Weekly Market Watch

Released 05 June 2017 - Weekly Market Watch

Last week recap

Traded higher last week as expectations of a tighter monetary policy stance for the ECB at its June meeting and a lower than expected U.S. Non-Farm Payrolls number pressured the Greenback. The week began on a quiet note as the United States observed a bank holiday on Monday. The rate then consolidated at a slightly lower level after comments from ECB President Draghi, who said in a speech at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament that, “Downside risks to the growth outlook are further diminishing, and some of the tail risks we were facing at the end of last year have receded measurably. The fact that domestic consumption and investment are the main engines driving the recovery makes it more robust and resilient to downside risks, which relate predominantly to global factors.” The pair then made its weekly low of 1.1108 on Tuesday after German Preliminary CPI declined by -0.2% m/m compared to an expectation of -0.1%. U.S. data had the CB Consumer Confidence Index print at 117.9 versus 120.1 expected. On Wednesday, the rate rallied despite German Retail Sales, which declined by -0.2% compared to an expected increase of +0.4%, also, EZ CPI Flash Estimate missed expectations at +1.4% y/y versus +1.5% anticipated and Core CPI Flash Estimate increased by +0.9% versus +1.0% expected. The pair fell fractionally on Thursday after U.S. President Donald Trump announced the United States was withdrawing from the Paris Climate Accord. Economic data had ADP Non-Farm Employment Change, which showed +253K new jobs last month versus an expectation of +181K, nevertheless, Initial Jobless Claims increased to 248K in its latest week versus an expectation of 239K. The rate then made its weekly high of 1.1284 on Friday after U.S. Non-Farm Employment Change showed the addition of +138K jobs in May versus +181K expected. Also out was U.S. Average Hourly Earnings, which increased by +0.2% m/m as widely anticipated and the U.S. Trade Balance, which showed a deficit of -47.6B versus an expectation of -45.5B. EUR/USD closed at 1.1282

Lost ground last week as asset flows favoured the Yen over the Greenback with very little significant economic data from Japan. The week began with the pair consolidating at a slightly higher level on Monday in the absence of any significant numbers out of either country. The rate lost ground on Tuesday after Japanese Retail Sales increased by +3.2% y/y versus an expectation of +2.2%. The pair then lost a fraction on Wednesday after a lower than expected U.S. Pending Home Sales number. Thursday saw the rate rally after mixed U.S. employment data, and comments by BOJ board member Yutaka Harada, who stated that, “It is of course possible that the BOJ may register losses because it will receive low interest rates while paying high interest rates,” Harada continued saying that, “The BOJ will always make a profit in the long run as it can buy high-yielding government bonds using cash and current account deposits that carry almost no cost, thus, the BOJ will not make potentially dangerous losses in the long run.” On Friday, the pair made both its weekly high of 111.70 and its weekly low of 110.32 after a disappointing U.S. Non-Farm Payrolls number. USD/JPY closed at 110.45, with an overall weekly loss of -0.8%.

Traded higher last week as both countries reported mixed economic numbers and despite perceived prospects of a hung government after the General Election next week. The week began with Cable rallying on Monday as both countries observed bank holidays. The rate continued fractionally higher on Tuesday after a lower than expected U.S. CB Consumer Confidence number. Cable then made both its weekly low of 1.2768 and its weekly high of 1.2920 on Wednesday after a new modelling for the Times by YouGov predicted that Conservatives would get 310 parliamentary seats down from a previous estimate of 330, and that Labour would get 257 seats versus a previous estimate of 229. The required number for a majority is 326 seats, making a hung government a real possibility. Thursday saw the rate decline a fraction after UK Manufacturing PMI printed at 56.7, in line with expectations. Cable resumed its rally on Friday, gaining a fraction after UK Construction PMI printed at 56.0 versus an expectation of 52.7. GBP/USD closed at 1.2890, with a gain of +0.9% for the week.

Showed little change last week as weak oil prices pressured the commodity currencies and despite better than expected economic data from Australia. The rate began the week consolidating on Monday in the absence of any significant economic numbers from either country. The pair gained ground on Tuesday after Australian Building Approvals increased by +4.4% compared to an expectation of +3.2% with the previous number upwardly revised from -13.4% to -10.3%. The rate then declined after making its weekly high of 0.7475 on Wednesday after the price of oil declined below $48 per barrel. The pair continued selling off on Thursday despite Australian Retail Sales, which increased by +1.0% m/m versus +0.3% anticipated, and Private Capital Expenditures, which increased by +0.3% q/q, in line with expectations. The pair then made its weekly low of 0.7370 on Friday before rallying sharply after a lower than expected U.S. Non-Farm Payrolls number. AUD/USD closed at 0.7439, with a loss of just 5 pips and virtually unchanged on the week.

Gained a fraction last week as the rise in crude oil prices and lower than expected Canadian economic data put pressure on the Loonie. The rate began the week gaining a fraction after making its weekly low of 1.3426 on Monday in the absence of any significant data from either country. The pair gained another fraction on Tuesday after the Canadian Current Account came out with a deficit of -14.1B versus -11.4B expected, while RMPI increased by +1.6% m/m, less than half the expected increase of +3.8%. On Wednesday, the rate extended its gains despite Canadian GDP, which increased by +0.5% m/m versus an expectation of +0.3%. The pair gained fractionally on Thursday after mixed U.S. employment numbers. The rate then sold off on Friday after making its weekly high of 1.3546 despite the Canadian Trade Balance, which came out with a deficit of -0.4B versus an expected flat reading. USD/CAD closed at 1.3490, with a gain of +0.3% from its previous weekly close.

Continued its rally last week as the United States reported mixed numbers with very little significant economic data from New Zealand. The week began with the pair gaining a fraction on Monday in the absence of any releases out of either country. Tuesday saw the rate gain after making its weekly low of 0.7034 after the RBNZ Financial Stability Report noted that, “The outlook for the global economy has improved since the last Report, but global political and policy uncertainty remains elevated and debt burdens are high in a number of countries. A sharp reversal in risk sentiment could lead to higher funding costs for New Zealand banks and an increase in domestic borrowing costs. Rising protectionism could also affect the trade-exposed sectors of the New Zealand economy.” The rate then declined a fraction on Wednesday after the ANZ Business Confidence Index printed at 14.9 compared to a previous reading of 11.0. The pair lost another fraction on Thursday after mixed U.S. employment data. The pair then gained sharply on Friday after a lower than expected U.S. NFP report. NZD/USD closed at 0.7146, with a an overall weekly gain of +1.2%.

The week ahead

AUD The Australian economic calendar is somewhat active this coming week, featuring Company Operating Profits (5.10%) on Monday; the Current Account (-0.2B), the RBA’s Cash Rate Decision (unchanged at 1.50%) and the RBA Rate Statement on Tuesday; GDP (0.20%) on Wednesday and the Trade Balance (1.91B) on Thursday. Resistance for AUD/USD is seen at 0.7718/0.7834, 0.7555/0.7679 and 0.7468/0.7524, with support noted at 0.7416/20, 0.7222/0.7388 and 0.7159/62.

CAD The Canadian economic calendar is moderately active this coming week, featuring Ivey PMI (62) on Tuesday; Building Permits (2.40%) on Wednesday; the NHPI (0.30%) and a speech by BOC Governor Poloz on Thursday; and the Employment Change (11.5K) and the Unemployment Rate (6.60%) on Friday. Resistance for USD/CAD is seen at 1.4001, 1.3752/92 and 1.3508/1.3696, while support shows at 1.3367/1.3495, 1.3263/1.3312 and 1.3223.

EUR The Eurozone economic calendar is light this coming week, only featuring the ECB’s Minimum Bid Rate Decision (unchanged at 0.00%) and the ECB Press Conference on Thursday. In addition, Monday will be a French and German Bank Holiday. Resistance for EUR/USD is seen at 1.1414/27, 1.1326/65 and 1.1285, with support showing at 1.1211/78, 1.1109/39 and 1.1020/45.

GBP The UK economic calendar is rather inactive this coming week, only featuring Services PMI (55.1) on Monday; the Halifax HPI (-0.20%) on Wednesday; the UK Parliamentary Elections on Thursday; and Manufacturing Production (0.80%) and the Goods Trade Balance (-12.0B) on Friday. Resistance to the topside for GBP/USD shows at 1.3120, 1.3047/57 and 1.2902/83, while support for the pair is expected at 1.2829/64, 1.2768/74 and 1.2569/1.2615.

JPY The Japanese economic calendar is very sparse this coming week, only featuring Final GDP (0.60%) on Thursday. Resistance for USD/JPY currently shows up at 114.95/115.61, 113.79/114.36 and 111.44/113.04, with support indicated at 110.08/26, 108.12 and 107.48.

NZD The New Zealand economic calendar is very peaceful this coming week, only featuring the GDT Price Index (last 3.20%) on Tuesday. Also, Sunday is a New Zealand Bank Holiday. The chart for NZD/USD shows resistance at 0.7349/75, 0.7236/46 and 0.7121/0.7172. On the downside, technical support is expected at 0.6934/0.7116, 0.6817/96 and 0.6674/0.6738.

USD The U.S. economic calendar is relatively light this coming week, only featuring Revised Nonfarm Productivity (-0.60%), ISM Non-Manufacturing PMI (57.1) and Factory Orders (-0.20%) on Monday; JOLTS Job Openings (5.65M) on Tuesday; Crude Oil Inventories (last -6.4M) on Wednesday and Weekly Initial Jobless Claims (241K) on Thursday.

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