The European Central Bank’s decision to hold rates at 0.05 percent was widely expected, and so is Mario Draghi’s move to apply quantitative easing. Large-scale government bond purchases will be executed to the tune of EUR60 billion each month.
The Bank of Canada surprised the market with a rate cut on Wednesday, amidst the declining price of oil. Slashes overnight rate target to 0.75 percent while most analysts expected it to stay at one percent.
Canada’s economic data also posted dim pictures. The CPI main and core figures are down by 0.7 percent and 0.3 percent respectively. Foreign Securities Purchases grew much less than expected at CAD4.29 billion versus expectations of CAD7.23 billion. Manufacturing Sales slide more than anticipated, while Wholesale Sales slipped 0.3 percent, the lowest figure in eight months. Retail Sales grew 0.4 percent in November.
Meanwhile, the Bank of England’s MPC voted 9-0-0 in favor of maintaining rates last Wednesday. This was after five months where two policymakers have continuously voted in favor of hiking rates. Plunging oil prices have increased the risk of low inflation in the horizon. MPC Asset Purchase Facility votes were also 9-0-0.
In the United States, the latest report from the Department of Labor showed the Jobless Claims for the prior week rose to 307,000, which is 6,000 more than anticipated. Housing Starts grew 1.09 million while Building Permits came in less than expected at 1.03 million.
In China, the GDP and Industrial Production published reports were better than forecast at 7.3 percent and 7.9 percent, respectively. Fixed Asset Investment came in line with the median estimate of 15.7 percent.
Gold is poised to close January at its best close in many months and years. Price breached $1,300 this week and printed its third consecutive bullish week. If $1,300 does not present a considerable resistance, then we would likely see $1,400 soon.
Oil printed another bearish week; in fact, it’s seventh in the last 10 weeks. This time, it made a strong close just above the $45 level. With no significant negating force seen so far, this is destined to move toward $30-$40.
EURUSD got pummeled this week as it dropped over 560 pips from its weekly high of 1.1679. This week, it hit its sixth straight weekly decline, and it’s poised to go for parity soon. Stay away from its tracks.
USDJPY lost a lot of attention as traders focus on the EUR this week. USDJPY stayed afloat around 118 and closed the week nearly unchanged and just below this level. Traders will continue to go on a wait and see mode on this pair.
The sixth straight weekly decline was much milder in GBPUSD as its cousin the EURUSD gets pummeled lower. Nevertheless, Cable is now down below the 1.5000 psychological level and it could be sold further toward 1.4500.
The Week Ahead
Monday will be an abbreviated day in terms of news. There will be Japan’s Trade Balance and BOJ Monetary Policy Meeting Minutes; New Zealand Credit Card Spending; Germany’s Ifo Business Climate; Eurogroup meetings; and UK BBA Mortgage Approvals. Australia will celebrate Australia Day.
Tuesday will be much more packed with Australia’s NAB Business Confidence; China’s CB Leading Index; UK Preliminary GDP; ECOFIN meetings; US Durable Goods Orders, S&P/Case-Shiller Composite-20 House Price Index, New Home Sales, and US Consumer Confidence.
Wednesday will be unusually brief with Australia’s Consumer Price Index and Trimmed Mean CPI; GfK German Consumer Climate; US FOMC Statement and Rate Announcement.
On Thursday, New Zealand will be out early with its announcement of its Trade Balance data, Official Cash Rate and Rate Statement. These will be followed by Australia’s CB Leading Index and Import Prices; Japan’s Retail Sales; UK’s Nationwide HPI and CBI Realized Sales; Germany’s Unemployment Change and Preliminary CPI; EZ M3 Money Supply; and US Unemployment Claims and Pending Home Sales.
Friday will have an abundant mix of economic releases, such as New Zealand’s Building Consents; Japan’s Household Spending, Preliminary Industrial Production, and Tokyo Core CPI; Australia PPI and Private Sector Credit; Germany’s Retail Sales; UK Net Lending to Individuals; Spain Flash GDP and Flash CPI; Italy Monthly Unemployment Rate; Canada’s GDP; and US Core PCE Price Index, Advance GDP, Employment Cost Index, Chicago PMI, and Revised University of Michigan Consumer Sentiment.