5 Things Traders Will Watch in January – Introduction
We are just a week away from the new year. This is usually a good time for traders to watch the market closely and also, take some time off and reflect. To many traders, the year has been good with major moves in the market. Here are the 5 things you need to watch out in January.
- MFIID II Regulations
On 3rd January, the sweeping regulations from the EU called MFIID II will take effect. These regulations are intended to protect investors and improve transparency in the market and the will affect everyone involved in the market. Brokers will be required to adhere to stricter external and internal reporting. They will require traders to submit more documents.
For traders, the impacts will be felt as they will need to submit more documents. High Frequency Traders will need to register as investment firms and submit their algorithms to regulators.
While these regulations will affect companies and traders in the EU region, other companies outside that offer EU data will be affected as well. The United States managed to negotiate to allow its companies to operate under the strict U.S. regulations.
- U.S. Interest Rate Decision
Last week, the Fed met and agreed to hike interest rate in December. They then guided to three more hikes in the coming year. On January 30th, they will meet and on 31st, they will announce their next rate hike decision. Many expect the Fed to hike the interest rates by between 125bps and 150bps.
The case for another hike in January has been made by the passage of the tax reform package by the republicans. It has also been made possible by positive data from the United States especially on inflation and employment.
Every January, investors watch the growth or slowdown of Chinese manufacturing. China, being the second biggest economy in the world is a key determinant of how the other countries will perform. This is because China is the key exporter and importer in the world. On 2nd January, China will release its manufacturing data. In the past years, this data has moved markets significantly. For example, in 2016, this data was partly to blame for a global slump in stock markets.
- Next United States Move
This year, the focus of senators and congress in the United States was on Obamacare and tax reform. The former failed and with senators and congress facing mid-term elections, the tax reform package is expected to pass this week and be signed before Christmas. The president has called it an excellent Christmas gift. After this, investors will pay close attention to the next move by the republicans. Some, expect it to focus on infrastructure.
The announcement could move markets especially in utilities and infrastructure companies.
Having had an exciting run in 2017, traders will continue to watch closely the cryptocurrencies market. This year, Bitcoin has moved from under $1,000 to the current $20,000 while Ethereum has moved from under $40 to the current $700.
Some have called these moves a bubble. They have predicted that the currencies will soon crash.
On the other hand, some have called the currencies undervalued, implying that they could soar in the coming months. In the coming year, we will watch how the currencies perform. As I have advised before, you should not invest a lot of money on these currencies. Instead, you should just buy one or half of the currency and wait.