AUD Weekly Market Watch 18/5/2015

Last Week recap

EUR/USD Continued rallying last week as bond yields gained in Europe and the outlook for the Eurozone economy and inflation grew more optimistic. Also, lower than expected U.S. economic data and the ruling out of a Fed rate hike by June gave further support to the rate. The week began with the pair making its weekly low of 1.1130 on Monday after uncertainty over Greek payments pressured the rate. Eurogroup chair Jeroen Dijsselbloem stated that, “we have made progress, but we are not very close to an agreement,” adding that, “it will surely not be reached at the Eurogroup meeting on Monday.” The rate then gained ground on Tuesday after Greece completed a payment of €750M to the IMF, and yields on European bonds surged, pushing rates higher in some Eurozone nations. On Wednesday, the pair extended its gains after U.S. Retail Sales came out with a flat reading m/m versus an expected increase of +0.3%, while Core Retail Sales increased +0.1% m/m compared to an expected increase of +0.4%. Nevertheless, both previous numbers were upwardly revised to +1.1% from +0.4% and +0.7% from +0.4% respectively. Eurozone numbers had German Preliminary GDP increase +0.3% q/q versus +0.5% expected, while French Preliminary GDP increased +0.6% q/q compared to +0.4% anticipated. The pair continued higher on Thursday after U.S. PPI dropped -0.4% m/m, significantly lower than the increase of +0.1% that was expected, also, Core PPI declined -0.2% m/m versus +0.1% anticipated. The rate went on to make its weekly high of 1.1466 on Friday after U.S. Preliminary UoM Consumer Sentiment printed at 88.6, notably lower than the expected reading of 95.8. EUR/USD closed at 1.1446, with an overall gain of +2.1% from its previous weekly close. 

USD/JPY Declined a fraction last week as asset flows favoured the Yen over the Greenback and with very little economic data out of Japan. The week began with the pair gaining on Monday in the absence of any significant data out of either country. The rate then declined after making its weekly high of 120.27 on Tuesday after the Japanese Current Account showed a surplus of +2.07T versus an expected surplus of +1.34T. The pair continued selling off on Wednesday after lower than expected U.S. Retail Sales data. The rate then consolidated on Thursday after making its weekly low of 118.88 after disappointing U.S. PPI numbers. On Friday, the pair gained a fraction after comments from BOJ Governor Kuroda, who stated that, “The decline in real interest rates will stimulate private demand, which will lead to an upturn in the economy, improving the output gap.  Then, the improvement in the output gap, together with a rise in inflation expectations, will increase inflation rates.  As people experience actual price increases, their inflation expectations will rise further.” USD/JPY went on to close at 119.38, with a loss of -0.3% for the week. 

GBP/USD Extended its previous gains last week as the BOE left rates and stimulus measures unchanged and with mostly lower than expected economic data out of the United States. Cable began the week rising sharply on Monday after making its weekly low of 1.5392 as the BOE left its benchmark Official Bank Rate at 0.50% and the Asset Purchase Facility at 375B as was widely anticipated. The rate continued higher on Tuesday after UK Manufacturing Production increased +0.4% m/m versus +0.3% expected, also, the UK NIESR GDP Estimate came out at +0.4% versus a previous reading of +0.3% downwardly revised from +0.6%. On Wednesday, Cable extended its gains after the BOE’s Inflation Report stated that, “CPI inflation was 0.0% in March 2015 as falls in food, energy and other import prices continued to weigh on the annual rate. Inflation is likely to rise notably around the turn of the year as those factors begin to drop out. Inflation is then projected to rise further as wage and unit labour cost growth picks up and the effect of sterling’s appreciation dissipates.” Also supporting the pair on Wednesday were dismal U.S. Retail Sales numbers. Cable then made its weekly high of 1.5814 on Thursday after the United States reported lower than expected PPI data. The rate then lost ground on Friday as traders squared positions and despite lower than expected U.S. economic numbers. GBP/USD went on to close at 1.5726, showing an overall weekly gain of +1.8%.

AUD/USD Continued its rally last week as Australia reported better than expected economic numbers and with mostly lower than anticipated data out of the United States. The rate started the week making its weekly low of 0.7875 on Monday as Australian NAB Business Confidence printed at 3, with no change from its previous release. The pair then gained on Tuesday after Australian Home Loans increased +1.6% m/m compared to an expected +1.1%. Also out was the Australian Annual Budget Release, which stated that, “The Australian economy is set to strengthen over coming years, as we transition from a mining investment led boom and non-mining sectors step up to drive growth. The global economic outlook is strengthening, and households and businesses are already benefiting from historically low interest rates, a lower exchange rate, and lower petrol and electricity prices. The Government's historic free trade agreements will help unlock new trade opportunities throughout the region.” On Wednesday, the rate continued gaining after the Australian Wage Price Index increased +0.5% q/q, in line with expectations. The pair then made its weekly high of 0.8162 on Thursday after lower than expected U.S. PPI numbers. The rate continued selling off on Friday after position squaring and despite lower than expected U.S. economic numbers. AUD/USD went on to close at 0.8036, with a gain of +1.3% for the week. 

USD/CAD Continued selling off last week as Canada reported mostly better than expected economic numbers, while U.S. economic data failed to meet expectations. The rate began the week making its weekly high of 1.2143 on Monday in the absence of any significant data out of either country. The pair continued lower on Tuesday after a lower than expected U.S. employment number. On Wednesday, the rate extended its losses after lower than expected U.S. Retail Sales numbers. The pair then gained after making its weekly low of 1.1918 on Thursday after Canadian NHPI came out with a reading of 0.0% m/m compared with an expected increase of +0.2%. Friday saw the rate continue gaining despite Canadian Manufacturing Sales, which increased +2.9% m/m versus +1.2% expected. Also, Canadian Foreign Securities Purchases increased to +22.47B, which was significantly higher than the expected +7.23B0. USD/CAD went on to close the week at 1.2014, with an overall loss of -0.5% compared to its previous weekly close. 

NZD/USD Lost a fraction last week despite New Zealand reporting better than expected economic numbers, while U.S. data came in lower than expected. The week began with the pair declining on Monday in the absence of any significant numbers out of either country. The pair then rallied after making its weekly low of 0.7326 on Tuesday after the RBNZ’s Financial Stability Report noted that, “With the financial system facing significant and increasing risks, it is critical that banks maintain their capital and liquidity buffers, and apply prudent lending standards. Banks should ensure that any new capital instruments continue to maintain loss-bearing capacity, in view of the significant risks the sector faces. The Reserve Bank plans to undertake a review of current bank capital requirements in light of global and domestic changes affecting the banking system in recent years.” On Wednesday, the rate extended its gains after New Zealand Retail Sales increased +2.7% q/q versus +1.6% expected, while Core Retail Sales increased +2.9% q/q compared to +1.5% expected. Also out was the Business NZ Manufacturing Index, which printed at 51.8 compared to a previous reading of 54.6. The rate then consolidated on Thursday after making its weekly high of 0.7562 after dismal U.S. PPI data. The pair then declined on Friday as despite lower than expected U.S. economic numbers. NZD/USD went on to close at 0.7460, showing an overall decline of -0.4% for the week.

The Week Ahead

USD: The U.S. economic calendar is quite busy this coming week, featuring the FOMC Meeting Minutes’ release on Wednesday.  Monday starts the week’s highlights off with a speech by FOMC Member Evans and the NAHB Housing Market Index (57), and Tuesday’s key events include Building Permits (1.06M) and Housing Starts (1.02M). Wednesday then offers a speech by FOMC Member Evans, Crude Oil Inventories (last -2.2M) and the FOMC Meeting Minutes, while Thursday features Weekly Initial Jobless Claims (267K), Flash Manufacturing PMI (54.6), the Philly Fed Manufacturing Index (8.3), Existing Home Sales (5.23M) and a speech by FOMC Member Fischer. Friday’s important data then concludes the week with a speech by FOMC Member Williams, CPI (0.1%) and Core CPI (0.2%).

AUD: The Australian economic calendar is moderately active this coming week, featuring the RBA’s Monetary Policy Meeting Minutes on Tuesday.  Monday starts the week’s highlights off with a speech by RBA Deputy Governor Lowe, and Tuesday’s key events include the RBA’s Monetary Policy Meeting Minutes. Wednesday then offers another speech by RBA Deputy Governor Lowe,  the Westpac Consumer Sentiment survey (last -3.2%) and a speech by RBA Assistant Governor Edey, while Thursday features MI Inflation Expectations (3.4%). That concludes the week’s important data since Friday offers nothing notable.  Resistance for AUD/USD is seen at 0.8024/29, 0.8074 and 0.8162, with support noted at 0.7839/0.7937, 0.7785 and 0.7625/0.7737.

NZD: The New Zealand economic calendar is rather quiet this coming week, only featuring PPI Input (-0.6%) on Monday, Inflation Expectations (1.8%) and the tentatively scheduled GDT Price Index (-3.5%) on Tuesday and the Annual Budget Release on Thursday. The chart for NZD/USD shows resistance at 0.7492/0.7575, 0.7605/95 and 0.7739/42.  On the downside, technical support is expected at 0.7420/30, 0.7389 and 0.7326.

GBP: The UK economic calendar is quite busy this coming week, featuring speeches by BOE Governor Carney on Friday.  Monday is quiet, so Tuesday starts the week’s highlights off with CPI (0.0%), PPI Input (0.8%) and the RPI (0.9%). Wednesday’s key events then include the release of the MPC’s Official Bank Rate Votes (0-0-9) and Asset Purchase Facility Votes (0-0-9), while Thursday features the release of Retail Sales (0.4%) and CBI Industrial Order Expectations (3). Friday’s important data then concludes the week with Public Sector Net Borrowing (7.9B), a speech by MPC Member Shafik, and two speeches by BOE Governor Carney. Resistance to the topside for GBP/USD shows at 1.5785, 1.5814 and 1.5874, while support for the pair is expected at 1.5222/68, 1.5315/51 and 1.5491/1.5551.

EUR: The Eurozone economic calendar is active this coming week, featuring the German Ifo Business Climate survey on Friday.  Monday is quiet, so Tuesday starts the week’s highlights off with the German ZEW Economic Sentiment survey (48.9), EZ Final CPI (0.0%), and the EZ ZEW Economic Sentiment survey (62.4).  Wednesday then offers nothing of note, while Thursday features French Flash Manufacturing PMI (48.6), French Flash Services PMI (52.0), German Flash Manufacturing PMI (51.9), German Flash Services PMI (53.9), EZ Flash Manufacturing PMI (51.8), EZ Flash Services PMI (53.9), the ECB’s Monetary Policy Meeting Accounts and a speech by ECB President Draghi. Friday’s important data then concludes the week with the German Ifo Business Climate survey (108.3) and two speeches by ECB President Draghi. Resistance for EUR/USD is seen at 1.1679, 1.1498/1.1553 and 1.1442/66, with support showing at 1.1388/91, 1.1269/89 and 1.1035/1.1133.

JPY: The Japanese economic calendar is somewhat busy this coming week, featuring the BOJ’s Monetary Policy Statement on Friday.  Monday starts the week’s highlights off with Core Machinery Orders (1.7%), and Tuesday offers nothing notable. Wednesday’s key events then include Preliminary GDP (0.4%), while Thursday is quiet. Friday’s important data then concludes the week with the tentatively scheduled BOJ Monetary Policy Statement and BOJ Press Conference, as well as a speech by BOJ Governor Kuroda. Resistance for USD/JPY currently shows up at 119.62, 120.14/121.27 and 121.84/122.02, with support indicated at 119.05/37, 118.04/88 and 116.87/92.

CAD: The Canadian economic calendar is more active than usual this coming week, featuring CPI data on Friday.  Monday is a Bank Holiday, so Tuesday starts the week’s highlights off with a speech by BOC Governor Poloz. Wednesday then features Wholesale Sales (0.3%), while Thursday offers nothing notable. Friday’s important data then concludes the week with Core CPI (0.1%), Core Retail Sales (0.7%), CPI (0.1%) and Retail Sales (0.5%). Resistance for USD/CAD is seen at 1.2203 and 1.2102/62 and 1.2045/1.2087, while support shows at 1.1918/44 and 1.1802/41.