Weekly Market Watch

Released 19 December 2016 - Weekly Newsletter

Last week recap

Extended its previous week’s losses last week as the FOMC raised the Fed Funds Rate by 25 bps as was widely anticipated, with both economies reporting mixed economic data. The rate began the week on a positive note, gaining on Monday in the absence of any significant data out of both economies. The pair then consolidated at a slightly lower level on Tuesday after the German ZEW Economic Sentiment Index showed a reading of 13.8 compared to an expected print of 14.2. Also out on Tuesday were U.S. Import Prices, which showed a decline of -0.3% m/m as was widely expected. On Wednesday, the rate declined after making its weekly high of 1.0669 as the FOMC raised the benchmark Fed Funds Rate by 25 bps from 0.50% to 0.75%. FOMC Chair, Janet Yellen stated at the press conference that, “The Committee judged that a modest increase in the federal funds rate is appropriate in light of the solid progress we have seen toward our goals of maximum employment and two percent inflation. We continue to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain our objectives.” Economic numbers released on Wednesday included U.S. Core Retail Sales, which showed an increase of +0.2% m/m compared to an expected +0.4%, while Retail Sales increased by +0.1% versus the +0.3% anticipated. Also, U.S. PPI increased +0.4% compared to an expectation of +0.1%, while Core PPI increased by +0.4% versus the +0.2% expected. The pair then made its weekly low of 1.0366 on Thursday despite German Flash Manufacturing PMI showing a reading of 55.5 compared to an expected 54.6 result, while German Flash Services PMI printed at 53.8 versus an expected reading of 55.0. U.S. data had CPI and Core CPI increase +0.2% m/m, both as widely anticipated, and the Philly Fed Manufacturing Index, which printed at 21.5, significantly higher than the expectation of a 9.1 print. The pair gained a fraction on Friday after EZ Final CPI increased +0.6% y/y as widely anticipated, while U.S. Building Permits increased to an annualized +1.20M versus +1.24M expected. EUR/USD closed at 1.0449, with an overall decline of -1.0% for the week.
Extended its gains for the sixth week in a row last week as the FOMC raised interest rates with very little economic news from Japan. The week began on a quiet note, with the pair declining a fraction in the absence of any significant economic data our or either country. The rate then gained ground after making its weekly low of 114.72 on Tuesday after U.S. Import Prices showed a slight decline. On Wednesday, the pair gained ground after the FOMC raised the benchmark Fed Funds Rate by 25 bps to 0.75%. Also, Japanese Tankan Manufacturing Index came out with a reading of 10 as was widely anticipated, while the Tankan Non-Manufacturing Index printed at 18 compared to an expected reading of 19. The rate continued its rally on Thursday, making its weekly high of 118.65 after better than expected economic numbers from the United States. The pair then lost a fraction on Friday after weaker than anticipated U.S. Building Permits and Housing Starts. USD/JPY closed at 117.95, with a gain of +2.3% from its previous weekly close.
Continued selling off last week as the FOMC raised interest rates, while the BOE left interest rates and stimulus unchanged. The week began with Cable gaining on Monday in the absence of any significant data out of either country. The rate then made its weekly high of 1.2727 on Tuesday after UK CPI increased +1.2% y/y versus +1.1% expected, also, UK RPI increased +2.2% y/y versus +2.1% anticipated, while PPI Input declined -1.1% m/m versus -0.4% expected. On Wednesday, Cable continued its slide after the FOMC raised the Fed Funds Rate and despite UK Claimant Count Change, which printed at 2.4K versus 6.2K expected, nevertheless, the previous number was upwardly revised from 9.8K to 13.3K. Also out was the UK Average Earnings Index, which showed an increase of +2.5% 3m/y versus +2.3% anticipated. Cable then made its weekly low of 1.2375 on Thursday after the BOE left its benchmark Official Bank Rate unchanged at 0.25% and the Asset Purchase Facility at 435B by a unanimous MPC vote on both. The central bank’s Monetary Policy Summary noted that, “At its meeting ending on 14 December 2016 the Committee voted unanimously to maintain Bank Rate at 0.25%. The Committee voted unanimously to continue with the programme of sterling non-financial investment-grade corporate bond purchases totalling up to £10 billion, financed by the issuance of central bank reserves. The Committee also voted unanimously to continue with the programme of £60 billion of UK government bond purchases to take the total stock of these purchases to £435 billion, financed by the issuance of central bank reserves.” In addition to the BOE news, UK Retail Sales increased +0.2% as widely anticipated. The pair then gained a fraction on Friday after lower than expected U.S. Housing Starts and Building Permits data. GBP/USD closed at 1.2482, with a loss of -0.7% for the week.
Declined last week as asset flows favoured the Greenback over the Aussie with mixed economic numbers from both countries. The rate began the week gaining a fraction in the absence of any significant data out of either country. The pair then fell sharply on Tuesday after Australian HPI increased +1.5% q/q versus +2.6%. On Wednesday, the pair continued declining after the FOMC raised the Fed Funds rate by 25 basis points despite mixed economic releases seen from the United States. Thursday saw the pair continue selling off despite Australian Employment Change, which showed an increase of +39.1K compared to an expected 17.6K with the previous release significantly revised upwards from +9.8K to +15.2K, nevertheless, the Australian Unemployment Rate increase a notch from 5.6% to 5.7%. The pair then made its weekly low of 0.7265 on Friday despite lower than expected U.S. housing data. AUD/USD closed at 0.7295, with an overall weekly loss of -2.1%.
Reversed direction, gaining ground last week as the FOMC raised interest rates and despite a rise in crude oil prices. The week began on a quiet note, with the rate declining a fraction on Monday in the absence of any significant economic data from either country. The rate then consolidated at a slightly higher level on Tuesday after a weak U.S. Import Prices release. On Wednesday, the pair made its weekly low of 1.3080 after the FOMC raised the Fed Funds rate by a quarter point from 0.50% to 0.75%. Thursday saw the pair make its weekly high of 1.3416 after Canadian Manufacturing Sales declined -0.8% m/m versus an expected increase of +0.7%. The rate consolidated at a slightly higher level on Friday despite Canadian Foreign Securities Purchases, which increased to 15.75B versus 12.35B anticipated. USD/CAD closed at 1.3337, with an overall gain of +1.2% for the week.
Lost ground last week as the FOMC raised interest rates and with very little significant economic data out of New Zealand. The rate began the week gaining on Monday in the absence of any significant data out of either country. The pair continued gaining on Tuesday after mixed U.S. Retail Sales and PPI data. On Wednesday, the rate made its weekly high of 0.7238 before selling off after the FOMC raised the benchmark Fed Funds Rate by a quarter point. The pair continued selling off on Thursday after the United States reported inflation data which met expectations. The rate then made its weekly low of 0.6930 on Friday despite lower than expected U.S. housing numbers. NZD/USD closed at 0.6957, with a decline of -2.5% for the week.

The week ahead

AUD The Australian economic calendar is sparse this coming week, only featuring the RBA’s Monetary Policy Meeting Minutes and the tentatively scheduled Mid-Year Economic and Fiscal Outlook on Tuesday. Resistance for AUD/USD is seen at 0.7826/34, 0.7708/0.7834, 0.7614/96 and 0.7310/0.7557, with support noted at 0.7232/65, 0.7096/0.7144 and 0.6826/0.6909.

CAD The Canadian economic calendar is busier than usual this coming week, featuring GDP data on Friday. Tuesday starts the week’s highlights off with Wholesale Sales (0.3%), and Wednesday offers nothing of note. Thursday’s key events then include Core CPI (0.2%), Core Retail Sales (0.7%), CPI (-0.1%) and Retail Sales (0.2%). Friday’s important data then concludes the week with GDP (0.1%). Resistance for USD/CAD is seen at 1.4001, 1.3464/1.3638 and 1.3416, while support shows at 1.3194/1.3312, 1.3080/1.3139 and 1.2923/1.3005.

EUR The Eurozone economic calendar is virtually inactive this coming week, only featuring the German Ifo Business Climate survey (110.7) on Monday. Resistance for EUR/USD is seen at 1.0910/1.0964, 1.0657/1.0872 and 1.0504/68, with support showing at 1.0461 and 1.0365.

GBP The UK economic calendar is very peaceful this coming week, only featuring Public Sector Net Borrowing (11.5B) on Wednesday, and the Current Account (-28.3B) and Final GDP (0.5%) on Friday. Resistance to the topside for GBP/USD shows at 1.2727/1.2864, 1.2673 and 1.2511/56, while support for the pair is expected at 1.2226/1.2375, 1.2081/1.2145 and 1.1991.

JPY The Japanese economic calendar is largely quiet this coming week, only featuring the tentatively scheduled BOJ Policy Rate (unchanged at -0.10%), Monetary Policy Statement and Press Conference on Tuesday. Also, Friday is a Bank Holiday in Japan. Resistance for USD/JPY currently shows up at 121.23, 120.47/83 and 118.05/65, with support indicated at 116.86, 115.96/116.07 and 113.79/114.82.

NZD The New Zealand economic calendar is fairly quiet this coming week, only featuring ANZ Business Confidence (21.7) on Sunday; the tentatively scheduled GDT Price Index (last 3.5% and the Trade Balance (-500M) on Tuesday; and GDP (0.8%) and the Current Account (-4.89B) on Wednesday. The chart for NZD/USD shows resistance at 0.7484, 0.7339/0.7420 and 0.6984/0.7202. On the downside, technical support is expected at 0.6949/70, 0.6806/96 and 0.6674.

USD The U.S. economic calendar is quite active this coming week, featuring Final GDP data on Thursday. Wednesday starts the week’s highlights off with Existing Home Sales (5.52M) and Crude Oil Inventories (-2.6M), and Thursday’s key events include Core Durable Goods Orders (0.2%), Final GDP (3.3%), Weekly Initial Jobless Claims (255K), Durable Goods Orders (4.6%), the Core PCE Price Index (0.1%) and Personal Spending (0.4%). Friday’s important data then concludes the week with New Home Sales (575K) and the Revised University of Michigan Consumer Sentiment survey (98.2).


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