Bank of Canada announced last Wednesday that it is leaving its overnight rate target at 1 percent, with the Bank Rate respectively at 1.25 percent and deposit rate at 0.75 percent. The Bank noted that the world economic growth has behaved mainly as expected, but recent economic indicators in Canada showed 2013’s first quarter growth was better than anticipated. This is the ultimate policy announcement by BOC Governor Carney, who is moving over to the UK to head the Bank of England. Stephen S. Poloz was appointed Governor of the Bank of Canada by the Directors of the BOC last May 2. Beginning this June, Poloz will head the BOC for seven years during his term of office.
In other news, the United States continued to churn out favorable economic data this week. The Conference Board’s Consumer Confidence for May reached 76.2, the highest level in more than five years (expectations of 70.7); the revised version of May’s University of Michigan Consumer Sentiment stood at 84.5 (versus 84.1 expected); and Chicago PMI came in at 58.7, the best reading since March 2012.
Gold traded fairly quietly during the first three days of the week, and then it eventually rocketed higher—and fell. Buyers were able to punch through last week’s high but they lacked the firepower to burst through resistance around $1,420. After hitting the week’s high of $1,421, price made a sustained U-turn which managed to erase all of Thursday’s gains, closing the week virtually unchanged at $1,387. This was a big blow to bulls and now they have to protect support around $1,350-70 again.
Oil fared much worse than Gold this week after the former met heavy selling which started just below the $96 level on late Tuesday. The selling snowballed from then on, with oil ending the week on a new low and with a second bearish weekly close targeting the $90 level.
EURUSD printed its third weekly higher low and made further recovery this week. Gains were initiated after the touch of the week’s low at 1.2838 last Wednesday spurred buyers to come out and participate. Sellers retreated, leading to gains toward a 1.3060 high. The upside contains a lot of bearish traps, but nevertheless the aim of the buyers is to move towards 1.3200-50 initially.
USDJPY sellers have been dominant all this week, as they were able to confine price hikes to around 102.50 during the mid-week. The battle for control of the 100 level continues next week, with sellers firmly with the starting advantage. A break of this level targets 97 and 98.
GBPUSD printed a new 11-week low but it, too, followed EURUSD higher from Wednesday, rising 225 pips in just two days. Now that the pair is well of the 1.5150 area, buyers must push forward and attempt for a break of 1.5280-1.5300. If successful, this unlocks 1.5450 and higher levels.
The Week Ahead
Unlike the past few weeks, it’s going to be evenly active all throughout this week.
On Monday, Japan will be out with Capital Spending data; Australia has Retail Sales, Company Operating Profits, and ANZ Job Ads; other releases such as China HSBC Final Manufacturing PMI; Spanish, Italian, and UK Manufacturing PMI; Switzerland’s SVME PMI; and US USM Manufacturing PMI.
Tuesday has UK’s BRC Retail Sales Monitor; Australia’s Rate Statement and Announcement, as well as Current Account; Japan’s Average Cash Earnings; Spain’s Unemployment Change; UK Construction PMI and Halifax HPI; Eurozone PPI; US and Canada Trade Balance.
Wednesday has Australia’s GDP; UK, plus Spanish and Italian Services PMI; Eurozone Retail Sales and Revised GDP; US ADP Non-farm Employment Change; Canada’s Building Permits.
Thursday gets busier with the release of Australia’s Trade Balance; Switzerland’s CPI; Germany’s Factory Orders; UK Asset Purchase Facility and BOE Rate Announcement and Statement; ECB Rate Announcement and Press Conference; US Unemployment Claims; Canada Ivey PMI.
Friday remains packed with Australia’s AIG Construction Index; Germany’s Industrial Production and Trade Balance; Switzerland’s Foreign Currency Reserves; UK Consumer Inflation Expectations and Trade Balance; US and Canada Employment data.