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One Financial weekly market report.

Transcript of One Financial 09:14

  • Weekly Sentiment Paper Distributed by: One FinancialFor the Week of: 09/07 through 09/13 Written by: Andrei Wogen


    Week in Review! 2

    Australian Dollar! 2

    New Zealand Dollar! 4

    Japanese Yen! 5

    China Renminbi; Onshore, Yuan! 7

    Euro Area: Euro! 8

    British Pound! 9

    Canadian Dollar! 11

    United States Dollar! 12

  • Week in Review

    Australian DollarOverall View Overall sentiment for the Australian Dollar now is neutral. A couple of reasons for this.

    First is the overall strength of the USD that is expected to continue and grow which of course, will cause its counterparts to fall. The second reason, which is even more important, has to do with the RBA. They are currently in neutral stance and seem comfortable with that at this point. Because of this data, general movements in other currencies and global asset moves is what is driving the AUD right now and this can and has changed on a week-to-week basis. In saying this, last week, not only did the USD strength pull the AUD lower, so did lower than expected consumer confidence numbers. Confidence in Australia has taken a hit as of late due budget

    China CPI lower than expected; easing expectations from the PBoC rise; PPI also falls RBNZ leaves rates expected; however it seems that they will be on hold for

    longer than previously expected Fresh sanctions on Russia though (via INTERFAXX) Russia says it will hold to the cease

    fire despite the new sanctions Australian employment change higher than expected.maybe too high especially after

    last months too high unemployment rate which this month came back down Scotland vote in focus; polls continue to show anything could happen during this weeks

    vote while the Pound continues to take a beating overall due to the uncertainty surrounding everything

    US Retail Sales come in as expected showing continued strength in the consumer Expectations continue to rise and increase that the Fed will raise rates after a report this

    week said that there is a chance the language will be changed in reference to how long rates will stay low after QE ends; changes expected during this weeks FOMC meeting

  • reasons and now it seems to be going lower again. So in light of current reality, sentiment remains neutral for the Aussie Dollar for now as the RBA remains in neutral territory and multiple factors continue to push the Aussie Dollar back and forth, though recently more forth (up) than back (down). Though I expect it to turn more to the negative side of the equation (neutral-negative) as the USD continues to gain leaving currencies like the Aussie Dollar who have been a benefit to the carry trade, vulnerable for the foreseeable future. Other driving factors that continue to drive the Aussie, includes high house prices, falling commodity prices, falling mining investment, a struggling consumer and employment sector as well as a struggle for the non-mining sector to gain decent traction.

    Last Week in Review Last weeks main drivers of the AUD was three-fold. First, as already talked about, is the

    continued strength of the USD. The second is the weak consumer confidence number. And the third was the rather (too) good employment data. The number of newly employed rose for the month of August but by a much larger amount than expected and previous. The unemployment rate, as expected, did fall, though once again more than expected. After last months higher unemployment rise due to a change in the data collection, this employment number to me looks fishy, and so did the market. Though the president of the company that issued the employment data did reassure investors that the data was solid and was redone a couple of times before the official release. However, the markets still didnt believe it enough as the Aussie, after initially rising, fell shortly after. Likely due to the uncertainty surrounding the numbers. Overall the AUD ended the week mixed to lower.

    The Week Ahead and Other Thoughts For the week ahead, there are few drivers of importance for the AUD. The biggest will be

    RBA meeting minutes but due to the current stance of the RBA, the minutes will most likely not show anything too different or exciting that the markets would really take a lot of notice of. Other minor data will be The RBA Bulletin on Wednesday and the RBAs Annual Report on Thursday. These two reports might garner some interest, particularly the former, but once again, not a big chance of the markets paying very much attention to these releases. So overall, I expect sentiment to be mixed for the week ahead for the AUD. Up versus the NZD and JPY and down versus the USD is what I expect will happen.

  • New Zealand DollarOverall ViewOverall sentiment for the New Zealand Dollar is neutral negative right now as the

    currency continues to be sold off. This sell-off right now is driven mainly by continued lower milk prices, a more neutral RBNZ that is happy to leave rates alone for now and due to continued improving fundamentals in the US which is causing the carry trade between the USD and NZD to be unwound in expectation of higher rates in the US. Other concerns are surfacing too which include some weakness in the real estate sector as house prices have begun to fall some. As for the milk prices again, the lower milk prices go the lower buying power farmers will have going forward which I expect will put a damper on consumer confidence and spending thereby lowering overall growth in New Zealand. However, beneath these worries there are bright spots which include overall robust growth, as seen by recent GDP numbers, rising immigration and a jobs sector that remains strong overall. Also New Zealands Manufacturing sector and Industrial sector remain strong overall according to the latest data while the consumer remains strong overall right now too as retail sales continue to be strong.

    Last Week in ReviewLast week the RBNZ was one of the main drivers of the Kiwi and only helped to push it

    lower. The bank left their interest rate at 3.5% as expected but did strike a more neutral tone in terms of when rates will begin to rise again. Expectations had been for the next rate hike to be in December or the very early part of next year, however RBNZ Gov. Wheeler mentioned that the markets see the next rate rise in April next year and said this twice during his news conference. To me that is a good indication that rates will not rise until then, at least and if inflation continues to remain below the Banks target, the next rate hike could come even later. However, as the Bank said, the next rate hike will depend on how inflation and growth performs going forward. Overall though, the RBNZ did sound overall upbeat on GDP and inflation going forward even going so far as upgrading their expectations of growth going forward. Other data for the week was Electronic Card Retail Sales which came in lower than previous, showing a weaker consumer and Business NZ PMI data which came in better than previous showing that business conditions in New Zealand continue to improve. Maybe this will mean higher wages are coming and therefore more spending power for that weak consumer? Overall though the NZD ended the week mixed to negative.

    The Week Ahead and Other Thoughts

  • This week the main driver of the Kiwi market (aside from the FOMC meeting and general elections in New Zealand) will be GDP data being released on Wednesday, which therefore comes shortly after the FOMC meeting minutes are released. But nonetheless the New Zealand GDP data will garner some interest. Any lower (combined with a hawkish Fed) and the move lower in the Kiwi will just be strengthened. Any higher than expected, there will likely be some good up moves in the NZD in some of its cross pairs (EUR/NZD, GBP/NZD, NZD/JPY). Overall though, the GDP number should come in pretty good The time frame being used to calculate the GDP number (April - June) should mean that the release will be pretty good as lower milk prices had only just started to take affect at the end of this time period. Also too, the construction boom was still going strong (stronger than it is now anyway). The one downside could be in exports as China continued to decline during this period and Australia continue to struggle as well. Other data, industrial production, manufacturing PMI data and employment data were all upbeat overall during this time period and should therefore help to support overall growth. However, in my opinion, what will matter is what growth does going forward, especially in light of what the RBNZ had to say during last weeks rate decision. Therefore, the market reaction to this number could be muted some as the markets will be looking to the future now more than before for the New Zealand markets. The other big event this week will be general elections occurring in New Zealand. Although the vote in Scotland will get much more press than what is happening in New Zealand, the elections in New Zealand will still be important. The overall growth in New Zealand has been, in part, helped by the current government and the current government is being threatened right now in the polls. Though expectations are that the incumbent party will still win, the results could be close and could force the current government to have to form partnerships with some of their rivals in order to do anything in terms of law making and such during their upcoming term.if the win. Other minor data will be Current Account data for Q2 on Tuesday and Visitor Arrivals on Thursday.

    Japanese Yen Overall View

    Sentiment for the Japanese Yen continues to be Neutral to Ne