Weekly Market Watch

Released 22 August 2016 - AUD Weekly Market watch

Last week recap

Extended its previous week’s gains last week as the FOMC Meeting Minutes showed members were divided on when to raise interest rates with very little economic data out of the Eurozone. The week began on a positive note, as the pair gained after making its weekly low of 1.1152 on Monday after the U.S. Empire State Manufacturing Index printed at -4.2, significantly lower than the expected reading of +2.1 that was expected. The rate continued sharply higher on Tuesday after comments from the San Francisco Fed’s John Williams, who noted in the regional fed bank’s Economic Letter released on Tuesday that, “There is simply not enough room for central banks to cut interest rates in response to an economic downturn when both natural rates and inflation are very low”. Economic data on Tuesday had EZ ZEW Economic Sentiment, which came out at +4.6, notably higher than the expected reading of -6.3 anticipated, nevertheless, German ZEW Economic Sentiment showed a reading of +0.5 versus an expected +2.1. Also out on Tuesday were U.S. Building Permits, at an annualized +1.15M, in line with expectations, CPI, which showed 0.0% m/m, also as expected, and Core CPI, which increased +0.1% m/m versus +0.2% anticipated. On Wednesday, the pair consolidated at a slightly higher level after the FOMC Meeting Minutes showed that members were still divided as to when to raise the Fed Funds Rate. The Minutes noted that, “members generally agreed that, before taking another step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labor market and economic activity. A couple of members preferred also to wait for more evidence that inflation would rise to 2% on a sustained basis. Some other members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation”. Fed Fund futures ended the week with a 53.5% chance of a Fed rate hike in December. Thursday saw the rate extend its gains after EZ Final CPI increased +0.2% y/y as widely expected, also, the ECB’s Monetary Policy Meeting Accounts, describing the Brexit noted that, “The outcome of the referendum had been immediately reflected in currency valuations, via a sharp decrease in the effective exchange rate of the pound sterling. The euro had depreciated initially vis-à-vis the US dollar but overall had shown resilience and, in nominal effective terms, was trading at around the same level as in early June.” Also, FOMC member Dudley warned investors they were underestimating the chances of a Fed Rate hike, stating that, “We’re edging closer towards the point in time where it will be appropriate, I think, to raise interest rates further,” and that “the market is complacent about the need for gradually snugging up short-term interest rates over the next year or so”. Thursday’s U.S. numbers had the Philly Fed Manufacturing Index print at 2.0 versus 1.4 expected, while Initial Jobless Claims showed 262K claims last week compared to 269K expected. The pair then dropped a fraction on Friday in the absence of any significant data out of either economy as traders squared positions. EUR/USD went on to close at 1.1322, with an overall gain of +1.0% for the week.
Extended its previous week’s losses last week as asset flows continued favouring the Yen over the Greenback with very little significant economic data out of Japan. The rate began the week making its weekly high of 101.42 after Japanese Preliminary GDP showed growth of 0.0% q/q compared to an expected +0.2%, while the GDP Deflator increased +0.8% y/y versus +0.7% expected. The pair resumed its selloff on Tuesday, making its weekly low of 99.53 despite positive U.S. housing and industrial data and mixed CPI numbers. On Wednesday, the rate consolidated at a slightly lower level after the FOMC Meeting Minutes showed members undecided as to the timing of the next Fed rate hike. On Thursday, the pair extended its losses despite positive U.S. manufacturing and employment data. The rate then gained a fraction on Friday in the absence of any significant economic releases out of either country. USD/JPY closed at 100.17, with a loss of 1.0 % from its previous weekly close.
Reversed direction, rallying last week after the UK reported mostly better than expected economic numbers, while the FOMC Meeting Minutes showed members divided on when to raise interest rates. Cable began the week making its weekly low of 1.2864 on Monday despite a lower than expected U.S. Empire State Manufacturing Index number. The rate then rallied sharply on Tuesday after UK CPI increased +0.6% y/y compared to an expectation of +0.5%. Also, UK PPI Input increased +3.3% m/m, significantly higher than the expectation of +0.6%, and RPI, which increased +1.9% y/y versus +1.7% anticipated. On Wednesday, Cable consolidated at a slightly lower level after UK Average Earnings Index increased +2.4% 3m/y compared to an expected +2.5%, however, Claimant Count Change saw a decline of -8.6K, significantly lower than the increase of +5.2K that was expected. The pair then resumed its rally, gaining sharply on Thursday after UK Retail Sales increased +1.4% m/m versus +0.1% anticipated. Friday saw Cable sell off after UK Public Sector Net Borrowing declined -1.5B compared to an expected -2.3B. GBP/USD went on to close at 1.3078, with an overall weekly gain of +0.7%.
Lost a fraction last week as the RBA’s minutes for its August meeting confirmed the central bank’s -25 bps interest rate cut from 1.75% to 1.50% was in large part driven by appreciation in the Australian Dollar. The week began on a positive note, with the pair gaining a fraction on Monday after a lower than expected U.S. Empire State Manufacturing Index number. The pair then made its weekly high of 0.7748 on Tuesday after the RBA’s Monetary Policy Meeting Minutes, which noted that, “Low interest rates and the depreciation of the Australian dollar since 2013 were expected to continue to support the necessary adjustments in the economy following the end of the mining investment boom, though an appreciating exchange rate could complicate this. In coming to their policy decision, members noted that the recent CPI data had confirmed that inflation was likely to remain low for some time. They also observed that while prospects for growth were positive, there was room for stronger growth, which could be assisted by lower interest rates.” The rate declined on Wednesday after the Australian Wage Price Index increased +0.5% q/q, in line with expectations. On Thursday, the pair rallied after Australian Employment Change showed an increase of +26.2K jobs in July compared to an expectation of +10.2K, while the Australian Unemployment Rate declined to 5.7% from 5.8%. The rate then declined on Friday as traders squared positions. AUD/USD closed at 0.7622, with an overall loss of -0.4% for the week.
Extended its previous week’s losses last week as the rally in crude oil partially offset the lower than expected Canadian economic data at the end of the week. The rate began the week declining after making its weekly high of 1.2974 on Monday as the United States reported a lower than expected Empire State Manufacturing Index number. The pair continued selling off on Tuesday after Canadian Manufacturing Sales increased +0.8% m/m as widely anticipated. On Wednesday, the pair declined another fraction after the FOMC Meeting Minutes showed indecision among members over the next Fed interest rate hike. The rate sold off again on Thursday after the price of crude oil shot up over $50 per barrel and despite Canadian Foreign Securities Purchases, which printed at +9.0B compared to +17.23B expected with the previous number downwardly revised from +14.73B to +13.99B. The pair then gained ground on Friday after Canadian Core Retail Sales declined -0.8% m/m, significantly lower than the expected increase of +0.3% that was anticipated. Also out was Canadian Core CPI, which printed at 0.0%, in line with expectations and CPI, which declined -0.2% m/m versus an expected reading of 0.0%. USD/CAD closed the week at 1.2862, with an overall weekly decline of -0.8%.
Extended its previous week’s gains last week as both countries reported mostly better than expected economic numbers. The week began with the pair gaining a fraction after making its weekly low of 0.7164 on Monday as the United States reported a lower than expected Empire State Manufacturing Index number. The rate then gained sharply on Tuesday after NZ Employment Change increased +2.4% q/q, significantly higher than the +0.6% rise that was expected, while the NZ Unemployment Rate fell to 5.1% from a revised 5.2% and NZ PPI Input, which increased +0.9% q/q versus +0.5% expected. Also out was the NZ GDT Price Index, which showed an increase of + 12.7%, compared to a previous reading of +6.6%. On Wednesday, the pair declined a fraction after the release of the FOMC Meeting Minutes. Thursday saw the rate gain ground despite better than expected U.S. employment and manufacturing data. The pair then declined a fraction on Friday in the absence of any significant economic numbers from either country. NZD/USD closed the week at 0.7270, with an overall gain of +1.0% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is quiet this coming week, only featuring Construction Work Done (-1.90%) on Wednesday, and the Jackson Hole Symposium that will run from Thursday to Saturday. Resistance for AUD/USD is seen at 0.7826/34, 0.7718/64 and 0.7607/0.7675, with support noted at 0.7401/0.7565, 0.7241/0.7370 and 0.7284/99.

CAD The Canadian economic calendar is quiet this coming week, only featuring Wholesale Sales (0.50%) on Monday, followed by the Jackson Hole Symposium that will run from Thursday to Saturday. Resistance for USD/CAD is seen at 1.3147/1.3295, 1.2975/1.3054 and 1.2923, while support shows at 1.2762/1.2863, 1.2654/77 and 1.2592.

EUR The UK economic calendar is very inactive this coming week, only featuring Second Estimate GDP (0.60%) and Preliminary Business Investment (-0.90%) data on Friday. In addition, the Jackson Hole Symposium will run from Thursday to Saturday. Resistance to the topside for GBP/USD shows at 1.3184/1.3227, 1.3104/19 and 1.3093, while support for the pair is expected at 1.3020/63, 1.2902 and 1.2794/1.2865.

GBP The UK economic calendar is very inactive this coming week, only featuring Second Estimate GDP (0.60%) and Preliminary Business Investment (-0.90%) data on Friday. In addition, the Jackson Hole Symposium will run from Thursday to Saturday. Resistance to the topside for GBP/USD shows at 1.3184/1.3227, 1.3104/19 and 1.3093, while support for the pair is expected at 1.3020/63, 1.2902 and 1.2794/1.2865.

JPY The Japanese economic calendar is rather peaceful this coming week, only featuring a speech by BOJ Governor Kuroda on Tuesday, Tokyo Core CPI (-0.40%) on Friday and the Jackson Hole Symposium that will run from Thursday until Saturday. Resistance for USD/JPY currently shows up at 102.65/104.12, 101.96/102.26 and 100.82/96, with support indicated at 99.98/100.67, 99.53/64 and 98.99.

NZD The New Zealand economic calendar is peaceful this coming week. Monday offers nothing notable, so Tuesday starts the week’s highlights off with the Trade Balance (-320M). After a quiet Wednesday, Thursday then features the Jackson Hole Symposium that will run from Thursday to Saturday. The chart for NZD/USD shows resistance at 0.7607/59, 0.7389/0.7420 and 0.7227/0.7322. On the downside, technical support is expected at 0.7051/0.7186, 0.6949/78 and 0.6890.

USD The U.S. economic calendar is less active than usual this coming week, featuring Preliminary GDP data on Friday. Monday is quiet, so Tuesday starts the week’s highlights off with New Home Sales (575K), and Wednesday’s key events include Existing Home Sales (5.55M) and Crude Oil Inventories (last -2.5M). Thursday then offers Core Durable Goods Orders (0.40%), Weekly Initial Jobless Claims (265K), Durable Goods Orders (3.50%) and the first day of the Jackson Hole Symposium, while Friday features Preliminary GDP (1.10%), a speech by Fed Chair Yellen, the Revised University of Michigan Consumer Sentiment survey (90.6) and the second day of the Jackson Hole Symposium. Saturday then concludes the week with the final day of the Jackson Hole Symposium.


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