19/02/2016

Fundamental Analysis

Friday, February 19, 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 0.3% 0.3% 0.2%

10:00 am EUR German ZEW Economic Sentiment February 1.0 0.1 10.2

1:30 pm CAD Manufacturing Sales MoM December 1.2% 0.9% 1.2%

WEDNESDAY

9:30 am GBP Average Earnings Index 3m/y December 1.9% 1.9% 2.1%

7:00 pm USD FOMC Meeting Minutes

THURSDAY

12:30 am AUD Unemployment Rate January 6.0% 5.8% 5.8%

1:30 pm USD Unemployment Claims February 13 262K 275K 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%

Friday, February 19, 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

“There were stronger signs again that repeated downward revisions of the inflation outlook were feeding through to inflation expectations, which had again increased the probability of the euro area economy remaining in low inflation environment for an extended period of time” - European Central Bank

Friday, February 19, 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

Growth and inflation risks mount in Euro zone High

Growth and inflation risks are mounting in the Euro zone, the minutes of the European Central Bank's January meeting showed, and some policy makers are arguing for the need to act pre-emptively in the face of new threats. Low inflation could become entrenched, with poor wage growth already suggesting that weak crude prices are feeding into other prices, while China's downturn was also dimming the outlook as the risk of a hard landing for its economy rose, the ECB said. Meanwhile, the Euro zone current account surplus shrunk in December when compared to the previous month on a seasonally adjusted basis, according to the ECB. The current account surplus declined to 25.5 billion euros during the final month of 2015, from an upwardly revised 26.9 billion euros reported in November. A separate report showed, annual consumer prices in France remained unchanged in January. The cost of living in France climbed 0.2% in January, compared with the same period a year ago. Measured on a monthly basis, the consumer price index plunged 1.0% in the reported month. The so-called Harmonized Index of Consumer Prices showed annual inflation climbed at a pace of 0.3% year-on-year, compared with the previous month's 0.3% increase. On a monthly basis, the HICP slid 1.1% in January, compared with the 0.2% growth seen in the previous month.

18.02 open price 18.02 close price % change

EUR/USD 1.1128 1.1107 -0.19%

EUR/GBP 0.77859 0.77469 -0.50%

EUR/CHF 1.10433 1.10271 -0.15%

EUR/JPY 126.96 125.78 -0.93%

USD

“There are still some questions whether positive corporate sentiment will remain in place for the rest of the year, but for now companies are not turning cautious toward capital expenditure” - Shoji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities

Friday, February 19, 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 130 132 135

75% percentile 127 127 128

Median 125 125 125

25% percentile 122 123 122

MIN 115 115 113 * the data is based on international banks’ forecasts

Impact

US jobless claims decline unexpectedly last week High

The number of Americans applying for unemployment benefits unexpectedly declined last week, reinforcing the view the labour market continued to strengthen. Initial claims for state unemployment benefits decreased 7,000 to a seasonally adjusted 262,000 for the week ended Feb. 13, the lowest level since November, according to the Labor Department. The previous week's claims were unrevised. The four-week moving average of claims, which irons out week-to-week volatility, dropped by 8,000 to 273,250 last week. Claims have now been below the 300,000 threshold, which is associated with a healthy labour market, for 50 consecutive weeks - the longest stretch since the early 1970s. The gauge declined 12,000 between the January and February survey periods, suggesting a pick-up in job growth. At the same time, nonfarm payrolls rose by 151,000 in January. The health of the jobs market could determine whether the Fed hikes rates this year. How quick these lifts will come, though, will depend on how fast inflation pressures are able to bounce back after being kept at bay by cheap oil and lower costs of imports. Bets for a March rate hike have largely been eliminated due to tightening financial market conditions and concerns about the domestic and global economies.

18.02 open price 18.02 close price % change

AUD/USD 0.7185 0.7157 -0.39%

USD/CHF 0.9925 0.993 +0.05%

USD/JPY 114.1 113.24 -0.75%

NZD/USD 0.6633 0.6644 +0.17%

Friday, February 19, 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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