Released 11 October 2017 - Weekly Market News

Last week recap

Extended its previous week’s losses last week as economic data all but confirmed a December interest rate hike by the Fed, while the Euro was pressured by tension in Spain between the Spanish and Catalonian governments following last week’s referendum in favour of Catalonian independence. The week began with the pair declining after making its weekly high of 1.1807 on Monday after Catalonia voted overwhelmingly with a “yes” to secede from Spain amid violent clashes between voters and Spanish national police forces. Also, U.S. ISM Manufacturing PMI printed at 60.8 compared to an expectation of 57.9. The rate then gained a fraction on Tuesday as markets looked past the Catalonian referendum, stabilizing the single currency. The pair consolidated at a slightly higher level on Wednesday after comments from Fed Chair Janet Yellen. Speaking at a banking conference in Chicago, Yellen said that there was still “considerable slack” in the economy, also, referring to QE, Yellen said that, “I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed’. Wednesday’s numbers had U.S. ISM Non-Manufacturing PMI, printed at 59.8 versus an expectation of 55.5, while ADP Non-Farm Employment Change showed 135K new jobs last month compared to an expected 131K. The rate resumed its selloff on Thursday after the ECB Monetary Policy Meeting Accounts noted that, “A view was put forward that conditions were increasingly falling into place that would allow the intensity of monetary policy accommodation to be adapted and would provide an opportunity to scale back the Eurosystem's net asset purchases”. The account added that, “Any reassessment of the monetary policy stance should proceed in a very gradual and cautious manner, while maintaining sufficient flexibility.” Thursday’s numbers had U.S. Initial Jobless Claims drop to 260K versus 266K expected, while the U.S. Trade Balance came out with a deficit of -42.4B, which was in line with expectations. On Friday, the pair made its weekly low of 1.1668 after U.S. Average Hourly Earnings increased by +0.5% m/m compared to an expectation of +0.3%, with the previous number upwardly revised from +0.1% to +0.2%. Nevertheless, U.S. Non-Farm Payrolls disappointed the market, showing a decline of -33K jobs last month compared to an expected increase of +82K, while the U.S. Unemployment Rate fell to 4.2% from 4.4%. EUR/USD closed at 1.1727, with a loss of -0.7% for the week.
USD/JPY gained fractionally last week as tensions between the United States and North Korea continued heating up with both countries reporting mixed economic data. The week began with the pair gaining fractionally on Monday despite the Japanese Tankan Manufacturing Index printing at 22 versus an expected reading of 18, the highest reading in the index since 2007. Nevertheless, the Tankan Non-Manufacturing Index printed at 23 compared to an expected reading of 24. The rate gained another fraction on Tuesday after BOJ Deputy Governor Hiroshi Nakaso stated that Japan could smoothly withdraw its massive stimulus measures. Nakaso said that, “We cant rule out the chance the BOJ may incur red ink ... but short-term fluctuations in the BOJs revenues wont disrupt our policy-making”. Nakaso added that, “Its important to create a sustainable fiscal framework in Japan”. The pair then made its weekly low of 112.31 on Wednesday after better than expected U.S. ISM Non-Manufacturing PMI and ADP Non-Farm Employment numbers. The rate consolidated further on Thursday after positive U.S. employment and trade data. The pair made its weekly high of 113.43 on Friday after mixed U.S. employment and wage numbers. Late Friday, Reuters reported that a Russian diplomat, Anton Morozov said “they are preparing for new tests of a long-range missile” referring to North Korea, and that the missile could possibly reach the U.S. West Coast. USD/JPY closed at 112.61, with an overall gain of +0.1% from its previous weekly close.
Declined for its third consecutive week last week as calls for Prime Minister Theresa May to step down increased after the PM gave a speech at the Conservative Party Conference. The week began with Cable selling off after making its weekly high of 1.3394 on Monday after UK Manufacturing PMI printed at 55.9 compared to an expected reading of 56.3. The pair continued fractionally lower on Tuesday after UK Construction PMI, which showed a reading of 48.1 versus 51.1 expected, its lowest level since July of 2016. On Wednesday, the rate consolidated after UK Services PMI printed at 53.6 compared to an expectation of 53.2. Thursday saw Cable resume its selloff after PM Theresa May gave the keynote speech at the Conservative Party Council, in which she said that, “It’s about doing what every other major and growing economy in the world does. Not just sitting back and seeing what happens - but putting in place a plan and getting on with the job.” After the speech, it was reported that some members of May’s own party wanted May to quit due to her handling of Brexit. The rate then made its weekly low of 1.3026 after better than expected U.S. Average Hourly Earnings data and despite UK Halifax HPI, which showed an increase of +0.8% m/m versus an expected flat reading. GBP/USD went on to close at 1.3059, with an overall loss of -3.1% from its previous weekly close.
Fell fractionally last week as the RBA left interest rates unchanged, while both countries reported mixed economic data. The week began on a quiet note with the rate falling a fraction on Monday as Australia observed a bank holiday and the United States reported a better than expected PMI number. The pair then gained a fraction on Tuesday, after the RBA left its benchmark Cash Rate unchanged at 1.50% as was widely anticipated. In his Statement on Monetary Policy, Governor Philip Lowe noted that, “The Australian dollar has appreciated since mid-year, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to continued subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.” The rate then made it weekly high of 0.7874 on Wednesday despite better than expected U.S. employment and PMI data. On Thursday, the pair fell sharply after Australian Retail Sales declined by -0.6% m/m versus an expected increase of +0.3%. Nevertheless, the Australian Trade Balance showed a surplus of +0.99B compared to an expectation of +0.88B with the previous number upwardly revised from +0.46B to +0.81B. The pair then made its weekly low of 0.7732 on Friday after mixed U.S. employment and wage data. AUD/USD closed at 0.7761, with a net loss of -1.8% for the week.
USD/CAD continued gaining last week as the price of crude oil declined below the $50 per barrel handle, with mixed economic data from both countries. The week began with the pair gaining on Monday after a positive U.S. ISM Manufacturing PMI number. The rate fell a fraction on Tuesday in the absence of any significant data from either country. On Wednesday, the pair made its weekly low of 1.2448 after mixed U.S. employment and PMI numbers. The rate resumed its rally on Thursday after the Canadian Trade Balance showed a deficit of -3.4B compared to an expectation of -2.6B. The pair then made its weekly high of 1.2596 on Friday after Canadian Employment Change showed +10.0K new jobs versus an expected +13.9K, nevertheless, the Canadian Unemployment Rate declined to 6.2% from 6.3%. USD/CAD went on to close at 1.2524, with an overall weekly gain of +0.5%.
Extended its previous week’s losses last week as both countries reported mixed economic numbers. The rate began the week selling off after making its weekly high of 0.7217 on Monday after the New Zealand NZIER Business Confidence index printed at 5 compared to a previous reading of 18. The pair continued lower on Tuesday after the NZ GDT Price Index declined by -2.4% versus a previous reading of +0.9%. The rate then consolidated on Wednesday after mixed U.S. employment and PMI data. The pair resumed its selloff on Thursday after the United States reported mixed employment and trade numbers. On Friday, the rate made its weekly low of 0.7057 after U.S. Average Hourly Earnings came out better than anticipated. NZD/USD closed at 0.7079, with an overall decline of -1.7% from its previous weekly close.

The week ahead

AUD The Australian economic calendar is light this coming week, only featuring the NAB Business Confidence survey (last 5), and a speech by RBA Assistant Governor Debelle on Tuesday, followed on Friday by the RBA Financial Stability Review. Resistance for AUD/USD is seen at 0.8659, 0.8102/62 and 0.7785/0.8075, with support noted at 0.7711/33, 0.7609/0.7679 and 0.7562/72.

CAD The Canadian economic calendar is somewhat active this coming week, only featuring a Bank Holiday on Monday; Building Permits (last -3.50%) and a speech by Governing Council Member Wilkins on Tuesday; and the NHPI (0.30%) and a speech by Governing Council Member Wilkins on Thursday. Resistance for USD/CAD is seen at 1.2777, 1.2652/62 and 1.2575/99, while support shows at 1.2518/33, 1.2338/1.2465 and 1.2195/1.2239.

EUR The Eurozone economic calendar is virtually inactive this coming week, only featuring a speech by ECB President Draghi on Thursday. Resistance for EUR/USD is seen at 1.2623, 1.2329 and 1.1776/1.2091, with support showing at 1.1716/17, 1.1661/96 and 1.1583.

GBP The UK economic calendar is rather quiet this coming week, only featuring Manufacturing Production (0.30%) and the Goods Trade Balance (-11.2B) on Tuesday, followed on Thursday by the BOE Credit Conditions Survey. Resistance to the topside for GBP/USD shows at 1.3349/1.3480 and 1.3223/65, and 1.3125, while support for the pair is expected at 1.3027/47, 1.2905/84 and 1.2852.

JPY The Japanese economic calendar is peaceful this coming week, and the Japanese will observe a Bank Holiday on Monday. Resistance for USD/JPY currently shows up at 115.61, 113.25/114.49 and 112.71/92, with support indicated at 110.08/112.32, 108.13/109.91 and 107.31/48.

NZD The New Zealand economic calendar is sparse this coming week, only featuring the Business NZ Manufacturing Index (last 57.9) on Thursday. The chart for NZD/USD shows resistance at 0.7608/17, 0.7557 and 0.7131/0.7484. On the downside, technical support is expected at 0.6817/0.7056 and 0.6674/0.6738.

USD The U.S. economic calendar is busy this coming week, featuring Retail Sales data on Friday. Monday is a U.S. Bank Holiday, so Tuesday starts the week’s highlights off with a speech by FOMC Member Kashkari, and Wednesday then offers a speech by FOMC Member Kaplan, JOLTS Job Openings (6.06M) and the FOMC Meeting Minutes. Thursday features PPI (0.40%), Weekly Initial Jobless Claims (255K), Core PPI (0.20%), speeches by FOMC Members Brainard and Powell, and Crude Oil Inventories (last -6.0M), while Friday’s then concludes the week with CPI (0.60%), Core CPI (0.20%), Core Retail Sales (0.90%), Retail Sales (1.50%), Preliminary University of Michigan Consumer Sentiment survey (95.4), and speeches by FOMC Members Evans and Kaplan.


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