Weekly Review and Outlook 15th May 2017

Mark NugentMay 2017, Trading Plan

Weekly Forex Review – Week Commencing 8th May 2017

Economic Calendar

Over the weekend:

US Baker Hughes Total Rig Count (May) W/W 877 (Prev. 870)

Saudi’s Energy Minister Al-Falih stated markets were recently impacted by slow seasonal demand and growth in non-OPEC supply. Al-Falih added that the worst is clearly behind us and market is moving into re-balancing, while he further commented that he confident the production deal will be extended in the second half and possibly beyond. (Newswires)

Iran oil minister Zanganeh said OPEC and non-OPEC producers are likely to extend output curbs to support prices and added that USD 55/bbl is a suitable price for crude oil. (SHANA)

Macron won the French Presidential Election by a convincing margin.

German government officials propose UK single market access for a fee.

Monday

Chinese Trade Balance was positive (262B vs 197B) but masked lower than expected imports and exports leading to a negative sentiment.

Tuesday

In Australia, Retail Sales disappointed at -0.1% vs an expectation of 0.3%.

BoJ Summary of Opinions for April 26th-27th meeting stated that Japan’s economy has been turning to a moderate expansion and is likely to maintain growth above potential mainly through fiscal 2018. BoJ also stated that CPI is likely to increase towards 2% and although prices are sluggish recently, they are likely to start increasing as the economy maintains its moderate expansion. (Newswires)

German Finance minister Schauble said he predicts that ECB policy normalisation will commence shortly. (Newswires)

Wednesday

RBNZ kept Official Cash Rate unchanged at 1.75% as unanimously expected. RBNZ stated that accommodative policy will remain for considerable period, while the bank added that numerous uncertainties remain and policy may need to adjust accordingly. (Newswires)

RBNZ Governor Wheeler stated the central bank is neutral on monetary policy and expect OCR to remain 1.75% for the foreseeable future, while he added that inflation expectations would need to increase for a hike in OCR. (Newswires)

RBNZ Assistant Governor McDermott stated that underlying inflation pressure is same today as it was in February and added he is not unhappy about the decline in NZD from the rate decision. (Newswires)

Crude oil inventories in the US saw a bigger drawdown than expected (-5.2M vs -2.0M).

Thursday

Bank of England leaves interest rate unchanged at 0.25% as expected with only one dissenter who voted for an increase, as before. The Asset purchase facility was kept unchanged at 435B, voted for unanimously as before.

Bank of England Quarterly Inflation Report (QIR) Inflation Estimates: 2017: 2.8% (prev 2.7%) 2018: 2.4% (prev 2.6%) 2019: 2.2% (prev 2.4%) and QIR GDP Estimates: 2017: 1.9% (prev 2.0%) 2018: 1.7% (prev 1.6%) 2019: 1.8% (prev 1.7%).

Bank of England suggests that policy may need to be tighter than yield curve implies and that some MPC members would need relatively little upside news in growth or inflation to consider voting to tighten the interest rate.

Friday

US Core and Headline Retail Sales and CPI all missed expectations.

Market Reaction

Sentiment was neutral to slightly risk-off for most of the week. Over the course of the week the USD rose although a lot of the gain was lost of Friday with the bad news on Core and Headline Retail Sales and CPI. The S&P500 and Dow30 both lost ground although the Nasdaq climbed a small amount. Oil recovered from what was probably an over-reaction to US rig counts. Gold was flat on the week. The US 10 Year Treasury was up for most of the week but lost it all and closed down on the week after Friday’s economic news. The Euro50 fell back as did the EUR after Macron’s victory last Sunday. The Japan225 got stuck at resistance. The JPY weakened into the start of the week and then the risk sentiment turned more negative and on Thursday and Friday the currency strengthened, ending the week essentially flat. The GBP strengthened but was knocked back by Thursday’s BoE statement. The AUD recovered, bouncing up off support. The NZD climbed but closed down on the week after the RBNZ statement on Thursday.

Trading Plan

Three trades closed last week. Trade 22 (Japan225 long) closed for a gain of +1.91%. Trades 23 (USDJPY long) and Trade 24 (WTI long) both closed at breakeven. Month-to-date performance is +1.91% and year-to-date performance is +9.63%.

Weekly Forex Outlook – Week Commencing 15th May 2017

Economic Calendar

Over the weekend:

North Korea launches another missile on Sunday morning.

WTI crude futures surged following reports that both Russia and Saudi Arabia have agreed that oil output cuts should be extended for 9 more months which saw prices break above USD 48/bbl. Elsewhere, gold (+0.2%) prices remained amid increased geopolitical concerns following the North Korean missile test, while copper also gains amid a positive risk tone in its largest consumer China.

Russia Energy Minister Novak said that Russia and Saudi Arabia agree output cuts need to be extended for 9 months. Novak also commented that more countries are invited to the May meeting in Vienna, while Saudi Energy Minister Al-Falih stated that they recommend extending at the same terms. (Newswires)

Some OPEC members are pushing for deeper cuts or including new participants to join the cuts, including Turkmenistan & Egypt, according to sources. There were also source reports that Venezuela told other OPEC members that it wants deeper cuts of up to 5mln BPD, which didn’t gather support. (WSJ)

Mon – NZ Retail Sales (Sunday night). CNY Industrial Production.

Tues – AUD Monetary Policy Meeting Minutes. GBP CPI y/y. EUR Flash GDP.

Wed – GBP Average Earnings Index.

Thurs – JPY Preliminary GDP, GBP Retail Sales.

Fri – CAD CPI and Core Retail Sales.

Financial News

ETF flow favours non-US stocks

S&P500 stuck at 2400

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