Saturday, 26 August 2017

Week to Aug 25th

LAST WEEK (all times GMT)

On Monday, when not watching the eclipse, the market digested the departure of Steve Bannon from the White House. US indices were broadly flat, as was NKY, which tracked the yen during the cash hours. NKY volatility has been very low for three weeks now. DAX was down on a stronger Euro, however FTSE held its own against stronger GBP. The picture was much clearer in currencies, USD was down against all currencies and gold, and 10-year bond yields were down. Oil gave up nearly all the sharp ramp it enjoyed last Friday, as the final day of the September contract was traded.

Sometimes Tuesday is the reverse of Monday and so it was for USD which was up against all currencies except CAD which fell after the Canadian Retail Sales miss at 1230, mainly because there was no negative news and Oil rallied. Gold was similarly down, and yields were up. The picture was similar with indices, which were all up sharply, and the VIX was back below 12. However for all indices except FTSE, these were the highs of the week.

The sentiment see-saw took a downturn again on Wednesday, partly when Trump said he would build the wall even “if we have to close down our government”. PMIs during the European session were mixed, and then there was a big miss (-9.4% vs +0.3%) in the change in US New Home Sales at 1400. SPX and DAX gave up around half of Tuesday’s gains, NKY gave them all up on stronger JPY. Only FTSE kept its head above water on two days of weakening GBP. Currencies were mixed but, in line with indices, was generally negative for USD. EUR recovered all of Tuesday’s losses, as did JPY. The rise in AUD and CAD was more muted, helped by the rise in Oil despite a very slight EIA miss (-3.33M vs 3.45M) at 1430. This is one of the most accurate EIA prints versus estimate we have seen for a long time. In line with everything else, Gold was up and yields were well down, giving up two days’ gains.

Thursday was yet another see-saw day. We separate our chart of the week into days at 0000GMT each day, partly because it is the global time reference, but mainly because it cuts a neat division between the Asian, European and US markets in that order and is close to the ‘twilight hour’ (2100-2200 GMT) when no markets are open. The USDJPY chart this week is quite amazing, precise reversal after the end of the US session on the first four days of this week. Many instruments (Gold, NKY, JPY, FTSE, US10Y) performed a re-run of Tuesday and Oil which did a re-run of Monday.

News releases were light, and there were no black swans. SPX, DAX and FTSE rallied slightly, but the former pair finished flat and FTSE was only slightly up as UK GDP came in (1.7%) as expected at 0830. Currencies were mixed, CAD and GBP were up, EUR and AUD were flat. This is not to say that USD was weak, as JPY and Gold were down and yields were up. Oil gave up 1.6% which is quite mild by this most volatile of instruments’ standards.

Friday was the big day, with speeches by Janet Yellen at 1400 and Mario Draghi at 1900, and fifth day of sentiment reversal! Even though neither speech contained any direct references to currencies, as we have said before it was what they didn’t say. Yellen didn’t say anything hawkish, and USD promptly fell 60 pips against JPY, 80 pips against EUR, and 70 pips against GBP, which doesn’t normally benefit from these dollar flights. Five hours later, Draghi didn’t say anything dovish and EUR put on a further 60 pips, to break through $1.19, its highest level since January 2015. It was an across the board rout for USD, Gold was also up (after a strong but momentary spike down) and yields were down. Indices were less volatile that earlier in the week, and generally ended flat.

In summary, a most unusual week where we saw USD sentiment reverse every single day. The weekly movement figures below belie the actual volatility seen in the week.


WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover. The best forex trade of the week would have been long EURNZD up 2.41%. The strongest index movement was FTSE, up 1.12%

AUDNZD 1.0956 (+1.05%)
AUDUSD 0.7932 (+0.06%)
EURGBP 0.9259 (+1.37%)
EURUSD 1.1922 (+1.38%)
GBPUSD 1.2879 (+0.04%)
USDCAD 1.2841 (-0.83%) 
USDJPY 109.34 (+0.12%) 
DAX     12171 (+0.14%)
FTSE     7397 (+1.12%)
NIFTY    9892 (+0.62%)
NKY     19459 (+0.01%)
SPX    2443.4 (+0.71%)
GOLD  1291.03 (+0.51%)
OIL     47.86 (-1.79%)

NEXT WEEK (all times are GMT)

The final week of August ends the summer holiday season, and once again it is NFP week as Sep 1 falls on a Friday. There are several forwarding looking indicators released this week.

Monday is a public holiday in the UK only, which has implications for forex flow, as London is the world’s main forex centre. FTSE futures will be traded as normal, as will the ADRs of the majors (BT, HBSC, Barclays) in New York. There is little scheduled news, but in politics Reichskanzlser Merkel meets her the Spanish, Italian and French leaders in Paris.

Tuesday has some forward looking indicators, Consumer Confidence in Germany and the US, and Home Prices in the latter. (All housing statistics are taken as forward looking). President Trump meets his counterpart from Finland.

Wednesday may see a major speech on tax reform, says White House Economic Advisor Gary Cohn (who is still there!). UK PM May flies to Japan. Topics may include Brexit and North Korea. The major news item of the day is US GDP, although the ADP jobs print is always interesting as a preview to NFP. The estimate is the same as last month’s actual at 178k. Note the normal low volatility German inflation figure which may provide a clue to the next day’s more important Eurozone figure.

On Thursday, Europe is in the forefront with German Retail Sales and Unemployment, and Eurozone Unemployment and CPI. The euro is an extreme high again. Poor figures could trigger a pullback.

Friday is NFP day. The estimate, at 185K is slightly higher than ADP, but well within historical norms. If the print is close to the estimate, traders will be looking at the ancillary reports: Unemployment, Average Weekly Hours. Average Hourly Earnings, and Labor Force Participation Rate in that order. Also important is the ISM Manufacturing PMI, which comes after several countries Markit reports in the same area. An exceptional item is the US Bank Stress Test Info, released 30 minutes before the market closes.


CALENDAR (all times are GMT). High volatility items are in bold

Mon Aug 28
1400 USD Dallas Fed Manuf Business Index
2330 JPY Unemployment and Jobs/Applicants Ratio

Tue Aug 29
0600 EUR Germany Gfk Consumer Confidence
1300 USD S&P/Case-Shiller Home Prices Indices
1400 USD Conference Board Consumer Confidence
2245 NZD Building Permits
2130 WTI API Oil Stock
2350 JPY Retail Sales

Wed Aug 30
0830 GBP UK Consumer Credit/Mortgage Approvals
0900 EUR Economic Sentiment/Business Climate
1200 EUR Germany Inflation (CPI)
1215 USD ADP Employment
1230 CAD Current Account Q2
1230 USD US PCE (Prices)
1330 USD US GDP
1430 WTI EIA Oil Stock
2350 JPY Japanese FDI

Thu Aug 31
0000 GBP UK Gfk Consumer Confidence
0100 CNY PMIs
0100 AUD HIA New Home Sales
0600 EUR Germany Retail Sales
0800 EUR Germany Unemployment
0900 EUR Eurozone Unemployment
0900 EUR Eurozone Inflation (CPI)
1230 USD US PCE (Price Index)
1230 USD Personal Income & Spending
1230 CAD Canada GDP
1230 USD Initial/Continuing Jobless Claims
1345 USD Chicago PMI
1400 USD Pending Home Sales
2330 AUD AIG Performance of Manuf Index

Fri Sep 01
0755 EUR Germany Markit PMIs
0800 EUR Eurozone Markit PMIs
0830 GBP UK Markit Manuf PMI
1230 USD US NFP/AHE/Unemployment
1345 USD US Markit Manuf PMI
1400 USD US ISM Manuf PMI/Prices paid
1400 USD US Construction Spending
1700 WTI US Baker Hughes Rig Count
2030 USD US Bank Stress Test Info

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