During the latest meeting between Group of Seven central bank heads and finance ministers, consensus has been expressed concerning tolerance of the latest Yen weakness. G-7 policymakers stated that the latest recovery developments in Japan and the current exchange rate movements were at the center of their attention in the meetings.
The Yen has slid 15 percent against the US Dollar and is now at its weakest in the last four years. “Everybody watches exchange rate developments,” noted German Finance Minister Wolfgang Schaeuble. “We had a very intense discussion about Japan with our Japanese colleagues.” For his part, BOJ Chief Haruhiko Kuroda expressed that “easing will contribute to achieving our domestic objective of ending nearly 15 years of deflation,” and reiterated that the monthly bond buying is meant to achieve a 2 percent inflation target by 2015. Kuroda further noted that the G-7’s understanding of his policy strategy has increased.
In other news, Canada’s Building Permits increased by 8.6 percent in March following a 1.5 percent gain in the previous month.
Reserve Bank of Australia eased rates to 2.75 percent from 3 percent, while Bank of England maintained rates at 0.50 percent and Asset Purchase Program at GBP375 billion.
US weekly jobless claims made another positive surprise this week, coming in at 323,000 versus expectations of 333,000. This ties up with recent data which showed improved Non-Farm Employment Change and Unemployment Rate (7.5 percent).
For the third consecutive week, Gold failed to make a convincing mark above the $1,480-$1,500 area as buyers were unable to demonstrate a show of force. Price edged lower to reach $1,419 before ending the week with a close around $1,448. The $1,400 level would likely be attacked again if buyers will continue to manifest complacency in the coming weeks.
Oil gunned for its third straight bullish weekly close despite a lackluster trading week. Price slid nearly $3 on a volatile Friday, but a $2 upside pop a few hours ahead of Friday’s closing bell managed to give oil a bullish end for the week. $97 remains the key to further upside.
EURUSD’s mid-week upside thrust failed to breach or even touch the coveted 1.3200 mark. This was followed by a two-day 240-pip decline which resulted in the pair’s end-of-week bearish reversal, culminating in a weekly close below 1.3000 for the first time since late April. This was a tremendous upset for bulls as they have been trying to conquer 1.3200 since April. If 1.2950 breaks next week, traders can expect a move toward 1.2700-1.2800 soon.
Like other major pairs, USDJPY made big moves and powered higher late this week thanks to the latest USD strength. After consolidating below 100 since early April, the pair rocketed up and moved closer to 102 before ending the week ultra-bullish at 101.57. It would be interesting to see whether price will ease back to 99-101 in the following weeks.
With USD strength all around, GBPUSD also suffered a humiliating 270-pip decline during the last two trading days of the week, as buyers were unable to capture 1.5600 for the second week. The decline on Friday pierced through an ascending trendline and price looks set to move down toward 1.5200, especially if 1.5300-50 does not hold.
The Week Ahead
Monday jumpstarts the week with the release of Australia’s Home Loans and NAB Business Confidence; China’s Fixed Asset Investment plus Industrial Production; Switzerland and US Retail Sales. Eurogroup meetings are also scheduled.
On Tuesday, there are New Zealand’s Retail Sales; UK RICS House Price Balance; Germany’s Final CPI and ZEW Economic Sentiment; Euro-area Industrial Production; and ECOFIN meetings.
Wednesday starts very early with Australia’s Annual Budget Release and Wage Price Index; Japan’s Tertiary Industry Activity and Consumer Confidence; Germany, Italy, and France Preliminary GDP; UK Unemployment Rate and Claimant Count Change, along with BOE Inflation Report and BOE Chief King’s speech; Euro-area Flash GDP; Canada Manufacturing Sales; US PPI, TIC Long-Term Purchases, Empire State Manufacturing Index, and Industrial Production.
Thursday will be equally active with New Zealand’s Business NZ Manufacturing Index; Japan’s Preliminary GDP; Euro-area CPI and Trade Balance; Canada’s Foreign Securities Purchases; US CPI, Building Permits, Housing Starts, Philly Fed Manufacturing Index, and Unemployment Claims.
Friday activity is much less with a few key releases scattered throughout the day such as New Zealand’s PPI; Japan’s Core Machinery Orders; Canada’s CPI and Wholesale Sales; and US Preliminary UoM Consumer Sentiment.