Weekly Market Watch

Released 13 July 2015 - Weekly Newsletter

Last week recap



Traded higher last week as the Greek referendum returned a NO vote last Sunday. Nevertheless, as the week progressed, developments indicated that Greece would secure a bailout agreement with creditors, while the FOMC Meeting Minutes came out on the dovish side. The week began with the rate gaining after gapping lower on Monday as the results of the Greek referendum returned a No vote with 61.3% of voters voting against austerity measures that would secure a bailout loan. Monday’s economic numbers had German Factory Orders decline by -0.2% m/m versus an expected flat reading, while U.S. ISM Non-Manufacturing PMI printed at 56.0 compared to an expected 56.5. The pair then made its weekly low of 1.0915 on Tuesday as no solution to the Greek situation was arrived at either the Eurogroup meetings or the Euro Summit. At the Eurogroup Meetings, EG President Jeroen Dijsselbloem said that, “It''s up to the Greek government to show how it can agree with its creditors. The pressure is especially on the Greeks, the banks are closed and the situation is difficult.” While at the Euro Summit, French President Hollande said that, “What do we want? For Greece to stay in the euro. To get there, Greece must make serious, credible proposals. We are waiting for them and they have already been announced, they must be fleshed out now. Its the issue for tonight. The onus is on Greece to make some proposals. Its up to Europe to show solidarity by giving them a medium-term outlook, with immediate aid.” Tuesday’s data had the U.S. Trade Balance show a deficit of -41.9B, which was in line with expectations. On Wednesday, the rate gained ground after Greek PM Tsipras sent a letter to the European bailout fund demanding a three year bailout package, the letter stated that, “we trust Member States appreciate the urgency of our loan request at this time given the fragility of our banking system, our shortage of available liquidity, our upcoming obligations, our build-up of internal arrears, and our expressed desire to clear our outstanding arrears with the IMF and the Bank of Greece.” Also supporting the rate were the FOMC’s Meeting Minutes, which noted that, “The Committee concluded that, although it had seen some progress, the conditions warranting an increase in the target range for the federal funds rate had not yet been met, and that additional information on the outlook, particularly for labor markets and inflation, would be necessary before deciding to implement such an increase.” Thursday saw the pair lose a fraction as Greek PM Tsipras finalized the details of the three year bailout. The rate then made its weekly high of 1.1215 on Friday after Greece submitted its proposal to European creditors with a three year bailout loan agreement worth 53.5B. Greece will raise its sales tax to generate revenue of about 1% of GDP and reform its pension system. EUR/USD went on to close at 1.1155, with an overall gain of +0.5% from its previous weekly close. As of this writing, the results of the emergency summit held in Brussels over the weekend show that creditors will not give Greece the massive bailout it needs unless the country commits to deeper economic reforms than it presented. The EU and IMF estimate the country needs between €82B and €86B over the next three years.



Lost a fraction last week as asset flows favoured the Yen over the Greenback and with mostly better than expected economic data out of Japan. The week began with the pair making its weekly high of 122.92 on Monday despite a lower than expected U.S. ISM Non-Manufacturing PMI number. The rate declined on Tuesday as the U.S. Trade Balance came out showing a deficit in line with expectations. On Wednesday, the pair declined sharply, making its weekly low of 120.40 after the Japanese Current Account showed an expanding surplus of +1.64T compared to an expected surplus of +1.39T, while the FOMC Meeting Minutes indicated the Fed might not raise rates as soon as previously forecast. The rate then reversed direction, trading higher on Thursday despite Japanese Core Machinery Orders, which increased +0.6% m/m, significantly better than the expected decline of -4.8%. The pair continued higher on Friday in the absence of any significant data out of either country. USD/JPY closed at 122.69, down 13 pips or -0.1% overall on the week.


Declined fractionally last week as the BOE left rates unchanged and the FOMC indicated it was unclear as to when it would begin to raise U.S. rates. Cable started the week by making its weekly high of 1.5627 on Monday after a lower than expected U.S. ISM Non-Manufacturing PMI reading. The pair then declined on Tuesday after UK Manufacturing Production declined -0.6% m/m versus an expected increase of +0.1%. On Wednesday, Cable made its weekly low of 1.5329 despite UK Halifax HPI, which increased +1.7% m/m and after the UK Annual Budget Release announced that, “From April 2016, a new National Living Wage of £7.20 an hour for the over 25s will be introduced. This will rise to over £9 an hour by 2020. The deficit will be reduced by around 1% of GDP (the value of the economy as a whole) on average in each year, which is the same pace as over the last 5 years.” The pair then consolidated at a slightly higher level on Thursday after the BOE left its benchmark Official Bank Rate at 0.50% and the Asset Purchase Facility at 375B as widely anticipated. The Bank issued a short statement with the rate release, which noted, “At its meeting today, the committee noted that the incoming data over the past couple of months had been broadly consistent with the central outlook for output growth and inflation contained in the May [inflation] report. The significant upward movement in market interest rates would, however, weigh on that outlook; in the committees view, the implied rise in the expected future path of Bank rate was not warranted by the recent developments in the domestic economy”. Cable rallied on Friday after the UK Trade Balance showed a contracting deficit of -8.0B compared to an expected deficit of -9.7B with the previous number downwardly revised to -9.4B from -8.6B. GBP/USD went on to close at 1.5508, with a decline of -0.3% for the week.



Continued selling off last week as the RBA left rates unchanged and the FOMC indicated uncertainty for the timing of U.S. rate hikes. The pair began the week making its weekly high of 0.7531 on Monday after Australian ANZ Job Advertisements increased +1.3% m/m compared to a previous reading of +0.1%. The rate then fell on Tuesday after the RBA left its benchmark Cash Rate at 2.0% as widely anticipated. In his Statement following the rate release, Governor Stevens noted that, “The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices. The Board today judged that leaving the cash rate unchanged was appropriate at this meeting. Information on economic and financial conditions to be received over the period ahead will inform the Boards assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.” On Wednesday, the pair made its weekly low of 0.7371 despite a dovish FOMC Meeting Minutes. The rate recovered on Thursday, gaining ground after Australian Employment Change showed an increase of +7.3K compared to an expected decline of -2.1K, while the Australian Unemployment Rate remained at 6% compared to an expected rise to 6.1%. The pair then lost ground on Friday after Australian Home Loans declined -6.1% m/m versus -3.3% expected. AUD/USD closed at 0.7437, with an overall loss of -1.0% from its previous weekly close.


Extended its gains last week as asset flows favoured the Greenback over the Loonie with mixed economic numbers from both countries. The rate began the week making its weekly low of 1.2562 on Monday after Canadian Ivey PMI printed at 55.9, in line with expectations. The pair continued gaining on Tuesday, making its weekly high of 1.2778 after the Canadian Trade Balance showed a deficit of -3.3B versus -2.6B anticipated. On Wednesday, the rate extended its gains after Canadian Building Permits declined -14.5% m/m, almost triple the anticipated decline of -5.2% that was expected. Thursday saw the pair decline after Canadian NHPI increased +0.2% m/m compared to an expected +0.1%. The rate continued lower on Friday after Canadian Employment Change declined -6.4K versus -9.0K expected, while the Canadian Unemployment Rate remained steady at 6.8%. USD/CAD went on to close at 1.2662, with a gain of +0.8% for the week.



Reversed direction, gaining a fraction last week as the FOMC released a dovish Meeting Minutes and with very little economic data out of New Zealand. The week began with the pair consolidating at a slightly higher level on Monday after New Zealand NZIER Business Confidence printed at 5 versus a previous reading of 23. The rate then made its weekly low of 0.6618 on Tuesday after the U.S. Trade Balance came out in line with expectations. On Wednesday, the pair gained sharply after the FOMC Meeting Minutes indicated uncertainty as to when the Fed will begin raising rates. The rate continued higher on Thursday after higher than expected U.S. Initial Jobless Claims. The pair then made its weekly high of 0.6769 on Friday in the absence of any significant economic data out of either country. NZD/USD closed at 0.6711, with an overall gain of +0.5% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is rather quiet this coming week, only featuring the NAB Business Confidence survey (last 7) on Tuesday; the Westpac Consumer Sentiment survey (last -6.9%) on Wednesday; the MI Inflation Expectations survey (last 3.0%) and the NAB Quarterly Business Confidence survey (last 2) on Thursday. Resistance for AUD/USD is seen at 0.7737/92, 0.7532/0.7682 and 0.7495, with support noted at 0.7371, 0.7271 and 0.7016.

CAD The Canadian economic calendar is busier than usual this coming week, featuring the BOC’s Overnight Rate Decision on Wednesday. Monday and Tuesday are quiet, so Wednesday starts the week’s highlights off with Manufacturing Sales (0.4%), the BOC Monetary Policy Report, the BOC Rate Statement, the BOC’s Overnight Rate Decision (unchanged at 0.75%) and the BOC Press Conference. Thursday’s key events then include Foreign Securities Purchases (10.23B), while Friday’s important data concludes the week with Core CPI (-0.1%) and CPI (0.2%). Resistance for USD/CAD is seen at 1.2822/34 and 1.2778/83, while support shows at 1.2632/65, 1.2537/1.2562 and 1.2387/1.2422.

EUR The Eurozone economic calendar is also rather busy this coming week, featuring the Eurogroup Meetings on Sunday and Monday. Sunday starts the week’s highlights off with the Eurogroup Meetings and the Euro Summit, and Monday features the Eurogroup Meeting’s second day. Tuesday is a French Bank Holiday and its key events include the German ZEW Economic Sentiment survey (30.6), the EZ ZEW Economic Sentiment survey (51.1) and the ECOFIN Meetings. Wednesday offers little of note, while Thursday features EZ Final CPI (0.2%), the ECB’s Minimum Bid Rate Decision (0.05%) and the ECB Press Conference. That concludes the week’s important events since Friday offers nothing of note. Resistance for EUR/USD is seen at 1.1379/91, 1.1207/89 and 1.1150, with support showing at 1.1035/1.1124, 1.0954/69, 1.0818/99 and 1.0712.

GBP The New Zealand economic calendar is also quiet this coming week, only featuring the tentatively scheduled GDT Price Index (-5.9%), the Business NZ Manufacturing Index (51.5) and CPI (0.5%) on Wednesday. The chart for NZD/USD shows resistance at 0.6922/41, 0.6805/77 and 0.6769. On the downside, technical support is expected at 0.6639/81, 0.6618 and 0.6557/71.

JPY The Japanese economic calendar is very quiet this coming week, only featuring the tentatively scheduled Monetary Policy Statement and BOJ Press Conference on Wednesday. Resistance for USD/JPY currently shows up at 124.14/45, 123.85 and 122.87, with support indicated at 122.45/47, 121.93/122.02 and 120.41/84.

NZD The New Zealand economic calendar is also quiet this coming week, only featuring the tentatively scheduled GDT Price Index (-5.9%), the Business NZ Manufacturing Index (51.5) and CPI (0.5%) on Wednesday. The chart for NZD/USD shows resistance at 0.6922/41, 0.6805/77 and 0.6769. On the downside, technical support is expected at 0.6639/81, 0.6618 and 0.6557/71.

USD The U.S. economic calendar is very busy this coming week, featuring Retail Sales data on Tuesday. Monday is quiet, so Tuesday starts the week’s highlights off with Core Retail Sales (0.7%), Retail Sales (0.4%), Import Prices (0.3%) and Business Inventories (0.2%). Wednesday’s key events then include PPI (0.2%), Core PPI (0.1%), the Empire State Manufacturing Index (3.4), the Capacity Utilization Rate (78.2%), Industrial Production (0.2%), testimony by Fed Chair Yellen, Crude Oil Inventories (last 0.4M) and a speech by FOMC Member Williams. Thursday offers Weekly Initial Jobless Claims (282K), more testimony by Fed Chair Yellen, the Philly Fed Manufacturing Index (12.1), and the NAHB Housing Market Index (59). Friday’s important data then concludes the week with Building Permits (1.11M), CPI (0.3%), Core CPI (0.2%), Housing Starts (1.09M), the Preliminary University of Michigan Consumer Sentiment survey (96.7) and a speech by FOMC Member Fischer.


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