Weekly Review and Outlook 14th November 2016

Mark NugentNov 2016, Trading Plan


Weekly Forex Review – Week Commencing 7th November 2016

Economic Calendar

The economic calendar on Monday was sparse.

Early Tuesday sees China Trade Balance missing (325B vs 366B) due to exports being below expectation. UK Manufacturing Production m/m beating target (0.6% vs 0.5%). Trump wins the US presidency. Market reaction is not severe, equities down around 3% and reversing already, helped by a presidential speech by Trump. USD little changed. Some safe haven flows into JPY and bonds, but the latter already completely reversed.

Wednesday saw New Zealand Official Cash Rate cut by 25bps to 1.75% as expected. Some strength was observed after the accompanying statement proclaimed house price inflation remains excessive – which could cause the RBNZ to delay any more easing. This move was later pared however, and Deputy Governor McDermott struck a decidedly more dovish tone later in Asia-Pac hours. The RBNZ are positive on annual inflation which is expected to rise from the December quarter and went on to state that they expect growth to be strong enough to have inflation settle around the middle of the target range. RBNZ Governor Wheeler stated that he considered the cash rate decision in light of the US election result and stated that at this stage he doesn’t think they will need another cut. RBNZ Deputy Governor McDermott said they can cut rates more if needed and risks on rates still are to the downside, adding that that the NZD is too high and they look at intervention at each meeting (ZeroHedge).

Thursday saw US Unemployment Claims at 254K vs expectation of 267K.

Friday saw University of Michigan Consumer Sentiment beat expectation (91.6 vs 87.4)

Market Reaction

US equities performed strongly as the Trump news was digested and closed up on the week. UK equities also performed strongly on Wednesday but gave a lot back by the Friday close and ended  down on the week. The Euro50 was up on the week. WTI dropped below the 50MA and closed the week at USD43.78/bbl. On the currency markets, the USD performed very strongly, closing the week at a level not seen since early March this year. The JPY weakened significantly as the market remained boisterous post Trump. The GBP saw strength as well, moving strongly up on  Wednesday, Thursday and Friday. The Euro lost ground after an initial surge on Wednesday which reversed. The commodity currencies all dropped on the week. Emerging Market currencies and equities drop significantly as bond yields rise and on fears over Trump’s desire to bring jobs back to the US. US, UK and German 10 year treasuries all saw yields increase.

Trading Plan

I did not trade last week due to the run up to the Presidential Election and then I felt that the result merited giving the markets some time to settle down. Month-to-date performance is +2.19% and year-to-date performance is +33.2%.

Weekly Forex Outlook – Week Commencing 14th November 2016

Economic Calendar

Over the weekend it has been reported that President-elect Trump has chosen Republican National Committee Chair Reince Priebus as White House Chief of Staff, which is suggested to be a positive and more conventional move (ZeroHedge).

Early today (Monday) saw Japanese Prelim GDP q/q beat expectation (0.5% vs 0.2% and prior revised to 0.2% from 0.0%). Chinese Industrial Production looked familiar (6.1% vs 6.2%).

Mon – Draghi speaks at the Italian Treasury in Rome.
Tues – Australian Monetary Policy Minutes; German Prelim GDP; RBA Gov Lowe speaks; UK CPI y/y; UK – Carney at Inflation Report Hearings; US Core Retail Sales; New Zealand Global Dairy and Retail Sales.
Wed – UK Average Earnings Index
Thurs – UK Retail Sales; US Core CPI (favoured PCE measure out 30/11); Yellen before the Joint Economic Committee
Fri – Draghi at the Euro Finance Week; Canadian Core CPI.

Financial News

Carney faces lawmakers as pound decline pushes inflation higher

It’s not just Deutsche Bank – German banking gloom in four charts

Emerging Market bond and currency markets face meltdown after trumps win

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