Weekly Outlook
Review Of The Week – 13th February 2012
Main theme driving the FX market: Risky stocks and higher-yielding currencies outperformed on hopes that Greece may soon receive a default-averting rescue loan, while more signs pointed to a resilient global economy. Consequently, the euro weathered a move by Moody’s to slash the creditworthiness of six euro zone
states. The Australian dollar rose against the greenback on signs of a strengthening global economy and after the nation’s jobless rate unexpectedly fell a notch to 5.1% in January, it’s lowest in six months.
Australian Dollar: The RBA surprised the market this past week by holding the overnight cash rate at 4.25% amidst expectations of a 25 basis point cut. Coupled with the decision were remarks that the central bank may continue to strike a dovish tone for monetary policy as the board curbs its outlook for growth and inflation. Deputy Governor Philip Lowe held a cautious tone for the region citing that many businesses are scaling back or closing down local operations and that general global uncertainty is likely to continue for some time.
U.S. Dollar: The dollar surrendered a lead to three-week peaks as end of week optimism about Greece and the health of the global economy curbed demand for safety. But the more strength the U.S. economy shows, the more it can lead to sustainable gains for the dollar by reducing the risk of further Fed action. Weekly jobless claims surprisingly fell to the fewest in 4 years and business surveys from the New York and Philadelphia Fed districts rose to multi-month peaks.
Euro: The euro spent the better part of the week underwater on Greek debt fears and after Moody’s decision to slash the credit ratings of six euro zone nations. But the common currency rose above three-week lows on optimism that European leaders may use a Feb. 20 summit to grant more aid to the debt-stricken Hellenic republic.
Japanese yen: A surprise decision by the Bank of Japan to increase its asset purchases to ¥65 trillion from ¥55 trillion sent the yen tumbling to 3½ month lows against its U.S. rival. The BOJ’s action brought to the surface other liabilities for the yen such as the nation’s eroding current account position which has long underpinned the currency’s safe haven status.
Highlights for Next Week
Australia: It is a quiet news week in the sunburnt country with the central bank’s February meeting minutes set for release Tuesday along with the domestic wage price index Wednesday. The tone of the minutes are expected to be bearish however the Credit Suisse overnight index swaps market is now pricing in just 50 basis points of cuts over the next 12 months. Wednesday’s event is expected to see a 3.4% increase in wages over the past 12 months.
United States: The holiday-shortened U.S. week will see the economic spotlight shine on the housing market and sentiment among the nation’s consumers. Though a lean week for local indicators, dollar sentiment should have no shortage of drivers with the fate of Greece’s bailout sure to sway investor sentiment.
Euro-zone: Investors this week have Feb. 20 circled, the day euro zone finance ministers plan to meet and possibly decide on whether to loan more money to Greece. To gauge the odds of a looming recession, traders will study reports on euro zone industrial orders and German corporate sentiment.
Britain: Market participants this week get to parse the minutes to the Bank of England’s February meeting at which policymakers decided to increase growth-positive asset purchases by £50 billion to £325 billion. Investors will also examine key factory and revised fourth quarter growth figures for potential clues on the outlook for BOE policy.
Japan: Headlining the Japanese economic calendar this week will be a crucial report on the nation’s trade position. The yen could build on the prior week’s broad losses if Japan reports a weaker than expected trade balance for January.
h2(Recent Key Releases).
Recent Key Releases
| Indicator | Actual | Forecast | Previous |
|---|---|---|---|
| AU Home Loans (Dec) | 2.3% | 2.0% | 1.8% |
| AU Westpac Consumer Confidence (Jan) | 4.2% | - | 2.4% |
| AU Unemployment Rate (Jan) | 5.1% | 5.3% | 5.2% |
| DE GDP (MoM) (Q4) | 1.5% | 2.0% | 2.6% |
| US PPI (MoM) (Jan) | 0.1% | 0.3% | -0.1% |
Upcoming Key Releases
| Date | Indicator | Forecast | Previous |
|---|---|---|---|
| Tues 21st | AU RBA’s Meeting Minutes | N/A | N/A |
| Tues 21st | CH Trade Balance (Jan) | 2.5B | 2.0B |
| Wed 22nd | AU Wage Price Index | 3.4% | 3.6% |
| Friday 24th | US Consumer Sentiment | 73 | - |
| Friday 24th | UK GDP (YoY) (Q4) | 0.8% | 0.5% |
