Equity markets remained positive over the week with the DOW up slightly to 25219 and the DOW back up to 2732. Earlier levels over 25400 almost seem inevitable as Stocks continue the upward trend from the February 09 low, a huge turn around after seeing record breaking falls recently. We saw another week of the greenback falling away with higher than expected CPI inflation reports pushing currency prices to highs. The US Dollar hitting a 3 year low over the week the US Dollar Index trading at 89.12 as volatility in the markets should continue for a while yet. Growth in the United States is on the improve as tax cuts should push the economy higher along with massive infrastructure plans which will in turn push commodities higher, the stagnant US economy looks to have shaken off its 10 year “lull” –markets watch this space with anticipation. US inflation surprised the markets to the upside surpassing expectations of 1.9% to print at 2.1% and 0.5% for the month- well above the 0.3% expected. This confirmed fears of an expected faster increase in rate hikes triggered by the earlier non-farm payroll report. The New Zealand Dollar traded to a new high or 0.7430 while the Australian Dollar also regained the previous week’s losses to top out just shy of 0.8000 Thursday. The EURO and British Pound also gained ground against the weak Greenback. US Retail Sales published early Saturday morning to show excellent numbers and push all the major currencies off highs to close the week. US Holiday and Canada holidays Monday will bring about light trading leading into a moderately busy economic calendar starting Tuesday when BoE Governor Carney speaks.
The Australian Dollar continued its run north late last week pushing past key resistance at 0.7960 to post a fresh high of 0.7988. Saturday US Building Permits showed a substantial increase in the number of annualised new residential building permits to reverse the Australian Dollar back to low 0.7900’s putting it on the back foot. Tuesday sees Monetary Policy Minutes – expect the RBA to talk up growth here, quarterly wage growth prints Wednesday.
New Zealand (NZD)
The New Zealand Dollar improved on early week gains over the US Dollar Friday as it traded as high as 0.7430 before bouncing lower. Ending a 5 day bullish streak better than expected US Building Permits printed just prior to closing the week, spooking investors and bringing the New Zealand Dollar back down to earth to 0.7380 in heavy Volume trading. The US Holiday Monday should stunt any real movement early in the week with NZ quarterly Producer Price Index printing tomorrow in what looks to be a quiet week locally.
United States (USD)
The US dollar rebounded late Friday/Saturday after a week of US broad-based weakness. US Building permits printed 1.4m over the 1.29m expectation lifting the US Dollar fortunes to end the week on a positive tone. The US dollar weakness is largely due to tax reform and fiscal growth, this seems to outweigh any concerns of higher inflation in the US highlighting a more active Fed. Normally higher US bond yields such as last week’s 2.92 high in the 10 year price boosts the US Dollar but with distorted quantitive easing by central banks this has played havoc on interest rates being less reliable and a poor indicator of exchange rate movement. FOMC meeting minutes Friday along with FOMC members speeches to follow to close the week.
The EUR suffered the same fate as other pairs Friday after US Building Permits printed higher than the expected figures the EUR recouping some of the losses incurred earlier in the week. Even though it traded as high as 1.2555 Friday it still closed the week 190 points (nearly 2 cents) stranger than the greenback. US Holiday Monday should bring about low volumes and with little movement. Later in the week German Manufacturing will be the highlight of the EUR week with figures expected to show further expansion and improve EUR towards last week’s high of 1.2555
United Kingdom (GBP)
The Great British Pound outperformed Friday posting a new high of 1.4140 pushing past the recent target level of 1.4070 with ease against the greenback during heavy trading during NY. US Building Permits printed positive taking GBP off the high, assisting was GBP Retail Sales figures printing at 0.1% versus 0.5% expected putting the GBP on the back foot leading into the weekend. With a rate hike certainly on the cards now we should expect the GBP to strengthen further over the coming days if this week’s inflation hearing and Unemployment rate prints well.
The Japanese Yen continues its bullish drive against the US Dollar through Friday last week before being ousted by a fresh faced US Dollar after US Building Permits printed well. Generally the JPY looks healthy enough tracking over 6c better the US Dollar since the start of the year price which was around 112.00. January’s Japanese trade balance came in at a deficit of US9B which was well below the expected 10.2B the market was expecting. Generally the numbers show a robust economy as the world still demands Japanese products. No Japanese local data to be released this week.
The Canadian Dollar made up made small gains last week mainly trading in a tight range until US figures pushed it out of favor with investors.The CAD closed the week with worse than expected Manufacturing monthly sales of -0.3% over an expectation of 0.2% p Monday the Canadian Dollar has opened well as crude oil prices are up over 1% the high over the last 10 days. This week sees Core Retail Sales and monthly CPI figures
Major Announcements last week:
• US CPI 0.5% vs 0.3% expected
• US Retail Sales -0.3% vs 0.2% expected
• Australian Employment Change 16.0k vs 15.3k
• US PPI 0.4% vs 0.4% expected
• UK Retail Sales 0.1% vs 0.5% expected
• US Building Permits 1.40m vs 1.29m expected