Apr 6-10, 2015 Forex weekly summary features the following market events:
Aussie bounces back on RBA inaction
If the week before saw the Australian dollar weaken considerably as speculation for RBA rate cuts fuelled by sharp declines in commodity prices, namely Iron Ore saw the Aussie being sold off, the RBA decided to leave interest rates unchanged in a closely contested decision. The main debate for the RBA was the rising prices in the property markets which could fuel further in the event of further rate cuts. The RBA’s monetary policy statement, in its forward guidance was seen as being neutral to dovish while not ruling out further rate cuts in the future. The Australian Dollar bounced back up across the board and at one point was very resilient against the Greenback as well. Other economic data from Australia included the retail sales numbers which beat estimates rising 0.7% in what is being termed as an effect of the February rate cut from the RBA.
- AIG services index 50.2 vs. 51.7 previously
- Retail sales m/m 0.7% vs. 0.4%
- ANZ job advertisements m/m -1.4% vs. 0.7% previously
- RBA Cash rate unchanged at 2.25%
- AIG construction index 50.1 vs. 43.9
- Home loans m/m 1.2% vs. 3%
BoJ leaves policy unchanged – Expects inflation near-zero in the near term
The Bank of Japan’s monetary policy meeting was the next big focus for the markets this past week. However, as widely expected, the BoJ stood pat on policy. One member’s call to scale down the asset purchases was voted down overwhelmingly by 8 – 1. The BoJ cited that in the near term inflation could fall to zero but was confident as the Central bank seems to look through the temporary blip. The Japanese Yen was muted to the news and was trading mixed across the board although broadly stronger. There were no major economic releases from Japan this week.
- Leading indicators 105.3% vs. 105.2%
- Economy watchers sentiment 52.2 vs. 50.6
- Preliminary machinery tools orders y/y 14.6% vs. 28.9% previously
- Bank lending y/y 2.6% vs. 2.5%
British Pound still trading within range
The British Pound continues another week of trading sideways with no clear directional bias. While the Cable managed to rally earlier in the week, the currency broke down after data showed that the UK’s trade balance widened to historic levels on account of a drop in exports to the US. Economic data from the UK remains mixed with services PMI rising above estimates but manufacturing and construction outputs remain mixed. The Bank of England met this week and as widely expected, there was no change to policy. GBPUSD continues to range between 1.495 and 1.465/.475 levels.
- Services PMI 58/9 vs. 57.1
- BRC Shop price index y/y -2.1% vs. -1.7% previously
- Halifax HPI m/m 0.4% vs. 0.1%
- Trade balance -10.3bn vs. -8.9bn
- BoE Official bank rate, unchanged at 0.5%
- Manufacturing production m/m 0.4% vs. 0.4%
- Construction output m/m -0.9% vs. 1.9%
- Industrial production m/m 0.1% vs. 0.3%
Weakness sets into the Euro, data overlooked
The single currency gave up its previous gains mid week after the EURUSD collapsed below 1.07 levels and was seen weaker across the board. The biggest losses were to the bullish EURAUD, where the currency erased its entire pre-RBA meeting gains. Greece continued to plague the currency although the country managed to pay off its debt to the IMF, but still looks cash strapped as social payments are due within a few weeks. There has been no headway made with the negotiations and the Greek premier’s trip to Russia did not bear much fruit. Economic data was a bit positive but the currency overlooked all the positives this week.
- Spain services PMI 57.3 vs. 56.5
- Italy services PMI 51.6 vs. 51.1
- Eurozone final services PMI 54.2 vs. 54.3
- Eurozone Sentix investor confidence 20 vs. 20.9
- PPI m/m 0.5% vs. 0.1%
- German factory orders m/m -0.9% vs. 1.5%
- Retail PMI 48.6 vs. 46.4 previously
- Retail sales m/m -0.2% vs. -0.1%
- German industrial production m/m 0.2% vs. 0.1%
- French industrial production m/m 0% vs. -0.1%
Bulls attempt to push the Greenback back to 100
This week saw the Greenback open weak on account of the NFP numbers released late last week. However, with the FOMC meeting minutes turning out to be hawkish than expected, the Greenback quickly gained its bullish momentum, as the US Dollar index attempts to keep up its gains from lows of 96.55 and was seen trading above 99 handle, a few points short of the psychological 100 barrier again. Besides the FOMC meeting minutes, weekly unemployment claims continued to remain subdued while the JOLTS job openings report was also positive, all of which is slowly starting to convince the markets that the March jobs report was at best a temporary seasonal weakness than anything else. The renewed strength in the US Dollar saw most of the currencies give up their gains with the Euro and the British Pound losing to the USD.
- Final services PMI 59.2 vs. 58.6
- ISM non-manufacturing PMI 56.5 vs. 56.6
- JOLTS job openings 5.13mn vs. 5.01mn
- IBD/TIPP economic optimism 51.3 vs. 49.1
- Weekly unemployment claims 281k vs. 283k
- Wholesale inventories m/m 0.3% vs. 0.2%
Canadian Dollar, tracking Oil losses
The Canadian dollar was also weaker this week with Crude oil futures trading weaker. Economic data from Canada continues to disappoint with both the Ivey PMI and building permits coming out weaker than expected. The Loonie gave up its gains from last week as USDCAD saw a renewed bullish momentum pick up after the FOMC meeting minutes. The monthly jobs report released today showed a better than expected improvement in the jobs report, as the monthly employment change beat estimates calling for no change, rising 28.7k. The unemployment rate also improved by 0.1% from 6.9% to 6.8%.
- Ivey PMI 47.9 vs. 51.1
- Building permits m/m -0.9% vs. 3.4%
- NHPI m/m 0.2% vs. 0.1%
- Housing starts 189.7k vs. 175k
- Employment change 28.7k vs. 0k
- Unemployment rate 6.8% vs. 6.9%
