Weekly Market Update 15.02.2016
GBPUSD: GBPUSD spent the past week fluctuating in a tight range directly under 1.4500 and around the key 1.4500 level. This consolidation has occurred after the currency pair spent late January and early February bouncing from its multi-year lows above 1.4000. While critically-lowered expectations of a US Federal Reserve rate hike in the foreseeable future may have placed the dollar under a great deal of pressure, the Bank of England (BoE) is arguably even more dovish when it comes to rate hikes. The monetary policy committee vote to keep rates unchanged was unanimous, and was accompanied by lower forecasts for inflation, economic growth, and wages. If the BoE consistently maintains an even more dovish stance than the Fed, it would be a clear bearish signal for the currency pair. Sustained trading below the 1.4500 level could prompt a further drop to begin targeting the 1.4250 level.
USDCAD: USDCAD consolidated in a tight range this past week after having made a modest bounce from its recent lows. A continued drop in oil prices for most of this past week, which weighed on the oil-correlated Canadian dollar, helped USDCAD rise off those lows. US dollar weakness in the midst of diminishing Fed rate hike expectations, however, limited this rise. While USDCAD has, since mid-January, been mostly entrenched within a sharp pullback from multi-year highs around 1.4600 resistance, the hammer candle in early February that reached down to a new year-to-date low of 1.3638 prompted a pivot back to the upside. In the longer term, the currency pair continues to trade within a strong bullish trend, despite the noted pullback in late January and early February. With the prospect of a successful oil output deal somewhat difficult to imagine given strong underlying differences among major oil-producing nations, continued weakness in crude could be one of the catalysts that potentially propels USDCAD to new highs. In the short term, the key 1.4000 resistance level continues to be the major level to watch. With any sustained breakout above 1.4000, the currency pair could be on track once again to target 1.4200 resistance level.
UPCOMING KEY MARKET EVENTS
|Date / Time||Currency||Event||Previous|
|16 Feb/0030||AUD||RBA Meeting's Minutes|
|17 Feb/1900||USD||FOMC Minutes|
|18 Feb/0030||AUD||Employment Change s.a. (Jan)||-1K|
|18 Feb/1230||EUR||ECB Monetary Policy Meeting Accounts||0.3%|
|19 Feb/1330||CAD||Consumer Price Index (YoY) (Jan)||1.6%|
Time : GMT (Source: Fab Trader Platform)
Fixed Deposit Rates (USD)
|Tier||30 Days||90 Days||180 Days||360 Days|
|1 Million and above||2.50||3.00||3.50||4.00|
(Source: Fab Treasury)
Fixed Deposit Rates (EUR & GBP)
|Currency||30 Days||90 Days||180 Days||360 Days|
(Source: Fab Treasury)
Market Rates (from 5th - 11th October)
(Source: Fab Trader Platform & exchange-rates.org)
Metals and Stocks (from 5th - 11th October)
(Source: Fab Trader Platform)
Fed's 'dot plot' looks increasingly out of touch on rates
The Federal Reserve's rate path "dot plot" has become increasingly detached from financial markets' interest-rate projections and risks sending an overly hawkish message that may undermine the central bank's credibility.
Despite falling inflation expectations and turmoil in financial markets this week as concerns about growth mounted, the Fed hewed to its message that it could build on December's rate rise with further hikes in 2016. Quite how many rises is unclear, and there is just one tool economists can use to get an idea: a chart in the Fed's quarterly "Summary of Economic Projections" known colloquially as the dot plot. The chart shows individual Federal Reserve rate setters' expectations, although they are not identified by name.
Both Fed Chair Janet Yellen and New York Fed Chief William Dudley suggested this week that rate rises were still on the cards, pointing to the underlying health of the U.S. economy. Neither referred directly to the "dot plot" that envisages four rate hikes this year, versus market pricing of a one in three chance of even a single rate rise this year. Fed officials say that while the dots, issued every quarter, do not represent a rate path per se, they can be used to manage expectations……
Fed officials have had to regularly ratchet down their dot-plot forecasts since they began publishing them four years ago. At the time the Fed said the publication of individual rate forecasts would give markets a better idea of where the Fed was heading. Economists say it was a useful signaling tool to reinforce the bank's commitment to zero rates. Prior to Yellen's appearance this week in Congress, she had not spoken since signing off on the December rate rise. She has no listed speaking engagements until the March Federal Open Markets Committee meeting - a gathering the Fed had wanted to keep on the cards for a potential rate rise. (Source: reuters.com)
Oil edges down, pares Friday's jump of over 10 percent
Brent and U.S. crude futures edged down on Monday as a strong dollar weighed on prices, paring gains from a more than 10-percent jump late last week that came amid renewed talk that OPEC might finally agree to cut output to reduce a world glut. The mood inside the Organization of the Petroleum Exporting Countries (OPEC) is shifting from mistrust to a growing consensus that a decision must be reached on how to end the global oil price rout, Nigeria's oil minister said, adding he will have talks with his Saudi and Qatari counterparts.
London Brent crude for April delivery LCOc1 was down 45 cents at $32.91 a barrel by 00:32 GMT (7 p.m. ET on Sunday). It jumped $3.30 on Friday after the United Arab Emirates' energy minister was quoted as saying that OPEC members are ready to cooperate on an output cut.
The U.S. dollar rose from a 15-month low against the yen and also gained against the euro on Monday helped by a bounce in U.S. consumer spending last month. "The dollar's strength is contributing to slight declines in Brent and U.S. crude," said Kaname Gokon at brokerage Okato Shoji in Tokyo. "But the market may not move much today due to the U.S. holiday." Iran will load 4 million barrels of crude oil on tankers destined for Europe in the coming 24 hours, a senior official was quoted as saying on Saturday, including 2 million barrels to be bought by France's Total. (Source: reuters.com)
Oil's Drop Puts Pressure on Algeria's Government
Chinese shares fell more than 1 percent on Monday as trading resumed after the Lunar New Year break and investors caught up with wild swings in global markets, while Beijing took another swipe at currency devaluation talk with a strong fix for the yuan. The Shanghai Composite Index .SSEC was down 1.6 percent after its first morning's trade since Feb. 5, while the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen was down 1.4 percent. The moves were relatively modest, given Japan's Nikkei .N225 alone sank 11 percent last week, though the Chinese indexes have had a more brutal 2016, losing about 22 percent and 12 trillion yuan ($1.84 trillion) in market value so far.
"Today's investor sentiment in China is damped by last week's global equity sell-off," said Zeng Yan, strategist at Zhongtai Securities Co. Zeng said the impact could be temporary, however, as last week's global sell-off was mainly driven by falling commodity prices and concerns about the impact on European banks. (Source: reuters.com)