Weekly Forex Wrap Up: February 9th to February 13th
Dollar Weakness was the theme of the week in what seems to be a growing evidence of a possible correction looming for the US Dollar index. The British Pound and the Euro saw a bullish week despite the fact that the Euro was susceptible to the rumors from the Greece debt negotiations, to which the Euro was more reactive to than the fundamentals from Eurozone.
BoJ halts monetary easing
Bank of Japan surprised the markets yesterday in an unscheduled announcement that it was putting a halt to its monetary stimulus expansion citing that further weakness in the Yen would hurt consumer sentiment. The fact that the announcement comes at a time when the Yen was trading within a range and not near some yearly highs has confused as well as catching the markets off guard. The Yen strengthened on the news but failed to capitalize on the news before easing back for the remainder of the day. There were no major economic data from Japan this week.
- Bank lending y/y 2.5% vs. 2.6% previously
- Consumer confidence 39.1 vs. 39.4
- Economy watchers sentiment 45.6 vs. 45.7
- Core machinery orders m/m 8.3% vs. 2.4%
- PPI y/y 0.3% vs. 1.2%
- Prelim machine tools orders y/y 20.4% vs. 33.9%
Sterling strengthens on inflation outlook
British Sterling ignored weak industrial and manufacturing production data setting its eyes on the Bank of England’s inflation outlook. Rather mixed, for the short term the BoE’s outlook was dovish while revising upwards its inflation outlook for the long term. The BoE also remained committed to further monetary policy easing should the need arise, while at the same time acknowledging that growth in the labor markets would make the case for an interest rate hike. Regardless, the British Sterling focused on the positives as the currency rallied across the board.
- Manufacturing production m/m 0.1% vs. 0.3%
- Industrial production m/m -0.2% vs. 0.3%
- NIESR GDP estimate 0.7%
- UK Construction output m/m 0.4% vs. 2.6%
Euro back above 1.14
The Euro managed to lift off from the lows of 1.12 to trade above 1.14 at the time of writing. Economic data was largely mixed this week but the Euro continued to remain resilient, despite the risks from the Greek debt negotiations which seem to be heading nowhere while the clock continues to tick. While this continues to pose a major risk for the Euro heading into next week, the fact that the EURUSD has moved above 1.14 is starting to show signs of forming a base.
- Sentix investor confidence 12.4 vs. 3.4
- French industrial production m/m 1.5% vs. 0.3%
- Italian industrial production m/m 0.4% vs. 0.1%
- German Final CPI m/m -1.1% vs. -1%
- Eurozone industrial production m/m 0% vs. 0.3%
- French prelim GDP q/q 0.1%
- German prelim GDP q/q 0.7% vs. 0.3%
- Italy prelim GDP q/q 0%
- Eurozone Flash GDP q/q 0.3% vs. 0.2%
Aussie resilient despite weak jobs data
The monthly jobs report from Australia disappointed on all fronts as the unemployment rate rose to 6.4%. While the Aussie initially saw steep losses during the day, the currency managed to turn around, especially against the Greenback. Most of the economic data from Australia was mixed as the currency continues to trade with no direction, ranging back and forth.
- ANZ Job advertisements 1.3% vs. 1.8% previously
- NAB business confidence 3 vs. 2
- HPI q/q 1.9% vs. 2%
- Westpac consumer sentiment 8% vs. 2.4% previously
- Home loans m/m 2.7% vs. 2.3%
- MI Inflation expectations 4% vs. 3.2% previously
- Employment change -12.2k vs. -4.7k; unemployment rate 6.4% vs. 6.2%
US Dollar starting to look weak
The Greenback could most likely close this week on a bearish note, making it the third straight week of no new highs being set. While the Dollar Index remains within a range at the top, the signs are starting to show of a possible correction looming. But the main risks come from next week’s FOMC meeting minutes which could potentially push the greenback higher depending on how the markets perceive the minutes.
There were not much of economic releases from the US this week with the exception of retail sales which fell below estimates.
- Labor market conditions index 4.9 vs. 7.3 previously
- NFIB small business index 97.9 vs. 101.3
- IBD/TIPP economic optimism 47.5 vs. 51.4
- Wholesale inventories m/m 0.1% vs. 0.2%
- Federal budget balance -17.5bn vs. -2.6bn
- Core retail sales m/m -0.9% vs. -0.4%; retail sales m/m -0.8% vs. -0.4%
- Weekly unemployment claims 304k vs. 282k
- Business inventories m/m 0.1% vs. 0.2%
