LAST WEEK (all times GMT)
On Monday, North Korea tensions continued to fade, and SPX, DJIA and NDX all edged up to another all-time high, and the risk-on mood was confirmed by JPY and bond prices hitting a seven-week low, and Gold a two-week low. DAX also made a seven-week high, and FTSE and NKY were also up. The picture with USD was similarly positive, and only EUR was (slightly) stronger on the day. After some volatility, Oil settled nearly flat, a mere 10c down on the day.
Tuesday was a quiet day, and the general trend continued in equities. SPX was slightly up, NKY and FTSE a little more so. Nevertheless another all-time high for SPX. DAX gave up ground as EUR advanced, despite the German ZEW sentiment beat at 0900. Gold was up slightly and AUD followed. Otherwise USD was flat, as were bond yields. Oil showed some volatility but and ended the day slightly up. The API stock beat came after the open outcry market closed.
Wednesday was the big day, the FOMC rate set, which was a hold at 1.25%, but with hawkish remarks about further rate rises and balance sheet tightening. The FOMC didn’t have a big effect on equities which were flat (although SPX and DJIA inched to yet another ATH). The exception was NKY which rallied on the release, but purely its usual reaction to JPY weakening. However VIX fell below 10 for the first time since early August.
In forex, the FOMC effect was much more pronounced. USD rallied strongly against all currencies, as did bond yields, and Gold fell. The only exception was AUD which had been rising all day. The FOMC slump pushed it back to flat on the day. GBP had also been rallying, but gave up all its gains, and more to FOMC. This pushed DXY to a three-week high of 92.70. Surprisingly Oil had its best day of the week, rallying 1.02% in spite of the EIA Stock miss (4.59M vs 3.49M).
Thursday saw equities wobble. SPX gave up 0.3% but still held above 2500, nevertheless after a rally to 10.2, VIX actually closed down at 9.7. Other indices were similarly down, FTSE giving up the week’s gains on strong sterling. The currency situation was mixed. EUR and GBP recovered most of Wednesday’s losses, but Gold and AUD carried on downwards. Despite the BoJ rate decision (hold), JPY was flat on the day, as were CAD and Oil (after a brief dip in the latter).
Friday saw a keynote speech by Theresa May on Brexit, and FTSE soared 56 points (0.78%) on the day. Or was that the reason? Perhaps it was just that GBP gave up 0.64% to erase Thursday’s gains. Trump’s tax plans were delayed, yet DAX and SPX were also up, reversing some but not all of Thursday’s losses. SPX finished the week exactly flat. NKY tracked USDJPY as usual and was down. USD was mixed, it was flat against EUR and CAD after spikes up in both currencies in the European session. However, DXY was slightly down on the day, despite the GBP fade as JPY gave up some of Wednesday’s gains. AUD and Gold were up, but the latter stayed below $1,300. Oil was flat, but held on to mid-week gains following speculation on an extension to output cuts. Yields were slightly down, but still finished up 6bp for 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 EURJPY up marginally more than USDJPY at 2.44%. The strongest index movement was again NKY at 1.22%, driven largely by a falling yen.
AUDNZD 1.0849 (-1.18%)
AUDUSD 0.7965 (-0.46%)
EURGBP 0.8853 (+0.71%)
EURUSD 1.1948 (+0.02%)
GBPUSD 1.3496 (-0.68%)
USDCAD 1.2339 (+1.17%)
USDJPY 111.99 (+2.42%)
DAX 12613 (+0.51%)
FTSE 7307 (+1.16%)
NIFTY 9983 (-1.22%)
NKY 20326 (+1.71%)
SPX 2502.0 (+0.01%)
GOLD 1297.19 (-1.74%)
OIL 50.66 (+1.67%)
NEXT WEEK (all times are GMT)
As we go into the final week of the month and quarter, the weekend saw elections in New Zealand and Germany. For the fourth time, New Zealand saw a hung parliament with the National Party taking most seats, and given the NZD rate decision is this week, there will be more focus than usual on the Kiwi. Otherwise the US tax plans on Monday, and the GDP and PCE (a proxy for inflation) on Thursday/Friday, will be the main events.
On Monday, the Trump administration is scheduled to disclose further details of their tax reforms. This is the most important item today. Also ECB President Draghi will speak in Brussels. Focus continues on New Zealand. We expect volatility in NZD after the election, and the Trade Balance print may be a focus. We will also see the first steps to the formation of a government by coalition, with Winston Peters of anti-immigration party NZ First being the kingmaker. He has already said he will take his time making a decision, although Peters has already expressed antipathy for the Greens. Mathematically the only majorities possible are National+NZ First, or Labour+Greens+NZ First (or National+Greens which seems unlikely).
Tuesday sees Fed Chair Yellen speak at 1645, with a Q&A session afterwards. Before that Fed Mester (hawk), Brainard (dove), and new member Atlanta Fed President Bostic are speaking. Like Monday, data is light on the day.
Wednesday’s releases are UK GDP at 0830 and of course the weekly Oil Stocks report, but again we turn to New Zealand for the RBNZ rate decision (1.75% hold expected) at 2100. Although no surprises are likely, the post-decision speech comes from the new acting Governor, Grant Spencer, who is considered to be more hawkish than outgoing Governor Wheeler.
Thursday has plenty of economic releases. The main figure is US GDP, released at the same time as the QoQ PCE. For some reason, the YoY and MoM PCE figures are not released until the next day. These are probably the most important data releases of the week. Turning to Japan, there are a raft of releases: inflation, unemployment and retail sales. Note there is a special session of the Japanese Diet (Parliament) where PM Abe is rumoured to be calling a snap election for October 22.
Friday sees an unusual event, BoE Governor Carney “in conversation” with ECB President Draghi. Closing remarks are delivered at 1445. Earlier in the day we have Eurozone inflation, German unemployment, and the MoM and YoY prints for US PCE. A strong print for the first of these could have a significant effect on EUR.
CALENDAR (all times are GMT). High volatility items are in bold
Mon Sep 25
0500 JPY Coincident/Leading Economic Indices
0800 EUR Germany IFO Climate/Expectations
1230 USD Chicago Fed National Activity Index
1400 USD Dallas Fed Manufacturing Business Index
2145 NZD NZ Imports/Exports/Trade Balance
2350 JPY BoJ MPC Minutes
Tue Sep 26
1300 USD Home Price Indices
1400 USD New Home Sales
2030 WTI API Stocks
Wed Sep 27
0830 GBP UK GDP
1230 USD US Durable Goods Orders
1400 USD US Pending Home Sales
1430 WTI EIA Stocks
2100 NZD RBNZ Interest Rate Decision (1.75% hold expected)
2350 JPY Japan FDI
Thu Sep 28
0600 EUR Germany Gfk Consumer Confidence Survey
0900 EUR Eurozone Services Sentiment/Industrial Confidence/Business Climate
1230 USD US Initial/Continuing Jobless Claims
1230 USD US Personal Consumption Expenditure QoQ
1330 USD US GDP
2145 NZD NZ Building Permits
2330 JPY Japan Inflation (CPI)
2330 JPY Japan Unemployment//Jobs-Applicants Ratio
2350 JPY Japan Retail Sales
Fri Sep 29
0001 GBP UK Gfk Consumer Confidence
0600 EUR Germany Retail Sales
0800 EUR Germany Unemployment
0830 GBP UK Consumer Credit/Mortgage Approvals
1000 EUR Eurozone Inflation (CPI)
1230 USD US Personal Income/Spending
1230 USD US Personal Consumption Expenditure MoM, YoY
1230 CAD Canada GDP
1345 USD Chicago PMI
1700 WTI Baker Hughes Rig Count