14th February 2017 – Weekly Currency Market Report.



The Market in Brief:

                                                    • AUD up against the majors and flat V USD and GBP
                                                    • RBA leaves cash rate at 1.5% as expected while Retail Sales print -0.1% V expected +0.3%.
                                                    • RBNZ leaves cash rate at 1.75% as expected.
                                                    • U.S. data mixed.
                                                    • U.K data prints above expectations
                                                    • CAD data prints below expectations

Market Events Due:

                                                • CNY CPI and PPI (Tue)
                                                • AUD Employment Change and Unemployment Rate (Thur)
                                                • USD PPI m/m and Fed Chair Yellen speaks (Wed) CPI and Retail Sales (Thur) Building Permits and Philly Fed Manufacturing Index (Fri)
                                                • EUR German Prelim GDP q/q
                                                • U.K. CPI y/y (Tue) Retail Sales (Fri)

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AUD/USD: AUD basically closed the week flat against the US, down a tiny 3 points. It was down for most of the week after disappointing retail sales on Monday but posted a solid rally on Friday. On Tuesday the RBA left the cash rate at 1.5% as expected whilst on Friday the Chinese Trade Balance printed a huge 355bn V expected 295bn. So AUD is now only 20 points shy of its 3 month high 6 days ago. It is up over 7% since the Christmas lows and back to being only 100 points shy of the November 8 high just before Trump was elected.

AUD/EUR: AUD closed the week up 1.4% to hit a fresh 22 month high with German Industrial Production printing -3.0% v expected +0.2%. Germany is the powerhouse of the Eurozone so this gives you an indication of their dire situation. At the moment every time Mario Draghi, president of the ECB speaks, the Euro weakens. On the technical side the resistance at the 50% retracement of the sell off from mid-2012 to late-2015 has been broken. AUD is now up 6% since the Christmas lows which offers a great opportunity for importers.

AUD/GBP: Similar to AUDUSD, AUDGBP closed the week flat after being down for most of the week until Friday. U.K. Manufacturing Production shot the lights out at 2.1% V expected 0.3% but GBP didn’t rally. So those buying GBP get another bite at the cherry. A well known contrarian economist has called GBP the new Gold but at this stage while we believe GBP is undervalued he may be getting a little carried away.

AUD/NZD: AUD posted its second consecutive weekly gain against the NZD to close 1.4% higher, so importers targeting 100 points higher were done as well as those targeting 150 points higher. The currency finally broke 20 points higher than the tight 3 month range it had been confined to. This represents the best time in the last 3 months for importers or those buying NZD.

AUD/JPY: Whilst the JPY was the only currency to post a gain against the AUD the previous week, those fortunes were reversed last week on Thursday and Friday. AUDJPY actually posted a fresh 2 month high against the JPY, up a relatively small 0.6% but the currency still remains held in that tight range of only 3.5% over the last 3 months. On the charts the range still favours importers given AUD is up 12% since November 8 when Trump was elected. Exporters can look to chip away on dips. 

AUD/CHF: AUD posted its second consecutive weekly gain against the CHF closing the week up a solid 1.1% to hit a fresh 23 month high. The resistance that has held for almost 2 years was slightly broken. As mentioned last week if the EUR continues to weaken this will put more pressure on the CHF and this is what we saw.  

Compass Global Markets Team.



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