Weekly Market Watch

Released 07 December 2015 - Weekly Newsletter

Last week recap

Reversed direction, trading sharply higher last week as the ECB’s previously announced additional easing measures failed to meet bear expectations for the rate, while the United States released a better than expected Non-Farm Payroll number. The week began on a soft note with the pair declining a fraction on Monday after German Retail Sales dropped -0.4% m/m compared to an expected increase of +0.3%, while German Preliminary CPI rose +0.1% m/m as widely expected. U.S. data had Pending Home Sales increase +0.2% m/m compared to +1.6% anticipated. The rate increased on Tuesday after German Unemployment Change decreased -13K compared to -4K expected and the Eurozone Unemployment Rate dropped to 10.7% from 10.8%. U.S. data had ISM Manufacturing PMI print at 48.6 versus 50.6 expected. On Wednesday, the pair consolidated at a slightly lower level after U.S. ADP Non-Farm Employment Change showed an increase of +217K compared to +191K expected, also, Fed Chair Yellen stated that, “On balance, economic and financial information received since our October meeting has been consistent with our expectations of continued improvement in the labor market, continuing improvement in the labor market helps strengthen confidence that inflation will move back to our 2% objective over the medium term.”The rate then made both its weekly high of 1.0980 and it weekly low of 1.0522 on Thursday after the ECB left its benchmark Minimum Bid Rate unchanged at <0.05% as="" was="" widely="" anticipated.="" the="" central="" bank="" also="" cut="" the="" deposit="" rate="" by="" -10="" bps="" to="" a="" negative="" -0.30%="" which="" was="" a="" smaller="" cut="" than="" the="" market="" expected.="" in="" his="" speech="" after="" the="" rate="" release,="" ecb="" president="" draghi="" said="" that,="" “the="" monthly="" purchases="" of="" €60="" billion="" under="" the="" app="" are="" now="" intended="" to="" run="" until="" the="" end="" of="" march="" 2017,="" or="" beyond,="" if="" necessary,="" and="" in="" any="" case="" until="" the="" governing="" council="" sees="" a="" sustained="" adjustment="" in="" the="" path="" of="" inflation="" consistent="" with="" its="" aim="" of="" achieving="" inflation="" rates="" below,="" but="" close="" to,="" 2%="" over="" the="" medium="" term.="" we="" will="" also="" reinvest="" the="" principal="" payments="" on="" the="" securities="" purchased="" under="" the="" app="" as="" they="" mature,="" for="" as="" long="" as="" necessary.”="" this="" compares="" to="" the="" previous="" september,="" 2016="" date="" to="" end="" the="" bank’s="" asset="" purchase="" program.="" the="" pair="" then="" lost="" ground="" on="" thursday="" after="" u.s.="" non-farm="" payrolls="" showed="" +211k="" new="" jobs="" in="" november="" compared="" to="" an="" expected="" +201k,="" also,="" the="" u.s.="" trade="" balance="" showed="" a="" deficit="" of="" -43.9b="" compared="" to="" -40.6b="" anticipated.="" eur/usd="" went="" on="" to="" close="" at="" 1.0873,="" with="" an="" overall="" gain="" of="" +2.7%="" from="" its="" previous="" weekly="">

Gained a fraction last week as both countries reported mostly mixed economic numbers. The week began with the pair gaining on Monday after Japan Retail Sales increased +1.8% y/y versus +0.9% expected, and Preliminary Industrial Production, which rose +1.4% compared to +1.9% anticipated. Also on Monday, BOJ Governor Kuroda said that, “Looking at recent economic developments, the slowdown in emerging economies, particularly China, has affected Japan''s exports and production. Nevertheless, as years ago, the underlying trend in inflation has also been improving steadily. Quantitative and qualitative monetary easing (QQE), which the Bank introduced in April 2013, has been exerting its intended effects toward overcoming deflation.” The rate then declined on Tuesday after Japanese Capital Spending increased +11.2% q/y versus +2.3% expected. Wednesday saw the pair make its weekly high of 123.66 after a better than expected U.S. ADP Non-Farm Employment number. The rate then declined sharply on Thursday after a lower than expected U.S. ISM Non-Manufacturing PMI print. On Friday, the pair gained after a better than expected U.S. Non-Farm Payrolls number. USD/JPY closed at 123.10, with a gain of +0.3% for the week.

Reversed direction, gaining ground last week as the BOE released its Financial Stability Report and Bank Stress Test results with both countries reporting mixed economic data. The week began with Cable gaining a fraction on Monday after UK Net Lending to Individuals increased +4.8B as was widely anticipated. The rate then consolidated at a slightly higher level on Tuesday after the BOE’s Bank Stress Test results showed that RBS and Standard Chartered were singled out as the only UK banks that would require additional capital in the event of another financial crisis. Tuesday’s data had UK Manufacturing PMI print at 52.7 compared to an expected reading of 53.7. On Wednesday, Cable made its weekly low of 1.4894 after UK Construction PMI printed at 55.3 versus an expected 58.4 reading. The rate then gained sharply on Thursday, making its weekly high of 1.5158 after UK Services PMI printed at 55.9 versus 55.1 expected. Cable then sold off on Friday after a better than expected U.S. Non-Farm Payrolls number, which brought GBP/USD to close at 1.5104, with an overall weekly gain of +0.5%.

Gained ground last week as the RBA left interest rates unchanged with mixed economic numbers from both countries. The week began with the pair gaining ground after making its weekly low of 0.7169 on Monday after Australian Company Operating Profits increased +1.3% q/q compared to +1.1% expected. The rate then gained sharply on Tuesday after the RBA left its benchmark Cash Rate unchanged at 2.0%. The Rate Statement concluded saying, “At todays meeting the Board again 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. 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.” Also out were Australian Building Approvals, which increased +3.9% m/m versus an expected decline of -2.4%, and the Australian Current Account, which showed a deficit of -18.1B compared to -16.6B expected. On Wednesday, the pair sold off after comments from RBA Governor Stevens, who said that, “I wont go into detail here, but, in brief, year-ended GDP growth is forecast to be in the range of 2 to 3 per cent in June 2016 and to pick up a bit during the following year. Domestic inflationary pressures are expected to remain subdued. Inflation is forecast to be in the range of 1½ to 2½ per cent over the year to June 2016, and 2 to 3 per cent over the year to June 2017. The unemployment rate is projected to remain around 6 per cent or a little above over the next year, before gradually declining.” Also out was Australian GDP, which showed an increase of +0.9% q/q versus +0.7% expected. The pair then resumed its uptrend on Thursday despite the Australian Trade Balance, which showed a deficit of -3.31B compared to an expected -2.61B. Friday saw the rate make its weekly high of 0.7384 before consolidating after Australian Retail Sales rose +0.5% versus +0.4% expected. AUD/USD closed at 0.7335, with an overall gain of +2.0% for the week.

Showed little change last week as the BOC left interest rates unchanged and Canada reported mostly lower than expected economic data. The rate began the week selling off a fraction on Monday despite the Canadian Current Account showing a deficit of -16.2B compared to an expected -15.2B. The pair then declined a fraction on Tuesday after Canadian GDP declined -0.5% m/m versus an expected increase of +0.1%. The rate consolidated on Wednesday after the BOC left its benchmark Overnight Rate unchanged at 0.50%. The Bank’s statement noted that, “Total CPI inflation remains near the bottom of the Bank’s target range, owing to declines in consumer energy prices. Core inflation is close to 2 per cent as the effects of the lower dollar and the output gap continue to offset each other. The Bank judges that the risks around the inflation profile remain roughly balanced over the projection horizon. Vulnerabilities in the household sector continue to edge higher while overall risks to financial stability are evolving as expected. Taking all of these developments into consideration, the Bank judges that the risks to the outlook for inflation remain within the zone for which the current stance of monetary policy is appropriate. Therefore, the target for the overnight rate remains at 1/2 per cent.” Thursday saw the rate consolidate at a lower level after making its weekly low of 1.3292 after mixed U.S. economic numbers. The pair then made its weekly high of 1.3414 on Friday after Canadian Employment Change declined -35.7K versus -9.7K expected , while the Canadian Unemployment Rate edged up to 7.1% from 7.0% and the Canadian Trade Balance showed a deficit of -2.8B versus -1.7B anticipated, which brought USD/CAD to close at 1.3360, with a loss of -11 pips and virtually unchanged on the week.

Gained sharply last week as the United States reported mixed economic numbers with very little significant economic data out of New Zealand. The week began with the pair gaining after making its weekly low of 0.6513 on Monday after ANZ Business Confidence printed at 14.6 versus previous reading of 10.5. The rate extended its gains on Tuesday after the New Zealand GDT Index increased +3.6% compared to a previous reading of -7.9%. On Wednesday, the pair lost ground after a better than expected U.S. employment number. The rate then resumed its uptrend on Thursday after mixed U.S. economic data. The pair then made its weekly high of 0.6785 on Friday despite a better than expected U.S. Non-Farm Payrolls number. NZD/USD closed at 0.6744, with an overall gain of +2.4% for the week.

The week ahead

AUD The Australian economic calendar is rather active this coming week, featuring key jobs data on Thursday. Monday starts the week’s highlights off with ANZ Job Advertisements (last 0.4%), and Tuesday’s key events include NAB Business Confidence (last 2). Wednesday then offers the Westpac Consumer Sentiment survey (last 3.9%) and Home Loans (-1.0%), while Thursday features MI Inflation Expectations (last 3.5%), the Employment Change (-10.0K) and the Unemployment Rate (6.0%) to conclude the week’s important data. Resistance for AUD/USD is seen at 0.7532, 0.7427/95 and 0.7343/84, with support noted at 0.7279/84, 0.7151/0.7223 and 0.6907/0.7083.

CAD The Canadian economic calendar is quiet this coming week, only featuring Building Permits (-6.7%) and a speech by BOC Governor Poloz on Tuesday, and then the NHPI (0.1%) on Thursday. Resistance for USD/CAD is seen at 1.4195, 1.4006 and 1.3415/56, while support shows at 1.3278/1.3352, 1.3153/97 and 1.2900/1.3054.

EUR The Eurozone economic calendar is quieter than usual this coming week, only featuring the Eurogroup Meetings on Monday, the ECOFIN Meetings and an Italian Bank Holiday on Tuesday, a speech by German Buba President Weidmann on Thursday and the ECB’s Targeted LTRO (15.5B) on Friday. Resistance for EUR/USD is seen at 1.1052/95, 1.0980/1.1005 and 1.0896/97, with support showing at 1.0808/35, 1.0659/1.0712 and 1.0522/65.

GBP The UK economic calendar is quite active this coming week, featuring the BOE’s Official Bank Rate Decision on Thursday. Monday starts the week’s highlights off with a speech by BOE Governor Carney, and Tuesday’s key events include the Halifax HPI (8th-9th December, 0.3%), Manufacturing Production (-0.1%), and the NIESR GDP Estimate (last 0.6%). Wednesday then offers nothing notable, while Thursday features the Trade Balance (-9.8B), the MPC’s Official Bank Rate Votes (1-0-8), the Monetary Policy Summary, the MPC’s Official Bank Rate Decision (unchanged at 0.50%), the Asset Purchase Facility (unchanged at 375B) and the MPC’s Asset Purchase Facility Votes (0-0-9). Friday’s important data then concludes the week with a speech by MPC Member Weale. Resistance to the topside for GBP/USD shows at 1.5304/82, 1.5241/63 and 1.5158/1.5199, while support for the pair is expected at 1.5026/53, 1.4894/1.4993 and 1.4852/55.

JPY The Japanese economic calendar is moderately active this coming week, featuring a tentatively scheduled speech by BOJ Governor Kuroda on Monday; the Current Account (1.53T) and Final GDP (0.1%) on Tuesday; Core Machinery Orders (-1.5%) on Wednesday; and the BSI Manufacturing Index (12.1) on Thursday. Resistance for USD/JPY currently shows up at 125.06/85, 124.47/57 and 123.66/72, with support indicated at 123.00/33, 120.02/122.30 and 118.49/119.65.

NZD The New Zealand economic calendar is characteristically quiet this coming week, only featuring the RBNZ’s Official Cash Rate Decision (a cut to 2.50% from 2.75% expected), the RBNZ Rate Statement, the RBNZ Monetary Policy Statement and the RBNZ Press Conference. The chart for NZD/USD shows resistance at 0.6863/95, 0.6790/0.6813 and 0.6720/38. On the downside, technical support is expected at 0.6557/0.6618, 0.6455/99 and 0.6388/0.6400.

USD The U.S. economic calendar is quieter than usual this coming week, featuring Retail Sales and PPI data on Friday. Monday is quiet, so Tuesday starts the week’s highlights off with JOLTS Job Openings (5.59M). Wednesday then offers Crude Oil Inventories (last 1.2M), while Thursday features Weekly Initial Jobless Claims (266K) and Import Prices (-0.8%). Friday’s important data then concludes the week with Core Retail Sales (0.3%), PPI (0.0%), Retail Sales (0.2%), Core PPI (0.2%) and the Preliminary University of Michigan Consumer Sentiment survey (92.3).

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