Press review - page 502
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EUR/USD - "The data front for the Euro next week is rather busy; although we have to wait until Thursday before we see any ‘high impact’ announcements when German CPI is released. The following morning on Friday we get more German data with Unemployment figures and later in the session, Euro-Zone CPI data for the month of March is released. Continued beats will drive additional strength to the Euro on the basis of less dovishness out of the ECB; but the predominant factors in Euro price action at the moment appear to be political in nature, so unless these inflation and unemployment numbers come out significantly-above expectations, expect the prevailing winds of political forces to denominate how this data is inferred and priced-in by market participants."
GBP/USD - "Essentially, there are two main reasons why the Bank could move. First, UK inflation climbed to 2.3% in February, above the Bank of England’s 2% target for the first time since late 2013. Second, the UK economy has so far confounded those who predicted a sharp downturn if the British people decided to leave the EU, as they did. In particular, the first reading of fourth-quarter GDP – up 0.7% quarter/quarter – suggests that the economy is motoring ahead. That figure is likely to be confirmed on Friday, when revised data are published, keeping the prospect of a rate rise firmly on the agenda and helping the Pound to extend its gains."
USD/JPY - "Indeed, the bar appears to be high for central bank officials to boost the interest rate forecast as Chair Yellen argues ‘inflation moved up over the past year, mainly because of the diminishing effects of the earlier declines in energy prices and import prices,’ and the central bank may attempt to buy more time as ‘market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.’ With that said, growing uncertainties surrounding the fiscal outlook may continue to foster fresh 2017-lows in USD/JPY even as the Bank of Japan (BoJ) continues to pursue its Quantitative/Qualitative Easing (QQE) Program with Yield-Curve Control."
AUD/USD - "In fundamental forecast terms then, it’s hard to see this week as anything but ‘steady as she goes’ for AUD/USD. And that means the pair probably heads lower, if not catastrophically so. This thesis might just be threatened by Chinese manufacturing data which comes out on Friday in the form of the March Purchasing Managers Index for the sector. Given the Aussie Dollar’s sometime role as the market’s favorite liquid China proxy, strength in this index could see the currency end next week with a flourish."
NZD/USD - "A recent report from rating’s agency Moody’s Investor Services gave the Government of New Zealand the thumbs-up and re-affirmed the country’s Aaa rating. Moody’s said that it expects New Zealand to be among the fastest growing Aaa-rated economies in the coming years. They agency added that while the economy is small and open, in the event of shocks the economy “responds swiftly and positively to a weaker exchange rate and lower interest rates, as seen in recent years. Exchange-rate and interest-rate sensitive sectors such as tourism and construction generate economic activity and jobs to support income.”"
USD/CNH - "Next Thursday, China will release the March Manufacturing PMI print which is expected to fall to 51.2 from 51.6 in the prior month, according to Bloomberg. Despite that the forecasted read is still in the expansion range (above 50), a falling number indicates that the improvement seen in China’s manufacturing industries have not yet proved to be sustainable. In fact, other Chinese indicators show that producers are facing challenges of higher costs and lower sales. As a result, unless there is a big positive surprise in the PMI print, the gauge is less likely to bring significant support to the Yuan; however, if it falls greater than expected or even below 50, it can easily go against the Yuan."
GOLD (XAU/USD) - "Looking ahead to next week, traders will be eyeing the third and final read on U.S. 4Q GDP with consensus estimates calling for an upward revision to 2% from 1.9%. Aside from the economic docket, look for a fresh batch of Fed rhetoric to drive USD / Gold price action with Chicago Fed President Charles Evans, Dallas Fed President Robert Kaplan, Chair Janet Yellen, Fed Governor Jerome Powell and Minneapolis Fed President Neel Kashkari slated for commentary next week. Markets are priced for three hikes in 2017 and for gold, the fuel for a sustained push higher could be sparked by either a shift in the Fed’s tone or a broader turnover in equity markets- (note the SPX posted its largest weekly loss since November this week)."
Crude Oil - "On Friday, we got word from Baker Hughes International that the U.S. Oil Rig Count Report had risen 21 rigs to 652 active rigs. This number is over double the number of active rigs from last summer at around 330. As you would expect, the majority of rigs being reinitiated are in the cheaper to produce shale regions."
S&P 500 - "The economic calendar for the coming week is light with ‘high’ impact events. We have Advance Goods Trade Balance and Consumer Confidence on Tuesday; Final Q4 GDP on Wednesday; Core Personal Consumption Expenditure (PCE) on Friday. It’s unlikely any of these events cause a major stir in equities; the larger reactions will likely to be seen in the FX/rates space."
Dax Index - "Last week, we placed a lot of emphasis on the DAX for directional cues in general risk trends given it had at that time the clearest technical formation of the major indices. The rising wedge formation broke to the downside, but the DAX quickly found a low early Wednesday and recovered to close out the week. The rally doesn’t fully undermine the bearish break, but if it doesn’t turn lower soon we will need to consider alternatives. The Wednesday low carved out a lower low from 3/8, and with a downturn soon we could have a lower high in place from the 3/16 peak. In this scenario, the price sequence for the month of March will begin taking on the shape of a ‘head-and-shoulders’ pattern. We would of course need to see a break of the neckline and drop below 11850 before getting the green light. On weakness below last week’s low we will look to 11722, then nothing substantial arrives until the February low of 11480."