Weekly Market Watch

Released 02 November 2015 - Weekly Newsletter

Last week recap

Lost a fraction last week as the FOMC released a more hawkish than expected statement and with mixed economic numbers out of both economies. The week began with the pair gaining on Monday after German Ifo Business Climate edged expectations printing at 108.2 compared to 108.1 forecast, also, U.S. New Home Sales declined to an annualized 468K versus 546K expected. The rate then lost a fraction on Tuesday despite U.S. Core Durable Goods Orders, which declined -0.4% m/m compared to an expected flat reading, while Durable Goods Orders fell -1.2% m/m versus -1.1% anticipated. On Wednesday, the pair tumbled, making both its weekly high of 1.1095 and its weekly low of 1.0896 after the FOMC left its benchmark Fed Funds Rate at the historical low of 0<0.25% as="" widely="" anticipated.="" in="" the="" fomc="" statement,="" the="" language="" referring="" to="" the="" world="" economic="" situation="" was="" omitted,="" which="" was="" taken="" as="" a="" hawkish="" development,="" the="" statement="" noted="" that,="" “in="" determining="" whether="" it="" will="" be="" appropriate="" to="" raise="" the="" target="" range="" at="" its="" next="" meeting,="" the="" committee="" will="" assess="" progress--both="" realized="" and="" expected--toward="" its="" objectives="" of="" maximum="" employment="" and="" 2="" percent="" inflation.="" this="" assessment="" will="" take="" into="" account="" a="" wide="" range="" of="" information,="" including="" measures="" of="" labor="" market="" conditions,="" indicators="" of="" inflation="" pressures="" and="" inflation="" expectations,="" and="" readings="" on="" financial="" and="" international="" developments.="" the="" committee="" anticipates="" that="" it="" will="" be="" appropriate="" to="" raise="" the="" target="" range="" for="" the="" federal="" funds="" rate="" when="" it="" has="" seen="" some="" further="" improvement="" in="" the="" labor="" market="" and="" is="" reasonably="" confident="" that="" inflation="" will="" move="" back="" to="" its="" 2="" percent="" objective="" over="" the="" medium="" term.”="" thursday="" saw="" the="" rate="" recover="" somewhat="" after="" u.s.="" advance="" gdp="" increased="" +1.5%="" q/q="" compared="" to="" an="" expected="" +1.6%="" increase,="" with="" the="" previous="" number="" upwardly="" revised="" from="" +2.3%="" to="" +3.9%.="" the="" pair="" then="" gained="" a="" fraction="" on="" friday="" after="" the="" u.s.="" employment="" cost="" index="" increased="" +0.6%="" q/q="" as="" widely="" anticipated="" and="" ez="" core="" cpi="" flash="" estimate,="" which="" increased="" +1.0%="" y/y="" compared="" to="" +0.9%="" expected,="" while="" the="" eurozone="" unemployment="" rate="" declined="" to="" 10.8%="" from="" 10.9%="" downwardly="" revised="" from="" 11%.="" eur/usd="" closed="" at="" 1.1002,="" showing="" an="" overall="" decline="" of="" -0.1%="" from="" its="" previous="" weekly="" close.="">
Declined moderately last week as the BOJ left monetary policy unchanged and despite a hawkish FOMC Statement. The week began with the pair declining after making its weekly high of 121.49 on Monday after a lower than expected U.S. New Home Sales number. The rate extended its losses on Tuesday after disappointing U.S. Durable Goods Orders data. The pair then rallied on Wednesday after making its weekly low of 120.02 as the FOMC released a hawkish Statement and Japanese Retail Sales, which declined -0.2% y/y compared to an expected increase of +0.4%. On Thursday, the rate lost a fraction after disappointing U.S. Advance GDP and Pending Home Sales numbers. The pair then declined on Friday after the BOJ’s Monetary Policy Statement showed the central bank had left stimulus measures unchanged with one dissenting member advocating for a reduction in purchases, the Statement noted that, “Although the timing of reaching around 2 percent depends on developments in crude oil prices, it is projected to be around the second half of fiscal 2016, assuming that crude oil prices will rise moderately from the recent level. Thereafter, Japan''s economy is expected to gradually shift to a growth path that sustains such inflation in a stable manner.” BOJ Governor Haruhiko Kuroda told reporters at the press conference following the monetary policy statement that, “We will make necessary adjustments to our program to achieve the 2% inflation target as soon as possible, but only if it is in balance with the overall economy.” Friday’s economic data had Japanese Tokyo Core CPI decline -0.2% y/y as widely anticipated, and Japanese Household Spending, which declined -0.4% y/y compared to an expected increase of +1.2%. USD/JPY closed at 120.59, with an overall loss of -0.7% for the week.
Gained ground last week as asset flows favoured Sterling over the Greenback despite a hawkish FOMC Statement and a lower than expected UK GDP number. Cable began the week on a positive note, gaining a fraction on Monday after a lower than expected U.S. housing number. The pair then sold off on Tuesday after UK Preliminary GDP increased +0.5% q/q compared to an expectation of +0.6%. On Wednesday, Cable declined after the FOMC released its Statement, which increased expectations of a December rate hike. The pair gained ground on Thursday after making its weekly low of 1.5241 as UK Net Lending to Individuals increased +4.9B m/m versus expectation of +4.4B, while the United States reported a lower than expected Advance GDP number. Cable then rose sharply on Friday after mixed U.S. economic data, which brought GBP/USD to close at 1.5426, with a weekly gain of +0.5%.
Continued its slide last week as Australia reported mostly lower than expected economic data and the FOMC Statement inferred a higher likelihood of an interest rate increase in December. The week began with the rate making its weekly high of 0.7268 on Monday after a lower than expected U.S. housing number. The pair then declined on Tuesday despite disappointing U.S. Durable Goods Orders data. On Wednesday, the rate fell sharply after the FOMC released their Statement and Australian CPI, which increased +0.5% q/q compared to a consensus of +0.7%, and Trimmed Mean CPI, which rose +0.3% q/q versus +0.5% expected. The pair then made its weekly low of on Thursday after Australian Import Prices increased +1.4% versus +1.6% forecast. The pair then recovered somewhat on Friday, gaining ground after Australian PPI printed at +0.9% compared to +0.3% expected, which brought the rate up to close at 0.7139, with an overall loss of -1.2% for the week.
Reversed direction, selling off last week as crude oil prices came off of their lows and asset flows favoured the Loonie over the Greenback. The week began with the pair making its weekly low of 1.3054 on Monday after the United States reported a lower than expected housing number. The rate then rallied on Tuesday despite lower than expected U.S. Durable Goods Orders data. On Wednesday, the pair made its weekly high of 1.3278 before selling off sharply after the release of the FOMC Statement. The rate continued its decline on Thursday after Canadian RMPI increased +3.0% m/m versus +1.2% expected, while the United States reported a lower than expected Advance GDP number. The pair continued its slide on Friday after Canadian GDP increased +0.1% m/m as was widely anticipated. USD/CAD went on to close at 1.3067, with an overall loss of -0.7% from its previous weekly close.
Gained a fraction last week as the RBNZ left interest rates unchanged following three consecutive rate hikes and despite a hawkish FOMC Statement and mixed economic numbers out of both countries. The week began on a positive note, with the rate gaining on Monday despite the New Zealand Trade Balance showing an expanding deficit of -1,222M versus -822M expected. The pair then made its weekly high of 0.6811 on Tuesday after disappointing U.S. Durable Goods Orders data. On Wednesday, the rate made its weekly low of 0.6620 after the RBNZ left its benchmark Official Cash Rate unchanged at 2.75%. The central bank’s Rate Statement noted that, “Annual CPI inflation is expected to return well within the target range by early 2016, as the effects of earlier petrol price falls drop out of the CPI calculation and in response to the fall in the exchange rate since April. However, the exchange rate has been moving higher since September, which could, if sustained, dampen tradables sector activity and medium-term inflation. This would require a lower interest rate path than would otherwise be the case.” The pair then consolidated at a slightly higher level on Thursday after a lower than expected U.S. Advance GDP number. Friday saw the rate gain after the New Zealand ANZ Business Confidence index printed at +10.5 compared to a previous reading of -18.9. NZD/USD went on to close at 0.6766, with an overall gain of +0.3% for the week.

The week ahead

AUD The Australian economic calendar is moderately busy this coming week, featuring the RBA’s Cash Rate Decision on Tuesday. Monday starts the week’s highlights off with Building Approvals (1.8%), and Tuesday’s key events include the RBA’s Cash Rate Decision (unchanged at 2.00%) and the RBA Rate Statement. Wednesday then offers Retail Sales (0.4%), the Trade Balance (-2.85B) and a speech by RBA Governor Stevens, while Thursday features a speech by RBA Deputy Governor Lowe. Friday’s important data then concludes the week with the RBA’s Monetary Policy Statement and a speech by RBA Assistant Governor Edey. Resistance for AUD/USD is seen at 0.7343/81, 0.7279/84 and 0.7181/0.7215, with support noted at 0.7066/83, 0.6907/0.7016 and 0.6246.

CAD The Canadian economic calendar is somewhat active this coming week, featuring the Trade Balance (-2.5B) on Wednesday, Ivey PMI (last 53.7) on Thursday, and then the Employment Change (12.1K), the Unemployment Rate (last 7.1%) and Building Permits (-3.7%) on Friday. In addition, the Daylight Savings Time Shift will occur in Canada on Sunday. Resistance for USD/CAD is seen at 1.3415/56, 1.3308/09 and 1.3153/97, while support shows at 1.3006/1.3054, 1.2900/90, and 1.2830/59.

EUR The Eurozone economic calendar is less active than usual this coming week, only featuring Spanish Manufacturing PMI (51.9) on Monday; the Spanish Unemployment Change (70.3K) and a speech by ECB President Draghi on Tuesday; a speech by ECB President Draghi on Wednesday; and German Factory Orders (1.1%), the EU’s Economic Forecasts and a speech by ECB President Draghi on Thursday. Resistance for EUR/USD is seen at 1.1386/1.1409, 1.1207/1.1333 and 1.1072/1.1171, with support showing at 1.0996/1.1005, 1.0808/96 and 1.0520.

GBP The UK economic calendar is active this coming week, featuring the BOE’s Official Bank Rate Decision on Thursday. Monday starts the week’s highlights off with Manufacturing PMI (51.3), and Tuesday’s key events include Construction PMI (58.9). Wednesday then offers the Halifax HPI (4TH-9TH Nov, 0.7%) and Services PMI (54.6), while Thursday features the BOE Inflation Report, the MPC’s Official Bank Rate Votes (1-0-8), the BOE’s Monetary Policy Summary, the MPC’s Official Bank Rate Decision (unchanged at 0.50%), the Asset Purchase Facility (unchanged at 375B), the MPC’s Asset Purchase Facility Votes (0-0-9), and a speech by BOE Governor Carney. Friday’s important data then concludes the week with Manufacturing Production (0.4%), the Trade Balance (-10.7B) and the NIESR GDP Estimate (0.5%). Resistance to the topside for GBP/USD shows at 1.5530/1.5722, 1.5505/08 and 1.5466/1.5475, while support for the pair is expected at 1.5304/82, 1.5241/43 and 1.5106/99.

JPY The Japanese economic calendar is very quiet this coming week, only featuring the BOJ’s Monetary Policy Meeting Minutes on Thursday. In addition, Tuesday is a Japanese Bank Holiday. Resistance for USD/JPY currently shows up at 125.27/85, 121.84/122.02 and 120.54/121.49, with support indicated at 120.02/34, 119.05/65 and 118.49/88.

NZD The New Zealand economic calendar is rather quiet this coming week, only featuring the tentatively scheduled GDT Price Index (last -3.1%), as well as the Employment Change (0.4%) and the Unemployment Rate (6.0%), which are all due out on Tuesday. The chart for NZD/USD shows resistance at 0.6790/0.6813, 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 active this coming week, featuring key jobs data on Wednesday and Friday. After the U.S. Daylight Savings Time Shift on Sunday, Monday starts the week’s highlights off with ISM Manufacturing PMI (50.0) and a speech by FOMC Member Williams, while Tuesday’s key events include Factory Orders (-0.8%). Wednesday then offers speeches by FOMC Members Brainard and Dudley, as well as testimony by Fed Chair Yellen and the ADP Non-Farm Employment Change (183K), the Trade Balance (-42.7B), ISM Non-Manufacturing PMI (56.6), and Crude Oil Inventories (last 3.4M. Thursday features speeches by FOMC Members Fischer and Lockhart, plus Weekly Initial Jobless Claims (263K), Preliminary Nonfarm Productivity (0.1%) and Preliminary Unit Labor Costs (2.2%). Friday’s important events then include Average Hourly Earnings (0.2%), Non-Farm Payrolls (179K), the Unemployment Rate (5.1%) and a speech by FOMC Member Brainard. The week concludes on Saturday with a speech by FOMC Member Williams.


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