Friday Lookback – 18-11-2016

Source: Forex News

Welcome to our weekly review where we look back over the results of some of the previous week’s economic indicators. It gives us the chance to reflect on how much were expectations met or missed and to examine a successful trade you could have made this week.

Event: UK Consumer Price Index

Date: Tuesday 15 November 2016 at 09:30 GMT

Markets affected: GBP/USD, EUR/GBP

Trending hashtags: #gbp, #usd, #uk, #inflation

According to the Office for National Statistics which is responsible for the preparation of the Consumer Price Index (CPI) report, the UK inflation rate unexpectedly fell during October to 0.9% from 1% in comparison to the precious month. Analysts had expected the CPI index to move upwards to 1.1% instead as a result of the pound’s fall. Despite the inflation’s decrease, prices of goods produced by factories and prices of raw materials increased during October. Clothing prices and university tuition fees increased at a slower pace than twelve months ago and so they kept the overall inflation from increasing faster.

Despite the rather disappointing result, it is still expected by investors that inflation might increase given the sterling’s continuous decrease following the referendum result in June as imports by the British are more expensive now. Since the referendum result, the GBP/USD fell by approximately 16% whereas the EUR/GBP increased by 11%.

Event: U.S. Retail Sales

Date: Tuesday 15 November 2016 at 13:30 GMT

Markets affected: EUR/USD

Trending hashtags: #us, #retail, #inflation

U.S. Retail Sales surprised the markets as they increased higher than anticipated during October. According to the Commerce Department, retail sales during October increased by 0.8% whereas during the last twelve months there was an increase by 4.3%. This is the latest piece of evidence which suggests that the world’s largest economy is steadily growing and also fuels speculation for an interest rate increase by the Federal Reserve (Fed) before the end of the year.

According to the Commerce Department, the increase of retail sales was assisted by the demand for building materials after the hurricane Matthew. Car sales increased by 1.1% whereas spending levels at petrol stations also increased as a chain result of increased fuel prices. Increased expectations for an imminent interest rate increase during December’s Fed meeting pushed the EUR/USD rate lower following the release of the retail sales data.

Event: US Consumer Price Index

Date: Thursday 17 November 2016 at 13:30 GMT

Markets affected: EUR/USD

Trending hashtags: #usd, #eur, #inflation, #cpi

The U.S. Consumer Price Index (CPI) for October increased at the fastest pace since April as a result of an increase in rents and fuel prices. This is yet another piece of evidence that points to a possible interest rate increase by the Fed in December. The prospects for that happening were also boosted by lower unemployment benefit applications.

The Trade of the Week

Time in: Tuesday 15 November 2016 at 13:00 GMT

Market: EUR/USD

Investment: $500 with 200:1 leverage

Time out: Tuesday 15 November 2016 at 14:00 GMT

P&L: $330

If you had sold the EUR/USD with a $500 margin at the price of $1.07682 and closed the deal, after the release of the October U.S. Retail Sales data, at 14:00 GMT which saw a 0.3% drop of the EUR/USD rate you might have made $330. A nice tidy profit for a modest economic event. Note this example does not take into account spread.

http://www.independent.co.uk/news/business/news/uk-inflation-rate-fall-explained-why-did-it-just-drop-latest-a7418336.html
http://www.cnbc.com/2016/11/15/us-retail-sales-oct-2016.html
http://www.forbes.com/sites/timworstall/2016/11/17/us-inflation-to-2-1-but-no-this-isnt-the-inflation-the-federal-reserve-is-looking-for/#5055f5ee68ba

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