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Weekly FX Market Performance

Here is how the Foreign Exchange market moved last week.

  • The British pound emerged as the top performing currency last week as it gained against the U.S. dollar. Most of the gains came on account of the Brexit related headlines keeping the currency pair volatile. The GBP closed the week with 0.14% gains and built upon the 0.95% gains from the week before.
  • The Japanese yen was down 1.19% on the week making it the weakest currency last week. The declines came after global risk sentiment eased pushing the yen lower amid a stronger U.S. dollar as well. The has managed to recover from the losses seen in the weeks before.
  • The New Zealand dollar was also the weakest currency last week as it shed 1.19% on the week. The NZD fell as traders adjusted their positions in anticipation of weak fundamentals.
  • The euro currency was down 0.84% last week. The declines came as the economic data from the Eurozone weakened on all fronts with growth and inflation slowing in the month of December 2018.
  • The CAD was down 0.06% and the NOK was down 0.36% last week. The performance in the respective currencies tracked the price action in oil. Crude oil prices were seen easing after posting a strong rally in the weeks before.

weekly FX market performance

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Market Highlights from last week

What was the main market events that impacted the financial market last week? Let’s review the 4 main events here.

1. Brexit agreement defeated

The UK put the Brexit agreement deal to a parliamentary vote on Tuesday.

As widely expected, the agreement was defeated with a majority of 230 votes leaving Theresa May to scramble back to Brussels to renegotiate amendments to the existing deal.

The defeat in the parliament is also expected to further complicate the UK’s politics.

The British pound however reacted positively to the defeat of the bill as it recovered from intraday losses to close with modest gains on the day.

2. Increased China Trade Surplus Data

Latest trade surplus data from China showed that it increased 17 percent from a year ago to $323 billion on the year ending December.

This was the highest since dating back to 2006.

Exports to the U.S. increased 11.3% on the year while imports from the U.S. grew just 0.7%.

The overall trade surplus for China was seen at $351.76 billion with total exports rising 9.9% from the year before while imports grew 15.8% on the same period.

Although China posted an increase in the trade surplus, this was the lowest since 2013 despite exports rising the highest since 2011.

Officials said that the biggest concern was the uncertainty surrounding the trade negotiations with the United States.

3. Economic disappointment from Eurozone

There was more economic disappointment from the Eurozone with the latest industrial production figures falling at a faster rate than expected.

Preliminary data from the statistics office showed that industrial production fell on a seasonally adjusted basis of 1.7% in November.

This was down from a revised industrial production figure of 0.1% in October.

Economists expected to see an increase of 0.3% for the period.

The declines came as production of capital goods posted a 2.3% decline while durable goods output fell 1.7%.

Energy production was also weaker, falling 0.6% on the month.

On a year over year basis, the Eurozone’s industrial production was down 3.3%.

4. Canada Consumer Price accelerated

Consumer prices in Canada was seen accelerating two percent in December, driven by higher airfare costs and fresh vegetable costs offset the cheaper prices amid falling fuel prices.

Data from Statistics Canada showed that consumer prices increased 1.7% on the year.

The details come as the Bank of Canada was seen holding interest rates steady at its meeting earlier in January.

5. Germany GDP Estimates

The latest flash GDP estimates from Germany showed that the nation barely missed a technical recession in the fourth quarter of the year.

For the year 2018, Germany’s GDP growth rate was seen advancing just 1.5%.

This was the slowest pace of growth in five years after the economy grew 2.2% in the year before.

Softening global demand and the hard-hit automobile industry posted a drag while domestic demand and government spending managed to somewhat offset the weak figures.

Important Economic Events of this week

Here are the main economic events that you want to focus on this week.

1. ECB Meeting

The European central bank will be holding its monetary policy meeting this week on Thursday.

The central bank will be keeping all key rates unchanged at this meeting.

Given that the central bank ended its QE purchases in December last year, this month’s meeting is more of a placeholder.

Concerns about the slowdown in the Eurozone’s economy could likely be featured.

However, as seen by the minutes from the December meeting, ECB officials are still likely to maintain a balanced tone indicating the downside risks for the economy.

At the December meeting, officials also discussed restarting the TLTRO program as well.

However, this is unlikely to happen until the March meeting and based on the incoming economic data.

2. US Economic Data release

Economic data from the U.S. takes a backseat this week.

The only notable releases of mention include the monthly retail sales report for December.

Retail sales could be expected to tip higher due to holiday spending and higher wages.

Durable goods orders report is due on Friday and could provide more insights into whether the trade tariffs have started to influence the durable goods sector as well.

3. China GDP Figures

Other economic reports over the week will cover the fourth quarter GDP figures from China.

The data will give full insight into China’s GDP growth over the year.

The world’s second largest economy has been targeting a growth rate of above 6% this year.

Any signs of slowdown in the economy could however signal concerns about the U.S. led tariffs having its effect on the Chinese.

4. Bank of Japan Monetary Policy Meeting

The Bank of Japan will be holding its monetary policy meeting this week on Wednesday.

No changes are expected to the central bank’s policies.

With the October sales tax countdown now underway, the BoJ is likely to maintain its balance in the language and assessment of the economy.

The last interest rate cut from the Bank of Japan came in September of 2016 and as the BoJ continues with its QQE program, inflation has remained muted.

Gold Technical Analysis

Gold prices maintained their range within 1296 and 1289 levels for the most part last week before breaking out to the downside.

Price action was seen closing just a few points shy of the 1280 support.

The declines come following a large symmetrical triangle formation indicating consolidation at the top end of the rally.

If gold prices fail to hold the 1280 support, we could expect the downside to give way.

This will potentially open gold prices to further declines as they fall to the 1250 level of support.

Given the current global sentiment, there is however a chance that gold prices could hold the support at 1280.

This will once again keep prices subdued and trading within the range of 1280 and 1297.

Given the fact that gold barely missed testing the 1300 level of resistance, we expect to see the consolidation taking place once again.

To the downside, the retest of the 1250 support will mark a decent correction.

There is further scope for gold prices to fall and test the 1230 level. But this will depend on the momentum.

For the moment, watch for how gold prices evolve at the current levels.

A retest of the 1280 level for resistance following the downside breakout is the ideal scenario.

This could potentially bring new selling pressure at 1280 when it is tested for resistance.

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