AUD Weekly Market Watch 31/03/2014

Last week recap

EUR/USD  continued declining last week, losing fractionally as both countries reported mixed economic numbers and the Bundesbank’s Jens Weidmann did not completely rule out further QE. The week began with the rate making its weekly high of 1.3875 on Monday after the G7 met in The Hague to discuss the situation in Ukraine and Crimea. Economic numbers had French Flash Manufacturing PMI printing at 51.9, versus 49.8 that was expected, while French Flash Services PMI came out with a reading of 51.4, versus 47.9 expected. Nevertheless, German Flash Manufacturing PMI printed 53.8 versus 54.7 expected, and German Flash Services PMI, at 54.0, versus 54.7 expected. Monday’s U.S. numbers had Flash Manufacturing PMI print at 55.5, versus 56.6 expected. The pair then began its decline on Tuesday after comments from the Bundesbank and ECB Council member Jens Weidmann, who did not rule out further easing measures stating that “negative rates” were a “more appropriate measure” against the euro’s appreciation on inflation. Tuesday’s economic data included, German Ifo Business Climate, which came out with a reading of 110.7, versus 110.9 expected; U.S. numbers had CB Consumer Confidence print at 82.3, versus an expected reading of 78.7, while New Home Sales showed an annualized 440K, versus 447K that was expected. The rate extended its losses on Wednesday after St. Louis Fed Chief Bullard said that "there's a little bit of ambiguity around the notion of when the QE program ends." Stating that the Fed "has not really talked about that" and that QE was a "data-based policy" and not a "calendar based policy". Economic numbers had U.S. Durable Goods Orders increase +2.2% m/m, double the expected reading of +1.1%, while Core Durable Goods rose +0.2%, in line with expectations. Wednesday’s EZ numbers had German GfK Consumer Climate print at 8.5 as was widely anticipated. The pair continued heading south on Thursday after U.S. Initial Jobless Claims showed 311K, versus 326K expected, and despite U.S. Final GDP missing expectations printing at 2.6%, versus an expected reading of 2.7%, also, U.S. Pending Home Sales declined -0.8% m/m, versus an expected increase of +0.1%. On Friday, the pair made its weekly low of 1.3704 as talk of further easing by the ECB at this week’s meeting weighed on the rate. Friday’s economic number had German Preliminary CPI increase +0.3% m/m, versus +0.4% expected, and French Consumer Spending increase +0.1% m/m, versus an expected increase of +1.0%. EUR/USD went on to close the week at 1.3751, showing an overall decline of -0.3% from its previous weekly close. 

USD/JPY extended its previous week’s gains last week as asset flows favoured the Greenback and with mixed economic numbers out of both countries. The week began with the pair consolidating at a slightly higher level on Monday despite a lower than expected U.S. Flash Manufacturing PMI number. The pair then rose fractionally on Tuesday after mixed U.S. Consumer Confidence and housing data. On Wednesday, the pair declined despite a better than expected U.S. Durable Goods Orders release and dovish comments from the Fed’s Bullard. The rate then made its weekly low of 101.71 on Thursday after a lower than expected U.S. Final GDP and Pending Home Sales numbers. The rate then recovered and closed higher on Thursday. The pair then made its weekly high of 102.42 on Friday after Japanese Household Spending declined -2.5% y/y, significantly lower than the increase of +0.2% that was expected. Nevertheless, Japanese Core CPI increased +1.0% y/y, versus +0.9% expected, and Japanese Retail Sales rose +3.6% y/y, versus +3.4% that was expected.  USD/JPY went on to close at 102.75, showing an overall gain of +0.5% for the week. 

GBP/USD reversed direction, gaining ground last week as the UK government sold a £4.2 billion stake in Lloyds Banking Group and with both countries reporting mixed economic data. The week began with the rate consolidating at a slightly higher level on Monday after making its weekly low of 1.6464 after a lower than expected U.S. Flash Manufacturing PMI number. Cable continued rising on Tuesday after UK CPI increased +1.7% y/y as was widely anticipated, also, UK RPI increased +2.7% y/y, versus +2.6% expected; however, BBA Mortgage Approvals showed 47.6K, versus 50.0K expected, while UK PPI Input declined -0.4% m/m, versus an expected increase of +0.4%,which limited Sterling’s gains on Tuesday. Cable kept climbing on Wednesday after news that the UK government had sold its stake in Lloyds Banking Group, the 7.8% stake in the company raised £4.2B, which according to George Osborne, Chancellor of the Exchequer, will be used to pay off national debt. Also supporting the rate were comments by MPC member Martin Weale, who stated, “My sense is things are going quite well. That looking at the evidence, the economy is growing in a way which is quite different from a year ago. Inflation is slightly below target and after a long period of above target inflation that is certainly good news if you are doing my job.” On Thursday, Cable continued its rally after UK Retail Sales increased +1.7% m/m, significantly higher than the +0.5% increase that was expected. The pair then made its weekly high of 1.6650 on Friday despite the UK Current Account showing a deficit of -22.4B, versus an expected deficit of -13.4B, with the previous number downwardly revised from -20.7B to -22.8B. Also out was UK Final GDP, rising +0.7% q/q, as was widely anticipated. GBP/USD went on to close at 1.6637, with a gain of +1.0% for the week. 

AUD/USD extended its previous week’s gains, rallying sharply last week as the rate was supported by positive comments from the RBA’s Stevens and as traders expected the cycle of lower rates was over for the RBA. The week began on a firm note, with the rate trading higher after making its weekly low of 0.9046 on Monday after a lower than expected U.S. Flash Manufacturing PMI number. The pair continued higher on Tuesday after comments from the RBA’s Deputy Governor Lowe, in which he stated, “The relatively high reliance of Australian issuers on the offshore market is evident in the data on the composition of corporate bonds outstanding. Currently, bonds that were issued offshore account for around 80 per cent of the outstanding value of bonds issued by Australian-based corporations. A decade ago, this figure was considerably lower at around 50 per cent. The offshore market is favoured by companies that want to raise foreign currency funding as a natural hedge against their foreign currency revenue.” The rate kept climbing on Wednesday after RBA Governor Stevens noted that, “Overall, in 2014 economic global growth is thought likely by major forecasters to be a bit higher than in 2013, and at about average pace. More of the growth is coming from the advanced countries, and proportionately not quite so much from the emerging ones. That is probably a welcome re-balancing in some respects, after the weakness of the advanced countries in recent years.” The rate continued rallying on Thursday after lower than expected U.S. Final GDP and Pending Home Sales numbers. On Friday, the pair made its weekly high of 0.9294 before selling off on position squaring, which brought AUD/USD to close at 0.9246, showing an overall weekly gain of +1.8%. 

USD/CAD reversed direction, trading lower last week, as risk appetite favoured the Loonie over the Greenback and with virtually no economic data released out of Canada. The week began with the rate rising fractionally on Monday despite a lower than expected U.S. Manufacturing PMI number and after comments from Timothy Lane, BOC Governing Council Member. Lane gave a speech on financial benchmarks in Toronto, in which he described problems with some of the benchmarks such as the LIBOR rate, “As alleged misconduct related to such benchmarks has been investigated, firms have paid multi-billion-dollar fines, and some high-flying traders have lost their jobs. These headlines have been damaging to trust. They raise doubt about whether some key financial benchmarks were in fact providing an unbiased, arm’s length measure of actual market conditions. At the extreme, they could even be seen as raising questions about the integrity of the wider financial system.”  The pair then began selling off on Tuesday after mixed Consumer Confidence and New Home Sales numbers out of the United States. The pair extended its losses on Wednesday despite better than expected U.S. Durable Goods Orders. On Thursday, the rate continued heading south as the U.S. reported a lower than expected Final GDP number and lower Pending Home Sales. The pair then made its weekly low of 1.1000, before rallying on short covering, which brought USD/CAD to close at 1.1058, showing an overall loss of -1.4% from its previous weekly close. 

NZD/USD gained ground last week as risk appetite and asset flows favoured the Kiwi over the Greenback, and with very little in the way of economic releases from New Zealand. The week began on a positive note, with the rate rising after making its weekly low of 0.8513 on Monday after a lower than expected U. S. Manufacturing PMI number. The pair continued gaining on Tuesday as the United States reported mixed economic data. On Wednesday, the rate kept rallying despite better than expected U.S. Durable Goods Orders and after the New Zealand Trade Balance came out showing a surplus of +818M, significantly higher than the +595M surplus that was expected. The pair extended its gains on Thursday after lower than expected U.S. Final GDP and Pending Home Sales. The rate then traded lower on Friday after making its weekly high of 0.8695, bringing NZD/USD to close at 0.8647, showing an overall gain of +1.4% for the week. 
  

The Week Ahead

USD: The upcoming U.S. economic calendar is less active than last week, featuring key jobs data on Wednesday and Friday.  Monday starts the week’s highlights off with the Chicago PMI (59.2) and a speech by Fed Chairperson Yellen, and Tuesday’s key events include ISM Manufacturing PMI (54.2).  Wednesday then features the ADP Non-Farm Employment Change (192K), Factory Orders (1.3%) and Crude Oil Inventories (last 6.6M), while Thursday offers the Trade Balance (-38.3B), Weekly Initial Jobless Claims (319K), and ISM Non-Manufacturing PMI (53.5). Friday’s important data then concludes the week with Non-Farm Payrolls (196K), the Unemployment Rate (6.6%) and Average Hourly Earnings (0.2%). 

AUD: The upcoming Australian economic calendar is busier than last week, featuring the RBA Rate Decision on Tuesday.  Monday starts the week’s highlights off with Private Sector Credit (0.4%) and the tentatively scheduled HIA New Home Sales data (last 0.5%), and Tuesday’s key events include the RBA’s Cash Rate Decision (2.50%) and RBA Rate Statement.  Wednesday then features Building Approvals (-1.7%), while Thursday offers Retail Sales (0.4%), the Trade Balance (0.82B) and a speech by RBA Governor Stevens to conclude the week since Friday is quiet. Resistance for AUD/USD is seen at 0.9279/0.9317, 0.9527 and 0.9757, with support noted at 0.9112/37, 0.8981/0.9085 and 0.8889/0.8937. 

NZD: The upcoming New Zealand economic calendar is about as quiet as last week, only featuring Building Consents data (last -8.3%) and the ANZ Business Confidence survey (last 70.8) on Monday. The chart for NZD/USD shows resistance at 0.8671/95, 0.8764 and 0.8840.  On the downside, technical support is expected at 0.8638/41, 0.8532/84, and 0.8499/0.8523.

GBP: The upcoming UK economic calendar is about as active as last week, featuring a speech by BOE Governor Carney on Monday.  Sunday is the UK Daylight Savings Time Shift, while Monday starts the week’s highlights off with Net Lending to Individuals (2.3B) and a speech by BOE Governor Carney, and Tuesday’s key events include Manufacturing PMI (56.7).  Wednesday then features Nationwide HPI (0.7%), Construction PMI (63.1), and a speech by MPC Member Cunliffe, while Thursday offers Services PMI (58.2) and the BOE Credit Conditions Survey. Friday’s important data then concludes the week with the tentatively scheduled Halifax HPI (4th-8th of April, 0.7%). Resistance to the topside for GBP/USD shows at 1.6650/67, 1.6717/85 and 1.6802/22, while support for the pair is expected at 1.6577/1.6640, 1.6441/65 and 1.6251/60.

EUR: The upcoming Eurozone economic calendar is quieter than last week, featuring the ECB Rate Decision on Thursday.  Sunday is the Eurozone’s Daylight Savings Time Shift, while Monday starts the week’s highlights off with German Retail Sales (-0.3%) and the CPI Flash Estimate (0.6%), and Tuesday’s key events include Spanish Manufacturing PMI (52.9), Italian Manufacturing PMI (52.2), the German Unemployment Change (-9K), the EZ Unemployment Rate (12.0%), and the first day of the ECOFIN Meetings.  Wednesday then features the Spanish Unemployment Change (-5.3K) and the second day of the ECOFIN Meetings, while Thursday offers Spanish Services PMI (54.1), Italian Services PMI (52.3), Retail Sales (-0.3%), the ECB’s Minimum Bid Rate Decision (unchanged at 0.25%), and the ECB Press Conference. Friday’s important data then concludes the week with German Factory Orders (0.5%). Resistance for EUR/USD is seen at 1.3772/98, 1.3824/1.3970 and 1.4000, with support showing at 1.3698/1.3748, 1.3642 and 1.3561. 

JPY: The upcoming Japanese economic calendar is about as busy as last week, featuring the Tankan indexes on Tuesday.  Monday starts the week’s highlights off with Preliminary Industrial Production (3.6%), and Tuesday’s key events include the Tankan Manufacturing Index (19), the Tankan Non-Manufacturing Index (24) and Average Cash Earnings (-0.1%). The rest of the week offers little noteworthy data. Resistance for USD/JPY currently shows up at 102.97, 103.75 and 104.83/91, with support indicated at 102.64/102.82, 101.43/102.14, and 100.00/101.20. 

CAD: The upcoming Canadian economic calendar is busier than last week, featuring key jobs data on Friday.  Monday starts the week’s highlights off with GDP (0.4%), and Tuesday’s key events include RMPI (2.3%).  Wednesday then offers little of note, while Thursday features the Trade Balance (0.2B). Friday’s important data then concludes the week with the Employment Change (25.3K), Unemployment Rate (7.0%), and Ivey PMI (58.3). Resistance for USD/CAD is seen at 1.1099/94, 1.1229 and 1.1277, while support shows at 1.1039/1.1053, 1.0939/99 and 1.0909.