Weekly Market Watch

Released 21 February 2017 - Weekly Newsletter

Last week recap

Continued to sell off last week, declining by a fraction as political uncertainty grew over the possible election of right-wing and anti-EU National Front candidate Marine Le Pen in the upcoming French presidential race and put pressure on the Euro. The week began with the rate declining on Monday after the EU Economic Forecasts expected growth in the Eurozone to be moderate this year and weaken further in 2018. EU Commissioner Pierre Moscovici noted that, “with uncertainty at such high levels, it''s more important than ever that we use all policy tools to support growth.” The pair continued heading south on Tuesday after Fed Chair Janet Yellen, testifying before the Senate Banking Committee stated that, “At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.” Economic numbers had German Preliminary GDP, which increased by +0.4%, compared to an expected +0.5%. Also out were EZ Flash GDP, which also increased by +0.4% versus +0.5% expected and the German ZEW Economic Sentiment index, which printed at 10.4, significantly lower than the expectation of 15.1. Tuesday’s U.S. data had PPI increase by +0.6% m/m versus +0.3% anticipated, and Core PPI, which increased by +0.4% m/m versus an expectation of +0.2%. On Wednesday, the pair rallied after making its weekly low of 1.0521 after better than expected U.S. data: U.S. CPI increased by +0.6% m/m versus an expected +0.3%, while Core CPI increased by +0.3% versus +0.2% anticipated. Also, Core Retail Sales increased by +0.8% versus an expected increase of +0.4%, with the headline number gaining +0.4% m/m compared to an expectation of a +0.1% increase. Thursday saw the pair continue gaining, making its weekly high of 1.0672 after the ECB Monetary Policy Meeting Accounts noted that, “the Governing Council confirmed that it would continue to make purchases under the APP at the current monthly pace of €80 billion until the end of March 2017 and that, from April 2017, the net asset purchases were intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council saw a sustained adjustment in the path of inflation consistent with its inflation aim.” Thursday’s economic numbers had U.S. Building Permits increase to an annualized 1.29M compared to an expectation of 1.23M, and Philly Fed Manufacturing Index, which printed at 43.3, significantly higher than the expected 18.5 print. The pair then sold off on Friday in the absence of any significant data out of either economy. EUR/USD closed at 1.0612, with an overall loss of -0.2% from its previous weekly close.
Extended its previous week’s losses last week, declining by another fraction as asset flows favoured the Yen over the Greenback, and with very little significant economic data out of Japan. The week began with the pair gaining a fraction after Japanese Preliminary GDP increased by +0.2% q/q compared to an expectation of +0.3%, while the Preliminary GDP Price Index fell by -0.1% q/q versus -0.2% anticipated. The rate continued higher on Tuesday after better than expected U.S. PPI data. On Wednesday, the pair made its weekly high of 114.95 after U.S. Retail Sales and CPI releases beat market expectations. The rate resumed its selloff on Thursday after comments from BOJ Governor Kuroda, who stated that, “All in all, over the last ten years or so, the robustness of the global financial system has been steadily enhanced in many areas. Accordingly, the risk that we could fall into the same kind of crisis as the last one is probably lower to a considerable degree. Having said that, I must point out that the environment surrounding the financial system is undergoing rapid changes, including the development of FinTech and the rapid growth of the shadow banking sector.” The pair continued selling off on Friday, making its weekly low of 112.61 in the absence of any significant economic data out of either country. USD/JPY closed at 112.85, with an overall loss of -0.4% for the week.
Declined a fraction last week as the UK reported mostly lower than expected economic data, with mixed numbers out of the United States. Cable began the week gaining a fraction on Monday in the absence of any significant economic data out of either country. The rate then sold off after making its weekly high of 1.2547 on Tuesday after UK CPI increased by +1.8% y/y missing market expectations of a +1.9% increase. Also UK RPI increased by +2.6% y/y versus +2.8% anticipated, and UK PPI Input, which increased by +1.7% compared to an expectation of +1.0%. On Wednesday, Cable consolidated after making its weekly low of 1.2480 despite UK Claimant Count Change, which showed a decline of -41.4K, significantly better than the increase of +1.1K that was anticipated. Also, the UK Average Earnings Index increased by +2.6% 3m/y missing expectations of a +2.8% increase. The rate gained a fraction on Thursday despite mostly better than expected U.S. economic data. Cable then declined on Friday as the United States reported positive housing and manufacturing data. GBP/USD closed at 1.2414, with an overall weekly loss of -0.6%.
Showed little change for the second consecutive week as Australia reported positive employment data with mixed numbers from the United States. The rate began the week declining on Monday in the absence of any significant data out of either country. The pair then gained ground on Tuesday after making its weekly low of 0.7617 despite better than expected U.S. PPI data. On Wednesday, the rate continued rallying despite U.S. CPI and Retail Sales data, which beat expectations. The pair then sold off after making its weekly high of 0.7731 on Thursday after Australian Employment Change showed the addition of +13.5K jobs last month compared to an expected increase of +9.7K, while the Australian Unemployment Rate declined a notch to 5.7% from 5.8%. The rate continued its selloff on Friday in the absence of any significant economic numbers from either country. AUD/USD closed at 0.7667, with a loss of just -5 pips and virtually unchanged on the week.
Showed little change last week as the price of crude oil held above the $50 per barrel handle with very little economic data out of Canada. The rate began the week falling a fraction on Monday in the absence of any significant data out of either country. The pair consolidated at a slightly higher level on Tuesday as the United States reported better than expected PPI data. Wednesday saw the rate consolidate again as Canadian Manufacturing Production increased by +2.3% m/m compared to +1.4% expected. On Thursday, the pair made its weekly low of 1.3008 despite U.S. housing and manufacturing data which beat the consensus. Friday saw the pair make its weekly high of 1.3126 after Canadian Foreign Securities Purchases increased to 10.23B from 7.26B with an expectation of 11.59B. USD/CAD closed at 1.3095, with an increase of a mere +10 pips and virtually unchanged on the week.
Extended its previous week’s losses, declining a fraction last week as the United States reported mixed economic numbers with very little significant data out of New Zealand. The week began with the rate declining by a fraction in the absence of any significant data out of either country. The pair then made its weekly low of 0.7133 on Tuesday after better than expected U.S. PPI numbers. The rate rallied on Wednesday despite better than expected U.S. CPI and Retail Sales data. On Thursday, the pair sold off after making its weekly high of 0.7242 after New Zealand Retail Sales increased by +0.8% q/q compared to an expectation of +1.1%, while Core Retail Sales increased by +0.6% versus +0.9% expected. Friday saw the rate decline another fraction in the absence of any significant economic data from either country. NZD/USD closed at 0.7183, with an overall gain of +0.2% for the week.

The week ahead

AUD The Australian economic calendar is fairly light this coming week, only featuring the RBA’s Monetary Policy Meeting Minutes and a speech by RBA Governor Lowe on Tuesday; Construction Work Done (0.5%) and the Wage Price Index (0.5%) on Wednesday; and Private Capital Expenditure (-0.4%) and a speech by RBA Governor Lowe on Thursday. Resistance for AUD/USD is seen at 0.7834, 0.7731/77 and 0.7688/0.7709, with support noted at 0.7568/0.7617, 0.7492/0.7557 and 0.7222/0.7310.

CAD The Canadian economic calendar is sparse this coming week, only featuring Wholesale Sales (0.4%) on Monday; Core Retail Sales (0.8%) and Retail Sales (0.1%) on Wednesday; and CPI (0.3%) and Trimmed Core CPI (1.6%) on Thursday. Resistance for USD/CAD is seen at 1.3312/56, 1.3211 and 1.3125/77, while support shows at 1.2995/1.3080, 1.2967/79 and 1.2910.

EUR The Eurozone economic calendar is somewhat busy this coming week, featuring the ECB’s LTRO data on Wednesday. Monday starts the week’s highlights off with the ECOFIN Meetings, and Tuesday’s key events include French Flash Manufacturing PMI (53.5), French Flash Services PMI (53.8), German Flash Manufacturing PMI (56.2), German Flash Services PMI (53.6), EZ Flash Manufacturing PMI (55.0), and EZ Flash Services PMI (53.7). Wednesday then offers the German Ifo Business Climate survey (109.6) and the ECB’s Long Term Refinancing Operation (62.2B), which concludes the week’s highlights. Resistance for EUR/USD is seen at 1.1139, 1.0774/1.0964 and 1.0640/1.0718, with support showing at 1.0461/1.0620 and 1.0339/1.0419.

GBP The UK economic calendar is rather sparse this coming week, only featuring Public Sector Net Borrowing (-14.4B) data on Tuesday; followed on Wednesday by the Second Estimate GDP (0.6%), Preliminary Business Investment (0.0%) and speeches by MPC Members Cunliffe and Shafik. Resistance to the topside for GBP/USD shows at 1.2705/90, 1.2672/73 and 1.2451/1.2581, while support for the pair is expected at 1.2346/1.2411 and 1.2081/1.2199.

JPY The Japanese economic calendar is inactive this coming week, featuring no noteworthy data. Resistance for USD/JPY currently shows up at 116.86, 115.06/116.07 and 113.12/79, with support indicated at 112.04/61 and 111.35/44.

NZD The New Zealand economic calendar is quiet this coming week, only featuring PPI Input (1.0%) on Sunday and the tentatively scheduled GDT Price Index (last 1.3%) on Tuesday. The chart for NZD/USD shows resistance at 0.7484, 0.7311/0.7420 and 0.7217/41. On the downside, technical support is expected at 0.7172, 0.7116/43 and 0.7042.

USD The U.S. economic calendar is somewhat active this coming week, featuring the FOMC Meeting Minutes on Wednesday. Monday is a Bank Holiday, so Tuesday starts the week’s highlights off with speeches by FOMC Members Kashkari and Harker. Wednesday then offers Existing Home Sales (5.55M), a speech by FOMC Member Powell and the FOMC Meeting Minutes, while Thursday features Weekly Initial Jobless Claims (242K) and Crude Oil Inventories (last 9.5M). Friday’s important data then concludes the week with New Home Sales (575K) and the Revised University of Michigan Consumer Sentiment survey (96.1).


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