Weekly Review and Outlook 8th May 2017

Mark NugentMay 2017, Trading Plan

Weekly Forex Review – Week Commencing 1st May 2017

Economic Calendar

Over the weekend:

Nothing of note.

Monday

US Core PCE hit expectations at -0.1%.

Tuesday

BoJ minutes for March 15th-16th meeting stated that Japan’s economy continued moderate recovery trend and exports picked up. Minutes also stated that members agreed inflation lacked strength and that it was not appropriate to raise the yield target because yields rose overseas. (Newswires)

RBA kept the Cash Rate unchanged at 1.50% vs. Exp. 1.50% (Prev. 1.50%), while it reiterated that unchanged policy is consistent with sustainable growth and achieving inflation target. RBA also commented that higher commodity prices give significant support to Australia’s national income and that a broad-based pick up was seen globally since last year. (Newswires)

UK Manufacturing PMI beat expectation (57.3 vs 54.0).

Wednesday

UK Construction PMI beat expectation at 53.1 vs 52.1. EUR Prelim Flash GDP comes in on target at 0.5%.

Thursday

Fed kept rates unchanged at 0.75%-1.00% as expected, with the decision made by unanimous vote. (Newswires)
– Fed stated growth slowdown in Q1 is likely to be transitory and that they still expect the economy to expand at a moderate pace.
– Fed said that the 12-month inflation is running close to its 2% goal and labour market continued to strengthen as growth slowed.
– Fed reiterated that risks to outlook appear roughly balanced and it expects economy to warrant gradual rate hikes.
– Fed did not signal any change to its balance sheet policy.
– The widely expected announcement from the Fed resulted into a fairly subdued immediate reaction across major US asset classes, although the USD gradually benefited and Tnotes were pressured in the minutes following the release as Fed Fund Rate Futures began to price in a 93% chance of a June hike vs. 69% the prior day given the Fed’s downplaying of lacklustre Q1 growth and confidence in the Labour market.

In the US, ADP Non-Farm Employment was on track at 177K and ISM Non-Manufacturing PMI beat expectation (57.5 vs 56.1).

RBA Governor Lowe said that the high cost of housing is a real issue for many and can have serious side effects, while he added that rates could be expected to increase overtime. Lowe also conducted a Q&A in which he commented that lower rates would contribute to imbalances in the system, but added did not rule out the possibility that rates could go lower at some point. (Newswires)

UK Services PMI beat expectation (55.8 vs 54.6) as did Construction and Manufacturing earlier in the week.

Macron seen to be winner in French election TV debate.

Friday

RBA Monetary Policy Statement showed inflation and GDP forecast were mostly unchanged from the February statement with GDP forecast for H1 2017 maintained at 1.50%-2.50% and FY 2017 forecast maintained at 2.50%-3.50%. However, RBA upgraded its outlook for H1 2018 by 25bps to 2.75%-3.75% and stated that the expected increase in underlying inflation is still quite gradual, citing low wage growth.

In the US, Average Hourly Earnings were at expectation at 0.3%. Non-Farm Employment Change was 211K, beating the expectation of 194K.

Market Reaction

The story was one of consolidation. Risk sentiment was neutral/slightly on. There was little movement in the USD and US equities. Oil dropped on over-supply fears and made a partial recovery on Friday. The US 10 Year yield rose over the week. The JPY weakened and moved decisively up through resistance. European stocks and the EUR rose into the presidential election. The Japan225 rose despite Japanese traders being on holiday from Wednesday. The AUD suffered from poor copper and iron ore pricing.

Trading Plan

Trade 22 (Japan 225 long) was opened on Monday and at weekend was well in profit. No capital at risk as stop at 1.7 x risk.

Weekly Forex Outlook – Week Commencing 8th May 2017

Economic Calendar

Over the weekend:

US Baker Hughes Total Rig Count (May) W/W 877 (Prev. 870)

Saudi’s Energy Minister Al-Falih stated markets were recently impacted by slow seasonal demand and growth in non-OPEC supply. Al-Falih added that the worst is clearly behind us and market is moving into re-balancing, while he further commented that he confident the production deal will be extended in the second half and possibly beyond. (Newswires)

Iran oil minister Zanganeh said OPEC and non-OPEC producers are likely to extend output curbs to support prices and added that USD 55/bbl is a suitable price for crude oil. (SHANA)

Macron won the French Presidential Election by a convincing margin.

German government officials propose UK single market access for a fee.

Mon – Chinese Trade Balance was positive (262B vs 197B) but masked lower than expected imports and exports leading to a negative sentiment.

Tues – AUD Retail Sales

Wed – NZD Cash Rate, Rate Statement and Monetary Policy Statement.

Thurs – GBP BoE Super Thursday

Fri – US Headline and Core CPI and Retail Sales

Financial News

Macron wins French election

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