Weekly Market Watch

Released 13 March 2017 - Weekly Newsletter

Last week recap

Extended its previous week’s gains last week as the ECB left rates and stimulus unchanged. Nevertheless, upbeat comments from ECB President Draghi and speculation of an ECB interest rate hike as early as this September supported the Euro. The week began with the rate selling off on Monday despite the EZ Sentix Investor Confidence index increasing to 20.7 — a ten year high — compared to 18.5 expected and after U.S. Factory Orders, which increased by +1.2% m/m versus an expectation of +1.1%. The pair continued lower on Tuesday after German Factory Orders showed a decline of -7.4% m/m versus -2.5% anticipated, and despite the U.S. Trade Balance, which showed an expanding deficit of -48.5B versus an expected reading of -47.0B. The rate extended its losses on Wednesday after U.S. ADP Non Farm Employment Change increased to +298K versus +184K expected, with the previous number upwardly adjusted from +246K to +261K. Also Revised U.S. Non Farm Productivity increased by +1.3% q/q versus +1.5% anticipated. The pair then made its weekly low of 1.0524 on Thursday before rallying after the ECB left its benchmark Minimum Bid Rate unchanged at 0.0% as was widely anticipated. The ECB updated its projections for EZ GDP to grow +1.8% this year, +1.6% in 2018 and +1.7% in 2019. Despite the upwardly revised growth numbers, ECB President Draghi commented that, “there was a general recognition that the balance of risk has improved, certainly as far as growth is concerned”. Draghi added that, “the risks surrounding the euro area growth outlook have become less pronounced, but remain tilted to the downside and relate predominantly to global factors.” The pair then made its weekly high of 1.0698 on Friday some analysts predicted that the ECB could begin hiking interest rates when the asset purchase program ends later this year, and despite U.S. Non-Farm Payrolls, which showed +235K jobs in February compared to an expectation of +196K, however U.S. Average Hourly Earnings increased only +0.2% m/m versus +0.3% anticipated. EUR/USD closed at 1.0671, with an overall gain of +1.6% for the week.
Extended its previous week’s gains last week as Japan reported lower than expected economic data, while U.S. numbers were mostly mixed. The week began with the rate making its weekly low of 1.1355 after North Korea launched four ballistic missiles, which fell into the Sea of Japan. Japanese PM Shinzo Abe stated that, “(The test-firing) clearly shows that North Korea is now a new level of threat,” Abe added that, “Japan will continue to coordinate closely with the United States, South Korea and other countries to strongly urge North Korea to exercise restraint.”The pair gained a fraction on Tuesday despite a lower than expected U.S. Trade Balance. On Wednesday, the pair continued rallying after Japanese Final GDP increased by +0.3% q/q compared to an expectation of +0.4%. The rate extended its gains on Thursday as U.S. bond yields increased and U.S. Initial Jobless Claims came out in line with expectations. The pair then made its weekly high of 115.49 on Friday after a better than expected U.S. NFP number and the Japanese BSI Manufacturing Index, which printed at 1.1, significantly lower than the expectation of 8.4. Also on Friday, the BOJ reduced the size of its JGB purchases: The one- to three- year JGB purchase was lowered to 300B JPY, 20B lower than last week’s previous purchase, while the purchase of discount bills was lowered to 250B JPY. USD/JPY closed at 114.73, with a gain of +0.8% from its previous weekly close.
Extended its previous week’s losses last week as both countries reported mixed economic data. Cable began the week trading lower after making its weekly high of 1.2299 on Monday after Charlotte Hogg gave her first speech as deputy governor for market and banking, replacing Minouche Shafik of the BOE’s Monetary Policy Committee. The rate extended its losses on Tuesday after UK Halifax HPI increased by +0.1% m/m versus an expectation of +0.4%. Cable continued south on Wednesday after UK Chancellor of Exchequer Philip Hammond delivered his first full budget statement. The UK Annual Budget Release noted that, “This year the deficit will have been cut by almost two thirds from its peak. Over the next 4 years, the deficit will have been eliminated and the government will be running a surplus – where more tax is raised than is spent. To help achieve this, there will be a further £3.5 billion of savings from departmental spending in 2019-20, less than 50p in every £100 the government spends.”The rate then made its weekly low of 1.2133 before consolidating on Thursday after the UK RICS House Price Balance printed at 24% versus 23% expected. Cable gained a fraction on Friday after the UK Goods Trade Balance showed a deficit of -10.8B compared to an expectation of -11.1B, while UK Manufacturing Production declined by -0.9% m/m versus -0.6% anticipated. GBP/USD closed at 1.2138, with a loss of -0.6% for the week.
Extended its previous week’s losses last week as the RBA left interest rates unchanged and the United States reported mixed economic data. The rate began the week selling off on Monday after Australian Retail Sales increased by +0.4% as was widely anticipated. The rate then made its weekly high of 0.7632 on Tuesday after the RBA left its benchmark Cash Rate unchanged at 1.50% as was widely expected. In his Statement on the Monetary Policy Decision, Governor Phillip Lowe noted that, “The outlook continues to be supported by the low level of interest rates. Financial institutions remain in a good position to lend. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.” The pair then sold off sharply on Wednesday after the price of crude oil fell by almost $3 per barrel, affecting all of the commodity currencies. The rate continued selling off on Thursday, making its weekly low of 0.7490 as crude oil prices plunged under the $50 handle. The pair then rallied on Friday as traders squared positions and despite a better than expected U.S. Non-Farm Payrolls number. AUD/USD closed at 0.7497, with an overall loss of -1.3% for the week.
Extended its rally last week, as crude oil prices plunged below the $50 handle with mixed economic numbers from both countries. The week began with the rate gaining after making its weekly low of 1.3371 on Monday as the United States reported Factory Orders in line with expectations. The pair then consolidated at a slightly higher level on Tuesday despite the Canadian Trade Balance, which came out with a surplus of +0.8B compared to +0.2B anticipated. Also, Canadian Ivey PMI printed at 55.0 compared to an expectation of 58.9. On Wednesday, the rate gained sharply as the price of crude oil began to sell off and despite Canadian Building Permits, which increased by +5.4% m/m, significantly higher than the expectation of +3.1% with the previous number upwardly revised from -6.6% to -4.4%. The pair then made its weekly high of 1.3534 on Thursday as the price of crude oil fell below $50 per barrel and Canadian NHPI, which increased by +0.1% as widely anticipated. The rate then sold off on Friday after Canadian Employment Change increased by +15.3K, notably higher than the +0.6K that was expected, and the Canadian Unemployment Rate, which fell to 6.6% from 6.8%. USD/CAD went on to close at 1.3420, with a weekly gain of +0.4%.
Extended its previous week’s losses last week as the United States reported mixed economic data with very little significant economic data out of New Zealand. The rate began the week trading lower after making its weekly high of 0.7045 on Monday after U.S. Factory Orders were in line with expectations. The pair continued its slide on Tuesday after the New Zealand GDT Price Index declined by -6.3% compared to a previous reading of -3.2%. On Wednesday, the pair fell another fraction after better than expected U.S. employment and Revised Non-Farm Productivity. The rate then made its weekly low of 0.6917 on Thursday as U.S. bond rates increased and Initial Jobless Claims came in as expected. The pair gained ground on Friday as traders squared positions and despite a better than expected U.S. Non-Farm Payrolls number.

The week ahead

AUD The Australian economic calendar is sparse this coming week, only featuring the Employment Change (16.3K) and the Unemployment Rate (5.70%) on Thursday, followed by the G20 Meetings on Friday and Saturday. Resistance for AUD/USD is seen at 0.7834 and 0.7631/0.7777, with support noted at 0.7490/0.7556 and 0.7222/0.7310.

CAD The Canadian economic calendar is sparse this coming week. After the Daylight Saving Time Shift on Sunday, the week only features Foreign Securities Purchases (9.45B) on Thursday, the G20 Meetings and Manufacturing Sales (last 2.30%) on Friday and the G20 Meetings on Saturday. Resistance for USD/CAD is seen at 1.3533/63 and 1.3436/64, while support shows at 1.3312/86, 1.3209/11 and 1.3125/77.

EUR The Eurozone economic calendar is fairly peaceful this coming week, only featuring a speech by ECB President Draghi on Monday, German ZEW Economic Sentiment (13.20) on Tuesday and Final EZ CPI (2.00%) on Thursday. The G20 Meetings will also be held on Friday and Saturday. Resistance for EUR/USD is seen at 1.1139, 1.0774/1.0964 and 1.0698/1.0718, with support showing at 1.0617/39, 1.0461/1.0520 and 1.0339/1.0419.

GBP The UK economic calendar is moderately busy this coming week, starting on Wednesday with the Average Earnings Index (2.40%), the Claimant Count Change (3.2K) and the Unemployment Rate (4.80%). Thursday then offers the MPC Official Bank Rate Votes (0-0-9), the Official Bank Rate Decision (unchanged at 0.25%), the Monetary Policy Summary, the Asset Purchase Facility Decision (unchanged at 435B) and the MPC Asset Purchase Facility Votes (0-0-9), and Friday and Saturday feature the G20 Meetings. Resistance to the topside for GBP/USD shows at 1.2451/1.2581, 1.2346/1.2411 and 1.2213, while support for the pair is expected at 1.2081/1.2199 and 1.1985/1.2037.

JPY The Japanese economic calendar is rather quiet this coming week, only featuring the BOJ Policy Rate (unchanged at -0.10%), the Monetary Policy Statement, and the BOJ Press Conference on Thursday, followed by the G20 Meetings on Friday and Saturday. Resistance for USD/JPY currently shows up at 116.86, 115.06/116.07 and 114.74/95, with support indicated at 112.61/113.79, 111.92/112.04 and 111.35/68.

NZD The New Zealand economic calendar is quiet this coming week, only featuring the Current Account (-2.43B) on Tuesday, GDP (0.70%) on Wednesday and the G20 Meetings on Friday and Saturday. The chart for NZD/USD shows resistance at 0.7116/72, 0.7042 and 0.6948/96. On the downside, technical support is expected at 0.6882/96, 0.6861 and 0.6707/38.

USD The U.S. economic calendar is active this coming week, featuring the FOMC Fed Funds Rate Decision data on Wednesday for which a 25 basis point rise is expected. After Sunday’s Daylight Saving Time Shift, Tuesday starts the week’s highlights off with PPI (0.10%) and Core PPI (0.20%). Wednesday then offers CPI (0.00%), Core CPI (0.20%), Core Retail Sales (0.10%), Retail Sales (0.20%), the Empire State Manufacturing Index (15.30), Crude Oil Inventories (last 8.2M), the FOMC’s Economic Projections, the FOMC Rate Statement, the Federal Funds Rate Decision (25 basis point rise to <1.00%), and the FOMC Press Conference, while Thursday features Building Permits (1.26M), the Philly Fed Manufacturing Index (30.2), Weekly Initial Jobless Claims (245K), Housing Starts (1.26M) and JOLTS Job Openings (5.45M). Friday’s highlights include the first day of the G20 Meetings, the Capacity Utilization Rate (75.50%), Industrial Production (0.30%) and the Preliminary University of Michigan Consumer Sentiment (97.10), and Saturday concludes the week with the second day of the G20 Meetings.


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