Weekly Review and Outlook 26th June 2017

Mark NugentJune 2017, Trading Plan

Weekly Forex Review – Week Commencing 19th June 2017

Economic Calendar

Over the weekend:

French President Macron’s party won a parliamentary majority with over 300 seats from a total of 577.

Monday

There were hawkish comments from Fed’s Dudley that he is confident US inflation would increase in tandem with wages and that the expansion in US has a long way to go.

RBA minutes from June 6th meeting reiterated it is appropriate to keep accommodative stance on monetary policy unchanged and that rising AUD complicates economic adjustment. The minutes also stated that the RBA still expects GDP growth to rise to 3% overtime, despite soft Q1 figures. (Newswires)

Tuesday

BoE Governor Carney speaks (a reschedule of last week’s Mansion House speech). He has said that “now is not the time to raise rates”.

UK – The DUP was reported to have threatened to walk away from talks with the Conservative party over forming a government. Last night there was speculation that the Conservatives could even open talks with the Liberal Democrats’ 12 MPs about supporting the Tory Government if the DUP talks fail. (Telegraph)

Wednesday

BoJ meeting minutes for April 26th – 27th meeting stated that members viewed Japan’s economy had been turning towards a moderate expansion and which is likely to continue. Furthermore, members concurred that financial conditions in Japan were highly accommodative and that pursuing current powerful easing is appropriate. The minutes also stated that momentum towards price goal is not firm enough and that risks to economy are skewed to downside. (Newswires)

The GBP hypothesis among short term traders has been flipped on its head again as the comments from the BoE’s Haldane give the hawkish bias a fresh lease of life. The MPC member voted for no change at the meeting last week, so traders look to the vote split to neutralise over the months ahead, given his positive outlook on growth and higher inflation expectations. As ever, data dependency should limit the upside as well as the not-so small matter of the Brexit negotiations ahead, with only the CBI industrial trends orders down on the schedule this week.

UK PM May is facing a constitutional crisis after Labour and the Liberal Democrats threatened to use the House of Lords to water down Brexit. (Telegraph/Times)

New Zealand Interest Rate Decision: Unchanged at 1.75% vs. Exp. 1.75% (Prev. 1.75%)

Statement:
– Policy to remain accommodative for some time.
– Uncertainties remain and policies may need to adjust accordingly.
– Changes announced in the 2017 budget should support growth.
– Outlook for domestic economic growth remains positive.

Fed’s Harker (Voter, Neutral) seeks ‘pause’ on rate hikes while forging ahead on balance sheet reduction and commented that balance sheet unwind could start in September. (Newswires)

Thursday

CAD Core and Headline Retail Sales beat expectation (1.5% vs 0.6% and 0.8% vs 0.3% respectively).

Friday

CAD CPI misses (0.1% vs 0.2%).

Market Reaction

Monday saw positive risk tone but by Tuesday the tone was risk-off and stayed that way for the rest of the week. The USD was range-bound with little economic news. The Nasdaq regained around half of the 9th June drop, while the S&P500 and Dow 30 were flat on the week. Oil was down and made a partial recovery by the weekend. The US 10 Year yield was down on the week, ending at 2.13%. The EUR was range-bound as was the GBP and CAD. The AUD had a down week and the NZD had it’s fifth consecutive up week, ending at a prior support level.

Trading Plan

I closed three trades last week. Trade34 (Nasdaq long) closed for a loss of 0.52%. Trade 35 (USDJPY long) closed for a loss of 0.15%. Trade 36 (AUDJPY long) closed at breakeven. Month-to-date performance is +0.32% and year-to-date performance is +9.4%.

Weekly Forex Outlook – Week Commencing 26th June 2017

Economic Calendar

Over the weekend:

Nothing of note.

In the news:

Gold plunges as 1.8 million ounces traded

Mon – BoJ Summary of Opinions from June 15-16th said that Japan’s economy has been turning towards a moderate expansion and that the most effective way to reach inflation goal is to continue with the current monetary policy. (Newswires)

Fed’s Bullard (Non-Voter, Dove) said Fed can wait and see impact of fiscal policy and tax reform before hiking. Bullard added that there is potential balance sheet move could come at a non-hike meeting and that he sees the Fed balance sheet being cut to the low USD 2trln mark (from around USD 4.5trln) within 5 years. (Newswires)

Currently (12 noon BST), equities are up, oil is up and gold down. The JPY is weakening. Risk tone is positive.

Tues – GBP Stability Report and Carney speech.

Wed – USD Crude Oil Inventories

Thurs – USD Final GDP

Fri – Tokyo Core CPI; UK Current Account; UK Final GDP; US Core PCE Price Index

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Here is your Weekly Review and Outlook video.

I discuss last week’s trades at 2:55 and this week’s trading plan at 6:55.

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