Weekly Market Watch

Released 24 July 2017 - Weekly Market News

Last week recap

Surged last week as the ECB left interest rates unchanged, while the Greenback was pressured by the Trump administration’s second failed attempt to repeal Obamacare and pass a healthcare bill. The week began with the rate consolidating after making its weekly low of 1.1434 on Monday after EZ Final CPI increased by +1.3% y/y, in line with expectations. The pair then gained ground on Tuesday after the second failure of the Trump administration in replacing Obamacare, falling two votes short in Congress. Tuesday’s economic numbers had German ZEW Economic Sentiment, which printed at 17.5 compared to an expectation of 17.8. Wednesday saw the rate retreat after positive U.S. housing numbers: Building Permits rose to an annualized +1.25M versus an expectation of +1.20M, while Housing Starts increased to +1.22M versus a consensus of +1.16M. On Thursday, the pair gained sharply after the ECB left its benchmark Minimum Bid Rate at 0.00% as widely anticipated. In addition, the Deposit Rate was left at -0.4% and the QE program will continue to purchase EUR 60B in assets a month until the end of the year. After the rate release, ECB President Draghi said that, “While the ongoing economic expansion provides confidence that inflation will gradually glide toward levels in line with the inflation aim, it has yet to translate into stronger inflation dynamics”. Thursday’s economic data included U.S. Initial Jobless Claims, which declined to 233K in its latest week, while the U.S. Philly Fed Manufacturing Index printed at 19.5 compared to an expectation of 23.4. The rate then made its weekly high of 1.1682 on Friday in the absence of any significant data from either economy. EUR/USD closed at 1.1659, with an overall gain of +1.8% for the week.
Extended its previous week’s selloff last week as the BOJ left its benchmark Policy Rate unchanged, while the U.S. Dollar was pressured by political events in the United States. The pair began the week making its weekly high of 112.86 on Monday despite a lower than expected U.S. Empire State Manufacturing Index number. The pair then sold off on Tuesday after the U.S. Congress failed to appeal and replace Obamacare for the second time. Wednesday saw the rate decline a fraction after the BOJ left its benchmark Policy Rate at -0.10% as was widely expected. Also, members voted to keep the target for 10-year JGBs at 0%. In the press conference following the rate decision, BOJ Governor Haruhiko Kuroda said that, “European and U.S. central banks have also repeatedly delayed the projected timing for hitting their price targets. Part of the reason was the sharp decline in oil prices, along with other factors beyond the central banks' control. Its unfortunate that we had to push back the timing many times, but our forecasts must be an appropriate one that reflects economic and price developments at the time.” The pair then consolidated on Thursday after a lower than expected U.S. manufacturing number. Friday saw the rate make its weekly low of 111.00 in the absence of any significant numbers from either country. USD/JPY closed the week at 111.10, with a net loss of -1.2%.
Lost ground last week as the UK reported lower than expected inflation data, and despite political uncertainty in the United States. The week began with Cable declining on Monday as the UK began its second round of Brexit negotiations in Brussels. UK Brexit Secretary David Davis said that, “We made a good start last month, and this week well be getting into the real substance.” Davis added that “Protecting the rights of all our citizens is the priority for me going into this round and Im clear that its something we must make real progress on.” The rate then made its weekly high of 1.3124 on Tuesday before falling a fraction after UK CPI increased by +2.6% y/y, disappointing the market with an expectation of +2.9%. Also out were RPI, which increased by +3.5% y/y compared to +3.6% expected, and PPI Input, which declined by -0.4% m/m versus -0.8% anticipated. On Wednesday, Cable fell a fraction after better than expected U.S. housing data. The pair then made its weekly low of 1.2932 on Thursday as Brexit talks concluded their second week. The EU chief negotiator Michel Barnier said that, “We require this clarification on the financial settlement, on citizens rights, on Ireland - with the two key points of the common travel area and the Good Friday Agreement - and the other separation issues where this weeks experience has quite simply shown we make better progress where our respective positions are clear.” Thursday’s economic numbers had UK Retail Sales, which increased by +0.6% m/m versus +0.4% expected. Cable then gained a fraction on Friday as traders squared positions and despite UK Public Sector Net Borrowing, which fell to 6.3B compared to an expectation of 4.3B. GBP/USD closed at 1.2992, with a loss of -0.8% from its previous weekly close.
Continued its rally last week as the RBA released its minutes for the July 4th meeting, while the Greenback was pressured by the second failure of the Trump administration in repealing Obamacare and passing a new healthcare bill. The week began with the rate declining on Monday despite a lower than expected U.S. manufacturing number. The pair then rallied sharply on Tuesday after the RBA’s Monetary Policy Meeting Minutes noted that, “Members discussed the Bank’s work estimating the neutral real interest rate for Australia. The various estimates suggested that the rate had been broadly stable until around 2007, but had since fallen by around 150 basis points to around 1 per cent. This equated to a neutral nominal cash rate of around 3½ per cent, given that medium-term inflation expectations were well anchored around 2½ per cent, although there is significant uncertainty around this estimate.” On Wednesday, the rate extended its gains despite better than expected U.S. housing data. Thursday saw the pair make its weekly high of 0.7988 before retreating after Australian Employment Change showed +14.0K new jobs in June compared to an expectation of +14.5K, while the Australian Unemployment Rate held steady at 5.6%. The pair continued its selloff on Friday after comments from RBA Assistant Governor Debelle, referring to the RBA minutes said that, “No significance should be read into the fact the neutral rate was discussed at this particular meeting,” adding that, “While an easier monetary policy elsewhere in the world should lead to faster growth in the world economy, which is good for the Australian economy, an appreciating exchange rate works against this.” AUD/USD closed at 0.7911, with a gain of +1.1% for the week.
Declined for its fourth consecutive week last week as political events in the United States pressured the Greenback, while Canada reported mostly better than expected economic numbers. The week began with the rate making its weekly high of 1.2699 on Monday despite Canadian Foreign Securities Purchases, which increased to +29.46B, significantly higher than the +9.78B that was expected. On Tuesday, the pair began selling off after news broke that the Trump administration had failed to repeal and replace Obamacare for the second time. The rate extended its losses on Wednesday after Canadian Manufacturing Sales increased by +1.1% m/m compared to an expectation of +0.9%. Thursday saw the pair consolidate after better than expected U.S. Initial Jobless Claims data. The rate then made its weekly low of 1.2521 on Friday after Canadian CPI, which declined by -0.1% as widely anticipated. Also, Canadian Core Retail Sales declined by -0.1% m/m versus 0.0% anticipated. USD/CAD closed at 1.2534, with an overall weekly loss of -0.8%.
Extended its previous week’s gains last week as New Zealand reported lower than expected inflation data, justifying the RBNZ’s neutral stance on interest rates. The week began with the rate dropping sharply on Monday, making its weekly low of 0.7261 after NZ CPI showed a flat reading for the quarter compared to an expected increase of +0.2%. The pair then recovered all of Monday’s losses on Tuesday after the NZ GDT Price Index increased by +0.2% versus a previous reading of -0.4%. The rate added another fraction to its gains on Wednesday despite better than expected U.S. housing data. On Thursday, the pair continued rallying after mixed U.S. employment and manufacturing numbers. The rate then made its weekly high of 0.7457 on Friday in the absence of any significant economic data from either country. NZD/USD closed the week at 0.7449, with a gain of +1.5% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is rather calm this coming week, only featuring CPI (0.40%), Trimmed Mean CPI (0.50%) and a speech by RBA Governor Lowe on Wednesday. Resistance for AUD/USD is seen at 0.8068/75, 0.7989 and 0.7913/38, with support noted at 0.7833/34, 0.7572/0.7679 and 0.7222/0.7535.

CAD The Canadian economic calendar is sparse this coming week, only featuring Wholesale Sales (0.50%) on Monday, followed on Friday by GDP (0.20%). Resistance for USD/CAD is seen at 1.2822/59, 1.2763 and 1.2654/80, while support shows at 1.2522, 1.2362 and 1.2127.

EUR The Eurozone economic calendar is busy this coming week, featuring CPI data on Friday. Monday starts the week’s highlights off with French Flash Manufacturing PMI (54.6), French Flash Services PMI (56.6), German Flash Manufacturing PMI (59.1), German Flash Services PMI (54.4), Flash Manufacturing PMI (57.3) and Flash Services PMI (55.5), and Tuesday’s key events include the German Ifo Business Climate survey (114.9). Wednesday then offers nothing notable, while Thursday features the Spanish Unemployment Rate (17.90%) and EZ M3 Money Supply (5.00%). Friday’s important data then concludes the week with German Preliminary CPI (0.20%), Spanish Flash CPI (1.50%) and Spanish Flash GDP (0.90%). Resistance for EUR/USD is seen at 1.1714 and 1.1683, with support showing at 1.1616, 1.11209/1.1494 and 1.1109/66.

GBP The UK economic calendar is light this coming week, only featuring a speech by MPC Member Haldane on Tuesday, followed on Wednesday by Preliminary GDP (0.30%). Resistance to the topside for GBP/USD shows at 1.3371, 1.3279 and 1.3029/1.3120, while support for the pair is expected at 1.2932/76, 1.2768/1.2899 and 1.2690.

JPY The Japanese economic calendar is peaceful this coming week, featuring no notable data. Resistance for USD/JPY currently shows up at 115.30/61, 112.92/114.95 and 111.41/112.25, with support indicated at 110.08/111.12, 109.74 and 108.81/109.11.

NZD The New Zealand economic calendar is inactive this coming week, featuring no notable data. The chart for NZD/USD shows resistance at 0.7608/17 and 0.7458/84. On the downside, technical support is expected at 0.7297/0.7402, 0.6817/0.7262 and 0.6674/0.6738.

USD The U.S. economic calendar is quite busy this coming week, featuring GDP data on Friday. Monday starts the week’s highlights off with Existing Home Sales (5.59M), and Tuesday’s key events include CB Consumer Confidence (116.2). Wednesday then offers New Home Sales (615K), Crude Oil Inventories (last -4.7M), the FOMC Rate Statement and the Federal Funds Rate Decision (unchanged at <1.25%), while Thursday features Core Durable Goods Orders (0.40%), Weekly Initial Jobless Claims (242K) and Durable Goods Orders (3.20%). Friday’s important data then concludes the week with Advance GDP (2.50%), the Advance GDP Price Index (1.30%), the Employment Cost Index (0.60%), the Revised University of Michigan Consumer Sentiment survey (93.1) and a speech by FOMC Member Kashkari.


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