Weekly Market Watch

Released 10 April 2017 - Weekly Newsletter

Last week recap

Extended its previous week’s losses last week as the United States launched a military strike against Syria with mixed data from both economies. The rate began the week on a positive note, gaining a fraction on Monday after ECB chief economist Peter Praet said in an interview that ECB policymakers were, “more confident that the economic expansion will continue to firm and broaden.” Nevertheless, Praet added that, “underlying inflation, which is an indicator of price stability over the medium term, remains subdued.” Monday’s numbers had U.S. ISM The pair consolidated at a slightly lower level on Tuesday after the U.S. Trade Balance showed a deficit of -43.6B compared to an expected -46.0B, also, Spanish Unemployment Change printed at -48.6K versus an expectation of -41.2K. Manufacturing PMI print at 57.2, in line with expectations, and Spanish Manufacturing PMI, which printed at 53.9 compared to an expectation of 54.6. On Wednesday, the rate lost a fraction after making its weekly high of 1.0688 as the FOMC Meeting Minutes showed a single dissenting vote to last month’s Fed rate hike, Neel Kaskari, the Minutes noted that, “He preferred to await additional information on the amount of slack remaining in the labor market and increased evidence that inflation would stabilize at the Committee''s symmetric 2 percent inflation objective before taking another step to remove monetary policy accommodation.” The Minutes outlined a plan to reduce the Fed’s USD 4.5T balance sheet. Also, U.S. ADP Non-Farm Employment Change showed the addition of +263K jobs compared to an expectation of +184K, nevertheless, the previous number was downwardly revised from +298K to +245K, and U.S. ISM Non-Manufacturing PMI, which printed at 55.2 compared to an expected reading of 57.0. The pair extended its losses on Thursday after comments from ECB President Draghi, who stated that, “Before making any alterations to the components of our stance – interest rates, asset purchases and forward guidance – we still need to build sufficient confidence that inflation will indeed converge to our aim over a medium-term horizon, and will remain there even in less supportive monetary policy conditions.” Thursday’s numbers had U.S. Initial Jobless Claims show 234K claims in its latest week, compared to an expected 251K, and German Factory Orders, which increased by +3.4% m/m, which was in line with expectations. The rate then made its weekly low of 1.0579 on Friday after news that the United States had launched a military strike against an airfield in Syria, and despite U.S. Non-Farm Payrolls, which showed only +98K jobs added last month compared to an expected +174K, with the previous number downwardly revised from +235K to +219K, while the U.S. Unemployment Rate declined to 4.5%, its lower level in more than a decade. Also, U.S. Average Hourly Earnings increased by +0.2% m/m as was widely anticipated. EUR/USD closed at 1.0590, with an overall loss of -0.6% for the week.
Lost a fraction last week as U.S. President Trump met with Chinese President Xi Jinping, while both countries reported mixed economic numbers. The pair began the week selling off after making its weekly high of 111.58 on Monday as the Japanese Tankan Manufacturing Index printed at 12 compared to an expectation of 14, while the Tankan Non-Manufacturing Index printed at 20 versus an expected reading of 19. The rate continued lower on Tuesday despite a better than expected U.S. Trade Balance number. On Wednesday, the pair consolidated at a slightly lower level after a somewhat hawkish FOMC Meeting Minutes and comments from a former BOJ official, Kazuo Momma. Momma stated that the BOJ will soon lower its inflation forecast, saying the BOJ’s forecasts for inflation are “too optimistic”, he expects core inflation to be around 0.5% this year and increase to 1.0% next year, compared to the banks current forecast of 1.5% by the end of 2017 and 1.7% by the end of 2018. Thursday saw the rate gain a fraction as U.S. President Trump began his two day summit with Chinese President Xi Jinping, and after a better than expected U.S. Initial Jobless Claims release. The pair then rallied after making its weekly low of 110.08 on Friday after a lower than expected U.S. Non-Farm Payrolls number and lower Unemployment Rate. USD/JPY closed at 111.07, with an overall weekly decline of -0.2%.
Reversed direction, trading lower last week as the United States launched a military attack on Syria, while the European Parliament voted for a phased approach for Brexit negotiations. Cable began the week declining after making its weekly high or 1.2554 on Monday after UK Manufacturing PMI printed at 54.2 compared to an expectation of 55.1. The rate continued heading south on Tuesday after PM Theresa May stated that “no deal is better than a bad deal” for Brexit. Economic data had UK Construction PMI, which printed at 52.2, in line with expectations. Cable then rallied on Wednesday after UK Services PMI printed at 55.0 compared to an expected reading of 53.5. Also, the European Parliament voted 516 – 133 with 50 abstentions for the phased approach to Brexit negotiations. The pair then resumed selling off, falling a fraction on Thursday after a better than expected U.S. Initial Jobless Claims number. Friday saw Cable make its weekly low of 1.2364 after news of the U.S. military strike on a Syrian airbase and after UK Manufacturing Production, which declined by -0.1% m/m compared to an expected increase of +0.3%. Also out were the UK Goods Trade Balance, which showed a deficit of -12.5B compared to an expectation of -10.9B, and Halifax HPI, which showed flat growth m/m compared to an expected increase of +0.2%. GBP/USD went on to close at 1.2371, with a loss of -1.4% from its previous weekly close.
Declined last week as the RBA left interest rates unchanged with mixed economic numbers from both countries. The rate began the week selling off after making its weekly high of 0.7639 on Monday as Australian Retail Sales declined by -0.1% m/m compared to an expected increase of +0.3%, nevertheless, Australian Building Approvals showed an increase of +8.3% m/m, significantly higher than the expectation of -1.4% that was anticipated. The pair extended its losses on Tuesday after the RBA left its benchmark Cash Rate unchanged at 1.50% as was widely expected. In his Statement, Governor Lowe noted that, “The outlook continues to be supported by the low level of interest rates. Lenders have recently announced increases in mortgage rates, particularly those paid by investors. 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.” Also, the Australian Trade Balance showed a surplus of +3.57B compared to an expected surplus of +1.75B. On Wednesday, the rate consolidated as the United States reported mixed economic numbers and a somewhat hawkish FOMC Meeting Minutes. The pair resumed selling off on Thursday after a better than expected U.S. employment number. Friday saw the pair make its weekly low of 0.7493 as news of the U.S. strike on Syria hit the market and despite a lower than expected U.S. Non-Farm Payrolls number. AUD/USD closed at 0.7504, with a loss of -1.6% for the week.
Gained ground last week as the United States attacked a Syrian airbase and despite the price of crude oil, which rallied firmly above the $50 per barrel handle and better than expected Canadian economic numbers. The pair began the week gaining after making its weekly low of 1.3294 on Monday as the BOC’s Business Outlook Survey noted that, “Overall, inflation expectations are marginally higher than in the winter survey: higher commodity prices and expected inflationary pressures in the United States are viewed as contributing to domestic inflation over the next two years.” Tuesday saw the pair make its weekly high of 1.3455 after the Canadian Trade Balance came out with a deficit of -1.0B, compared to an expected surplus of +0.7B. The rate continued gaining on Wednesday after mixed U.S. economic releases and a somewhat hawkish FOMC Meeting Minutes. The rate fell a fraction on Thursday as the price of crude oil rallied above the $50 handle per barrel and despite Canadian Building Permits, which declined by -2.5% m/m versus an expected increase of +1.4%. The pair then consolidated at a slightly lower level after Canadian Employment Change printed at +19.4K versus an expectation of +5.7K, while the Canadian Unemployment Rate held steady at 6.7%, also, Ivey PMI printed at 61.1 versus an expected reading of 56.3. USD/CAD closed the week at 1.3404, with a gain of +0.6% from its previous weekly close.
Extended its previous week’s losses last week as asset flows favoured the Greenback over the Kiwi, with very little significant economic data out of New Zealand. The rate began the week gaining a fraction on Monday despite the NZ NZIER Business Confidence index printing at 17 compared to a previous reading of 28. The pair then sold off after making its weekly high of 0.7021 on Tuesday after the NZ GDT Price Index printed at +1.6% compared to a previous reading of +1.7%. The rate declined a fraction on Wednesday after mixed U.S. economic releases and a hawkish FOMC Meeting Minutes. On Thursday, the pair consolidated at a slightly higher level despite a better than expected U.S. employment number. The pair then sold off, making its weekly low of 0.6929 on Friday as news of the U.S. attack on a Syrian airbase supported the Greenback. NZD/USD closed at 0.6935, with an overall loss of -1.0% for the week.

The week ahead

AUD The Australian economic calendar is rather quiet this coming week, only featuring NAB Business Confidence (last 7) on Tuesday as well as the Employment Change (20.3K), Unemployment Rate (5.90%) and the RBA Financial Stability Review on Thursday. Also, Thursday will be a Bank Holiday in Australia. Resistance for AUD/USD is seen at 0.7834, 0.7718/77 and 0.7524/0.7679, with support noted at 0.7490/0.7510, 0.7369 and 0.7222/0.7310.

CAD The Canadian economic calendar is rather busy this coming week, featuring the BOC Overnight Rate Decision on Wednesday. Monday and Tuesday offer nothing notable, so Wednesday starts the week’s highlights off with the BOC Monetary Policy Report, the BOC Rate Statement, the BOC’s Overnight Rate Decision (unchanged at 0.50%) and the associated BOC Press Conference. Thursday then offers Manufacturing Sales (-0.40%) and the NHPI (0.20%), while Friday is a Bank Holiday in Canada. Resistance for USD/CAD is seen at 1.3534/63 and 1.3408/95, while support shows at 1.3367/86, 1.3263/1.3312, and 1.3125/1.3211.

EUR The Eurozone economic calendar is very quiet this coming week, only featuring the German ZEW Economic Sentiment (13.2) survey on Tuesday. Also, Friday is a Bank Holiday in Germany. Resistance for EUR/USD is seen at 1.0850/1.0964, 1.0774/1.0828 and 1.0617/1.0718, with support showing at 1.0520/24, 1.0493/94 and 1.0339/1.0453.

GBP The UK economic calendar is quite active this coming week, featuring key jobs data on Wednesday. Monday is quiet, so Tuesday starts the week’s highlights off with CPI (2.20%), PPI Input (-0.50%) and RPI (3.10%), and Wednesday’s key events include the Earnings Index (2.10%), the Claimant Count Change (-10.2K) and the Unemployment Rate (4.70%). Thursday then offers the BOE Credit Conditions Survey, while Friday is a UK Bank Holiday. Resistance to the topside for GBP/USD shows at 1.2672/1.2727, 1.2505/1.2614 and 1.2374/1.2451, while support for the pair is expected at 1.2346/64, 1.2081/1.2213 and 1.1985/1.2037.

JPY The Japanese economic calendar is inactive this coming week, featuring no notable data. Resistance for USD/JPY currently shows up at 114.74/116.07, 112.55/113.79 and 111.44/112.19, with support indicated at 110.08/26, 106.94 and 105.52.

NZD The New Zealand economic calendar is peaceful this coming week, featuring no notable data, although Thursday is a New Zealand Bank Holiday. The chart for NZD/USD shows resistance at 0.7236/46, 0.7040/0.7172 and 0.6934/96. On the downside, technical support is expected at 0.6861/96 and 0.6707/38.

USD The U.S. economic calendar is quite busy this coming week, featuring Retail Sales data on Friday. Monday starts the week’s highlights off with a speech by Fed Chair Yellen , and Tuesday’s key events include JOLTS Job Openings (5.59M) and a speech by FOMC Member Kashkari. Wednesday then offers Import Prices (-0.30%) and Crude Oil Inventories (last 1.6M), while Thursday features PPI (0.00%), Weekly Initial Jobless Claims (242K), Core PPI (0.20%) and the Preliminary University of Michigan Consumer Sentiment survey (97.1). Friday’s important data then concludes the week with CPI (0.00%), Core CPI (0.20%), Core Retail Sales (0.20%) and Retail Sales (0.10%).


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