Market Overview

Falling oil prices and concerns over the slowdown in the Chinese economy dominated the global markets this week. The transformation of the Chinese economy from the production to services sector weighs on the Chinese economic growth and on the global growth.

Official growth data from China will be released next week. Analysts expect the Chinese economy to expand 6.8% in the fourth quarter, after a 6.9% in the third quarter. The weaker-than-expected growth data is likely to weigh on global stock markets and on oil prices.

Regarding the U.S. economic data, the situation remained unchanged. The labour market continues to strengthen, but inflation and the manufacturing sector remain weak. U.S. retail sales, producer prices and industrial production dropped in December. It is likely that the Fed will delay further interest rate hikes if the situation does not change in the coming weeks and months.

The European Central Bank (ECB) will release its interest rate decision next week. It is unlikely that the central bank will change its monetary policy as it adjusted its stimulus measures in December.

It is likely that the currency pair EURUSD will rise toward the resistance level at $1.1000 or at $1.1100, if the U.S. economic data will be negative or there will be negative news from China and no negative news from the Eurozone.

If the U.S. economic data will be positive and in case of the negative news from the Eurozone, the currency pair EURUSD may test the level at 1.0800.

The British pound was under pressure this week as speculation that central bank will keep its interest rates at low levels for a longer period weighed on the British currency. The Bank of England on Thursday kept its monetary policy unchanged. Low inflation and uncertainty over UK's membership of the European Union are main risks to the country's economy.