Weekly Market Watch

Released 26 October 2015 - Weekly Newsletter

Last week recap

Declined sharply last week after the ECB left rates unchanged, and despite mostly positive economic numbers out of the Eurozone. The week began with the pair losing a fraction on Monday in the absence of any significant data out of either economy. The rate then made its weekly high of 1.1386 on Tuesday after U.S. Building Permits printed at 1.10M compared to 1.16M expected, but Housing Starts expanded to 1.21M versus 1.14M expected. On Wednesday, the pair consolidated at a slightly lower level ahead of the ECB rate decision. The rate declined sharply on Thursday after the ECB left the benchmark Minimum Bid Rate unchanged at 0.05% as widely anticipated. At the press conference after the rate decision, ECB President Draghi said that, “The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation. In particular, the Governing Council recalls that the asset purchase programme provides sufficient flexibility in terms of adjusting its size, composition and duration.” Adding that, “the degree of monetary policy accommodation will need to be re-examined at our December policy meeting when the new...projections will be available.” EZ economic releases on Thursday had the Spanish Unemployment Rate decline to 21.2% compared to 21.9% expected, while U.S. Initial Jobless Claims showed 259K versus 266K anticipated and Existing Home Sales, which came out at 5.55M versus 5.38M expected. The rate continued sliding on Friday, making its weekly low of 1.0996 despite French Flash Manufacturing PMI, which printed at 50.7 compared to 50.2 expected, while German Flash Manufacturing PMI printed at 51. EUR/USD closed the week at 1.1016, with a loss of -2.9%.
Rose last week as asset flows favoured the Greenback over the Yen and with little significant economic news out of Japan. The week began with the pair gaining a fraction after making its weekly low of 119.13 on Monday in the absence of any significant economic releases out of either country. The rate extended its gains on Tuesday as the United States reported mixed housing numbers. On Wednesday, the pair’s rally continued after the Japanese Trade Balance showed an expanding deficit of -0.36T compared to an expected deficit of -0.07T, while Japanese All Industries Activity declined -0.2% m/m versus -0.1% anticipated. Thursday saw the rate gain after positive U.S. Existing Home Sales and Initial Jobless Claims. The pair then made its weekly high of 121.47 on Friday despite Japanese Flash Manufacturing PMI, which printed at 52.5 compared to an expected reading of 50.6. USD/JPY closed at 121.45, with an overall gain of +2.2% from its previous weekly close.
Reversed direction last week, declining as the Greenback recovered after two weeks of declines and despite positive economic data out of the UK. Cable began the week gaining a fraction in the absence of any significant data out of either country. The rate declined on Tuesday after comments from MPC member McCafferty, who stated that, “The ongoing fiscal consolidation and sub-par growth in the world economy both act to constrain growth, and are likely to do so for some time to come. As a result, the normalisation of the neutral interest rate is likely to be very gradual, and its level will remain below that prior to 2007 in coming years. Nevertheless, to the extent that the neutral rate is gradually rising, it remains a consideration in setting the appropriate level of Bank Rate, for, as the neutral rate increases, it requires Bank Rate to be lifted in parallel if the stance of policy – the level of monetary stimulus – is to remain unchanged.” The pair continued its slide on Wednesday despite UK Public Sector Net Borrowing, which declined to 8.6B compared to 9.1B expected. On Thursday, Cable made its weekly high of 1.5508 after UK Retail Sales showed an increase of +1.9% m/m compared to an expected +0.3%, the rate then sold off after favourable U.S. employment and housing data. Friday saw the rate make its weekly low of 1.5305 with no significant numbers out of either country, bring Cable to close the week at 1.5310, with an overall weekly loss of -0.8%.
Extended its previous week’s losses last week as asset flows favoured the Greenback over the Aussie and despite an optimistic outlook from the RBA’s Monetary Policy Meeting Minutes. The week began with the rate declining on Monday after making its weekly high of 0.7306 in the absence of any significant data out of either country. The pair then gained a fraction on Tuesday after the RBA’s Monetary Policy Meeting Minutes stated that, “Members noted that reductions in the cash rate earlier in the year continued to provide support to aggregate demand, particularly dwelling investment and household consumption. Members also noted that conditions in the labour market had strengthened further over recent months and were somewhat better than had been expected earlier in the year.” On Wednesday, the rate fell after comments from RBA Assistant Governor Edey, who noted that, “Given its mandate for financial stability, the Reserve Bank''s primary interest has been in central clearing, and it has worked closely on this with the other council agencies. Initially the agencies favoured an incentives-led transition to central clearing. But for a number of reasons, including considerations of international consistency, the council ultimately turned its attention to a mandated approach.” Thursday saw the pair consolidate after making its weekly low of 0.7181 as Australian NAB Quarterly Business Confidence printed at 0 versus a previous reading of 4. The pair then gained a fraction on Friday with no data from either country. AUD/USD closed at 0.7218, showing an overall decline of -0.7% for the week.
Gained ground last week as the BOC left interest rates unchanged and both countries reported mixed economic data. The week began with the rate making its weekly low of 1.2900 on Monday after Canadian Federal elections confirmed the Liberal Party of Canada had the majority of parliamentary seats with 184 and Justin Trudeau as Prime Minister. The pair then declined on Tuesday despite Canadian Wholesale Sales, which declined -0.1% m/m versus an expected increase of +0.2%. Wednesday saw the rate gain sharply after the BOC left its benchmark Overnight Rate unchanged at 0.50%. The bank’s rate statement noted that, “Canada’s economy has rebounded, as projected in July. In non-resource sectors, the looked-for signs of strength are more evident, supported by the stimulative effects of previous monetary policy actions and past depreciation of the Canadian dollar. Household spending continues to underpin economic activity and is expected to grow at a moderate pace over the projection period. However, lower prices for oil and other commodities since the summer have further lowered Canada’s terms of trade and are dampening business investment and exports in the resource sector. This has led to a modest downward revision to the Bank’s growth forecast for 2016 and 2017.” On Thursday, the pair declined after Canadian Retail Sales increased +0.5% m/m versus an expected +0.1%, nevertheless, Core Retail Sales came out flat m/m versus an expected increase of +0.2%. The rate then made its weekly high of 1.3196 on Friday after Canadian CPI declined -0.2% m/m compared to an expected -0.1%, while Core CPI increased +0.2% versus +0.3% anticipated. USD/CAD closed at 1.3164, with a weekly gain of +1.9%.
Reversed direction, trading lower last week as the United States reported mixed economic numbers and with very little data out of New Zealand. The rate began the week declining on Monday with no significant numbers out of either country. Tuesday, the pair extended its losses after mixed U.S. housing numbers and the New Zealand GDT Price Index, which declined -3.1% compared to a previous reading of +9.9%. On Wednesday, the pair made its weekly low of 0.6696 as U.S. Crude Oil Inventories showed a larger than expected increase. The rate then gained ground on Thursday despite positive U.S. employment and housing data. Friday saw the pair make its weekly high of 0.6863 in the absence of any significant numbers out of either country. NZD/USD closed at 0.6746, with an overall loss of -0.9% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is fairly quiet this coming week, only featuring CPI (0.7%) and Trimmed Mean CPI (0.5%) on Wednesday, Import Prices (1.6%) on Thursday, and PPI (0.3%) on Friday. Resistance for AUD/USD is seen at 0.7427/95, 0.7343/81 and 0.7279/84, with support noted at 0.7181/0.7215, 0.7083 and 0.6907/0.7016.

CAD The Canadian economic calendar is characteristically quiet this coming week, only featuring a speech by Governing Council Member Lane on Tuesday, RMPI (-6.6%) on Thursday and GDP (0.1%) on Friday. Resistance for USD/CAD is seen at 1.3415/56, 1.3308/09 and 1.3192/97, while support shows at 1.3006/1.3153, 1.2900/90, and 1.2830/59.

EUR The Eurozone economic calendar is rather active this coming week, featuring the German Ifo Business Climate Survey on Monday. After the EU’s Daylight Savings Time shift on Sunday, Monday starts the week’s highlights off with the German Ifo Business Climate survey (108.1), and Tuesday’s key events include the EU M3 Money Supply (5.0%). Wednesday then offers little of note, while Thursday features German Preliminary CPI (-0.1%), Spanish Flash CPI (-0.6%), and the German Unemployment Change (-4K). Friday’s important data then concludes the week with German Retail Sales (0.4%), Spanish Flash GDP (0.9%), the EZ CPI Flash Estimate (0.0%), the EZ Core CPI Flash Estimate (0.9%) and the EZ Unemployment Rate (11.0%). Resistance for EUR/USD is seen at 1.1386/1.1409, 1.1207/1.1333 and 1.1086/1.1171, with support showing at 1.0996/1.1005, 1.0808/47 and 1.0520.

GBP The UK economic calendar is unusually quiet this coming week, only featuring the UK Daylight Saving Time Shift on Sunday; Preliminary GDP (0.6%) on Tuesday; and Net Lending to Individuals (4.4B) on Thursday. Resistance to the topside for GBP/USD shows at 1.5530/1.5722, 1.5505/08 and 1.5329/1.5466, while support for the pair is expected at 1.5304/05, 1.5243 and 1.5106/99.

JPY The Japanese economic calendar heats up a bit this coming week, featuring Retail Sales (0.5%) on Wednesday, and then Household Spending (1.2%), Tokyo Core CPI (-0.2%), the tentatively scheduled BOJ Monetary Policy Statement, Press Conference, and the BOJ Outlook Report. Resistance for USD/JPY currently shows up at 125.27/85, 121.84/122.02 and 121.23/49, with support indicated at 120.34/98, 119.05/65 and 118.49/88.

NZD The New Zealand economic calendar is also rather inactive this coming week, only featuring a Bank Holiday on Sunday; the Trade Balance (-822M) on Monday; the RBNZ’s Official Cash Rate Decision (unchanged at 2.75%) and the RBNZ Rate Statement on Wednesday; and the ANZ Business Confidence survey (last -18.9) on Friday. The chart for NZD/USD shows resistance at 0.6813, 0.6844/95 and 0.6920. On the downside, technical support is expected at 0.6706/0.6738, 0.6618/0.6696 and 0.6557/71.

USD The U.S. economic calendar is busy this coming week, featuring the Fed Funds Rate Decision on Wednesday. Monday starts the week’s highlights off with New Home Sales (546K), and Tuesday’s key events include Core Durable Goods Orders (0.0%), Durable Goods Orders (-1.1%) and the CB Consumer Confidence survey (102.5). Wednesday then offers the Goods Trade Balance (-64.9B), Crude Oil Inventories (last 8.0M), the FOMC Statement, and the Federal Funds Rate Decision (unchanged at <0.25%). Thursday features Advance GDP (1.6%), Weekly Initial Jobless Claims (264K), the Advance GDP Price Index (1.5%), a speech by FOMC Member Lockhart and Pending Home Sales (1.1%). Friday’s important data then concludes the week with the Employment Cost Index (0.6%), the Core PCE Price Index (0.2%), Personal Spending (0.2%), the Chicago PMI (49.5), a speech by FOMC Member Williams and the Revised University of Michigan Consumer Sentiment survey (92.6).


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