Weekly Market Watch

Released 14 December 2015 - Weekly Newsletter

Last week recap

Extended its previous week’s gains last week despite mostly better than expected U.S. economic data, and with very few significant economic releases out of the Eurozone. The week began with the rate making its weekly low of 1.0795 on Monday after Atlanta Fed President Dennis Lockhart said that the U.S. economy was experiencing “solid, moderate growth” but that, “we don't know exactly how the economy is going to evolve. We cant commit ourselves ... in advance to a particular pattern or particular schedule”. Lockhart was referring to December 16th’s potential Fed rate hike and subsequent Fed actions. The pair then rallied on Tuesday after U.S. JOLTS Job Openings, which printed +5.38M compared to an expected +5.59M. The rate then made its weekly high of 1.1042 on Wednesday after comments from ECB Policymaker Ewald Nowotny, who told reporters in Vienna, referring to last week’s ECB rate decision, “It was absurd what expectations were expressed, I believe it was really a massive failing of market analysts. I don’t believe the ECB’s communications policy gave a false signal.” On Thursday, the pair sold off as crude oil prices fell below the $37 handle and despite U.S. Initial Jobless Claims, which showed an increase of 282K versus 266K expected. The rate then recovered on Friday, gaining ground after the ECB’s Targeted LTRO lent out 18.3B to Eurozone banks and despite U.S. Core Retail Sales, which increased +0.4% m/m compared to +0.3% anticipated, while Retail Sales increased +0.3% versus +0.2% expected, and PPI, which increased +0.3% m/m compared to an expected flat reading and Core PPI, which rose +0.3% versus +0.2% expected. EUR/USD went on to close the week at 1.0993, with an overall gain of +1.1% from its previous weekly close.
Lost ground last week as asset flows favoured the Yen over the Greenback and with mixed economic numbers out of both countries. The week began with the pair making its weekly high of 123.47 on Monday after BOJ Governor Kuroda said that, “The Bank of Japan has been pursuing quantitative and qualitative monetary easing (QQE) since April 2013, and the policy has been steadily exerting its intended effects toward achieving the price stability target of 2 percent. It goes without saying that the financial system serves as an important transmission channel through which QQE produces its effects.” Also out on Monday were Japanese Final GDP, which increased +0.3% q/q compared to an expected +0.1% rise, and the Japanese Current Account, which showed a surplus of +1.49T versus +1.53T expected. The rate then began selling off on Tuesday after Japanese Core Machinery Orders increased an impressive +10.7% m/m, significantly higher than the expected decline of -1.5%. On Wednesday, the pair extended its losses despite the Japanese BSI Manufacturing Index, which printed at 3.8 versus an expected reading of 12.1. The pair then consolidated at a slightly higher level on Thursday after mixed U.S. employment and Import Prices data. Friday saw the pair make its weekly low of 120.57 despite better than expected U.S. Retail Sales and PPI data. USD/JPY closed at 120.82, with an overall loss of -1.9% for the week.
Extended its previous week’s gains last week as the BOE left rates and stimulus unchanged, the UK reported mostly lower than expected numbers with mixed economic data out of the United States. The week began with Cable declining on Monday in the absence of any significant economic data out of either country. The pair then made its weekly low of 1.4955 on Tuesday after UK Manufacturing Production declined -0.4% m/m compared to an expected decline of -0.1%, also out were Halifax HPI, which declined -0.2% m/m versus an expected increase of +0.3% and the NIESR GDP Estimate, which came in at +0.6% compared to a previous reading of +0.5% downwardly revised from +0.6%. Cable then rose sharply on Wednesday in anticipation of Thursday’s BOE rate and monetary policy releases. On Thursday, the rate declined after the BOE left its benchmark Official Bank Rate unchanged at 0.50% as widely anticipated, while the Asset Purchase Facility was left at 375B. The Monetary Policy Summary noted that, “As in previous months, there is a range of views among MPC members about the balance of risks to inflation relative to the target in the medium term. At the Committee’s meeting ending on 9 December, eight members judged it appropriate to leave the stance of monetary policy unchanged at present. Ian McCafferty preferred to increase Bank Rate by 25 basis points, given his view that the path of domestic costs was more likely to lead to inflation exceeding the target in the medium term than was embodied in the Committee’s collective November projections.” Also out on Thursday was the UK Trade Balance, which showed a deficit of -11.8B versus -9.8B expected. On Friday, Cable made its weekly high of 1.5239 despite better than expected U.S. Retail Sales and PPI data. GBP/USD went on to close at 1.5222, with an overall weekly gain of +0.8%.
Lost ground last week as the price of oil dipped to $35.62 per barrel and despite impressive employment numbers out of Australia. The week began with the pair making its weekly high of 0.7338 on Monday despite Australian ANZ Job Advertisements increasing +1.3% m/m compared to a previous reading of +0.3%. The rate continued its slide on Tuesday after Australian NAB Business Confidence printed at 5 versus a previous reading of 3 upwardly revised from 2, also, Australian Westpac Consumer Sentiment printed at -0.8% versus a previous reading of +3.9%. On Wednesday, the pair gained a fraction after making its weekly low of 0.7171 as Australian Home Loans declined -0.5% m/m compared to an expected -1.0% decline. The rate then traded higher on Thursday after Australian Employment Change showed an increase of +71.4K, significantly higher than the expected decline of -10.0K that was expected. Also, the Australian Unemployment Rate declined to 5.8% from 5.9% versus an expected increase to 6.0%. The pair then resumed selling off on Friday as the price of oil broke the $37 per barrel handle and after better than expected U.S. PPI and Retail Sales numbers. AUD/USD went on to close at 0.7183, with a loss of -2.1 percent for the week.
Dropped sharply last week as the price of oil’s slide took its toll on the petrocurrency. The week began with the rate making its weekly low of 1.3370 on Monday in the absence of any significant economic data out of either country. The pair continued higher on Tuesday despite Canadian Building Permits increasing +9.1% m/m versus +3.0% expected. On Wednesday, the rate consolidated at a slightly lower level as U.S. Crude Oil Inventories showed a negative number. The pair then resumed its rally on Thursday despite Canadian NHPI, which increased +0.3% m/m versus +0.1% expected. Friday saw the pair make its weekly high of 1.3756 as the price of oil fell below $36 per barrel and positive U.S. economic numbers led the rate to close at 1.3753, with an overall gain of +2.9% for the week.
Lost a fraction last week as the RBNZ cut its benchmark Official Cash Rate by 25 bps and with mixed economic numbers coming out of the United States. The rate began the week on a soft note, declining on Monday in the absence of any significant data from either country. The pair then gained ground on Tuesday after a lower than expected U.S. employment number. On Wednesday, the pair made its weekly low of 0.6564 after the RBNZ cut its Official Cash Rate to 2.5% from 2.75%. The RBNZ Rate Statement noted that, “Monetary policy needs to be accommodative to help ensure that future average inflation settles near the middle of the target range. We expect to achieve this at current interest rate settings, although the Bank will reduce rates if circumstances warrant. We will continue to watch closely the emerging flow of economic data.” RBNZ Governor Graeme Wheeler said at the press conference, that, “The rise in the exchange rate is unhelpful and further depreciation would be appropriate in order to support sustainable growth”. The pair then made its weekly high of 0.6780 on Thursday after mixed U.S. economic data. Friday, the rate sold off as the price of oil affected all the commodity currencies, bringing NZD/USD to close the week at 0.6708, with a loss of -0.5%.

The week ahead

AUD The Australian economic calendar is rather quiet this coming week, only featuring the RBA’s Monetary Policy Meeting Minutes and the HPI (2.1%) on Tuesday; a speech by RBA Assistant Governor Debelle on Wednesday, and the Mid-Year Economic and Fiscal Outlook due out from the 15th to the 17th of December. Resistance for AUD/USD is seen at 0.7333/0.7495, 0.7279/84 and 0.7171/0.7223, with support noted at 0.7151/58 and 0.6907/0.7083.

CAD The Canadian economic calendar is busier than usual this coming week, featuring CPI data on Friday. Monday is quiet, so Tuesday starts the week’s highlights off with Manufacturing Sales (-1.5%) and a speech by BOC Governor Poloz. Wednesday then offers Foreign Securities Purchases (last 3.35B), Thursday features nothing of note, and Friday concludes the week with Core CPI (last 0.3%), CPI (last 0.1%) and Wholesale Sales (last -0.1%). Resistance for USD/CAD is seen at 1.4195, 1.4006 and 1.3756, while support shows at 1.3621, 1.3415/56 and 1.3278/1.3352.

EUR The Eurozone economic calendar is quite busy this coming week, featuring a speech by ECB President Draghi on Monday that starts the week’s highlights off. Tuesday’s key events then include the German ZEW Economic Sentiment survey (15.2) and the EZ ZEW Economic Sentiment survey (34.4), while Wednesday offers French Flash Manufacturing PMI (50.6), French Flash Services PMI (50.7), German Flash Manufacturing PMI (52.7), German Flash Services PMI (55.5), EZ Flash Manufacturing PMI (52.8), EZ Flash Services PMI (54.0) and EZ Final CPI (0.1%). Thursday then features the German Ifo Business Climate survey (109.2), which concludes the week’s important data since Friday offers nothing notable. Resistance for EUR/USD is seen at 1.1134/73, 1.1042/1.1104, 1.0980/1.1005 and with support showing at 1.0896/97, 1.0808/35 and 1.0659/1.0712.

GBP The UK economic calendar is active this coming week, featuring key jobs data on Wednesday. Monday starts the week’s highlights off with a speech by MPC Member Shafik, and Tuesday’s key events include CPI (0.1%), a speech by MPC Member Haldane, PPI Input (-1.0%) and the RPI (0.9%). Wednesday then offers the Average Earnings Index (2.5%), the Claimant Count Change (0.9K) and the Unemployment Rate (5.3%), while Thursday features Retail Sales (0.6%) that concludes the week’s important data since Friday offers nothing of note. Resistance to the topside for GBP/USD shows at 1.5470/75, 1.5304/82 and 1.5239/63 and while support for the pair is expected at 1.5158/1.5199, 1.5026/53 and 1.4852/1.4993.

JPY The Japanese economic calendar is rather inactive this coming week, only featuring the Tankan Manufacturing Index (12) and the Tankan Non-Manufacturing Index (25) on Monday, followed by Friday’s tentatively scheduled BOJ Monetary Policy Statement and BOJ Press Conference. Resistance for USD/JPY currently shows up at 123.00/72, 122.21/30 and 121.23/64, with support indicated at 120.02/120.57, 118.49/119.65 and 118.05.

NZD The New Zealand economic calendar is also quite peaceful this coming week, only featuring the tentatively scheduled GDT Price Index (last 3.6%) and the Current Account (-4.85B) on Tuesday; GDP (last 0.4%) on Wednesday; and the ANZ Business Confidence survey (last 14.6) on Friday. The chart for NZD/USD shows resistance at 0.6863/95, 0.6779/0.6813 and 0.6720/38. On the downside, technical support is expected at 0.6696, 0.6557/0.6618 and 0.6455/99.

USD The U.S. economic calendar is busy this coming week, featuring the very closely watched FOMC Statement and Fed Funds Rate Decision on Wednesday. Monday is quiet, so Tuesday starts the week’s highlights off with CPI (0.0%), Core CPI (0.2%) and the Empire State Manufacturing Index (-5.7). Wednesday’s key events then include Building Permits (1.16M), Housing Starts (1.14M), the Capacity Utilization Rate (77.3%), Industrial Production (0.0%), Crude Oil Inventories (last -3.6M), the FOMC’s Economic Projections, the FOMC Statement, the Federal Funds Rate Decision (expected to rise 25 bps to <0.50% from <0.25%) and the FOMC Press Conference. Thursday features the Philly Fed Manufacturing Index (2.1), Weekly Initial Jobless Claims (271K) and the Current Account (-123B). Friday then concludes the week with a speech by FOMC Member Lacker.


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