Weekly Market Watch

Released 14 November 2016 - Weekly Newsletter

Last week recap

Fell sharply in an extremely volatile week after Donald J. Trump shocked world markets after winning the U.S. presidential election on Tuesday. The week began with the rate selling off on Monday after German Factory Orders declined -0.6% m/m, significantly lower than the increase of +0.2% that was anticipated. Tuesday saw the pair make its weekly high of 1.1299 after news that the Republican nominee, Donald Trump had won the election for U.S. president against Democratic candidate, Hillary Clinton. In his victory speech, Trump said that, “As I’ve said from the beginning, ours was not a campaign, but rather an incredible and great movement made up of millions of hard-working men and women who love their country and want a better, brighter future for themselves and for their families.” The rate then fell sharply after the news as U.S. long term bond yields surged and the Greenback staged an impressive rally. On Wednesday, the rate continued its slide after the EU’s Economic Forecasts noted that, “The renewed fall in oil prices early this year and the depreciation of the euro’s exchange rate vis-à-vis the US dollar are expected to remain key determinants of both export and import prices in 2016.” The pair extended its losses on Thursday after U.S. Weekly Initial Jobless Claims came in at 254K versus an expectation of 267K. The pair went on to make its weekly low of 1.0830 on Friday as the United States celebrated a bank holiday and after the U.S. Preliminary University of Michigan Consumer Sentiment index printed at 91.6 versus an expected reading of 87.4. EUR/USD closed at 1.0858, with an overall loss of -2.5% from its previous weekly close.
Gained sharply last week as risk appetite favoured the Greenback over the Yen and despite the outcome of the U.S. presidential election. The rate began the week gapping higher on Monday as expectations favoured Hillary Clinton in Tuesday’s U.S. presidential election. The pair continued gaining on Tuesday after initial results confirmed that Trump had won the U.S. election. The rate then made its weekly low of 101.18 on Wednesday before rallying sharply as extreme volatility hit currency pairs after the U.S. election and despite the Japanese Current Account, which showed a deficit of -1.48T compared to an expectation of -1.98T. The pair extended its gains on Thursday after the Japanese Tertiary Industry Index declined -0.1% m/m versus an expected flat reading. On Friday, the pair consolidated its gains, declining a fraction despite a better than expected UoM Consumer Sentiment index reading. USD/JPY closed at 106.64, with an impressive gain of +3.5% for the week.
Extended its previous week’s gains last week as the UK reported mostly better than expected numbers and despite the results of the U.S. presidential election. Cable began the week on a soft note, with the rate declining on Monday despite the UK Halifax HPI printing at +1.4% versus an expected increase of +0.3%. The pair continued its decline on Tuesday despite UK Manufacturing Production, which saw a reading of +0.6% versus +0.5% expected. On Wednesday, Cable made its weekly low of 1.2352 as the market reacted initially to the Trump victory in U.S. presidential elections and before rallying despite the UK Goods Trade Balance, which showed a deficit of -12.7B compared to an expectation of -11.3B. The rate continued gaining on Thursday despite a positive U.S. employment number. Cable then made its weekly high of 1.2673 on Friday as the United States celebrated a bank holiday. GBP/USD closed at 1.2603, with a net weekly gain of +0.7%.
Lost ground last week as the U.S. presidential election results favoured the Greenback over the Aussie and with very little economic data out of Australia. The rate began the week on a positive note, rallying on Monday after polls favoured Hillary Clinton as the winner in Tuesday’s U.S. presidential election. The pair continued gaining on Tuesday, making its weekly high of 0.7777 before the results of the election became apparent on Wednesday morning. On Wednesday, the pair fell sharply after news that Trump had won the U.S. presidential election. High volatility continued in the rate on Thursday as the market continued reacting to the U.S. election results. Friday saw the pair make its weekly low of 0.7524 after RBA Assistant Governor Debelle stated that, “A well-functioning foreign exchange market is very much in the interest of all market participants. This clearly includes central banks, both in their own role as market participants but also as the exchange rate is an important channel of monetary policy transmission. In a globalised world, the foreign exchange market is one of the most vital parts of the financial plumbing.” AUD/USD closed at 0.7548, with an overall weekly loss of -1.7%.
Rallied last week as asset flows favoured the Greenback over the Loonie in the aftermath of the U.S. presidential election. The week began with the rate gaining a fraction on Monday as expectations of a Clinton win in Tuesday’s election supported the Greenback. The pair then declined on Tuesday despite Canadian Housing Starts, which increased 192.9K versus 195K expected and after comments from BOC assistant governor Schembri, who stated that, “The drop in commodity prices and the associated depreciation of the Canadian dollar ushered in a complex adjustment within the Canadian economy. As a result, the exporting landscape is transitioning once again. Canada’s resource sector is shrinking in economic importance as investment and employment shift toward the non-resource sector.” Wednesday saw the pair make its weekly low of 1.3263 before rallying sharply after Trump was confirmed as the winner of the U.S. presidential election. The pair continued gaining on Thursday after the Canadian New Housing Price Index showed a reading of +0.2%, in line with expectations. The rate made its weekly high of 1.3547 on Friday as the United States observed a bank holiday, bringing USD/CAD to close at 1.3528, with a gain of +0.9% for the week.
Declined last week as the RBNZ lowered interest rates and Donald Trump won the U.S. presidential election. The rate began the week gaining fractionally on Monday in the absence of any significant economic data from either country. The pair continued gaining on Tuesday, making its weekly high of 0.7402 as preliminary results showed Trump ahead in the presidential election. On Wednesday, the rate fell sharply after Trump was confirmed the winner of the presidential election and after the RBNZ lowered its benchmark Overnight Cash Rate from 2.0% to 1.75%. The RBNZ Rate Statement noted that, “Weak global conditions and low interest rates relative to New Zealand are keeping upward pressure on the New Zealand dollar exchange rate. The exchange rate remains higher than is sustainable for balanced economic growth and, together with low global inflation, continues to generate negative inflation in the tradables sector. A decline in the exchange rate is needed.” While Governor Graeme Wheeler said in the press conference following the rate release that the exchange rate was “higher than is sustainable” and that he had “an open mind on intervention.” Adding that, “Numerous uncertainties remain, particularly in respect of the international outlook and policy may need to adjust accordingly”. The pair continued its slide on Thursday as the Greenback continued strengthening on Trump’s victory. On Friday, the pair made its weekly low of 0.7107 after a better than expected U.S. consumer sentiment number. NZD/USD closed at 0.7127, with an overall weekly loss of -2.7%.

The week ahead

AUD The Australian economic calendar is rather light this coming week, only featuring the RBA’s Monetary Policy Meeting Minutes and a speech by RBA Governor Lowe on Tuesday; the Wage Price Index (0.5%) on Wednesday; and the Employment Change (20.3K) and Unemployment Rate (5.7%) on Thursday. Resistance for AUD/USD is seen at 0.7826/34, 0.7708/77 and 0.7614/96, with support noted at 0.7401/0.7557, 0.7232/0.7370 and 0.7284/99.

CAD The Canadian economic calendar is moderately active this coming week, featuring CPI data on Friday. Wednesday starts the week’s highlights off with Manufacturing Sales (-0.2%) and a speech by Governing Council Member Lane, and Thursday’s key events include Foreign Securities Purchases (12.74B). Friday’s highlights then conclude the week with Core CPI (0.3%) and CPI (0.2%). Resistance for USD/CAD is seen at 1.4001, 1.3638 and 1.3524/47, while support shows at 1.3194/1.3464, 1.2999/1.3005 and 1.2923/38.

EUR The Eurozone economic calendar is rather busy this coming week, featuring GDP data on Tuesday. Monday starts the week’s highlights off with a speech by ECB President Draghi, and Tuesday’s key events include German Preliminary GDP (0.3%), EZ Flash GDP (0.3%), and the German ZEW Economic Sentiment survey (7.9). Wednesday then offers little of note, while Thursday features Final EZ CPI (0.4%) and the ECB’s Monetary Policy Meeting Accounts. Friday’s important data then concludes the week with speeches by ECB President Draghi and German Buba President Weidmann. Resistance for EUR/USD is seen at 1.1028/1.1196, 1.0910/1.0964 and 1.0858, with support showing at 1.0807/29, 1.0710/76 and 1.0461/1.0519.

GBP The UK economic calendar is somewhat active this coming week, featuring key jobs data on Wednesday. Tuesday starts the week’s highlights off with CPI (1.1%), PPI Input (1.6%), the RPI (2.3%) and the Inflation Report Hearings. Wednesday then offers the Average Earnings Index (2.3%), the Claimant Count Change (1.9K), and the Unemployment Rate (4.9%), while Thursday features Retail Sales (0.5%0 to conclude the week’s highlights. Resistance to the topside for GBP/USD shows at 1.3437/80, 1.2790/1.2864 and 1.2673, while support for the pair is expected at 1.2556, 1.2226/1.2351 and 1.2081/1.2145.

JPY The Japanese economic calendar is quite peaceful this coming week, only featuring Preliminary GDP (0.5%) on Sunday and a speech by BOJ Governor Kuroda on Monday. Resistance for USD/JPY currently shows up at 108.22, 107.47 and 106.94, with support indicated at 106.31/80, 104.63/105.59 and 104.12/15.

NZD The New Zealand economic calendar is fairly quiet this coming week, only featuring Retail Sales (0.8%) and Core Retail Sales (1.1%) on Monday; the tentatively scheduled GDT Price Index (last 11.4%) on Tuesday; and PPI Input (0.9%) on Wednesday. The chart for NZD/USD shows resistance at 0.7483, 0.7339/0.7420 and 0.7107/0.7202. On the downside, technical support is expected at 0.7034/0.7086, 0.6949/78 and 0.6806/47.

USD The U.S. economic calendar is busy this coming week, featuring key inflation data on Wednesday and Thursday. Tuesday starts the week’s highlights off with Core Retail Sales (0.5%), Retail Sales (0.6%), the Empire State Manufacturing Index (-1.5) and Import Prices (0.4%). Wednesday then offers a speech by FOMC Member Bullard, PPI (0.3%), Core PPI (0.2%), the Capacity Utilization Rate (75.5%), Industrial Production (0.2%), and Crude Oil Inventories (last 2.4M). Thursday features Building Permits (1.19M), CPI (0.4%), Core CPI (0.2%), the Philly Fed Manufacturing Index (8.1), Weekly Initial Jobless Claims (257K), Housing Starts (1.16M), and testimony by Fed Chair Yellen. Friday then concludes the week’s highlights with speeches by FOMC Member Bullard and George.


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