Weekly Market Watch

Released 11 September 2017 - Weekly Market News

Last week recap

Gained sharply last week as tensions rose between the United States and North Korea, another severe hurricane hit the United States, and the Fed’s vice chairman Stanley Fischer resigned; while the ECB left interest rates unchanged. The rate began the week gaining a fraction after North Korea conducted its sixth nuclear test on Sunday using a significantly more advanced missile than in previous tests, thereby escalating tensions with the United States. Also, Spanish Unemployment Change increased by 46.4K versus an expected 16.3K. The pair then made its weekly low of 1.1867 on Tuesday after FOMC member Lael Brainerd said that U.S. inflation levels were “far short” and that, “We should be cautious about tightening policy further until we are confident inflation is on track to achieve our target”. Tuesday’s data had U.S. Factory Orders decline by -3.3% m/m, which was in line with expectations. The rate consolidated at a slightly higher level on Wednesday after news that Fed vice-chair Stanley Fischer had resigned and after U.S. ISM Non-Manufacturing PMI printed at 55.3 versus an expectation of 55.8. Also, the U.S. Trade Balance showed a deficit of -43.7B compared to -44.6B anticipated. The pair then declined sharply on Thursday after the ECB left its benchmark Minimum Bid Rate unchanged at 0.00%. In his Introductory Statement to the Press Conference, ECB President Mario Draghi noted that, “The economic expansion, which accelerated more than expected in the first half of 2017, continues to be solid and broad-based across countries and sectors. At the same time, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability.” Also on Thursday, U.S. Initial Jobless Claims jumped to 298K from 236K, compared to an expectation of 245K, which was in large part due to the effects of the recent hurricane in Texas. The rate then consolidated after making its weekly high of 1.2091 on Friday as President Trump signed legislation removing the debt ceiling, keeping the government in business until December 8th. EUR/USD closed at 1.2032, with an overall increase of +1.5% for the week.
Fell sharply last week as geopolitical tensions with North Korea and uncertainty with the Federal Reserve weighed on the Greenback. The week began with the pair consolidating on Monday after making its weekly high of 109.92 as North Korea conducted another nuclear test over the weekend and after comments from former BOJ board member Takahide Kiuchi told Reuters that, “YCC (Yield Curve Control) is a very fragile framework that won't be sustainable once the economy is hit with an external shock”. He added that, “Theres not much left monetary policy can do to prop up the economy, and the cost of ultra-easy policy is becoming huge”. The rate then declined sharply on Tuesday after dovish comments from FOMC member Brainard. On Wednesday, the pair recovered somewhat after a better than expected U.S. Trade Balance and despite a lower than expected ISM Non-Manufacturing PMI number. The pair resumed selling off on Thursday after a higher than expected U.S. Initial Jobless Claims number. The rate then made its weekly low of 107.31 on Friday as North Korea threatened to launch another missile to celebrate its Foundation Day on Saturday and as another major hurricane (Irma) threatened the state of Florida, Friday’s economic data had Japanese Final GDP increase by +0.6% m/m compared to an expectation of +0.7%. USD/JPY closed at 107.80, with an overall decline of -2.2% from its previous weekly close.
Gained for its third consecutive week last week, as the Greenback was pressured by Fed and geopolitical uncertainty, while both countries reported mixed economic numbers. Cable began the week selling off on Monday after UK Construction PMI printed at 51.1 compared to an expectation of 52.1. The rate rallied on Tuesday after UK Services PMI printed at 53.2, which was in line with expectations. On Wednesday, Cable consolidated at a slightly higher level after mixed U.S. trade and manufacturing data. The pair resumed its rally on Thursday after Antonio Tajani, the president of the European Parliament proposed moving the first phase of Brexit negotiation from October to December. Tajani stated that, “We have three irrevocable priorities which are: rights for three-and-a-half million EU citizens living in the UK; the payment of what the EU deserves — not a euro more nor a euro less; third point, the Good Friday Agreement, that has to give us a positive solution for the border between Ulster and the Republic of Ireland. Once we have reached an agreement on these three points, we can talk about the future. Without an agreement on this, we cannot talk about the future. So far we have noted that no concrete proposals have arrived, only very foggy proposals.” Thursday’s economic numbers had UK Halifax HPI increase by +1.1% m/m, significantly higher than the +0.2% that was expected. Cable then made its weekly high of 1.3223 on Friday after UK Manufacturing Production increased by +0.5% m/m compared to a consensus of +0.3% and the Goods Trade Balance, which showed a deficit of -11.6B compared to an expectation of -11.9B. GBP/USD went on to close at 1.3193, with a net gain of +1.9% for the week.
Continued its rally for the fourth consecutive week last week, as the RBA left interest rates unchanged, while the Greenback was pressured by geopolitical and Fed concerns. The week began with the pair making its weekly low of 0.7941 on Monday after Australian Company Operating Profits declined by -4.5% q/q compared to an expected decline of -3.9%. The rate then resumed its rally on Tuesday after the RBA left its benchmark Cash Rate at 1.50% as was widely anticipated. After the rate decision, Governor Philip Lowe, speaking at a dinner in Brisbane stated that the RBA aimed to stimulate the economy without adding to household debt and that low rates are supporting jobs growth. “These are positive developments” he said, adding that, “Even so, it will be some time before we are at what could be considered full employment in Australia and before underlying inflation is at the mid-point of the medium-term target range. This means that stimulatory monetary policy continues to be appropriate.” The rate consolidated at a slightly higher level on Wednesday after Australian GDP increased by +0.8% q/q as was widely anticipated. The pair resumed its rally on Thursday despite Australian Retail Sales, which showed a flat reading m/m versus an expected increase of +0.2%, and the Australian Trade Balance, which showed a surplus of +0.46B compared to an expectation of +0.93B. The pair then made its weekly high of 0.8124 on Friday as the Greenback was pressured by geopolitical concerns. AUD/USD closed at 0.8051, with an overall weekly gain of +1.1%.
Extended its losses for the fourth consecutive week last week, as the BOC unexpectedly raised interest rates by 25 bps for the second consecutive month. The week began with the rate making its weekly high of 1.2324 on Monday as both countries observed a bank holiday. The pair then sold off on Tuesday as FOMC member Brainard made dovish comments. On Wednesday, the rate fell sharply after the BOC unexpectedly raised its benchmark Overnight Rate to 1.00% from 0.75%. In the central bank’s rate statement, the BOC noted that, “Given the stronger-than-expected economic performance, Governing Council judges that today’s removal of some of the considerable monetary policy stimulus in place is warranted. Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation. Particular focus will be given to the evolution of the economy’s potential, and to labour market conditions. Furthermore, given elevated household indebtedness, close attention will be paid to the sensitivity of the economy to higher interest rates.” Also, the Canadian Trade Balance showed a deficit of -3.0B compared to an expected -3.2B, and Labor Productivity, which declined by -0.1% versus +0.9% anticipated. The pair continued its slide on Thursday despite Canadian Ivey PMI, which printed at 56.3 versus an expectation of 61.3, and Building Permits, which declined by -3.5% m/m versus a consensus of -1.5%. The rate then made its weekly low of 1.2060 on Friday after Canadian Employment Change printed at +22.2K versus an expectation of +17.8K, while the Unemployment Rate declined to 6.2% from 6.3%. USD/CAD closed at 1.2150, with an overall decline of -2.0% for the week.
Reversed direction, gaining ground last week as the Greenback was pressured by geopolitical concerns with very little significant economic data from New Zealand. The rate began the week making its weekly low of 0.7155 on Monday in the absence of any significant numbers from either country. The pair then gained on Tuesday after the New Zealand GDT Price Index printed at +0.3% compared to a previous reading of -0.4%. The rate declined on Wednesday after mixed U.S. Trade Balance and ISM Non-Manufacturing PMI numbers. Thursday saw the rate resume its rally after a lower than expected U.S. Initial Jobless Claims number. The pair then made its weekly high of 0.7336 on Friday in the absence of any significant data from either country. NZD/USD closed at 0.7258, with an overall weekly gain of +1.5%.

The week ahead

AUD The Australian economic calendar is moderately active this coming week, featuring key jobs data on Thursday. Monday is quiet, so Tuesday starts the week’s highlights off with the NAB Business Confidence survey (last 12), and Wednesday then offers nothing notable. Thursday features a speech by RBA Assistant Governor Debelle, the Employment Change (19.2K) and the Unemployment Rate (5.6%) that conclude the week’s highlights. Resistance for AUD/USD is seen at 0.8659, 0.8124/62 and 0.8042/75, with support noted at 0.7891/0.7997, 0.7807/70 and 0.7222/0.7679.

CAD The Canadian economic calendar is very peaceful this coming week, only featuring the NHPI (0.20%) due out on Thursday. Resistance for USD/CAD is seen at 1.2522/75, 1.2413/65 and 1.2339/62, while support shows at 1.2127, 1.2060 and 1.1919.

EUR The Eurozone economic calendar is light this coming week, only featuring a speech by German Buba President Weidmann on Thursday. Resistance for EUR/USD is seen at 1.2623, 1.2329 and 1.2042/91, with support showing at 1.1822/1.1979, 1.1776 and 1.1661.

GBP The UK economic calendar is busy this coming week, featuring the MPC’s Official Bank Rate Decision on Thursday. Monday offers nothing notable, so Tuesday starts the week’s highlights off with CPI (2.8%), PPI Input (1.2%) and the RPI (3.7%). Wednesday then offers the Average Earnings Index (2.3%), the Claimant Count Change (-4.2K), and the Unemployment Rate (4.4%), while Thursday features the MPC’s Official Bank Rate Votes (2-0-7), the Monetary Policy Summary, the Official Bank Rate Decision (unchanged at 0.25%), the Asset Purchase Facility (unchanged at 435B) and the MPC’s Asset Purchase Facility Votes (0-0-9). Friday’s then concludes the week with a speech by MPC Member Vlieghe. Resistance to the topside for GBP/USD shows at 1.3444/80, 1.3371 and 1.3223/65, while support for the pair is expected at 1.3120/58, 1.3030/47 and 1.29768/1.2988.

JPY The Japanese economic calendar is quiet this coming week, featuring no notable events. Resistance for USD/JPY currently shows up at 112.92/115.61, 110.08/112.25 and 108.59/109.91, with support indicated at 108.13/26 and 107.31/48.

NZD The New Zealand economic calendar is sparse this coming week, only featuring the Business NZ Manufacturing Index (last 55.4) on Thursday. The chart for NZD/USD shows resistance at 0.7608/17, 0.7557 and 0.7262/0.7484. On the downside, technical support is expected at 0.7191, 0.6817/0.7131 and 0.6674/0.6738.

USD The U.S. economic calendar is this coming week, featuring CPI data on Thursday. Monday is quiet, so Tuesday starts the week’s highlights off with JOLTS Job Openings (5.96M), and Wednesday then offers PPI (0.3%), Core PPI (0.2%) and Crude Oil Inventories (last 4.6M), while Thursday features CPI (0.3%), Core CPI (0.2%) and Weekly Initial Jobless Claims (300K). Friday’s then concludes the week with Core Retail Sales (0.5%), Retail Sales (0.1%), the Empire State Manufacturing Index (18.3), the Capacity Utilization Rate (76.8%), Industrial Production (0.1%) and the Preliminary University of Michigan Consumer Sentiment survey (95.3).


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