Weekly Market Watch

Released 17 August 2015 - Weekly Newsletter

Last week recap

Gained ground last week as the Greenback and commodity currencies were negatively affected by the Chinese Yuan devaluation, while the Euro and Sterling ended the week as the strongest major currencies. The week began with the rate rallying after making its weekly low of 1.0925 on Monday after comments from the Fed’s Stanley Fischer, saying that, “Employment has been rising pretty fast relative to previous performance, and yet inflation is very low, and the concern about this situation is not to move before we see inflation, as well as employment, returning to more normal levels.” The pair extended its gains on Tuesday after the Chinese PBOC cut the reference rate for the Yuan by -1.90%. Economic data had Eurozone ZEW Economic Sentiment printed at 47.6 compared to an expected 43.9; nevertheless, German ZEW Economic Sentiment showed a reading of 25.0 versus an expected 31.7. Also out was U.S. Preliminary Unit Labor Costs, which increased +0.5% q/q compared to an expected flat reading with the previous number significantly revised up from +5.0% to +6.7%. On Wednesday, the rate made its weekly high of 1.1213 after the New York Fed’s William Dudley stated that, “What is going on in China has…very significant implications for commodity prices,” and that, “I am going to leave currency policy to the Chinese. In fact, I am going to leave dollar policy to the U.S. Treasury.” About the timing of a Fed Rate hike he said, “I am not going to tell you when, but we are certainly getting nearer to that point.” Wednesday’s data had U.S. JOLTS Job Openings come in at 5.25M compared to 5.33M expected. Thursday saw the rate consolidate after the ECB Monetary Policy Meeting Accounts noted that, “Finally, with regard to developments in international markets, following the agreement on Greece on 13 July the focus had seemed to be shifting towards China and the United States.” Economic data had U.S. Core Retail Sales increase +0.4% as widely anticipated, while Retail Sales increased +0.6%, also in line with expectations. The pair then lost ground on Friday as traders squared positions and after news that the Greek Parliament had approved the new bailout program. Greek PM Tsipras stated that, “I do not regret my decision to compromise; we undertook the responsibility to stay alive over choosing suicide.” Friday’s economic numbers included German Preliminary GDP, which increased +0.4% q/q versus +0.5% expected, while U.S. PPI increased +0.2% m/m versus +0.1% expected and the Preliminary University of Michigan Consumer Sentiment survey showed a disappointing reading of 92.9 versus the 93.5 anticipated. EUR/USD closed at 1.1110, posting an overall gain of +1.3% for the week.
Showed little change last week as the BOJ’s Monetary Policy Meeting Minutes left monetary policy unchanged with mixed economic data out of both countries. The rate began the week on a positive note, gaining on Monday after the Japanese Current Account showed a surplus of +1.30T versus an expected surplus of +1.41T. The rate extended its gains on Tuesday after better than expected U.S. Preliminary Unit Labor Costs data. On Wednesday, the pair dropped sharply, making both its weekly high of 125.27 and its weekly low of 123.78 after the BOJ’s Monetary Policy Meeting Minutes showed no change in the bank’s monetary policy, stating that, “Bond, stock, and foreign exchange markets had temporarily shown somewhat volatile movements in response to developments in political and economic conditions in Greece and large fluctuations in the Chinese stock market. Specifically, yields on 10-year JGBs had temporarily declined, mainly reflecting a drop in long-term interest rates overseas against the background of uncertainty about political and economic conditions in Greece.” The rate then recovered on Thursday after Japanese Core Machinery Orders declined -7.9% m/m compared to an expected decline of -5.3%. Friday saw the pair lose some ground despite better than expected U.S. PPI and consumer sentiment data. USD/JPY closed the week at 124.29, with a gain of just 8 pips overall and virtually unchanged on the week.
Gained last week as the Greenback was pressured by the Yuan devaluation and the UK reported better than expected employment data. Cable began the week gaining sharply after making its weekly low of 1.5457 on Monday as comments from FOMC members Fischer and Lockhart indicated the expected Fed September rate hike was still not decided upon. The rate then consolidated at a slightly lower level on Tuesday after better than expected U.S. Labor Costs and Nonfarm Productivity numbers. On Wednesday, Cable resumed its rally, making its weekly high of 1.5659 after UK Claimant Count Change declined by -4.9K, significantly better than the expected increase of +1.4K that was expected, while the UK Unemployment Rate held steady at 5.6%. Nevertheless, the UK Average Earnings Index increased +2.4% 3m/y versus +2.8% anticipated. Thursday saw the rate consolidate after U.S. Retail Sales data was in line with expectations. The rate continued higher on Friday despite better than expected U.S. economic numbers. GBP/USD went on to close at 1.5645, with an overall gain of +1.0% from its previous weekly close.
Reversed direction last week, selling off after the Chinese Yuan devaluation and continued weakness in the commodities markets. The rate began the week consolidating on Monday after comments from FOMC members Fischer and Lockhart. The pair then declined sharply on Tuesday after making its weekly high of 0.7438 after news that the PBOC had lowered the reference rate for the Yuan by -1.9%, China is Australia’s largest trading partner. Also pressuring the rate on Tuesday was Australian NAB Business Confidence, which printed at 4 versus a previous reading of 8, downwardly revised from 10. On Wednesday, the pair made its weekly low of 0.7214 before gaining sharply after speculation that the Fed might delay a September rate hike in light of the Yuan’s devaluation. Also supporting the rate on Wednesday was Australian Westpac Consumer Sentiment, which increased to +7.8% versus a previous reading of -3.2%, and the Wage Price Index, gaining +0.6% q/q as widely anticipated. The pair then lost a fraction on Thursday despite Australian MI Inflation Expectations printing at +3.7% versus a previous reading of +3.4%. Friday saw the rate consolidate at a slightly higher level after comments from RBA Assistant Governor Kent, who said that, “The Australian economy has been growing at a moderate pace since commodity prices peaked around four years ago. While mining investment has declined substantially since then and has further to fall, resource exports have grown strongly and are expected to do so for some time.” AUD/USD went on to close at 0.7317, with an overall weekly loss of -1.3%.
Lost a fraction last week as asset flows favoured the Loonie over the Greenback after the Chinese Yuan devaluation, and despite lower oil and commodity prices. The week began with the rate declining sharply on Monday after dovish comments from FOMC members Fischer and Lockhart. The pair then gained on Tuesday after positive U.S. Unit Labor Costs and Nonfarm Productivity numbers. On Wednesday, the rate declined sharply after news of the Chinese Yuan devaluation put significant pressure on the Greenback. The pair then gained on Thursday despite Canadian NHPI, which increased +0.3% m/m versus +0.1% expected. Friday saw the pair extend its gains after Canadian Manufacturing Sales increased by only +1.2% m/m compared to an expected +2.3% rise. USD/CAD closed at 1.3094, declining -0.3% for the week.
Reversed direction, declining last week as the effects of the Chinese Yuan devaluation pressured the Kiwi due to China being New Zealand’s largest trading partner. The week began with the pair consolidating on Monday after dovish comments from two FOMC members. The rate then declined on Tuesday after better than expected U.S. economic numbers. On Wednesday, the pair gained after making both its weekly low of 0.6466 and its weekly high of 0.6643 after news broke that the Chinese Yuan had been devalued. The rate then lost ground on Thursday after New Zealand Retail Sales increased +0.1% m/m compared to +0.5% expected and Core Retail Sales, also gaining +0.1% m/m versus a consensus of +0.7%. The pair continued lower on Friday after better than expected U.S. PPI and Industrial Production numbers. NZD/USD closed at 0.6531, showing a loss of -1.3% for the week.

The week ahead

AUD The Australian economic calendar is very quiet this coming week, only featuring the release of the RBA’s Monetary Policy Meeting Minutes on Tuesday. Resistance for AUD/USD is seen at 0.7532/0.7682, 0.7438/95 and 0.7418/27, with support noted at 0.7348/71, 0.7215/71 and 0.7016.

CAD The Canadian economic calendar is busier than usual this coming week, featuring CPI data on Friday. Monday starts the week’s highlights off with Foreign Securities Purchases (-5.95B), while Tuesday and Wednesday offer nothing notable. Thursday’s key events then include Wholesale Sales (0.2%), and Friday’s important data concludes the week with Core CPI (0.0%), Core Retail Sales (0.6%), CPI (0.1%), and Retail Sales (0.3%). Resistance for USD/CAD is seen at 1.3305, 1.3212/60 and 1.3093/1.3102, while support shows at 1.3006/62, 1.2915/51 and 1.2859.

EUR The Eurozone economic calendar is quieter than usual this coming week, only featuring French Flash Manufacturing PMI (last 49.6), French Flash Services PMI (last 52.0), German Flash Manufacturing PMI (last 51.8), German Flash Services PMI (last 53.8), EZ Flash Manufacturing PMI (last 52.4) and EZ Flash Services PMI (54.0), which are all due out on Friday. Resistance for EUR/USD is seen at 1.1436/66, 1.1207/89 and 1.1128/50, with support showing at 1.1017/48, 1.0954/69 and 1.0808/92.

GBP The UK economic calendar is a bit busier this coming week, featuring CPI (0.0%), PPI Input (-1.3%) and RPI (0.9%) on Tuesday; Retail Sales (0.2%) on Thursday; and Public Sector Net Borrowing (-2.3B) on Friday. Resistance to the topside for GBP/USD shows at 1.5659/97, 1.5766/1.5814 and 1.5909/29, while support for the pair is expected at 1.5530/97, 1.5424/66 and 1.5315/51.

JPY The Japanese economic calendar is a bit more active this coming week, featuring Preliminary GDP (-0.5%) on Monday; the Trade Balance (-0.16T) on Wednesday; and then the tentatively scheduled BOJ Monetary Policy Statement and BOJ Press Conference on Thursday. Resistance for USD/JPY currently shows up at 125.67/85, 125.05/06 and 124.47/57, with support indicated at 123.56/124.14, 122.45/123.00 and 121.93/122.02.

NZD The New Zealand economic calendar is also peaceful this coming week, only featuring the tentatively scheduled GDT Price Index (last -9.3%) and PPI Input (-0.5%) on Tuesday. The chart for NZD/USD shows resistance at 0.6736/69, 0.6618/93 and 0.6557/71. On the downside, technical support is expected at 0.6442/96 and 0.5926/91.

USD The U.S. economic calendar is moderately active this coming week, featuring the FOMC Meeting Minutes on Wednesday. Monday starts the week’s highlights off with the Empire State Manufacturing Index (5.0), and Tuesday’s key events include Building Permits (1.21M) and Housing Starts (1.20M). Wednesday then offers CPI (0.2%), Core CPI (0.2%), Crude Oil Inventories (last -1.7M), and the FOMC Meeting Minutes. Thursday features a speech by FOMC Member Williams, Weekly Initial Jobless Claims (272K), the Philly Fed Manufacturing Index (7.2), and Existing Home Sales (5.45M). Friday’s important data then concludes the week with Flash Manufacturing PMI (53.5).


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