Weekly Forex Review – Week Commencing 7th March 2017
Monday: Early today we have had AUD Retail Sales on target at 0.4%. BoJ Governor Kuroda wants bond buying to be sustainable and has no plans to tighten policy soon considering stagnant inflation and fragile recovery, according to sources. (Newswires). RBA Interest Rate Decision 1.50% vs. Exp. 1.50% (Prev. 1.50%). RBA stated that unchanged policy remains consistent with economic growth and that high AUD/USD could complicate the economic transition. RBA added that inflation remains quite low and medium-term risk to China growth remains. (Newswire).
Tuesday: House of Lords voted 366 to 268 votes to pass an amendment to the Article 50 bill that requires the Government to allows MPs a “meaningful vote” on the final Brexit deal. (Newswires). Govt Ministers are said to urge for UK PM May to call for a snap election to give her a clear mandate for her Brexit plan. (Newswires). Saudi Oil Minister Al-Falih stated they will seek an extension of output reduction deal in May and added that inventory levels will be considered on whether to extend the deal. Al-Falih also stated that OPEC and non-OPEC have removed 1.4mln bpd from markets and that global oil demand is picking up. (Newswires)
Wednesday: Poor Chinese Trade Balance figures at -60B vs expectation of 173B. Although not normally bothering the markets, the ADP Non-Farm Employment Change of 298K vs expectation of 184K has raised some eyebrows. Crude oil inventories also soared at 8.2M vs expectation of 1.1m. UAE Energy Minister Al-Mazrouei stated that he thinks today’s oil price slip is temporary and price will rise as OPEC sticks to the output agreement. UAE Energy Minister also commented that increasing US oil inventory levels were “a worry”. (Newswires). In the UK we had the UK Annual Budget. Of major concern to the markets was the improved budget deficit forecasts (positive).
Thursday: China CPI y/y missed at 0.8% vs 1.8%. The ECB surprised no one by keeping rates and QE unchanged. Draghi said that QE will continue until sustained inflation increases are seen. Underlying inflation pressures remain subdued. ECB lifts 2017 CPI forecast to 1.7% (Prev. 1.3%), lifts 2018 forecast to 1.6% (Prev. 1.5%), maintains 2019 forecast at 1.7%. ECB lifts 2017 GDP growth forecast to 1.8% (Prev. 1.7%), 2018 GDP forecast to 1.7% (Prev. 1.6%), maintains 2019 GDP at 1.6%. The ECB removed some language form its statement regarding low interest rates as Draghi acknowledged improved economic outlook by adding later that it’s less likely that rates will have to be cut, and that there’s no longer a “sense of urgency” in monetary policy. The EUR rose. Riksbank’s Jochnick said the SEK ought to strengthen and the Riksbank should continue with expansionary monetary policy. (Newswires). Saudi Arabia have told US firms not to assume OPEC will extend supply cuts to offset shale output growth, according to sources. (Newswires)
Friday: US Non-Farm Employment Change exceeded expectations at 235K vs 196K and the prior number was revised upwards (238K ex 227K). However, Average Hourly Earnings m/m missed at 0.2% vs 0.3%
The USD was flat on the week, falling on Friday due to profit taking and the miss on Average Earnings, the expectation on jobs being priced in after Wednesday’s early warning from ADP. US equities had an up day on Friday ending the week essentially flat. The FTSE 100 did likewise but the FTSE250 hit new highs. The Dax 30 was flat, failing to challenge the all-time high made at the start of the month. The Japan 225 moves up to resistance while oil is hit for three consecutive days by the increasing US inventories. On the currency markets, the EUR rises significantly after Draghi says future rate cuts unlikely. The JPY weakens slightly on the week. The GBP is down on the week and the CAD spends the entire week below support.
Trade 13 closed last week (S&P500 long) for a loss of 0.51%. Month-to-date performance sits at +4.24% and year-to-date at +4.20%.
Weekly Forex Outlook – Week Commencing 13th March 2017
Tues – Chinese Industrial Production
Wed – GBP Average Earnings Index; US CPI and Retail Sales; US Crude Oil Inventories; USD Fed Funds Rate; NZD GDP
Thurs – JPY BoJ Policy Rate; GBP Super Thursday
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