Welcome to the Weekly Commentary

EUR/USD EUR/USD reversed direction last week, trading higher after Eurozone leaders met at the EU summit in Brussels reaching several agreements. The week began on a soft note with the rate declining as the newly formed Greek coalition government announced it would be asking for an extension of two years for its schedule of austerity measures in addition to other terms. Economic data on Monday had U.S. New Home Sales increase to 369K, versus an expected 347K. The rate continued heading south on Tuesday after an auction of Spanish bills saw yields triple from a similar auction in May. Eco-data for Tuesday had German Gfk Consumer Climate print at 5.8 as widely expected, while the U.S. CB Consumer Confidence index came out at 62.0, versus an expected 63.8 print. On Wednesday, the pair continued its decline as German Preliminary CPI declined by -0.1% m/m, versus an expected flat reading. In U.S. numbers, Core Durable Goods Orders rose by +0.4% m/m, versus an expected +0.9% increase, while Durable Goods Orders increased +1.1% m/m, versus +0.5% expected.  Also out were Pending Home Sales, which increased +5.9% m/m, versus an expected increase of +1.2%. The rate then made its weekly low of 1.2407 on Thursday as EU leaders met in Brussels to promote fiscal union. German Chancellor Angela Merkel stated that, "I fear that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures," she continued, "Oversight and liability have to go hand in hand. There can only be joint liability when adequate oversight is ensured." Economic data for Thursday included U.S. Final GDP, which rose by +1.9% q/q as widely anticipated, and German Unemployment Change rising to 7K, versus an expected rise of only 4K. The rate then rose sharply on Friday, making its weekly high of 1.2692 after leaders at the EU summit agreed to establish a single mechanism involving the ECB that would allow for the Spanish banking system to be financed through the EFSF, later to be replaced by the ESM. Friday's economic data had German Retail Sales decline by -0.3% m/m, versus an expected increase of +0.1%, and the EZ M3 Money Supply, which increased by +0.4% y/y, versus an expected flat reading. EUR/USD went on to close at 1.2659, showing an overall gain of +0.9% from its previous weekly close.

USD/JPY USD/JPY lost ground last week as the Japanese parliament passed a bill doubling the consumption tax and as Japan reported better than expected economic data. The week began with the rate trading off of its weekly high of 80.61 on Monday as the Japanese Finance Ministry announced it was considering direct bi-lateral trading with China using the Yuan and the Yen for transactions. The rate extended its losses on Tuesday after the Japanese parliament voted 363-96 to double the consumption tax within three years; nevertheless, the bill still needs to be passed by the upper house to become law. On Wednesday, the pair consolidated at a slightly higher level after the United States reported higher Pending Home Sales and mixed Durable Goods Orders. The rate then declined on Thursday as Japanese Retail Sales increased by +3.6% y/y, versus a +3.1% increase expected.  The pair then made its weekly low of 79.13 after Tokyo Household Spending increased by +4.0% y/y, versus +2.5% that was expected, and Tokyo Core CPI, which declined by -0.6% y/y, versus -0.7% expected. Also out was Japanese Preliminary Industrial Production, which declined by -3.1% m/m, versus -2.7% expected. USD/JPY went on to close the week at 79.78, showing an overall decline of -0.8%.

GBP/USD GBP/USD traded higher last week due in part by risk assets in general gaining against the Greenback and expectations of further easing by the BOE. The week began with Cable dropping after a positive U.S. New Home Sales number. The rate then jumped on Tuesday after comments by BOE Governor King addressing parliament during Inflation Report hearings where he alluded to the bank implementing "very loose monetary policy" and that, "Having one overall supervisory authority that didn't feel it had a strong political commitment to banks, but instead the stability of the financial system as a whole, might be better from our point of view. Personally I would find that a bit of a relief." Tuesday's eco-data had UK Public Sector Net Borrowing drop to 15.6B versus 13.6B expected.  On Wednesday, Cable reversed direction trading lower after UK BBA Mortgage Approvals dropped to 30.2K, versus 32.8K expected, and UK CBI Realized Sales, which increased to 42, significantly higher than the 12 print expected. The rate continued weaker on Thursday, making its weekly low of 1.5484 as UK Final GDP came out showing a decline of -0.3% q/q as widely anticipated, while UK Nationwide HPI declined by -0.6% m/m, versus an expected rise of +0.3%, and the UK Current Account which widened to a deficit of -11.2B versus -8.9B expected. Cable then shot up on Friday, making its weekly high of 1.5714 as UK GfK Consumer Confidence came out at -29, versus a -30 expected print and statements by BOE Governor King where he said, "We need to put it right… both the culture and structure... from excessive levels of compensation to shoddy treatment of customers to the deceitful manipulation of one of most important interest rates. The future calculation of Libor on 'my word is my libor' is now dead."  GBP/USD went on to close the week at 1.5702, showing an overall gain of +0.8% from its previous weekly close.

AUD/USD AUD/USD rose sharply last week with risk assets in demand after the EU summit provided some hope in resolving the European crisis. The week began with the rate rising off of its weekly low of 0.9968 as risk aversion spilled over from the previous week and the U.S. reported a better than expected New Home Sales number. The pair then rose on Tuesday as the United State reported mixed economic data and the Dollar was pressured from Japan and China's consideration of direct trading in their home currencies. On Wednesday, the rate extended its gains despite positive U.S. economic data. The pair then retreated on Thursday after Australian HIA New Home Sales increased by +0.7% m/m, versus a previous reading of +6.9%. Friday saw the rate rise sharply making its weekly high of 1.0257 after Australian Private Sector Credit rose by +0.5% m/m as widely anticipated. AUD/USD then sold off somewhat to close at 1.0236, with an overall gain of +1.7% for the week. 

USD/CAD USD/CAD lost considerable ground last week as risk assets gained against the Greenback and Canada reported a better than expected GDP number. The week began with the rate rising as the Greenback strengthened against most majors. On Tuesday, the pair fell after mixed economic data from the United States. The rate then reversed direction trading slightly higher on Wednesday after mixed U.S. Durable Goods Orders numbers and a positive U.S. Pending Home Sales number. Thursday saw the rate continue higher, making its weekly high of 1.0361 after the United States reported GDP growth of +1.9% as expected. The pair then dropped sharply on Friday, making its weekly low of 1.0164 after Canadian GDP grew by +0.3% m/m, versus +0.2% expected. Also out was Canadian RMPI, which declined -1.0% m/m, versus -1.3% expected. USD/CAD went on to close at 1.0165, showing an overall loss of -1.9% for the week.

NZD/USD NZD/USD gained sharply last week as risk appetite supported the rate and the United States reported mixed economic data. The week began with the rate falling on Monday as the Greenback strengthened against most majors and in the absence of any economic data out of New Zealand. On Tuesday, the rate traded higher after mixed economic data out of the United States. The pair extended its gains, rising marginally on Wednesday after New Zealand reported a Trade Surplus of +301B, in line with expectations. The pair then made its weekly low of 0.7837 on Thursday after the New Zealand NBNZ Business Confidence index came out at 12.6, versus a previous reading of 27.1. On Friday, the rate reversed direction trading sharply higher as risk assets appreciated against the Greenback, bringing NZD/USD to close at 0.8008, with an overall gain of +1.3% from its previous weekly close.