What Happened in the Market the Week Dec 05 - 09 and What is Coming Up

During the week just past euro was the main currency to see! On Sunday, December 4[SUP]th[/SUP] Italy voted to at the constitutional referendum rising risks for the Eurozone, while ECB decided to extend and reduce its bond-buying program sending the euro to the bottom again.

[B]Italy’s “no” vote at the referendum means[/B] resignation of the Italian Prime Minister Matteo Renzi who proposed the referendum. This may lead to the opposite party, Five Star Movement to take over, which has called for a euro referendum, Italy to exit Eurozone. Following that, EUR/USD fell to fresh 20-month low at 1.0505 and the day after jumped to a new two-week high at 1.0800.

On Thursday, at [B]ECB policy meeting[/B], the central bank kept its interest and deposit rates unchanged while it decided to extend its bond-buying program. Traders were expected ECB to extend its asset purchase program by six months but instead, they extended it nine months beyond March was initially the end and reduced the amount as it was expected. Thus, now, ECB’s QE program ends in December 2017 and is down to 60 billion euros monthly instead of 80 billion euros before. Note, that the total amount of massive stimulus by the end of 2017 is now bigger than an extension of six months, even though the monthly purchasing amount is reduced, however, the ECB President Mario Draghi appeared very dovish and during his speech expressed the possibility of more stimulus, the downside risks the economy faces and stated that there is “no tapering on sight”, [B]pushing the EUR/USD vigorously 270 pips lower.
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[B]U.S. dollar[/B] has been subdued this week as traders expect the last [B]FOMC meeting[/B] of the year, Wednesday! Fed is widely expected to raise its interest rate thus traders will see this day as the biggest highlight of the remaining days of 2016 and will set the market’s tone.

[B]British Pound [/B]remained neutral, throughout the week, as traders expect the decision who is responsible for triggering Article 50. If the U.K. government wins, U.K. Prime Minister Theresa May is expected to trigger the article by March and pave the way out of the European Union. Otherwise, the parliament is expected to try to delay the Brexit. Next week, British final inflation rate for November will be closely watched, though the BoE interest rate decision on Thursday will hog its limelight.
[B]
U.S Dollar – United States[/B]
· [B]Markit PMIs: [/B]The [B]services PMI[/B] ticked lower at 54.6 in November while thecomposite PMI remained the same with the previous month at 54.9.
· [B]ISM non-manufacturing: [/B]The indicator rose to 57.2 in November, versus 54.8 in October, recording the highest reading in 13 months.
· [B]Nonfarm productivity[/B]: U.S. productivity rose 3.1% s.a. annual pace in Q3, the biggest rise in two years.
· [B]Factory Orders:[/B] The factory orders in October jumped to 2.7% mom, from 0.6% mom before, beating market expectations to rise by 2.6%.
· [B]Trade Balance:[/B] The trade deficit recorded a sharp increase in October, as exports weakened following an increase in the summer and imports jumped dragging down the overall economic growth of the country, the last months of the year. The trade gap widened to $42.6 billion in October, the steepest rise since March 2015, versus a gap of $36,2 billion before.

[B]Euro – Eurozone [/B]
· [B]Markit PMIs:[/B] The service sector slipped to 53.8 in November, as it failed to reach the market prediction of 54.1 while the composite PMI expanded at 53.9 for November from 53.7 the month prior.
· [B]Gross Domestic Product:[/B] Eurozone’s final GDP growth raise a bit the optimism, as it rose 1.7% for Q3, above market expectations of 1.6%.
· [B]Retail Sales:[/B] The retail sales rose at 1.1% on annual basis, in October, a turnaround from the previous month which was revised down to -0.4%.

[B]British Pound – United Kingdom [/B]
· [B]Markit PMIs: [/B]The services PMI for November showed an improvement in the sector to 55.2 versus 54.2 the previous month. The composite PMI also exceeded expectations, rising up to 55.2 from 54.6 before.
· [B]Manufacturing and Industrial Production:[/B] The indicator created a negative turnaround in October at -0.4% yoy from a revised 0.1% yoy the month before.
· [B]Industrial Production:[/B] The industrial production fell by 1.5% in October at -1.1% yoy from 0.4% the month prior.
· [B]NIESR GDP Estimate: [/B]The NIESR GDP for the last three months until November remained the same as the month prior at 0.4%.
· [B]Consumer Inflation Expectations[/B] jumped to the highest since 2014 but sterling remained indifferent. Consumers expect inflation to average 2.8% the next twelve months, up from 2.2% in August. The increase of 0.6% is the biggest in more than six years.

[B]Australian Dollar – Australia[/B]
· [B]Reserve Bank of Australia interest rate decision:[/B] RBA left its key interest rate unchanged at the record low of 1.50% today, as policymakers expect higher commodity prices to stimulate the national income.

[B]Canadian Dollar – Canada[/B]
· [B]Bank of Canada interest rate decision: [/B]BoC announced that is maintaining its target for the overnight rate at 0.5%.