WeeklyOutlook Ending on 28thJanuary 2016
Dollargreenback on weekend, all eyes on Fed.
Thedollar rose on Friday as the new U.S. administration keeps up a busypace of meetings and actions with a Fed meeting next week expected toadd more for investors to chew on.Trump is expected to speak onSaturday with Russian President Vladimir Putin for the first timesince taking power a week ago and was asked if he would liftsanctions imposed on Russia by then-President Barack Obama overMoscow's annexation of Ukraine's Crimea Peninsula in 2014. Trumpdeclined to be drawn in, saying it was too early to tell, but May wasemphatic that any such action needed to be coordinated with Europeanallies who also imposed sanctions.The Fed releases its latest reviewof policy on Wednesday with the Fed Rate Monitor Tool fromInvesting.com showing a nearly 95% think the central bank will holdpat.Investors took note of U.S. Bureau of Economic Analysis figuresthat said gross domestic product grew 1.9% in the fourth quarter of2016, disappointing expectations for 2.2% and after a 3.5% growthrate in the three months to September. Separately, the Census Bureausaid U.S. durable goods orders fell 0.4% in December, compared toexpectations for a 2.6% gain. Core durable goods orders, whichexclude transportation items increased by 0.5% last month, in linewith expectations.Sentiment on the greenback improved after Trumpsuggested the implementation of a 20% tax on Mexican goods to pay fora border wall, sparking concerns of a possible trade war betweenMexico and the U.S. as Trump said a meeting to discuss a border walland trade ties with counterpart President Enrique Peña Nieto wouldnot happen as planned.
Eurowas neutral all over the week
EUROcontinues in neutral in all the sessions. The currency pair traded ina broad range between 1.10642 and 1.10812 before settling at 1.10806,up 0.0078 or 0.41% on the session. At session highs, the euro reachedits highest level versus the greenback since mid-October. For thequarter, the euro soared by more than 4.75% against its Americancounterpart, building steam over the last week amid extremely dovishindications from Janet Yellen on a delayed interest rate hike by theFederal Reserve. It marked the strongest three-month period for theeuro since the first quarter of 2011, when it jumped 5.8% against thedollar.On Friday, the second quarter will kick off with March'scritical U.S. jobs report, which could provide key insight into theFederal Open Market Committee's (FOMC) decision-making process whenit meets next in late-April. Earlier this week, Yellen noted that theU.S. economy has displayed remarkable resiliency as the labor marketcontinues to exhibit dramatic improvements. Analysts expect monthlynonfarm payrolls to increase by 210,000 for the month, while theunemployment rate remains steady at 4.9%. In February, U.S. non-farmpayrolls shot up by 240,000, pushing the three-month average above225,000.While the headline unemployment rate remained at eight-yearlows last month, economists were also encouraged by a 0.2% decline inU-6 unemployment, a broader gauge of the employment situationnationwide. The U-6 rate, which measures the level of workersmarginally attached to the labor markets and no longer activelylooking for a job, stood at 9.7% in February. By comparison, theFed's preferred gauge of U.S. unemployment, peaked at 18% in 2010 atthe end of the Financial Crisis. Analysts will also keep a close eyeon monthly wage gains after average hourly earnings slumped by 0.1% amonth earlier.
Poundtraded almost flat remains low
Thepound was off 0.25% at $1.2567 at 04:45 ET after hitting seven-weekhighs the previous session.May is expected to discuss bilateral tradearrangements with the U.S. as it prepares to exit the EU.Butobservers believe it would take time to hammer out any agreement ontrade.The U.K. economy has fared better than expected since the June23 vote to leave the EU.U.K. fourth-quarter annual GDP growth of 2.2%beat estimates.However, observers expect the U.K. economy to sufferthe effects of its divorce from the EU. Appearing alongside DavidCameron in Northern France after appearing at a ceremony tocommemorate the Battle of the Somme, Hollande remained adamant thatthe U.K. will have to face the consequences of the unexpecteddecision. In addition, Hollande urged leaders that a swift resolutionto the Brexit developments would help diminish the uncertainty thathas gripped the euro area over the last week. “Being in theEuropean Union has advantages. And that's what the British arestarting to understand," Hollande said. "Those who weretempted by the Brexit are starting to think it over…The faster itgoes, the better it will be for them. “Hollande’s comments cameone day after Bank of England governor Mark Carney noted that the BOEwill likely approve further easing measures at some point this summerto help safeguard the economy. Earlier this week, Cameron said hewould leave the task of whether to invoke Article 50 of the LisbonTreaty to his successor. Cameron is expected to step down bySeptember 2.
Goldlost against strong dollar settled in green on expectation of Fed.
Goldprices inched up in the U.S. Friday as a a U.S. Federal Reservemeeting and jobs data are slated next week and are expected to setthe tone, along with any comments from President Donald Trump. Goldfor February delivery on the Comex division of the New YorkMercantile Exchange gained 0.03% to $1.190.15 and on track to finishthe week down a bit more than 1%. Also on the Comex, silver futuresfor March delivery rose 1.79% to $17.152 a troy ounce and copperfutures gained 0.67% to $2.691 a pound. The Fed releases its latestreview of policy on Wednesday with the Fed Rate Monitor Tool fromInvesting. com showing a nearly 95% think the central bank will holdpat. Investors took note of U.S. Bureau of Economic Analysis figuresthat said gross domestic product grew 1.9% in the fourth quarter of2016, disappointing expectations for 2.2% and after a 3.5% growthrate in the three months to September. Separately, the Census Bureausaid U.S. durable goods orders fell 0.4% in December, compared toexpectations for a 2.6% gain. Core durable goods orders, whichexclude transportation items increased by 0.5% last month, in linewith expectations. Demand for gold weakened as sentiment on thegreenback improved after Trump suggested the implementation of a 20%tax on Mexican goods to pay for a border wall, sparking concerns of apossible trade war between Mexico and the U.S. as Trump said ameeting to discuss a border wall and trade ties with counterpartPresident Enrique Peña Nieto would not happen as planned.
CrudeOildoped lightly .
U.S.oil moved lower on Friday, as news of a rise in U.S. productiondampened demand as it was seen as curtailing recent efforts by theOrganization of the Petroleum Exporting Countries to reduce globaloutput. U.S. crude futures for March delivery were down 0.69% at$53.40 a barrel, off Thursday’s three-week highs of $54.06 abarrel. On the ICE Futures Exchange in London, the March Brentcontract tumbled 1.03% to trade at $55.66 a barrel.The U.S. EnergyInformation Administration said on Wednesday that crude supplies roseby 2.9 million barrels last week to 488.3 million barrels. The reportsparked concerns over the levels of global oil supplies as OPEC andnon-OPEC countries have made a strong start to lowering their oiloutput under the first such pact in more than a decade, energyministers said over the weekend as producers look to reduceoversupply and support prices.Ministers said that 1.5 million barrelsa day of the roughly 1.8 million in cuts pledged by OPEC and non-OPECcountries have already been taken out of the market.January 1 markedthe official start of the deal agreed by OPEC and non-OPEC membercountries such as Russia in November last year to reduce output byalmost 1.8 million barrels per day.If carried out as planned, thedeal should reduce global supply by about 2%..
Summaryof the week:
U.S.stocks and S&P 500 gained on weekend.
Itwas a good week for U.S. equities. Starting with the U.S. stocks; DowJones gains 275.28 points and 1.37%. Nasdaq Composite gain 1.92% andraise 109 point. S&P 500 up by 25 points and gained 1.09% for theweek.
Comingto European counterparts, UK’s FTSE 100 up by 46 points and 0.64%.German DAX 30 gains 284 points and 2.41%. Additionally French CAC 40up by 29 points and 0.59% on the weekly basis.
Note:Here all the currencies are measured in percentage against the U.S.dollar