A review of the week past
and the week ahead

Welcome to City Index with Tony Sycamore

Monday 18th February 2018


What mattered last week:

  • A strong finish to the week enabled the S&P500 to lock in a +2.50% gain for the week, while the NASDAQ registered a more modest +2.0% gain.
  • The rally fuelled by renewed optimism over progress on U.S. - China trade talks and an agreement which avoids another U.S. government shutdown.
  • Reports suggest the March 1 deadline for tariffs to rise to 25% on U.S. $250 billion of Chinese exports will be extended by 60 days to allow negotiators more time to build on recent progress.
  • U.S. economic data was mixed as retail sales fell by -1.2%, the biggest drop since 2009. Offsetting this was higher than expected core CPI and strong job openings.
  • As the U.S. equity market rally has extended, the probability of a recession in the U.S. has fallen to approximately 30% vs. 60% at the beginning of 2019.
  • Closer to home, the RBNZ elected to ignore the recent lead from other Central Banks and delivered a less dovish than expected statement.
  • This resulted in a sharp short covering rally in NZDUSD and other NZDXXX rates with the NZDUSD finishing the week above .6860 for a 1.8% gain, while AUDNZD closed near 1.0400.
  • Locally the ASX200 closed unchanged at 6066, consolidating recent gains after a less onerous than expected final report from the banking Royal Commission and dovish tones from the RBA the previous week.
  • The AUDUSD bounced from support ahead of .7050 to close the week at .7140.

For the week ahead, the key events are:

Australia: RBA meeting minutes (Tuesday), Q4 wage price index (Wednesday), labour force report and RBA Governor Lowe speaks (Thursday).

  • 4Q wage price index (Wed): The market is looking for a 0.6% q/q increase in wages, which would take the year over year number to 2.3%. This would be the highest since 4Q 2014, though still well below the long-term average of 3.2%.
  • Labour force report (Thurs): The expectation is for a rise of 15k jobs created which should be enough to keep the unemployment rate steady at 5.0%.

The Australian earnings reporting season picks up the pace this week with reports from 70 companies including index heavy weights BHP, Woolworths and Wesfarmers.

New Zealand: Global dairy trade auction (Tuesday).

China: House price index (Friday).

Japan: Reuters Tankan index, machinery orders (Monday), balance of trade (Tuesday), CPI (Friday).

U.S.: President’s Day holiday (Monday), NAHB survey (Wednesday), FOMC meeting minutes (Thursday), durable goods, existing home sales (Friday).

FOMC Minutes (Thurs): The minutes from the meeting will be analysed specifically to dissect the discussion around the removal of “some further gradual increases in the target range” from the statement. Potentially the minutes may also clarify if all members view the hiking cycle as being over, or if they think the current pause is only temporary.

Fed speaker on the wires this week include Mester, Bostic, Willams and Clarida.

Canada: Wholesale sales (Thursday), retail sales (Friday).

Euro Area: EA current account, German ZEW business survey (Tuesday), German PPI (Wednesday), EA consumer confidence, German CPI, German and EA Markit flash PMI’s (Thursday), German IFO business survey (Friday).

  • Markit ‘flash’ euro area PMIs (Thurs): The Markit flash ‘PMIs’, will provide a timely update on the depth of the current euro area downturn (as will IFO). The manufacturing PMI is expected to edge lower to 50.3 from 50.5 while the services PMI is expected to stabilise after the “yellow vest” protests in France have receded. The composite PMI is expected to soften further to 50.3.

UK: Labour force report (Tuesday).

  • Labour force report (Tue): The unemployment rate is expected to remain steady at 4.0%. The survey is only up until the end of December and this month’s data is unlikely to reflect the continued impact of the delayed Brexit withdrawal vote.

About TECHFX TRADERS

The session will be run by Tony Sycamore founder of TECHFX TRADERS. Tony has over 20 years’ experience trading primarily at Goldman Sachs and he also worked in senior Institutional roles at Commonwealth Bank and BNP Paribas. His experience has allowed him to see and work with some of the biggest global traders.

Finalist – Best Bank FX Research & Strategy
Tony was the only Australian finalist nominated for Best Bank FX Research & Strategy at the 2016 Technical Analyst awards.

Finalists: Commonwealth Bank of Australia – Tony Sycamore, Director Institutional FX • Banque Pictet & Cie • Credit Suisse RBC Capital Markets • Royal Bank of Scotland • Scotia Bank

Tony Sycamore

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