Weekly Market Update 29/05/16-04/06/2016
Last week the performance of the US dollar against currencies in the major group was mixed. The Greenback lost 117 pips against the British Pound on the optimism that pressure from both local and international organizations eased concern regarding Brexit. GbpUsd closed at 1.4613 (+0.81% weekly); the rate however failed to rise above the most recent high thus momentum strategies failed to gain ground, considering that a lot of noise would create sudden spikes before the referendum day. The Canadian dollar rose 85 pips and UsdCad closed last Friday at 1.3023 (-0.65% weekly). The Kiwi dollar was the worst performer against the US dollar and NzdUsd lost 68 pips to 0.6690 (-1.01% weekly). EurUsd slid 107 pips to 1.1110 (-0.96% weekly) after the probability of a rate hike by the FED the next month or July increased. St. Louis Fed President James Bullard said last week that a rate hike was not set in stone, labour data suggested that it was time to pull the trigger. FED Chairwoman Yellen confirmed that a rate hike would be appropriate in the coming months. Aussie dollar lost 38 pips against the US dollar closing at 0.7179 (-0.59% weekly). UsdChf rose 40 pips to 0.9938 (+0.40% weekly) and the parity could be reached this week. Gold dropped for the third consecutive week closing at 1,215.3 $/oz (-3.18% weekly). The negative sentiment on Gold was triggered by several factors: The commodity was one of the best performers YTD and profit taking materialized. There is little confidence at the moment on a long term reversal of the multiyear bearish trend. Potential rate hikes from the FED combined with prompt actions by central banks in case of systemic risk eased the demand for the shiny metal. The aggressive monetary easing by G20 central banks did not create high inflationary expectations as the threat now is deflation. It is difficult to predict scenario when monetary authorities used tools that brought monetary policy to uncharted territory.
It could be possible that sudden regional increase in demand could lift the shiny metal as China and India inflation mixed with lower confidence on the financial system could increase the demand of safe assets. Geopolitical tensions could have a short lived effect on the commodity, and a sovereign debt crisis can have a positive effect. Crude Oil last week closed at 49.56 $ barrel (+2.38 weekly) and now its performance YTD is the same as Gold. Positive performance of global equity indices as Nasdaq100 rose 3.45% weekly and the DAX in Germany closed at 10,286.31 (+3.94% weekly). On Monday the most important events will be the Eurozone Consumer Confidence and Greek GDP, both released at 09:00 GMT. In many countries Memorial Day will be observed and trading volumes will probably be far below it’s daily average. It is relevant to follow the situation in Greece as Gross Domestic Product data could be used by both the Government and the Troika to give weight to their reasons. On Tuesday, Eurozone Consumer Price Index will be released at 09:00 GMT. It is expected at +0.8% YoY compared to +0.7% previously. Canadian GDP data is released at 12:30 GMT and at 13:00 GMT it’s the turn of the Case Shiller Housing Home Price Index. On Wednesday during the Asian session the Chinese Caixin data regarding the Manufacturing PMI, released at 01:45 GMT could have a relevance on risk appetite. At 05:45 GMT Swiss GDP data will kick off the European session and at 07:15 GMT further data from Switzerland, Retail Sales, could keep Swiss Franc intraday volatility high. At 14:00 GMT. in The US, ISM Manufacturing and Prices data. On Thursday the ECB will decide both the Interest Rate and Deposit Rate at 11:45 GMT and traders will be focused on the Press Conference and Monetary Policy Statement at 12:30 GMT. At 15:00 GMT Crude Oil traders should pay attention to the EIA Crude Oil Stocks Change. Friday will be not a quiet day for traders planning a long weekend as at 12:30 GMT the US Unemployment Rate and Non Farm Payrolls are both released: the data will not only increase intraday volatility sharply but would also have relevance in the short term decisions on monetary policy. At 14:00 GMT US Factory Orders will be the last event on the calendar.
About The Author
Leave a Comment
You must be logged in to post a comment.