Weekly Market Watch

Released 26 September 2017 - Weekly Market News

Last week recap

Showed little change last week despite a hawkish FOMC Statement and better than expected EZ PMI data. The rate began the week gaining a fraction on Monday after EZ Final CPI increased by +1.5% as widely anticipated. The pair extended its gains, rising another fraction on Tuesday after the German ZEW Economic Sentiment index printed at 17.0 versus an expectation of 12.3. Also, U.S. Building Permits increased to an annualized +1.30M compared to +1.22M expected, while Housing Starts showed +1.18M, in line with the consensus. Wednesday saw the rate make both its weekly high of 1.2028, and its weekly low of 1.1860 after the FOMC left its benchmark Fed Funds Rate unchanged at 1.25% as widely anticipated. The Fed confirmed that it would begin normalizing its balance sheet in October and upwardly revised its GDP growth projections for 2017 and 2019 while downwardly revising the unemployment rate forecast. Referring to damage caused by recent hurricanes, Fed Chair Janet Yellen said that, “In the third quarter … economic growth will be held down by the severe disruptions caused by Hurricanes Harvey, Irma, and Maria.” Yellen continued saying that, “As activity resumes and rebuilding gets underway, growth likely will bounce back. Based on past experience, these effects are unlikely to materially alter the course of the national economy beyond the next couple of quarters.” The pair then recovered somewhat, gaining ground on Thursday despite U.S. Initial Jobless Claims, which declined to 259K compared to an expectation of 302K. The rate consolidated on Friday after positive PMI news: German Flash Manufacturing PMI printed at 60.6 versus 59.0 expected; German Flash Services PMI showed a reading of 55.6 compared to an expectation of 53.8; EZ Flash Manufacturing PMI printed at 58.2 versus 57.2 expected, and EZ Services PMI, which showed a reading of 55.6 compared to a consensus of 54.7. EUR/USD went on to close at 1.1945, with a gain of just one pip from its previous weekly close and virtually unchanged on the week. Germany held election on Sunday, electing Chancellor Angela Merkel for a fourth term. EUR/USD gapped lower in early trading on Monday morning.
Extended its previous week’s gains last week as both the FOMC and the BOJ left interest rates unchanged. The week began with the pair edging up on Monday after a report over the weekend that Japanese PM Shinzo Abe will dissolve the Lower House of the Japanese Parliament on September 28th and call for a snap-election. The rate consolidated at a slightly higher level on Tuesday after better than expected U.S. housing data. Wednesday saw the pair make its weekly low of 111.11 before gaining after a hawkish FOMC Statement and Economic Projections releases. The rate then made its weekly high of 112.70 on Thursday after the BOJ left its benchmark Policy Rate at a negative -0.10% and its pledge to maintain 10-year JGBs at zero percent under its Yield Curve Control (YCC) policy, both as was widely expected. In the press conference after the rate release, BOJ Governor Haruhiko Kuroda said that, “Price moves remain weak and there''s still some distance in achieving our price target. The BOJ will continue its powerful monetary easing to achieve 2 percent inflation at the earliest date possible,” Kuroda continued, saying that, “We will take further monetary easing steps if necessary”. The pair sold off on Friday in response to U.S. President Trump’s remarks on North Korea’s “total devastation”. USD/JPY closed at 111.97, with an overall gain of +1.1% for the week.
Reversed direction last week, selling off after four consecutive weeks of rallying after UK PM Theresa May called for a two-year “implementation period” after Brexit. The week began with Cable declining on Monday after comments from BOE Governor Mark Carney, who said in a speech that, “Any prospective increases in Bank Rate would be expected to be at a gradual pace and to a limited extent, and to be consistent with monetary policy continuing to provide substantial support to the economy.” The rate consolidated on Tuesday after better than expected U.S. housing data. On Wednesday, Cable made both its weekly low of 1.3451, and its weekly high of 1.3656 after a somewhat hawkish FOMC Statement. Wednesday’s economic data had UK Retail Sales increase by +1.0% m/m versus +0.2% anticipated. Thursday saw Cable rally after UK Public Sector Net Borrowing printed at 5.1B versus 6.5B expected, with the previous number downwardly revised from -0.8B to -1.3B. The rate resumed its selloff on Friday as UK Prime Minister Theresa May called for a two-year “implementation period” after Brexit. May stated that “The eyes of the world are on us, but if we can be imaginative and creative about the way we establish this new relationship, if we can proceed on the basis of trust in each other, I believe we can be optimistic about the future we can build for the United Kingdom and for the European Union”. GBP/USD closed at 1.3492, with a loss of -0.7% from its previous weekly close.
Continued its decline last week as the Greenback was supported by a hawkish FOMC Statement. The rate began the week selling off on Monday in the absence of any significant data out of either country. The pair rallied on Tuesday after the RBA Monetary Policy Meeting Minutes noted that, “The appreciation of the Australian dollar over recent months, driven in part by a broad depreciation of the US dollar, was weighing on domestic growth and contributing to subdued inflationary pressure. A further appreciation of the Australian dollar would be expected to result in a slower pick-up in growth and inflation.” The rate then made its weekly high of 0.8102 on Wednesday despite a hawkish U.S. FOMC Statement. On Thursday, the pair fell sharply after comments from RBA Governor Philip Lowe, who stated that, “Some normalisation of monetary conditions globally should be seen as a positive development, although it does carry risks. It is a sign that economic growth in advanced economies has become self-sustaining, rather than just being dependent on monetary stimulus. A rise in global interest rates has no automatic implications for us here in Australia. Notwithstanding this, an increase in global interest rates would, over time, be expected to flow through to us, just as the lower interest rates have. Our flexible exchange rate though gives us considerable independence regarding the timing as to when this might happen." The pair then gained ground on Friday after making its weekly low of 0.7907 as traders squared positions. AUD/USD closed at 0.7958, with an overall weekly loss of -0.5%.
Extended its previous week’s gains last week as the Greenback was supported by a hawkish FOMC Statement, with mixed economic numbers from both countries. The rate began the week making its weekly low of 1.2170 on Monday after Canadian Securities Purchases increased to +23.95B compared to an expectation of +4.46B. The pair gained a fraction on Tuesday after Canadian Manufacturing Sales fell by -2.6% m/m versus an expected decline of -1.7%. The rate then made its weekly high of 1.2389 on Wednesday after a hawkish FOMC Statement. On Thursday, the pair lost a fraction after Canadian Wholesale Sales increased by +1.5% m/m versus an expected decline of -0.7%. The rate gained a fraction on Friday after Canadian CPI increased by +0.1% m/m versus +0.2% expected, while Canadian Core Retail Sales increased by +0.2% versus an expectation of +0.4%. USD/CAD closed at 1.2332, with a gain of +1.2% for the week.
Continued its rally last week as New Zealand reported better than expected economic data ahead of parliamentary elections. The pair began the week declining on Monday in the absence of any significant data out of either country. The pair gained on Tuesday after the New Zealand Current Account showed a contracting deficit of -0.62B compared to an expectation of -0.82B, and the NZ GDT Price Index, which printed at +0.9% versus a previous reading of +0.3%. The rate then made its weekly high of 0.7433 on Wednesday after a hawkish FOMC Statement and NZ GDP, which increased by +0.8% q/q as was widely anticipated. Thursday saw the pair lose ground after better than expected U.S. employment and manufacturing data. The rate gained ground on Friday as New Zealand voters went to the polls to elect 120 members of parliament. As of this writing, the latest polls show that the National Party is ahead of Labour. NZD/USD closed at 0.7330, with an overall gain of +0.6% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is this coming week, featuring data on . Monday starts the week’s highlights off with a speech by RBA Assistant Governor Bullock, and Tuesday and Wednesday offer nothing notable. Thursday then offers a speech by RBA Assistant Governor Debelle to conclude the week’s economic highlights. Also, the Australian Daylight Saving Time Shift will take place on Saturday. Resistance for AUD/USD is seen at 0.8659, 0.8102/62 and 0.7995/0.8075, with support noted at 0.7891/0.7940, 0.7807/70 and 0.7222/0.7679.

CAD The Canadian economic calendar is light this coming week, only featuring a speech by BOC Governor Poloz on Wednesday, followed by the GDP (last 0.30%) and the RMPI (last -0.60%) on Friday. Resistance for USD/CAD is seen at 1.2522/75, 1.2338/1.2465 and 1.2238, while support shows at 1.2195/1.2239, 1.2119/27 and 1.2061.

EUR The Eurozone economic calendar is busy this coming week, featuring CPI data on Thursday and Friday. Sunday starts the week’s highlights off with the German Federal Elections, and Monday’s key events include the German Ifo Business Climate survey (116) and a speech by ECB President Draghi. Wednesday then offers the EZ M3 Money Supply (4.60%), while Thursday features German Preliminary CPI (0.10%) and Spanish Flash CPI (1.80%). Friday’s important data then concludes the week with German Retail Sales (last 0.60%), the EZ CPI Flash Estimate (1.60%), the EZ Core CPI Flash Estimate (1.20%), and a speech by ECB President Draghi. Resistance for EUR/USD is seen at 1.2623, 1.2329 and 1.1979/1.2091, with support showing at 1.1822/1.1909, 1.1776 and 1.1661.

GBP The UK economic calendar is moderately active this coming week, starting on Thursday with a speech by BOE Governor Carney. Friday then offers the Current Account (-15.8B), Final GDP (0.30%), Net Lending to Individuals (5.0B), and speeches by MPC Member Broadbent and BOE Governor Carney to conclude the week’s highlights. Resistance to the topside for GBP/USD shows at 1.4004/56, 1.3834 and 1.3615/56, while support for the pair is expected at 1.3444/80, 1.3371 and 1.3223/65.

JPY The Japanese economic calendar is peaceful this coming week, only featuring speeches by BOJ Governor Kuroda on Monday and Thursday. Resistance for USD/JPY currently shows up at 115.61, 113.47/114.49 and 112.72/92, with support indicated at 110.08/112.25, 108.13/109.91 and 107.31/48.

NZD The New Zealand economic calendar is sparse this coming week, only featuring ANZ Business Confidence (last 18.3) on Monday; and the Official Cash Rate Decision (unchanged at 1.75%) and the RBNZ Rate Statement on Wednesday. The chart for NZD/USD shows resistance at 0.7608/17, 0.7557 and 0.7319/0.7484. On the downside, technical support is expected at 0.7182/0.7262, 0.6817/0.7131 and 0.6674/0.6738.

USD The U.S. economic calendar is busy this coming week, featuring Final GDP data on Thursday. Monday starts the week’s highlights off with speeches by FOMC Member Dudley, FOMC Member Evans and FOMC Member Kashkari, and Tuesday’s key events include CB Consumer Confidence (119.6), New Home Sales (591K), and speeches by FOMC Member Brainard and Fed Chair Yellen. Wednesday then offers Core Durable Goods Orders (0.20%), Durable Goods Orders (1.10%), Pending Home Sales (-0.50%), Crude Oil Inventories (last 4.6M), and a speech by FOMC Member Brainard, while Thursday features Final GDP (3.10%), Weekly Initial Jobless Claims (269K) and a speech by FOMC Member Fischer. Friday’s important data then concludes the week with Core PCE Price Index (0.20%), Personal Spending (0.10%), Chicago PMI (58.5), the Revised University of Michigan Consumer Sentiment survey (95.3) and a speech by FOMC Member Harker.


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