Weekly Review and Outlook 12th December 2016

Mark NugentDec 2016, Trading Plan

Weekly Forex Review – Week Commencing 5th December 2016

Economic Calendar

Monday

BoE’s Carney stated that the BoE’s tolerance for above target inflation is limited and went on to state that UK indicators suggest continued solid growth. UK’s PM May has announced that MPs will today be given the opportunity to vote on her timetable for triggering Article 50 and formally beginning Brexit by serving Article 50 by the end of March 2017 (Telegraph).

Tuesday

RBA kept rates unchanged as widely expected while AUD was pressured by further disappointing domestic data (Net Export Contributions to GDP). Several banks forecast tomorrow’s Australian GDP to print a Q/Q contraction for the first time in 5 years.

Wednesday

Australian GDP q/q missed (-0.5% vs 0.2%), the first negative number in 5 years.The Canadian overnight rate remained unchanged as per expectation at 0.50%. In the UK, MPs backed PM May’s plan to trigger Article 50 by end March 2017. BoJ’s ETF purchasing seen boosting Nikkei 225 to over 21,000 level by end of next year, according to FT. New Zealand Treasury stated if the budget improves, there is scope for income tax cuts and faster debt repayments, while it also raised FY16/17 GDP target to 3.5% from 3.3% and FY17/18 target to 3.4% from 3.0%. (Newswires) New Zealand Finance Minister Bill English is set to be confirmed as the next Prime Minister after rivals conceded (Newswires). RBNZ Gov Wheeler indicates the bank is probably finished with its rate cutting cycle.

Thursday

The summary of the ECB meeting is as follows: QE extended from March 2017 to end December 2017 at EUR60b/month vs current EUR80b/month. Draghi was keen to emphasize in the press conference that they could bring back the EUR80b/month purchases if necessary. He said QE was open-ended. All interest rates remain the same as expected. Re forecasts: GDP and inflation are broadly unchanged.

Friday

No major events.

Market Reaction

The USD was flat on the week and ended near all-time highs. The risk-on sentiment saw the JPY rise over the week. US equities were booming with the S&P500 and Dow30 reaching new all-time highs and the Nasdaq approaching a new all-time high. The EUR was down on the week after the Italian referendum-inspired gap down on last Monday’s open. WTI was flat on the week although the CAD continues to rise. The GBP took a breather from its slow grind up and had a down week. UK and European stocks rise across the board as does the Japan225 on QE-related bond buying and a weak JPY which is good for exporters.

Trading Plan

Two trades closed last week. Trade 81 (EURUSD short) at breakeven and Trade 82 (GBPUSD short) for a gain of 1.50%. Month-to-date performance stands at a gain of 1.5% and year-to-date sees a gain of 34.5%.

Weekly Forex Outlook – Week Commencing 12th December 2016

Over the weekend/early today: WTI crude surged at the open following reports that Non-OPEC producers agreed to cut output by 558,000 bpd beginning in January. The CAD rises. Bloomburg report Saudia Arabia saying they will cut further than the cap agreed on Nov 30th.

Outgoing Italian Foreign Minister Gentiloni was given a mandate to form a new Italian government following PM Renzi’s resignation. Ipsos-poll on Italy showed M5S-EFDD with 32% of support and PD-S&D with 30% of support. (Newswires) Note: The Five Star Movement (M5S) party is known to be anti-establishment in which a top party official Di Battista stated last week that he did not support an exit from EU but supported a referendum on the Euro (ZeroHedge).

Economic Calendar

Mon –
Tues – UK CPI
Wed – UK Average Earnings; US Core Retail Sales; FOMC Fed Funds Rate and Statement
Thurs – UK Retail Sales and BoE Super Thursday; US Core CPI; BoC Gov Poloz speaks
Fri –

Financial News

Oil surges

Italy – 5 star and elections, referendum on Euro

Why the US stock market rally may last

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