Weekly Forex Wrap Up: 8th to 12th December

Weekly Forex Wrap Up and summary of the week in Forex

Weak US Dollar

The US Dollar showed signs of weakness since the start of the week after the Dollar index hit a multi-year resistance level of 89.20 with lack of any fundamentals for the first part of the week. Better than expected NFP data released last week failed to support the Greenback starting Monday. The Dollar index however managed to make a bullish close yesterday but a lot is left to be seen on today’s close. A bearish close below yesterday’s low of 87.94 could spell further declines in the Greenback. However, considering the fact that yesterday’s daily candle closed as a piercing line candlestick pattern, only a close above the weekly open of 89.41 will offer any bullish continuation for the Greenback.

• Labor Market Conditions index m/m 2.9 vs. 3.9 last month
• NFIB small business index 98.1 vs. 96.6 expectations
• JOLTS jobs opening 4.83M vs. 4.81M
• IBD/TIPP Economic optimism 48.4 vs. 47.2
• Wholesale inventories m/m 0.4% vs. 0.1%
• Core retail sales m/m 0.5% vs. 0.1%; retail sales m/m 0.7% vs. 0.4%
• Weekly Unemployment claims 294k vs. 299k
• US import prices m/m -1.5% vs. -1.7%
• US PPI m/m -0.2% vs.- 0.1%; Core PPI m/m 0% vs. 0.1%

Euro bullish despite increasing speculation on ECB QE

With the ECB inaction last week, the focus this week was on the TLTRO loans, which as widely expected saw a less than expected take up sparking speculating that the ECB’s QE in Q1 of 2015 could almost be a done deal. The Euro however shrugged off the fundamentals and continued to rally from yearly lows near 1.22, making a weekly high of 1.249. A bullish close today could most likely spark a short squeeze in the Euro which could possibly see the EURUSD head higher towards 1.25 followed by 1.26 levels.

• German industrial production m/m 0.2% vs. 0.2%
• Sentix Investor confidence -2.5 vs. -9.9
• French industrial production m/m -0.8% vs. 0.2%
• German final CPI m/m 0%; French CPI m/m -0.2% vs. 0.2%
• TLTRO 129.8bn vs. 148.2bn
• German WPI m/m -0.7% vs. 0.3%
• Eurozone industrial production m/m 0.1% vs. 0.2% forecasts

Yen strengthens ahead of weekend elections

The weakness in the US Dollar saw a demand for safe have currencies as the Yen strengthened for most of the week after reaching highs of 121.844 earlier. Despite the broad strength in the Yen, investors will be looking to the results of the Japanese elections over the weekend (Dec 14^th). While it is well known that incumbent, Shinzo Abe will win the elections; the focus will be on the majority seats that will be won. Should Abe’s LDP party win with a clear majority, the markets would view this as an endorsement for continuation of Abenomics with the Yen likely to rally next week.

• Final GDP q/q -0.5% vs. -0.1%
• Final GDP price index y/y 2% vs. 2.1%
• Economy watchers sentiment 41.5 vs. 45.9
• Preliminary machinery tools orders y/y 36.6% vs. 30.8% previously
• BSI Manufacturing index 8.1 vs. 13.1
• PPI y/y 2.7% vs. 2.7% expectations
• Consumer confidence 37.7 vs. 39.6
• Core machinery orders m/m -6.4% vs. -2.1%

Sterling seeks direction

The British Sterling continued to move directionless this week with no clear fundamentals. Manufacturing and industrial production month on month saw a decrease but the Sterling was supported by comments from BoE’s Ian McCafferty who wanted to see the BoE raise interest rates sooner than expected. The BoE also announced a change in its monetary policy reviews where starting August 2015, the BoE will publish its statement as well as the minutes simultaneously and from 2016 the BoE will cut its meetings to 8 per year

• BRC retail sales monitor y/y 0.9%
• Manufacturing production m/m -0.7% vs. 0.2%
• Industrial production m/m -0.1% vs. 0.3%
• NIESR GDP estimates 0.7%
• RICS House price balance 13% vs. 16%

RBA Rules out rate cuts. Verbal intervention to continue

A bleaker outlook for the Australian economy saw some of the market proponents calling for a rate cut next year. This was quickly put to rest as the RBA Governor Glenn Stevens ruled out rate cuts in the near term while continuing to talk down the Aussie dollar. In his most recent interview with the Australian Financial Review, he said that he would prefer to see the Aussie dollar trade near $0.75 cents to the US Dollar for the coming year. The RBA has been fairly successful in talking down the Aussie from the highs of $0.94 to current levels of $0.85 which was the intended target earlier this year. With further expectations of declines to $0.75 for next year, the Aussie looks poised for more depreciation against the Greenback.

• ANX Job advertisements m/m 0.7%
• Home loans m/m 0.3% vs. 0.1%
• MI Inflation expectations 3.4% vs. 4.1% previously
• Employment change 42.7k vs. 15.2k
• Unemployment rate 6.3%

SNB Prefers to wait for ECB to move first

The Swiss National Bank, in its quarterly monetary policy review left interest rates unchanged and refrained from any action. The move, which was widely expected, saw a knee jerk reaction in the Swiss Franc which strengthened across the board intraday and seems to be threatening to test the SNB’s floor of 1.20. It is starting to get very evident that the SNB will act only if the ECB takes steps to weaken the Euro further and introduce QE. So given the state of things, the SNB will be closely watching the ECB’s actions in the coming months.

• CPI m/m 0%
• Retail sales m/m 0.3% vs. 0.9%
• Unemployment rate 3.1% vs. 3.2%
• LIBOR Rate <0.25%