AUD Weekly Market Watch 30/11/2015

Last Week recap

EUR/USD Extended its previous week’s losses last week as both economies reported mixed economic data with continued talk of the ECB increasing stimulus measures at their upcoming meeting this week. The week began with the pair consolidating at a slightly lower level on Monday after the Fed made a special announcement of one line of text which read: “Review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.” Monday’s economic data had French Flash Manufacturing PMI print at 50.8, in line with expectations, while German Flash Manufacturing PMI printed at 52.6 compared to an expectation of 52.2. The rate then gained a fraction on Tuesday after German Ifo Business Climate printed at 109.0 versus 108.3 expected, also, U.S. Preliminary GDP increased +2.1% q/q versus +2.0% anticipated and U.S. CB Consumer Confidence, which printed at 90.4 compared to an expected reading of 99.3. On Wednesday, the pair lost ground after making both its weekly low of 1.0565 and its weekly high of 1.0688 after an unnamed ECB official told Reuters that the central bank was considering several options for increasing stimulus at its next meeting. These measures included staggering charges on banks hoarding cash and additional asset purchases. In addition, the official said the bank was considering a split level rate to soften the impact of negative interest rates. In a separate statement, the ECB said that its asset purchase program would be paused between December 22nd, 2015 and January 1st, 2016 due to lower liquidity during the holiday season with purchases frontloaded to November 27th until December 21st. Wednesday’s economic data had U.S. Core Durable Goods Orders increase +0.5% m/m as widely anticipated, while the headline number increased +3.0% m/m compared to an expected +1.6%. Also, U.S. Initial Jobless Claims saw +260K claims last week compared to an expected +273K. The rate continued declining on Thursday after the ECB’s Financial Stability Review noted that, “highly indebted foreign-currency borrowers may be vulnerable to a prospective normalization of financial conditions in the U.S. and other advanced economies.” and that, “misaligned asset prices are a key vulnerability in that they could potentially lead, at some point, to sharp adjustments of risk premia.” Thursday’s data had Eurozone M3 Money Supply increase +5.3% y/y versus +4.9% expected. The pair lost a fraction on Friday as Spanish Flash CPI declined -0.3% y/y compared to -0.5% expected. EUR/USD went on to close at 1.0590, with an overall loss of -0.5% from its previous weekly close. 

USD/JPY Showed little change last week as the BOJ’s Monetary Policy Meeting Minutes noted that the timeframe on reaching its 2% inflation goal would be extended, while both countries reported mixed economic numbers. The pair began the week making its weekly high of 123.25 on Monday as Japan observed a bank holiday and the Fed issued its special statement regarding interest rates. The pair continued selling off on Tuesday after the BOJ’s Monetary Policy Meeting Minutes noted that, “members concurred that the timing of reaching around 2 percent was projected to be delayed compared with the projection in the July 2015 interim assessment, but this was due mainly to the effects of the decline in crude oil prices, and the underlying trend in inflation had steadily been improving,” adding that, “a few members added that the projected delay in the timing of reaching 2 percent had also been partly attributable to a somewhat slow improvement in the output gap.” On Wednesday, the rate gained ground after making its weekly low of 122.25 as the U.S. reported positive Durable Goods Orders and employment data. Thursday saw the pair lose a fraction after Tokyo Core CPI came out with a reading of 0.0% y/y compared to an expected decline of -0.1%, nevertheless, Japanese Household Spending declined -2.4% y/y versus an expected flat reading which limited the yen’s gains. USD/JPY went on to close at 122.72, with a loss of just -8 pips and virtually unchanged on the week. 

GBP/USD Extended its previous week’s losses last week as the BOE’s Governor Carney testified at the Inflation Report Hearings and HM Treasury released the Autumn Forecast Statement. Cable began the week declining after making its weekly high of 1.5195 on Monday after the U.S. Fed issued a special announcement on interest rates. The rate continued sliding on Tuesday after BOE Governor Mark Carney testified before parliament at the Inflation Report Hearings that, “the question in my mind is when is the appropriate time for interest rates to increase, and that is strongly consistent with the strength of the domestic economy.” While the central bank’s Chief Economist, Andy Haldane testified that, “balance of risks around UK GDP growth and inflation is skewed materially to the downside, more so than embodied in the November 2015 Inflation Report.” Cable then gained ground on Wednesday after George Osborne, Chancellor of the Exchequer told the House of Commons after the release of the Autumn Forecast Statement that, “The forecast I present shows that after the longest period of rising debt in our modern history, this year our debt will fall and keep falling in every year that follows. The four-year public spending plans that I set out are forecast to deliver that surplus, so we don’t borrow forever and are ready for whatever storms lie ahead.” The rate then resumed its decline on Thursday as the United States observed a bank holiday and with no significant data out of the UK. Cable then made its weekly low of 1.5029 on Friday after UK Second Estimate GDP increased +0.5% q/q as was widely expected, while UK Preliminary Business Investment increased +2.2% q/q compared to an expected increase of +1.5%. GBP/USD closed at its weekly low of 1.5029, with an overall decline of -1.1% for the week. 

AUD/USD Reversed direction, declining a fraction last week as Australia reported mostly lower than expected economic data and with mixed numbers out of the United States. The week began with the pair making its weekly low of 0.7158 on Monday after the U.S. Fed’s announcement on interest rates. The rate then gained ground on Tuesday after comments from RBA Governor Stevens, in which he responded to why the RBA had not yet lowered interest rates, saying, “I am more than content to lower rates if that actually helps, but is that the best thing to do at any particular time, that's the question that I frame. As for February, you know that's three months away, we've got Christmas, we should just chill out, come back and see what the data says.” The rate then made its weekly high of 0.7282 before selling off after RBA Assistant Governor Debelle said at a foreign exchange conference that, “As we develop the single code of conduct for the FX market, the intention is that the market will move further to a more favourable and desirable location and allow participants to have much greater confidence that the market is functioning appropriately. We need this to occur, as it very much in all our interests to have a well-functioning foreign exchange market.” Wednesday’s data had Australian Construction Work Done decline -3.6% q/q versus an expectation of -1.8%. The pair continued its slide on Thursday after Australian Private Capital Expenditure declined -9.2% q/q, significantly lower than the -2.8% that was expected. The rate continued lower on Friday in the absence of any significant data out of either country which brought the pair to close at 0.7190, with an overall weekly decline of -0.6%.

USD/CAD Extended its previous week’s gains last week after the United States reported mixed economic data and with very few significant economic releases out of Canada.  The week began with the pair making its weekly high of 1.3434 on Monday after the Fed released an announcement on interest rates and a lower than expected U.S. Existing Home Sales number. The pair continued its decline on Tuesday despite better than expected U.S. Preliminary GDP, and Trade data. On Wednesday, the pair made its weekly low of 1.3279 after mixed U.S. economic numbers. Thursday saw the pair consolidate as the United States observed a bank holiday and with no economic numbers out of Canada. The rate then gained ground on Friday after Canadian RMPI increased +0.4% m/m, in line with expectations. USD/CAD went on to close the week at 1.3372, with a gain of +0.2% for the week. 

NZD/USD Declined last week as the United States reported mixed economic numbers with very little significant data out of New Zealand. The week began with the pair making its weekly low of 0.6491 on Monday after the U.S. Fed issued a special announcement on interest rates. The pair then gained on Tuesday after mixed U.S. GDP, Consumer Confidence and Trade numbers. On Wednesday, the pair extended its gains after New Zealand reported its Trade Balance, which showed a contracting deficit of -963M compared to an expected deficit of -1,000M with the previous number upwardly revised from -1,222M to 1,140M. Thursday saw the pair make its weekly high of 0.6595 as the United States observed the Thanksgiving bank holiday and with no significant data out of New Zealand. The pair then sold off on Friday in the absence of any significant numbers out of either country, which brought NZD/USD to close at 0.6529, with an overall weekly loss of -0.4%.

The Week Ahead

USD: The U.S. economic calendar is very active this coming week, featuring key jobs data on Wednesday and Friday.  Monday starts the week’s highlights off with the Chicago PMI (54.3) and Pending Home Sales (1.6%), and Tuesday’s key events include ISM Manufacturing PMI (50.6) and a speech by FOMC Member Evans. Wednesday then offers speeches by FOMC Members Brainard, Lockhart, Williams and Fed Chair Yellen, in addition to the ADP Non-Farm Employment Change (191K), Revised Nonfarm Productivity (2.2%), Crude Oil Inventories (last 1.0M), while Thursday features Weekly Initial Jobless Claims (269K), testimony by Fed Chair Yellen, ISM Non-Manufacturing PMI (58.1), Factory Orders (1.2%) and a speech by FOMC Member Fischer. Friday’s important data then concludes the week with Average Hourly Earnings (0.2%), Non-Farm Payrolls (201K), the Unemployment Rate (5.0%) and the Trade Balance (-40.6B).

AUD: The Australian economic calendar is busier than usual this coming week, featuring the RBA’s Cash Rate Decision on Tuesday.  Monday starts the week’s highlights off with Company Operating Profits (1.1%), and Tuesday’s key events include Building Approvals (-2.4%), the Current Account (-16.6B), the RBA’s Cash Rate Decision (unchanged at 2.00%) and the RBA Rate Statement. Wednesday then offers a speech by RBA Governor Stevens and GDP (0.7%), while Thursday features the Trade Balance (-2.61B). Friday’s important data then concludes the week with Retail Sales (0.4%). Resistance for AUD/USD is seen at 0.7343/81, 0.7279/84 and 0.7181/0.7223, with support noted at 0.7157, 0.6907/0.7083 and 0.6246.

NZD: The New Zealand economic calendar is rather quiet this coming week, only featuring ANZ Business Confidence (last 10.5) on Monday, followed by the tentatively scheduled GDT Price Index (-7.9%) on Tuesday. The chart for NZD/USD shows resistance at 0.6790/0.6813, 0.6618/0.6738 and 0.6557/95. On the downside, technical support is expected at 0.6455/99, 0.6388/0.6400 and 0.6234/87.

GBP: The UK economic calendar is moderately active this coming week, featuring UK Bank Stress Test Results on Tuesday.  Monday starts the week’s highlights off with Net Lending to Individuals (4.8B), and Tuesday’s key events include UK Bank Stress Test Results, the BOE Financial Stability Report, a speech by BOE Governor Carney and Manufacturing PMI (53.7). Wednesday then offers the tentatively scheduled Halifax HPI (last 1.1%) and Construction PMI (58.4), while Thursday features Services PMI (55.1), which concludes the week’s highlights. Resistance to the topside for GBP/USD shows at 1.5304/82, 1.5241/63 and 1.5053/1.5199, while support for the pair is expected at 1.5026/29, 1.4900/93 and 1.4852/55.

EUR: The Eurozone economic calendar is fairly busy this coming week, featuring the ECB’s Minimum Bid Rate Decision on Thursday.  Monday starts the week’s highlights off with German Retail Sales (0.3%) and German Preliminary CPI (0.1%), and Tuesday’s key events include Spanish Manufacturing PMI (51.9), the German Unemployment Change (-4K), and the EZ Unemployment Rate (10.8%). Wednesday then offers the Spanish Unemployment Change (last 82.3K), the EZ CPI Flash Estimate (0.2%), and the EZ Core CPI Flash Estimate (1.1%), while Thursday features the ECB’s Minimum Bid Rate Decision (unchanged at 0.05%) and the ECB Press Conference. Friday’s important data then concludes the week with German Factory Orders (1.3%). Resistance for EUR/USD is seen at 1.0996/1.1005, 1.0808/96 and 1.0659/1.0712, with support showing at 1.0565, 1.0520 and 1.0461.

JPY: The Japanese economic calendar is pretty quiet this coming week, only featuring Retail Sales (0.9%) and a tentatively scheduled speech by BOJ Governor Kuroda on Monday. Resistance for USD/JPY currently shows up at 125.06/85, 124.47/57 and 123.00/72, with support indicated at 122.25/30, 120.02/122.02 and 118.49/119.65.

CAD: The Canadian economic calendar is busier than usual this coming week, featuring the BOC’s Overnight Rate Decision on Wednesday.  Monday starts the week’s highlights off with the Current Account (-15.2B), and Tuesday’s key events include the release of GDP (0.1%) data. Wednesday then offers the BOC’s Rate Statement and Overnight Rate Decision (unchanged at 0.50%), while Thursday features little of note. Friday’s important data then concludes the week with the Employment Change (-0.7K), Trade Balance (-1.7B) and Unemployment Rate (7.0%). Resistance for USD/CAD is seen at 1.4195, 1.4006 and 1.3415/56, while support shows at 1.3278/1.3352, 1.3153/97 and 1.2900/1.3054.