AUD Weekly Market Watch 4/5/2015

Last Week recap

EUR/USD Continued its rally last week as both economies reported mixed economic numbers. The rate was supported by a neutral FOMC Statement and confidence that Greece was nearing an agreement with creditors. The week began with the pair making its weekly low of 1.0818 on Monday in the absence of any significant data out of either economy. The pair extended its gains on Tuesday after Greek Prime Minister Alexis Tsirpas expressed confidence that Greece would reach an outline deal with creditors before EZ finance ministers meet on May 11th, one day before a repayment of €700 million is due to the IMF. Also, U.S. CB Consumer Climate came out with a reading of 95.2 versus 102.6 expected. The rate continued gaining on Wednesday after the FOMC Statement showed a neutral stance on rates, the Statement noted that, “The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.” Also out on Wednesday was U.S. Advance GDP, which increased only +0.2% q/q versus an anticipated increase of +1.0% with the previous number downwardly revised from +2.6% to +2.2%. On Thursday, the pair continued its rally despite German Retail Sales, which declined -2.3% m/m versus an expected increase of +0.5%, while German Unemployment Change showed a decline of -8K versus -14K expected. Thursday’s U.S. data had Initial Jobless Claims drop to 262K versus 290K expected. The rate then declined on Friday after making its weekly high of 1.1289 after U.S. ISM Manufacturing PMI printed at 51.5 versus 52.1 expected. EUR/USD went on to close at 1.1196, with an overall gain of +2.9% from its previous weekly close. 

USD/JPY Continued gaining last week as Fitch downgraded Japan on fiscal concerns and with mixed data out of the United States. The week began with the pair gaining on Monday after Japanese Retail Sales declined by -9.7% y/y versus an expected drop of -7.4%. The rate then declined on Tuesday despite Fitch’s downgrading Japan’s sovereign rating from A+ to A on fiscal concerns. The ratings agency said that it expected “the gross general government debt-to-GDP ratio to rise to 244 per cent of GDP by end-2015, by far the highest ratio of any rated sovereign”. On Wednesday, the rate gained despite a lower than expected U.S. Advance GDP and neutral FOMC Statement. The pair continued rallying on Thursday after making its weekly low of 118.49 as the Japanese Monetary Policy Statement reiterated its position on interest rates and monetary policy, while the BOJ’s Outlook Report noted that, “Japan's economy is likely to continue growing at a pace above its potential from fiscal 2015 through fiscal 2016. Thereafter, through fiscal 2017, the economy is projected to maintain its positive growth, although with a slowing in its pace to around a level somewhat below the potential growth rate. The slowdown is due mainly to (1) the effects of a front-loaded increase and subsequent decline in demand prior to and after the consumption tax hike planned in April 2017 and (2) cyclical deceleration.” Also out on Thursday was Japanese Household Spending, which declined -10.6% y/y compared to an expected decline of -11.7%, and Tokyo Core CPI, which increased +0.4% y/y versus +0.5% expected. The pair then made its weekly high of 120.28 on Friday after Japanese Average Cash Earnings increased +0.1% y/y versus +0.4% expected. USD/JPY went on to close at 120.11, with a gain of +1.0% for the week. 

GBP/USD Reversed direction, losing a fraction last week as asset flows favoured the Greenback over Sterling and with both countries reporting mixed economic data. The week began with Cable gaining on Monday after making its weekly low of 1.5106 as UK CBI Order Expectations printed at 1 versus an expected reading of 4. The pair continued higher on Tuesday despite UK Preliminary GDP, which increased +0.3% q/q compared to an expected +0.5%. On Wednesday, Cable made its weekly high of 1.5497 after a neutral FOMC Statement and lower than expected U.S. Advance GDP number. The rate then declined on Thursday after better than expected U.S. Initial Jobless Claims and Chicago PMI. Cable continued its sharp decline on Friday after UK Manufacturing PMI printed at 51.9 compared to an expected reading of 54.6, while UK Net Lending to Individuals increased to +3.1B versus +2.6B expected. GBP/USD went on to close at 1.5146, with an overall weekly loss of -0.3%.  

AUD/USD Gained another fraction last week as asset flows favoured the Aussie over the Greenback and with mixed numbers from both countries. The week began on a positive note, with the pair gaining after making its weekly low of 0.7790 on Monday after comments from the RBA’s Governor Stevens, who said in a speech that, “There has been a lot of debate about just where current capital ratios for Australian banks stand in the international rankings. The reason there is so much debate is because such comparisons are difficult to make. There seems little doubt, though, that most supervisory authorities (and for that matter most banks) around the world have, since the crisis, revised their thinking on how much capital is needed and none of those revisions has been downward.” The rate then gained sharply on Tuesday after China’s PBOC announced it would begin purchasing local government debt and the Renminbi hit a 13 month low. On Wednesday, the pair made its weekly high of 0.8074 before selling off as the FOMC Statement indicated no immediate action on interest rates and U.S. Advance GDP came out lower than expected. Thursday saw the rate extend its losses after Australian Import Prices declined -0.2% q/q, which was significantly lower than the increase of +1.1% expected. The pair continued its decline on Friday despite Australian PPI, which increased +0.5% q/q compared to +0.2% expected. AUD/USD went on to close at 0.7842, with an overall gain of +0.3% for the week. 

USD/CAD Lost a fraction last week as asset flows favoured the Loonie over the Greenback and with very little economic data out of Canada. The week began with the rate declining after making its weekly high of 1.2194 on Monday in the absence of any significant economic data out of either country. The pair continued lower on Tuesday after comments from the BOC’s Governor Poloz, who stated that, “The negative effects of lower oil prices hit some sectors of the economy right away. For example, the impact of lower prices on income and wealth has already led to a fall in household spending. The various positives—more exports because of a stronger U.S. economy and a lower Canadian dollar, and more consumption spending as households spend less on fuel—will arrive only gradually, and are of uncertain size. Therefore, in January we faced a risk that returning the Canadian economy to full capacity and stable 2 per cent inflation would be delayed significantly. Accordingly, we took out some insurance against that risk, in the form of a 25-basis-point reduction in the policy interest rate.” On Wednesday, the pair made its weekly low of 1.1944 after Canadian RMPI showed a decline of -0.9% m/m compared to an expected -1.8%. The rate then gained on Thursday despite Canadian GDP, which showed a flat reading m/m compared to an expected decline of -0.1%. Friday saw the pair continue higher despite a lower than expected U.S. ISM Manufacturing PMI number. USD/CAD closed at 1.2166, with a gain of just +0.1% for the week.

NZD/USD Extended its previous week’s losses last week as the RBNZ left rates unchanged, but indicated an easing bias in the bank’s rate statement.  The week began with the pair gaining on Monday in the absence of any significant data out of either country. The rate extended its gains on Tuesday after New Zealand reported a Trade surplus of +631M compared to an expected surplus of +315M. On Wednesday, the rate made its weekly high of 0.7742 before trading sharply lower after the RBNZ left its benchmark Official Cash Rate unchanged at 3.5%. The bank’s rate statement noted that, “Lower fuel prices, coming on top of the high exchange rate and low global inflation, lowered annual CPI inflation to 0.1 percent in the March quarter. Underlying inflation remains low and is expected to pick up gradually. Monetary policy will focus on the medium-term trend in inflation. The Bank expects to keep monetary policy stimulatory, and is not currently considering any increase in interest rates.” The pair consolidated on Thursday after mixed economic data out of the United States. Friday saw the rate resume its decline, making its weekly low of 0.7505 before recovering somewhat to close the week at 0.7536, showing an overall decline of -0.8% from its previous weekly close.

The Week Ahead

USD: The U.S. economic calendar is moderately active this coming week, featuring key jobs data on Wednesday and Friday.  Monday starts the week’s highlights off with Factory Orders (2.1%) and a speech by FOMC Member Evans, and Tuesday’s key events include the Trade Balance (-39.2B) and ISM Non-Manufacturing PMI (56.2). Wednesday then offers the ADP Non-Farm Employment Change (192K), Preliminary Non-farm Productivity (-1.7%), Preliminary Unit Labor Costs (4.0%) and a speech by Fed Chair Yellen. Thursday features Weekly Initial Jobless Claims (275K), while Friday’s important data then concludes the week with Non-Farm Payrolls (231K), the Unemployment Rate (5.4%) and Average Hourly Earnings (0.2%).

AUD: The Australian economic calendar is quite busy this coming week, featuring the RBA’s Cash Rate Decision on Tuesday.  Monday starts the week’s highlights off with Building Approvals (-1.7%) and ANZ Job Advertisements (-1.4%), and Tuesday’s key events include the Trade Balance (-0.98B), the RBA’s Cash Rate Decision (25 bp cut to 2.00% from 2.25%), the RBA’s Rate Statement. Wednesday then offers Retail Sales (0.4%), while Thursday features the Employment Change (4.0K) and the Unemployment Rate (6.2%). Friday’s important data then concludes the week with the RBA’s Monetary Policy Statement. Resistance for AUD/USD is seen at 0.7839/0.7937, 0.8024 and 0.8074, with support noted at 0.7682/0.7737, 0.7625/43 and 0.7532/75.

NZD: The New Zealand economic calendar is rather quiet this coming week, only featuring the tentative scheduled GDT Price Index (-3.6%), as well as the Employment Change (0.8%) and Unemployment Rate (5.5%), which are all due out on Tuesday. The chart for NZD/USD shows resistance at 0.7535/72, 0.7605/95 and 0.7739/42.  On the downside, technical support is expected at 0.7605, 0.7505 and 0.7430/92.

GBP: The UK economic calendar is less active than usual this coming week, featuring Parliamentary Elections on Thursday.  Monday is a Bank Holiday, and Tuesday’s key events include the Halifax HPI (5th-7th May, 0.3%) and Construction PMI (57.6).  . Wednesday then offers Services PMI (58.6), while Thursday features UK Parliamentary Elections. Friday’s important data then concludes the week with the Trade Balance (-9.8B). Resistance to the topside for GBP/USD shows at 1.5164, 1.5222/68 and 1.5315/51, while support for the pair is expected at 1.5106/13, 1.5053 and 1.4971/93.

EUR: The Eurozone economic calendar is fairly active this coming week, featuring Spanish Employment Change data on Tuesday.  Monday starts the week’s highlights off with Spanish Manufacturing PMI (54.6), Italian Manufacturing PMI (53.4), and German Final Manufacturing PMI (51.9), and Tuesday’s key events include the Spanish Unemployment Change (-64.8K) and EU Economic Forecasts. Wednesday then offers Spanish Services PMI (57.4), Italian Services PMI (52.1), German Final Services PMI (54.4) and Retail Sales (-0.4%), while Thursday features German Factory Orders (1.6%). Friday offers nothing notable and is a Bank Holiday in France. Resistance for EUR/USD is seen at 1.1269/89, 1.1388 and 1.1442/49, with support showing at 1.1097, 1.1035/52 and 1.0899/1.0906.

JPY: The Japanese economic calendar is quiet this coming week, only featuring the BOJ’s Monetary Policy Meeting Minutes on Friday. Also, Monday, Tuesday and Wednesday are Bank Holidays in Japan. Resistance for USD/JPY currently shows up at 120.14/121.19 and 121.84/122.02, with support indicated at 119.28/62, 118.04/71 and 116.87/92.

CAD: The Canadian economic calendar is busier than usual this coming week, featuring key jobs data on Friday.  Monday offers nothing of note, so Tuesday starts the week’s highlights off with the Trade Balance (-0.6B) and a speech by Governing Council Member Wilkins. Wednesday’s key events then include Ivey PMI (50.1), while Thursday features Building Permits (-0.9%). Friday’s important data then concludes the week with the Employment Change (28.7K) and the Unemployment Rate (6.8%). Resistance for USD/CAD is seen at 1.2428/48, 1.2304/1.2409 and 1.2203, while support shows at 1.2045/1.2102, 1.1944 and 1.1802/41.