Recap: Week Ending August 9, 2013

August 11, 2013

New MBA trading courses at the HIDC

New Undergraduate trading courses at the GTF

For the first week in many, both US and global equity markets closed in the red. The move to the downside comes on the heels of a small but mighty push to new highs in both the S&P 500 and the Dow Jones Industrials. More significantly was the participation that global markets took in on the downside action, with almost every major equity index closing lower on the week. Such a move across the board gives the possible scenario for a further move to the downside as markets continue to gain momentum in the same direction. The market is still awaiting news from the US Federal Reserve regarding their next move in their targeted interest rate. Currently the targeted rate it 0-.25%, this means that the FED is targeting interbank loans to be between the range of 0-0.25%. To accomplish this the FED is using open market operations, Quantitative Easing, to repurchase government securities which are held by financial institutions, increasing the money supply, decreasing the demand for short term loans. Currently for a 30 day Fed Fund loan the interest charged is roughly 0.09% which is in the lower range of the targeted rate. The low rate indicates that the fed buying program is partially working, decreasing the demand for short term loans due to the excess deposits in institutional bank reserves. On the other hand, the market continues to grind higher; however, the growth appears to be stalled despite such interest rates being so low and money cheap to borrow. This leads many investors to believe that when the QE stops, which appears to be the lifeline of the market, equalities may head south as the low rates are not currently helping the market. All possible outcomes will be discussed in the upcoming FOMC meeting which has many investors eagerly awaiting the results.

This past week the Canadian Government released its unemployment rate for the month of July. As a surprise to economists, the rate ticked up to 7.2%, rising from the both the prior reading and consensus reading of 7.1%. This move up in unemployment comes a week following the surprising 20 basis point move down in US employment. Following the release of US unemployment the USD rose against the CAD hitting a high of over 1.04250, however, following the Canadian unemployment release the CAD gained strength vs the USD, pushing the USD down to below 1.028. Both investors and traders will keep a close eye on the market to see further reaction to Canadian unemployment.

The economics calendar is relatively quiet for the upcoming week in Canada: however, key economic figures will be released in the US and European nations. Monday the US will release its Monthly Budget Statement for the month of July with a prior reading of $116.5B. On Tuesday, key Consumer Price Index figures will be released from both Germany and the UK. For Germany’s CPI for the month of July, MoM, economics are looking for a reading of 0.5% vs a prior reading of 0.1%. Meanwhile in the UK economists consensus has not been released, however, a prior reading of the CPI MoM came in at -0.2%. On Wednesday, the US will release Retail Sales for the month of July with a consensus of 0.4%. Moving forward to Thursday, the US will release its Consumer Price Index for the month of July with a prior MoM reading of 0.5% with economists looking for 0.3%. The BoC will also release its quarterly review. To close the week, the US will report the ever so important Reuters/Michigan Consumer Sentiment Index for August. Economists are looking or a reading of 85.6 where the past reading came in at 85.1.

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