Weekly Market Watch

Released 23 February 2015 - Weekly Newsletter

Last week recap

Was virtually unchanged last week as the FOMC’s meeting minutes indicated a dovish bias and Greece secured a four month extension to its bailout from Eurozone finance ministers. The week began on a soft note with the rate declining as the United States observed a bank holiday and the Eurogroup’s Jeroen Dijsselbloem stated in Brussels that, "The next step has to come from the Greek authorities; they have to make up their mind. We are ready and willing to reach an honourable agreement … no one has the right to work towards a dead end especially one that is mutually detrimental for all Europeans.” The pair then gained ground on Tuesday after mixed economic sentiment numbers out of the Eurozone: EZ ZEW Economic Sentiment printed at 52.7 versus 51.3 expected, while German ZEW Economic Sentiment showed a reading of 53.0 compared to an expected 55.4 print. On Wednesday, the rate consolidated at a slightly lower level after Greece requested a six month loan extension. Greek Finance minister Yanis Varoufakis said that “We should extend the credit programme by a few months to have enough stability so that we can negotiate a new agreement between Greece and Europe.” Also, the FOMC Meeting Minutes showed the Fed was reluctant to change the language in the minutes, indicating it would continue leaving rates at historical lows for the time being. The pair then declined on Thursday after making its weekly high of 1.1449 as Germany rejected Greece’s request for a six month loan extension. Also, the ECB Monetary Policy Meeting Accounts noted that, “Against the background of expectations of further monetary policy accommodation in the euro area, the euro had weakened against major currencies, with the exception of the Japanese yen. Since the early December 2014 meeting, the euro had depreciated by around 6% against the US dollar and had declined to an 11-year low of below USD 1.16, which in part reflected strong growth expectations in the United States.” The pair recovered on Friday after making its weekly low of 1.1278 as Greece reached a provisional agreement to extend its bailout loan for four months, but will only get the financing if it meets certain conditions. Friday’s economic data had German Flash Manufacturing PMI print at 50.9 versus 51.8 expected and French Manufacturing PMI showed a reading of 47.7 compared to 49.7 anticipated. EUR/USD went on to close at 1.1378, with an overall decline of just 7 pips and mostly unchanged on the week.
Gained a fraction last week as the BOJ left monetary policy unchanged and after both countries reported mostly lower than expected economic data. The rate began the week on a soft note despite Japanese Preliminary GDP, which increased +0.6% q/q compared to an expected increase of +0.9%. The pair then rallied and made both its weekly low of 118.22 and its weekly high of 119.41 on Tuesday as the United States reported lower than expected housing and manufacturing data. On Wednesday, the pair declined after the BOJ’s Monetary Policy Statement showed the bank had left monetary policy unchanged. In the press conference after the release of the statement, BOJ Governor Kuroda said that, “As I’ve said before, exchange rate changes are positive for some industries and companies and negative for others, depending on their situation. But as long as the exchange rate reflects economic fundamentals … I don’t think it is bad for the economy.” Also out on Wednesday was the Japanese Trade Balance, which showed a contracting deficit of -0.41T, less than half the -0.95T that was expected. The pair then gained ground on Thursday after a positive U.S. Initial Jobless Claims number. Friday saw the rate consolidate at a slightly lower level in the absence of any significant data out of Japan. USD/JPY went on to close at 118.96, with a gain of +0.2% from its previous weekly close.
Showed little change last week as the BOE’s MPC Meeting Minutes showed a unanimous decision on both interest rates and stimulus at their latest rate decision. Cable began the week declining on Monday in the absence of any significant economic data out of either country. The pair then made its weekly low of 1.5315 on Tuesday after UK CPI came out at +0.3% y/y as widely anticipated. Also, RPI increased +1.1% y/y versus the +1.2% expected and PPI Input declined -3.7% m/m compared to an expected decline of -2.5%. On Wednesday, Cable made its weekly high of 1.5479 after the MPC Meeting Minutes for February showed unanimous votes on both rates and stimulus. Nevertheless, the minutes indicated that possibly 3 members differed in opinion, with one member advocating higher stimulus and a lower interest rate. Also supporting Sterling was the UK Claimant Count Change, which showed a decline of -38.6K, significantly higher than the -25.2K that was expected, and the UK Average Earnings Index, which increased +2.1% 3m/y compared to an expected increase of +1.7%. The rate then came under pressure on Thursday despite UK CBI Industrial Order Expectations printing at 10 compared to an expected reading of 7. Cable extended its losses on Friday after UK Retail Sales declined -0.3% m/m versus an expected decline of -0.1%. GBP/USD closed at 1.5389, with a gain of only 3 pips and virtually unchanged on the week.
Gained ground last week as the RBA Monetary Policy Meeting Minutes outlined some of the reasons for its rate hike at its last meeting and the United States reported mostly lower than expected economic data. The rate started the week consolidating at a slightly lower level after Australian New Motor Vehicle Sales declined -1.5% m/m versus a previous reading of +2.6%. The pair then gained ground on Tuesday after making its weekly low of 0.7740 after the RBA’s Monetary Policy Meeting Minutes warned on the Australian housing market and noted that, “The Australian dollar had depreciated by around 9 per cent against the US dollar since the December meeting. On a trade-weighted basis, the Australian dollar was around 4 per cent below its early 2014 levels, notwithstanding significant falls in commodity prices over the intervening period. The depreciation of the Australian dollar against the US dollar and renminbi had been partly offset by its appreciation against the yen and euro.” The rate then consolidated at a slightly higher level on Wednesday as the FOMC Meeting Minutes came out more dovish than expected. On Thursday, the pair declined a fraction after a better than expected U.S. Initial Jobless Claims number. The rate made its weekly high of 0.7847 on Friday despite a better than expected U.S. Flash Manufacturing PMI number. AUD/USD went on to close at 0.7838, with an overall gain of +1.1% from its previous weekly close.
Gained fractionally last week as both countries reported mostly lower than expected economic data. The week began with the pair consolidating at a slightly higher level on Monday in the absence of any significant numbers out of either country. The pair then made its weekly low of 1.2361 on Tuesday despite Canadian Foreign Securities Purchases showing a decline of -13.55B, significantly worse than the expected increase of +5.35B that was expected. On Wednesday, the pair gained after the FOMC Meeting Minutes and despite Canadian Wholesale Sales, which showed an increase of +2.5% m/m compared to an expected increase of +0.4%. Thursday saw the pair continue higher after a better than expected U.S. employment number. The rate then made its weekly high of 1.2563 after Canadian Retail Sales declined -2.0% m/m versus the -0.3% expected, while Core Retail Sales declined by -2.3% m/m compared to an expected decline of -0.7%. USD/CAD went on to close at 1.2332, with an overall weekly gain of +0.2%.
Continued rallying last week as New Zealand released better than expected economic numbers and with mostly lower than expected data out of the United States. The week began with the rate consolidating at a slightly higher level on Monday after New Zealand Retail Sales increased +1.7% q/q compared to an expected +1.3%, while Core Retail Sales gained +1.5% q/q versus +1.1% expected. The rate continued fractionally higher on Tuesday after making its weekly low of 0.7468 as the New Zealand GDT Price Index increased +10.1% versus a previous reading of +9.4%. The pair then made its weekly high of 0.7572 on Wednesday as the FOMC Meeting Minutes showed a more dovish bias than expected. The rate then declined on Thursday after the United States reported a better than expected Initial Jobless Claims number. On Friday, the pair declined a fraction, which brought NZD/USD to close at 0.7520, with a gain of +1.1% for the week.

The week ahead

AUD The Australian economic calendar is rather quiet this coming week, only featuring Construction Work Done (-0.8%) and the Wage Price Index (0.7%) on Wednesday, and Private Capital Expenditure (-1.3%) on Thursday. Resistance for AUD/USD is seen at 0.7840/80, 0.8024/67 and 0.8105, with support noted at 0.7756, 0.7684/0.7719 and 0.7625/43.

CAD The Canadian economic calendar is characteristically quiet this coming week, only featuring a speech by BOC Governor Poloz on Tuesday, and then Core CPI (0.1%) and CPI (-0.3%) on Thursday. Resistance for USD/CAD is seen at 1.2676, 1.2591 and 1.2563, while support shows at 1.2456, 1.2421 and 1.2351/78.

EUR The Eurozone economic calendar is quite active this coming week, featuring the Targeted LTRO data on Thursday. Monday starts the week’s highlights off with the German Ifo Business Climate survey (107.4), and Tuesday’s key events include Final CPI (-0.6%) and a speech by ECB President Draghi. Wednesday then offers another speech by ECB President Draghi, while Thursday features the GfK German Consumer Climate survey (9.6), the German Unemployment Change (-10K), the EZ M3 Money Supply (3.8%), Private Loans (-0.3%), the tentatively scheduled Italian 10-year Bond Auction (last average yield 1.62%, with a 1.4 bid-to-cover ratio), and the Targeted LTRO (last 129.8B). Friday’s important data then concludes the week with German Preliminary CPI (0.6%), French Consumer Spending (-0.3%), and Spanish Flash CPI (-1.5%). Resistance for EUR/USD is seen at 1.1679, 1.1533, 1.1422/59, with support showing at 1.1359/75, 1.1261/97 and 1.1097/1.1114.

GBP The UK economic calendar is rather busy this coming week, featuring CBI Realized Sales (42) on Monday, Mortgage Approvals (36.2K) on Wednesday, and then Nationwide HPI (26th-28th, 0.3%), Second Estimate GDP (0.5%) and Preliminary Business Investment (2.3%) on Thursday. Resistance to the topside for GBP/USD shows at 1.5422, 1.5479/85 and 1.5540, while support for the pair is expected at 1.5342/51, 1.5222 and 1.5033/1.5101.

JPY The Japanese economic calendar is fairly busy this coming week, featuring the BOJ’s Monetary Policy Meeting Minutes on Sunday, as well as Household Spending (-4.0%), Tokyo Core CPI (2.2%), Preliminary Industrial Production (3.1%) and Retail Sales (-1.1%) on Thursday. Resistance for USD/JPY currently shows up at 119.21, 119.62 and 120.47/82, with support indicated at 118.29/97, 117.17/118.04 and 115.56/89.

NZD The New Zealand economic calendar is somewhat active this coming week, featuring Inflation Expectations (2.1%) on Tuesday, the Trade Balance (-157M) on Wednesday, Building Consents (-2.1%) on Thursday and the ANZ Business Confidence survey (last 30.4) on Friday. The chart for NZD/USD shows resistance at 0.7712, 0.7607/59, and 0.7572. On the downside, technical support is expected at 0.7484/92, 0.7323/0.7430 and 0.7174/0.7213.

USD The U.S. economic calendar is quite active this coming week, featuring GDP data on Friday. Monday starts the week’s highlights off with Existing Home Sales (5.03M), and Tuesday’s key events include CB Consumer Confidence (99.6), testimony by Fed Chair Janet Yellen, and Mortgage Delinquencies (24th-27th, 5.85%). Wednesday then offers more testimony from Fed Chair Janet Yellen, New Home Sales (477K) and Crude Oil Inventories (7.7M), while Thursday features CPI (-0.6%), Core CPI (0.1%), Weekly Initial Jobless Claims (285K), Core Durable Goods Orders (0.6%), and a speech by FOMC Member Lockhart. Friday’s important data then concludes the week with Preliminary GDP (2.1%), Chicago PMI (58.4), Pending Home Sales (2.5%) and the Revised University of Michigan Consumer Sentiment survey (94.2).


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