Weekly Review and Outlook 13th February 2017

Mark NugentFeb 2017, Trading Plan

Weekly Forex Review – Week Commencing 6th February 2017

Economic Calendar

Monday

Monday saw AUD Retail Sales m/m miss at -0.1% vs 0.3%.

Tuesday

Early Tuesday saw NZ Inflation Expectations. New Zealand 2yr Inflation Expectations (as of Q1 2017) at 1.92% vs previous (Q4 2016) of 1.68%. RBNZ Governor Wheeler stated he will not be seeking another term when current term expires in September this year, with Deputy Governor Spencer to be the acting Governor for 6 months after until a replacement is chosen.

RBA kept the Official Cash Rate unchanged at 1.50% as expected and stated that unchanged policy is consistent with growth and inflation targets. RBA added that conditions in the global economy have improved over the recent months and that high commodity prices have supported an increase in Australia’s terms of trade, although the central bank also commented that inflation is seen to remain low for some time. This dampened expectation of further rate reductions.

BoJ Summary of Opinions from January 30th-31st meeting stated that Japan’s economy has continued its moderate recovery trend and will likely continue at a pace above its potential. The BoJ stated it should be prudent regarding abruptly changing policy and that it observed more positive developments in the real economy including pick-up in exports, an upturn in private consumption and an increase in business fixed investment. (BoJ/Newswires)

Wednesday

RBNZ maintained the OCR at 1.75%, in line with expectations. RBNZ said that the NZD remains higher than sustainable for balanced growth and a decline in the exchange rate is needed. There were also later comments from RBNZ Governor Wheeler that removed an easing bias in favour of a neutral bias and that the OCR is likely to stay low, while Assistant Governor McDermott stated he is uncomfortable with the NZD level and that they are to ensure 2% inflation before increasing rates.

The UK Government passed the Article 50 legislation without amendment and by a very large majority.

Thursday

Fed’s Evans (Voter, Dove) stated that he will discuss halting portfolio reinvestment after a few more rate hikes, while he added that 3 rate hikes this year is not unreasonable. (Newswires)

Friday

RBA Quarterly Statement on Monetary Policy stated a strengthening of AUD could complicate economy’s transition and reiterated that the RBA judged holding policy steady consistent with growth and inflation goals. The RBA also lowered GDP forecast for H1 by 1% to 1.5%-2.5%, but affirmed 2017 forecast at 2.5-3.5%. (Newswires)

USD gains due to President Trump alluding to tax reforms to be announced over the coming weeks.

Market Reaction

The USD had it’s first weekly rise after 7 consecutive down weeks. US equity indices see new all-time highs and there’s broad equity buoyancy across the globe. Oil returns to the top of its consolidation channel. The JPY weakens on the risk-on sentiment. The EUR is struggling and drops to short-term support. The GBP has an up week and moves to the middle of its consolidation zone. CAD consolidates and the AUD is supported by good news from China.

Trading Plan

Trades 3 (Japan 225 long), 5 (EURUSD short), 6 (USDJPY long) and 7 (S&P500 long) remain open. They are all in profit bar Trade 6 which is at breakeven.

Weekly Forex Outlook – Week Commencing 13th February 2017

Economic Calendar

Over the weekend – JPY weakened across the board after US President Trump refrained from discussing currency issues with Japanese PM Abe at their meeting last week and as the region reacted to the positive risk tone which spurred outflows from safe-havens including JPY. This was also exacerbated following the release of Japanese GDP figures where Prelim GDP q/q missed at 0.2% vs 0.3%.

ECB’s Nowotny said the ECB are to discuss QE in the middle of the year and that there is currently no reason to change QE policy path. (Newswires)

North Korea fired a medium-range ballistic missile into the East Sea on Sunday. In light of the missile launch, US President Trump stated that the US would 100% stand by Japan and reinforce alliances in the Pacific, while US, Japan and South Korea also requested an urgent UN Security Council meeting. (Yonhap/Independent)

Mon –
Tues – China CPI; UK CPI; Fed Chair Yellen speaks
Wed – GBP Average Earnings; US CPI and Retail Sales; more Yellen
Thurs – NZD Retail Sales
Fri – GBP Retail Sales

Financial News

Le Pen risk

US shale drilling booms

Merkel drops in polls

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Here is your Weekly Review and Outlook video.

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