Weekly Review and Outlook 30th January 2017

Mark NugentJan 2017, Trading Plan

Weekly Forex Review – Week Commencing 23rd January 2017

Economic Calendar

Monday

The USD remains weak after Trump’s inauguration last Friday. Yesterday, US Treasury Secretary designate Mnuchin warned that excessive USD strength could be negative in the short term. Yields on US 10 Year Treasuries are down since the inauguration. The US equity position is better with highs being maintained. Both UK indices approach their 50MAs from the upside. The Euro50 remains flat and the Japan225 sits at the 50MA. On the currency markets, the JPY and GBP continue to strengthen.

Tuesday

UK courts decide that legislation is required to trigger Article 50 and begin the process of leaving the EU, rather than a simple decison by ministers. The GBP was unperturbed. The Trump trade may be back, at least for equities. Trump announces two major oil pipelines and his team has short-listed 50 infrastructure projects valued at total USD137.5B, as priorities (Newswires). The S&P500 and Nasdaq hit all time highs and the Dow 30 is not far behind. The USD itself moves up very slightly. UK indices pause just above the 50MAs as the GBP continues to strengthen. The JPY weakens propelling the Japan225 upwards.

There is now a regular newsflow from the ECB on the removal of monetary easing: ECB’s Lautenschläger stated she is optimistic that the CB will soon discuss exit from easy monetary policies, but also commented that loose monetary policy should not be stopped abruptly and instead the dose should be cut slowly as such policy should be reduced gradually (Newswires).

Wednesday

All 3 major US equity indices reach new all-time highs and the Japan225 gets caught up in the excitement driven by firm gains in Japanese financials. The USD moves down slightly and the EUR re-enters its consolidation triangle. The GBP continues to rise and the JPY weakens on risk sentiment (risk on).

NZ CPI q/q exceeded expectations at 0.4% vs 0.3% and the NZD index rises.

Trump begins the process of building the wall on the Mexican border

Thursday

UK Prelim GDP q/q beat expectation at 0.6% vs 0.5%.

In Japan, Tokyo Core CPI y/y beats expectation but is still indicative of deflation (-0.3% vs -0.4%). The USD index climbs and the 3 major US equity indices all hold at or around all-time highs. UK equities consolidate as GBP has a small up day. The JPY weakens as the Japan 225 moves up. CAD and oil both stay within channels.

Friday

US Advance GDP q/q missed at 1.9% vs expectation of 2.1%. The prior number has been significantly revised from 2.9% to 3.5%. This afternoon, UK PM Theresa May will be the first foreign leader to visit US President Trump.

Market Reaction

The highlight of the week is US equities with each of the 3 major indices making new highs. The USD was flat on the week. The GBP rose and equities were flat across the week which started with PM Theresa May’s Lancaster House speech and ended with her Trump visit. The EUR was down on the week and the Euro50 was flat. The JPY weakened which, together with good corporate results from financials, helped to propel the Japan225 upwards. Oil consolidated and the CAD rose.

Trading Plan

I exit the week in 3 trades: USDJPY long; Japan225 long and Euro50 short.

Weekly Forex Outlook – Week Commencing 30th January 2017

Economic Calendar

Mon – China holiday (all week), US Core PCE m/m
Tues – JPY BoJ Rate, Outlook and Policy Statement; CAD GDP
Wed – GBP Manufacturing PMI; USD FOMC Fed Funds Rate and Statement
Thurs – GBP BoE Super Thursday
Fri – GBP Services PMI; US Average Hourly Earnings and Non-Farm Payroll

Financial News

OPEC sticking to production cuts
Better forecasts not enough for carney in Brexit’s long shadow

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