Weekly Market Watch

Released 19 June 2017 - Weekly Market Watch

Last week recap

Showed little change last week as the Fed raised the Fed Funds Rate by 25 bps, while French President Macron’s centrist party won a majority in the first round of French parliamentary elections. The rate began the week consolidating at a slightly lower level on Monday after the results of Sunday’s French parliamentary elections showed the La Republique en Marche and allied MoDem parties had won 32.3% of parliamentary seats in the first round, with the final election round now due to take place on June 18th. The pair traded down a fraction on Tuesday after German ZEW Economic Sentiment printed at 18.6 compared to an expectation of 21.6. Also, U.S. PPI showed a flat reading as widely expected, and Core PPI increased by +0.3% m/m versus +0.2% anticipated. The rate then made its weekly high of 1.1295 on Wednesday before settling fractionally higher after the FOMC increased the Fed Funds Rate by 25 bps to 1.00% – 1.25% as was widely expected. FOMC member Neil Kashkari was the only member that voted against the rate hike, voting to leave the target rate unchanged. The FOMC also announced it would normalize its balance sheet, stating that, “The Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated. This program, which would gradually reduce the Federal Reserve's securities holdings by decreasing reinvestment of principal payments from those securities, is described in the accompanying addendum to the Committees Policy Normalization Principles and Plans.” Wednesdays economic numbers included U.S. CPI, which declined by -0.1% m/m versus an expected increase of +0.2%, while Core CPI increased by +0.1% compared to an expectation of +0.2%, also, Core Retail Sales declined by -0.3% versus an expected increase of +0.2% and Retail Sales, which also declined -0.3% versus an expected increase of +0.1%. The pair sold off sharply on Thursday making its weekly low of 1.1131 as momentum from Wednesday’s rate decision put pressure on the Euro. Also, U.S. Initial Jobless Claims declined to 237K versus an expected 241K. The rate recovered some ground on Friday after U.S. Building Permits showed +1.17M versus an expected +1.25M, also, EZ Final CPI increased by +1.4% y/y as widely anticipated. EUR/USD closed at 1.1194, with a one pip increase and virtually unchanged on the week.
Gained a fraction last week as the BOJ left its Policy Rate and monetary policy unchanged, while the FOMC raised the Fed Funds Rate by 25 bps. The week began with the pair declining on Monday as risk assets favoured the Yen over the Greenback. The pair gained a fraction on Tuesday after better than expected U.S. PPI data. On Wednesday, the rate made its weekly low of 108.80 after the FOMC rate release and dismal U.S. CPI and Retail Sales data. The pair recovered, rallying on Thursday after mixed U.S. economic releases. The rate then made its weekly high of 111.41 on Friday after the BOJ left its benchmark Policy Rate unchanged at -0.10% with annual asset purchases of JPY 80T and the JGB yield held at around 0%. In the post meeting press conference, BOJ Governor Kuroda said that, “With the 2% inflation target still some way off, it is not appropriate to talk about how an exit is going to work, or show simulations on what an exit would mean in terms of the BOJs financial health.” USD/JPY closed at 110.82, with a gain of +0.4% for the week.
Gained a fraction last week as the BOE left interest rates and the Asset Purchase Facility unchanged, while the FOMC raised the Fed Funds Rate by a quarter point. Cable began the week making its weekly low of 1.2637 on Monday in the absence of any significant data from either country. The pair gained ground on Tuesday after UK CPI increased by +2.9% y/y compared to an expectation of +2.7%, a four-year high. Also, RPI increased by +3.7% y/y versus +3.5% anticipated and PPI Input, which declined by -1.3% versus an expected decline of -0.5%. The rate consolidated after making its weekly high of 1.2816 on Wednesday after the UK Average Earnings Index increased by +2.1% 3m/y versus an expectation of +2.4%. Also released were the UK Unemployment Rate, which held steady at 4.6% as widely expected and Claimant Count Change, which dropped to 7.3K versus an expectation of 12.5K, however the previous release was upwardly revised to 22.0K from 19.4K. Cable then gained a fraction on Thursday after the BOE left its benchmark Official Bank Rate unchanged at 0.25% and the Asset Purchase Facility at 435M as was widely anticipated. The voting on the Asset Purchase Facility was unanimous; however, Ian McCafferty and Michael Saunders joined Kristin Forbes in voting for a rate hike. The BOE’s Monetary Policy Summary noted that, “CPI inflation has been pushed above the 2% target by the impact of last year’s sterling depreciation. It reached 2.9% in May, above the MPC’s expectation. Inflation could rise above 3% by the autumn, and is likely to remain above the target for an extended period as sterling’s depreciation continues to feed through into the prices of consumer goods and services. The 2½% fall in the exchange rate since the May Inflation Report, if sustained, will add to that imported inflationary impetus.” The rate added another fraction on Friday after a lower than expected U.S. Building Permits release. GBP/USD closed at 1.2776, with an overall gain of +0.3% from its previous weekly close.
Extended its previous week’s gains last week as Australia reported better than expected employment numbers, with mixed data from the United States. The week began with the rate making its weekly low of 0.7520 on Monday in the absence of any significant data from either country. The pair sold off on Tuesday after Australian NAB Business Confidence, which showed a reading of 7 versus a previous print of 13. The pair then gained sharply on Wednesday, making its weekly high of 0.7634 after dismal U.S. CPI and Retail Sales data and despite a 25 bps hike in the Fed Funds Rate. The pair then consolidated on Thursday after Australian Employment Change showed an additional +42.0K jobs in May compared to an expected increase of +9.7K with the previous number upwardly revised from +37.4K to +46.1K. Also, the Australian Unemployment Rate declined to 5.5% from 5.7%. The rate extended its gains on Friday after lower than expected U.S. housing numbers. AUD/USD closed at 0.7615, with a weekly gain of +1.2%.
Declined sharply last week as BOC officials inferred the possibility of a rate hike at their next meeting on July 12th, and despite the continued selloff in crude oil. The week began with the rate dropping sharply after making its weekly high of 1.3469 on Monday after comments from the BOC’s Caroline Wilkins, who said in a speech that, “At present, there is significant monetary policy stimulus in the system. As we work toward our interest rate decision on 12 July, we will be focusing on the data and talking to many people like you to get a better sense of what is happening on the ground.” The pair extended its losses on Tuesday after a radio interview with BOC Governor Poloz, in which he said that the economic recovery was widening after recovering from weak oil prices. “What that suggests to us is that the interest rate cuts we put in place in 2015 have largely done their work, so thats very reassuring, were encouraged by the data.” The pair then made its weekly low of 1.3164 on Wednesday after lower than expected U.S. economic data and despite a 25-bps hike in the Fed Funds Rate. On Thursday, the pair gained a fraction despite Canadian Manufacturing Sales, which increased by +1.1% versus an expectation of +0.9%. Friday saw the rate resume its downtrend after lower than expected U.S. housing data and despite Canadian Foreign Securities Purchases, which dropped to 10.60B versus 12.14B expected. USD/CAD closed at 1.3209, with an overall loss of -1.9% from its previous weekly close.
Extended its gains last week, making it the sixth consecutive week the rate has closed higher. The week began with the pair making its weekly low of 0.7169 on Monday in the absence of any significant data out of either country. The rate consolidated on Tuesday after the New Zealand Current Account showed a surplus of +0.24B versus +0.95B expected. On Wednesday, the pair made its weekly high of 0.7318 after lower than expected U.S. economic data and the quarter point hike in the Fed Funds Rate. The rate then sold off on Thursday after New Zealand GDP increased by +0.5% compared to an expectation of +0.7%. The pair resumed its rally on Friday after the Business NZ Manufacturing Index printed at 58.5 compared to a previous reading of 56.9. NZD/USD closed at 0.7234, with a gain of +0.4% for the week.

The week ahead

AUD The Australian economic calendar is very quiet this coming week, only featuring a speech by RBA Governor Lowe on Monday, followed on Tuesday by the RBA’s Monetary Policy Meeting Minutes and the HPI (2.20%). Resistance for AUD/USD is seen at 0.7913/38, 0.7718/0.7834 and 0.7635/0.7679, with support noted at 0.7416/0.7610, 0.7222/0.7388 and 0.7159/62.

CAD The Canadian economic calendar is moderately active this coming week, featuring CPI data on Friday. Tuesday starts the week’s highlights off with Wholesale Sales (last 0.9%), and Thursday’s key events include Core Retail Sales (last -0.2%), Retail Sales (last 0.7%). Friday’s important data then concludes the week with CPI (last 0.4%), Common CPI (last 1.3%), Median CPI (last 1.6%) and Trimmed CPI (last 1.3%). Resistance for USD/CAD is seen at 1.3752/92, 1.3367/1.3696 and 1.3263/1.3312, while support shows at 1.3209/23, 1.3164/69 and 1.3056.

EUR The Eurozone economic calendar is somewhat active this coming week, featuring PMI data on Friday. Monday starts the week’s highlights off with a speech by German Buba President Weidmann. Friday then concludes the week’s important events with French Flash Manufacturing PMI (54.1), French Flash Services PMI (57.1), German Flash Manufacturing PMI (59.1), German Flash Services PMI (55.4), EZ Flash Manufacturing PMI (56.9) and EZ Flash Services PMI (56.2). Resistance for EUR/USD is seen at 1.1414/27, 1.1326/65 and 1.1211/95, with support showing at 1.1166, 1.1109/39 and 1.1020/45.

GBP The UK economic calendar is rather sparse this coming week, only featuring a speech by BOE Governor Carney on Tuesday; Public Sector Net Borrowing (7.3B) and a speech by MPC Member Haldane on Wednesday; and a speech by MPC Member Forbes on Thursday. Resistance to the topside for GBP/USD shows at 1.3047/57, 1.2817/1.2983 and 1.2768/74, while support for the pair is expected at 1.2690, 1.2557/1.2635 and 1.2358/1.2376.

JPY The Japanese economic calendar is quiet this coming week, featuring no notable events. Resistance for USD/JPY currently shows up at 113.79/114.36, 111.41/113.04 and 110.81, with support indicated at 110.08/26, 108.81/109.11 and 107.48/108.12.

NZD The New Zealand economic calendar is quiet peaceful this coming week, only featuring the GDT Price Index (last 0.60%) on Tuesday, and the RBNZ Rate Statement and the Official Cash Rate Decision (unchanged at 1.75%) on Wednesday. The chart for NZD/USD shows resistance at 0.7402/84, 0.7349/75 and 0.7297/0.7318. On the downside, technical support is expected at 0.7222/46, 0.6817/0.7184 and 0.6674/0.6738.

USD The U.S. economic calendar is less active than usual this coming week, featuring housing market data on Wednesday and Friday. Monday starts the week’s highlights off with a speech by FOMC Member Dudley, and Tuesday’s key events include speeches by FOMC Members Evans, Kaplan and Fischer, as well as the Current Account (-124B). Wednesday then offers Existing Home Sales (5.54M) and Crude Oil Inventories (last -1.7M), while Thursday features Weekly Initial Jobless Claims (241K). Friday’s important data then concludes the week with New Home Sales (599K).


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