AUD Weekly Market Watch 25/08/2014

Last Week recap

EUR/USD Continued selling off last week as the FOMC Meeting Minutes revealed members discussed an exit strategy for stimulus measures, and Fed Chair Janet Yellen inaugurated the Jackson Hole Symposium with a hawkish speech on Friday. The week began with the rate making its weekly high of 1.3398 on Monday as the German Bundesbank released its monthly report, noting that, “The annual rate of inflation as measured by the national consumer price index (CPI) as well as the Harmonised Index of Consumer Prices (HICP) went up to 1.0%, compared with 0.9% (CPI) and 0.6% (HICP).” The pair continued its selloff on Tuesday after positive U.S. housing data, with Building Permits rising to +1.05M versus the +1.0M forecast, and Housing Starts, rising to +1.09M versus an expected +0.97M with the previous number upwardly revised from +0.89M to +0.95M. Also out was U.S. CPI, increasing +0.1% m/m as widely anticipated, while Core CPI gained +0.1% m/m versus +0.2% expected. On Wednesday, the rate dropped sharply after the Fed released it FOMC Meeting Minutes for its August 7-8th meeting. The minutes stated that, “Participants expressed general support for the normalization approach outlined by the staff, though some noted reservations about one or more of its features. Almost all participants agreed that it would be appropriate to retain the federal funds rate as the key policy rate, and they supported continuing to target a range of 25 basis points for this rate at the time of liftoff and for some time thereafter.” The pair then recovered some of its losses on Thursday after mixed European PMI data, with German Flash Manufacturing PMI printing at 52.0, in line with forecasts and German Flash Services PMI, showing a reading of 56.4, versus an anticipated 55.5 print. French Manufacturing PMI missed expectations printing at 46.5 versus 47.9 anticipated, while French Services PMI showed a reading of 51.1, beating the forecast reading of 50.3. Thursday’s U.S. numbers had the Philly Fed Manufacturing Index show a reading of 28.0, significantly higher than the expected print of 19.7, and U.S. Flash Manufacturing PMI, printing at 58.0 versus 55.7 expected. Also, Initial Jobless Claims showed 298K new claims versus 302K expected. The rate then resumed its selloff on Friday after Fed Chair Yellen opened the Jackson Hole Symposium addressing employment issues, which the market interpreted as hawkish. Also, ECB President Draghi, speaking afterwards noted that, “The way back to higher employment, in other words, is a policy mix that combines monetary, fiscal and structural measures at the union level and at the national level. This will allow each member of our union to achieve a sustainably high level of employment.” EUR/USD went on to close at 1.3242, showing an overall loss for the week of -0.9%. 

USD/JPY Extended its gains last week as the United States reported positive economic data, a hawkish FOMC statement and mixed economic data out of Japan.  The week began with the pair making its weekly low of 102.37 on Monday after a positive U.S. NAHB Housing Market Index reading, printing at 55 versus an anticipated print of 53. The rate continued gaining on Tuesday as U.S. housing and CPI data favoured the Greenback. On Wednesday, the pair kept rallying after the release of the FOMC Meeting Minutes and as the Japanese Trade Balance came out showing a deficit of -1.02T versus an anticipated deficit of -0.77. Also, Japanese All Industries Activity decreased -0.4% m/m versus -0.2% expected.  The rate continued trading higher on Thursday despite Japanese Flash Manufacturing PMI printing at 52.4 versus an expected reading of 51.7, and after better than expected U.S. numbers. The pair then made its weekly high of 1.0418 on Friday after hawkish words from Fed Chair Janet Yellen in Jackson Hole. USD/JPY went on to close at 103.93, with a weekly gain of +1.5%.  

GBP/USD Extended its previous week’s losses last week after the BOE’s MPC Meeting Minutes showed two members dissenting on interest rates and as the UK reported mixed economic data. The week began on a positive note, with Cable making its weekly high of 1.6736 on Monday despite a positive U.S. housing number. The rate then began selling off sharply on Tuesday after UK CPI increased +1.6% m/m failing to meet expectations of a +1.8% rise. Also out Tuesday were UK RPI, increasing +2.5% y/y and just missing expectations of +2.6%, and PPI Input, declining -1.6% m/m versus the -1.0% forecast.  Cable extended its losses on Wednesday after the MPC Meeting Minutes showed that members Weale and McCafferty dissented on an interest rate hike, stating that, “Since monetary policy ... could be expected to operate only with a lag, it was desirable to anticipate labour market pressures by raising the Bank Rate in advance”. Nevertheless, the MPC majority stated that, “A premature tightening in monetary policy might leave the economy vulnerable to shocks, with the effectiveness of any further necessary stimulus being limited by the effective lower bound on Bank Rate”. The pair extended its losses on Thursday after UK Retail Sales increased +0.1% m/m versus an expected increase of +0.4% and UK Public Sector Net Borrowing dropped by -1.1B, missing the forecast decline of -1.9B. On Friday, Cable made its weekly low of 1.6560 before closing at 1.6571 after a hawkish speech by Fed Chair Yellen in Jackson Hole. GBP/USD showed a decline of -0.7% from its previous weekly close.

AUD/USD Lost a fraction last week as the RBA’s Monetary Policy Meeting Minutes reiterated the central bank’s position in keeping rates low and as the Fed’s FOMC Meeting Minutes and positive U.S. economic data supported the Greenback. The week began with the pair gaining slightly on Monday despite Australian New Motor Vehicle sales declining -1.3% m/m versus a previous reading of +2.2 upwardly revised from +1.7%. The rate then declined after making its weekly high of 0.9345 on Tuesday after positive U.S. housing numbers and the RBA’s Monetary Policy Meeting Minutes, which reiterated the bank’s position on keeping rates low for a considerable period and that policymakers continue to see uncertainties in the Australian economic outlook. The minutes noted that, “Conditions in foreign exchange markets continued to be quiet over the past month, with little change in major exchange rates in July and volatility remaining around historic lows. The US dollar recorded a modest appreciation while the euro depreciated by 2 per cent on a trade-weighted basis. The Australian dollar also depreciated slightly against the US dollar and on a trade-weighted basis over the past month, although it remained well above its level in late January notwithstanding lower commodity prices and a narrowing in interest rate differentials between Australia and most other advanced economies since then.” The pair continued selling off on Wednesday after a speech by RBA Governor Stevens and the release of the FOMC Meeting Minutes. On Thursday, the rate made its weekly low of 0.9235 before trading higher after the Australian CB Leading Index showed an increase of +0.4% m/m versus a previous reading of +0.2%. The pair continued gaining on Friday despite comments from the Fed’s Yellen at Jackson Hole. AUD/USD went on to close at 0.9316, showing a decline of a mere -4 pips and virtually unchanged on the week. 

USD/CAD Reversed direction gaining ground last week after Canada reported mixed economic numbers and the Greenback was supported by positive U.S. data and the FOMC Meeting Minutes. The pair began the week on a soft note, with the pair consolidating after making its weekly low of 1.0874 despite Canadian Foreign Securities Purchases showing a decline of -1.07B, significantly lower than the increase of +14.68B that was expected. The rate then gained sharply on Tuesday after positive U.S. housing data. The pair extended its gains on Wednesday despite Canadian Wholesale Sales increasing +0.6% m/m versus +0.4% expected. The rate then made its weekly high of 1.0935 before declining on Thursday after the United States reported better than expected manufacturing, employment and housing numbers. On Friday, the pair consolidated at a slightly higher level after Canadian CPI declined -0.2% m/m versus an expected decline of -0.1%, and Core CPI, dropping -0.1% versus an expected increase of +0.1%. Also out were Canadian Retail Sales, which increased +1.1% m/m, significantly higher than the +0.3% that was forecast, also, Canadian Core Retail Sales increased +1.5% m/m, beating the consensus of a +0.4% rise. USD/CAD went on to close at 1.0946, showing an overall weekly gain of +0.8%. 

NZD/USD Lost ground last week as the Greenback gained against all major currencies and New Zealand reported mixed economic data. The week began with the pair declining after making its weekly high of 0.8499 as New Zealand reported PPI Input declined -1.0% q/q versus an expected increase of +0.7%, while PPI Output dropped -0.5% q/q versus +0.8% forecast.  The pair continued its slide on Tuesday after New Zealand Inflation Expectations increased +2.2% q/q versus a previous reading of +2.4%. The rate extended losses on Wednesday after New Zealand Visitor Arrivals dropped -0.5% m/m versus a previous reading of -0.3%. On Thursday, the pair gained ground after making its weekly low of 0.8347 as New Zealand Credit Card Spending increased +4.5% y/y versus a previous reading of +6.0% downwardly revised from +7.0%. The rate continued higher on Friday despite a hawkish speech by Fed Chair Yellen in Jackson Hole. NZD/USD went on to close at 0.8400, showing a decline of -1.0 from its previous weekly close. 

The Week Ahead

USD: The upcoming U.S. economic calendar is about as active as last week, featuring Preliminary GDP data on Thursday.  Monday starts the week’s highlights off with New Home Sales (426K), and Tuesday’s key events include Core Durable Goods Orders (0.5%), Durable Goods Orders (7.4%), S&P/CS Composite-20 HPI (8.2%), and CB Consumer Confidence 89.1.  Wednesday then features Crude Oil Inventories (last -4.5M), while Thursday offers Preliminary GDP (3.9%), Weekly Initial Jobless Claims (299K), and Pending Home Sales (0.6%). Friday’s important data then concludes the week with the Core PCE Price Index (0.1%), Personal Spending (0.2%), the Chicago PMI (56.3), and the Revised University of Michigan Consumer Sentiment survey (80.4).

AUD: The upcoming Australian economic calendar is quieter than last week, only featuring  the Jackson Hole Symposium on Sunday, Construction Work Done (-0.4%) on Wednesday, and Private Capital Expenditure (-0.8%) on Thursday. Resistance for AUD/USD is seen at 0.9321/0.9373, 0.9401/0.9469 and 0.9504, with support noted at 0.9274, 0.9200/53 and 0.9112/37.

NZD: The upcoming New Zealand economic calendar is as quiet as last week, only featuring the Jackson Hole Symposium on Sunday, the Trade Balance (-475M) on Tuesday, and Building Consents (3.5%) and ANZ Business Confidence (39.7) on Friday. The chart for NZD/USD shows resistance at 0.8406/61, 0.8512/0.8602, and 0.8640/0.8734.  On the downside, technical support is expected at 0.8390, 0.8346 and 0.8240.

GBP: The upcoming UK economic calendar is less active than last week, featuring CBI Realized Sales data on Thursday. Monday is a UK Bank Holiday, so Tuesday starts the week’s highlights off with BBA Mortgage Approvals (44.2K), and Wednesday is quiet. Thursday’s key events then include CBI Realized Sales (25), while Friday’s important data concludes the week with Nationwide HPI (0.0%) and the tentatively scheduled Preliminary Business Investment (2.1%). Resistance to the topside for GBP/USD shows at 1.6582, 1.6656/67 and 1.6730/65, while support for the pair is expected at 1.6465, 1.6251/1.6309 and 1.6215.

EUR: The upcoming Eurozone economic calendar is about as busy as last week, featuring the EZ Flash CPI Estimate on Friday.  Monday starts the week’s highlights off with the German Ifo Business Climate survey (107.1), and Tuesday offers little of note. Wednesday’s key events then include the EZ GfK German Consumer Climate survey (8.9), while Thursday features German Preliminary CPI (0.0%), Spanish Flash CPI (-0.2%), the German Unemployment Change (-6K), EZ M3 Money Supply (1.5%), Private Loans (-1.5%), and the tentatively scheduled Italian 10-year Bond Auction (last average yield 2.60%, with a 1.5 bid to cover ratio). Friday’s important data then concludes the week with German Retail Sales (0.1%), the EZ CPI Flash Estimate (0.3%), the EZ Core CPI Flash Estimate (0.8%) and the EZ Unemployment Rate (11.5%). Resistance for EUR/USD is seen at 1.3294, 1.3332/35 and 1.3366, with support showing at 1.3242, 1.3220 and 1.3003.

JPY: The upcoming Japanese economic calendar is roughly as quiet as last week, only featuring Household Spending (-2.7%), Tokyo Core CPI (2.7%), Preliminary Industrial Production (1.4%) and Retail Sales (-0.1%) on Friday. Resistance for USD/JPY currently shows up at 104.12/19, 105.43 and 110.39, with support indicated at 103.75, 102.71/103.07 and 101.31/102.12.

CAD: The upcoming Canadian economic calendar is quieter than last week, only featuring the Current Account (-11.4B) on Thursday, and GDP (0.3%) and the RMPI (0.7%) on Friday. Resistance for USD/CAD is seen at 1.0943/85, 1.1052 and 1.1194, while support shows at 1.0903, 1.0859 and 1.0693/1.0813.

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