Currency Market Trend Analysis: February 13, 2018
By The Numbers: Your FX Week In Review
|Date||Releases / Holiday|
|February 12, 2018||Family Day||Canada|
|February 12, 2018||Monthly Budget Statement (Jan)||USA|
|February 13, 2018||CPI/PPI (Jan)||UK|
|February 13, 2018||FOMC Member Mester speech||USA|
|February 14, 2018||Harmonised Index of Consumer Prices (Jan)||Germany|
|February 14, 2018||GDP (Q4)||EMU|
|February 14, 2018||Industrial Production (Dec)||EMU|
|February 14, 2018||Retail Sales (Jan)||USA|
|February 14, 2018||CPI (Jan)||USA|
|February 15, 2018||BoC Schemrbi speech||Canada|
|February 15, 2018||Jobless Claims (Feb)||USA|
|February 15, 2018||NAHB Housing Market Index (Feb)||USA|
|February 15, 2018||Capacity Utilization||USA|
|February 16, 2018||Wholesale Price Index (Jan)||Germany|
|February 16, 2018||Retail Sales (Jan)||UK|
|February 16, 2018||Housing Starts Change (Jan)||USA|
|February 16, 2018||Baker Hughes US Oil Rig Count||USA|
Upcoming bank holidays and impactful report releases for select countries.
CAD/USD - Canadian Dollar
CAD/USD opened last week at 0.8008 and closed at 0.7950 – depreciating by 0.72% as oil prices fell and concerns over a return of inflation drove a liquidation of US stocks, increasing USD demand.
The CAD came under pressure this week as employment figures missed the mark. 88,000 jobs were lost in January, against an expected increase of 10,000. Additionally, the unemployment rate jumped to 5.9%, exceeding the expectation of 5.8%. It is of note that this may have been payback for a strong November and December, in which a collective 136k jobs were added to the Canadian economy. In January, Ontario increased the minimum from $11.60 to $14.00. It is likely that this contributed to the job loss. As a result of this hike, some analysts have revised up wage growth projections YoY from 2.9% to 4.0%.
Oil prices also contributed to a hard week for the Loonie, dropping 8.69%. This fall was driven by US crude, which reached production of 10.251 million barrels per day – a level of output that hasn’t been seen since 1983.
This past week saw a dramatic stock sell-off, triggered in-part by NFP-driven fears of returning inflation. This sell-off benefited currencies that are viewed as safe havens, as well as currencies in which large volumes of stocks were denominated. As stocks fell, and people liquidated their positions, the corresponding currency had to be purchased. The USD was a prime beneficiary of both of these factors, exacerbating the CAD’s data-driven losses.
1. Family Day: Monday, February 12th
2. BoC Schembri speech (Dec): Thursday, February 15th
GBP/USD - British Pound
GBP/USD opened last week at 1.4018 and closed at 1.3828 – depreciating by 1.36% as the USD benefited from USD-denominated stock sell-offs, and UK data failed to impress.
UK data missed the mark this past week, putting further pressure on the Sterling. The services, manufacturing, and composite PMI’s all came in below expectations, and the trade deficit widened to 13.58 billion pounds. These data were partially balanced by a hawkish BoE meeting, in which interest rates were remained constant (as expected), but inflation and growth forecasts were upgraded (the 2018 GDP growth projection was increased from 1.6% to 1.8%). The BoE reported little economic slack, going on to state that demand is exceeding supply, and will drive further inflationary pressures. Markets are currently pricing in a 70% probability for a May rate hike.
Markets will likely look to UK and US CPI/PPI figures for impetus this week. The UK CPI will be of particular importance, given the ongoing struggle with negative real wage growth.
1. CPI/PPI (Jan): Tuesday, February 13th
2. Retail Sales (Jan): Friday, February 16th
EUR/USD - European Central Bank Euro
EUR/USD opened last week at 1.2415 and closed at 1.2253 – depreciating by 1.30% as the USD was underpinned by stock liquidation-driven demand, despite strong Eurozone (EZ) figures.
EZ data underpinned the common currency this past week, shielding it in-part from broad-based USD gains. The German ISM nonmanufacturing index rose to 59.9 against a 56.7 expectation, while the EZ services PMI came in at 58.0 against a 57.6 estimate. Additionally, the European Commission released an updated forecast of 2.3% 2018 GDP growth for the EZ.
The Euro received further support as Merkel’s CDU/CSU and the SPD reached an agreement to form a grand coalition. Many are skeptical of the strength of this coalition, but it likely represents a reduction in political risk for the common currency.
Markets will likely look to EZ GDP and US CPI/PPI for guidance this coming week.
1. Harmonised Index of Consumer Prices (Jan, Germany): Wednesday, February 14th
2. GDP (Q4, EMU): Wednesday, February 14th
3. Industrial Production (EMU): Wednesday, February 14th
4. Wholesale Price Index (Jan, Germany): Friday, February 16th
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