Market Overview:
Markets closed the week relatively uneventfully with no significant data publishing to shift things around. Investors took on risk earlier with equities and commodity markets all making gains, but with Syrian Missile Strike the headline towards the end of the week markets turned to the safe haven as gold came off its low trading back at 1343. Heated trade discussions continued between the US and China with China aiming their efforts directly at US agriculture. Beijing has promised to retaliate with more tariffs aimed at the US agriculture sector which includes soy bean, which could have a massive detrimental effect on US farmers. Reports are that President Trump may be contemplating a move back into TPP (Trans Pacific Partnership). When US withdraw from the TPP this was damaging to US agriculture, but with the Chinese on the front foot with current trade negotiations this could spell total disaster for US farmers. The US, France and UK Fridaynight launched 105 missiles into Syria targeting chemical weapons facilities with reports suggesting to good effect taking out a select few. There are an estimated 50 warehouses in Syria which contain storage of chemical weapons after the 2013 Syria chemical weapons disarmament deal only partially dismantled existing stockpiles. So one would suspect that with the ease of creating further chemical weapons and the stash currently held, the job done by the US, France and UK is only partially completed. Interestingly President Trump never had authority from congress and Theresa May never consulted parliament prior to launching the air strikes. Nine FOMC members speak this week with US Core Retail Sales tomorrow which will give us clues as to further Dollar direction for 2018.
Australia
The Australian Dollar (AUD) made gains last week, even against the New Zealand Dollar (NZD), as it traded higher against its main rivals. Markets reached for safer investments heading into the close of the week as the Syrian Missile situation unfolded taking the Australian Dollar (AUD) off its lows across the board. The RBA’s financial stability review published with a strong bias saying global conditions have remained strong and the Australian economy remains poised. RBA monetary policy minutes is released in the past hour have had little impact. On Thursday we have employment data to digest.
New Zealand
The New Zealand Dollar (NZD) stayed positive over the week making it one of the strongest currencies in a market driven by risk sentiment. Earlier in the week the kiwi set new highs but was soon under pressure as markets sought safer style investments and sold NZD. Threats of Syrian Missile strikes by the US, France and UK governments dropped the kiwi back towards 0.7770 against the US Dollar. New Zealand Medal table at the conclusion to the Commonwealth Games looks like this. Gold 15, Silver 16, Bronze 15 with a total of 46 medals, edging out South Africa who finished on 37 finishing, 5th overall which is a mighty effort. Our most successful Commonwealth Games outside of the two held in New Zealand. I will miss the games on TV. The highlight of the games for me was seeing David Liti hoisting 229kg’s above his head in the 105kg plus weightlifting category to win the gold. The NZD this week will again be governed by offshore risks, we expect it to drift lower on the whole.
United States
The US Dollar (USD) was in the spotlight last week dominating currency moves. The US Dollar Index recovered from its near 3 week low of 89.38 to close out the week at 89.72. Rebounding on Syrian Missile attacks, markets took to the US Currency and other safe haven assets. Although the US Dollar made up gains later in the week it remained down on most the weekly open crosses. Post FOMC minutes US policy makers commented that raising rates would continue as forecast despite ongoing trade war signs. This week we have a busy week on the US Calendar with nine Fed members speaking around economic topics of importance which should reflect the tone of the Fed going forward and give the US further support. President Trump might get a slap on the hand this week when he fronts to congress for acting without their approval to release missiles into Syria, a move which has been well received by various markets as the right thing to do in support of earlier suspected chemical attacks on Douma. Crude oil inventory numbers publish Thursdaywith the number expected to be positive after last week’s 3.3M barrels.
Europe
The EURO (EUR) dropped in value against the US Dollar (USD) midway through last week on risk aversion linked to the Syrian airstrikes but recovered late Friday as concerns diminished and risk returned. Mondaysaw the EUR spike on the open back to its high of 1.2390 on US Dollar weakness. The Syria situation has ended up hurting the US Dollar as investors pulled the EURO (EUR) north during the European session. The Empire/NY Manufacturing index printed worse than expected at 15.8 as opposed to 19.8 putting the US Dollar (USD) under pressure. Further movement in the pair over the week will be mainly based around risk sentiment and US FOMC members speaking. There are nine speakers this week who will talk on a range of US and global economic issues. We think the EUR should keep its current momentum against the greenback and make a push for 1.2500 then 1.2550 the December 2014 high.
United Kingdom
It seems most market analysts are picking the Pound (GBP) to return to 1.50 against the greenback (USD), this level was last traded during Brexit 19 June 2016 where we saw the Pound travel to 1.5020 early during the voting before it sank to 1.3230 areas by the end of the trading day. Syria threats were quickly shrugged off Monday after UK, France and the US joined forces launching airstrikes into Syria, following reports of chemical attacks in Douma. Theresa May addressed the UK Parliament post strikes with Russia saying if there was another attack on Syria there would be global chaos. The focus this week is with the central banks with potential for a rate hike from the Bank of England (BoE) on the cards next week. This positive sentiment is giving the Pound (GBP) good momentum against the crosses. Currently against the USD Dollar (USD) the pair sits bang on resistance of 1.4340 the high from January 2018, a break through here would almost certainly climb to 1.4500. Unemployment rate prints tonight with yearly CPI tomorrow and Retail Sales Thursday. If these all publish above expectation we could see the 1.45 handle this week.
Japan
Investors purchased the US Dollar (USD) in favour of the Japanese Yen (JPY) late in the week pushing the price to a high or 107.75 in high volume trading conditions. As President Trump tweeted of possible airstrikes into Syria markets turned and bought the safer USD back to the 107.35 weekly close. Monetary policy head Eiji Maeda suggested the Bank of Japan (BoJ) may raise its interest rate targets before price growth reaches 2%, trade figures as well as yearly CPI Friday should give us clues with the Japanese Yen (JPY) still well supported from the late March low of 104.70.
Canada
The Canadian Dollar (CAD) has traded stronger on the back on stronger oil prices. Crude traded to a high of 67.70 Thursday before succumbing to risk off markets due to the Syrian Missile attacks on Syria. The Canadian Dollar has opened the week against the US Dollar (USD) around 1.2600 from its prior open at 1.2700. At one point the pair traded to a fresh 20th February 2018 low before punters bought back the US Dollar and sold equities, the DOW closing at 24360 after reaching 24650 during the risk squeeze. The bank of Canada (BoC) announce their cash rate this week on Thursday with no hike predicted remaining at 1.25% with the monetary statement to follow, monthly CPI also to publish.
Major Announcements last week:
• Syrian airstrikes put the US Dollar on the backfoot
• US Equities recover off lows
• Trump government rethinks re- entering TPP
• US University of Michigan prints at 97.8 compared to 100.6 expected
• Crude Oil stocks publishes at 3.3M Barrels over -.06M expected boosting CAD
• US Core PPI comes in at 0.3% with 0.1% expected