Weekly Review and Outlook 17th April 2017

Mark NugentApril 2017, Trading Plan

Weekly Forex Review – Week Commencing 10th April 2017

Economic Calendar

Monday

Fed’s Dudley (Voter, Dove) said the Fed are still working on a plan to shrink the balance sheet and expects to begin to shrink the balance sheet later in 2017, early 2018. (Newswires)

Monday was quiet on the calendar. Geopolitical issues remain the focus – Syria and the carrier group in the Korean peninsula. China said to be amassing 150,000 troops on the North Korean border o deal with refugees in the event of a US strike.

Tuesday
UK CPI y/y hits 2.3% vs expectation of 2.2%.

BoJ Governor Kuroda stated BoJ easing is not targeting an FX level and that JPY weakness could help inflation reach target quicker. Kuroda further stated that he sees no problem with asset purchases or expansion of monetary base. (Newswires)

Wednesday

Chinese CPI missed at 0.9% vs 1.1% expected. UK Average Earnings beat expectation at 2.3% (2.1% expected).

CAD saw rate unchanged at 0.50%.

The BOC said 1) The forecast for the output gap closing moves forward to H1 2018, 2) no improvement in labour market indicators over the past year and 3) it is too early to conclude that the economy is on a sustainable path.

New forecasts: GDP: Q1 2.2% (Prev. 1.5%); CPI: Q1 2.0% (Prev. 1.8%)

BoC Governor Poloz says the BoC is decidedly neutral and a rate cut remains a possibility if risks in outlook are realised but says given the recent data a rate cut was not on the table at present. BoC deputy governor Wilkins judges the neutral rate to be lower now than previously expected; economy has material room to grow.

Comments from President Trump: the USD is getting too strong and he prefers low interest rate policy. This resulted in USD weakening against its major counterparts, in which Trump added that is likely he will not offer Fed Chair Yellen a second term.

Thursday

A light news day.

Friday

Headline US CPI and Core CPI missed expectations (-0.3% vs 0.0% and -0.1% vs 0.2% respectively). Headline and Core Retail Sales also missed (-0.2% vs 0.1% and 0.0% vs 0.2% respectively).

Market Reaction

The USD was down on the week, driven in part bu Trump’s comments about the USD being overvalued. US equities also dropped as risk tone was negative due to geopolitical issues. Oil consolidated around USD53/bbl. Gold rose. US 10 Year yield dropped below support on the risk-off sentiment. UK equities were up on the week but the Japan 225 dropped as the JPY strengthened.

Trading Plan

Trade 19 (EURUSD short) closed for a loss of 0.5% and Trade 20 (NZDCAD short) closed for a gain of 1.0%. Month-to-date performance is +1.02% and year-to-date performance is +5.40%.

Weekly Forex Outlook – Week Commencing 17th April 2017

Economic Calendar

Over the weekend:

Saudi Arabia, Iraq, Kuwait Aim for USD60/bbl oil price. The three OPEC countries see price level as appropriate to lift their economies without spurring more output from American shale, signalling they will support additional production cuts next month. (WSJ) Saudi Oil Min Al Falih said “it’s too soon to discuss extending oil output pact. The level of compliance among OPEC and non-OPEC oil producers with a global deal to cut output is very good, above 100 percent, but it is premature to talk about extending the deal.” (Nasdaq)

Geopolitical tensions continued: North Korea says “we will go to war” if US chooses to provoke. US VP Pence said that the “US era of strategic patience with North Korea is over.”

Monday

Monday was a Bank Holiday in EU. US Treasury Secretary Mnuchin warned of a delay to tax reform, as he commented that the timeline to get it complete by August is “highly aggressive to not realistic at this point”. Mnuchin added that over long periods of time the strength of the USD is a good thing.

Tuesday

RBA minutes from April 4th meeting stated that conditions in the labour market had been somewhat weaker than had been expected. RBA minutes also stated that members judged steady rates consistent with growth and inflation targets, while CPI is expected to pick up above 2% this year.

Later today we have AUD Monetary Policy Meeting Minutes.

UK PM May speaks (scheduled 70 minutes prior to event).

Wednesday

EUR Final CPI; NZD CPI

Thursday

BoE Gov Carney speaks.

Friday

GBP Retail Sales; CAD CPI.

(First round of french election: Sunday 23rd April).

Financial News

French election up for grabs

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