Weekly Market Watch

Released 10 August 2015 - Weekly Newsletter

Last week recap

Declined fractionally last week as the United States reported a slightly lower than expected Non-Farm Payrolls number with both economies reporting mixed economic data. The rate began the week on a soft note, declining from its weekly high of 1.0995 on Monday after Spanish Manufacturing PMI printed at 53.6 versus 54.2 expected, while U.S. ISM Manufacturing PMI printed at 52.7 compared to an expected reading of 53.6. The pair continued lower on Tuesday despite Spanish Unemployment Change, which declined -74.0K compared to an expected -45.6K. U.S. data included an increase in Factory Orders of +1.8% m/m, which was widely anticipated. On Wednesday, the rate consolidated at a slightly higher level after U.S. ADP Non-Farm Employment Change increased +185K compared to an expected +216K, also, the U.S. Trade Balance showed a deficit of -43.8B versus an expected -42.8B and ISM Non-Manufacturing PMI, which printed at 60.3 versus 56.3 anticipated. The pair extended its gains on Thursday after German Factory Orders increased +2.0%, significantly higher than the expected reading of +0.4% Also on Thursday, a European Commission Spokesperson reiterated President Jean Paul Juncker’s statement that bailout negotiations with Greece are progressing and that “an agreement this month, preferably August 20, is possible.” The rate then made its weekly low of 1.0854 on Friday before trading higher after U.S. Non-Farm Payrolls showed +215K new jobs in July compared to an expected +222K with the previous number upwardly revised from +223K to +231K, while the U.S. Unemployment Rate held steady at 5.3%. Also out were U.S. Average Hourly Earnings, which increased +0.2% m/m as widely expected. EUR/USD went on to close at 1.0962, with an overall loss of -0.3% from its previous weekly close.
Gained ground last week as the BOJ left the policy rate and stimulus measures unchanged, with mixed numbers out of both countries. The week began with the pair consolidating at a slightly higher level on Monday after Japanese Final Manufacturing PMI printed at 51.2 as was widely expected. The rate continued gaining on Tuesday after making its weekly low of 123.79 as Japanese Average Cash Earnings declined -2.4% y/y compared to an expected increase of +0.9%. On Wednesday, the pair extended its gains after mixed U.S. economic data. The rate then declined on Thursday after Japanese Leading Indicators printed at 107.2% compared to 106.9% expected. The pair made its weekly high of 125.06 on Friday before declining after a lower than expected U.S. NFP number and the BOJ’s Monetary Policy Statement, which left rates and stimulus measures unchanged. After the release, BOJ Governor Kuroda said in a press conference that, “A weak yen is positive for exports and companies operating globally ... On the other hand; it hurts households and small firms via rising import costs. As agreed among G7 nations, exchange rates should move in a way reflecting economic fundamentals. If they are moving so, it should be positive for the economy. My remarks in parliament (last month) never talked about specific dollar/yen levels.” USD/JPY went on to close at 124.21, with a gain of +0.3% for the week.
Lost a fraction last week as the BOE released its meeting minutes, quarterly inflation report and a policy statement all at once for the first time on Thursday. Cable began the week on a soft note, declining a fraction after UK Manufacturing PMI printed at 51.9, in line with expectations. The rate continued lower on Tuesday after UK Construction PMI showed a reading of 57.1 versus 58.6 anticipated. Wednesday saw Cable make its weekly high of 1.5650 after a lower than expected U.S. ADP Non-Farm Employment Change number and despite UK Services PMI printing at 57.4 versus an expected reading of 58.1. The pair then declined sharply on Thursday after the BOE MPC Meeting Minutes showed that Ian McCafferty was the sole dissenter on the 8-1 interest rate vote with a unanimous vote leaving the Asset Purchase Facility at 375B. In addition to the minutes, the bank also released its quarterly Inflation Report, which said that UK inflation will average only 0.3% in 2015 versus a previous estimate of 0.6% in May. The BOE now expects inflation to accelerate to 1.5% in 2016. After the releases, BOE Governor Carney said that, “There's no question the persistent strength of sterling is having an influence on policy, and its one of the factors, but it has to persist. We will take it into account. But even taking it into account, the strength of sterling, and even taking into account the fiscal consolidation that were going to see over the coming years and the weakness in global demand, we see robust private sector growth here and consistent with that is a need to begin to increase interest rates.” Cable extended its losses on Friday, making its weekly low of 1.5423 despite a lower U.S. NFP number and after the UK Trade Balance showed a deficit of -9.2B, which was in line with expectations. GBP/USD closed at 1.5489, with an overall loss of -0.2% for the week.
Extended its previous week’s gains last week as the RBA left rates unchanged and Australia reported mostly better than expected economic data. The rate began the week making it weekly low of 0.7259 on Monday after Australian ANZ Job Advertisements declined -0.4% m/m versus a previous reading of +1.2%. The pair then gained sharply on Tuesday after the RBA left its benchmark Cash Rate unchanged at 2.0%. The rate statement noted that, “In Australia, the available information suggests that the economy has continued to grow. While the rate of growth has been somewhat below longer-term averages, it has been associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year.” Also out on Tuesday were the Australian Trade Balance, which showed a deficit of -2.93B compared to an expected -3.06B, and Australian Retail Sales, which increased +0.7% m/m versus +0.5% expected. On Wednesday, the rate declined after mixed U.S. employment and trade data. The pair then consolidated on Thursday after Australian Employment Change increased to +38.5K compared to an expected +10.2K, nevertheless, the Australian Unemployment Rate increased to 6.3% from 6.1%. The rate then resumed its rally on Friday after the RBA’s Monetary Policy Statement noted that, “Moreover, there are increasing signs that the depreciation of the exchange rate is providing additional support to demand for domestically produced goods and services, which should in time lead to more investment.” Also out were Australian Home Loans, which increased +4.4% m/m versus +5.2% expected. AUD/USD closed at 0.7417, with an overall gain of +1.6% from its previous weekly close.
Continued its rally last week as oil prices supported the rate and despite better than expected economic numbers from Canada. The rate began the week on a positive note, increasing despite a lower than expected U.S. ISM Manufacturing PMI number. The pair continued gaining on Tuesday as U.S. Factory Orders were in line with the consensus. On Wednesday, the rate made its weekly high of 1.3212 despite the Canadian Trade Balance showing a deficit of -0.5B compared to an expected deficit of -2.8B. The pair then traded lower on Thursday in the absence of any significant data out of Canada. Friday saw the rate make its weekly low of 1.3047 after a lower than expected U.S. NFP number and Canadian Building Permits, which increased +14.8% m/m, significantly higher than the +5.1% that was expected, also, Canadian Employment Change, which came out at +6.6K compared with a consensus of +5.3K, while the Canadian Unemployment Rate held steady at 6.8%. USD/CAD went on to close at 1.3132, with a gain of +0.3% for the week.
Continued its rally last week as asset flows favoured the Kiwi over the Greenback and with mixed economic numbers out of both countries. The week began with the rate declining on Monday despite lower than expected U.S. economic data. The pair continued heading south on Tuesday after the New Zealand GDT Price Index declined -9.3% versus a previous reading of -10.7%, also out was NZ Employment Change, which increased +0.3% q/q versus consensus of +0.5%, while the NZ Unemployment Rate gained a notch to 5.9% from 5.8%. The rate then made its weekly low of 0.6489 on Wednesday after mixed economic data out of the United States. On Thursday, the pair began gaining despite U.S. Initial Jobless Claims which were in line with expectations. The rate then made its weekly high of 0.6635 on Friday after a lower than expected U.S. NFP number. NZD/USD closed at 0.6619, with an overall weekly gain of +0.5%.

The week ahead

AUD The Australian economic calendar is fairly active this coming week, featuring NAB Business Confidence data (last 10) that starts the week off on Tuesday. Wednesday then offers the Westpac Consumer Sentiment survey (last -3.2%), the Wage Price Index (0.6%) and a speech by RBA Deputy Governor Lowe. Thursday features MI Inflation Expectations (last 3.4%) and a speech by RBA Assistant Governor Kent, which concludes the week’s highlights since Friday is quiet. Resistance for AUD/USD is seen at 0.7532/0.7682, 0.7448/95 and 0.7418/27, with support noted at 0.7348/71, 0.7233/71 and 0.7016.

CAD The Canadian economic calendar is quiet this coming week, only featuring the NHPI (0.3%) on Thursday and Manufacturing Sales (2.1%) on Friday. Resistance for USD/CAD is seen at 1.3305, 1.3260 and 1.3212, while support shows at 1.3093/1.3102, 1.3006/62 and 1.2915.

EUR The Eurozone economic calendar is less active than usual this coming week, featuring German Preliminary GDP data on Friday. Monday is quiet, so Tuesday starts the week’s highlights off with the German ZEW Economic Sentiment survey (31.1) and the EZ ZEW Economic Sentiment survey (43.9). Wednesday offers little of note, while Thursday features the ECB Monetary Policy Meeting Accounts. Friday’s important data then concludes the week with German Preliminary GDP (0.5%), EZ Final CPI (0.2%) and Flash GDP (0.4%). Resistance for EUR/USD is seen at 1.1436/66, 1.1207/89 and 1.1017/1.1150, with support showing at 1.0954/69, 1.0808/92 and 1.0712.

GBP The UK economic calendar is quiet this coming week, only featuring the Average Earnings Index (2.8%), the Claimant Count Change (1.4K) and the Unemployment Rate (5.6%) due out on Wednesday. Resistance to the topside for GBP/USD shows at 1.5530/97, 1.5666/97 and 1.5766/1.5814, while support for the pair is expected at 1.5424/66, 1.5315/51 and 1.5220/35.

JPY The Japanese economic calendar is peaceful this coming week, only featuring the Current Account (1.41T) on Monday; the BOJ’s Monetary Policy Meeting Minutes on Wednesday, and Core Machinery Orders (-4.9%) on Thursday. Resistance for USD/JPY currently shows up at 125.67/85, 125.05/06 and 124.14/57, with support indicated at 123.56/85, 122.45/123.00 and 121.93/122.02.

NZD The New Zealand economic calendar is peaceful this coming week, only featuring Retail Sales (0.5%) and Core Retail Sales (0.7%) data on Thursday. The chart for NZD/USD shows resistance at 0.6813, 0.6736/69 and 0.6618/93. On the downside, technical support is expected at 0.6557/71, 0.6442/96 and 0.5926/91.

USD The U.S. economic calendar is unusually busy this coming week, featuring Retail Sales data on Tuesday. Monday starts the week’s highlights off with speeches by FOMC Members Fischer and Lockhart, and Tuesday’s key events include Preliminary Nonfarm Productivity (1.6%), Preliminary Unit Labor Costs (-0.1%) and Mortgage Delinquencies (11th-13th August , last 5.54%). Wednesday then offers JOLTS Job Openings (5.42M) and Crude Oil Inventories (last -4.4M), while Thursday features Core Retail Sales (0.5%), Retail Sales (0.5%), Weekly Initial Jobless Claims (272K), and Import Prices (-1.0%). Friday’s important data then concludes the week with PPI (0.1%), Core PPI (0.1%), the Capacity Utilization Rate (78.0%), Industrial Production (0.3%) and the Preliminary University of Michigan Consumer Sentiment survey (93.5).


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