Data, news, market movers, reports, headlines……………
Every day numerous amounts of financial data are released to the public giving us clues to what is
happening in the economy. Some good, some bad, normally only shaking and rattling the secondary
trend. When trading, it is important to understand the importance of a major trend and how it differs
from its internal secondary trend.
Major trends are normally affected by the overall outlook on the economy, the "business cycle" as
you may put it, while change of interest rates "a break on economy growth " or unpleasant words
from the ex FED chairman saying that the Us economy has a 1/3 of a chance of going into a
recession can change the secondary trend.
An experienced trader can use these "pullbacks" (changes in the secondary trend) in order to enter a
position/trade more comfortably.
This week was filled with important data. The financial data mainly concentrated on two countries,
the US and the United Kingdom.
1) The FOMC left its rates unchanged – this was expected by traders and therefore the data did
not change the recent turn around in the dollars trend, bouncing off strong support levels
against the rest of the Majors.
Unchanged from the last statement the FED is still observing current growth and still claims
that the US economy is between growth and inflation, which gives little chance for FED
intervention in the near future.
There are two main factors that should be considered:
a) Unemployment is still under a comfortable 5% which means consumers can continue to
hold inflation pressures as they can afford to continue buying products.
b) Factories are still producing at full productivity.
In addition to these two major factors the US still has a large worrisome trade deficit which
has enlarged according to recent data that has been published.
2) A rise of British power?
This week the central bank's interest rise didn't help the GBP to hold its ground. A 0.25% rise
to 5.5% was duly expected by the markets and therefore didn't manage to change the
currency's path down. A different reaction in the markets could have been seen if the rise was
by 0.5%
In addition, England could be heading towards uncertain times, especially as Prime Minister
Tony Blair has recently announced his resignation.
This, and recent inflation pressures, could lead England into near turbulent times.
Next week important financial data* is going to be released:
UK - PPI, CORE PPI, CPI
GERMANY- GDP
USA- CPI, CORE CPI
This data could either confirm the recent new trend in the dollar against the rest of the major
currencies or set it back to its old familiar trend if indicators continue to point to lower growth.
* Economic data can be found on our web site under economic calendar
SUMMARY
• The business cycle is coming into its 5th year and the economies are still on tender hooks over
recent inflation worries.
• The dollar looks like it has hit its bottom
• Portfolios should be watched carefully as unwanted financial data can take away recent
profits.
• Shakes and rattles that financial data gives should be used in order to obtain better entry
positions in order to continue to roll in additional gains.