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The world now: Disappointment, Hope and Concern

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It is the period of uncertainty, not only in Europe but throughout the world. While many investors weight on Greece exiting the Euro zone and see EURUSD down below parity, fundamental developments from the US keep surprising investors globally.

What happened last week

Starting with the disappointing NFP data, the FED and the majority of analysts weighted in the seasonal factor. Despite improved weather in the US, Jobless claims came in higher than expected and housing starts were also announced as below anticipated levels. Nonetheless, the USD was hit hard last week pushing lower against its counterparts, so much so that even the troubled Euro gained some200 pips against the USD.

Meanwhile, the biggest hit of the week was the confetti hit of the ECB president Mario Draghi by an activist during the ECB press conference. The slogan of the protest was “End the ECB dick – tatorship”. Although Mario Draghi initially wanted to keep it calm, he was shocked by the action; hence he skipped directly to the questions.

Oil on the other hand made a 16 week high rising as far as $58.7 per barrel despite the news that Saudi Arabia had boosted its output to a 30 year high. The biggest reason behind the oil price hike was Al Qaida capturing an oil terminal in Yemen.

The new concern

Many financial institutions as well as individual financial analysts believe that the world has entered into a new debt bubble which is about to burst.

Yngve Slyngstad, the chief executive of Norway’s Government Pension Fund Global was the latest to comment on this subject.  Mr. Slyngstad commented “Monetary policy does affect pricing in today’s market to such an extent that monetary policy itself has been a risk you have to watch,” in an interview in New York last week.  The debt risk for many analysts is at such levels that many believe the end result could be even worse than the 2008 financial crisis.

The catalyst for the bubble to burst could be the US rate hike which could possibly end the ever rising bull stock market but over a relatively longer time frame than one might expect.

What to look for next week?

The coming week will have a number of market moving events from around the world.

Monday, April 20: In Europe, German March PPI data and the German Bundesbank report are expected to confirm that the German economy is also weak compared to historic averages. Later in the day Bank of Canada (BOC) governor Poloz and Reserve Bank of Australia (RBA) governor Stevens will be giving speeches. In both central bank speeches major volatility is expected. Investors will be looking for specific comments about interest rates in Mr. Stevens’ speech.

Tuesday, April 21: In Europe, Germany will announce ZEW Economic sentiment with the expectation for growth.

Wednesday, April 22: The Bank of England’s monthly Monetary Policy Committee vote count
is to be announced. The report will enlighten investors about the mindset of the BOE MP Committee as the interest rates remain at historic lows while the elections are getting closer.

Investors will also be watching US existing home sales as the housing starts disappointed last week. Meanwhile the US Crude Oil inventories announcement is expected to create significant volatility in crude oil prices.

Thursday, April 23: It is a PMI day all over the world, starting with China. The Chinese HSBC manufacturing purchasing managers’ index (PMI) data will be followed by investors carefully as the Chinese economy is falling behind. Slowdown in China is also showing side effects in the Australian and New Zealand economies. Hence, depending on the data, major volatility is expected earlier on Thursday in AUD pairs.

In Europe MARKIT PMI data is also to be announced for major European countries. The difference between German and the French PMIs is expected to be narrowed.

The US session will be marked by two major fundamental developments; weekly initial jobless claims
and new home sales figures for March. Both figures will be followed carefully as the recent US data has been rather disappointing.

Friday, April 24: The day will start with the German IFO Business Climate index which is expected to show signs of developments in the largest economy of Europe. The rest of the day will be focused on the Eurogroup meeting of euro zone finance ministers as Grexit will be the theme of the meeting.

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