Currency Market Trend Analysis: March 5, 2018
By The Numbers: Your FX Week In Review
|Date||Releases / Holiday|
|March 5, 2018||Markit Services PMI (Feb)||EMU/USA|
|March 5, 2018||ISM Non-Manufacturing PMI (Feb)||USA|
|March 6, 2018||BRC Like-For-Like Retail Sales (Feb)||UK|
|March 6, 2018||Fed’s William Dudley speech||USA|
|March 6, 2018||Factory Orders (Jan)||USA|
|March 6, 2018||Ivey Purchase Managers Index (Feb)||CAD|
|March 7, 2018||FOMC Member Kaplan Speech||USA|
|March 7, 2018||Gross Domestic Product (Q4)||EMU|
|March 7, 2018||BOC Interest Rate Decision/Statement||CAD|
|March 8, 2018||ECB Deposit Rate Decision||EMU|
|March 8, 2018||ECB Monetary policy statement and press conference||EMU|
|March 8, 2018||BoC Gov Council Member Lane Speech||CAD|
|March 9, 2018||Imports/Exports (Jan)||Germany|
|March 9, 2018||Manufacturing/Industrial Production||UK|
|March 9, 2018||Nonfarm Payrolls (Feb)||USA|
|March 9, 2018||Net Change in Employment (Feb)||CAD|
Upcoming bank holidays and impactful report releases for select countries.
CAD/USD opened last week at 0.7918 and closed at 0.7765 – depreciating by 1.94% as Trump initiated a trade war, and Canadian retail sales and GDP missed the mark.
The Loonie continued a month of soft data, with retail sales contracting 0.8% MoM, and QoQ GDP arriving at 1.7% against a 2.0% expectation. This comes after disappointing January employment figures, and ongoing concerns over household debt levels.
Oil was a mixed bag for the commodity-sensitive CAD this past week. One of Canada’s main exports is oil, with US being the primary buyer. The recent glut in US shale production has resulted in heavy pressure for Canadian oil, which is now selling to US refineries at a 45% discount. Oil prices climbed this past week on reports that Libya’s biggest oil fields halted production, lending support to the beleaguered Canadian industry.
The CAD came under further pressure resulting from US anti-trade sentiment. NAFTA concerns continue to grow, with Trump announcing a 25% steel tariff and 10% aluminum tariff. Trump went on to state that “Trade wars are good, and easy to win” – showing a fundamental lack of economic understanding, troubling for economies that trade heavily with the US. Trudeau responded by calling a trade war unacceptable.
Given last month’s rocky employment data, Friday’s net change in employment will be in particular focus. Markets will also be on the lookout for follow-ups to Trump’s tariffs and trade war rhetoric.
1. Ivey Purchase Managers Index (Feb): Tuesday, March 6th
2. BOC Interest Rate Decision/Statement (Feb): Wednesday, March 7th
3. BoC Gov Council Member Lane Speech: Thursday, March 8th
4. Net Change in Employment (Feb): Friday, March 9th
GBP/USD opened last week at 1.3967 and closed at 1.3801 – depreciating by 1.19% as politics weighed, and hard-Brexit fears were stroked.
Brexit dominated the news, and the GBP/USD market this past week. The issue of the North Ireland border flared up, and tensions seem to be rising. EU chief negotiation Barnier delivered a draft agreement, while criticizing the UK for their inability to clarify their Brexit stance. Barnier stated that he sees a transition period ending by Dec 2020 – a time frame far shorter than the UK’s goal. Theresa May stated that there cannot be an open border in Northern Ireland, and rejected Barnier’s agreement. Furthermore, UK Foreign Secretary Boris Johnson stated that the UK will no stay subject to European Council of Justice rulings.
Compounding political woes, reports indicate that three cabinet ministers warned May that her government could collapse within a year.
The BoE is meeting next week, but it is not expected that they will hike rates. Currently there is a 50% chance of a May hike priced in. This week, markets will look to further Brexit developments and today’s PMI for impetus.
1. Markit Services PMI (Feb): Monday, March 5th
2. BRC Like-For-Like Retail Sales (Feb): Tuesday, March 6th
3. Manufacturing/Industrial Production: Friday, March 9th
European Central Bank Euro
EUR/USD opened last week at 1.2294 and closed at 1.2317 – appreciating by 0.19% as the USD came under pressure following Trump’s threats of a trade war, and EU politics came in mixed.
This past week was uneventful data-wise for the Eurozone. German flash CPI came in slightly below expectation, but EZ inflation figures are expected to match expectations, rising to 1.2% and 1.0% YoY for consumer and energy prices respectively. The EUR gained support from ECB Council member Jens Widmann, who noted that a 2019 rate hike was realistic, and could that more volatility and monetary tightening could be expected.
Politics came in mixed for the common currency. The German Coalition was voted into effect, with 66.02% voting for and a 78.3% SPD participation rate. On the flip side, the Italian election ended in a deadlock, with no party holding majority.
This week, markets will look to Q4 GDP and developments on US trade policy.
1. Markit Services PMI (Feb, EMU): Monday, March 5th
2. Gross Domestic Product (Q4, EMU): Wednesday, March 7th
3. ECB Deposit Rate Decision (EMU): Thursday, March 8th
4. Imports/Exports (Jan, Germany): Friday, March 9th
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