16/02/2016

Fundamental Analysis

Tuesday, February 16, 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 15-20)

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

MONDAY

Tentative CNY Trade Balance January 406B 389B 382B

2:00 pm EUR ECB President Draghi Speaks

9:45 pm NZD Retail Sales QoQ Quarter 4 1.2% 1.4% 1.6%

TUESDAY

12:30 am AUD Monetary Policy Meeting Minutes

9:30 am GBP CPI YoY January 0.2%

10:00 am EUR German ZEW Economic Sentiment February 10.2

1:30 pm CAD Manufacturing Sales MoM December 1.0%

WEDNESDAY

9:30 am GBP Average Earnings Index 3m/y December 2.0%

7:00 pm USD FOMC Meeting Minutes

THURSDAY

12:30 am AUD Unemployment Rate January 5.8%

1:30 pm USD Unemployment Claims February 13 269K

FRIDAY

9:30 am EUR Retail Sales MoM January -1.0%

1:30 pm CAD Core CPI MoM January -0.4%

1:30 pm USD Core CPI MoM January 0.1%

Tuesday, February 16, 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

US While addressing Congress, Fed Chair Janet Yellen said that the central bank is unlikely to reverse its plan to hike interest rates further this year. The actual path of the federal funds rate will depend on incoming economic data, and policy makers regularly reassess what level of the federal funds rate is consistent with reaching and maintaining maximum employment and 2% inflation. Financial conditions in the US have recently become less supportive of growth. "These developments, if they prove persistent, could weigh on the outlook for economic activity and the labour market, although declines in longer-term interest rates and oil prices provide some offset. Foreign economic developments, in particular, pose risks to US economic growth." As recessions fears build in the US, Yellen did not excluded a "chance" of a downturn ahead. She also said that the Fed is studying whether negative interest rates would help in case conditions worsen further. Australia Testifying before the House of Representatives Economics Committee, RBA Governor Glenn Stevens said that the Australian economy continued to grow at a sub-trend pace, but a weaker Aussie Dollar and easy monetary policy is supporting growth. Stevens stressed that further easing is possible if inflation slows and global headwinds threaten Australia's growth trajectory. The central bank head estimated that inflation is unlikely to cause near-term issues over the next two years though, partly due to the weakening Australian Dollar, which was tracking falling commodity prices. Like most other central banks, the RBA noted the elevated risks associated with recent market volatility. Stevens confirmed that rates are likely to remain steady for most or all of 2016. Japan Japan logged an 18th current account surplus in a row amid a plunge in crude oil imports and a travel surplus due to the Japanese Yen's depreciation. In the final month of 2015, Japan reported a current account surplus of 960.7 billion yen, compared with 225.9 billion yen a year earlier, according to the Finance Ministry. Trade exports increased 5.5% to 6.247 trillion yen, while imports dropped 2.2% to 6.059 trillion yen. In 2015, the nation's current account surplus surged more than six fold from the previous year to 16.64 trillion yen, with imports slumping 10.3%, while exports rose 1.5%.

Key highlights of the week ended February 12

EUR

“In order to make the euro-area more resilient, contributions from all policy areas are needed. The ECB is ready to do its part” - Mario Draghi, ECB President

Tuesday, February 16, 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 1.18 1.18 1.18

75% percentile 1.08 1.08 1.10

Median 1.05 1.05 1.05

25% percentile 1.03 1.01 1.02

MIN 0.99 0.95 0.95 * the data is based on international banks’ forecasts

Impact

ECB ready to act, Draghi says; trade surplus increases in December

High

The European Central Bank President Mario Draghi said the central bank “is ready to do it part” in March if the financial market volatility or the pass-through effect of low oil prices reduces inflation expectations. Draghi also added that fiscal policies including public investment and lower taxation should put the Euro area’s economy on a firmer ground. ECB President welcomed improvements in the banking sector, saying that Euro bloc’s banks have significantly strengthened their capital positions. However, Draghi acknowledged that some parts of the banking sector still faced a number of challenges, including “uncertainty about litigation and restructuring costs in a number of banks working through a stock legacy assets. Last week saw renewed market volatility, particularly on Euro zone bank shares, which Draghi said was due to slowing growth in emerging markets and falling commodity prices, as well as anticipation that new financial regulations and lower interest rates would drag down bank profits. Meanwhile, the Euro zone’s trade surplus widened in December due to a steep decline in imported energy prices. According to Eurostat, the trade surplus of the currency bloc surged to 24.3 billion euros in the reported month, up from 23.6 billion euros a year earlier. Both exports and imports increased 3% compared with December 2014.

15.02 open price 15.02 close price % change

EUR/USD 1.1261 1.1156 -0.93%

EUR/GBP 0.7759 0.77263 -0.42%

EUR/CHF 1.09938 1.10114 +0.16%

EUR/JPY 127.65 127.84 +0.15%

AUD

“The outlook for continued low inflation may provide scope for easier monetary policy, should that be appropriate” - Reserve Bank of Australia

Tuesday, February 16, 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

RBA remains watchful of global markets volatility, ready to cut rates

High

The Reserve Bank of Australia continues to monitor closely developments in global markets and stands ready to lower interest rates further if the economy requires additional support. The central bank has held the official cash rate unchanged since May but indicated that it is keeping an easing bias, with soft domestic inflation providing the bank scope to offset the impact of weaker global conditions on the nation’s economy. The cash rate was left at a record-low 2.0% for the eighth meeting in a row in February, the bank's first meeting of the year. The officials judged that there were "reasonable prospects" for growth in the Australian economy, and that employment had been stronger than previously estimated. One major risk to Australia's growth outlook is the recent turbulence in global financial markets, resulting from concerns over China’s economy. Market wobbles in China have seen its share market plunge, capital flee at a record pace and the slowest growth pace last quarter since 2009. The RBA, however, said China’s officials had scope to respond to an economic crisis, but added any sharp slowing in China’s economy would have spill-over effects for the region, including Australia. Economists continue to expect further rate cuts in the second half of the year as headwinds to growth stiffen, and hiring slows.

15.02 open price 15.02 close price % change

AUD/JPY 80.482 81.802 +1.64%

AUD/USD 0.7109 0.7139 +0.42%

EUR/AUD 1.58247 1.56285 -1.24%

GBP/AUD 2.0419 2.0224 -0.95%

NZD

“For this quarter, the housing and tourism-related industries had notable increases, with the largest in hardware, building, and garden supplies” - Tehseen Islam, business indicators manager

Tuesday, February 16, 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

New Zealand retail sales growth slows in Q4; inflation expectations decline

High

New Zealand retail sales volume rose less than expected in the final three months of 2015, as a decline in motor vehicle sales offset gains in hardware supplies. The volume of retail sales climbed 1.2% in the fourth quarter compared with the previous three months, following a downwardly revised 1.5% pace in the September quarter and compared with a median forecast for an increase of 1.4%. Measured on an annual basis, volumes rose 5.3%, down from the 5.7% pace in the year to September 2015. Hardware, building and garden supplies retailing registered the biggest volume increase in the reported period, surging 5.3%. However, a 1.7% decline in motor vehicle and parts sales from a peak hit in the preceding quarter dragged down the overall figure. Core retail sales, which exclude volatile vehicle-related industries, climbed 1.4% in the fourth quarter. New Zealand consumer spending is being supported by record migration and tourism, low interest rates and a robust housing market. That is helping the nation’s economy to offset weaker returns for commodities as prices for dairy products, the country’s largest goods exports, remains low. Separately, business managers expect inflation to be 1.63% annually over the next two years, down from 1.85% in the quarter. This was the lowest level since the second quarter of 1994.

15.02 open price 15.02 close price % change

AUD/NZD 1.073 1.0735 +0.05%

EUR/NZD 1.6989 1.678 -1.23%

GBP/NZD 2.1892 2.1713 -0.82%

NZD/USD 0.663 0.6648 +0.27%

Tuesday, February 16, 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 of the previous week (February 8-12)

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

MONDAY

1:30 pm CAD Building Permits MoM December 11.3% 5.6% -19.9%

TUESDAY

12:30 am AUD NAB Business Confidence January 2 2

9:30 am GBP Trade Balance December -9.9B -10.4B -11.5B

3:00 pm USD JOLTS Job Openings December 5.61M 5.41M 5.35M

WEDNESDAY

9:30 am GBP Manufacturing Production MoM December -0.2% 0.0% -0.3%

3:00 pm USD Fed Chair Yellen Testifies

THURSDAY

1:30 pm USD Unemployment Claims February 6 269K 287K 285K

10:30 pm AUD RBA Gov Stevens Speaks

FRIDAY

7:00 am EUR German Prelim GDP QoQ Quarter 4 0.3% 0.3% 0.3%

1:30 pm USD Retail Sales MoM January 0.2% 0.1% 0.2%

3:00 pm USD Prelim UoM Consumer Sentiment February 90.7 92.6 92.0

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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