Weekly Market Watch

Released 23 January 2017 - Weekly Newsletter

Last week recap

Extended its previous week’s gains last week as Donald J. Trump was inaugurated as the 45th U.S. president and the ECB left interest rates and stimulus measures unchanged. The week began with the rate making its weekly low of 1.0595 on Monday as the United States observed a bank holiday and with no significant economic data out of the EU. The pair then gained sharply on Tuesday, making its weekly high of 1.0719 after UK Prime Minister Theresa May promised to adopt a “phased approach” for a “smooth and orderly” Brexit and that, “I can confirm today that the Government will put the final deal that is agreed between the UK and the EU to a vote in both Houses of Parliament, before it comes into force.” Tuesday’s economic releases had German ZEW Economic Sentiment show a reading of 16.6 compared to an expectation of 18.9, while the U.S. Empire State Manufacturing Index printed at 6.5 versus an expected reading of 8.1. The rate gave back most of its previous day’s gains on Wednesday after EZ Final CPI increased by +1.1% y/y as widely anticipated, while U.S. Core CPI increased by +0.2% and the headline number by +0.3%, both in line with market expectations. Also on Wednesday, Fed Chair Janet Yellen said that it “makes sense” to raise U.S. interest rates gradually, and that, “waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road - either too much inflation, financial instability, or both.” Yellen added that, “in that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession.” The pair recovered some of its losses on Thursday after the ECB left its benchmark Minimum Bid Rate unchanged at 0.0%. In his introductory statement to the press conference, ECB president Draghi noted that, “A very substantial degree of monetary accommodation is needed for euro area inflation pressures to build up and support headline inflation in the medium term. If warranted to achieve its objective the Governing Council will act by using all the instruments available within its mandate.” The rate extended its gains on Friday as newly inaugurated U.S. president Trump said in his inauguration speech that, “For too long, a small group in our nation's capital has reaped the rewards of government while the people have borne the cost. Washington flourished, but the people did not share in its wealth. Politicians prospered, but the jobs left and the factories closed. The establishment protected itself, but not the citizens of our country. Their victories have not been your victories. Their triumphs have not been your triumphs. And while they celebrated in our nations capital, there was little to celebrate for struggling families all across our land.” EUR/USD closed at 1.0696, with an overall weekly gain of +0.5%.
Showed little change last week as the United States reported mostly better than expected economic numbers, with very few economic releases out of Japan. The week began with the rate consolidating at a slightly lower level on Monday as the United States observed a bank holiday while Japanese Core Machinery Orders declined -5.1% m/m, significantly lower than the expectation of -1.3%. Also out was Japanese PPI, which declined -1.2% y/y, beating expectations of a -1.4% decline. The pair continued its decline, falling sharply on Tuesday after Japanese Revised Industrial Production increased +1.5% m/m as was widely anticipated. On Wednesday, the rate rallied after making its weekly low of 112.56 as U.S. CPI inflation data came out in line with expectations. The pair then made its weekly high of 115.61 on Thursday after better than expected U.S. employment, housing and manufacturing data. The pair then declined a fraction on Friday as Donald J. Trump was inaugurated as the 45th U.S. president. USD/JPY closed at 114.56, with a gain of a mere +4 pips and virtually unchanged for the week.
Continued its rally last week as UK PM Theresa May outlined her 12-point strategy for a “smooth and orderly Brexit”, while Donald J. Trump was inaugurated as the 45th U.S. president. The week began with Sterling gapping lower and making its weekly low of 1.1985 on Monday in anticipation of PM May’s Tuesday speech and after comments from BOE Governor Carney, who said that, “the UK’s monetary policy framework is grounded in society’s choice of the desired end. These ethical determinations are encoded in the monetary policy remit, from which the MPC takes its orders and against which it is accountable.” Cable then traded sharply higher on Tuesday after UK PM May’s speech in which she outlined her plan for the UK’s exit from the EU. May stated in her speech that, “I want this United Kingdom to emerge from this period of change stronger, fairer, more united and more outward-looking than ever before. I want us to be a secure, prosperous, tolerant country – a magnet for international talent and a home to the pioneers and innovators who will shape the world ahead. I want us to be a truly Global Britain – the best friend and neighbour to our European partners, but a country that reaches beyond the borders of Europe too. A country that goes out into the world to build relationships with old friends and new allies alike.” Also supporting Sterling on Tuesday was UK CPI, which showed an increase of +1.6% y/y compared to an expectation of +1.4%, while RPI increased +2.5% m/m versus +2.3% anticipated, nevertheless, UK PPI Input missed expectations at 1.8% versus an expected increase of +2.2%. Cable then sold off on Wednesday despite the UK Average Earnings Index, which increased by +2.8% 3m/y versus an expected +2.6%, and UK Claimant Count Change, which showed a decline of -10.1K, significantly better than the expected increase of +4.6K that was expected, with the previous number downwardly revised from +2.5% to +1.3%. The rate then resumed its rally on Thursday despite better than expected economic numbers from the United States. Cable continued gaining on Friday despite UK Retail Sales, which showed a decline of -1.9% m/m compared to an expected decline of -0.1%. GBP/USD went on to close at 1.2364, with an overall gain of +1.4% from its previous weekly close.
Extended its previous week’s gains last week as the United States inaugurated Donald J. Trump as its 45th president and with very little significant economic data out of Australia. The rate began the week trading fractionally lower and making its weekly low of 0.7457 on Monday in the absence of any significant data out of either country. The pair gained sharply on Tuesday as the move in Sterling reflected on the Aussie. On Wednesday, the rate then sold off on Wednesday after U.S. inflation data came in as anticipated. The pair then resumed its rally on Thursday after Australian Employment Change showed an increase of +13.5K versus an expectation of +10.2K. Nevertheless, the Australian Unemployment Rate increased a notch to 5.8% from 5.7%. Friday saw the rate consolidate after making its weekly high of 0.7588 as U.S. President Trump was inaugurated in Washington D.C. AUD/USD went on to close at 0.7554, with an overall gain of +0.7% for the week.
Reversed direction, trading higher last week as the BOC left interest rates unchanged and the U.S. Dollar was favoured over the Loonie in light of the Trump presidency. The week began with the pair trading fractionally lower on Monday in the absence of any significant data out of either country. The pair then made its weekly low of 1.3018 declining sharply on Tuesday as the Loonie reacted against the Greenback after UK PM May’s speech. The rate then rallied on Wednesday after the BOC left its benchmark Overnight Rate unchanged at 0.50%. The central bank’s Rate Statement noted that, “Uncertainty about the global outlook is undiminished, particularly with respect to policies in the United States. The Bank has made initial assumptions about prospective tax policies only, resulting in a modest upward revision to its US growth outlook. Overall, the global economy is strengthening largely as expected and prices of some commodities, including oil, have risen.” Thursday saw the pair continue higher as the United States reported mostly better than expected data and despite Canadian Manufacturing Sales, which showed an increase of +1.5% m/m compared to an expected increase of +0.2%, nevertheless, Canadian Foreign Securities Purchases came to only +7.24B compared to an expected +10.23B. The rate ended the week consolidating after making its weekly high of 1.3386 on Friday after Canadian CPI showed a decline of -0.2% m/m compared to an expected flat reading, while Trimmed Core CPI increased +1.6% y/y as widely anticipated. Also out were Canadian Retail Sales, which increased +0.2% m/m versus +0.5% anticipated, and Core Retail Sales, which showed an increase of +0.1%, in line with market expectations. USD/CAD closed at 1.3321, with a net weekly gain of +1.5%.
Continued gaining for its fourth straight week last week as Donald J. Trump was inaugurated as the United States’ 45th president, and with very little significant economic data seen out of New Zealand. The rate began the week consolidating after making its weekly low of 0.6861 on Monday as the New Zealand NZIER Business Confidence index showed a reading of 28 compared to a previous print of 26. The pair then gained ground on Tuesday after the New Zealand GDT Price Index came out with a reading of +0.6% compared to a previous print of -3.9%. The rate sold off on Wednesday as the United States reported CPI inflation data which was in line with expectations. The pair then gained ground on Thursday despite better than expected U.S. housing, employment and manufacturing data. The rate then made its weekly high of 0.7224 on Friday as the United States inaugurated Donald Trump as president. NZD/USD closed at 0.7166, with an overall gain of +0.6% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is rather peaceful this coming week, only featuring CPI (0.7%) and Trimmed Mean CPI (0.5%) on Wednesday. Also, Wednesday is a Bank Holiday in Australia. Resistance for AUD/USD is seen at 0.7614/0.7834 and 0.7568/88, with support noted at 0.7492/0.7557, 0.7222/0.7310 and 0.7096/0.7162.

CAD The Canadian economic calendar is quiet this coming week, only featuring Wholesale Sales (0.3%) on Monday. Resistance for USD/CAD is seen at 1.4001 and 1.3356/1.3638, while support shows at 1.3312, 1.3147/77 and 1.3080.

EUR The Eurozone economic calendar is busy this coming week, featuring M3 Money Supply data on Friday. Monday starts the week’s highlights off with a speech by ECB President Draghi, and Tuesday’s key events include French Flash Manufacturing PMI (53.4), French Flash Services PMI (53.2), German Flash Manufacturing PMI (55.5), German Flash Services PMI (54.6), EZ Flash Manufacturing PMI (54.8) and EZ Flash Services PMI (53.9). Wednesday then offers the German Ifo Business Climate survey (111.3), while Thursday features the Spanish Unemployment Rate (18.9%). Friday’s important data then concludes the week with the EZ M3 Money Supply (4.9%). Resistance for EUR/USD is seen at 1.1298, 1.1139 and 1.0718/1.0964, with support showing at 1.0620, 1.0461/1.0588 and 1.0339/1.0419.

GBP The UK economic calendar is rather sparse this coming week, only featuring the EU Membership Court Ruling on Tuesday; Public Sector Net Borrowing (6.7B) on Wednesday; and Preliminary GDP (0.5%0 on Thursday. Resistance to the topside for GBP/USD shows at 1.2511/56 and 1.2387/1.2481, while support for the pair is expected at 1.2081/1.2199, 1.2037 and 1.1985/91.

JPY The Japanese economic calendar is peaceful this coming week, only featuring Tokyo Core CPI (-0.4%) on Thursday. Resistance for USD/JPY currently shows up at 116.54/117.19, 115.61/116.07 and 115.06, with support indicated at 113.75/79, 113.12 and 112.56/86.

NZD The New Zealand economic calendar is quiet this coming week, only featuring CPI (0.3%) on Wednesday. The chart for NZD/USD shows resistance at 0.7484, 0.7339/0.7420 and 0.7219/38. On the downside, technical support is expected at 0.7116/43, 0.7042 and 0.6786/0.6970.

USD The U.S. economic calendar is active this coming week, featuring GDP data on Friday. Monday is quiet, so Tuesday starts the week’s highlights off with Existing Home Sales (5.54M), and Wednesday then offers Crude Oil Inventories (last 2.3M). Thursday features Weekly Initial Jobless Claims (247K) and New Home Sales (585K), while Friday’s important data then concludes the week with Advance GDP (2.1%), Core Durable Goods Orders (0.5%), the Advance GDP Price Index (2.1%), Durable Goods Orders (2.7%) and the Revised University of Michigan Consumer Sentiment survey (98.2).


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