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Forex:  Last week’s biggest and most surprising headliner proved to be the Fed’s unexpected decision to keep its current monetary policy unchanged, which was followed by emotional reactions on the financial markets.

Maintaining the influx of $85 billion in the country’s economy in the form of purchases of government bonds and mortgage-backed assets had a serious negative impact on the greenback. As a result, the US dollar index futures for December, which measures the dollar movement against other major currencies, landed on its lowest value since the middle of February.

The DX1213 reached 80.53 points, or a decline by 1.12%, on a weekly basis. Meanwhile, chart movements of EUR/USD, GBP/USD and AUD/USD were upward, with the most traded currency pair ending the period 220 pips higher and Friday’s last quote being 1.3522. The sterling increased its value by 144 pips and closed the week at 1.6015, while the AUD/USD added 160 pips to end at 0.9408.

Indices

Waiting for more evidence of progress by the US economy was the main reason members of the Fed to vote 9 against 1 in favour of keeping the size of the QE and to postpone the phasing-out the financial stimulus. Wall Street reacted strongly to the news and only few minutes were enough for the indices to rise by more than 1%. Weekly gains for the S&P500 topped 1.27%, the Dow climbed by 0.60%, while the Nasdaq100 appreciated by 1.50%.

Canadian phone manufacturer BlackBerry experienced a serious “earthquake” in its market performance on Friday. After news about the company cutting more than 4,500 jobs broke, its shares plummeted by more than 17% and closed at $8.70. We will also be closely monitoring another technology giant, Apple, as the company started selling its new iPhones on Friday, with the first release being in China. Purchase demand of the new phones will show the direction of the company’s shares in the coming months.

European markets also rode the green wave generated by the continuing stimulus programme in the US. France’s CAC40 added 1.77% to close at 4,191, while Spain’s IBEX and Italy’s S&P/MIB rose by 2.37% and 2.25% to end at 9,157 and 17,967, respectively, while Germany’s DAX30 climbed by 1.70% to 8,657. After yesterday’s elections, at which it became clear that current Chancellor Angela Merkel has once again won an impressive 41.5%, the index opened today with a positive outlook and a 40-point rise.

Commodities

The eased tension over the Syrian crisis dragged oil futures down, with US Light Sweet Crude for November delivery (WTI1113) and Brent for the same period (COIL1113) losing over $3.50 for the past five days. Gold and silver closed mixed, with XAU/USD appreciating by 0.42%, closing at $1,329 per troy ounce, and XAG/USD declining by 1.88% to end the week at $21.78.

What to expect this week?

The active trading season has already started getting back into shape. Monday will offer the Preliminary release of the Markit Manufacturing and Services PMI for September of France, Germany, and the Eurozone. Another attention-drawing event will be ECB President Mario Draghi’s speech later in the day. Tuesday’s highlights will come from the IFO survey of Germany’s Business Climate, US Housing Price Index for August and the country’s Consumer Confidence for September. New Zealand will also contribute to the economic calendar with its Trade Balance for August.

Wednesday will see Germany’s Gfk Consumer Confidence Survey for October, US Durable Goods Orders and New Home Sales – both for August. Thursday is set for more economic data to be released, with main entries including the UK’s GDP (MoM and YoY) as well as the US GDP Price Index for Q2, the country’s Initial Jobless Claims and Pending Home Sales (YoY and MoM) and Japan’s National Consumer Price Index. ECB President Mario Draghi is set for another speech this week, and Friday will see him in Milan, at Bocconi University, which is expected to cause high market volatility. Other data will include France’s GDP for Q2.

Source:  dfmarkets.co.uk