Welcome to the Weekly Commentary

EUR/USD EUR/USD gained marginally last week as economic numbers indicated the EZ had fallen back into recession and the FOMC Meeting Minutes showed members “favored the use of economic variables, in place of or in conjunction with a calendar date”. The week began with the rate consolidating at a slightly lower level after the Eurogroup Meeting failed to reach an agreement on the next tranche of Greece’s bailout.  The pair continued lower on Tuesday, making its weekly low of 1.2660 after German ZEW Economic Sentiment unexpectedly dropped to -15.7, versus an expected reading of -9.9. EZ ZEW Economic Sentiment also declined, showing a reading of -2.6, versus +0.2 expected. The rate then reversed direction on Wednesday after EZ Finance Ministers decided to grant Greece another two years to lower its deficit to 2% of GDP. In eco numbers, U.S. Core Retail Sales came out with a flat reading m/m versus an expected increase of +0.2%, and Retail Sales, dropping by -0.2%, versus an expected increase of +0.2%. Also supporting the rate was U.S. PPI, declining by -0.2% m/m, versus an expected rise of +0.2%; and the FOMC Meeting Minutes, with members deciding to implement further asset purchases after Operation Twist ends in December and replacing the calendar language to numerical thresholds.  The pair then made its weekly high of 1.2801 on Thursday as U.S. Initial Jobless Claims rose to 439K, significantly higher than the 372K that was expected. Also out was U.S. Core CPI, rising +0.2% m/m and EZ Flash GDP, which declined by -0.1% q/q, versus -0.2% expected indicating the Eurozone has fallen back into a recession. The rate then declined on Friday after Deutsche Bundesbank head Jens Weidmann said that the ECB’s bond purchases could weaken member states reform efforts. EUR/USD went on to close at 1.2741, with an overall gain of +0.3% from its previous weekly close.

USD/JPY USD/JPY gained sharply last week as Japanese PM Noda dissolved the lower house of Parliament, triggering an election for a new PM in December. The rate began the week on a positive note, rising marginally after Japanese Preliminary GDP declined -0.9% q/q, versus an expected drop of -0.8%, while Japanese Tertiary Industry Activity rose +0.3% versus an expected flat reading. Also supporting the rate were comments by BOJ Governor Masaaki Shirakawa, stating, “Exports and output are likely to remain weak, and domestic demand won't increase enough to make up for the weakness in exports,” On Tuesday, the pair made its weekly low of  79.20 as Japanese Revised Industrial Production declined -4.1% m/m as widely anticipated. The rate then strengthened on Wednesday as Japanese PM Noda gave indications that he would dissolve the lower house of parliament on November 16^th, triggering an election for December if the opposing party agreed to pass electoral reforms.  Polls indicated that the Liberal Democratic Party would likely win with former PM Shinzo Abe becoming the new PM. The pair continued gaining strength on Thursday, making its weekly high of 81.45 as Abe called to raise the Japanese inflation target to 3% from its current 1%. The pair continued higher on Friday as asset flows continued favouring the U.S. Dollar bringing USD/JPY to close at 81.30, with an overall gain of +2.2% for the week.

GBP/USD GBP/USD declined fractionally last week as the BOE downgraded UK economic forecasts and delivered a dovish inflation report. The week began on a soft note, with the rate declining marginally in the absence of any significant economic data out of either country. Cable then made its weekly high of 1.5914 after UK CPI increased to 2.7% from 2.2%, with a consensus of 2.3%. Also out were UK PPI Input, with an increase of +0.4% m/m, versus a decline of -0.4% expected and RPI, which gained +3.2% y/y, versus +2.9% expected. On Wednesday, the pair sold off after the UK Inflation Report, which credited the rise in CPI in part to higher University Tuitions, the Report stated, “The subdued recovery reflects a judgement that the global environment will remain unfavourable. In addition, the Committee believes that the effective supply capacity of the economy is likely to continue to grow slowly over the forecast period.” Also, UK Claimant Count Change rose to 10.1K, versus a decline of -0.5% that was expected; nevertheless the UK Unemployment Rate fell to 7.8% from 7.9%.  Cable then strengthened on Thursday after making its weekly low of 1.5825 as U.S. Initial Jobless Claims rose unexpectedly and despite UK Retail Sales declining -0.8% m/m, versus -0.1% expected. The rate continued higher on Friday as the United States reported weaker than expected economic data, closing the week at 1.5878, with an overall decline of -0.1%.

AUD/USD

USD/CAD USD/CAD showed little change last week as the United States reported mostly lower than expected economic data and Canada had very few economic releases. The week began with the rate making its weekly low of 0.9984 on Monday in the absence of any significant releases out of either country. The pair then gained some ground on Tuesday despite the United States reporting a larger than expected Federal Budget deficit. On Wednesday, the rate continued higher as the FOMC gave indications that it would continue its QE III program after the end of Operation Twist in December. Thursday saw the rate reverse direction, trading lower after Canadian Manufacturing Sales increased +0.4% m/m, versus +0.3% expected and U.S. Initial Jobless Claims came out higher than expected. The pair then made its weekly high of 1.0056 on Friday before selling off on position squaring, which brought USD/CAD to close at 1.0011, with a loss of only 3 pips and virtually unchanged on the week.

NZD/USD  
NZD/USD lost fractionally last week as the United States reported weaker than expected economic data and with very few economic releases from New Zealand. The week began with the rate rising in the absence of any significant economic releases out of either country. The pair then reversed direction, trading lower after making its weekly high of 0.8201 on Tuesday after New Zealand Core Retail Sales declined -0.3% q/q, versus an expected increase of +0.6%, and NZ Retail Sales, which dropped -0.4% q/q, versus an expected rise of +0.4%. The pair then dropped sharply on Wednesday despite the United States reporting lower than expected economic numbers. On Thursday, the pair consolidated at a slightly lower level as U.S. numbers continued mixed with a large increase in Initial Jobless Claims. The pair then gained ground on Friday after making its weekly low of 0.8050 bringing NZD/USD to close the week at 0.8124, showing an overall loss of -0.2% for the week.