Market Watch - Thursday 23 Feb 2017

AFEX

Today's key data

  • GBP 11:00 CBI realized sales
  • USD 13.30 Weekly jobless claims
  • USD 16:00 Crude oil inventories
  • AUD 22:30 RBA Governor Lowe speaks

See key data for this week ›

USD
As expected, the FOMC minutes released late last night gave little news, as many Fed members have already expressed their views since the meeting.  This actually caused the greenback to fall slightly, but it remains at very attractive levels against most rivals, as there was nothing new supporting more action than anticipated.  USD increased ahead of these minutes preparing for this to potentially be more hawkish than expected, thus when it was released in line it caused the a US Dollar to pull back a little bit.  One negative note on  the minutes was the fact that while FOMC voting members think the economy is going to continue to improve but that "Trumponomics" make the outlook somewhat more uncertain. Although "many participants" expect a rate hike "fairly soon", only "a few participants" expect a hike "at an upcoming meeting". The minutes showed that "uncertain" is still the main message from the Fed and this word was this time mentioned 14 times. May or June still seems more likely for a US rate hike but a bumper jobs report for February could increase the chances for a March move.  That said, the greenback is still in striking distance of the 42 (now 43) day high it hit yesterday in its pairing with EUOR at the moment.  The Commodity Currencies were stronger overnight as oil ticked up.  Yen strengthened on better than anticipated SPPI YoY – which is an inflationary measure of the pricing of goods purchased by Japanese Corporations on an annual basis.- yesterday night which was released @ +0.5% compared to 0.4% economists’ consensus growth along with an upward revision to 0.5% from 0.4% on the previous number.   Further, some uncertainty continued to benefit Yen combined with the recent visit of President Donald Trump where he did not address Japanese or Chinese currency manipulation as some expected.  This latter notion  was a boon for the Commodity Group + Japanese Currency given the intertwined issue of trade with both the US & China, and US international trade in general.   Essentially, Japan is an exporter with a great deal of goods going to the  US, and the Yen can sometimes be significantly affected by sentiment on China as well.  For the Commodity Group, and AUD + NZD in particular, their supply to China is essential so worsening US & China trade relations could impact US demand.  Notably, the Mexican Peso is significantly higher as President Trump has not said anything negative about NAFTA in the last few weeks either.   

 

 

CAD

The Loonie was up in its pairing with a weakening US Dollar despite worse than anticipated Canadian Retail Sales yesterday as oil ticked up in addition to a softer greenback.   Canadian Retail Sales MoM disappointed @ -0.5% headline given consensus of +0.1%, but the previous figure was increas3eed a touch to ).3% from +0.2% today.  However the Core Retail Sales MoM number was released at -0.3% compared to consensus increase of 0.8%, along with downward revision to -0.1% from 0.1% growth the last release. Canadian inflationary data carries a lot of weight at the moment, since Bank of Canada Governor Stephen Poloz did leave room for a rate cut if necessary based on Canadian economic performance.  This does not mean their will necessarily be a rate cut, but heavily implies the BoC will not raise rates, and their next move would likely be down if any move would occur.  Today Corporate Profits is due @ 08:30 AM today with key Canadian CPI MoM + YoY data set form tomorrow @ 0830 AM as well.

 

EURO
The Euro fought back yesterday afternoon versus the USD given aforementioned traders reaction to the FOMC minutes,  and, perhaps more importantly,  the centrist politician Francois Bayrou offered to form an alliance with the presidential candidate Emmanuel Macron.  Mr. Bayrou won less than 10% of the vote in 2012 and had no chance of victory himself, but he would have drawn votes from Macron.  After Bayrou’s announcement to support Macron the implied probability of Macron winning the French Presidential Election rose from 34% to 38%.  Anything that reduces the chances of Marine Le Pen becoming the next president of France is perceived as positive for the Euro and that is why we saw a reversal of trend.  Given Brexit especially, this French election is very key for the entire Eurozone as a whole given what is potentially at stake in a Marine Le Pen victory .

 

GBP
Cable was a touch higher this morning as the greenback weakened a bit, and British Pound was a little lower in its pairing with the EURO after it a  hit 2-month highs against the single currency yesterday.   Yesterday’s GBP rally versus EURO was in the wake of an opinion poll on Monday showed French presidential candidate Marine Le Pen gaining ground.  The poll suggests anti-European Union & nationalist Le Pen may have more chance of springing a surprise if she makes it through to the second round of the elections in May.   that said, the Pound fell a bit  vis-à-vis EUR  as this new development regarding Francois Bayrou mentioned above could dampen Marine Le Pen’s Presidential hopes.  The closer a French populist shock becomes, the more the pound will begin to look like a safe haven relative to the Euro & vice versa.  The pound has now gained around 4% against the Euro since the middle of January.   Sterling gains ran out of steam yesterday morning despite data that showed UK growth in the final quarter of 2016 was slightly stronger than initial estimates.  Revised figures said GDP rose by 0.7% with a better performance from manufacturing behind the upward revision from 0.6%. However, business investment fell 1% and there were signs of a tougher year ahead as household spending slowed.  All eyes on the unfolding of Brexit as article 50 is about to trigger next month

ROW
Australian Dollar, Kiwi, ZAR, Mexican Peso and Japanese Yen were all higher than most against the slightly weaker US Dollar on general global trade factors.  Firstly, the Yen strengthened on better than anticipated SPPI YoY – which is an inflationary measure of the pricing of goods purchased by Japanese Corporations on an annual basis.- yesterday night which was released @ +0.5% compared to 0.4% economists’ consensus growth along with an upward revision to 0.5% from 0.4% on the previous number.   Further, some uncertainty continued to benefit Yen combined with the recent visit of President Donald Trump where he did not address Japanese or Chinese currency manipulation as some expected.   Commodity Group got a boost from an uptick in the price of oil overnight.  Further, for the Commodity Group, and AUD + NZD in particular, their supply to China is essential so worsening US & China trade relations could impact US demand.   These factors are good for the entire Commodity Group which greatly benefit from free flowing global trade

 

Monday Feb 20th

  • USD All day Presidents' Day holiday
  • GBP 00:01 Nationwide HPI
  • GBP 11:00 CBI Industrial order expectations
  • EUR 15:00 Consumer confidence

Tuesday Feb 21st

  • AUD 00:30 RBA Meeting minutes
  • EUR 09:00 Flash services PMI
  • GBP 09:30 Public Sector Net Borrowing
  • AUD 21:30 RBA Governor Lowe speaks

Wednesday Feb 22nd

  • EUR 09:00 German IFO
  • GBP 09:30 Second estimate GDP QoQ
  • GBP 09:30 Preliminary business investment QoQ
  • EUR 10:00 Final CPI YoY
  • CAD 13:30 Core retail sales MoM
  • USD 19:00 FOMC meeting minutes

Thursday Feb 23rd

  • AUD 00:30 Private capital expenditure QoQ
  • GBP 11:00 CBI realized sales
  • USD 16:00 Crude oil inventories
  • AUD 22:30 RBA Governor Lowe speaks

Friday Feb 24th

  • CAD 13:30 CPI MoM
  • USD 15:00 New home sales
  • USD 15:00 UoM consumer sentiment

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