Weekly Market Watch

Released 24 August 2015 - Weekly Newsletter

Last week recap

Extended its previous week’s gains last week as the world economic situation — which began with China’s Yuan devaluation and subsequent stock market crash — and the FOMC Meeting Minutes further reduced the possibility of a September rate hike by the Fed. The rate began the week on a soft note, declining on Monday despite the U.S. Empire State Manufacturing Index, which declined -14.9, significantly worse than the expected increase of +5.0 that was expected. The pair made its weekly low of 1.1016 on Tuesday after unofficial reports that the Greek government was to announce a confidence vote, which could raise uncertainty on the bailout deal with international creditors. Tuesday’s data had U.S. Building Permits increase an annualized +1.12M compared to an expected +1.23M, while Housing Starts increased +1.21M versus +1.19M anticipated. On Wednesday, the rate gained sharply after the FOMC Meeting Minutes indicated that a September rate hike was becoming more unlikely, the minutes noted that, “some participants expressed the view that the incoming information had not yet provided grounds for reasonable confidence that inflation would move back to 2 percent over the medium term and that the inflation outlook thus might not soon meet one of the conditions established by the Committee for initiating a firming of policy.” Also supporting the rate was U.S. CPI and Core CPI, with both increasing +0.1% m/m compared to an expected +0.2% increase for each. The pair continued sharply higher on Thursday after news that Eurozone finance minister had signed off on the €86B bailout deal for Greece, which obtained the first portion of the bailout after repaying €3.4B to the ECB. Thursday’s numbers had U.S. Initial Jobless Claims rise to 277K versus 272k expected, while Existing Home Sales increased to +5.59M versus +5.45M expected and the Philly Fed Manufacturing Index, which printed at 8.3 compared to 6.9 anticipated. Friday saw the pair continue sharply higher, making its weekly high of 1.1387 after news that Greek Prime Minister Alex Tsipras would be stepping down, which could lead to a snap election in Greece, possibly as soon as September 20th. Friday’s economic data had German Flash Manufacturing PMI print at 53.2 versus 51.7 expected; however French Flash Manufacturing PMI showed a reading of 48.6 versus an anticipated print of 49.8. EUR/USD closed at 1.1384, with an overall gain of +2.4% from its previous weekly close.
Lost ground last week as asset flows favoured the Yen over the Greenback with both countries reporting mixed economic numbers. The week began on a quiet note, with the pair making its weekly high of 124.57 on Monday after Japanese Preliminary GDP declined -0.4% q/q versus an expected decline of -0.5%, while the Preliminary GDP Price Index rose +1.6% compared to an expected increase of +2.2%. The rate then consolidated at a slightly lower level on Tuesday after mixed U.S. housing data. On Wednesday, the pair declined sharply after a dovish FOMC Meeting Minutes and despite the Japanese Trade Balance showing a deficit of -0.37T versus -0.16T anticipated. The rate extended its losses on Thursday despite better than expected U.S. Existing Home Sales and Manufacturing data. The pair then made its weekly low of 121.81 on Friday after Japanese Flash Manufacturing PMI printed at 51.9, just slightly lower than the 52.1 print that was expected. USD/JPY went on to close at 122.06, with an overall loss of -1.8% for the week.
Extended its previous week’s gains, gaining a fraction last week as expectations for a BOE rate hike decreased, while both countries reported mixed economic numbers. The week began with Cable declining on Monday after an article printed in the UK Telegraph by MPC member Kristin Forbes, in which she wrote, “Maintaining interest rates at the current low levels during an expansion risks creating distortions. Therefore, interest rates will need to be increased well before inflation hits our 2pc target. Waiting too long would risk undermining the recovery—especially if interest rates then need to be increased faster than the gradual path which we expect.” The pair then made its weekly low of 1.5561 before gaining sharply after UK CPI increased +0.1% y/y versus an expected flat reading, also, PPI Input declined -0.9% m/m versus an expected decline of -1.8% and RPI, which increased +1.0% y/y as widely anticipated. Cable continued higher on Wednesday after lower than expected U.S. CPI data and a dovish FOMC Meeting Minutes. Thursday saw the rate gain a fraction despite UK Retail Sales, which increased +0.1% m/m compared to an expected +0.4% and positive U.S. housing and manufacturing data. Cable then made its weekly high of 1.5722 on Friday after UK Public Sector Net Borrowing declined by -2.1B, in line with expectations. GBP/USD closed at 1.5687, with an overall weekly gain of +0.3%.
Extended its previous week’s losses as China’s woes and lower oil prices put pressure on the rate. The week began with the pair consolidating after making its weekly high of 0.7388 on Monday after a lower than expected U.S. manufacturing number. The rate then declined on Tuesday after the RBA’s Monetary Policy Meeting Minutes stated, “Members noted that an accommodative monetary policy setting remained appropriate given the forecasts, while observing that the Australian economy had been adjusting to the shift in activity in the resources sector from the investment to the production phase. This shift had been accompanied by significant declines in key commodity prices and was being assisted by the depreciation of the exchange rate over recent months.” On Wednesday, the pair gained a fraction after a dovish FOMC Meeting Minutes and lower than expected U.S. CPI data. The rate then resumed selling off on Thursday, making its weekly low of 0.7284 after better than expected U.S. housing and manufacturing data. The rate extended its losses on Friday after the price of crude oil traded below the $40 per barrel handle and the Chinese Caixin PMI Manufacturing Index printed at its lowest level since March of 2009. AUD/USD closed at 0.7307, with an overall loss of -0.9% for the week.
Gained ground last week as the price of oil traded below the $40 per barrel handle and despite mostly better than expected economic numbers out of Canada. The week began with the pair consolidating on Monday after Canadian Foreign Securities Purchases increased to +8.51B, significantly higher than the decline of -5.95B that was expected. The rate then declined on Tuesday after mixed U.S. housing data. On Wednesday, the pair gained after making its weekly low of 1.3023 despite lower than expected U.S. CPI numbers and a dovish FOMC Meeting Minutes. Thursday saw the rate decline after Canadian Wholesale Sales increased +1.3% m/m compared to an expected increase of +1.0%. The pair then made its weekly high of 1.3192 on Friday despite Canadian Core Retail Sales increasing +0.8% m/m versus +0.6% expected, while Retail Sales increased +0.6% m/m versus +0.2% anticipated. Also out was Canadian CPI, which increased +0.1% m/m as widely anticipated, while Core CPI came out with a flat reading, also as widely expected. USD/CAD closed at 1.3180, with an overall weekly gain of +0.7%.
Gained ground last week as asset flows favoured the Kiwi over the Greenback and with mostly better than expected economic data out of New Zealand. The week began with the pair gaining after making its weekly low of 0.6526 on Monday as the United States reported a lower than expected manufacturing number. The rate continued gaining on Tuesday after the New Zealand GDT Price Index increased +14.8%, significantly higher than the last print of -9.3%. Also out was NZ PPI Input, which declined -0.3% q/q versus -0.5% expected, while PPI Output declined -0.2% as widely anticipated. On Wednesday, the pair consolidated at a slightly higher level after lower than expected U.S. CPI data and a dovish FOMC Meeting Minutes. Thursday saw the rate continue rallying despite better than expected U.S. manufacturing and Existing Home Sales numbers. The pair then made its weekly high of 0.6706 on Friday after New Zealand Credit Card Spending increased +9.7% y/y versus a previous reading of +6.6%. NZD/USD closed at 0.6681, with a gain of +2.2% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is rather light this coming week, only featuring Construction Work Done (-1.5%) and a tentatively scheduled speech by RBA Governor Stevens on Wednesday, and then Private Capital Expenditure (-2.5%) on Thursday. Also, the Jackson Hole Symposium will take place from Thursday to Saturday. Resistance for AUD/USD is seen at 0.7532/0.7682, 0.7418/95 and 0.7348/71, with support noted at 0.7215/84 and 0.7016.

CAD The Canadian economic calendar is quiet this coming week, only featuring a speech by Governing Council Member Schembri on Tuesday and the RMPI (last 0.0%) on Friday, plus the Jackson Hole Symposium, which runs from Thursday to Saturday. Resistance for USD/CAD is seen at 1.3305, 1.3212/60 and 1.3192, while support shows at 1.3093/1.3102, 1.3006/62 and 1.2915/51.

EUR The Eurozone economic calendar is fairly quiet this coming week, only featuring the German Ifo Business Climate survey (107.6) on Tuesday; EZ M3 Money Supply (4.9%) on Thursday, and then German Preliminary CPI (-0.1%) and Spanish Flash CPI (-0.1%) on Friday, in addition to the Jackson Hole Symposium that runs Thursday through Saturday. Resistance for EUR/USD is seen at 1.1436/66 and 1.1387/1.1409, with support showing at 1.1207/89, 1.1128/50 and 1.1017/48.

GBP The UK economic calendar is less active than usual this coming week, only featuring the Second Estimate GDP (0.7%), Preliminary Business Investment (1.6%) and a speech by BOE Governor Carney on Friday — plus the Jackson Hole Symposium from Thursday to Saturday. Resistance to the topside for GBP/USD shows at 1.5697/1.5722, 1.5766/1.5814 and 1.5909/29, while support for the pair is expected at 1.5605/59, 1.5530/97 and 1.5424/66.

JPY The Japanese economic calendar is rather peaceful this coming week, only featuring Household Spending (0.9%), Tokyo Core CPI (-0.1%) and Retail Sales (1.1%) on Friday, as well as the Jackson Hole Symposium that will run from Thursday through Saturday. Resistance for USD/JPY currently shows up at 125.05/85, 123.56/124.57 and 122.45/123.00, with support indicated at 121.81/93, 120.08/50 and 118.49/88.

NZD The New Zealand economic calendar is also quiet this coming week, only featuring Inflation Expectations (last 1.9%) and the Trade Balance (-600M) on Tuesday, as well as the Jackson Hole Symposium that runs from Thursday to Saturday. The chart for NZD/USD shows resistance at 0.6813, 0.6736/69 and 0.6648/0.6706. On the downside, technical support is expected at 0.6618/31, 0.6557/71 and 0.6442/96.

USD The U.S. economic calendar is quite active this coming week, featuring Preliminary GDP data on Thursday. Monday starts the week’s highlights off with a speech by FOMC Member Lockhart, and Tuesday’s key events include CB Consumer Confidence (92.8) and New Home Sales (512K). Wednesday then offers Core Durable Goods Orders (0.3%), Durable Goods Orders (-0.5%), a speech by FOMC Member Dudley, and Crude Oil Inventories (last 2.6M). Thursday features Preliminary GDP (3.2%), Weekly Initial Jobless Claims (275K), Pending Home Sales (1.3%) and the start of the influential Jackson Hole Economic Symposium attended by monetary policymakers from around the world. Friday’s important data then includes the Goods Trade Balance (-62.3B), the Core PCE Price Index (0.1%), Personal Spending (0.4%), the Revised University of Michigan Consumer Sentiment survey (93.2) and the second day of the Jackson Hole Symposium. The final day of the Jackson Hole Symposium and a speech by FOMC Member Fischer then conclude the week’s economic highlights on Saturday.


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