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A busy week ahead for SLV. The upcoming ECB rate decision could result in a weaker Euro. And as the Euro/USD falls, SLV is likely to follow. The next NFP report could also bring down the price of SLV. This week is expected to be turbulent not only for silver and the iShares Silver Trust ETF (NYSEARCA: SLV ) but also for other commodities and major currencies, considering the upcoming non-farm payroll report, Yellen’s testimony and the ECB rate decision. The first two events could influence people’s perspectives regarding the upcoming FOMC meeting, while the last event could have a strong impact on the Euro. And given the expected changes of both central banks’ monetary policies, the price of SLV is likely to resume its descent. The highly expected European Central Bank policy meeting will be on Thursday. Currently, some analysts think the ECB may announce a two tier deposit rate for commercial banks parking their cash at the ECB – a similar system to the one they have in Switzerland. Others think ECB President Draghi will just consider lowering again the deposit rate and increasing the already running quantitative easing program. In either way, this could mean a weaker Euro, which may put additional downward pressure on SLV. The following day, the non-farm payroll report will be published. Last time, the NFP’s headline figure was high at 271,000 jobs – well above market estimates. And wage growth rate rose to 2.5%, which was the highest rate since 2009. With such progress, the FOMC is likely to move forward with raising its cash rate, assuming the next NFP report doesn’t disappoint. After all, the FOMC promised in the last meeting that if economic data show promising results, the committee will move forward with a rate hike in December. The market is still not fully convinced the FOMC will hit liftoff in a few weeks from now – the implied probabilities for a December hike are at 78%. Perhaps if the next NFP report shows a growth rate in jobs of over 200,000 – the market currently estimates a growth of 201,000 – and a wage growth of at least 2.4%, the market will be more inclined to believe higher interest rates are up ahead. And then the market could start focusing on the pace of subsequent rate hikes. So far this month, long-term treasury yields also rose: 10-year yields increased by 0.06 percentage points while 1-year yields added 0.16 pp. For SLV, a higher cash rate also means higher long-term interest rates, which are likely to bring down silver prices. But it’s worth noticing that it’s still not a done deal about the December rate hike. If the NFP report shows a very modest gain in jobs and lower growth rate in wages, this could reduce the odds of a December hike by the Fed. And that also means a short term bounce for SLV. Chair Yellen will testify this week in front the Joint Economic Committee of the U.S. Senate and before Economic Club of Washington regarding the economic outlook of the U.S. This will be her last public address before the December meeting. Perhaps she will refer to progress of labor market and inflation. After all, according to the personal and income outlay update , consumption grows at a slower pace than income. And the core PCE inflation is only at 1.3% (back in October) – well below the Fed’s 2% target . It seems that the rise in wages didn’t result in more spending, which, in turn, didn’t raise core inflation. Without higher inflation, the Fed will still reconsider up to the last minute whether raising rates in December is a prudent move. The silver market has seen better days. If the NFP report shows another modest gain in jobs and the ECB moves forward in reducing its rates or augmenting its QE program, the U.S. dollar is likely to appreciate. And given the current expectations of what’s up ahead, the price of SLV is more likely to keep declining in the short term. For more please see: Choosing Between Gold and Silver Scalper1 News
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