Weekly Market Commentary

Released Monday, 14 August 2017

Last week recap

Extended its gains last week as the U.S. Dollar was pressured by geopolitical tension between the United States and North Korea, with very little significant economic data released by the Eurozone. The rate began the week by gaining a fraction on Monday as St. Louis Fed President James Bullard said he was “ready to get going in September” on the unwinding of the Fed’s $4.5 trillion balance sheet, but that the balance sheet unwind, “is going to be very slow and I don’t think there will be a lot of impact on the markets.” The pair declined on Tuesday after U.S. JOLTS Job Openings increased to +6.16M compared to an expectation of +5.74M. The rate then made its weekly low of 1.1688 on Wednesday after comments from U.S. President Trump, responding to threats from North Korea that said they were ready to give the United States a “severe lesson”. Trump responded saying that North Korea “best not make any more threats to the United States” and that, “they will be met with fire, fury and, frankly, power the likes of which this world has never seen before.” On Thursday, the pair consolidated at a slightly higher level after U.S. PPI declined by -0.1% m/m compared to an expected increase of +0.1%, while Core PPI also declined by -0.1% versus +0.2% expected. In addition, Initial Weekly Jobless Claims increased to 244K in its latest week, which was in line with expectations. The rate then made its weekly high of 1.1844 on Friday after disappointing U.S. CPI data. Both Core CPI and CPI increased by only +0.1% m/m compared to an expectation of +0.2%. EUR/USD went on to close at 1.1819, with a net gain of +0.4% for the week.
Declined last week as risk aversion favoured the Yen over the Greenback with very few significant economic releases from Japan. The rate began the week consolidating on Monday in the absence of any significant numbers from either country. The pair then lost ground after making its weekly high of 110.91 on Tuesday as the United States reported a better than expected JOLTS Job Openings number. Wednesday saw the rate lose a fraction after U.S. President Trump responded to threats made by North Korea. The pair then declined sharply on Thursday after the United States released lower than expected PPI data. On Friday, the rate made its weekly low of 108.72 after dismal U.S. CPI and Core CPI releases. USD/JPY closed at 109.16, with a loss of -1.3% from its previous weekly close.
Extended its previous week’s losses, falling by a fraction last week as both countries reported mixed economic data. Cable began the week trading lower after making its weekly high of 1.3058 on Monday after the UK was reportedly ready to pay £36B to settle the “divorce bill” with the European Union. Nevertheless, PM May’s spokesman, James Slack told reporters, “I don’t recognize that figure,” while Brexit Secretary David Davis said that the amount was “news to me”. Tuesday saw the pair lose ground after a better than expected U.S. employment number. The rate gained ground on Wednesday after comments from U.S. President Trump threatening North Korea and lower than expected U.S. Preliminary Unit Labor Costs and Non-Farm Productivity data. Cable then sold off on Thursday after the UK Goods Trade Balance showed a deficit of -12.7B compared to an expected deficit of -11.0B. Also, UK Manufacturing Production came out with a flat reading m/m as widely anticipated. The rate then gained ground after making its weekly low of 1.2938 on Friday after the United States released lower than expected CPI and Core CPI numbers. GBP/USD closed the week at 1.3009, with an overall decline of -0.2%.
Extended its previous week’s losses, losing another fraction last week as risk aversion favoured the Greenback over the Aussie with very little significant economic data from Australia. The pair began the week on a quiet note, falling a fraction after making its weekly high of 0.7947 on Monday as Australia observed a bank holiday. The rate lost another fraction on Tuesday despite the Australian NAB Business Confidence index, which increased to 12 from a previous reading of 8, which was the highest level in the index since 2008. Also on Tuesday, RBA Assistant Governor Christopher Kent said that the Aussie’s appreciation against the Greenback was due to the unwinding of the “Trump Trade”. Kent told Bloomberg that, “Gradually that's just been unwinding, In addition to that, theres been a bit weaker inflation of late in the US, so I think thats a large part of the Australian dollar appreciation story of late.” The pair then consolidated on Wednesday after lower than expected U.S. economic numbers. The rate resumed selling off on Thursday despite lower than expected U.S. PPI numbers. The pair then gained ground on Friday after making its weekly low of 0.7838 after RBA Governor Philip Lowe told the Australian parliament that “Current market pricing implies greater probability of a rate rise than a rate reduction, it also implies that the next move in interest rates is a long way out, I think they’re both reasonable assumptions that the next move will be up rather than down.” AUD/USD closed at 0.7891, with an overall decline of -0.4% from its previous weekly close.
Extended its previous week’s gains last week as asset flows favoured the Greenback over the Loonie with mixed economic numbers from both countries. The rate began the week on a quiet note, gaining after making its weekly low of 1.2629 on Monday as Canada observed a bank holiday. The pair then consolidated on Tuesday after a better than expected U.S. JOLTS Job Openings number. Wednesday saw the rate continue to gain despite Canadian Building Permits, which increased by +2.5% m/m, significantly higher than the -1.8% that was anticipated. The pair extended its gains on Thursday after Canadian NHPI increased by +0.2% m/m versus +0.5% expected. The rate then declined on Friday after making its weekly high of 1.2752 as the United States reported lower than expected CPI data. USD/CAD closed at 1.2672, with an overall gain of +0.2% for the week.
Extended its previous week’s losses last week as the RBNZ left interest rates unchanged, with mixed economic data from both countries. The rate began the week trading lower after making its weekly high of 0.7414 on Monday after New Zealand Inflation Expectations increased by +2.1% q/q compared to a previous reading of +2.2%. The rate continued its slide on Tuesday after a better than expected U.S. employment number. On Wednesday, the pair gained a fraction after the RBNZ left its benchmark Official Cash Rate unchanged at 1.75% as was widely anticipated. The RBNZ’s Monetary Policy Statement noted that, “The trade-weighted exchange rate has increased since the May Statement, partly in response to a weaker US dollar. A lower New Zealand dollar is needed to increase tradables inflation and help deliver more balanced growth.” The Statement concluded stating that, “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.” The pair then declined sharply on Thursday, making its weekly low of 0.7250 after the New Zealand Business NZ Manufacturing Index printed at 55.4 compared to a previous reading of 56.0. The rate rallied on Friday after lower than expected U.S. inflation data. NZD/USD closed at 0.7313,with a weekly decline of -1.2%.


The week ahead

AUD The Australian economic calendar is somewhat active this coming week, featuring the RBA’s Monetary Policy Meeting Minutes on Tuesday. Monday starts the week’s highlights off with a speech by RBA Assist Governor Kent, and Tuesday’s key events include the RBA’s Monetary Policy Meeting Minutes. Wednesday then offers the Wage Price Index (0.50%), while Thursday features the Employment Change (20.3K), the Unemployment Rate (5.60%) and a speech by RBA Assistant Governor to conclude the week’s highlights. Resistance for AUD/USD is seen at 0.8162, 0.8042/75 and 0.7938/89, with support noted at 0.7891/0.7913, 0.7833/38, and 0.7222/0.7679.

CAD The Canadian economic calendar is light this coming week, only featuring Foreign Securities Purchases (23.45B) on Wednesday; Manufacturing Sales (-1.00%) on Thursday; and CPI (0.00%), Common CPI (last 1.40%), Median CPI (last 1.60%), and Trimmed CPI (last 1.20%) on Friday. Resistance for USD/CAD is seen at 1.2859/1.2928, 1.2752/63 and 1.2713, while support shows at 1.2654/80, 1.2522/75 and 1.2362/1.2413.

EUR The Eurozone economic calendar is rather inactive this coming week, only featuring German Preliminary GDP (0.70%), as well as a French and Italian Bank Holiday on Tuesday; Flash EZ GDP (0.60%) on Wednesday; and Final CPI (1.30%) and the ECB Monetary Policy Meeting Accounts on Thursday. Resistance for EUR/USD is seen at 1.2042, 1.1910 and 1.1846/76, with support showing at 1.1683/1.1776, 1.1616 and 1.11209/1.1494.

GBP The UK economic calendar is moderately busy this coming week, featuring key jobs data on Wednesday. Monday is quiet, so Tuesday starts the week’s highlights off with CPI (2.70%), PPI Input (0.40%), and the RPI (3.50%). Wednesday then offers the Average Earnings Index (1.80%), the Claimant Count Change (7.2K), and the Unemployment Rate (4.50%), while Thursday features Retail Sales (0.20%) to conclude the week’s highlights. Resistance to the topside for GBP/USD shows at 1.3267/79, 1.3120/58 and 1.3047, while support for the pair is expected at 1.2932/1.2988, 1.2768/1.2899 and 1.2690.

JPY The Japanese economic calendar is very peaceful this coming week, only featuring Preliminary GDP (1.00%) on Monday. Resistance for USD/JPY currently shows up at 115.30/61, 112.92/114.95 and 110.08/112.25, with support indicated at 109.74/91, 108.78/109.11 and 108.13.

NZD The New Zealand economic calendar is rather sparse this coming week, only featuring Retail Sales (2.00%) and Core Retail Sales (2.10%) on Sunday; the GDT Price Index (last -1.60%) on Tuesday; and PPI Input (0.90%) on Wednesday. The chart for NZD/USD shows resistance at 0.7608/17, 0.7557 and 0.7344/0.7484. On the downside, technical support is expected at 0.7297/0.7308, 0.6817/0.7262 and 0.6674/0.6738.

USD The U.S. economic calendar is quite busy this coming week, featuring Retail Sales data on Tuesday. Tuesday starts the week’s highlights off with Core Retail Sales (0.30%), Retail Sales (0.40%), the Empire State Manufacturing Index (10.2), and Import Prices (0.10%). Wednesday then offers Building Permits (1.25M), Housing Starts (1.23M), Crude Oil Inventories (last -6.5M), and the FOMC Meeting Minutes, while Thursday features Weekly Initial Jobless Claims (240K), the Philly Fed Manufacturing Index (18.4), the Capacity Utilization Rate (76.70%), Industrial Production (0.30%) and a speech by FOMC Member Kaplan . Friday’s important data then concludes the week with the Preliminary University of Michigan Consumer Sentiment survey (94.1) and a speech by FOMC Member Kaplan.

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