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Weekly Market Watch - Monday, 17 November 2008
Subscribe to our weekly "Market Watch" newsletter. Last Week RecapThe Australian Dollar lost four cents last week and traded between a high of 0.6982 and a low of 0.6338. The local unit began on the strong foot after it was revealed a Chinese economic stimulus package would provide a boost to commodity prices. However, once again U.S stock markets dictated the Aussie and its crosses. AUD/JPY cross-rate lost more than 10 per cent in the week hitting a low of 60.01 as investors flew to safe havens. Rumours proved to be true that the Reserve Bank of Australia intervened Thursday morning and provided much-needed support around 0.6350 against the Greenback. Overall, our dollar closed the week lower against most majors at 0.5100 versus the Euro Dollar and 0.4350 versus the Sterling.The New Zealand Dollar saw a week of despair as it fell below 60 cents against the U.S dollar and continued heading south. Retail Sales fell for a third straight quarter which may prompt the Reserve bank of New Zealand to cut interest rates again next month. The Kiwi largely followed moves in equity markets and base metals all which saw a rollercoaster ride during the week. The Dow Jones Industrial Average gave back all of its gains on Friday putting pressure on the Kiwi and a disappointing G20 summit saw the NZD fall to three-week lows of 0.5510. Against its Tasman rival the Kiwi buys 0.8600. The Pound sterling was under heavy pressure last week and lost more than 10 big figures against its U.S counterpart. Further evidence of a weakening UK economy in the form of housing industry survey saw the Sterling sold heavily. Adding to this was the BoE’s quarterly inflation report which suggested interest rates have much further to fall from their current level of 3%. Against its southern hemisphere rivals the Sterling closed the week at 2.26 versus the Aussie and 2.66versus the New Zealand Dollar. The most heavily traded currency pair fell to a three-week low of 1.2388 after it was reported that the European economy is technically in a recession. Third-quarter GDP fell for a second consecutive month which saw the Euro lose its gains earlier in the week. The Euro has seen a dramatic fall from its highs of 1.6037 against the Greenback in July and has fallen through several key support levels since. It will be interesting times ahead for the Euro Dollar as it enters into its first recession since the Euro-Zone formed. The Week AheadUSD: The data log in jammed full of releases this week for the Greenback, so volatility is expected to be the name of the game. It all starts today with the release of the Empire Manufacturing Survey for November, which is expected to come in at negative 27 compared with previous of negative 24.6. Tuesday sees the release of US PPI, TIC Flows and the ABC Consumer Confidence Survey. Wednesday sees MBA Mortgage Applications, October CPI, Housing Starts, Building Permits and the all important minutes from the F.O.M.C’s previous meeting. This is followed up Thursday with the Philadelphia Fed Survey (expectations are a better number than previous), along with the all important address by Henry Paulson in Washington into the health of the US and Global economy.AUD: The release tomorrow by the Reserve Bank of Australia of it’s minutes from its previous meeting appear to be the highlight this week for the little battler. The minutes will provide the markets with an indication into what the RBA will be doing next in regards to interest rates. Released on the same say is the Westpac Leading Index for September, a measurement of consumer confidence, is expected to come in below expectations. Thursday sees RBA Governor Stevens speaking in Melbourne, where no doubt he will deliver his expectations on the state of the Australia and Global economies. On the whole, not really a lot of significant data out of Australia this week, so one suspects AUD direction will again be coupled to global equity movements. To view live charts follow these links: AUD/USD AUD/EUR AUD/GBP AUD/JPY AUD/NZDNZD: Lack of data this week out of New Zealand potentially may have a negative effect on the Kiwi Dollar. Data is extremely thin with little to no impact resulting on the releases. Data slated for release includes Tuesdays Producer Price (Input and Output), Thursdays Visitor Arrivals for October and Friday’s Credit Card Spending. A break of 0.5250 for the Kiwi versus the Greenback opens doors for 0.50 cents and below. To view live charts follow these links: NZD/USDGBP: Another critical week for the Sterling with many traders believing it will fail to make up any lost ground against the Greenback, with the market believing that it will not break back above the 1.50 this week. On the data front, Tuesdays Consumer Price Index for October and Wednesdays release of the Bank of England minutes from it previous meeting, heightens the market for some possible Sterling selling. This is followed up with Thursday Retail Sales for October, which is expected to come on at negative 0.8% compared with a previous reading of negative 0.4%. To view live charts follow these links: GBP/USDEUR: With confirmation Friday that the Euro Zone economy has officially entered a recession, this week will possibility give traders further impetuses to sell the EURO. Data wise, it starts thick and fast with the release Monday of the Euro Zone Trade Balance for September. The balance is expected to shrink from a previous reading of negative 9.3 billion to negative 6 billion. Thursdays German PPI along with various releases (including industrial orders and sales) from other EU member states and Fridays Euro Zone, French and German Purchasing Managers Index all have the ability to put the EURO on the back foot as traders enter the weekend. To view live charts follow these links: EUR/USDJPY: The release of GDP for the third quarter gets thing underway for the Yen this week, with the figure expected to come in even, indicating no growth in the Japanese economy over the course of the last 3 months. This is followed up Tuesday with the release of the Leading Index for September and Wednesdays Merchandise Trade Balance for October. Thursday Bank of Japan Policy meeting will be closely watched, with the Bank expected to leave interest rates on hold at 0.30%. The accompanying rhetoric by the BoJ Governors should provide many with future indications on economic growth and interest rates. To view live charts follow these links: JPY/USDCAD: The release Wednesday of the Leading Indicators Index (a composite index designed to forecast developments in the Canadian economy) get the LOONIE moving this week. This is followed up with Friday with Consumer Price Index, with both the month on month and year on year figures to come in as previous. To view live charts follow these links: CAD/USD
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