10/03/2016

Fundamental Analysis

Thursday, March 10, 2016 08:30 GMT

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Major events this week (March 7-11)

Day/Time (GMT) Flag Currency Event Period Actual Forecast Previous

MONDAY

3:40 am JPY BOJ Gov Kuroda Speaks

7:00 am EUR German Factory Orders MoM January -0.1% -0.4% -0.2%

11:50 pm JPY Final GDP QoQ Quarter 4 -0.3% 0.4% -0.4%

TUESDAY

Tentative CNY Trade Balance February 210B 339B 406B

1:30 pm CAD Building Permits MoM January -9.8% -2.2% 7.7%

WEDNESDAY

9:30 am GBP Manufacturing Production MoM January 0.7% 0.2% -0.3%

3:00 pm CAD BOC Rate Statement

8:00 pm NZD RBNZ Rate Statement

THURSDAY

1:30 am CNY CPI YoY February 2.3% 1.8% 1.8%

1:30 pm EUR ECB Press Conference

1:30 pm USD Unemployment Claims March 4

FRIDAY

1:30 pm CAD Unemployment Rate February 7.2%

3:00 pm USD Prelim UoM Consumer Sentiment March 91.7

Thursday, March 10, 2016 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

Euro zone The Euro zone's growth and inflation prospects have weakened and policy makers should take these developments into account when deciding on monetary policy. Inflation across the currency bloc slid into negative territory in February, virtually ensuring the ECB will unveil additional stimulus when it reviews policy on March 10. Meanwhile, Bank of France Governor Francois Villeroy de Galhau said that the ECB is ready to deploy fresh stimulus measures to underpin worryingly low inflation. The central bank's tools include targeted loans to commercial banks, more asset purchases and providing more details about how long the ECB plans keep rates at low levels. Mr. Villeroy de Galhau noted that the brief period of negative inflation does not mean the arrival of a more prolonged period of falling prices. Inflation should turn positive again later this year with the stabilization of oil prices. Australia The RBA left the official cash rate unchanged after assessing an effect recent global financial turbulence has had on domestic growth, but kept doors open for further monetary policy easing if economic conditions worsen substantially. The central bank kept the cash rate at record low of 2%. Meanwhile, the Australian economy beat all expectations, growing at the fastest pace in almost two years in the final quarter of 2015, a sign the worst of the global commodity rout may be over. Australia's economy rose 0.6% in the fourth quarter from the July-September period, when the economy grew an upwardly revised 1.1%, outpacing economists' forecast for a 0.4% growth, according to the Australian Bureau of Statistics. That propelled growth for the whole year to 3%. Canada Canada's economy slowed the most among the Group of Seven developed countries in 2015, highlighting the effect of the commodity-price shock on the trade-reliant country and the challenges its policy makers face in supporting growth. Canada's gross domestic product increased 0.8% on annualized basis in the fourth quarter, down from the 2.4% growth rate in the July-September period. The biggest drag on growth was business investment, which dropped 1.7% from the preceding three-month period and declined for the fourth straight quarter. Switzerland Switzerland's economy unexpectedly accelerated, while exports showed signs of resilience in 2015, despite a strong Swiss Franc, migrant crisis and adverse external environment undermined the country's performance. The Swiss economy expanded 0.4% in the fourth quarter of 2015, supported by consumption expenditure from private households and the public sector. Quarterly estimates suggest a provisional GDP growth rate of 0.9% for 2015, compared with 1.9% in 2014.

Key highlights of the week ended March 4

GBP

“While January's rebound in manufacturing output was most welcome, latest survey evidence offers a warning that the sector is still finding life tough” - IHS Economics

Thursday, March 10, 2016 08:30 GMT

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S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q1 16 Q2 16 Q3 16

MAX 1.61 1.62 1.66

75% percentile 1.55 1.56 1.56

Median 1.51 1.51 1.52

25% percentile 1.49 1.48 1.47

MIN 1.41 1.28 1.25 * the data is based on international banks’ forecasts

Impact

UK industrial production recovers in January, after December’s sharp fall

High

UK industrial production recovered in January after a sharp decline in December, led by a stronger than expected increase in manufacturing. Industrial output climbed 0.3% from December, when it dropped 1.1%, according to the Office for National Statistics. Economists, however, had expected a gain of 0.4%. Manufacturing increased 0.7%, while utilities increased production by 4.3%. The findings of the Confederation of British Industries survey showed the recent depreciation of the Pound helped some manufacturing firms to stabilize output and export orders. The CBI said that despite market volatility in emerging markets, China still represents a huge opportunity for the UK’s industry. Industrial output remained 10.2% below its peak in early 2008 during three months to January 2016, while manufacturing production was 6.4% smaller. The UK economy slowed in the second half of last year and economists predict that it could lose more momentum in early 2016. Analysts say that Britain’s referendum on its European Union membership could also drag on growth. The EEF, an association of British manufacturing employers, revised its 2016 UK growth outlook down to 1.9%, from 2.1% and lowered its manufacturing growth forecast to 0.6% from 0.8%.

09.03 open price 09.03 close price % change

GBP/USD 1.4215 1.4217 +0.01%

EUR/GBP 0.77461 0.77375 -0.11%

GBP/CAD 1.9061 1.8835 -1.19%

GBP/JPY 160.1 161.148 +0.65%

NZD

“Further policy easing may be required to ensure future average inflation settles near the middle of the target range” - RBNZ Governor Graeme Wheeler

Thursday, March 10, 2016 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q1 16 Q2 16 Q3 16

MAX 0.78 0.82 0.84

75% percentile 0.65 0.65 0.65

Median 0.63 0.62 0.62

25% percentile 0.62 0.61 0.60

MIN 0.58 0.55 0.55 * the data is based on international banks’ forecasts

Impact

RBNZ unexpectedly cuts OCR by 25 bp to 2.25%, more easing to come

High

The Reserve Bank of New Zealand stunned markets by cutting the official cash rate and said that further easing may be required to help offset a recent decline in inflation expectations and help faltering dairy sector amid weak global economic background. The RBNZ lowered the country’s cash rate by 25 basis points, taking it to a record low of 2.25%. In a statement, the central bank said the outlook for the world’s economy had deteriorated since December, due to slower growth in China and Europe. The surprised decision came just five weeks after Governor Graeme Wheeler’s speech in which he signalled no rush to ease further in response to weak inflation. The New Zealand Dollar slumped more than 1 US cent following the rate cut, which financial markets had assigned a 30% probability. Most economists now expect a second reduction in the OCR in June. Headline inflation climbed just 0.1% in the December quarter, according to Statistics New Zealand, the weakest annual increase in the price level since 1999. Mr Wheeler said the main reason inflation was so weak was due to ongoing decline in fuel prices and low imports prices. The central bank is worried that weak inflation will influence firms’ price and wage setting behaviour. A key risk to the nation’s economy remains the dairy sector, where export commodity prices remain some 55% lower than their 2014-peak.

09.03 open price 09.03 close price % change

AUD/NZD 1.1027 1.1249 +2.01%

EUR/NZD 1.6323 1.6531 +1.27%

GBP/NZD 2.1075 2.1366 +1.38%

NZD/USD 0.6746 0.6654 -1.36%

CNY

“The jump is temporary. Inflation is unlikely to become a concern that would limit monetary policy” - Nomura Holdings Inc.

Thursday, March 10, 2016 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q1 16 Q2 16 Q3 16

MAX 0.80 0.79 0.81

75% percentile 0.71 0.71 0.71

Median 0.69 0.68 0.68

25% percentile 0.68 0.67 0.66

MIN 0.64 0.64 0.61 * the data is based on international banks’ forecasts

Impact

China’s inflation unexpectedly accelerates in February to 2.3% amid higher food prices

High

China’s consumer prices increased the most since mid-2014 in February as food costs rose amid the week-long Lunar New Year holidays. China’s inflation accelerated to an annual 2.3% rate in February, according to the National Bureau of Statistics, compared with economists’ forecast for a 1.8% increase. Food prices spiked 7.3%, up from the prior month’s advance of 4.1%. Inflation is predicted to nudge higher this year, though economists believe that it is unlikely to reach levels that would undermine China’s leaders’ plans to boost government spending to cushion slowing economic growth. Last week the government announced this year’s official inflation target of 3%. At the same time, producer prices, which have been declining for more than three years, plunged 4.9% in February from year earlier, a slight improvement compared with the preceding month’s decrease of 5.3%. Most economists expect Beijing to introduce further easing measures over the coming months as sluggish overseas and domestic demand put at risk the government’s recently-announced 2016 GDP growth target band of 6.5%-7.0%. Last week the PBoC cut the reserve requirement ratio for large banks to boost higher lending levels.

09.03 open price 09.03 close price % change

AUD/JPY 83.781 84.851 +1.28%

AUD/USD 0.7439 0.7486 +0.63%

EUR/AUD 1.48018 1.46937 -0.73%

GBP/AUD 1.9109 1.8992 -0.61%

CAD

“Fiscal stimulus from Ottawa is no miracle growth cure for the economy, and any relapse in oil prices will simply expose the underlying soggy growth outlook” - BMO

Thursday, March 10, 2016 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q1 16 Q2 16 Q3 16

MAX 1.42 1.41 1.43

75% percentile 1.37 1.37 1.36

Median 1.35 1.35 1.34

25% percentile 1.31 1.31 1.30

MIN 1.25 1.10 1.20 * the data is based on international banks’ forecasts

Impact

BoC keeps key interest rate on hold, waiting for federal budget

High

The Bank of Canada kept its benchmark interest rate on hold as it awaits for Ottawa’s forthcoming spending plans to stimulate the nation’s economy before taking any further steps. The central bank maintained the target for the overnight rate steady at 0.5%, noting that the near-term economic outlook remains virtually unchanged from January. The BoC said that while stubbornly low oil prices continue to derail the Canadian economy, it noted that inflation appeared on track and that 2015 closed out with better than estimated growth. Canada’s GDP increased an annualized 0.8% in the final quarter of 2015, while for the whole year the nation’s economy grew 1.2%. The central bank expects that economic output will increase 1% in the first quarter of the year. However, financial vulnerabilities have increased and the commodity-price decline has left overall business investment very weak. Canada’s Liberal government is due to announce its federal budget on March 22, pledging during an election campaign to spend as much as 10 billion Canadian dollars during each of the next two fiscal years. A recent commodity-price rebound, coupled with shifting expectations for Canada’s and US monetary policy, have caused Canada’s currency to strengthen versus the US Dollar. The BoC welcomed the recent pick-up, as it returned the exchange rate to previous estimates assumed in January.

09.03 open price 09.03 close price % change

AUD/CAD 0.9974 0.9918 -0.56%

CAD/CHF 0.7425 0.7528 +1.39%

EUR/CAD 1.47642 1.45723 -1.30%

USD/CAD 1.3409 1.3248 -1.20%

Thursday, March 10, 2016 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

Major events this week (February 29-March 4)

Day/Time (GMT) Flag Currency Event Period Actual Forecast Previous

MONDAY

12:00 am NZD ANZ Business Confidence February 7.1 23.0

10:00 am EUR CPI Flash Estimate YoY February -0.2% 0.0% 0.3%

1:30 pm CAD Current Account Quarter 4 -15.4B -16.8B -15.3B

TUESDAY

3:30 am AUD RBA Rate Statement

9:30 am GBP Manufacturing PMI February 50.8 52.3 52.9

1:30 pm CAD GDP MoM December 0.2% 0.1% 0.3%

3:00 pm USD ISM Manufacturing PMI February 49.5 48.5 48.2

WEDNESDAY

12:30 am AUD GDP QoQ Quarter 4 0.6% 0.5% 1.1%

9:30 am GBP Construction PMI February 54.2 55.5 55.0

1:15 pm USD ADP Non-Farm Employment Change February 214K 185K 193K

THURSDAY

12:30 am AUD Trade Balance January -2.94B -3.22B -3.52B

9:30 am GBP Services PMI February 52.7 55.1 55.6

3:00 pm USD ISM Non-Manufacturing PMI February 53.4 53.2 53.5

FRIDAY

12:30 am AUD Retail Sales MoM January 0.3% 0.4% 0.0%

1:30 pm CAD Trade Balance January -0.7B -1.0B -0.6B

1:30 pm USD Unemployment Rate February 4.9% 4.9% 4.9%

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

Chart SMA (55) – Simple Moving Average of 55 periods SMA (200) – Simple Moving Average of 200 periods Forecasts

EXPLANATIONS

Third Quartile – separates 25% of the highest forecasts

Second Quartile – the median price based on the projections of the industry

First Quartile – separates 25% of the lowest forecasts

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

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