There was a mixed bag of economic data releases this week, and most notable of which are data out of China and the UK.
Weak data came out from different corners of the globe, namely Italy and Euro-area Industrial Production, UK Core CPI, PPI and Retail Sales data, US Empire State and Philly Fed Manufacturing Index, Australia’s Employment Change, and New Zealand CPI. UK Retail Sales for December surprised with a fall of 0.1 percent despite the holiday shopping season, and this puts the economy on the path of contraction.
On the bright side, there were also a handful of economic releases that provided economic optimism for other economies. Economic forecasts were outpaced by actual readings of Euro-area Trade Balance, US Retail Sales, US Unemployment Claims, US Housing Starts, and US TIC Long Term Purchases, Canada’s Manufacturing Sales, Japan’s Core Machinery Orders, Italy’s Trade Balance, and China GDP. The US Treasury reported $52.3 billion in TIC Long Term Purchases, besting its forecast of just $19.8 billion. China showed resilience amid global economic weakness as GDP rose 7.9 percent in the fourth quarter of last year, ending the streak of eight consecutive quarterly declines.
Things have continued to look up for gold this week, especially after the nasty spike low during the first week of January. Price made a new monthly high on Thursday and it closed the week at $1,684. Topside, buyers need to contend with the $1,700 level ahead of much more wood to chop in the $1,730-50 area. $1,650-60 could pose as solid support near-term.
Oil headed for its longest winning streak since November 2011 as US House Republicans are set to vote next week on a three-month extension of the US debt ceiling. The US Treasury has expressed concern that the nation will exceed its $16.4 trillion debt ceiling 1 or two months from now. Oil also benefitted from the good GDP numbers out of China. Oil has reached its highest price in nearly four months and is set to approach the $97-$98 area if no resistance will come in the way of the bulls real soon. $94/$95 is expected to hold near-term.
Natural gas climbed to its six-week high due to a forecast of cold weather for the US Midwest to the Northeast over the coming 10 days. Soybean prices fell on optimism for Brazilian crop yields thanks to recently experienced rainfall. Meanwhile, corn rose as investors forecast its smallest stockpiles since 1974.
EURUSD posted a quiet week, with just 148-pip range, compared to the prior two weeks. Attention was on the 1.3400 resistance which prevented the buyers from pushing through with their lofty attempts at the 1.3500 and 1.3600 levels. On the downside, buyers were keen to defend 1.3255/1.3300, which effectively put a lid on price this week. Buyers need to keep this lid, otherwise 1.3000 would remain vulnerable in the coming weeks.
USDJPY traders made a bold attempt at the coveted 90.00 level this week – and they have triumphed, even closing the week above this level for the first time in more than two years. Now the question is whether they would be able to hold on to this level in the coming weeks. The BOJ reports and announcements this coming week would most likely set the pace for USDJPY in the next 1-2 months.
As expected, GBPUSD continued to weaken and blasted through the important 1.6000 level with relatively not much fuss. The week closed at 1.5862, just ahead of 1.5825 which is the 4-month low and does not seem farfetched now. The real test for both sides will come at the 1.5700-50 area. A break of this area would help depress price further to the lower 1.5300s.
The Week Ahead
Just ahead, the market will face one of the busiest weeks of January.
Monday won’t have any key economic releases during the Asian session. Germany’s PPI, Eurogroup meetings, and Canada’s Wholesale Sales data will be released. German Bundesbank President Jens Weidmann will present a speech in Frankfurt later today. The US banks will be closed due to Martin Luther King Day.
On Tuesday, the market will closely watch BOJ’s Monetary Policy Statement, press conference, and Overnight Call rate announcement; UK’s Public Sector Net Borrowing and CBI Industrial Order Expectations; Germany’s ZEW Economic Sentiment; Canada’s Retail Sales; US Existing Home Sales and Richmond Manufacturing Index. ECOFIN meetings will also be held, while ECB President Draghi is also set to make a speech today.
On Wednesday, there are Australia’s CPI; Bank of Japan’s Monthly Report; UK’s Claimant Count Change, MPC Meeting Minutes, Unemployment Rate; Switzerland’s ZEW Economic Expectations; Bank of Canada’s Monetary Policy Report, rate announcement, statement, and press conference; US crude oil inventories. Today is also day 1 of the 4-day World Economic Forum annual meetings.
On Thursday, Japan’s Trade Balance, China’s HSBC Flash Manufacturing PMI; Euro-area, France, and Germany Flash Manufacturing PMI and Services PMI; Spain’s Unemployment Rate; Eurozone Current Account; UK CBI Realized Sales and BBA Mortgage Approvals; Belgium NBB Business Climate, US Unemployment Claims, Flash Manufacturing PMI.
For Friday, there is Japan’s Tokyo Core CPI, BOJ’s Monetary Policy Meeting Minutes;
Germany’s Ifo Business Climate; UK’s Preliminary GDP; Canada’s CPI; and US New Home Sales.
Saturday is the expected final day of the World Economic Forum annual meetings.