The World Overall

One Financial | Andrei Wogen| finance.wogen@gmail.com|For the Week of: 05/10

Last Week in Review

AUD The RBA cut rates last week by 25 basis points during their
meeting last week. This move was expected overall though and as such
the Aussie, after an initial fall on the announcement, rose a good
amount shortly after. This rise is likely due to the fact that the market is
no longer expecting any more easing from the RBA for the time being or
at all. As for their statement, this was neutral overall. Highlights
included an upbeat assessment of inflation and the employment sector
while concerns were raised in regards to the overall weak business cycle
and capex and concerns were once again raised about the high
Australian Dollar saying that it needed to be lower. On the whole it was
a pretty neutrally toned statement. As for rate cuts, personally I am not
expecting another cut in rates for a while. However what I am expecting
is some sort of action to help bring down the Aussie Dollar as concerns I
expect will continue to rise from the RBA in terms of the height of the
Aussie Dollar. A further cut in rates would simply encourage more risks
to materialize in the housing market and wouldnt really help bring
down the Aussie Dollar given the low rate environment that continues
to be. Hence why I think the next action from the RBA will be directly
targeted at the Aussie Dollar.
GBP The UK elections have ended and the results are in. After one of
the closest races in the nations history, the Conservative party came out
ahead both in parliament and in the Prime Minister vote and by a pretty
good margin. Compared with expectations, the main opposition party,
the Labor Part, did quite poorly. The news of the Conservative party
winning sent the Pound on a tear higher versus the US Dollar and Euro
as well as other currencies. However the optimism surrounding the
elections I expect wont last for long, for two reasons. The first being
that the economic conditions of the UK and subsequently the BoE will
come back into focus and both have a dovish tone to them right now,
especially the economic conditions. The second reason that I think this
optimism will be short lived has to do with a promise that newly reelected PM Cameron gave in that he promised a vote on the UKs EU
membership if he were to win re-election. Now, if he holds to this
promise or not is a whole other discussion but if he does, this I expect
would cause quite a bit of uncertainty and therefore a more negative
tone in the Pound and the UK markets. In terms of this EU membership
vote, I expect some sort of a decision will come soon, probably by the
end of the summer with an actual vote, if that is the end game, to
happen sometime later this year into next. But like I said, just the vote
alone, if it were to happen, will create uncertainty and therefore I expect
would cause the overall sentiment of the Pound to turn negative for a
time.

AUD/USD, 4 Hour even with a

rate cut and a dovish RBA the Aussie
continues to be supported

NZD The New Zealand unemployment rate jumped more than

expected this past week, highlighting that there is a good deal of spare
capacity in the New Zealand economy yet. Wages also fell from last
quarters print. Overall this is a pretty dovish signal in terms of future
possible policy moves by the RBNZ and now there are expectations out
there that the RBNZ will lower rates next instead of raise them next.
USD Monthly job numbers showed a pretty good showing as
payrolls rose 223,000, just a tad off of expectations. Unemployment also
fell while the participation rate rose and wages came in mixed. On the
whole then, the data was pretty good but not the best. Wages still
remain weak and the number of newly added jobs did come in shy of
expectations. Also, I do wonder just how long this strength in the jobs
market will continue. With the US economy weakening in the past few
months, I expect that the US jobs sector will follow suit and soon. If this
happens, then expectations for rate hikes will be pushed back even
more.
CNY China inflation data for April came in lower than expected for
both month-to-month and year-to-year. Month-to-month in fact dipped
into negative territory while year-over-year came in better than last
months inflation data. Producer price data though continued its fall
into negative territory, now in negative territory for thirty-seven months
in a row. Inflation therefore is mixed overall and this apparently has
helped push the PBoC to action as last weekend the central bank cut its
key interest rate by 25bps. The bank said the cut is meant to help
stabilize investment in the country as Chinas economy continues to
weaken. Short term, this cut should help support Chinas debt and
equity markets as well as help stabilize some things in the country as far
as investment goes, but long term, that is another question and in my
opinion the Bank (and therefore government) still has quite a ways to go
before they have done enough to really support the economy for the
longer term.

What to Watch this Week

GBP The Bank of England meets this week for their monthly rate
decision but there are no expectations for a move higher in rates. I am
expecting no change as well given the low inflation, lower growth
environment that is currently present in the United Kingdom right now.
As for data of interest this week, the monthly employment and wage
data will be in focus for the Sterling market. The unemployment rate
continues to tick lower and wages seem to be improving some. Both
good signs for the UK economy. More improvement will be watched for
in these parts of the economy by both the BoE and the market. Then, to
close out the week we will have the release of the BoEs inflation report
along with a speech by BoE Gov. Mark Carney to wade through. On the
whole, the Banks assessment of the economy and inflation, both now
and going forward, will likely be lower as things continue to trend
lower in the overall UK economy. This report will be yet another reason
that the BoE will be holding off on rate rises for the time being. The UK
economy is just not doing that well, at least well enough for the BoE,
and the projections going forward will likely not give any better reason
for rate rises either.

GBP/USD, 4 Hour market

liked the results of the UK
election.but rally will likely be
short lived

EUR Aside from the Greece saga continuing, the main data this week
comes in the form of Preliminary First Quarter Growth numbers from
several Euro Zone countries with Germany, France and the Euro Zone
being in focus. On the whole, the Euro Zone economy did show some
improvement in the first part of this year and so growth numbers I
expect will reflect this better growth, printing higher than the forth
quarters readings. The main risk therefore, in my opinion, is for growth
numbers that are weaker than previous. If growth did in fact weaken in
the first quarter, more than expected, this would bring out the Euro
bears again as sentiment would turn more negative again. As for events
this week, minutes from the latest ECB meeting will be in focus. The
Bank is fully on course to continue its quantitative easing program and
so attention to will turn to their assessment of the Euro Zone economy
and inflation. During their press conferences lately, and subsequent
statement, they have been sounding a bit more upbeat on the economy
and inflation. This I expect will translate into the minutes being released
this week and so, aside from mentions of QE and low interest rates, the
minutes could actually be a bit upbeat. If this is the case, I expect that
the Euros recent turn to overall positive sentiment will be reinforced
but on the whole, the GDP data will likely take precedence over the ECB
minutes as the GDP data will help prove whether or not the Banks
expectations are being fulfilled or not.
USD This week the main event from the US will be retail sales data
on Thursday. One of the things the Fed is particularly watching in order
to help determine when they should raise rates, is consumer spending
and this is especially reflected in retail sales data. On the whole,
consumer spending has been weak as the US consumer continues to
want to save instead and so a consistent pick up in spending will be
watched both this week and going forward. As for overall sentiment,
this continues to be less and less positive as the US economy continues
to show weakness and the Fed seems to be very data dependent indeed
and so is very likely a few meetings off yet from raising rates. But,
because the Fed seems to be so data dependent for rate rises, the market
is too and a good retail sales number I expect will help turn the US
Dollar around and give it a decent sized bid.

Overall Sentiment Indicator

Asset

Overall Sentiment

Strength Rating

US Dollar

Positive

Euro

Positive

Pound

Positive

Canada Dollar

Positive

Australian Dollar

Positive

Japanese Yen

Negative

New Zealand Dollar

Neutral

EUR/USD, Daily Euro been on a

rally lately..this weeks data will
help determine this recent rallys
existence

USD/JPY, 4 Hour even with all the

recent weak US data this pair
continues to be supportedfor now

Economic Calendar
Region

Event/Data

New Zealand

Electronic Card Retail Sales (April) y/y

China

New Loans

United Kingdom

Expected

Date

Time (EST)

05/10

6:45pm

903B

05/10

n/a

BoE Rate Decision

0.5%

05/11

7am

United Kingdom

Industrial Production y/y

0.2%

05/12

4:30am

United Kingdom

Manufacturing Production y/y

1%

05/12

4:30am

New Zealand

RBNZ Gov. Wheeler Speech

05/12

5:05pm

China

Industrial Production y/y

6.1%

05/13

1:30am

China

Retail Sales y/y

10.4%

05/13

1:30am

Germany

Q1 GDP q/q

0.5%

05/13

2am

Germany

Q1 GDP y/y

05/13

2am

Italy

Q1 GDP q/q

0.2%

05/13

4am

United Kingdom

Claimant Count Change (April)

-20.1K

05/13

4:30am

United Kingdom

ILO Unemployment Change

5.5%

05/13

4:30am

United Kingdom

Avg. Earnings Inc. Bonus

05/13

4:30am

United Kingdom

Avg. Earnings Ex. Bonus

05/13

4:30am

Euro Zone

Q1 GDP y/y

05/13

5am

Euro Zone

Q1 GDP q/q

05/13

5am

United Kingdom

BoE Gov. Carney Speech

05/13

6:30am

United Kingdom

BoE Inflation Report

Dovish

05/13

6:30am

United States

Retail Sales ex. Autos m/m

0.4%

05/13

8:30am

United States

Retail Sales m/m

0.3%

05/13

8:30am

United States

Industrial Production y/y

05/13

9:15am

0.5%