The third week of central bank interest rate decisions and announcements has proved to be more interesting with the appearance of Bank of Canada outgoing-Governor and Bank of England Governor-to-be Mark Carney in a UK Treasury Select Committee hearing this week.
Carney told UK lawmakers in a session which lasted almost 4 hours that he is prepared to take on the role of BOE Governor since he has “led a team with a proven track record of monetary policy management” in Bank of Canada. He is also in favor of maintaining a steady monetary stimulus for a particular period to help regain household and business confidence. Carney will be the first outsider to head the BOE in 318 years.
In other news, Reserve Bank of Australia, Bank of England, and European Central Bank maintained their rates at 3 percent, 0.5 percent, 0.75 percent, respectively.
Australian Bureau of Statistics published a report showing Home Building Permits declined surprisingly 4.4 percent for the second time last December. More notably, Japan’s Core Machinery Orders, Switzerland’s Retail Sales, and Trade Balance data from China, Germany, US, and Canada all beat their expectations, with China and Germany posting higher surpluses.
Gold prices moved in a much tighter range this week, bobbing up and down within a mere $23 range. Traders can now expect to burst out either way from the ongoing consolidation this coming week, if not the next. $1,650 and $1,700 are the levels that need to be broken soon.
It was a complete turnaround for oil this week as traders failed to seize the opportunity of a follow-through attack after breaking higher beyond $97. After reaching a $98.22 high, price achieved a relatively smooth downward flow and reaching as deep as $95.03 on Wednesday. Bears seem to have solidified their move to the $95s and we could see them exerting more pressure this coming week as they target $90 to $93.
Corn and soybeans decline as a United States Department of Agriculture report showed that officials expect a significant rise in inventories. Corn extended its slide and soybeans fell the most in around three months. Meanwhile, Arabica coffee premium slid to its lowest since 2009, while copper and Brent oil gained after strong Trade Balance data from China.
It turns out the 1.3710 high reached last February 1 has posed as a short-term top as price made a steady retreat from this area this week. EURUSD has settled at 1.3362 this week, the exact area which served as resistance for more than one week in January. As mentioned last week, a retracement back to the area of 1.3400 was not surprising. Now, traders should watch price action in the current area as it will dictate the move in the next one or two weeks.
USDJPY has been sick with irrational exuberance lately and now traders have fallen down from the stars along with USDJPY’s price. Essentially, price did nothing this week as most of the gains from Tuesday onwards has been erased in one fell swoop this Friday. Anyone with an open long position should now watch price action and look to exit or pare their respective positions.
GBPUSD has risen from a coma thanks to efforts made by remaining bulls. Buyers were able to help spring price back up by more than 200 pips from its uncertain 1.5630 lows this week. There is no reason to celebrate yet as the environment is still bearish. Bulls need to conquer the 1.5900 and 1.6000 levels next… and soon!
The Week Ahead
Monday starts out quietly in the economic releases arena. On the table are only France’s Industrial Production, Eurogroup Meetings, and speeches from US FOMC Member Yellen and Bank of Canada Gov. Council Member Lane. Japan will celebrate National Foundation Day while Chinese banks will be closed the entire week to observe the Spring Festival.
On Tuesday, there are Japan’s M2 Money Stock, Consumer Confidence, and Preliminary Machine Tool Orders; Australia’s NAB Business Confidence; New Zealand’s REINZ HPI; Switzerland’s CPI; ECOFIN Meetings; UK CPI, RPI, PPI, and BOE Inflation letter; SNB Chairman Jordan’s speech; Bank of Canada outgoing-Governor Carney’s speech; ECB President Draghi’s speech ; US Mortgage Delinquencies, Federal Budget Balance, and FOMC Member George’s speech.
Wednesday is also hectic with Australia Westpac Consumer Sentiment; Japan Tertiary Industry Activity, CGPI; Swiss PPI; Euro-area Industrial Production, Italian 10-year bond auction; BOE Governor King’s speech, BOE Inflation report; US Retail Sales, Import Prices, Business Inventories, Crude oil Inventories, and speech from FOMC Member Bullard.
Thursday, is equally packed with these releases: Japan Preliminary GDP and Preliminary GDP Price Index; Australia MI Inflation Expectations; France, Italy, and Germany Preliminary GDP, Euro-area Flash GDP, France Preliminary Non-Farm Payrolls, ECB Monthly Bulletin; US Unemployment Claims, and FOMC Bullard and Tarullo speeches. Today concludes the weeks of central bank appearances and announcements with Bank of Japan’s Monetary Policy Statement, Overnight Call Rate, and press conference.
Friday ends the week with New Zealand’s Retail Sales; China’s Foreign Direct Investment
Japan’s Revised Industrial Production, BOJ Monthly Report; Italy trade Balance, UK Retail Sales, Euro-area trade Balance; Canada Manufacturing Sales; US Empire State Manufacturing Index Capacity Utilization Rate, TIC Long-term Purchases, Industrial Production, Preliminary University of Michigan Consumer Sentiment.
Friday is the first day of the two-day G20 meetings. Central bankers and Finance ministers from the 20 most industrialized countries will again meet to discuss developments and policies going forward.
On Sunday, the United States will celebrate the President’s Day.