Weekly Market Watch

Released 09 November 2015 - Weekly Newsletter

Last week recap



Dropped sharply last week as the ECB gave indications of further easing and the United States reported a better than expected Non-Farm Payrolls number. The NFP number drove expectations of a Fed December rate hike up to 70% on Fed Funds rate futures. The week began on a soft note, with the pair declining off its weekly high of 1.1052 on Monday after Spanish Manufacturing PMI printed at 51.3 compared to an expected reading of 51.9, also, U.S. ISM Manufacturing PMI printed at 50.1, in line with expectations. The rate extended its loss on Tuesday despite U.S. Factory Orders, which declined -1.0% m/m versus -0.8% expected and after comments from ECB President Draghi, who stated, “the degree of monetary policy accommodation will need to be re-examined at the Governing Council''s December meeting," adding that, "The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation.”. The pair continued its slide on Wednesday after testimony from Fed Chair Janet Yellen before the House Financial Services Committee, in which she stated that, “Taken as a whole, the reforms we have adopted since the crisis, including those mandated by the Dodd-Frank Act, represent a substantial strengthening of the regulatory framework for the largest financial institutions and should help ensure that the U.S. financial system remains able to fulfil its vital role of supporting the economy.” Economic numbers had the U.S. Trade Balance come in with a contracting deficit of -40.8B versus -42.7B expected. Also out were ADP Non-Farm Employment Change, which saw +182K new jobs last month, in line with expectations, and ISM Non-Manufacturing PMI, which printed at 59.1 compared to 56.6 expected. The pair then consolidated at a slightly higher level on Thursday after U.S. Preliminary Unit Labor Costs rose +1.4% q/q compared to +2.2% anticipated, while Initial Jobless Claims saw 276K applicants compared to 263K expected, and despite German Factory Orders, which declined -1.7% m/m versus an expected increase of +1.1%. On Friday, the pair fell sharply making its weekly low of 1.0706 after U.S. Non-Farm Payrolls showed an increase of +271K compared to an expected +181K, also, U.S. Average Hourly Earnings increased +0.4% m/m versus +0.2% anticipated, while the U.S. Unemployment Rate declined a notch to 5.0% from 5.1%. EUR/USD closed at 1.0742, showing an overall loss of -2.4% from its previous weekly close.



Gained sharply last week as the BOJ left monetary policy unchanged and the United States reported positive employment news. The rate began the week making its weekly low of 120.25 on Monday after a positive U.S. ISM Manufacturing PMI number. The pair continued gaining on Tuesday despite a lower than expected U.S. Factory Orders data. On Wednesday, the rate extended its gains after better than expected U.S. Trade and Non-Manufacturing PMI numbers. Thursday saw the pair gain a fraction after the BOJ’s Monetary Policy Meeting Minutes showed the central bank would continue with its easing policies, stating that, “Members shared the view that global financial markets had been nervous -- although they had started to regain their calmness with market participants increasingly concerned over uncertainties regarding the outlook for emerging economies including China. A few members pointed out that, although the volatility of stock prices had risen worldwide since the summer, the effects of this on the real economy had been limited so far and, due to the continuation of substantial monetary easing in major economies, the risks of credit tightening and heightening anxiety about the financial system had declined.” The pair then gained sharply on Friday, making its weekly high of 123.26 after U.S. Non-Farm Payrolls came out better than anticipated. Also on Friday, BOJ Governor Kuroda stated in a speech that, “The Bank will make the most appropriate policy decisions by scrutinizing the current situation of economic activity and prices and their outlook, various risk factors, and developments in financial and capital markets at every Monetary Policy Meeting.” USD/JPY closed at 123.14, showing a weekly gain of +2.1%.


Reversed direction, declining sharply last week after the BOE left interest rates and stimulus unchanged and the United States reported better than expected employment numbers. The week began with Cable making its weekly high of 1.5496 on Monday after UK Manufacturing PMI printed at 55.5 compared to an expected reading of 51.3. The rate consolidated on Tuesday after UK Construction PMI printed at 58.8, in line with expectations. On Wednesday, Cable lost a fraction after better than expected U.S. trade and PMI data and UK Services PMI, which printed at 54.9, just slightly higher than the expected reading of 54.6. The pair then declined sharply on Thursday after the BOE left its benchmark Official Bank Rate at 0.50% and the Asset Purchase Facility at 375B as widely anticipated. The Monetary Policy Summary showed that Ian McCafferty had again been the only dissenting member, voting for a 25 bps increase in the rate, while the vote on the Asset Purchase Facility was unanimous. After the rate release, BOE Governor Carney stated that, “Remember, remember, the fifth of November. What is memorable about today’s Inflation Report? The headlines are familiar. Inflation remains close to zero. I have written another open letter to the Chancellor explaining why and what we intend to do about it. The MPC has voted again by a majority of 8-1 to maintain Bank Rate at 0.5% and by 9-0 to maintain the stock of purchased assets at £375 billion. And once again, as it has since February of last year, we have reaffirmed our expectation that, when Bank Rate rises occur, they can be expected to be limited and gradual.” Cable extended its losses on Friday after better than expected U.S. Non-Farm Payrolls and despite UK Manufacturing Production, which increased +0.8% m/m compared to +0.4% expected, and the UK Trade Balance, which showed a contracting deficit of -9.4B compared to -10.7B expected. GBP/USD went on to close at 1.5046, showing an overall loss of -2.5% for the week.



Extended its losses last week as the RBA left interest rates unchanged and the United States reported positive employment numbers. The rate began the week gaining on Monday after Australian Building Approvals increased +2.2% m/m versus an expected +1.8%, nevertheless, the previous number was significantly downwardly revised from -6.9% to -9.5%. The pair continued gaining on Tuesday after the RBA left its benchmark Cash Rate unchanged at 2.0%. The RBA Rate Statement reiterated that, “The Australian dollar is adjusting to the significant declines in key commodity prices. At todays meeting the Board judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.” On Wednesday, the rate made its weekly high of 0.7223 after comments from the RBA’s Governor Stevens, who said that, “Were a change to monetary policy to be required in the near term, it would almost certainly be an easing, not a tightening. The rate of CPI inflation is clearly no impediment to easing.” Eco-data had the Australian Trade Balance come out with a contracting deficit of -2.32B versus an expected deficit of -2.85B, with the previous reading downwardly revised from -3.10B to -2.71B. Also, Australian Retail Sales increased +0.4% m/m as widely anticipated. Thursday saw the pair consolidate at a slightly higher level after lower than expected U.S. economic numbers. The rate then declined sharply on Friday, making its weekly low of 0.7021 after the United States released a better than expected NFP number and the RBA’s Monetary Policy Statement, which noted that, “The Australian dollar is adjusting to the lower commodity prices. The forecasts for commodity prices assume that there will be only a limited reduction in supply from high-cost producers, many of which are in China. However, it is possible that high-cost producers globally will cut their production further in response to the long period of lower commodity prices. This represents an upside risk to the forecasts for Australia’s terms of trade.” AUD/USD closed the week at 0.7039, showing an overall loss of -1.3% from its previous weekly close.



Rallied last week as employment numbers supported the Greenback and despite mostly positive economic data out of Canada. The rate began the week gaining ground on Monday after a positive U.S. ISM Manufacturing PMI number. The pair then made its weekly low of 1.3037 on Tuesday after a lower than expected U.S. Factory Orders number. On Wednesday, the rate gained ground after positive U.S. Trade and ISM Non-Manufacturing PMI numbers and despite the Canadian Trade Balance, which showed a contracting deficit of -1.7B versus -1.9B expected. The pair then gained a fraction on Thursday after Canadian Ivey PMI printed at 53.1 versus 54.0 expected. Friday saw the rate make its weekly high of 1.3316 after a better than expected U.S. Non-Farm Payrolls number and despite Canadian Employment Change, which increased by a whopping +44.4K in October, significantly higher than the +9.5K that was expected, while the Canadian Unemployment Rate declined a notch to 7.0% from 7.1%. USD/CAD closed the week at 1.3301, showing an overall gain of +1.8%.



Dropped sharply last week as the United States reported a better than expected Non-Farm Payrolls number and with very little economic data out of New Zealand. The week began with the pair making its weekly high of 0.6784 on Monday after a positive U.S. ISM Manufacturing PMI number. The rate continued selling off on Tuesday after the New Zealand GDT Price Index printed at -7.4% versus a previous reading of -3.1%, also, New Zealand Employment Change showed a decline of -0.4% q/q compared to an expected increase of +0.4% with the previous number downwardly revised from -1.7% to -2.1%. Also, the New Zealand Unemployment Rate edged up to 6.0% from 5.9% as widely expected. The pair extended its losses on Wednesday after better than expected U.S. employment, trade and manufacturing data. On Thursday, the rate gained a fraction after lower than expected U.S. Preliminary Nonfarm Productivity and Unit Labor Costs data. Friday saw the rate resume its downtrend, making its weekly low of 0.6497 after a better than expected U.S. NFP number. NZD/USD went on to close at 0.6520, showing an overall weekly loss of -3.6%.

The week ahead

AUD The Australian economic calendar is quite busy this coming week, featuring key jobs data on Thursday. Monday starts the week’s highlights off with ANZ Job Advertisements (last 3.9%), and Tuesday’s key events include the NAB Business Confidence survey (last 5) and Home Loans (0.1%). Wednesday then offers Westpac Consumer Sentiment (last 4.2%), while Thursday features MI Inflation Expectations (last 3.5%), the Employment Change (14.8K) and the Unemployment Rate (6.2%). That concludes the week’s highlights since Friday is quiet. Resistance for AUD/USD is seen at 0.7279/84, 0.7181/0.7223, and 0.7041/83, with support noted at 0.6907/0.7016 and 0.6246.

CAD The Canadian economic calendar is quiet this coming week, only featuring a speech by Governing Council Member Wilkins on Tuesday, a Bank Holiday on Wednesday, and a speech by Governing Council Member Wilkins and the NHPI (0.2%) on Thursday. Resistance for USD/CAD is seen at 1.3415/56, 1.3323/52 and 1.3308/09, while support shows at 1.3278, 1.3153/97 and 1.2900/1.3054.

EUR The Eurozone economic calendar is moderately active this coming week, featuring GDP data on Friday. Monday starts the week’s highlights off with the Eurogroup Meetings, and Tuesday’s key events include the ECOFIN Meetings. Wednesday is a French Bank Holiday and offers a speech by ECB President Draghi, while Thursday features two more speeches by Draghi. Friday’s important data then concludes the week with German Preliminary GDP (0.3%) and EZ Flash GDP (0.4%). Resistance for EUR/USD is seen at 1.1052/1.1171, 1.0996/1.1005 and 1.0808/96, with support showing at 1.0712, 1.0659/65 and 1.0520.

GBP The UK economic calendar is less active than usual this coming week, only featuring the Average Earnings Index (3.2%), the Claimant Count Change (1.6K), the Unemployment Rate (5.4%) and a speech by BOE Governor Carney on Wednesday, followed by a speech by MPC Member Haldane on Thursday. Resistance to the topside for GBP/USD shows at 1.5304/82, 1.5241/43 and 1.5052/1.5199, while support for the pair is expected at 1.4944/93, 1.4900 and 1.4852/55.

JPY The Japanese economic calendar is light this coming week, only featuring the Current Account (1.50T) on Tuesday and Core Machinery Orders (3.3%) on Thursday. Resistance for USD/JPY currently shows up at 125.06/85, 124.47/57 and 123.51/72, with support indicated at 123.00, 120.02/122.02 and 118.49/119.65.

NZD The New Zealand economic calendar is quiet this coming week, only featuring the RBNZ’s Financial Stability Report and a speech by RBNZ Governor Wheeler on Tuesday. The chart for NZD/USD shows resistance at 0.6790/0.6813, 0.6618/0.6738 and 0.6557/71. On the downside, technical support is expected at 0.6455, 0.6388/0.6400 and 0.6234/87.

USD The U.S. economic calendar is quite active this coming week, featuring Retail Sales data on Friday. Monday is quiet, so Tuesday starts the week’s highlights off with a speech by FOMC Member Evans, Import Prices (-0.1%) and Mortgage Delinquencies (10th-13th November, last 5.30%). Wednesday is a Bank Holiday, while Thursday features Weekly Initial Jobless Claims (270K), a speech by Fed Chair Yellen, JOLTS Job Openings (5.39M), speeches by FOMC Members Evans and Dudley, and Crude Oil Inventories (last 2.8M). Friday’s important events then conclude the week with a speech by FOMC Member Fischer, Core Retail Sales (0.4%), PPI (0.2%), Retail Sales (0.3%), Core PPI (0.1%), and the Preliminary University of Michigan Consumer Sentiment survey (91.3).


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