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Weekly Market Watch - Monday, 21 July 2008
Subscribe to our weekly "Market Watch" newsletter. Last Week RecapIt was nothing short of a busy week for all the major currencies. With further fears in the U.S credit markets the Greenback fell to a record low against the Euro, was sharply weaker against the Japanese yen and approached parity with the Swiss franc. Rising inflation concerns around the globe and lower oil prices helped the Greenback recover some of the lost ground against the Euro from 1.6037 earlier in the week to 1.5840. The Yen made a steep comeback from a seven-week low of 103.75 back up to just beneath 107.00. Meanwhile, the Australian dollar touched 0.9849, this was the highest level since the unit touched $US0.9893 on January 17, 1983, during the days of a fixed exchange rate. A somewhat dovish speech from the RBA governor Mr Stevens put pressure on the local unit, pulling back to 0.9750 as markets interpreted his comments that interest rates were likely to remain on hold. However, the Aussie seems to be holding up reasonably well with support sitting at 0.9650 and continuing strong commodity prices. The Sterling rallied through 2 U.S cents to 2.0150 earlier in the week thanks mainly to higher than expected U.K Retail Sales and jump in U.K CPI. The pound pulled back near 1.99 with a larger than expected jobless claim figure in 16 years. In other news, as expected the Bank of Japan left rates on hold at 0.5% and warned of downside risks to future economic growth. The Bank of Canada also left their cash rate at 3%.The A$ closed last week pretty much where it opened at 0.9701 having started the week at 0.9704. Same story for the NZ$ opening at 0.7621 and closing at 0.7608. The Euro opened last week at 1.5965 and moved lower to finish at 1.5838. The GBP moved higher in the week from 1.9904 from 1.9978. US$/JPY closed higher also at 106.93 from 105.99 The Week AheadUSD: Freddie Mac and Fannie May continue to dominant US Dollar direction. Over the past week, the US lost ground against the EUR and JPY, trading to low as 1.6020 against its Trans Atlantic counterpart and 104 against the Yen. As credit concerns eased on the back of US Treasury intervention Thursday and Friday last week, the big dollar clawed back some the week’s earlier losses, trading to a high of 1.5807 against the EUR and just above 107 against the Yen. Early data out of the US this week is fairly low key however Friday’s Durable Goods Orders for June, the University of Michigan Consumer Confidence survey and New Home Sales for June should provide some interesting movements for the big dollar heading into the weekend.AUD: After testing a 25 year post float high last week, the Australian Dollar opens in Sydney this morning trading just above the 0.97 handle. Last weeks high of 0.9850 has many traders and media pundits salivating in anticipation for parity. Many believe that this is merely a matter of time before this occurs. This week on the data front start with Monday’s release of the Producer Price Index for the 2nd quarter and New Motor Vehicle Sales for June. Wednesday’s all important Consumer Price Index for Q2 will be a clear indicator to the market of whether the Reserve Bank of Australia has done with its interest rate tightening policy. To view live charts follow these links: AUD/USD AUD/EUR AUD/GBP AUD/JPY AUD/NZDNZD: It should be an interesting week for the Kiwi dollar this week. Against the Australian dollar the Kiwi continues to loose significant ground with the 1.30 mark squarely in its sights. Against the greenback however, it has bounced between 0.7580 and 0.77 this past week. Traders expect more downward pressure on the Kiwi should the Reserve Bank of New Zealand not cut interest rates at this Thursday’ meeting. It was only several weeks ago that the Governor Alan Bollard spoke out saying that there was a greater chance of rates being cut Quarter 2 than raised. With no other data out of New Zealand this week, direction for the Kiwi will be taken from offshore events. To view live charts follow these links: NZD/USDGBP: The main data out of the UK is slated for release midweek and it starts Wednesday with the Bank of England minutes from its June meeting. This will give the market a clear direction of any future interest rate movements out of the UK and any economic growth forecasts. Other key events include Thursday’s release of the Retail Sales number for June and Friday’s Gross Domestic Product for Quarter 2. With the Retail Sales and GDP numbers expected to come in worse than forecast, traders are expecting a bumpy ride for the Sterling across the board this week. To view live charts follow these links: GBP/USDEUR: The EUR was consigned to a 2 cent range last week as the credit saga in the US continued to hold market attention. This coupled with some fairly week European data out of Germany, Italy and France ensured a fairly whippy week for the EUR. The high of last week was just above the 1.6020 handle, however as the week progressed and US Treasury intervention in the Freddie Mac and Fannie Mae saga hit the wires, the Greenback was able to claw back some of the initial losses which saw the EUR retreat to just above the 1.58 mark. Data wise this week sees the release on Wednesday of French Consumer Spending for June and Italian Retails Sales for May. One of the key events out of Europe this week will be Thursdays German Business Climate Survey for July and German IFO Expectations for July. This should set the tone for the EUR as Germany has been one of the few economies in Europe that has been doing well. To view live charts follow these links: EUR/USDJPY: The Bank of Japan in last weeks release of its minutes forecast that economic growth in Japan had shifted downwards. Despite these comments the Yen has held up fairly well on the crosses, remaining trapped between 104 and 106 against the Greenback. Economic releases out of Japan this week include the all important Merchandise Trade Balance for June on Wednesday and Thursdays Tokyo and National Consumer Price Index. A strong CPI number would put pressure on the Bank of Japan to at least revisit raising interest rates. To view live charts follow these links: JPY/USDCAD: The Canadian Dollar has remained range bound against the Greenback over the last several weeks and appears to be well entrenched in the 1 to 1.01 range. Last weeks announcement by the Bank of Canada that rates were to remain on hold had a modest impact on the Loonie, with the initial reaction allowing the currency pair to fall beneath the 1 mark. Data wise this week, Tuesdays Retail Sales number for May and Wednesdays Consumer Price Index for June will be the key events directing the Canadian Dollar this week. To view live charts follow these links: CAD/USD
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