Weekly Market Watch

Released 27 February 2017 - Weekly Newsletter

Last week recap



Declined another fraction last week as concerns over upcoming elections in Germany, the Netherlands and France triggered risk aversion. The week began with the rate making its weekly high of 1.0632 on Monday after comments from Eurogroup president J. Dijsselbloem, who stated that, “On the euro area economy, the recovery is clearly on track. There are lots of risks, downward risks also looming outside Europe and outside the euro area. Yet we are entering the fourth consecutive year of economic recovery and the recovery is gradually becoming stronger; real GDP grew steadily at 1.7% last year.” The pair then fell sharply on Tuesday after Philadelphia Fed President Patrick Harper said that he would not “take March off the table” for a Fed interest rate hike, while Cleveland Fed President Loretta Mester said she was “comfortable” with a March rate hike. Tuesday’s economic numbers had German Flash Manufacturing PMI print at 57.0 compared to an expectation of 56.2, while French Manufacturing PMI showed a reading of 52.3 versus 53.5 expected. On Wednesday, the rate made its weekly low of 1.0493 before gaining ground after the FOMC Meeting Minutes noted that, “After assessing current conditions and the outlook for economic activity, the labor market, and inflation, members agreed to maintain the target range for the federal funds rate at 1/2 to 3/4 percent. They judged that the stance of monetary policy remained accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.” Also, German Ifo Business Climate printed at 111.0 versus an anticipated reading of 109.6, while U.S. Existing Home Sales showed an annualized 5.69M versus an expected 5.55M. The pair continued higher on Thursday after comments from U.S. Treasury Secretary Steven Mnuchin, who stated that, “For longer-term purposes, an appreciation of the dollar is a good thing, and I would expect longer-term, as you’ve seen over periods of time, the dollar does appreciate, Mnuchin continued, saying, “In the short term, there are certain aspects (of a strong currency) that are positive about the dollar for our economy and there are certain aspects that are not as positive. A lot of the appreciation of the dollar since the election in particular is a sign of confidence in the Trump administration and the economic outlook for the next four years.” Friday saw the rate sell off after U.S. New Home Sales showed an annualized 555K compared to an expected 575K. Also, U.S. President Donald Trump said in a speech that, “Just take a look at NAFTA, one of the worst deals ever made by any country having to do with economic development. It''s economic undevelopment as far as our country is concerned.” EUR/USD went on to close the week at 1.0560, with an overall loss of -0.7% from its previous weekly close.


Continued losing ground last week as asset flows favoured the Yen over the Greenback with very little significant economic data from Japan. The week began on a positive note, as the rate gained on Monday with the United States observing a bank holiday, while the Japanese Trade Balance showed a surplus of +0.16T versus an expectation of +0.28T. The pair then made its weekly high of 113.77 on Tuesday despite Japanese Flash Manufacturing PMI hitting a three year high of 53.5 versus an expected 52.1, and after hawkish comments from two FOMC members. On Wednesday, the rate resumed its selloff despite a somewhat hawkish FOMC Meeting Minutes release. The pair continued lower on Thursday after comments from U.S. Treasury Secretary Mnuchin. The rate then made its weekly low of 111.92 on Friday after a lower than expected U.S. New Home Sales number. USD/JPY closed at 112.11, with an overall loss of -0.7% for the week.


Gained ground last week, adding a fraction after both countries reported mixed economic data. Cable began the week on a positive note, gaining a fraction on Monday in the absence of any significant data out of either country. The rate consolidated at a slightly higher level after making its weekly low of 1.2400 on Tuesday as the UK Inflation Report noted that, “CPI inflation has risen markedly over the past year and is judged likely to return to around the 2% target by February. Much of the rise to date reflects the elimination of past drags from food, energy and import prices, together with renewed rises in oil prices. The projected path for inflation over the next three years in large part reflects the impact of higher import prices following sterling’s depreciation.” Also, UK Public Sector Net Borrowing showed a decline of -9.8B compared to an expectation of -14.4B. On Wednesday, Cable declined a fraction despite UK Second Estimate GDP increased by +0.7% q/q versus an expectation of +0.6%, while Preliminary Business Investment declined by -1.0% q/q versus an expected flat reading. Thursday saw the rate rally after comments from U.S. Treasury Secretary Mnuchin. Cable then sold off on Friday after making its weekly high of 1.2568 as U.S. President Trump addressed the nation. GBP/USD closed at 1.2461, with an overall weekly gain of +0.4%.


Tread water for the third consecutive week last week as the RBA indicated caution over household consumption in the central bank’s Monetary Policy Meeting Minutes released on Tuesday. The week began with the rate gaining a fraction on Monday in the absence of any significant data out of either country. The pair then made its weekly low of 0.7649 on Tuesday after the RBA’s Monetary Policy Meeting Minutes noted that, “Low rental yields and slow growth in rents could refocus property investors’ attention on the possibility of oversupply in some regions. Although investor activity is currently quite strong, at least in Sydney and Melbourne, history shows that sentiment can turn quickly, especially if prices start to fall.” On Wednesday, the pair gained despite Australian Construction Work Done, which declined by -0.2% q/q versus an expected increase of +0.5%, while the Australian Wage Price Index increased by +0.5% q/q, in line with expectations. Thursday saw the pair extend its gains, making its weekly high of 0.7740 after comments from the RBA’s Philip Lowe, who noted in his Opening Statement to the House of Representatives Standing Committee on Economics that, “Since we appeared before this Committee last September, the Reserve Bank Board has kept the cash rate unchanged at 1.5 per cent. At its recent meetings the Board has been paying close attention to the outlook for inflation as well as two other issues: trends in household borrowing and in the labour market.” Also out on Thursday was Australian Private Capital Expenditure, which declined by -2.1% q/q versus an expected decline of -0.4%. The pair then sold off on Friday as traders squared positions and despite a lower than expected U.S. New Home Sales number. AUD/USD closed at 0.7670, up a mere +2 pips and virtually unchanged on the week.


Showed little change for the second consecutive week last week as both countries reported mixed economic numbers. The rate began the week gaining a fraction on Monday despite Canadian Wholesale Sales, which increased by +0.7% m/m versus +0.4% anticipated. The pair continued gaining on Tuesday after hawkish comments from two FOMC members. On Wednesday, the rate made its weekly high of 1.3209 after Canadian Core Retail Sales declined by -0.3% m/m versus an expected increase of +0.8%, while Retail Sales declined by -0.5% m/m versus an expected increase of +0.1%. The pair then declined on Thursday after comments from U.S. Treasury Secretary Mnuchin. The rate then made its weekly low of 1.3052 on Friday after Canadian CPI increased by +0.9% m/m, significantly higher than the expectation of +0.3%. USD/CAD closed at 1.3094, unchanged from its previous week’s close.



Gained fractionally last week as both countries reported mixed economic numbers. The rate began the week consolidating at a slightly lower level on Monday after New Zealand PPI Input increased by +1.0% q/q versus an expected increase of +0.9%. The pair then made its weekly low of 0.7129 on Tuesday after the New Zealand GDT Price Index declined by -3.2% compared to a previous reading of +1.3%. On Wednesday, the rate gained despite a better than expected U.S. Existing Home Sales number. The pair then made its weekly high of 0.7245 on Thursday after comments from U.S. Treasury Secretary Mnuchin. The rate then sold off on Friday as traders squared position and despite a lower than expected U.S. New Home Sales number. NZD/USD closed the week at 0.7196, with a gain of +0.2% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is moderately active this coming week, featuring GDP data on Wednesday. Monday starts the week’s highlights off with Company Operating Profits (8.00%), and Tuesday’s key events include the Current Account (-4.1B). Wednesday then offers GDP (0.70%), while Thursday concludes the week’s highlights with Building Approvals (-0.40%) and the Trade Balance (3.82B). Resistance for AUD/USD is seen at 0.7834 and 0.7731/77, with support noted at 0.7688/0.7709, 0.7492/0.7648 and 0.7222/0.7310.

CAD The Canadian economic calendar is somewhat active this coming week, featuring the BOC Rate Decision on Wednesday. Monday is quiet, so Tuesday starts the week’s highlights off with the RMPI (last 6.50%). Wednesday then offers the Current Account (last -18.3B), the BOC Rate Statement and the BOC’s Overnight Rate Decision (unchanged at 0.50%), while Thursday concludes the week with GDP (0.30%) and a speech by Governing Council Member Lane. Resistance for USD/CAD is seen at 1.3312/56, 1.3209/11 and 1.3125/77, while support shows at 1.2995/1.3080, 1.2967/79 and 1.2910.

EUR The Eurozone economic calendar is fairly busy this coming week, featuring CPI data on Thursday. Monday starts the week’s highlights off with Spanish Flash CPI (3.30%) and EZ M3 Money Supply (4.90%), and Tuesday has nothing notable scheduled. Wednesday then offers German Preliminary CPI (0.60%), Spanish Manufacturing PMI (55.9) and German Unemployment Change (-10K), while Thursday features the Spanish Unemployment Change (5.2K), EZ CPI Flash Estimate (1.80%) and Core EZ CPI Flash Estimate (0.90%). Friday’s important data then concludes the week with German Retail Sales (0.20%). Resistance for EUR/USD is seen at 1.1139, 1.0774/1.0964 and 1.0617/1.0718, with support showing at 1.0461/1.0520 and 1.0339/1.0419.

GBP The UK economic calendar is quieter than usual this coming week, only featuring Manufacturing PMI (55.7) and Net Lending to Individuals (4.0B) on Wednesday; Construction PMI (52.1) on Thursday and Services PMI (54.2) on Friday. 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 sparse this coming week, only featuring Household Spending (-0.30%) data on Thursday. Resistance for USD/JPY currently shows up at 116.86, 115.06/116.07 and 112.61/113.79, with support indicated at 111.92/112.04 and 111.35/44.

NZD The New Zealand economic calendar is light this coming week, only featuring the Trade Balance (-3M) On Monday and ANZ Business Confidence (last 21.7) on Tuesday. The chart for NZD/USD shows resistance at 0.7484, 0.7311/0.7420 and 0.7217/46. On the downside, technical support is expected at 0.7172, 0.7116/43 and 0.7042.

USD The U.S. economic calendar is busy this coming week, featuring Preliminary GDP data on Tuesday. Monday starts the week’s highlights off with Core Durable Goods Orders (0.50%), Durable Goods Orders (1.60%), Pending Home Sales (1.10%) and a speech by FOMC Member Kaplan, and Tuesday’s key events include Preliminary GDP (2.10%), Chicago PMI (53.1) and CB Consumer Confidence (111.1). Wednesday then offers the Core PCE Price Index (0.30%), Personal Spending (0.30%), ISM Manufacturing PMI (56.1), Crude Oil Inventories (last 0.06M) and speeches by FOMC Members Kaplan and Brainard, while Thursday features Weekly Initial Jobless Claims (245K). Friday’s important data then concludes the week with ISM Non-Manufacturing PMI (56.6), as well as speeches by FOMC Members Evans and Powell and Fed Chair Yellen.


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