Weekly Market Watch

Released 17 October 2016 - Weekly Newsletter

Last week recap

Extended its previous week’s losses last week as expectations of a Fed rate hike in December and positive employment news supported the Greenback, with mixed economic numbers from both economies. The rate began the week on a quiet note, trading lower after making its weekly high of 1.1202 on Monday as the United States observed a bank holiday, with no significant economic releases from the Eurozone. The pair continued selling off on Tuesday despite German ZEW Economic Sentiment, which printed at 6.2 versus 4.2 expected, while EZ ZEW Economic Sentiment showed a reading of 12.3, almost double the expected print of 6.3. On Wednesday, the rate continued its slide after the FOMC Meeting Minutes for its September 21st rate decision showed that three of the ten FOMC members were opposed to leaving rates unchanged at 0.25>0.50% on September 21st and that it had been a “close call”. Also, U.S. JOLTS Job Openings fell to an annualized 5.44M versus 5.79M expected. The pair then declined gained ground on Thursday despite U.S. Weekly Initial Jobless Claims, which declined to 246K versus an expectation of 252K in the week ending October 8th. The number was the lowest since 1973 and marked the 15th consecutive week the number stayed below 270K. Also on Thursday, U.S. Crude Oil Inventories showed +4.9M barrels of crude oil in inventory, compared to +0.4M expected and U.S. Import Prices increased +0.1% m/m as widely anticipated. The pair then made its weekly low of 1.0969 on Friday after U.S. Core Retail Sales increased +0.5% m/m versus +0.4% expected, while Retail Sales increased +0.6% m/m as widely anticipated. Also out was U.S. PPI, which increased +0.3% m/m versus an expectation of +0.2%, and Core PPI, up +0.2% m/m versus +0.1% expected. EUR/USD closed at 1.0972, with an overall loss of -2.0% for the week. After the Friday’s market close, Fed Chair Janet Yellen said that “by temporarily running a 'high-pressure economy, with robust aggregate demand and a tight labor market. One can certainly identify plausible ways in which this might occur.” Referring to reversing the damage to the economy brought about by the economic crisis. Yellen added that, “Increased business sales would almost certainly raise the productive capacity of the economy by encouraging additional capital spending, especially if accompanied by reduced uncertainty about future prospects”.
Extended its gains for the third consecutive week last week as the market priced in a possible Fed interest rate hike in December with very little significant economic data from Japan. The week began on a quiet note, with the pair trading higher after making its weekly low of 102.80 on Monday as both countries observed bank holidays. The rate then lost a fraction on Tuesday after the Japanese Current Account showed an expanding surplus of +1.98T compared to an expectation of +1.58T. Wednesday saw the rate resume its rally after the FOMC Meeting Minutes indicated members were possibly in favour of a December interest rate hike. The pair then declined after making its weekly high of 104.62 on Thursday after a better than expected U.S. Initial Jobless Claims number. On Friday, the pair gained ground after better than expected U.S. Retail Sales and PPI data. USD/JPY closed at 104.14, with a weekly gain of +1.2%.
Continued its steep slide last week after UK PM May allowed a motion from the opposition Labour party to have “full and transparent” parliamentary scrutiny before the triggering of article 50 for Brexit by the end of March, 2017. The week began with Cable trading lower after making its weekly high of 1.2443 on Monday as the United States observed a bank holiday and with no significant economic data out of the UK. Tuesday saw the rate continue its slide, making its weekly low of 1.2088 after MPC member Saunders noted that, “The same factors, along with the UK’s persistent current account deficit, probably also imply a lower equilibrium level for sterling’s real exchange rate. Indeed, sterling’s trade-weighted exchange rate is roughly 15% lower than a year ago, with about three-quarters of that move after the referendum.” On Wednesday, Cable gained a fraction after UK PM Theresa May allowed a motion by Labour for MPs to have more say over the UK’s strategy for leaving the EU before Article 50 is triggered next March, and despite indications by the FOMC that an interest rate hike might take place in December. The rate continued fractionally higher on Thursday despite a better than expected U.S. Initial Jobless Claims number. Friday saw the pair resume its selloff after better than expected U.S. Retail Sales and PPI numbers. GBP/USD closed at 1.2190, with an overall loss of -1.9% from its previous weekly close.
Gained a fraction last week as the rate reacted favourably to higher commodity and crude oil prices and despite an increased likelihood of a U.S. Fed interest rate hike in December. The week began with the rate gapping higher on Monday and consolidating at a slightly lower level as the United States observed a bank holiday and in the absence of any significant economic data out of Australia. The pair then fell sharply on Tuesday as comments from Chicago Fed president Charles Evans indicated a possible Fed rate hike in December and after the Australian NAB Business Confidence survey showed a reading of 6, unchanged from its previous release. On Wednesday, the rate gained fractionally despite a somewhat hawkish FOMC Meeting Minutes. Thursday saw the pair gain a fraction after making its weekly low of 0.7506 as the United States reported a better than expected employment number. The pair continued higher on Friday, making its weekly high of 0.7647 despite better than expected U.S. Retail Sales and PPI data and after the RBA’s Financial Stability Report noted that, “Since the crisis, the FSB and other international and national bodies have worked to address the risks posed by shadow banking, i.e. entities and activities involved in credit intermediation outside of the regular banking system, such as money market funds (MMFs), finance companies and securities lending. With the bulk of policy development now finalised, regulators’ focus has largely turned to implementation and monitoring.” AUD/USD closed at 0.7612, with a gain of +0.4% for the week.
Lost ground last week as the price of crude oil maintained above the $50 per barrel handle with very little significant economic data out of Canada. The pair began the week on a soft note, as the rate fell sharply on Monday with both countries observing bank holidays. The pair then recovered its losses on Tuesday in the absence of any significant economic releases from either country. On Wednesday, the rate continued fractionally higher as the FOMC Meeting Minutes showed three dissenting votes on leaving interest rates unchanged at their September meeting. The pair then fell sharply on Thursday despite a better than expected U.S. employment number and Canadian NHPI, which increased +0.2% m/m versus +0.3% anticipated. The rate continued selling off on Friday, making its weekly low of 1.3102 despite better than expected U.S. Retail Sales and PPI data, which brought the pair to close at 1.3139, with an overall loss of -1.0 % from its previous weekly close.
Extended its previous week’s losses last week as asset flows favoured the Greenback over the Kiwi with very little significant economic data out of New Zealand. The rate began the week declining after making its weekly high of 0.7180 on Monday as the United States observed a bank holiday with no significant economic data out of New Zealand. The pair continued sharply lower on Tuesday, again, in the absence of any significant numbers out of either country. On Wednesday, the pair consolidated at a slightly higher level after the NZ Business NZ Manufacturing Index printed at 57.7 versus a previous reading of 55.2, while FPI declined -0.9% m/m versus a previous reading of +1.3%. The rate continued gaining on Thursday after making its weekly low of 0.7034 despite a better than expected U.S. employment number. The pair then lost a fraction on Friday as the United States reported positive Retail Sales and PPI data. NZD/USD closed at 0.7087, with an overall weekly loss of -1.0%.

The week ahead

AUD The Australian economic calendar is fairly busy this coming week, featuring jobs data on Thursday. Monday starts the week’s highlights off with a speech by RBA Governor Lowe, and Tuesday offers the RBA’s Monetary Policy Meeting Minutes. After a quiet Wednesday, Thursday features the Employment Change (15.2K), the Unemployment Rate (5.70%) and the NAB Quarterly Business Confidence survey (last 2) to conclude the week. Resistance for AUD/USD is seen at 0.7826/34, 0.7709/64 and 0.7614/91, with support noted at 0.7401/0.7583, 0.7232/0.7370 and 0.7284/99.

CAD The Canadian economic calendar is busy this coming week, featuring the BOC Rate Decision on Wednesday. Monday starts the week’s highlights off with Foreign Securities Purchases (6.24B), and Tuesday’s key events include Manufacturing Sales (0.30%). Wednesday then offers the BOC Monetary Policy Report, the BOC Rate Statement, the Overnight Rate Decision (unchanged at 0.50%), the BOC Press Conference and a speech by BOC Governor Poloz, while Thursday features little of note. Friday’s important data then concludes the week with Core CPI (0.20%), Core Retail Sales (0.40%), CPI (0.20%) and Retail Sales (0.50%). Resistance for USD/CAD is seen at 1.3638, 1.3352/1.3456 and 1.3194/1.3312, while support shows at 1.3101/38, 1.2923/1.3075 and 1.2762/1.2863.

EUR The Eurozone economic calendar is fairly busy this coming week, featuring the ECB Rate Decision on Thursday. Monday starts the week’s highlights off with Final CPI (0.40%), a speech by ECB President Draghi and a speech by German Buba President Weidmann, and Tuesday offers nothing notable. Wednesday is then quiet, while Thursday features the first day of the EU Economic Summit, the ECB’s Minimum Bid Rate Decision (unchanged at 0.00%) and the ECB Press Conference. Friday then concludes the week with the second day of the EU Economic Summit. Resistance for EUR/USD is seen at 1.1213/83, 1.1103/1.1185 and 1.1028/70, with support showing at 1.0951/64, 1.0910 and 1.0824.

GBP The UK economic calendar is very active this coming week, featuring key jobs data on Wednesday. Monday starts the week’s highlights off with a speech by MPC Member Broadbent, and Tuesday’s key events include CPI (0.90%), PPI Input (0.40%) and RPI (2.00%). Wednesday then offers the Average Earnings Index (2.30%), Claimant Count Change (3.4K), the Unemployment Rate (4.90%) and a speech by MPC Member Haldane, while Thursday features Retail Sales (0.30%) and a speech by MPC Member Shafik. Friday’s important data then concludes the week with Public Sector Net Borrowing (8.6B). Resistance to the topside for GBP/USD shows at 1.2794/1.2864, 1.2324 and 1.2226/60, while support for the pair is expected at 1.2131, 1.2088 and 1.1991.

JPY The Japanese economic calendar is quiet this coming week, featuring no notable data. Resistance for USD/JPY currently shows up at 107.47, 106.31/80 and 104.63/105.59, with support indicated at 104.12/15, 103.35/38 and 101.24/102.65.

NZD The New Zealand economic calendar is rather quiet this coming week, only featuring CPI (0.00%) on Monday and the GDT Price Index (last -3.00%) on Tuesday. The chart for NZD/USD shows resistance at 0.7483, 0.7202/0.7420 and 0.7132/86. On the downside, technical support is expected at 0.7046/0.7086, 0.6949/78 and 0.6806.

USD The U.S. economic calendar is moderately active this coming week, featuring CPI data on Tuesday. Monday starts the week’s highlights with the Empire State Manufacturing Index (1.1), the Capacity Utilization Rate (75.60%), Industrial Production (0.30%) and a speech by FOMC Member Fischer, and Tuesday features CPI (0.30%) and Core CPI (0.20%). Wednesday then offers Building Permits (1.17M), Housing Starts (1.18M) and Crude Oil Inventories (last 4.9M), while Thursday concludes the week with a speech by FOMC Member Dudley, the Philly Fed Manufacturing Index (5.2), Weekly Initial Jobless Claims (251K) and Existing Home Sales (5.36M).


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