The second week of central bank interest rate decisions has ensued. Both the Reserve Bank of New Zealand and US Federal Reserve maintained their rates at 2.50 percent and less than 0.25 percent, respectively. A few more central banks will make their announcements this coming week.
On Tuesday, New Zealand’s Trade Balance report showed the country created a $486 million trade surplus back in December, its largest export percentage-based December surplus since December 1991.
On Wednesday, S&P/Case-Shiller House Price Index matched median projection for a 5.5 percent climb. This was another favorable indication for the US housing market, brought on by mortgage rates being near its record low.
Spain and Japan published disappointing data this week. Japan’s published weak readings in Retail Sales, Preliminary Industrial Production, Average Cash Earnings, and Housing Starts. Contraction was reported in manufacturing output, employment, and new orders in Japan. For Spain, recession has deepened further as evidenced by the 0.7 percent decline in Gross Domestic Product for the December quarter of 2012, according to the Spanish National Statistics Institute. Spain’s manufacturing PMI climbed to 46.1 but output and jobs continued to be cut, a Markit report showed. On the bright side, the Spanish export sector has been giving positive readings lately.
Friday’s US Non-Farm Employment Change had its actual figure miss economists’ expectations, but the silver lining came from a much better revised reading for January to 196,000. Revised University of Michigan Consumer Sentiment, Construction Spending, and ISM Manufacturing PMI also reported survey-beating figures.
It was another rough week for gold. Price bounced around a $30 area between $1,650 and $1,680 for a third consecutive week, indicating unwillingness of each side to make decisive moves at this point. The weekly close has a slight bearish tone and we could see a move back to the lower-$1,600s next week. Bulls have to exert more and make a decisive trek back to the $1,700 level.
Oil traders have more to celebrate this week. Despite the easing that happened in the last three trading days, oil has made a bullish weekly close for eight consecutive weeks. The next area of contention remains at the $98-$100 area. Friday’s move back toward $96.50 should be kept in mind, though.
EURUSD’s Friday resistance at the 1.3470s kept a lid on prices this week, albeit temporarily. Once price overcame this level on Tuesday, it carved a relatively smooth move higher. The pair reached a 1.3710 high after a nasty whipsaw which fleetingly brought price back to the area of the weekly open. Now, Euro is on track to proceed higher to its near-term ultimate target area of 1.4000 – 1.4500. A retracement back to 1.3400 – 1.3600 cannot be ruled out.
USDJPY consolidated during the first three days of this week, bouncing around and trading within Friday’s daily range. On Thursday, price ticked higher and reached fresh highs which continued on Friday, reaching another record high and came close to touching the 93.00 level. There is not much in the way of bulls to reach their next target, the 95.00 handle. However, any dips at this point would not be surprising.
Throughout this week, GBPUSD buyers made a concerted effort to bring price back toward the all-important 1.6000 level. Given the bearish environment, they only managed to push price 200 pips higher. Buyers were unable to reach and break above 1.5900, so bears took advantage and sent price tumbling back to the week’s lows in less than one day. Friday’s daily and weekly close below 1.5700 is definitely a bad sign and bulls should really stay out. The 1.5200 – 1.5500 area now comes back in the frame.
The Week Ahead
Monday opens the week with key releases such as Australia’s Building Permits; UK Halifax House Prices and PMI Construction; Spain’s Unemployment Change, Euro-area Sentix Investor Confidence, and PPI; and US Factory Orders.
On Tuesday, the market will watch for New Zealand’s Labour Cost Index; Australia’s House Price Index, Trade Balance, Reserve Bank of Australia Interest Rate Decision and Rate Statement; China’s HSBC China Services PMI; Switzerland’s Exports, Imports, and Trade Balance data; Markit Services PMI for Euro-area, Spain, Germany, France, UK, and Italy; Italy’s CPI; Euro-area Retail Sales; US Redbook Index, ISM Non-Manufacturing PMI, and IBD/TIPP Economic Optimism.
On Wednesday, New Zealand celebrates Waitangi Day. Notable economic release during the Asian session will be Australia’s Retail sales data. Later on, there is Germany’s Factory Orders, Canada’s Ivey PMI, and US EIA Crude Oil Stocks change.
Thursday is the most news-packed with Australia and New Zealand’s Employment Change and Unemployment Rate; Australia’s AiG Performance of Construction Index; Japan’s Foreign Bond Investment, Foreign Investment in Japan Stocks, Leading Economic Index, and Machinery Orders; European Council Meeting; Switzerland’s SECO Consumer Climate and Foreign Currency Reserves; France’s Trade Balance, Imports, and Exports; Spain’s Industrial Output; UK Trade Balance, Manufacturing Production, and Industrial Production; European Commission’s Economic Growth Forecasts; Germany’s Industrial Production; BOE’s Rate Decision and Asset Purchase Facility; ECB’s Rate Decision, Monetary Policy Statement, and press conference; Canada’s Building Permits and New Housing Price Index; US Consumer Credit Change and Initial Jobless Claims.
Friday closes the week with a raft of economic releases: Japan’s Bank Lending, Current Account, Eco Watchers Survey and Trade Balance; European Council Meeting (second day); China’s CPI, PPI, Exports, Imports, and Trade Balance; Switzerland’s Unemployment Rate and Real Retail Sales; Germany Harmonised Index of Consumer Prices, Imports, Exports, Current Account, Trade Balance; France’s Budget; Italy’s Industrial Output; UK 10-year bond auction; Greece CPI and Industrial Production; Canada’s Net Change in Employment, Participation Rate, Housing Starts, and International Merchandise Trade; US Wholesale Inventories and Trade Balance.
On Saturday, New Zealand will publish the REINZ House Price Index.