Sept 11, 2016 - Weekly Macro Outlook W37

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.

All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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Weekly Macro Overview 32W

This week’s Macro Overview is a little shorter due to holidays. We saw 2 rate cuts in the Commonwealth last week, both well expected. The first came from Royal Bank of Australia on Tuesday and the later from the Bank of England on Thursday. Traders were also watching the US employment data in the second half of the week, which were in general better than expected pushing the USD higher.

Monday:

It was a PMI day but the traders mostly didn’t get what they were expecting. The Chinese numbers were rather mixed and the Spanish, UK and US numbers were worse than expected.

Tuesday:

Tuesday early morning the RBA cut its benchmark rate by 25 bps. After the initial depreciation of AUD the traders reversed the direction as the wording of the Rate Statement suggested this could be the end of the easing. The AUDUSD rallied above 0.7600. Later in the morning the UK construction sector PMI was better than expected. In the afternoon the US PCE Price Index came out at 0.1% vs previous 0.2% and the unchanged Personal Spending couldn’t help the dollar which reached 1.1200.

Wednesday:

After the boring morning with only an unchanged UK services PMI we had ADP employment from the US. The improving data (also upward revision of the last figures) gave us a hint that the NFP Friday won’t be as low as expected. The dollar started the appreciation and this was probably the key moment of the week however, the Friday’s confirmation was still needed to let the dollar bulls run.

Thursday:

The worse than expected Australian Retail Sales didn’t really stop the bulls but managed to slow down the momentum after the Tuesday disappointing Rate Statement. The BoE cut the key rate as expected by 25 bps, also increasing the Asset purchase by GBP 60 bln, raising the questions whether this step wasn’t premature. The GBPUSD fell 200 bps in reaction to Carney’s speech half an hour later. In the afternoon, the US jobless claims came out more or less in-line with expectations and with muted reaction prior to US NFPs on Friday.

Friday:

After a sleepy morning the awaited job data caused the USD strengthening around 100 points against most of its peers despite the unchanged Unemployment Rate. The NFPs were worse than the previous (which was revised to the upside) but was much better than expected. Also the Average Earnings improved by 0.3% vs. forecasted 0.2% and previous 0.1%, what creates a better ground for an increase of the inflation.

Next week

Monday:

The only thing worth to watch is the Chinese trade balance, but not much of a change is expected. Maybe later the Canadian housing data could give some hint which direction the loonie will take.

Tuesday:

During Tokyo session, the Chinese inflation data can spur some volatility and later in the European session, the UK manufacturing will give us some hint, regarding the impact of the Brexit vote to the British economy. In the afternoon keep an eye on US job market data.

Wednesday:

The JOLTS job openings from the US will be released in the afternoon. They are expected to support the last week’s improvement in NFPs. The kiwi traders should be vigilant in the evening, as RBNZ may follow the RBA and cut the benchmark rate.

Thursday:

The regular US jobless claims and the New Zealand retail sales could be the only important data but don’t expect too much volatility around unless there is a huge surprise.

Friday:

Early in the morning, the Chinese Industrial production will be released with no change expected. We have also flash GDP from Europe later in the morning (Eurozone and Germany) which may have impact mainly on EUR crosses. In the afternoon, the Retail sales data and PPI are expected to be released in the US (expecting all worse than the previous set of data). However, given the rejection of the resistance in EURUSD (former support of the uptrend line) last week, a positive outcome could give a nice boost to the dollar bulls.

Have a successful week and don’t forget:

Watch you risk and be consistent in your trading!

Mr. TechMan

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. All rights reserved ©2016. Contact: landoftradingATgmail.com

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Weekly Macro Overview - Week 30

After the failed Turkish coup attempt market started the week in quiet tone. Despite it was an ECB week the EURUSD was stuck in 100 pts range most of the week but closing Friday below the 1.0980 as light negative momentum seems to be prevailing. Two most interesting moves of the week were the USDJPY sell off on Thursday after a release of a rather old interview with Kuroda, were he rejected the idea of helicopter money. The second was on Friday caused by the record weak UK Services PMI followed by a 180 pts sell off in cable.

Monday - The New Zealand CPI came out little worse than expected but better than previous (0.4% vs exp. 0.5%, prev 0.2%) stopped the selloff from the record highs of the previous 14 months. The main upward contributor was Petrol, also real estate prices rose. The Quarterly inflation is in an uptrend this year after the 4Q dip of -0.5%. Also from Monday there were news that Italy is working on setting up a bad bank to clean up the banking sector. According to Fitch rating agency, Japan may face fiscal risks after activating planned government stimulus package.

Tuesday – the UK inflation figures came out much better than expected. CPI y/y 0.5% vs exp 0.4% & prev. 0.3%. IMF again cuts world growth outlook for 2016 (3.1% from 3.2%) & 2017 (3.4% from 3.5%). The ZEW economic indicators were much worse than expected both for Germany and the EZ too mostly due to the uncertainty around Brexit, EURUSD had a delayed reaction 75pips to the downside. The US housing market was more or less in line with expectations while Housing starts seems to be stabilising around 1.2 mil the Building permits are in downtrend from last summer record highs, which could be a leading indicator of the slowing momentum of the economy. The GDT price index of diary auction in New Zealand was better at 0% than the previous months but still not indicating any growth momentum in the most important industry of the country no growth.

Wednesday – the main focus was on UK employment data. The Average earnings increased 2.3% in line with the expectations  while New claimants number went down to only 0.4k but the previous reading was revise to the upside from -0.4k to +12.2k. Unemployment rate was 4.9% vs exp/prev 5%. The Crude inventories declined more than expected.

Thursday – ECB day but we started with the economic outlook of RBNZ which dragged down the Kiwi (NZDUSD) after the CB clearly stated that the NZD exchange rate is too high, damaging the diary and manufacturing sector. The ECB didn`t change monetary policy as expected. Draghi stressed several times during the press conference that it too early to assess the Brexit effect but ECB is prepared to do whatever its needed inside his mandate to balance negative impact. Afternoon the US Unemployment claims came out better than expected and it seems to stabilize around 250k. The Philly manufacturing index couldn’t hold the positive pace from last month when dipped below zero. Existing home sales kept rising in June for the fourth consecutive month so overall we closed a USD positive day.

Friday – In the morning we saw several European PMIs coming out better than expected more or less in line with the consensus. The worst was the UK services PMI which hit the lowest level since April 2009 (at 47.4 from 52.3) followed by a 180 pts sell off on Cable in the next few hours. According to Reuters Greece eased slightly Capital Controls after creditors approval. The Canadian inflation data came out as expected (0% m/m 2.1% y/y) however lower than the previous month. The speculative net long in WTI keeps declining, last week at 289.6k from the peak in May at 368.8k.

Next week we have FOMC rate decision where no change is excepted in the wake of the shock vote for Brexit in the UK in June. However, traders will look for indication if there is any chance for a hike in the US this year. The Calendar is also full of prelim GDP figures from UK, EZ, Canada and US which can move the market.

Monday – in the morning the German Ifo Business Climate is expected to break its improving trend reflecting the worsening mood among managers, business owners after the UK voters decided to leave the EU. Late night the New Zealand trade balance figures could add some pressure on kiwi.

Tuesday – we have a few interesting data out from US starting with S&P home price index 1:00 PM and Flash Services PMI at 1:45 PM. However, the most important will be the Consumer Confidence published by the Conference Board Inc. which expected to maintain the downward trend from the beginning of last year. The same time the New Home Sales will give some hints what`s behind the declining trend of building permits but stable housing starts data.

Wednesday – in early morning the AUD traders may see some rock&roll as the quarterly CPI data may confirm the negative trend even a rebound is expected due to the higher commodity (mainly oil) prices. Later in the morning the forts GDP data of the week will be released in the UK, where the consensus expectation is slight increase to 0.5% from 0.4%. However due to the pre-Brexit negative sentiment could have caused some surprise. In the afternoon US Durable Goods orders and Pending Home sales will come out prior the FOMC. Even there are expected some improvement they will probably have diluted impact due to the upcoming rate decision in the evening where the Fed is expected to keep rates on hold and the statement will be the main driver. Don’t forget there will be no Press Conference this time.

Thursday – after FOMC the market will be digesting the news and therefore the early morning German CPI and Unemployment will not cause big moves. The main event will be the US jobless claims in the afternoon which seems to be stabilizing the last 3 months. Late night or for some early morning there will be a bunch of Japanese data in 20 mins starting with CPI, Unemployment, Retail sales and prelim industrial production mostly with medium importance.

Friday – early morning the Japanese Monetary Policy Statement and Rate Decision is due with the BOJ`s outlook report and press conf. Later European prelim GDP will be released at GMT 9:00 AM with An expected moderate 0.1% increase in the annual rate.  After the lunch break the markets will focus on Canadian and US GDP. While the Canadian monthly figures are expected to decline, the Quarterly US GDP is expected to rise annually to 2.6%. Keep in mind that this is the first US GDP release this used to have the most impact on the market.

One more thing, Friday late evening the European Bank Stress Test Results will come out and this could mean a significant risk if some big banks or several smaller players would fail. Italy will be in main focus due to the current discussions about the huge amount of NPLs in the country’s banks.

Watch your risk and be consistent.

Risk Event Calendar:

Mr. TechMan

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.

All rights reserved ©2016 www.landoftrading.com Contact: landoftradingATgmail.com

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