Weekly Market Watch

Released 12 December 2016 - Weekly Newsletter

Last week recap



Declined last week after the ECB left interest rates unchanged but extended stimulus measures with tapering, while both economies reported mixed economic data. The week began with the rate gaining sharply after making its weekly low of 1.0504 on Monday after a referendum in Italy to reduce the number of seats in parliament from 315 to 95 ended with a “no” vote. The “no” vote led to the resignation of Italian Prime Minister Matteo Renzi who had previously agreed to step down if the referendum favoured a “No” vote. Monday’s economic data had U.S. ISM Non-Manufacturing PMI print at 57.2 compared to an expectation of 55.3. The pair then lost a fraction on Tuesday despite German Factory Orders, which showed an increase of +4.9% m/m, which was significantly higher than the increase of +0.6% that was anticipated. The U.S. Trade Balance also came out and showed an expanding deficit of -42.6B versus the -41.5B that was expected, while Factory Orders gained +2.7% versus the +2.5% expected. On Wednesday, the rate gained a fraction after news that the Italian government was considering a bailout for the troubled Monte dei Pashi di Sienna bank, the nation’s third largest bank. Thursday saw the pair decline sharply after making its weekly high of 1.0873 after the ECB left its benchmark Minimum Bid Rate at 0.00%. While the central bank left the rate unchanged, it decided to extend its QE program scheduled to end in March of 2017, until December of 2017. The ECB said that it would taper stimulus currently at 80B per month, slowing measures to 60B beginning in April of 2017. In the ECB’s Rate Statement, the bank noted that, “Today’s extension of the asset purchase programme has been calibrated to preserve the very substantial degree of monetary accommodation necessary to secure a sustained convergence of inflation rates towards levels below, but close to, 2% over the medium term.” The rate continued selling off on Friday after U.S. Preliminary University of Michigan’s Consumer Sentiment index printed at 98.0 compared to an expectation of 94.3. EUR/USD closed at 1.0555, with a net decline of -1.1% for the week.


Continued rallying for its fifth consecutive week as risk appetite favoured the Greenback over the Yen with mixed economic numbers from both countries. The rate began the week gaining after making its weekly low of 112.86 on Monday after a better than expected U.S. ISM Non-Manufacturing PMI number. The pair gained another fraction on Tuesday after mixed U.S. trade and Factory Orders data. On Wednesday, the pair lost a fraction after U.S. JOLTS Job Openings came in as expected. The pair then resumed its rally on Thursday after Japanese Final GDP increased +0.3% q/q compared to an expected rise of +0.6%, also, the Japanese Current Account showed a surplus of +1.93T versus +1.57T that was expected. The pair made its weekly high of 115.36 on Friday despite the Japanese BSI Manufacturing Index, which showed a reading of +7.5 compared to an expected print of +3.4. USD/JPY closed at 115.29, with a weekly gain of +1.6%.



Reversed direction, declining last week as the UK parliament determined it was appropriate to invoke Article 50 to begin the UK exit from the European Union, while both countries reported mixed economic numbers. The week began with Cable rallying on Monday after UK Services PMI printed at 55.2 compared to an expected reading of 54.2. The rate then declined on Tuesday after making its weekly high of 1.2773 after mixed U.S. Factory Orders and Trade Balance numbers. On Wednesday, Cable extended its losses after UK Manufacturing Production declined -0.9% m/m versus an expected increase of +0.2%, also out was Halifax HPI, which increased +0.2% m/m as was widely anticipated. The rate continued selling off on Thursday, making its weekly low of 1.2548 as Cable reacted to the ECB extending stimulus measures. Cable then consolidated at a slightly lower level on Friday despite the UK Goods Trade Balance, which showed a contracting deficit of -9.7B versus an expected deficit of -11.9B. GBP/USD closed at 1.2574, with an overall decline of -1.2% from its previous weekly close.



Showed little change last week as the RBA left interest rates unchanged with mixed economic numbers from both countries. The rate began the week rallying after making its weekly low of 0.7411 on Monday after Australian Operating Profits increased +1.0% q/q compared to an expectation of +3.1%. The pair then lost a fraction on Tuesday after the RBA left its benchmark Cash Rate unchanged at 1.5% as was widely anticipated. The RBA Rate Statement noted that, “Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 has been helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are assisting the economy to make the necessary adjustments, though an appreciating exchange rate could complicate this.” On Wednesday, the rate gained a fraction despite Australian GDP, which declined -0.5% q/q versus an expected increase of +0.2%. The pair then declined on Thursday, after making its weekly high of 0.7508 as the Australian Trade Balance showed an expanding deficit of -1.54B compared to an expected deficit of -0.72B. The rate continued lower, losing fractionally on Friday after a better than expected U.S. consumer sentiment number. AUD/USD closed at 0.7451, with a loss of just 4 pips and virtually unchanged on the week..


Extended its previous week’s losses last week as the BOC left interest rates unchanged, the price of crude oil stayed above the $50 per barrel handle, and with mixed economic numbers from both countries. The week began with the rate declining after making its weekly high of 1.3354 on Monday despite a better than expected U.S. ISM Non-Manufacturing PMI number. The pair then gained a fraction on Tuesday despite the Canadian Trade Balance, which showed a contracting deficit of -1.1B compared to an expected deficit of -2.1B. Also out was Canadian Ivey PMI, which printed at 56.8 compared to an expectation of 59.9. On Wednesday, the rate resumed its selloff after the BOC left its benchmark Overnight Rate at 0.50% as was widely anticipated. The central bank noted in its Rate Statement that, “Economic data suggest that global economic conditions have strengthened, as the Bank anticipated in its October Monetary Policy Report (MPR). However, uncertainty, which has been undermining business confidence and dampening investment in Canada’s major trading partners, remains undiminished. Following the election in the United States, there has been a rapid back-up in global bond yields, partly reflecting market anticipation of fiscal expansion in a US economy that is near full capacity. Canadian yields have risen significantly in this context.” The pair continued losing ground on Thursday after Canadian Building Permits increased +8.7% m/m, significantly better than the +1.6% increase that was expected, while Canadian NHPI increased +0.4% m/m versus an expected increase of +0.2%. The pair then made its weekly low of 1.3151 on Friday before settling at 1.3175, with an overall weekly decline of -0.9%.



Closed with virtually no change last week as higher commodity and oil prices supported that rate with very little economic data out of New Zealand. The week began with the pair declining sharply after making its weekly high of 0.7402 on Monday as the United States reported a better than expected ISM Non-Manufacturing PMI number. The rate extended its losses on Tuesday after the New Zealand GDT Price Index increased +3.5% versus a previous reading of +4.5%. On Wednesday, the pair rallied after making its weekly low of 0.6971 after comments from the RBNZ’s Governor Wheeler, who stated that, “New Zealand’s terms of trade began falling in the second half of 2014, but the real effective exchange rate has generally remained high reflecting New Zealand’s higher economic growth and interest rates and the positive investment climate here compared to many other advanced economies.” Thursday saw the pair extend its gains despite a positive U.S. Initial Jobless Claims number. The rate continued gaining on Friday despite a better than expected U.S. Preliminary University of Michigan Consumer Sentiment number. NZD/USD closed at 0.7459, which was the same level the rate ended up at last week.

The week ahead

AUD The Australian economic calendar is sparse this coming week, only featuring the HPI (2.6%) on Tuesday; and the Employment Change (17.6K) and the Unemployment Rate (5.6%) on Thursday. Resistance for AUD/USD is seen at 0.7826/34, 0.7708/0.7834, 0.7614/96 and 0.7444/0.7557, with support noted at 0.7232/0.7416, 0.7096/0.7144 and 0.6826/0.6909.

CAD The Canadian economic calendar is rather quiet this coming week, just featuring Manufacturing Sales (0.7%) and a speech by BOC Governor Poloz on Tuesday, and Foreign Securities Purchases (12.35B) on Friday. Resistance for USD/CAD is seen at 1.4001, 1.3464/1.3638 and 1.3194/1.3312, while support shows at 1.3139, 1.2999/1.3005 and 1.2923/38.

EUR The Eurozone economic calendar is rather active this coming week, featuring the ECB’s Long Term Refinancing Operation results on Thursday. Tuesday starts the week’s highlights off with the German ZEW Economic Sentiment survey (14.2), and Thursday’s key events then include French Flash Manufacturing PMI (51.9), French Flash Services PMI (51.8), German Flash Manufacturing PMI (54.6), German Flash Services PMI (55.0), EZ Flash Manufacturing PMI (53.9), EZ Flash Services PMI (53.9) and the ECB’s Long Term Refinancing Operation (last 45.3B). Friday’s important data then concludes the week with EZ Final CPI (0.6%). Resistance for EUR/USD is seen at 1.0910/1.0964, 1.0657/1.0872 and1.0551/68, with support showing at 1.0504/1.0519 and 1.0461.

GBP The UK economic calendar is busy this coming week, featuring the MPC’s Official Bank Rate and Asset Purchase Facility Decisions on Thursday. Tuesday starts the week’s highlights off with CPI (1.1%), PPI Input (-0.4%) and the RPI (2.1%). Wednesday then offers the Average Earnings Index (2.3%), the Claimant Count Change (6.2K) and the Unemployment Rate (4.8), while Thursday concludes the week’s highlights, featuring Retail Sales (0.2%), the MPC’s Official Bank Rate Decision (unchanged at 0.25%) and Votes (unchanged at 0-0-9), as well as the MPC’s Asset Purchase Facility Decision (unchanged at 435B) and Votes (unchanged at 0-0-9). Resistance to the topside for GBP/USD shows at 1.2790/1.2864, 1.2736/74 and 1.2673, while support for the pair is expected at 1.2511/56, 1.2226/1.2351 and 1.2081/1.2145.

JPY The Japanese economic calendar is sparse this coming week, only featuring the Tankan Manufacturing Index (10) and the Tankan Non-Manufacturing Index (19) on Tuesday. Resistance for USD/JPY currently shows up at 118.05/49, 116.86 and 115.96/116.07, with support indicated at 113.79/114.82, 112.86/113.12 and 111.35/87.

NZD The New Zealand economic calendar is quite peaceful this coming week, featuring no notable data releases. The chart for NZD/USD shows resistance at 0.7484, 0.7339/0.7420 and 0.7164/0.7202. On the downside, technical support is expected at 0.6949/0.7107, 0.6806/96 and 0.6674.

USD The U.S. economic calendar is exceptionally active this coming week, featuring the Fed Funds Rate Decision on Wednesday that is widely expected to result in a 25 bps rise in the benchmark interest rate. Tuesday starts the week’s highlights off with Import Prices (-0.3%), and Wednesday’s key events include Core Retail Sales (0.4%), PPI (0.1%), Retail Sales (0.3%), Core PPI (0.2%), the Capacity Utilization Rate (75.1%), Industrial Production (-0.2%), Crude Oil Inventories (last -2.4M), FOMC Economic Projections, the FOMC Rate Statement, the Federal Funds Rate Decision (<0.75%) and the FOMC Press Conference. Thursday then features CPI (0.2%), the Core CPI (0.2%), the Philly Fed Manufacturing Index (9.1), Weekly Initial Jobless Claims (258K), the Current Account (-111B), and the Empire State Manufacturing Index (3.2). Friday’s important data then concludes the week with Building Permits (1.24M) and Housing Starts (1.23M).


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