reflect the recent market turbulences.

The U.S. economic data and news from China will be closely monitored by market participants. The U.S. labour market report is scheduled to be released next Friday. The better-than-expected figures could push the Fed officials to decide for the interest rate hike in September as some Fed officials already noted that the Fed should start raising its interest rate despite the recent developments.

The U.S. economic outlook will be also dependent on oil prices as U.S. oil companies made a significant contribution to the U.S. economy.

It is likely that the currency pair EURUSD will test the high of June 18 at $1.1436, maybe even the level of $1.1500, if the U.S. economic data will be negative.

Gains of the currency pair EURUSD could be limited by the situation in Greece. The uncertainty over the results of the election in Greece could have a negative impact on the euro.

If the U.S. economic is better than expected or if there are negative news from Greece, the currency pair EURUSD may test the level of $1.1100 or $1.1000.

Konstantin Meinhardt
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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