Recap: Week Ending June 14, 2013

June 16, 2013

New MBA trading courses at the HIDC
New Undergraduate trading courses at the GTF

Like the previous week, horizontal trade was the story for most investors, however, this week indexes closed lower. This is the first week in recent months where all the global indexes published by MarketWatch closed lower on the week. This lack of conviction to either side, as well as the risk off play, comes a week before the Federal Reserve Open Market Committee releases it’s interest rate decision on Wednesday June 19. This release is later followed by the FOMC Economic Projections as well as the Fed’s Monetary Policy Statement. This event has been on the minds of investors and traders since the last FOMC release when Chairman Bernanke hinted at the possibility of slowing quantitative easing (QE) later in the year. Such a move would possibly signal the rise of interest rates, ending the years of so called “cheap money.” If such easing would ends, many fear a downturn in global markets as investors could not continue to pour money borrowed on cheap interest rates into equities and bonds. If such a move were to happen, the opportunity for capitulation is large as panic selling may occur. At the moment, it appears investors are already starting to take profits from this monster run as US markets decline slightly. Despite such news from the Fed, the International Monetary Fund (IMF) downgraded its 2014 expected US performance.  Originally the IMF expected a 3% growth in the up coming year, however, have since downgraded it to 2.7%. Such expectations could possibility be influenced by the weakening USD. Such a move down in the USD can be seen against the JPY which has come off greatly from its highs. Last week the Bank of Japan, BoJ, kept interest rates at 0.1%. The USD budget deficit expanded in the past month as recorded on our MarketWatch economic calendar. The deficit is still expected to be below $1trillion USD for the year. The deficit rose greatly last month as large amounts of tax refunds are distributed annually in the month of May. Despite this the deficit widening it is still expected to be at its lowest level in over 4 years.

On an interesting note, advertisements for jobs in the US fell by over 3% in the month of April. On the other hand, the number of workers who quit their job rose. Economists are taking this positively as they believe that people usually quit their jobs in order to work at a better job. This signals that the creation of jobs in the US may be expanding in the upper levels of management and production, which has not yet been seen since the economy collapsed.

On top of the already mentioned FOMC investors and traders will be watching the news out of the US on Tuesday when the US government releases its housing starts and consumer price index. Housing starts are expected to fall to 0.98M from the previous reading of 1.005M. With this being said anything can occur as April surprised many, followed by a downturn in starts in May. Consumer Price Index for (MoM) may is expected to come in at 0.1% vs the previous reading of -0.4%. Such a positive reading is a positive sign for the US economy as well as the USD. On Friday the Bank of Canada, BoC, is scheduled to release its Consumer Price Index (MoM) for the month of May. The prior reading is 1.1%. This figure can be extremely volatile, however, give a recent view of moves in the prices of goods.

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