The World Overall

One Financial | Andrei Wogen| finance.wogen@gmail.com|For the Week of: 02/08

Last Week in Review

USD Monthly jobs figures showed yet another strong
increase in the number of jobs added in January. Figures from
December and November were also revised higher with
November showing a gain of over four-hundred thousand. As
for wages, which is starting to gain some attention by the
markets and the Fed, they rose higher with their biggest
increase since mid-2011. As for the unemployment rate though,
this was the only down-side to the report as it showed an
increase in this rate. Overall though the US jobs market seems to
be rolling along nicely even as manufacturing and now the oil
industry are slowing down some now. The manufacturing
sector once again last week showed yet more weakness as the
ISM Manufacturing PMI number came in lower once again
though the internals, including new business, improved. As for
the USD, this rose in response to the NFP number but ended
mixed to weaker for last week as data overall from the US has
been a bit weaker lately.
EUR The biggest news last week were the developments in
Greece as they continue to look for ways to reduce their debt
burden and the austerity currently in place there right now.
Meetings occurred between EU officials and German official
and Greece government officials as they tried to hammer out
some sort of deal that will allow Greece to stay in the Euro
Zone. However, the Eurogroup Chairman has given Greece a
deadline of February 16th to get a new bailout extension. This
really puts the pressure on both sides to figure something out
and I can only envision things getting more heated between the
parties. The thing is though, Greece doesnt really have much to
offer in terms of leverage to get what they want. This is usually
the case though when the debtor is getting chased by the
creditor as is the case right now. There options were limited
even more too when the ECB announced that Greek banks
would no longer be able to use their own government bonds as
collateral for loans they issue. They will however still be able to
use the ECB emergency funding program in case of a shortage
in funds in Greek banks. All in all then, the new Greek
government is at the point where they will have to either forgo
their campaign promises or let go of the Euro Zone and the
Euro. And noI dont believe they will be able to have both.
The other question that needs to be answered by both sides,
especially Germany, the ECB and all the other leaders of the
Euro Zone is whether or not they are truly committed to saving
the Euro Zone no matter what it takes. So for the next couple of

DXY - Daily Chart

EUR/USD - Daily Chart

weeks and probably more, the markets will continue to be

focused on Greece and how things proceed.
AUD Last week the RBA finally cut rates. The finally is
more for me than anyone as I have been looking for a rate cut
for some time now. The reasons? (1) China slowing, (2) slowing
Australian economy driven especially by the slowdown in the
mining sector and (3) the RBAs patience ending with how high
the AUDs value is. Looking at the statement too, the high
AUDs value was actually the main reason for their rate cut
once again highlighting the war going on between the central
banks in the world as each is trying its best to weaken their
currency. They also highlighted the weakness in domestic
activity and global economies. Overall though, it would appear
that the RBA is mainly focused on the high valuation of the
AUD based on their estimates and how the negative effects of
this are and will affect Australias economy. Looking ahead
then, I expect Australias economy to continue to weaken and
for the RBA to continue their desire to see the AUD move lower
overall . These things, as well as others, will therefore lead the
RBA to cut at least once again by years end.

AUD/USD - Daily Chart

CNY Data last week showed yet more weakness in both the
services sector and the manufacturing sector. This shows yet
more weakness in the domestic picture of China while Chinas
manufacturing continues to slow. I expect things to stay slow for
the time being in China as reforms continue to put pressure on
the consumer and businesses and investment within the
country.
NZD Employment data last week showed yet more strength
in the economy as more than expected number of jobs were
added for the fourth quarter. Labor costs remained steady too
which is a good thing in light of lower inflation plaguing the
world, including New Zealand. Participation rate also moved
higher showing that the increase in the number of employed is
actually a good, real increase. This data too though continues to
highlight the struggle the RBNZ has in terms of policy going
forward as inflation continues to move lower but the overall
economy continues to roll along nicely. The other important
data last week, and which shows that the overall economy
continues to do well and may be improving in the recent weak
commodity sector, were milk prices that rose for the fourth
dairy auction in a row. This is positive as milk prices, which are
a key component of New Zealands growth, will hopefully
support consumer spending and consumption going forward.
However, on a low note, commodity index numbers were lower
again with the 18 month of declines recorded last week. So not
all is doing well yet in the commodity sector.

What to Watch this Week

GBP This weeks inflation report will be the event of interest
for the market. In it the Bank of England will give their
assessment on the UK economy including growth and inflation.
Recent minutes showed the two main hawkish members of the

CNY/USD - Daily Chart

Bank pulling back on their calls for a rate hike and instead
opting to do what everyone else in the Bank is doing.wait.
This in my opinion can only mean that the MPC members see
more weakness in the UK than before, hence their desire to stay
pat for a while in raising rates. I think too, that the surprise from
this report will be if Gov. Carney gives a very positive report on
the economy, especially in comparison to last report. This will
be a key event though for the Pound and which direction it will
likely head in the near future. last week the BoE left rates and
their QE program as expected and previous.
AUD Along with employment data this week, RBA Gov.
Stevens will be speaking twice. In light of the RBAs actions last
week, his words will be watched closely, more than usual. His
second speech, on Thursday, will be of most interest as he will
be testifying in front of the House of Representatives Standing
Committee on Economics. This is where we could get more
clarification on why the RBA cut rates last week and where
things are headed from here. Also too, the other interesting
story I think will be what the AUD does. It fell initially (both
versus the Yen and the USD) after the RBA cut rates but then
rebounded to retract the whole move it made in response to the
RBAs actions. This to me tells me there is still much buying
interest for the Aussie and so could cause the RBA to harden
their tone in regards to their view that the Aussie is too high in
value at this point in time.
EUR As already mentioned, the situation in Greece will be
watched by the markets as Greeces deadline, set by both the
Eurogroup and their debt repayment schedule, draws nearer.
On another note, how the Euro reacts will be interesting to see
as it fell initially on the news out of Greece to start last week but
then retraced the whole move and then some. Shows to me that
the market is not too concerned yet about what is happening in
Greeceyet. Not a surprise though as the market is thinking
what I am: weve been here before with Greece. As for data,
prelim fourth quarter GDP from the Euro Zone and Germany
will be in focus with slightly better expectations than previous.
CNY This week one of the key data releases will be CPI data.
Inflation, as in the rest of the world, continues to fall while the
PBoC continues to be reluctant in doing anything about it aside
from some small measures at just the right moment to keep
things from getting too bad. If this weeks CPI release is worse
than expected, then whether or not the PBoC does something in
response is anyones guess. The other data of interest is New
Loans data which continues to be watched as loan activity has
slowed in the last few months which is not a good sign of
overall economic activity in China right now.

Economic Calendar
Region

Event/Data

Australia

RBA Stevens Speech

China

CPI y/y

China

New Loans

U.K.

BoE Inflation Report

Australia

Employment Change

Australia

Date

Time (EST)

02/08

7:15pm

1%

02/09

8:30pm

1.350B

02/10

9:00pm

02/11

5:30pm

5K

02/11

7:30pm

Unemployment Rate

6.2%

02/11

7:30pm

U.S.

Retail Sales ex-Autos m/m

-0.4%

02/12

8:30am

Australia

RBA Stevens Speech

02/12

5:30pm

0.3%

02/13

2:00am

Germany

Q4 GDP q/q

Expected

Germany

Q4 GDP y/y

1%

02/13

2:00am

Euro Zone

Q4 GDP q/q

0.2%

02/13

5:00am

Euro Zone

Q4 GDP y/y

0.8%

02/13

5:00am