The Reserve Bank of New Zealand and US Federal Reserve decided to leave rates unchanged according to their latest statements release this week. For the Fed’s part, it decided to continue cutting the monthly bond purchases by $10 billion to $65 billion , citing pickup in growth in past quarters as well as improvement “on balance” in the labor market. The Fed noted that the jobless rate has “declined but remains elevated” and the housing sector’s recovery “slowed somewhat.”
In the US, there were more weakness seen in economic indicators in the US. New Home Sales for December came in weaker than expected at 414,000 versus 457,000 expected. Pending Home Sales declined sharply, -8.7 percent, its worse since April 2011.
On Tuesday, reports showed US Durable Goods Orders including its Core part declined in December, posting -4.3 percent and -1.6 percent respectively. The decline of the headline figure is its worst decline in 5 months. Meanwhile, US CB Consumer Confidence returned above the 80 level, (80.7) this January.
In other news, Destatis reported that German Unemployment Change surprised to the upside with a 28,000 decline, much better than the -5,000 forecast.
Gold filed a new high this week (fifth consecutive weekly high, in fact), but price immediately reversed and went on to close the week lower, erasing most of the prior week’s gains. The $1,200 level continues to attract both sides and we could expect price to remain close to where it is now for some time.
Following Gold, Oil also posted another consecutive weekly high this week. But unlike Gold, Oil was able to keep its gains. The pullback from the $98s was expected, but we should see another challenge of this level in the coming week.
EURUSD had a very tough week as sellers pounded on their competitors for five straight days, leading to the pairs breakdown to new weekly lows. Bulls were unable to protect the 1.3500 level and this puts price at risk of spiraling down toward 1.3000-1.3300 in the coming week or so.
The decline in GBPUSD was much milder compared to what has transpired in EURUSD. This pair formed an inside bar for the weekly. We expect a potential test of the 1.6250-1.6300 area in the coming week.
USDJPY fell in unison with GBPUSD and EURUSD this week as USDJPY found it hard to get past sellers around 103. The weekly close below 102 could give sellers more confidence to attack 96-100 again.
The Week Ahead
This week will definitely be news-packed as the month of February gets under way.
Monday will kick off with Australia’s Building Approvals and ANZ Job Ads; China’s Non-Manufacturing PMI; Switzerland SVME PMI; Euro-area, Spain, Italy, UK Manufacturing PMI; Canada’s IPPI and RMPI; US Final and ISM Manufacturing PMI.
On Tuesday, Australia’s RBA Rate Announcement and Statement will be anticipated, as well as Spain’s Unemployment Change; UK Halifax HPI and Construction PMI; and US Factory Orders.
Wednesday will start very early with New Zealand’s Unemployment Rate and Employment Change ; Japan’s Average Cash Earnings; Services PMI data from Spain, Italy, and the UK; Eurozone Retail Sales; US ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI; and Canada Building Permits.
On Thursday, we will have Australia’s Retail Sales and Trade Balance; Germany’s Factory Orders; BOE and ECB Rate Announcement and Statement; US Trade Balance and Jobless Claims; and Canada’s Ivey PMI.
Finally, on Friday, RBA will release its Monetary Policy Statement. This will be followed in the afternoon by the release of Germany’s Trade Balance; Switzerland’s Foreign Currency Reserves and Retail Sales; UK Manufacturing Production and Trade Balance; and Canada and US Jobs Data.