Weekly Review and Outlook 20th March 2017

Mark NugentMarch 2017, Trading Plan

Weekly Forex Review – Week Commencing 13th March 2017

Economic Calendar

Monday: UK House of Lords passed the Brexit bill without the EU citizen rights or final vote amendments after House of Commons rejected amendments, with reports stating that Parliament also granted UK PM May permission to start Brexit. Furthermore, it is now expected that the UK will trigger Article 50 in the last week of March rather than this week, with UK Brexit Minister Davis stating Article 50 will be triggered by the end of this month as planned. (Newswires). UK PM May is preparing to reject Scottish First Minster Sturgeon’s demand for a 2nd Scottish Independence referendum in next the 2 years, according to a government source. (Times)

Tuesday: nothing.

Wednesday: UK Average Earnings missed (2.2% vs 2.4%). US Core CPI was on target at 0.2% with headline CPI beating expectation (0.1% vs 0.0%). US Core Retail Sales beat expectation at 0.2% vs 0.1% and headline Retail Sales missed at 0.1% vs 0.2%. NZ GDP missed at 0.4% vs 0.7%.

The Fed’s FOMC meeting:

The Fed hiked rates by 25bps to 0.75%-1.00% as expected. However, the dot plot projections showed forecasts for 2017 and 2018 were unchanged from December at 1.4% and 2.1% respectively, while the longer run forecast was also unchanged at 3%. This was viewed as being more dovish than expectation. Fed Chair Yellen stated that the economic outlook is highly uncertain and that changes in fiscal policy can affect the economic outlook.

Thursday: In Japan, the BoJ kept monetary policy unchanged as expected with NIRP held at -0.10%. BoJ maintained 10yr JGB yield target at around 0% and kept pledge to buy JGBs around current pace so that holdings rise JPY 80tln annually. BoJ also maintained its assessment that economy continues to recover moderately as a trend.

Dutch election – after having counted 93.5% of votes in the Netherlands election, PM Rutte’s VVD party is to win 33 seats, PVV at 20 seats, while CDA and D66 parties are to win 19 seats each. (Newswires) Subsequently, this shows a strong win for PM Rutte’s VVD party while the far-right, pro-Nexit PVV failed to meet projections. However, the PvdA (Labour Party and potential VVD coalition partner) underperformed with seats falling from 38 in 2012 to around 9 this time around.

The Bank of England kept rates unchanged at 0.25% but there was one dissenter (Forbes) who wanted an increase. QE remained unchanged at 435B, voted for with unanimity. It was stated that a modest withdrawal of stimulus in 3 years is appropriate. The GDP forecast was raised to 0.6% from 0.5% in February.

ECB’s Nowotny stated that the ECB could raise interest rates in a different way than the US Fed, stating that America’s model is to finish bond purchases first, but this may not transfer well to Europe. He went on to say that the ECB could also raise the deposit rate earlier than the prime rate. (Handelsblatt)

Friday: nothing.

Market Reaction

The main reaction last week was the USD after the Fed dot plot showed no increased hawkishness, being the same as the December dot plot. Still, US equities managed to rise on the week. Oil came up off the USD48.8/bbl low and gold rose too. UK and Euro equities gained on the week. The Japan225 dropped as the JPY strenghtened a bit – bad for exporters. The GBP moved up off support as we saw one MPC member vote for a rate hike. Both the NZD and the AUD flirt with resistance.

Trading Plan

No trades closed last week.

Weekly Forex Outlook – Week Commencing 20th March 2017

Economic Calendar

Mon – JPY Bank Holiday
Tues – AUD Monetary Policy Meeting Minutes; UK CPI; CAD Retail Sales
Wed – NZD Rate Statement
Thurs – GBP Retail Sales

Financial News

First skirmish of G20
These economies are seen improving dramatically this year
Bullish bets on crude cut by most ever
Oil price entering a bearish trend

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