For many reasons, I couldn’t help but sigh of relief after markets closed for the week on Friday. It was quite an interesting week as we saw market-moving events, most notable of which is the Swiss debacle! An event which will be remembered in history.
The week started out with news from Australia with the ANZ job advertisements m/m. The widely watched ANZ job ads report recorded its seventh consecutive monthly gains, jumping 1.8% in December. The index measures change in the number of jobs advertised in the major daily newspapers and websites covering the capital cities and somehow helps to picture willingness to employ. The number of job ads on the internet and in newspapers is now 11.4 per cent higher than they were a year earlier. The rise in ads reflected on the employment change which was released later in the week. The country posted record job gains, infact the best in 8 years with 37,400 jobs added, defying general expectations of of 5,300. November unemployment figures was revised upwards to 45,000 showing that payrolls where boosted in November and December by the most in any two-month period in the past eight year as unemployment rate also reduced 6,1% from 6.2%. The better than expected figures will reduce pressure on the central bank to cut already record-low interest rates. Home Loans m/m was released at -0.7, a fall from previous 0.2. The AUD ended the week slightly higher.
The Chinese trade balance which measures the difference in value between imported and exported goods during the previous month climbed to 49.6 more than forecast. Exports rose 9.7 percent in December on a year on year basis, exceeding the 6 percent median estimate in a Bloomberg News survey. Imports fell 2.4 percent, compared with projections for a 6.2 percent decline, leaving a trade surplus of $49.61 billion, the customs administration said in Beijing. This caused stocks to rally for the first time in four days and the Yuan initially strengthened but but ended the week much lower against the USD.
On Tuesday, the UK’s office of national statistics (ONS) reported that CPI inflation in December grew 0.5% on the year. This is the lowest reading in almost 15 years. November’s print was 1.0%, and forecasts called for around a 0.7% reading. The headline for the official report read “Rate of Inflation join lowest since records began”. Mark Carney, Bank of England Governor testified on the Financial Stability before the Treasury Select Committee, in London. He said inflation could slow further in the coming months, backing his argument to keep interest rates at a record low. “It’s a question of the pace of those interest-rate increases and the degree,” he said in a BBC interview. On aggregate, there was little volatility the GBPUSD pair for the week as momentum slowed after over 25 weeks of consistent bearish momentum.
From Europe, the European Court of Justice declared that ECB’s OMT “May Be Legal” but must meet the necessary conditions after previously rejecting Draghi’s plans for “outright monetary transactions” about a year ago. After this decision, we will be looking forward to the next ECB conference to see what the next action will be. On Thursday, German Buba President Weidmann, the Deutsche Bundesbank President and voting member of the ECB Governing Council spoke about the European central bank’s decision, stating that “ECJ’s opinion illustrates ECB’s limits”. ECJ’s decision may have been generally perceived as greenlight for the ECB to resume it QE, but Weidmann seems to be against it and will probably vote against QE in the next ECB meeting. The Euro fell for the week against most of it the majors, breaking an 8 year low on the EURUSD pair.
Federal Open Market Committee (FOMC) member, Federal Reserve Bank of Atlanta President Dennis Lockhart spoke on Tuesday. In summary, he stated that he expected US GDP to grow around 3% in 2015, inflation gradually rising after weak 2015 start and confidence in inflation forecast pivotal for liftoff. Jolts job openings came at 4.97m beating expectations of 4.86m. The core retail sales m/m and retail sales m/m were both negative, released at -1.0% and -0.9% respectively, both worse than the previous month. Other important news from the US are producer price index, unemployment claims, consumer price index (CPI), core CPI and the Prelim UoM Consumer Sentiment which came at a positive 98.2 propelled by a strengthening job market and lower fuel costs. This improves the odds that gains in spending will soon follow. The USD was mixed against the majors, as it strengthened most against the Euro, reaching an 8 year low on the EURUSD pair.
Interest rate was cut at an unscheduled emergency meeting as the Swiss franc soared by almost 30 percent in value against the euro on Thursday after the Swiss National Bank abandoned its three-year old cap at 1.20 francs per euro, cutting interest rate to -0.75, from 0.25. This lead to catastrophe in the markets with big banks like Citi, Barclays and Deustche recording high losses, as well as some forex brokers losing so much leading them into insolvency. The event proved to be some kind of stress test for brokers and traders alike.