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

Email: finance.wogen@gmail.com

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 along...as 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 Negative and now with the Ukraine crisis seeming to be abating again, the negative side is showing more. The main drivers of this sentiment right now include a weakening domestic economy, risk-on moves as geopolitical risks fade a bit and expectations of further easing going forward by the BoJ as well as due to better developments in other regions of the world, namely the US. Other things

driving the neutral side of sentiment include a fairly neutral and optimistic BoJ that continues to see growth improving in Japan going forward. But the negatives still weigh overall including weak overall growth, as seen by recent dismal GDP numbers, a weakening consumer as well as a struggling Services sector and weak industrial production. So overall the story is pretty bleak for Japan and expectations from the market for Japan going forward are not very good either.

Last Week in ReviewLast week continued to be a dismal one for the Yen and Japan as data continued to come

in lower than expected and continued to show weakness in the Japanese economy. Second quarter GDP was revised down on an annualized basis and quarter-over-quarter basis. Other data that was weak was the Trade Balance data, Eco Watchers survey numbers, Consumer Confidence, Machine Tool orders, Machinery orders m/m, industrial production, and capacity utilization. All these aforesaid numbers where either worse than expected or worse than previous or both. Overall then a dismal week for Japan. The one (sort of) bright spot was Machinery Orders on a year-over-year basis which came in better than expected and previous but even this does nothing to change the overall picture. As for events during the week in Japan, the only notable event was BoJ governor Kuroda speaking. Overall his message was the same as it has been saying that the BoJ has the tools to ease further (a big ol printer) but that they dont want to ease further at this point (printer is broke or something). Overall then, the picture looks bleak for Japan and few to no one is expecting things to improve dramatically and promisingly anytime time soon.

The Week Ahead and Other ThoughtsData this week is not as full as last week but still a few somewhat important numbers for

the markets to chew on. The most important data will be export and import numbers (especially after the recent weakness in exports) on Wednesday and Machine Tool orders on Thursday. Other data will be All Industry Activity Index numbers on Thursday, Coincident Index and Leading Economic Index data on Friday. Also BoJs Kuroda will be speaking on Tuesday at a news conference and then again on Thursday at a convention. The first speaking engagement might get some attention, depending on what he says, but overall I am not expecting any fireworks and both these speeches will most likely be non-events. Overall then, I expect the Yen to continue to have negative sentiment and to have this sentiment through at least the end of the year at current levels and then to increase shortly before or after the end of this year as the BoJ finally pulls the trigger and eases further.

China Renminbi; Onshore, Yuan Overall View

Since the Yuan is controlled by the PBoC at this point in time, it is easier to talk about the sentiment surrounding China as a whole. So as for the country, sentiment is currently negative-neutral. Main drivers of this negative sentiment continue to be an overall weak economy, as seen recently in manufacturing and services PMI data, lower house prices, and overall slower growth as China implements reforms to move the country to a more market-orientated one. As for the neutral side, the main driver of this sentiment is current expectations of further easing by the Chinese govt and PBoC in light of recent weak economic data. Other concerns adding to the negative sentiment include a frothy real estate market, despite prices going lower recently and due to a loan industry that is getting out of hand somewhat, especially in the shadow banking industry (though this has been reigned in some recently) as well as now even lower and continued falling inflation.

Last Week in ReviewLast week, CPI data for the month of August came in lower than expected by 0.2 points of

a percent. Inflation now sits at the 2% mark, far below the PBoCs 4% target. With this lower inflation, the question has to be asked, why hasnt the PBoC done something, anything, to ease policy further in order to avoid a further decline in inflation? As for the answer, I personally have no good ones but expectations continue to build that the Bank will soon ease policy further, many think by once again cutting the RRR rate for banks rather than cutting its main interest rate altogether. A cut in the RRR rate would affect the banks lending capabilities but whether or not the banks would actually lend more is the question. They have been reigning in their risk as of late with even the shadow banking industry issuing less loans lately and so just because the PBoC cuts the RRR rate to unleash more liquidity into the system, doesnt mean necessarily that the Banks will respond as such. Other data for the week was Money supply which fell for the month of August and New Loans data came in a bit better than expected and a lot more than previous, but still weak overall as weak domestic demand is helping to slow loan demand. Exports and Imports data was also released last week which showed that exports rose while imports fell, pretty much showing everybody what we already knew: domestic China is slowing while outside of China things continue to pick up, particularly in the US. Also, over the weekend, Industrial Production and Retail Sales numbers came in weaker than expected once again showing both a weakening consumer and a struggling overall economy.

The Week Ahead and Other Thoughts: This week, there is little data on the agenda and so focus will be on expectations for further easing by the PBoC. Stocks have been rising in China lately as anticipation for this easing grows. But time will only tell if the PBoC will actually ease further. Other minor data will be FDI numbers for the month of August, MNI Business Sentiment numbers and House price data. The House price data could get some attention especially if the data comes in much weaker than previous. House prices have been getting weaker as of late and are not in negative territory yet but they are getting closer.

Euro Area: Euro Overall View

Sentiment for the Euro is currently and fully negative. The main driving themes of this negative sentiment are a dovish ECB that has now eased policy further during their last meeting, weak Euro Zone growth overall and continuing falling inflation. Other themes in the background that continue to feed that negative sentiment include high unemployment, weak political structures, weak consumption, weak loan growth, high debt-to-GDP and weak business investment which has led to, in part, that high unemployment already mentioned. Another thing that is helping to feed this negative sentiment are the current sanctions put against Russia in light of their involvement in the conflict continuing in Ukraine have caused and are expected to continue to cause weak growth across the Euro Zone. Overall then the picture is quite bleak.

Last Week in Review Last week there was not a whole lot of important data for the market to pay attention to

and so the Euro did get a bit of a bounce especially versus the AUD and NZD while versus the USD it was pretty neutral. Data wasnt too bad overall. German trade balance came in better than expected with exports rising though imports falling again (due to more weakened domestic demand), France Industrial output came in better than expected, CPI in Portugal, France, Spain and Greece came in above expectations for some of the numbers while overall CPI data was good and Euro Zone industrial production came in better than expected. Overall

though, movements continue to be driven by recent ECB actions and USD strength. A lot of expectations for more downside movements in the Euro versus the USD especially. Versus other pairs I expect the Euro to be moved around more by the Euros counterparts in the cross pairs.

The Week Ahead and Other ThoughtsWednesdays CPI data will be the most important piece of data for the Euro this week. If

the CPI data from last week from some of the member countries in the Euro Zone are any indication, I would say there is some upside risk to this months inflation data. If that is the case, that CPI comes in stronger than previous and/or expected, I would expect there to be a bounce in the Euro though this bounce could be limited especially versus the USD depending on what the Fed has to say on Wednesday. Other data of interest will be German and Euro Zone ZEW sentiment numbers for September on Tuesday, which still has some downside risk in my opinion, and Euro Zone Trade balance data on Monday. Overall then I expect the negative overall sentiment to continue for the foreseeable future but to be weakened some this week, minus what happens with the Fed on Wednesday. However, in my opinion, there may be something even more important that will take the markets attention away from whatever the ECB is doing and that is based on what is happening right now is Scotland. With the vote for independence happening this week in Scotland, other regions of the world will be watching this very closely to see how things play out. One area of interest, and one that relates to the Euro Zone very much so, is Catalonia in Spain. Basically, Catalonia is an autonomous community of Spain that has been desiring complete independence from Spain over the past several years and more. However, the government of Spain does not recognize Catalonia as a sovereign nation. Support continues to rise for complete independence in Catalonia and if Scotland does gain independence from the UK, you can bet that Catalonia will make a push next for independence. And even if Scotland does not remove from the UK, the vote will likely be so close that the possibility for independence down the road will still be large enough that Catalonia (and other regions) will still be encouraged to vie for independence. So this is definitely something to watch. Geopolitical events may be one of if not the main driver of the markets going forward for quite some time going forward.

British Pound Main Longer-Term Themes

Current sentiment of the British Pound is neutral-negative. Recent weaker domestic data, falling inflation, and worries about the results surrounding the Scottish referendum have all

taken its toll on the Pound as of late. The main driver right now being the Scottish Referendum vote. Other things that have helped contribute to this negative tone towards the Pound include weaker retail sales but more importantly expectations of rate hikes and when they will come from the BoE being pushed back some. However, on the neutral side (and even more positive side) the overall economy continues to grow robustly which includes the jobs sector as well as the manufacturing and services sectors. Overall then things are fairly good domestically, but right now with worries about this referendum coming up in Scotland, the Pound will continue to be whipsawed by that. A vote removing Scotland from the UK would be Pound negative while a vote for Scotland to stay in the UK would likely cause the Pound to rebound again and maybe go inline again with the overall good fundamentals that the UK has right now though the vote has to be strongly in favor of staying in the UK for a very decent bounce in the Pound. If the vote comes out as it was in the polls at the end of last week, then the final vote will be close and if Scotland stays in the UK on a close vote, the risks will still be great for another vote not too far down the road thereby keeping a lid on any sort of bounce in the Pound.

Last Week in ReviewThe big event last week was the Scottish Independence vote. Polls by the end of the week

showed overall that the vote for independence was losing some ground but it was still tight overall. The ramifications of Scotland leaving the UK are big in themselves, but as I talked about a little bit in the previous Euro section, the effects could be more far reaching then just the within the UK and England and Scotland itself. At this point though, talking about the effects such an event would have on Scotland, there have already been several big companies that have said they will move their main operations to England in the event that Scotland leaves the UK. This includes RBS (Royal Bank of Scotland) which has been in Scotland since the 1700s. Other concerns and issues would the question of who would be Scotlands lender of last resort in the event that something big financially happens in Scotland (defaults, etc.). At this point the BoE is the lender of last resort for the UK but since the union would not continue if Scotland were to leave the UK, this would be a problem for the country. Other concerns of course would be business and consumer demand and growth as well as what the country would do for a currency since England (the BoE in particular) does not want to share a currency. So with the many problems and uncertainties surrounding this vote this week, the Pound has been taking a pounding (no pun intended). Other data for the week was mixed with House prices continuing to decline, BRC Retail sales data coming in better than expected, industrial production and manufacturing data both coming in better than expected. Trade balance data and RICS housing price balance were a couple more pieces of data that came in below expectations. During inflation report hearings this week, BoE members (including Gov. Carney) were neutral on rates saying that they would need to see how things perform in the economy going forward some more before making the decision to raise rates. This includes the Scotland vote and how that will effect things in the UK.

The Week Ahead and Other ThoughtsThe key event this week will be the Scottish independence vote on Thursday. Even with

the BoE Meeting minutes and CPI data being released, these things will pale in comparison to the vote in Scotland. Based on what we have heard lately, the BoE is fine with keeping rates as they are and with the risk of Scotland voting itself out of the UK the risk for any more dissents or any sort of changes in the minutes are low in my opinion. The other piece of data of importance will be CPI data on Tuesday. A higher number should increase rate hike expectations from the BoE and it likely will but once again, in my opinion, the market is solely focused on what will happen in Scotland. Other data for the week will be Rightmove House price data on Sunday, PPI and Retail Price Index on Tuesday, Employment numbers and wage growth data on Wednesday and Retail Sales on Thursday. Wage growth data on Wednesday will also likely get some attention as the BoE has been concerned with this. But as I have been banging on about, the Scotland independence vote on Thursday will be the biggie. The first results of the vote will be released at around 2am local Scotland time with the rest of the results trickling in throughout the hours after. It could take the whole day before the vote count is finalized and if the final vote is as close or closer to what the polls are showing right now, there could very well be calls for a recount thereby delaying the final decision.

Canadian Dollar Overall View

Overall the current sentiment for the Canadian Dollar is neutral. It is pretty much a tale of two cities for Canada right now. On the one hand you have the fundamentals which have been doing alright lately. Inflation and GDP have both risen lately, manufacturing and industrial production have been increasing lately and retail sales have continued to be overall strong showing decent demand from the consumer. Also, most recent data showing business and consumer confidence have been both rising based on the most current reading of both. House prices also continue to rise which is a concern by some. On the other side of the equation though is the BoC which continues to strike a pretty neutral to dovish tone. Their assessment of the improvement in inflation as of late for example, is to them, just noise. The one bright spot in their assessment though is in their assessment of the US economy which has a direct impact on Canadas. So because the US economy is doing well, the BoC expects the Canadian economy will soon follow. The other negative part of the Canadian economy continues to be its

employment sector. Overall then things are mixed for Canada and why CAD sentiment is also neutral.

Last Week in Review Last week the data was small in number and in market reaction. Building Permits rose for

July, being underpinned by low interest rates. Housing Starts came in lower than expected and New Housing index numbers were weaker than expected on a month-to-month basis which could be the start of a new trend lower in prices of new homes. Overall then, things did not change for the Canadian Dollar and nothing will until the BoC changes its course on rates and rhetoric. The CAD also ended mixed to lower as events in other regions pushed the currency around during the week.

The Week Ahead and Other ThoughtsFor this week, inflation data on Friday will be a key release for the Canadian Dollar.

Recently, inflation has been rising but the BoC has just shrugged this off as being just noise. Any more increase in the inflation rate and the BoC will have to face facts which would likely mean a change in their language towards inflation and growth overall. Another thing of interest will be a speech and the press conference by BoC Gov. Poloz. He will be speaking at the Economic Development Society conference and then holding a press conference about ninety minutes after that. This could gain some interest depending on what he says though I expect there to be no surprises. Overall then I expect the current sentiment to stay the same for the foreseeable future.

United States Dollar Overall View

The overall sentiment for the USD right now is neutral to positive. The things driving the positive sentiment include an overall strong and improving US economy, steady inflation that is very close to the Feds target, expectations that the Fed will raise rates soon, a slowly tightening Fed that is currently getting out of their QE program, and deteriorating fundamentals in other major economies including Japan and the Euro Zone. As for the economy, this continues to improve as services PMI data, manufacturing PMI data, retail sales data and consumer sentiment all continue to increase and improve overall. The main thing that is driving the neutral sentiment is a housing market that is currently slowing some in price and activity.

Overall though things are quite positive for the USD right now and as the economy continues to improve, expectations continue to rise that the US Fed will raise rates soon.

Last Week in ReviewLast week data was thinner with the only important piece of data being retail sales data

which came in as expected overall while the previous months reading was revised higher. Overall then, the consumer continues to look strong in the US. The other key data was UoM consumer sentiment data which came in higher than expected. Initial Jobless claims was the bleak spot for data last week as new claims came in a good amount higher that expected. However since the last few months have shown much improvement in the jobs market there was bound to be a pullback at some point, much like the NFP number the week before. Other positive data was NFIB Business Optimism index and business inventories, with the latter coming as expected.

The Week Ahead and Other ThoughtsThe FOMC meeting is the big event this week. Expectations have been rising that the Fed

will raise rates soon and that this meeting in particular, that there will be a change in the language as to when rates would begin to be raised. This comes after a report last week which reported that the phrase considerable time would be removed in reference to how long rates would remain low after the end of QE. So in response to this and other things recently (mainly the continuing improving US economy) the US Dollar continued to climb overall for the week, especially versus the Yen. Also this week we will get CPI data on Wednesday as well. Inflation has been steady overall and the markets have been happy with that. Other data for the week will be Industrial Production and Capacity Utilization on Monday, PPI on Tuesday and then Housing Starts, Building Permits, and Initial Jobless claims all on Thursday. The housing data will be of interest after recent data has shown a possible slowdown in the US housing market at a time when the Fed would rather not see this happening as they get closer to raising rates. Overall though I expect the overall sentiment of the US Dollar (positive to neutral) to continue overall for the foreseeable future especially as the Fed starts to hike rates. The US Dollar is likely beginning on a multi-year trend and this will be driven mainly by the Fed. As for the week ahead, sentiment will be driven by the Fed meeting. Overall, if the Fed does remove that phrase from its statement and sounds more hawkish overall I expect the recent rise in the US Dollar to be reinforced. However, with expectations so high, if the Fed does nothing in terms of sounding more hawkish, I expect a pull-back in the USD and one that could last for a bit after the recent buildup in the USD longs. But overall, the trend for the US Dollar is up as overall sentiment will continue to be positive and it will always have setbacks and this week could be one of those setbacks.