It was all about the Japanese yen this week as USDJPY gained bearish momentum sending prices to a 17-month low. The US dollar fell to lows of 107.66Yen on Thursday but managed to recover by Friday’s trading on mounting risks that some form of intervention from Japan could set about a massive short squeeze in the currency pair. The Bank of Japan will be meeting only towards the last week of April, and a lot could happen between now and then.
In the US economic data showed a modest improvement. US services sector continued to surge higher with the ISM non-manufacturing index rising to 54.5 in March, up from 53.4 the month before. FOMC meeting minutes were released over the week which showed that while Fed members argued the case for a rate hike in April, the consensus was broadly for keeping policy unchanged. The Fed’s minutes highlighted the risks of inflation continue to move below trend and therefore warranting a more guarded approach to rate hikes. The US dollar did not make any major gains this week with price staying flat for the most part. It was the same story with the EURUSD which although likely to close the week higher; the momentum has clearly fizzled out.
In Australia, interest rates were left unchanged by the RBA this week, and as widely expected, references to the AUD’s exchange rate appreciation was brought back into the statement. The Aussie fell on the RBA’s tone but soon managed to trim its losses following dovish meeting minutes from the Fed. The second half of the week saw the risk off sentiment led by yen’s rally send the commodity-linked currencies weaker as well, which included the Kiwi dollar.
The British Pound was weaker, but losses were limited this week to lows of 1.40. UK’s industrial and manufacturing production data came out weak while services and construction PMI’s were softly above estimates, offsetting the decline in manufacturing PMI’s.
Commodity markets saw a volatile week with Oil prices closing lower one day only to recoup the losses the next day. Crude Oil prices fell sharply on Thursday following Wednesday’s inventory report which showed a surprise drawdown in US commercial stock piles. However, by Friday morning, WTI Crude oil posted a strong recovery and is on track to the close the week on a bullish note. Gold prices turned higher following the dovish Fed minutes and the risk-off sentiment. But Friday saw a more volatile movement in Gold prices which remained trading sideways above 1225 and below 1240.
Friday’s economic data highlights included the Canada’s monthly jobs report came out stronger than expected as the nation’s unemployment rate fell from 7.30% to 7.10%. The monthly employment change was also robust, rising 40.6k, beating the forecasts of 10.4k. With Oil prices settled comfortably in a strong rally, USDCAD was seen trading weaker.
Economic events this week
- Australia building approvals m/m 3.10% vs. 2.10%
- Australia retail sales m/m 0.0% vs. 0.40%
- Spain unemployment change -58.2k vs. 21.3k
- UK construction PMI 54.2 vs. 54.3
- Eurozone unemployment rate 10.30% vs. 10.30%
- US factory orders m/m -1.70% vs. -1.50%
- Australia trade balance -3.41bn vs. -2.55bn
- RBA leaves cash rate unchanged at 2.0%
- German factory orders m/m -1.20% vs. 0.50%
- UK services PMI 53.7 vs. 53.9
- Canada trade balance -1.9bn vs. 0.9bn
- US trade balance -47.1bn vs. -46.3bn
- US ISM non-manufacturing PMI 54.5 vs. 54.1
- New Zealand Global Dairy Trade Index 2.10% vs. -2.90% previously
- China Caixin services PMI 52.2 vs. 51.4
- Canada Ivey PMI 50.1 vs. 54.9
- US Crude oil inventories -4.9mn vs. 3.1mn
- FOMC meeting minutes released
- Swiss foreign currency reserves 576bn vs. 571bn previously
- UK Halifax HPI m/m 2.60% vs. 0.80%
- ECB monetary policy meeting minutes released
- Canada building permits 15.50% vs. 4.70%
- US weekly unemployment claims 267k vs. 271k
- Fed Chair Janet Yellen speech
- Japan currency account 1.73tn vs. 1.57tn
- UK manufacturing production m/m -1.10% vs. -0.20%
- UK Goods trade balance -12.0bn vs. -10.3bn
- Canada employment change 40.6k vs. 10.4k
- Canada unemployment rate 7.10% vs. 7.30%