The central
banks last week have chosen a passive approach with no changed in their
monetary policies. The surprise drop in oil inventories this week caused the
return of oil bulls however the rally stalled at 47.50 and WTI closed around $46/barrel
and Brent after testing $50 dollars returned to $48/barrel. In the stock market
Eric Rosenberg caused a sell off on Friday by backing the rate hike later this
year. Next week we have BoE and SNB rate decisions.
Last week’s
summary:
The USD fell against most of its peers on Tuesday
after disappointing ISM Non-Manufacturing
PMI. The biggest blow to EURUSD however
came from Draghi on Thursday when EURUSD tested 1.1325. Market expected at
least some expansion of the monetary easing and the unchanged policy added
momentum to the euro bulls. It seems that central banks are running out of
ammunition and it may signal the end of the era of loose monetary policies. Cable had a good start to the week
after strong services PMI confirming last week’s surprise in manufacturing PMI,
the cross tested 1.3450 levels after US ISM figures but during the Asian
session lost the momentum and the disappointing
UK Manufacturing production and the
mixed mood after inflation hearing
caused the GBPUSD gave up its early
gains. The diary price index in New Zealand was positive again third
month in a row and this gave further boost to the kiwi. USDJPY bounced back from the downtrend line and tested 101 after
ISM. The Crude oil gained on supplies
concerns as Oil inventories fell
dramatically last week. The reason however had nothing to do with fundamentals
rather with bad weather which slowed down the unloading of tankers in the gulf.
We may see a sharp change to the upside in inventories soon. At the end of the
week everything changed however as Rosenberg
on Friday seemed to be very confident regarding rate hike this year. The result
dollar up against all its peers and stocks, commodities down. The criticism of
Greece from Eurogroup also added to
the downside for EURUSD weakness. The country accomplished only 2 out of 15
goals set by creditors and even the finance ministers backed the country by
saying there is still enough time… they stressed Greece needs to speed up
reforms… well we all know all the goals will not be achieved. In response Tsipras hosted a ClubMed meeting of South European countries to unite them in
response to the austerity pressures from Germany. Draghi also joined the
meeting adding more importance to the event. After the Brexit vote in June it
could be seen as an extremely destabilizing step and could mean further
pressure on EUR at Monday open.
Next Week Macro
Outlook / we will have a pretty busy week ahead
Monday:
As there
won’t be any big data released the first
day of the week, the markets will have some time to digest the events of the
weekend regarding Greece. FOMC and RBA speakers will also take the stage
later the day. Before midnight the Japanese
manufacturing index may add some volatility to the jen crosses.
Tuesday:
We will
start the day with Chinese data,
especially industrial production may
move the markets, watch AUD and NZD primarily after midnight. The GBPUSD traders will have some
rock’n’roll caused by UK inflation
which started to pick up this year. Just half an hour later Draghi speaks after the German and EZ ZEW index is published.
Look for some hints about the Club Med
meeting in Athens during the weekend. In the evening the API will release
the US crude inventories which after the last week’s weak data will be more
important than usually. The New Zealand
Current account balance will be released as last data of the day, the CA was
last month in the biggest surplus since Jun 2014.
Wednesday:
We start
with the UK employment data and no
big changes are expected in the job market given it’s close to maximum
employment. Also the oil inventories
will attract more attention as usually due to last weeks weak figures and
slowing exports. There could be a dramatic change to the upside I oil
inventories after the tropical storm passed. Later the GDP figures from New Zealand will be released, which seems to be
trending down.
Thursday:
The day is
packed with important data. After midnight the Australian employment figures will bring some action to the Aussie
traders. With unemployment rate at
5.7% the market expects a little increase in number of employees as the spring/summer
gold rally allowed to reopen some
mines. The situation in the mining sector is however still very difficult due falling
imports to China. In the morning the Swiss
and followed by UK rate decision and Monetary policy statement will bring
some vols to the market, even booth are expected to keep their MPs unchanged. In
the afternoon we have a flood of US
figures, Retail sales, PPI and
Unemployment claims in the same time. However if one looking for a hint
when the rate hike will happen, should keep an eye on Capacity Utilization Rate. Stanley Fisher, deputy head of Fed said two
weeks ago that the efficiency of the US economy is the key problem which the Fed
can’t really influence. When the rate hike cycle started under Greenspan, this
indicator was above 76% (in august 75.9%), when they finished it was over
82%...
Friday:
After a
busy Friday we will have the sales
figures in the Canadian manufacturing sector
and sae time US inflation data. While the Core
CPI is already at 2.2% and we know the Fed is looking at Core PCE index
(1.6%). A big surprise could be the factor that influences the sentiment in a
visible way. Also keep an eye on preliminary University Michigan Consumer sentiment (already at pre crisis
level) and inflation expectations (currently
only half of the pre-crisis expectations around 5%).
DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice.
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