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Fed, SNB Vote No Change; Canada Foreign Securities Purchases Surge

Both the Swiss National Bank and US Federal Reserve decided to keep their rates unchanged at -0.5 percent and less than 0.25 percent, respectively. There is speculation that the SNB might consider higher negative deposit rates if the Swiss franc continues to strengthen. In the Fed’s case, banks and analysts are divided in terms of the timing of the first rate hike, with some now thinking that it will come later rather than sooner.

In the United Kingdom, the MPC Asset Purchase Facility and Official Bank Rate votes came in just as widely expected: both at 0-0-9 (on hold). The Unemployment Rate stood at ticked back to 5.7 percent in January, while Claimant Count Change came in close to forecast in February at -31,000.

In Canada, Foreign Securities Purchases surprisingly surged in January to CAD5.73 billion. Manufacturing Sales slipped 1.7 percent, while the Wholesale Sales came in much weaker at -3.1 percent. Retail Sales, both main and core, declined for the second straight month. On the other hand, PPI’s main and core readings were both higher than expected.

In the United States, Unemployment Claims rose by 291,000 in the previous week, which was not far from the 295,000 forecast. Philly Fed Manufacturing Index increased 5.0 in March, compared to a 7.2 forecast. Current Account deficit widened to $113 billion during the fourth quarter of 2014.

Commodities

Gold headed to the latest lows during the start of the week. But it managed to recover on Wednesday and made a strong U-turn to close the week higher. The next immediate resistance is right at the $1,200 level.

Oil is currently posting a potential double bottom for 2015 in the daily chart. Price touched a $44 low on Wednesday but the day closed much better. It would be interesting to see if the $40-$45 area will hold for the coming weeks and months.

Currency Pairs

EURUSD showed a similar positive tone seen in oil on Wednesday and shared the same positive weekly ending. EURUSD bulls need to push through 1.1000 and 1.1500 to gain traction in their campaign to prevent further deterioration in price.

USD weakness prevailed this week and gave USDJPY its first weekly loss in five weeks. Buyers are expected to prevent further takedowns at 118 and 116. Monitor closely how 120 will react this week.

Like EURUSD, GBPUSD showed a spike on Wednesday which helped advance the price action in Cable. However, the week closed below 1.5000, so the aim for this week is to get a weekly close 1.5000 and get closer to 1.5500.

The Week Ahead

Monday will be very quiet, with only a few economic events, such as UK CBI Industrial Order Expectations; ECB Draghi’s speech; US Existing Home Sales.

Tuesday will be more hectic with China, Japan, Germany, US, Euro-area, and France Flash Manufacturing PMI; Germany, Euro-area, and France Flash Services PMI; UK CPI, PPI Input, RPI; US CPI and New Home Sales.

Wednesday’s action will start very early with New Zealand’s Trade Balance, followed by RBA’s Financial Stability Review; Germany’s Ifo Business Climate; UK BBA Mortgage Approvals; and US Durable Goods.

Thursday’s activity will start in the European session with Germany’s Gfk Consumer Climate; UK Retail Sales, FPC Statement, and CBI Realized Sales; and US Jobless Claims.

On Friday, we will witness the release of Japan’s Tokyo and National Core CPI, Household Spending, Jobless Rate, and Retail Sales; BOE Governor Carney’s speech; and US Final GDP and the revised reading of University of Michigan’s Consumer Sentiment.

EURUSD, Gold, Oil Continue their Decline

The Reserve Bank of New Zealand declared on Thursday that it is putting its Official Cash Rate on hold at 3.50 percent, with the view the current financial conditions around the world remains “very accommodative”.

Meanwhile, it was a mixed bag, but largely bearish week for China. Industrial Production, Fixed Assets Investment, Retail Sales all came in weaker than forecast. February CPI rebounds to 1 percent after previously posting the lone sub-1 percent reading in six months. PPI was much weaker at -4.8 percent. China New Loans was well above forecast in February (CNY1,020 billion), while, Money Supply improved by 12.5 percent.

The jobs data for Canada was mixed. Employment Change and Jobless Rate were -1,000 and 6.8 percent, while that for Australia was 15,600 and 6.3 percent, respectively.

In the United States, Unemployment Claims rose by 289,000 in the previous week, compared to the 306,000 forecast. Retail Sales, both main and core, declined for the third straight month. On the other hand, PPI fell for the fourth straight month in February, while its core reading slipped for the second consecutive month.

Commodities

Gold’s move this week was milder in context of the decline seen in Oil. More buyers participated to halt a strong move toward the $1140 area. Nevertheless, there is more downside pressure now as price lingers below the $1,200 level as Gold is moving off a sharp decline in the prior week.

Oil sellers showed no mercy as they pushed price $6 down to a weekly close below $45. Buyers need to take action next week, otherwise we would see a new low, probably $30 to $35 in the next two or three weeks.

Currency Pairs

EURUSD sellers replicated the move they’ve done last week and sank the pair over 400 pips this time. There is still no sign of a significant bounce. Although traders should remain cautious of one, they should continue following the trend.

USDJPY made an early attack on the upside but struggled to hold on to gains for most of the week. The sky remains open to bulls, hence a target of 125-130 remains a possibility.

Like EURUSD, GBPUSD also improved upon its losses of the prior week. The pair stretched further down by over 400 pips, reaching lows unseen since June 2010. Traders can wait for selling opportunities around 1.4800-1.4900.

The Week Ahead

This week, Monday will have New Zealand’s Westpac Consumer Sentiment; Australia’s New Motor Vehicle Sales; Switzerland’s CPI and Retail Sales; Canada’s Foreign Securities Purchases; US Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production, TIC Long-term Purchases , and finally US NAHB Housing Market index. ECB’s Draghi is due to speak later that day.

On Tuesday, Australia’s central bank will reveal its Policy Meeting Minutes and Statement, followed by the BOJ Press Conference. In the afternoon, there will be Euro-area and Germany’s ZEW Economic Sentiment; Canada’s Manufacturing Sales; and US Housing Starts and Building Permits.

Wednesday will have New Zealand’s Current Account; Japan’s Trade Balance; UK Unemployment Rate, Claimant Count Change, Annual Budget Release, and MPC Asset Purchase and Official Bank Rate votes; Canada’s Wholesale Sales; US FOMC Statement, Economic Projections, Rate Announcement, and Press Conference.

Thursday’s action will start early with New Zealand’s GDP report. This will be followed later by Switzerland’s SNB Libor Rate Announcement and Monetary Policy Assessment; Targeted LTRO; EU Economic Summit; US Current Account, Jobless Claims, and Philly Fed Manufacturing Index.

Finally, on Friday, we will witness the release of BOJ Policy Meeting Minutes; Euro-area Current Account; UK Public Sector Net Borrowing; Canada’s CPI and Retail Sales. FOMC’s Lockhart is also expected to give a speech today.

EURUSD Reach new lows as the US Posts Strong Data

Just like last year, the month of March started with a very busy week, particularly with the release of central bank rate decisions, strong Aussie data, and broadly positive data from the US.

Four central banks – the Bank of England, European Central Bank, Reserve bank of Australia, and Bank of Canada – made the decision to leave their respective rates unchanged (0.50 percent, 0.05 percent, 2.25 percent, and 0.75 percent, respectively). The Reserve Bank of Australia maintained this rate amid strong economic data.

Australia’s Building Approvals surged in January, rising 7.9 percent following a revised-higher 2.8 percent decline in the previous month. Analysts expected another decline that month. GDP just missed its 0.7 percent forecast and came in at 0.5 percent. Retail Sales came in as expected (0.4 percent), while Trade Balance came close to expectations, -AUD0.98 billion. Current Account improved during the December quarter, -AUD9.6 billion.

In the United States, Unemployment Claims rose by 320,000 in the previous week, compared to the 293,000 forecast. Non-Farm Employment Change surged, 295,000 versus 240,000 forecast. The Jobless Rate also improved to 5.5 percent. Meanwhile, the February ISM Manufacturing PMI eased to 52.9 in February.

Commodities

Gold’s $37 drop on Friday pushed yellow gold down easily by a $60 total through $1,200. The November 2014 lows now beckons and we could well see that get broken if price would be able to hold on to current losses.

Oil tried to spike higher this week, but overall price remained tied close to the $50. This is a worrying sign for bulls. They should try to take control and launch an attack toward $55 this week if possible.

Currency Pairs

EURUSD slid further this week, putting the pair into fresh negative territory. EURUSD sold 400 pips lower, breaking through 1.1000 for the first time since October 2003. The pair is now in a very steep downtrend; we could see a marginal bounce before heading to much deeper territory. 1.00 is on track.

USDJPY is now approaching the December 2014 mega highs as strong US jobs data boost this pair into the skies. We could see 125-130 in the near future.

The losses seen on GBPUSD was not far behind that of EURUSD’s. Nearly 400 pips was pulverized and the pair is now challenging the 2015 lows right smack at 1.4950. Further EURUSD weakness could send this pair into another downspiral. 1.4800 is the last main support ahead of fresh territories.

The Week Ahead

Starting March 8, Canada and the United States will implement the Daylight Savings time shift and clocks will move forward by 1 hour.

This time around, Monday will have a sparse amount of critical news releases, such as Japan’s Current Account and Final GDP; Australia’s ANZ Job Ads; Germany’s Trade Balance; and Eurogroup Meetings.

Tuesday will have Australia’s NAB Business Confidence; France and Italy’s Industrial Production; Switzerland’s Jobless Rate; China’s CPI and PPI; US JOLTS Job Openings; and ECOFIN meetings.

Wednesday will be busy with news like Australia’s Westpac Consumer Sentiment and Home Loans; Japan’s Core Machinery Orders; China’s Industrial Production, New Loans, Retail Sales, and Fixed Asset Investment; UK Manufacturing Production; and ECB Draghi’s speech.

Thursday’s action will start very early with New Zealand’s Interest Rate Announcement, Statement, and Press Conference. This will be followed by Japan’s BSI Manufacturing Index; Australia’s jobs data and MI Inflation Expectations; Eurozone Industrial Production; UK Trade Balance; Canada’s NHPI; US Retail Sales and Jobless Claims.

Finally, Friday will be brief. There will be NZ’s Business NZ Manufacturing Index; Canada’s Employment data; US PPI and Preliminary University of Michigan Consumer Sentiment.

US Data Broadly Weak; Chicago PMI Sags to 5.5-Year Low

In the United States, Unemployment Claims rose by 313,000 in the previous week, compared to the 288,000 forecast. Meanwhile, the February CB Consumer Confidence declined to 96.4 while the previous reading was revised higher, from 102.9 to 103.8.

Federal Reserve Chair Yellen provided written testimony to both the Semiannual Monetary Policy Report before the House Financial Services Committee and Senate Banking Committee, in Washington DC on Tuesday and Wednesday. She gave similar remarks and noted that, given the improving employment conditions, the Fed is now waiting for the right balance of inflation date before raising the federal funds rate.

The US National Association of Realtors reported that Existing Home Sales cooled in January to 4.82 million, after a revised-better reading of 5.07 million for December. New Home Sales grew 481,000 in January, just a thousand less than December’s reading. Pending Home Sales climbed 1.7 percent.

US Consumer Price Index was a mixed bag in January. Bureau of Labor Statistics said the headline CPI was -0.7 percent, while the core CPI edged up 0.2 percent.

Surprising contraction in the US Midwest is seen as the Chicago PMI proved very weak at 45.8 in February, its 5.5-year low, the ISM-Chicago revealed on Friday.

In other news, UK CBI Realized Sales plunged in February to +1, from +39 back in January, as lower sales plagued department stores and supermarkets. February’s reading is its weakest since November 2013.

Commodities

This week, Gold’s decline to $1,190 was met by buyers easily, and these buyers brought price back up through the $1,200 level. Resistance lies shortly ahead, from $1,250 through $1,300. Moreover, there is a descending trendline, which could pose as additional ceiling.

Oil remained glued to the $50 level this week, and price garnered considerable volatility, between $47 and $51 for the most part, on Wednesday and Thursday. The weekly close at mid-$49 might be a signal that price would do another attack on the recent lows.

Currency Pairs

EURUSD fell to its weakest weekly close in five weeks as 1.1400 capped bulls’ efforts to advance. Like Oil, the EURUSD seems ready to revisit its own lows. A bullish move through 1.1500 is necessary to prevent further declines from happening.

As expected, the 118 area proved to be supportive of bulls’ efforts and this week USDJPY clinched its third bullish weekly close in the last four weeks. Immediate resistance comes at 120 and 120.50.

GBPUSD posted its fourth bullish weekly close in the last five weeks. However, this week’s upmove proved weaker than it shows, after the pair dropped nearly 160 pips on Thursday, which erased the week’s bullish efforts. A wide band of resistance is seen at 1.5500 to 1.5600.

The Week Ahead

Monday will be quite active with New Zealand’s Overseas Trade Index; Australia’s Company Operating Profits and HIA New Home Sales; China’s HSBC Final Manufacturing PMI; Manufacturing PMI for Spain, Italy and the UK; UK Net Lending to Individuals; Eurozone CPI Flash Estimate and Jobless Rate; Canada Current Account; and US Core PCE Price Index, Personal Income, Personal Spending, and ISM Manufacturing PMI.

Tuesday will be compact but quite hectic with Australia’s Building Approvals, Current Account and RBA Cash Rate Announcement and Statement; Japan’s Average Cash Earnings; Spain’s Unemployment Change; UK’s Construction PMI; Euro-area PPI; BOE Gov. Carney’s speech; and Canada’s RMPI and IPPI.

Wednesday will stay busy with Australia’s GDP; UK Halifax HPI and Services PMI; Eurozone Retail Sales; Services PMI for Spain, Italy, the UK; US ADP Non-Farm Employment Change, Beige Book, and ISM Non-Manufacturing PMI; Bank of Canada Rate Announcement and Rate Statement.

Thursday’s action starts early with Australia’s Retail Sales and Trade Balance; Germany’s Factory Orders; BOE Rate Announcement and Statement; ECB Rate Announcement and Press Conference; Canada’s Ivey PMI; and US Unemployment Claims and Factory Orders.

Finally, on Friday, there will be Switzerland’s Foreign Currency Reserves and CPI; Germany’s Industrial Production; UK Consumer Inflation Expectations; Eurozone Revised GDP; Canada and US Trade Balance; Canada’s Labor Productivity; and US Employment data.

Canada Wholesale Sales Jump 2.5% in December; US Data was a Mixed Bag

The latest data from Statistics Canada revealed a 2.5 percent surge in Wholesale Sales to CAD55.4 billion in December, led by improved sales in 6 of the 7 subsectors monitored. In dollar terms, the motor vehicle and parts subsector spearheaded the month’s gains, as the motor vehicle industry posted the highest recorded sales for the subsector and industry. The miscellaneous subsector recorded its fifth straight month of higher sales, led by sales in the chemical (except agricultural) and allied product industry and the agricultural supplies industry. The machinery, equipment and supplies subsector was the sole decliner. Seven provinces (98 percent of the total wholesale sales) registered gains, led by Ontario.

In the United States, Unemployment Claims rose by 283,000 compared to the 293,000 forecast. Meanwhile, the February Flash Manufacturing PMI came in slightly better at 54.3. The Philly Fed Manufacturing Index and Empire State Manufacturing Index were both weaker than anticipated (and 7.8, respectively). The Philly figure was the lowest in a year.

In other news, the UK MPC Asset Purchase Facility and Official Bank Rate votes showed no change. The Claimant Count Change, Average Earnings Index, and Unemployment Rate all came in better than forecast (-38,600, 2.1 percent, and 5.7 percent, respectively).

Commodities

Gold’s nearly-$40 decline this week has given it its 4th consecutive weekly decline, following a top out just right above the $1,300 level. Price is now set to test the multi-year low printed on November at $1,131. A break of this area would enable a move toward $1,000.

Oil struggled to keep a foothold at the $54 level. In fact, price immediately reversed after reaching this area. Oil is back at the $50 level and bulls should be very careful as this could open up to another strong bearish leg toward $40.

Currency Pairs

EURUSD has been stuck in a very tight 170-pip range this week. Bulls failed to take advantage of the opportunity to diffuse the strong bearish momentum. A break of 1.1300 could send price back to 1.1100 and threaten to move to lower lows.

USDJPY barely moved this week, proving 119 is a magnet for both sides. Short-term trend is up with a tinge of consolidation bias. 118 remains supportive of bulls’ efforts.

GBPUSD was able to hit its fourth consecutive weekly high, but the fourth straight bullish weekly close was elusive. The pair closed the week lower than its open, albeit the weekly move was minimal. Price still needs to punch through resistances and toward 1.5800 to keep the bullish hope, no matter how small right now, alive.

The Week Ahead

Monday will be quiet except for Japan’s Monetary Policy Meeting Minutes; Germany’s Ifo Business Climate; UK CBI Realized Sales; and US Existing Home Sales.

Tuesday will have more activity with New Zealand’s Inflation Expectations; Switzerland’s Employment Level; Eurozone CPI; UK Inflation Report Hearings; Eurogroup Meetings; ECB Draghi’s speech; US CB Consumer Confidence and Fed Chair Yellen’s testimony.

Wednesday will be a brief news day with Australia’s Construction Work Done and Wage Price Index; China’s HSBC Flash Manufacturing PMI; UK BBA Mortgage Approvals; and US New Home Sales and Fed Chair Yellen’s testimony.

Thursday’s action will start early with New Zealand’s Trade Balance; Australia’s Private Capital Expenditure; Germany’s Gfk Consumer Climate and Unemployment Change; Eurozone’s M3 Money Supply and Private Loans; UK Second Estimate GDP; Canada’s CPI; Eurozone’s Targeted LTRO; US Unemployment Claims and Durable Goods Orders.

Friday will still be active with New Zealand’s Building Consents and ANZ Business Confidence; Japan’s Preliminary Industrial Production, Household Spending, Retail Sales, and Tokyo Core CPI; Switzerland’s KOF Economic Barometer; Germany’s Prelim CPI; France’s Consumer Spending; US Chicago PMI, Prelim GDP, Revised UoM Consumer Sentiment.

Australia Sheds Jobs in January; Jobless Rate Worst in 13 Years

The Australian Bureau of Statistic reported that Employment Change in January suffered a bigger loss in jobs, -12,200 compared to only its expectation for -4,700. On the bright side, the reading for December was revised higher, from 37,400 to 42,300. The Participation rate was steady at 64.7 percent. Unemployment rate ticked up to 6.4 percent, the highest level since August 2002. South Australia’s jobless rate of 7.3 percent led the employment weakness (other states with higher jobless rate include NSW, Queensland, and Victoria; unchanged in Tasmania).

German Trade Balance was much better at EUR21.8 billion in December, the latest figures from Destatis show. Meanwhile, Prelim Gross Domestic Product increased 0.7 percent during the fourth quarter of 2014, a considerable increase which is the second strongest increase in the last six quarters.

In the United States, Retail Sales’ headline and core reading were both weaker in January (-0.8 percent and -0.9 percent, respectively) despite the decline in gas prices to its lowest level since 2009. Meanwhile, the latest report from the Department of Labor showed that there was an increase in Americans who filed for unemployment claims last week. Jobless Claims was 304,000, that’s 22,000 higher than the median forecast.

Commodities

Near-term support at $1,200 held this week amid very narrow range trading that happened. The fact that price failed to reach $1,200 despite low volatility is a good indication of strength, so bulls must keep the pressure so they can push price back toward $1,300 in the short term.

Volatility remains but Oil did not reach a new high. Price stayed within the prior week’s range and the $50 support is holding so far. There is still a very long uphill climb before bulls can get confident of the situation. $50 to $60 would remain critical for both sides.

Currency Pairs

EURUSD is showing some signs that it might take a break from the weakness that’s been plaguing the pair since late 2014. Although minor, the three consecutive bullish weeks are an indication that price might attempt further advances in the near term. 1.16 remains as a critical area for now.

USDJPY reached a new weekly high but sellers right near the top greeted bulls on Thursday and Friday. The good news is that there is a relatively thick layer of support around 118 and more just below, and this could aid bulls in their quest for 120.

Again, GBPUSD did better than EURUSD this week as the former has made considerable upstrides in the last three weeks. Bulls must target a break of the 1.5650-1.5700 area in the next 5-15 days to keep the momentum on their side.

The Week Ahead

Monday will be light on news activity. The lineup includes New Zealand’s Retail Sales; UK Rightmove HPI; Japan’s Prelim GDP; Australia’s New Motor Vehicle Sales; and Eurogroup meetings. The US will observe Presidents’ Day today.

Tuesday will have Australia’s Monetary Policy Meeting Minutes; UK CPI, RPI, HPI, and PPI Output; Eurozone and German ZEW Economic Sentiment; ECOFIN meetings; Canada’s Foreign Securities Purchases; US Empire State Manufacturing Index, Mortgage Delinquencies, and NAHB Housing Market Index; and New Zealand’s GDT Price Index.

Wednesday will start with Japan’s Monetary Policy Statement and BOJ presscon; UK Average earnings Index, Claimant Count Change, Jobless Rate, and MPC Official Bank Rate and Asset Purchase Facility Votes; Canada’s Wholesale Sales; US Building Permits, PPI, Housing Starts, Capacity Utilization Rate, and FOMC Meeting Minutes.

Thursday will be quiet except for Japan’s Trade Balance; Switzerland’s Industrial Order Expectations; ECB Monetary Policy Meeting Accounts; US Jobless Claims and Philly Fed Manufacturing Index.

Finally, on Friday, activity will pick up a bit with Flash Manufacturing PMI and Flash Services PMI from France, Germany, and the Eurozone; UK Retail Sales and Public Sector Net Borrowing; Canada Retail Sales; and US Flash Manufacturing PMI.

RBA Cuts Rates; US NFP Improves but Jobless Rate Worsens

RBA surprisingly slashed its Official Cash Rate by 25 basis points to 2.25 percent from 2.50 percent on Tuesday. Meanwhile, the Bank of England decided rate stayed at 0.50 percent and GBP375 billion, respectively.

Markit reported UK Construction PMI surged to 59.1, well above the 56.9 median forecast. The January rebound was close to November’s 59.1 reading. Meanwhile, Services PMI also came in better than forecast at 57.2 and was just a tad lower than November’s 58.6 reading.

CAD Ivey PMI slumped to 45.4 its weakest reading since February 2011. On the other hand, Building Permits, Unemployment Change and Jobless Rate all were better at 7.7 percent, 35,400, and 6.6 percent, respectively.

In the United States, the latest report from the Department of Labor showed that there were fewer Americans who filed for unemployment claims last week. Jobless Claims was lower than expected at 278,000 compared to its 287,000 forecast. Trade deficit in the US widened to its largest in two years to -$46.6 billion in December. The November deficit has been revised from -$39 billion to -$39.8 billion.

US Personal Spending and Personal Income diverged, -0.3 percent and 0.3 percent, respectively. Core PCE Price Index was flat. ISM Manufacturing PMI came in lower than expected (53.5 versus 54.9 forecast).

US Non-Farm Payrolls for January rose 257,000 compared with expectations for a 236,000 rise. The Unemployment Rate inched up to 5.7 percent.

Commodities

Gold had a difficult time sustaining gains and staying close to $1300 this week. Price declined $57 before settling the week with a close at $1,233. Critical support is around $1,200. Near-term resistance remains at $1,300.

Finally some respite was seen in Oil as it registered its second consecutive bullish weekly close this week. Price pierced through the $50 level easily and managed to rise as high as $54 before closing the week just above $52. The $50 mark must hold if bulls want to keep price from falling again.

Currency Pairs

EURUSD failed to keep gains it made through 1.1500 and ended the week virtually unchanged. This would be a blow to the pair, more so if the 1.1300 fails to hold in the coming week. Bulls need to push through 1.1600 to negate a significant amount of bearishness in this pair.

USDJPY was supposed to have an uneventful week until Friday when the pair surged through 119 and closed above this level. The pair could then attempt a move to 120 to break the status quo.

GBPUSD did better than EURUSD this week as the former managed to print its second consecutive bullish week. However, GBPUSD still needs to break the ceiling past 1.5600 to gain a better foot hold this February.

The Week Ahead

Monday will start the week with the release of Japan’s Current Account and Consumer Confidence; Australia’s ANZ Job Ads; and Canada’s Housing Starts. The two-day G20 meetings will also start today.

Tuesday with Japan’s Tertiary Industry Activity; Australia’s NAB Business Confidence and HPI; China’s PPI and CPI; Switzerland’s CPI and Jobless Rate; UK NIESR GDP Estimate, Manufacturing Production and Industrial Production; and US JOLTS Job Openings and Mortgage Delinquencies.

Wednesday will only have Australia’s Home Loans; China’s New Loans; and Eurogroup meetings.

On Thursday, there will be a raft of news such as Business NZ Manufacturing Index; Australia’s MI Inflation Expectations and jobs data; Japan’s Core Machinery Orders; BOE Inflation Report, Inflation Letter, and BOE Governor Carney’s speech; US Retail Sales and Jobless Claims; and EU Economic Summit.

On Friday, there will still be news to watch out for such as RBA Governor Stevens’ speech; France, Italy, and Germany’s Preliminary GDP; Eurozone Flash GDP; Canada’s Manufacturing Sales; US Import Prices and Preliminary UoM Consumer Sentiment.

The European Central Bank Launches its quantitative Easing Program

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.

Commodities

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.

Currency Pairs

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.

Market Carnage on Swiss National Bank Shocker

The Swiss National Bank surprised the market as it decided to remove the EURCHF cap for the first time in over three years. Funds and brokers were caught on the wrong side of the market, causing some of them to shut down due to bankruptcy. FXCM, the largest US retail FX broker, suffered massive capital hit but Leucadia National came in to its rescue with capital infusion. The market carnage is still fresh, so it may take time before the dust settles. The SNB also slashed Libor rate to negative 0.75 percent from negative 0.25 percent.
In terms of PMI data, the US and UK posted weak readings. UK Construction PMI was slightly weaker at 57.6 while Services PMI was much weaker at 55.8. Meanwhile, US ISM Non-Manufacturing PMI was weak at 56.2 Canada led the pack with a better-than-expected Ivey PMI of 55.4.

In the United States, the latest report from the Department of Labor showed the Jobless Claims for the prior week rose to 316,000, the highest reading since the early part of September. Empire State Manufacturing Index advanced to 10.0 this January, after suffering a -3.6 reading in December. Meanwhile, Philly Fed Manufacturing Index plunged to 6.2, its lowest level since February.

Commodities

Gold pushed northward further this week with close to $65 advance, putting it close to the $1,300 even more. Tougher resistance is found around $1,350. We may have just seen the bulls set the tone for the entire month.

Finally, we have seen some respite for bulls as Oil has closed virtually unchanged this week following a drop to as low as $44. Buyers should take advantage of this situation by pushing price toward $55-$60 as soon as possible.

Currency Pairs

EURUSD declined for the sixth straight week on the back of the removal of the EURCHF cap. The pair dropped a little over 400 pips and it is slowly closing in on the 1.1000 level. Buyers need to bring price back toward 1.2000.

USDJPY eased again this week as buyers failed to take out the 118 level for the second week. Further selling could pull this pair toward 114-115 in the next 1-3 weeks.

GBPUSD declined for six straight weeks as well. However, unlike EURUSD, Cable put up an inside bar this week and closed in the mid-1.51s. With Dollar strength intact, this pair is still on its way to ward 1.48 to 1.50.

The Week Ahead

Monday will be very quiet except for a few news releases, particularly Australia’s New Motor Vehicle Sales; Switzerland’s PPI; Germany’s Bundesbank Monthly Report; and Canada’s Foreign Securities Purchases. The US will be on holiday to celebrate Martin Luther King Day.

Tuesday will start early with New Zealand’s NZIER Business Confidence; China’s GDP, Fixed Asset Investment, Industrial Production, and NBS Press Con; Germany’s ZEW Economic Sentiment; US NAHB Housing Market Index; and Canada’s Manufacturing Sales.

Wednesday will start early again with New Zealand’s CPI; Australia’s Westpac Consumer Sentiment; BOJ’s Monetary Policy Statement and Press Con; UK Claimant Count Change, Unemployment Rate, Average Earnings Index, MPC Asset Purchase Facility and Official Bank Rate Votes. This will be followed by Canada’s Wholesale Sales, Bank of Canada Overnight Rate Announcement, Rate Statement, Press Conference, and Monetary Policy Report; and US Housing Starts and Building Permits. Today is also day 1 of the 4-day World Economic Forum annual meetings

Thursday will be just as busy with Business NZ Manufacturing Index; Australia’s MI inflation Expectations; Spain’s Unemployment Rate; UK Public Sector Net Borrowing and CBI Industrial Order Expectations; ECB Rate Announcement and Press Con; US Jobless Claims.

Friday will still be active with China’s HSBC Flash Manufacturing PMI; Euro-area, France, and Germany Flash Manufacturing PMI and Services PMI; UK and Canada Retail Sales; Canada CPI; US Flash Manufacturing PMI and Existing Home Sales.

On Sunday, Greece will hold its much-anticipated Parliamentary Election.

US, UK PMI Slide; US Post Better December Jobs Outlook

The Bank of England was the lone central bank active this week and announced an unchanged position in terms of interest rates. They left the Official Bank Rate at 0.50 percent. While the Asset Purchase Facility remained the same at GBP375 billion

In terms of PMI data, the US and UK posted weak readings. UK Construction PMI was slightly weaker at 57.6 while Services PMI was much weaker at 55.8. Meanwhile, US ISM Non-Manufacturing PMI was weak at 56.2 Canada led the pack with a better-than-expected Ivey PMI of 55.4.

In the United States, jobs outlook looks better with current published readings. December’s Non-Farm Employment Change was better than forecast at 252,000, while the Unemployment Rate improved a notch to 5.6 percent. Trade Balance deficit improved to an 11-month low, -$39 billion, thanks to lower crude oil prices. Meanwhile, the latest report from the Department of Labor showed the Jobless Claims rose to a slightly higher-than-expected 294,000 claims.

Commodities

Gold carved a bullish week to start the new year and it was a key milestone as it ended above the $1,200 level. The next area of resistance is the nearby $1,250 area ahead of $1,350. Another bullish week could set the tone for the entire month.

Oil has now printed its sixth weekly loss out of seven, and there seems to be no end in sight so far. A bearish weekly close below the $50 mark last week could spur this commodity to head for the $30 in short notice.

Currency Pairs

EURUSD posted its fourth weekly consecutive loss after buyers failed to secure the 1.2000 level. The weekly low at 1.1753 blasted through the multi-year low set on June 2010 at 1.1875 and this opens up the pair into further losses ahead.

USDJPY suffered its first considerable loss in the past four weeks after bulls encountered selling pressure at and above the key 120 level. We would likely see this back and forth movement in the next few weeks.

GBPUSD also carved its fourth consecutive weekly loss just like EURUSD. But unlike the latter, Cable has yet to break its own key level at 1.5000. Buyers should take this opportunity to swing price back toward 1.5500 so they can negate further bearish pressures.

The Week Ahead

Monday will be very quiet except for a few news releases, particularly Australia’s ANZ Job Ads and Home Loans; and Bank of Canada’s Business Outlook Survey. There will be a bank holiday in Japan due to ‘Coming of Age Day.’

Tuesday will produce more activity with Japan’s Current Account and Bank Lending; UK CPI, RPI, and PPI Input; China’s Trade Balance and New Loans; Italy’s Industrial Production; US JOLTS Job Openings and Federal Budget Balance.

Wednesday will be busy, starting with the European Justice Court Ruling on the legality of the European Stability Mechanism and Fiscal Compact. Other news will follow like Eurozone Industrial Production; US Retail Sales, Import Prices, and Business Inventories.

Thursday will have Japan’s Core Machinery Order; Australia’s Unemployment Rate and Employment Change; US PPI, Jobless Claims, Philly Fed Manufacturing Index, and Empire State Manufacturing Index.

Finally, Friday will cap the week with Japan’s Tertiary Industry Activity; Switzerland’s PPI; UK Retail Sales; Eurozone Final CPI; US CPI, Capacity Utilization Rate, Industrial Production, and Preliminary UoM Consumer Sentiment.