Solforex.com - Weekly/Daily Forex Market Analysis

[limyeeshin]

Edition 39｜January 18, 2016​

The euro rose against the dollar on Friday as the concerns on oil prices drop continued to weigh. Beginning of the week, the euro was weakened as the offshore yuan slightly appreciated and China central bank tries to regulate the pace of devaluation. Thus, woes toward emerging markets were eased and turned the euro bearish. Also, the trade balance in China showed great improvement than the expectation further weakened the euro. But the U.S. economic report showed shrinkage in numbers and the oil prices hit below $30 in later week, brought back fear on emerging market slowdown and turned the euro bullish, shortening its loss. EUR/USD pair gained +0.46%, traded at 1.0915 in late trade.

The U.S. dollar was weakened against the euro and yen after weak U.S. economic data on Friday in combination of increased concerns on emerging markets economy. The U.S. retail sales fell 0.1% in December, compared to 0.1% increase seen. Also, the industrial output fell three months in a row by 0.4% last month, below 0.2% decline expected, while U.S. producer prices also declined. The dollar itself fell -0.13% against other major currencies, limited its loss by gaining from commodity linked currencies. USD/JPY fell -0.84%, traded at 117.05.

The commodity producing countries and emerging market currencies tumbled as the oil prices dropped to its fresh low below $30 since November 2003. Also, the commodity prices for industrial production declined as decline in U.S. industrial production and New York State manufacturing grew fear on demand depression. Copper fell -1.64%, nickel fell -2.12%, iron fell -2.31%, and aluminum fell -0.66%. AUD/USD fell 1.73% for the day and hit lows of 0.6828, the weakest since May 2009. CAD/USD fell to a fresh 12 year lows by falling 1.22% at 1.4540. NZD/USD also fell 0.2% to three and a half month lows at 0.6459.

The British pound dropped to new five and a half year lows against the dollar on Friday as Brent crude oil price hit $29.93, the lowest since 2004. GBP/USD fell -1.10%, hitting 1.4339 the lowest since 2010 before consolidating at 1.4357.

Elsewhere, emerging market currencies were generally weakened. South African rand fell 2.07%, Mexican peso fell 2.08%, Turkish lira dropped 0.81%, Norway crone dropped 0.62%, and Russian ruble fell 1.86%.

In the coming week, investors will be looking ahead to Chinese economic growth data for fourth quarter as well as the Eurozone private sector growth on Friday.

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Monday, January 18
U.S. markets are closed for Martin Luther King Day.
Australia is to release data on new auto-sales.
China is to release data on housing prices.
Japan is to publish data on industrial production.

Tuesday, January 19
China is to release bundle of data on GDP growth, industrial production, retail sales, and fixed asset investment.
Germany is to publish data on consumer price inflation followed by the ZEW report on German economic sentiment.
Eurozone is to publish data on current account and consumer prices.
The U.K. is to release data on consumer and producer price inflation and retail sales.
The U.S. is to release data on housing market index.

Wednesday, January 20
New Zealand is to release data on consumer price inflation.
Germany is to publish data on producer price inflation.
The U.K. is to release employment data on new unemployment claims, unemployment rate and average earnings.
Canada is to publish data on manufacturing sales and wholesale sales.
Also, Bank of Canada is to release the minutes of its recent monetary policy meeting.
The U.S. is to release bundle of data on consumer price inflation, housing new starts and building permits.

Thursday, January 21
In the Eurozone, European central bank is to hold monetary policy meeting and announce its benchmark rates. The ECB governor Mario Draghi is to give statements on monetary policy decision.
The U.S. is to release data on initial jobless claims and Philadelphia state manufacturing as well as weekly inventory for natural gas and crude oils.

Friday, January 22
Japan is to release data on PMI manufacturing index.
Eurozone is to release data on PMI manufacturing sector.
The U.K. is to publish data on retail sales.
Canada is to release data on consumer price inflation.
The U.S. is to release PMI data on manufacturing sector and existing housing sales.


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[limyeeshin]

Thursday 21 January 2016​

Major currencies remains up and downs, safe asset preference increased

The forex market showed steady up and downs under safe asset preferences with oil prices drop. The oil prices collapsed down to $26 level and spurred concerns on emerging markets economy. The euro and yen showed strength with increased safe asset preference from stimulated fears on emerging market slowdown. But the European and U.S. stock price sharply declined and thus, major currencies showed up and downs. The euro turned bearish as the oil prices shortened its falling gap. Also, investors expect that ECB monetary policy meeting would result in dovish movements, further weakened the euro.

Yen keeps bullish with demands on safer currencies

Japanese yen gained against the dollar with increased preferences on safer asset after steep decline in oil prices and stock markets in U.S. and Eurozone. It hit below 116.2 as concerns on emerging markets are increased. Also, Japan Chamber of Commerce announced that it is not required for Bank of Japan to increase current quantitative easing, further strengthened the yen. It shortened its gains as oil prices and stock drop gaps are reduced.

Major Pairs

EUR/USD -0.15%
USD/JPY -0.65%
GBP/USD +0.11%

Market movements

Elsewhere, emerging market currencies were generally bearish with shrinkage in commodity markets as material and oil prices dropped steep. Russian ruble fell sharply by 4.08%, Norway crone fell 0.93%, Brazilian real dropped 0.89%, and Australian dollar declined 0.45%. Others remained calm, with South African rand down 0.16%, and Turkish lira down 0.25%.

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[limyeeshin]

Edition 40｜January 25, 2016​

The euro fell against the U.S. dollar after rebounding in oil prices eased concerns for emerging markets. The oil price rebounded 10% on Friday, largest daily rallies ever. Also, the European Central Bank Governor Mario Draghi added that it is possible that the Eurozone to take changes for monetary policy further weakened the euro. Chinese Central Bank also reaffirmed continuous monitoring and intervention on stock prices, eased the insecurity in Chinese stocks. The stabilization in those concerns toward emerging markets and China led economy slowdown, weakened the euro and yen, the biggest participators in quantitative easing programs. EUR/USD fell -0.72%, traded at 1.0796 late Friday, with week losses of 1.12%.

The Japanese yen also fell as the concerns for emerging markets are eased from sharp rebound in oil prices and stabilizing in Chinese stock markets. Also, the yen increased its loss further after Bank of Japan Governor Kuroda mentioning that the additional asset buying will be extended through various means on Friday. Japan’s December trade balance is due on Monday with surplus of ￥100 billion expected. Forecast sees that exports to fall 6.8% and imports to decline 16.4%. USD/JPY gained 1.19% to 118.77 at its two weak highs.

Canadian dollar rose to one and a half week highs against the greenback with support from rebound in oil prices. Oil prices rallied above $31 per barrel on Friday due to weather conditions with freezing temperatures and snowstorms across East Coast and parts of Europe. Canadian dollar gained 1.01% and USD/CAD pair hit 1.4140, the pair’s lowest since January 11 before consolidating at 1.4142.

Overall, the main pairs showed up and downs. The greenback rose +0.52%, EUR/USD fell 0.72%, USD/JPY gained 1.19%, and the pound gained 0.32% against the dollar.
Currencies for emerging and commodity related markets generally stabilized. The Russian ruble rallied 4.91%, south African rand retreated 0.60, Norway crone gained 0.70%, Brazilian real was up 1.50%, and Australian dollar slightly gained by 0.09%. The exceptions were New Zealand dollar, falling 0.64% and the offshore yuan, down 0.20%.

In the coming week, investors will be looking ahead to Federal Reserve’s policy announcements on Wednesday for indication of future rate hike pace this year. Also, Friday’s data on U.S. GDP growth for fourth quarter will be closely watched.

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Monday, January 25
Japan is to release its trade balance.
Australia is to publish NAB business confidence report.
In Germany, IFO institute is to report on business climate.
European Central Bank Governor Mario Draghi is to speak at an even in Frankfurt, Germany.

Tuesday, January 26
Markets in Australia are shut for public holiday.
The Bank of England Governor Mark Carney is to testify on the Financial Stability Report to the Treasury Committee.
The U.S. is to publish data on private sector housing prices and consumer confidence.

Wednesday, January 27
Australia is to release data on consumer confidence.
Germany is to publish data on GfK consumer confidence.
China is to release data on public business profits.
The U.S. is to publish data on new home sales.
Also, the Federal Reserve is to announce the benchmark rate and rate statement from the recent FOMC meeting.

Thursday, January 28
The Reserve Bank of New Zealand is to announce its latest monetary policy decision followed by the trade balance release.
Japan is to publish data on retail sales.
Australia is to release data on importing prices.
Germany is to release data on consumer price inflation.
The U.K. is to publish its GDP growth for the fourth quarter.
The U.S. is to produce data on durable goods order, initial jobless claims, and pending home sales.

Friday, January 29
Japan is to release data on household spending, consumer inflation, and unemployment rate.
Bank of Japan is to release minutes on its recent monetary policy meeting followed by a press conference on prospect outlook.
Germany is to release data on retail sales.
The Eurozone is to publish data on consumer price inflation.
In the U.S., data on GDP growth for the fourth quarter, the manufacturing in Chicago region, and consumer sentiment index are due.


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[limyeeshin]

Thursday 28 January 2016​

U.S. dollar drops after Fed keeps rates unchanged

The U.S. dollar dropped against the euro as the Federal Reserve leaves the interest rates unchanged after the Federal Open Market Committee meeting. The U.S. dollar hit 98.7 ahead of Fed statements amidst the expectations being low for Fed to raise the rate any sooner. On the same day, the U.S. new home sales were greatly improved at 544,000 units, up 10.8%, much above 500,000 units expected. Also, the new home sales in November were revised up 1,000 units to 491,000. The dollar shortened its loss slightly after the upbeat data release. However, the Federal Reserve froze the benchmark rate at 0.25-0.50% and added that the federal funds rate will be likely to remain for some time, and only be gradually increased based on global economic and financial developments, kept the dollar lower. The greenback fell 0.40% itself, and EUR/USD gained +0.19% at 1.0893.

Kiwi holds steady after RBNZ keeps the rate at 2.5%

The New Zealand dollar slid against the U.S. dollar on Wednesday after the Reserve Bank of New Zealand decided to hold the official cash rates at 2.5%. The RBNZ froze the rate but also indicated that further rate cut may be necessary, weakened the currency. NZD/USD hit 0.6472 in late Asian trade, down 0.28%. AUD/NZD also gained after the RBNZ statement, up 0.61% at 1.0843. Meanwhile in Australia, the consumer price index rose 0.4% for the fourth quarter, slightly higher than 0.3% seen, up 1.7% in yearly basis.

Sterling falls against the greenback as U.K. pushes Brexit

The British pound slid lower against the U.S. dollar after the announcement that U.K Prime Minister David Cameron and Germany Prime Minister Merkel agreed on the progress of Brexit negotiation. David Cameron is to make a last-ditch appeal to Jean-Claude Juncker to save his EU renegotiation after talks became deadlocked over the issue of migration and benefits. GBP/USD fell 0.73%, traded at 1.4244.

Oil prices settles and supports Canadian dollar

The commodity-related Canadian dollar retreated against the dollar as the oil prices rebounded above $32 a barrel on Tuesday. USD/CAD traded at 1.4098, down 0.13%.
Elsewhere, Japanese yen recovered loss created from the oil prices drop after the U.S. Federal Reserve decided to keep the fund rate for quite some time. USD/JPY was up 0.19%, traded at 118.64. Market participants were attentive ahead of the conclusion of the Bank of Japan’s meeting on Friday.


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[limyeeshin]

Edition 41｜February 2, 2016​

The Japanese yen slumped as the Bank of Japan announced to adopt negative deposit rate on Friday as a part of effort to combat deflation. By adopting negative interest rates, commercial lenders are better to lend out excess reserves they keep with the central bank. The BoJ said that it had not ruled out deeper cuts, but it could cut further into negative territory if necessary. It also added that continuous quantitative easing will be implemented together with the negative rates until reaching the inflation goal. USD/JPY hit 121.68 before settling at 121.12, up 1.95% after the announcement.

The dollar rose against other major currencies on Friday after the U.S. gross domestic product data release that broadly met expectation. The unexpected decision by the Bank of Japan to shift the deposit rate to negative territory supported the dollar’s gain. But the dollar trimmed its gain on Monday after the slow growth in manufacturing disappointed investors for the next rate hike which likely to be in a slower pace. The personal income rose 0.3% as expected but the expenses were 0.0% lower than the previous month’s figure. PCE prices also fell 0.1% and core parts shrank to 0.0%. The manufacturing also stayed lower than the expectation at 48.2. Fed vice chair Stanley Fisher added that it is uncertain for how Federal Reserve to take next decision amid the global outlook being uncertain from structural reformation in China.

The euro gained against the dollar on Monday after disappointing U.S. manufacturing data bringing uncertainty to when Federal Reserve to hike interest rates. The manufacturing slowdown in China and the U.S. spurred concerns on emerging markets and turned the euro bullish. The euro limited its gains after the European Central Bank Governor Mario Draghi mentioning that emerging market risks are increasing and the additional stimulus QE may be necessary due to low inflation in the Eurozone. EUR/USD gained 0.55% at 1.0538 on late Monday.

The Australian dollar traded weaker on Tuesday in Asia as the Reserve Bank of Australia held the interest rates as expected. The central bank held the cash rate at a record low 2% on Tuesday, indicating scope for easier policy if future economic data requires to. AUD/USD traded at 0.7117, down 0.08% after the announcement. Elsewhere, the British pound shortened its loss on Monday with great improvement in manufacturing index. GBP/USD was up 0.43% at 1.4304.

In the coming week, investors will be looking ahead to central bank meeting announcements in the U.K. and Australia as well as U.S. job report to indicate strength in the labor market

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Tuesday, February 2
The Reserve Bank of Australia is to announce the benchmark rate and give rate statement.
The Eurozone is to release data on unemployment rate and producer price index.
The U.K. is to release survey data on construction.
The U.S is to publish data on auto-sales.

Wednesday, February 3
New Zealand is to release its quarterly employment report. The RBNZ Governor Graeme Wheeler is to speak at an event.
Australia is to publish data on trade balance and building permits.
China is to release Caixin PMI manufacturing index.
In Japan, Bank of Japan Governor Kuroda is to speak at an event followed by data release on consumer sentiment.
In the Eurozone, data on service sector and retail sales are to be published.
The U.S. is to produce data on ADP non-farm payroll, PMI service sector, and ISM non-manufacturing sector.

Thursday, February 4
In the Eurozone, ECB governor Mario Draghi is to speak at an event.
The Bank of Japan is to announce the recent monetary policy statements and benchmark rates.
The U.S. is to release data on initial jobless claims, productivity and factory orders.

Friday, February 5
The Reserve Bank of Australia is to publish its monetary policy statement followed by the data release on retail sales.
Germany is to release data on factory orders.
Canada is to produce monthly employment report follow by the trade balance data.
The U.S. is to publish bundle of data on non-farm payroll, unemployment rate, average hour income, trade balance, and consumer sentiment.


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[limyeeshin]

Edition 45｜February 15, 2016​

The dollar rose against other major currencies after improved economic data and rebound in oil prices supporting the expectation that the Federal Reserve is likely to tighten the pace for next rate decision. The retail sales for January rose 0.2%, above 0.1% increase seen. Retail figures excluding cars, fuel, building materials and food services rose 0.6%, rebounding from 0.3% decline in previous month. Also, the upbeat U.S. stocks spurred the preference toward risk assets, rebounded the oil prices by 12%. Solid data boosted the dollar against the yen, changing hands with 0.7% gain at 113.21. The dollar was also higher against the euro with EUR/USD declining 0.6% at 1.1254. The dollar itself rose 0.4% at 95.99 but still ended the week down 3.19% with ongoing concerns over slow global growth.

In the Eurozone, data on Friday showed that the economy only grew 0.3% in the fourth quarter with no improvement. The weaker than expected data increased the expectations that the European Central Bank to ramp up its quantitative easing program as ongoing woes on global outlook persist. EUR/USD traded at 1.1225, declining 0.27% in the latest trade.
Japanese yen held weaker on Monday as gross domestic product data from Tokyo showed weakness in the fourth quarter. The yen still gained against the dollar in a weekly base by 3.19% with increased safe asset preference over ongoing concerns on global outlook from the effects of negative rates on banks. But Japan’s GDP contracted 0.4% quarterly and -1.4% yearly with sluggish consumer spending with slow wage recovery, reduced yen’s gain. USD/JPY changed hands on Monday at 113.57, up 0.32%.

On Monday, China reports trade data for January with consensus showing exports to decline 1.9% annually and imports to shrink 0.8% with balance of $58.85 billion. However, retail sales, industrial output and fixed asset investment figures are excluded this week as the timing of Lunar New Year that distorts the data to have less accurate comparisons.

Investors will also be looking ahead to inflation data in U.S. for better indication of rate hike pace that the Federal Reserve will take. Also Canada and the U.K are to release their monthly inflation data.

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Monday, February 15
Markets in the U.S. and Canada are closed for national holidays.
Japan is to release preliminary fourth quarter GDP growth and industrial production figures.
Australia is to publish data on new auto sales.
China is to release its trade balance data.
Eurozone is to produce data on trade balance. Later the day, ECB Governor Mario Draghi is to speak at an the European Parliament’s Economic and Monetary Affairs Committee in Brussels

Tuesday, February 16
New Zealand is to publish data on retail sales and inflation outlooks.
Bank of Australia is to release minutes on its recent monetary policy meeting.
China is to release data on initial loans and monetary supply.
The U.K. is to release bundle of prices data on consumer and producer price inflation, retail prices and housing prices.
In the Eurozone, ZEW institute is to report on economy outlooks in Germany and business climate.
Canada is to release data on manufacturing sales.
The U.S. is to publish data on New York state manufacturing and housing market index.

Wednesday, February 17
Japan is to publish data on core machinery orders.
China is to report on foreigners direct investments.
The U.K. is to release data on average earnings, new unemployment claims and rates.
The U.S. is to release string of data on building permits, new starts, producer prices inflations, and industrial productions.
The Federal Reserve is to release its recent FOMC meeting minutes later the day.

Thursday, February 18
Australia is to release its monthly employment report.
China is to publish data on producer and consumer price inflations.
Eurozone is to release its recent ECB monetary policy meeting minutes.
Canada is to produce data on wholesale sales.
The U.S. is to report on Philadelphia region manufacturing and initial jobless claims.

Friday, February 19
Germany is to release data on producer price inflation.
The U.K. is to publish data on retail sales.
Canada is to release data on consumer price index and retail sales.
The U.S. is to release data on consumer prices.
The Eurozone is to round up the week with consumer price index.

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[limyeeshin]

Thursday 18 February 2016​

Dollar holds steady after mixed U.S. data

The U.S. dollar slightly fell against other major currencies after the release of U.S. economic data showing mixed figures. The U.S. Commerce Department said that housing starts fell 3.8% at 1.099 million units last month from December’s 1.143 million units, disappointing expected 2.5% rise to 1.170 million. Also, the building permits declined 0.2%, below 0.1% drop expected. The U.S. producer prices however scaled up 0.1% last month, much better than 0.2% drop seen and after 0.2% decline in December. The core producer price index moved up by 0.4% in January. Investors were more focused to the Federal Reserve’s meeting. The Federal Reserve said that industrial production beat the expectations by increasing 0.9%, indicating improvement in the economy that the central bank could accelerate the pace of tightening in near future. The greenback fell 0.02% to 96.88.

The yen gains despite lower trade balance

In Japan, the trade balance for January came in at ¥646 billion, below the ¥680 billion expected with imports falling 18% and exports dropping 12.9%. Bank of Japan board member Koji Ishida said on Thursday that the prolonged financial market turmoil would impact on real economy, although risk aversion is unlikely to trigger a global financial crisis as in the past. USD/JPY changed hands at 113.87, down 0.20%.

Aussie falls after disappointing employment report

The Australian dollar fell against the dollar on Thursday after the employment data showing declines in most sectors. The jobs fell by 7,900 jobs after 15,000 jobs added in January. Also, the unemployment rate was increased at 6.0%, worse than 5.8% expected. The Capital Economic noted that the decline in employment in Australia could be a continuous movement of data to reality after strong gains last year rather than impact from concerns over global economy. AUD/USD eased 0.28%, traded at 0.7164.

Chinese yuan gains with improved prices data

In China, consumer prices rose 0.5% in January as expected at the same level as December. For a year-on-year basis, the consumer prices gained 1.8%, near 1.9% increase expected and above 1.6% in previous month. Producer prices fell 5.3%, improving from 5.9% decline in previous month and 5.4% drop expected. Analysts noted that pickup in inflation last month is mostly seasonal, such as food prices rising sharply ahead of Chinese New Year. The Chinese yuan traded higher against the dollar at 6.5152 on Thursday.

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[limyeeshin]

Edition 45｜February 22, 2016​

The dollar and yen gained amongst major currencies with fresh falls in oil prices and equities, increasing safe asset preferences. The dollar itself eased 0.23% on Friday but still gained 0.65% in weekly basis. The dollar found support with greatly improved U.S. data earlier in the week giving hopes to investors that the Federal Reserve is likely to step on a tightening path this year. On Friday, the U.S. consumer price rose 1.4% in January, above 1.3% increase seen. Core inflation excluding food and energy rose larger than expected 2.2%. The dollar however fell against safe haven yen with USD/JPY pair trading at 112.66, down 0.53% on Friday.

The euro edged up against the dollar on Friday with oil prices drops. EUR/USD traded at 1.1130, up 0.22%, but still ended the week lower by 0.83%. On Thursday, the European Central Bank’s recent meeting reinforced expectations that the central bank is going to take further easing next month with continuous risks on growth and inflation. EUR/JPY also hit lows of 125.00 before settling at 125.36.

British pound boosted with increased expectations that European Union members would reach an agreement for Britain to remain in the union. The currency was also supported by the upbeat U.K. retail sales that was stronger than expected. GBP/USD gained 0.47%, traded at 1.4405.

On Saturday, China replaced China Securities Regulatory Commission Chair Xiao Gang to Liu Shiyu, chairman of the Agricultural Bank of China, likely as a response to failure in employing circuit breaker in the stock market. It also grew speculation that the central bank will seek to cut in the reserve ratio in medium term to stabilize market expectations. China also readjusted the consumer prices for food, tobacco, and alcohol by lowering 3.4% while increasing other goods to reflect consumption patterns.

Elsewhere, the commodity linked currencies such as Canadian dollar, New Zealand dollar, and Australian dollar were generally lower with impact from fresh slide in oil prices.

In the week ahead, investors will be looking to Eurozone’s business activity data for better indication of improvement in the economy. Thursday’s U.S. report on durable goods order will be also watched for hints on manufacturing sector.

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Monday, February 22
Japan is to release data on manufacturing.
In Germany, data on GDP growth and IFO’s report on business climate are due.
The U.K. is to publish data on industrial production.
The Eurozone is to release data on manufacturing and service sector.
The U.S. is to release data on manufacturing and a separate manufacturing report in Chicago region.

Tuesday, February 23
Germany is to release data on GDP growth and IFO institute’s report on business sentiment.
The U.S. is to release bundle of data on consumer sentiment, town house prices, existing home sales, and Richmond region manufacturing.

Wednesday, February 24
Australia is to release data on construction completions and wage prices.
Japan is to release data on business service prices.
The U.K. is to publish data on mortgage approvals.
The U.S. is to release data on mortgage claims, PMI service sector, and new housing sales.

Thursday, February 25
Australia is to release data on capital expenditures.
Germany is to publish data on consumer prices followed by GfK’s report on consumer trend.
The U.K. is to publish data on revised GDP for fourth quarter and service activities.
In the Eurozone, data on consumer prices, monetary supply, and personal loans are due.
The U.S. is to release data on durable goods order, weekly initial jobless claims and housing prices.

Friday, February 26
New Zealand is to release data on trade balance.
Japan is to release data on consumer prices.
China is to publish data on housing prices.
In the Eurozone, bundle of data on consumer survey, sentiment, and inflation are to be released followed by reports on industrial forecasts and service sector.
The U.S. is to release data on revised fourth quarter GDP, personal earnings and expenses and consumer sentiment.

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[limyeeshin]

Thursday 25 February 2016​

Pound sharply falls with risks related to Brexit

The British pound fell to seven-year lows on Wednesday, extending its loss as IMF (International Monetary Fund) cautioned the risks from Brexit. On Friday, U.K Prime Minister David Cameron reached an agreement with European Commission that granted Britain special status in the European Union. The IMF head Christine Lagarde said that the steady growth achieved by the nation could be threatened in the months leading up to June vote. HSBC also warned that a potential Brexit could cause pound to decline 20% further, creating sharp rise in imports and spiraling inflation, which could force the central bank to raise rates. It could also lead to heightened risk of contagion in the Eurozone if other nations decide to follow the case. GBP/USD traded at 1.3922, falling 0.71% further at the late trading.

Dollar shortens gains with disappointing economic data

The U.S. dollar fell from three week highs after the release of downbeat home sales data. The U.S. Commerce Department reported that new home sales plunged by 9.2% at 494,000, further below expected 4.4% drop to 520,000. Sales in the West region for new housing market collapsed 32% on the month. New home sales in the West, South, and Midwest areas have fallen into negative sector. Meanwhile, the PMI for service sector dropped to 49.8 in February, hitting lowest level since October 2013, much below 53.7 seen. The downbeat figures shortened the dollar’s gain, the currency index dropped to 97.51. Investors are looking ahead to the GDP and Core PCE data release on Friday for further indication for the monetary tightening path.

Yen gains with increased demand for safe haven

Japanese yen traded higher with oil price drops in early trading with increased inventory. The oil price slipped below $32 a barrel on Wednesday after Saudi Arabia’s oil minister said the production cuts will not happen. The Brexit risks in Eurozone and disappointing figures in U.S. economic data also spurred the preference toward safe asset and supported strength of the yen. In the late trading, rebound in oil price with increase in supply reduced the gap of gains against the dollar. SUD/JPY traded at 112.00, down 0.17% in latest trading.

Aussie declines despite upbeat spending data

The Australian dollar fell in Asia despite improved data on capital spending. The national building capital expenditure for the fourth quarter rose 1.2%, much higher than 4.7% monthly decline expected. Also plant and machinery capital expenditure rose 0.1% from 8.5% decline in previous reading, and private expenditure also rose 0.8%, above 3% drop seen. AUD/USD however fell 0.36%, traded at 0.7171.

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[limyeeshin]

Edition 45｜February 29, 2016​

The dollar turned bullish against other major currencies on Friday after improved U.S. economic reports that spurring expectations that the Federal Reserve will step on a tightened monetary path this year. The Commerce Department reported that gross domestic product grew at an annual rate of 1.0% in the fourth quarter, above 0.7% growth estimated, while GDP growth was expected to be revised down 0.4%. Also, separate report of consumer spending and inflation rose in January by 0.5% with Core PCE prices surging 1.7% from its previous month reading. The dollar rose 0.71% itself to a three-week highs of 98.13 with week gains of 1.63%.

The euro plunged against the dollar on Friday hitting its lowest level in three weeks after the U.S. core inflation reached its highest annual percentage in three years, adding views that the U.S. recovery is on track. EUR/USD pair traded between 1.0912 and 1.1069, before settling at 1.0932, falling 0.78% on the session. The euro has closed lower against the dollar in eight of the last ten sessions, and fell more than 3.2% since November.

The British pound also fell sharply against the dollar, falling to fresh seven-year lows at 1.3870 in late session. Since the U.K. received special statues in the European Union for the Brexit issue last week, the pound has plunged more than 3.2%. GBP/USD hit 1.4020 in the European morning trade but the gain was capped with continuous concerns over a potential Brexit. Several members of Conservative party mentioned that they will be backing the campaign to leave the EU. EUR/GBP also retreated in the earlier session to 0.7855.

Japanese yen retreated against the dollar on Friday, with USD/JPY gaining 0.9% to 114.00. But the yen was still supported with higher demand for the safe asset currency boosted by the concerns over the global growth and steep decline in oil and stock prices. The yen still have gained 5% against the dollar so far this year. An update shows that the yen gained in Asia on Monday with increased provisional industrial production by 3.7%, while retail sales falling 0.1%.

In Australia, the MI inflation gauge fell 0.2% monthly in February, while business inventories fell 0.4% quarterly. Company gross operating profits also dropped 2.8% in the fourth quarter. However, housing credit and private sector credit rose 0.5% in January. The Australian dollar eased against the greenback after the mixed data, with AUD/USD trading at 0.7125.

In the week ahead, investors will be focusing to surveys in manufacturing and service activity in the U.S. and China. Also, Friday’s U.S. nonfarm report for fresh would hint the strength in the labor market. The pound is still remained under heavy selling pressure with uncertainty over the U.K’s status in the Euro bloc. A referendum is to be held on June 23 for Britain to decide whether to stay or exit in the Eurozone.

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Monday, February 29
Japan is to release data on retail sales and housing permits.
Germany is to release data on import prices and retail sales.
The Eurozone is to publish data on consumer price inflation.
Canada is to release data on raw material price inflation.
The U.S. is to release data on pending home sales and manufacturing in Chicago and Dallas region.

Tuesday, March 1
Australia is to publish data on building approvals and current account. As well, an AIG report on manufacturing is due.
Japan is to release data on household expenditure, unemployment rate and PMI manufacturing.
China is to publish PMI data on manufacturing and non-manufacturing sector followed by Caixin manufacturing index.
In the Eurozone, PMI data on manufacturing and unemployment rate are to be produced.
The U.K. is to release the findings on the PMI manufacturing sector.
Canada is to publish monthly GDP report.
The U.S. is to release data on new auto sales, ISM manufacturing and construction expenditure.

Wednesday, March 2
Australia is to release fourth quarter growth figures.
The U.K. is to publish PMI data on construction.
Eurozone is to release data on producer price inflation.
In the U.S, ADP is to report on jobs creation.

Thursday, March 3
Australia is to release data on trade balance.
In China, Caixin is to report on non-manufacturing.
Germany is to release PMI service sector index.
The Eurozone is to release data on retail sales.
The U.K. is to release PMI data on services sector.
The U.S. is to release weekly initial jobless claims followed by data on factory orders, PMI service sector, and ISM non-manufacturing index.

Friday, March 4
Japan is to release data on overtime allowance.
Australia is to publish data on retail sales.
The U.S. is to report on non-farm payroll, unemployment rate, and average hourly earnings. Also, the trade balance is to be published.


(Mia Chung)
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