Weekly Review and Outlook 23rd January 2017

Mark NugentJan 2017, Trading Plan

Weekly Forex Review – Week Commencing 16th January 2017

Economic Calendar

Monday

BoE Governor Carney (Neutral) stated BoE sees slower UK growth and FX rate over next few years and there is evidence that consumption-led growth is less durable. Carney also commented that the central bank is prepared to act to protect economic growth in the face of Brexit triggered pressures. Carney also reiterated that the MPC has limits to the extent that above target inflation can be tolerated. (Newswires)

Tuesday

Early today we had UK CPI y/y beating expectation (1.6% VS 1.4%). UK PM Teresa May’s speech on her approach to the Brexit negotiations was well received.

Wednesday

This morning saw UK Average Earnings 3m/y grow by 2.8% vs expectation of 2.6%. This is fuel for inflation. BoJ is said to mull another upward revision to its economic assessment at the 31st January meeting. (Newswires) In FX markets, USD strengthened and reclaimed the 101.00 level on the latest comments by Fed Chair Yellen who signalled likelihood of multiple rate hikes annually. (Newswires) US CPI and Core CPI m/m both hit expection. Canadian Rate decision – left at 0.5% as per expectation. Moderate concern over inflation due to the fall in food prices, but little here to concern traders who are focusing on USD direction now more than anything else. NAFTA talks ahead are likely to limit CAD gains vs the USD, as is the broader view on the greenback, with risk aversion also supportive of the spot rate over the near term.

Thursday

ECB kept rate unchanged at 0.00% and QE also unchanged. ECB’s Draghi says outlook for headline inflation over the next two quarters is higher than forecast; they did not discuss reducing stimulus and that a substantial degree of stimulus is still required; risks remain tilted to the downside and inflation pressures are subdued.

Friday

UK Retail m/m underperformed (-0.9% vs -0.1%). In Canada, CPI m/m missed (-0.2% vs 0.0%) but Core Retail Sales hit expectation at 0.1%.

Market Reaction

The major move of the week was GBP strength on Monday caused by Teresa May’s bullish Brexit speech at Lancaster House in London, although UK equities suffered as the PM clearly has prioritised border control hence the Brexit will be hard – no access to the single market on current terms. The rest of the week seemed calm waiting for the US presidential inauguration and then on Friday when it happened there was very little market movement. US equities consolidated and the USD index was down across the week including on Friday. The EUR exited its triangle to the upside.

Trading Plan

No trades closed this week. Two trades entered: Trade 1 (USDJPY long) and Trade 2 (Japan225 long): both close to breakeven at Friday night close.

Weekly Forex Outlook – Week Commencing 23rd January 2017

Over the weekend/early today: nothing.

Economic Calendar

Mon – ECB President Draghi speaks
Tues – UK – EU Membership Court Ruling
Wed – AUD CPI q/q; NZ CPI q/q
Thurs – UK Prelim GDP q/q; JPY Tokyo Core CPI y/y
Fri – US Advance GDP q/q

Financial News

Trump trade approaches inflection point
Trump rally isn’t over

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