Weekly Market Watch

Released 14 September 2015 - Weekly Newsletter

Last week recap

Gained ground last week as the likelihood of a Fed rate hike in this week’s Fed meeting priced into the market diminished to 23% versus over 45% last month. The week began with the rate gaining a fraction after making its weekly low of 1.1120 on Monday after the Sentix Investor Confidence index printed at 13.6 compared to 16.2 expected. The pair continued gaining on Tuesday after the German Trade Balance showed a surplus of +22.8B versus +21.8B anticipated, while EZ Revised GDP increased +0.4% q/q versus +0.3% expected. The rate then consolidated at a slightly higher level on Wednesday despite U.S. JOLTS Job Openings, which increased to 5.75M compared to 5.3M expected. Thursday saw the pair continue rallying after U.S. Initial Jobless Claims showed 275K applicants, in line with expectations, while U.S. Import Prices declined -1.8% m/m versus an expected decline of -1.7%. The rate then made its weekly high of 1.1349 on Friday despite U.S. PPI, which came out with a flat reading versus an expected decline of -0.1%, while Core PPI increased +0.3% versus +0.1% expected. EUR/USD went on to close the week at 1.1332, with an overall gain of +1.6% from its previous weekly close.
Gained ground last week as asset flows favoured the Greenback over the Yen and despite mostly better than expected economic data out of Japan. The week began with the rate making its weekly low of 118.79 on Monday in the absence of any significant data out of either country. The pair gained further on Tuesday despite the Japanese Current Account, which showed a surplus of +1.32T versus +1.25T expected, while Japanese Final GDP declined -0.3% q/q compared to an expected decline of -0.4%. On Wednesday, the rate extended its gains after a positive U.S. employment number. The pair kept rallying on Thursday, making its weekly high of 121.32 after Japanese Core Machinery Orders declined -3.6% m/m, significantly weaker than the expected increase of +3.4%. The pair then consolidated at a slightly lower level on Friday after the Japanese BSI Manufacturing Index printed at 11.0, notably higher than the expected decline of -1.9%. USD/JPY went on to close at 120.57, with a gain of +1.2% for the week.
Reversed direction, gaining sharply last week after the BOE left rates and stimulus measures unchanged and with mixed economic data out of both countries. Cable began the week rallying after making its weekly low of 1.5170 in the absence of any significant data out of either country. The pair continued higher on Tuesday despite the UK BRC Sales Monitor, which declined -1.0% m/m versus a previous reading of +1.2%. On Wednesday, Cable declined after UK Manufacturing Production declined -0.8% m/m versus an expected increase of +0.2%, also, the UK Trade Balance showed an expanding deficit of -11.1B versus -9.5B expected. Thursday saw the rate resume its rally, making its weekly high of 1.5475 after the BOE left its benchmark Official Bank Rate unchanged at 0.50% and the Asset Purchase Facility at 375B. The bank showed only one dissenting member on the Official Bank Rate vote, while the vote for the Asset Purchase Facility was unanimous. The BOE’s Monetary Policy Summary noted that, “At the Committee’s meeting ending on 9 September the majority of members judged that the current stance of monetary policy remained appropriate. Ian McCafferty preferred to increase Bank Rate by 25 basis points, given his view that building domestic cost pressures would otherwise be likely to lead to inflation overshooting the target in the medium term. All members agree that, given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles. This guidance is an expectation, not a promise. The actual path that Bank Rate will follow over the next few years will depend on the economic circumstances.” Cable then consolidated its gains at lower level on Friday after MPC member Forbes said in a speech that, “The magnitude of recent exchange rate movements has highlighted how important these movements are for an economy and the ability of companies to compete internationally. Sterling’s effective exchange rate has appreciated 17% since its recent trough in the spring of 2013. The U.S. dollar has appreciated by about 20% over the same period, while the euro has weakened by 7%. The yen has been on a downward trend for even longer – depreciating more than 30% since June 2012.” GBP/USD went on to close at 1.5426, with an overall gain of +1.7% for the week.
Reversed direction, gaining ground last week as asset flows favoured the Aussie over the Greenback with both countries reporting mixed economic numbers. The week began on a positive note, with the pair gaining after making its weekly low of 0.6912 as Australian ANZ Job Advertisements increased +1.0% m/m compared to a previous reading of -0.5%. The rate continued higher on Tuesday despite Australian NAB Business Confidence, which printed at 1 versus a previous reading of 4. On Wednesday, the pair sold off after Australian Westpac Consumer Sentiment declined -5.6% compared to a previous reading of +7.8%, while Australian Home Loans increased +0.3% m/m versus +0.8% expected. Also on Wednesday, RBA Deputy Governor Lowe stated that, “With the US and Chinese economies being in different phases of the business cycle, it is unsurprising that the Chinese authorities might have come to the conclusion that greater flexibility of the renminbi against the US dollar was warranted. Notably, a move in this direction is also consistent with the authorities'' long-standing goal of transitioning to a more market-determined exchange rate. While the change in the Chinese exchange rate also attracted much attention, the magnitude of the change does need to be kept in some perspective.” The rate then made its weekly high of 0.7098 on Thursday after Australian Employment Change showed the addition of +17.4K new jobs in August, while the Australian Unemployment Rate declined a notch to 6.2% from 6.3%. The pair then consolidated at a slightly higher level on Friday as traders squared positions. AUD/USD went on to close at 0.7089, showing an overall gain of +2.6% from its previous weekly close.
Reversed direction last week, losing a fraction after a brief rebound in the price of oil and after the BOC left interest rates unchanged. The week began with the pair making its weekly high of 1.3308 on Monday in the absence of any significant data out of either country. The rate then declined on Tuesday once more, with no significant numbers out of the U.S. or Canada. On Wednesday, the rate made its weekly low of 1.3153 after the BOC left its benchmark Overnight Rate unchanged at 0.50% as widely expected. The Bank’s rate statement noted that, “Increasing uncertainty about growth prospects for China and other emerging-market economies, in contrast, is raising questions about the pace of the global recovery. This has contributed to heightened financial market volatility and lower commodity prices. Movements in the Canadian dollar are helping to absorb some of the impact of lower commodity prices and are facilitating the adjustments taking place in Canada’s economy. While the overall export picture is still uncertain, the latest data confirm that exchange rate-sensitive exports are regaining momentum.” The pair then lost ground on Thursday despite Canadian NHPI increasing by +0.1% compared to +0.2% expected. Friday saw the rate gain a fraction after better than expected U.S. PPI data. USD/CAD closed the week at 1.3261, with an overall loss of -0.1%.
Gained a fraction last week as the RBNZ lowered its benchmark Cash Rate by 25 bps with very little other significant economic numbers out of New Zealand. The week began with the pair making its weekly low of 0.6242 on Monday with no major economic data out of either country. The rate then gained ground on Tuesday again with no significant numbers out of either country. On Wednesday, the pair made its weekly high of 0.6423 after the RBNZ cut its Official Cash Rate to 2.75% from 3.0% as was widely anticipated. The central bank’s Monetary Policy Statement noted that, ““Global economic growth remains moderate, but the outlook has been revised down due mainly to weaker activity in the developing economies. Concerns about softer growth, particularly in China and East Asia, have led to elevated volatility in financial markets and renewed falls in commodity prices. The US economy continues to expand. Financial markets remain uncertain as to the timing and impact of an expected tightening in US monetary policy.” The pair then consolidated at a slightly higher level on Thursday after RBNZ Governor Wheeler said that, “Last year when we started to raise rates we were the only country in the world running positive output gaps. At the time we raised rates, in terms of the data we had I believe they were the right decisions.” The pair gained another fraction on Friday as the United States reported mixed economic numbers. NZD/USD went on to close at 0.6313, with an overall gain of +0.6% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is light this coming week, only featuring the RBA’s Monetary Policy Meeting Minutes on Tuesday, a speech by RBA Assistant Governor Debelle on Wednesday, and a speech by RBA Governor Stevens on Friday. Resistance for AUD/USD is seen at 0.7348/71, 0.7215/84 and 0.7098, with support noted at 0.7016/69, 0.6907 and 0.6753/73.

CAD The Canadian economic calendar is characteristically light this coming week, only featuring Manufacturing Sales (last 1.2%) and Foreign Securities Purchases (last 8.51B) on Wednesday, and then Core CPI (last 0.0%) and CPI (last 0.1%) on Friday. Resistance for USD/CAD is seen at 1.3352, 1.3323/25 and 1.3305/09, while support shows at 1.3153/92, 1.3006/1.3116 and 1.2915/51.

EUR The Eurozone economic calendar is unusually quiet this coming week, only featuring the German ZEW Economic Sentiment survey (18.3) and the EZ ZEW Economic Sentiment survey (42.1) on Tuesday, and then Final CPI (0.2%) on Wednesday. Resistance for EUR/USD is seen at 1.1713, 1.1436/66 and 1.1331/1.1409, with support showing at 1.1207/89, 1.1128/55 and 1.1005/86.

GBP The UK economic calendar is moderately active this coming week, featuring key jobs data on Wednesday. Monday is quiet, so Tuesday starts the week’s highlights off with CPI (0.0%), PPI Input (-2.2%) and RPI (0.9%). Wednesday then offers the Average Earnings Index (2.5%), the Claimant Count Change (-5.1K) and the Unemployment Rate (5.6%), while Thursday features Retail Sales (0.2%), which concludes the week’s highlights. Resistance to the topside for GBP/USD shows at 1.5424/66 and 1.5530/1.5722, while support for the pair is expected at 1.5335, 1.5160/89 and 1.5033/88.

JPY The Japanese economic calendar is somewhat active this coming week, featuring the tentatively scheduled BOJ Monetary Policy Statement and BOJ Press Conference on Tuesday, the Trade Balance (-0.35T) and a speech by BOJ Governor Kuroda on Thursday, and the BOJ Monetary Policy Meeting Minutes on Friday. Resistance for USD/JPY currently shows up at 122.45/123.00, 121.81/93 and 121.32, with support indicated at 120.08/50, 118.49/88 and 116.14.

NZD The New Zealand economic calendar is rather quiet this coming week, only featuring the tentatively scheduled GDT Price Index (last 10.9%) and the Current Account (-1.51B) on Tuesday, and GDP (0.6%) on Wednesday. The chart for NZD/USD shows resistance at 0.6618/0.6769, 0.6557/71 and 0.6407/96. On the downside, technical support is expected at 0.6248/68 and 0.6032.

USD The U.S. economic calendar is busy this coming week, featuring the Fed Funds Rate Decision on Thursday. Monday is quiet, so Tuesday starts the week’s highlights off with Core Retail Sales (0.1%), Retail Sales (0.4%), the Empire State Manufacturing Index (0.7), the Capacity Utilization Rate (77.9%) and Industrial Production (-0.1%). Wednesday then offers CPI (-0.1%), Core CPI (0.1%) and Crude Oil Inventories (last 2.6M). Thursday features Building Permits (1.15M), Weekly Initial Jobless Claims (276K), the Current Account (-111B), Housing Starts (1.16M), the Philly Fed Manufacturing Index (6.1), FOMC Economic Projections, the FOMC Statement, the Federal Funds Rate (<0.50%) and the FOMC Press Conference. That concludes the week’s key events, since Firday offers nothing notable.


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