The World Overall One Financial | Andrei Wogen| finance.wogen@gmail.com|For the Week of: 03/01

Last Week in ReviewNZD The New Zealand Dollar took a knock lower this past week as inflation expectations for the next two years fell more than expected. This caused a bit of talk to go around that the RBNZ could in fact lower interest rates next instead of raise them. However these expectations are low at this point. I myself am not expecting a rate cut next but instead am expecting for the RBNZ to probably wait a bit longer than previous to raise rates again. Also the internals of this inflation expectations data showed that growth is still expected to be strong overall and that the perception of monetary policy is that it is still quite accommodative and loose in comparison to historical trends.

USD During her testimony before US Congress members, the governor of the Fed did not in anyway signal that a rate hike is coming and in fact, at least in my opinion, sounded a bit dovish. She even had some concerns regarding the unemployment numbers in this country bringing up the idea that the current unemployment rate is maybe not as good as some would think. This tone did go against the overall consensus that was expecting some indication that at the very least the word patient would be removed from the Feds statement. But no such luck and as such the USD sold off. However it did regain some ground, and then some, after a better than expected Headline and Core Durable Goods orders numbers pointed to some better growth coming from the US while inflation continued to drop lower while Core stayed steady overall. Then, to end the week 4th GDP came in a bit better than expected and the internals looked good overall too though personal consumption slipped a bit. Overall though, the overall growth rate of 2014 was just about 2.4%. So still not that great on historical terms but still better than most countries out there. As for the Fed, I am not so sure that they will be that happy with last years overall growth as they were pegging 3% growth rate. What this could very well mean is that they do indeed hold off on raising rates for a while longer to see how this plays out better.

EUR Things got a bit heated between ECB President Draghi and members of the European Parliament during Draghis own testimony last week as the President defended the ECBs latest actions including QE. Drag also sounded his continued disapproval of certain governments and their lack of willingness to play ball and reform their countries as they need to. On the data front, German GDP and employment figures continued to show that improvement in that country anyway seems to be gaining some traction after a weak end to last year. However, inflation continued to moved lower on the whole across the Euro Zone. On the sentiment side of things, German, Italy, French and Euro Zone consumer sentiment improved over last month while business sentiment came in weaker in Germany and investor

EUR/USD (4hr) breakout lower last week

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sentiment was mixed from the Euro Zone. On the whole though sentiment seems to be improving some all around and so hopefully this will begin to translate into more consumer spending.

What to Watch this WeekEUR This week the main data release will be inflation data yet again. Last week we had final January numbers, this week we will get February preliminary data for the Euro Zone as a whole. Lower oil price are likely going to be continuing to work their way through the data and so it will be somewhat distorted by this and so the main focus will continue be on the Core reading. The other data of interest will be the final reading of fourth quarter GDP. The main event though this week will be the ECBs rate decision and press conference on Thursday. Rates will more than likely stay put and overall policy in fact will likely stay right where it is. Nice and easy. However any more details of QE will be watched for as the ECB gets ready to start it later this month. As announced at their January meeting, the Bank will be buying about 60 billion worth of bonds a month in the range of 2 years and 30 years and this program will last until inflation expectations and overall inflation begin to steadily rise. Overall it will hopefully be a positive for the economy and we could be seeing some improvement via recent sentiment readings anyway though the actual affect it has on the actual economy has been debated at length with many, including myself, not so optimistic that QE will actually be that positive for the overall economy.

GBP the BoE meets this week with the most likely outcome being no changes in rates or their QE program. The expectations continue to be that the Bank will raise rates by the end of this year into next year and it doesnt look like that will change anytime soon as the UK economy continues to do well but not great and the BoE continues to go back and forth in their tone. As for data, inflation expectations on Friday will be watched for any indication as to the possible path in inflation going forward. Like the rest of the world, inflation continues to move lower in the UK and so expectations I expect will follow and if that is the case could very well push the BoEs and the markets timetable for rate hikes back until mid-next year at the least, depending on how low the expectations, and subsequently the actual inflation data, goes. Other data spread about this week will be Services and Construction PMI data as well as house price and mortgage approvals data.

JPY there is little data this week from Japan but there is one of interest and that is capital spending for the fourth quarter of last year. Yes, the data is about two months old but it still could give us a pretty good indiction of where businesses are in terms of future capital expenditures. This is important as the business community in Japan has been hampered quite a bit for quite a while and so any pick up in this type of data will be an encouraging sight. Also too, it seems that the Japanese economy may be improving some as data recently has been looking better. Still too early to tell for sure though as there is still a great deal of weakness present in the Japanese economy. USD/JPY (Daily) still stuck in a range

GBP/JPY (4hr) stealth rally higher going on right now

USD this week, non-farm payrolls and the unemployment rate will be the highlight of not only the US markets but global markets as well. As they usually are. The labor market has continued to improve overall in the US and more signs of this will be looked for as the market continues to anticipate rate hikes coming from the Fed. A strong number this week will increase expectations that the language in the Feds statement will be changed, dropping the word patient as the Fed gets ready to raise rates with the market looking at June or September of this year to be the time of the first liftoff in rates by the Fed. However, I wonder just how long these spectacular jobs numbers can last. The jobs data has been quite impressive over the past few months and so there is something in the back of my mind that is thinking things cant continue like this forever. Which is true. The only question is when do things turn weaker. The market is expecting it to happen at this point. The other data of interest will be ISM Manufacturing PMI data on Wednesday, manufacturing PMI and construction spending data as well as ADP numbers and weekly jobless claims. The other data to watch, along with the NFP numbers, will be wage growth which seemed to pick up some last month and so will if this continues will be yet another encouraging sign for Dollar bulls and for those looking for a rate hike to come from the Fed this year. Which is pretty much everybody.

CAD The Canadian economy has been getting weaker over the past few months, due mostly to lower oil prices. In light of this the BoC cut rates unexpectedly last month saying that they did it as insurance against moves lower in the economy that they expect to come. This weeks BoC meeting therefore will gain interest as the market tries to determine what the path will likely be going forward from the BoC as the Bank gave little indication of this during their last meeting. Comments made by the BoC governor last week seemed to signal that the Bank will stay pat for a while and see how things play out before making a concrete decision. So more clarification on this one way or the other will be watched for in the Banks statement. The other data of importance this week will be GDP data for the 4th quarter of last year. It will likely not be a good release either as data over the last few months, particularly going into the last part of last year, has been weak.

AUD The big event this week will be the RBAs monthly meeting and rate decision. Expectations are rising for a rate cut this week yet again from the Ban and last weeks weak Capex numbers could give the ammunition the RBA needs (and may be looking for) to cut rates further. I personally am expecting the RBA will cut rates again this year but I am slightly expecting them to hold off a meeting or two to see how things play out. But they could very well just cut again to get it done and over with. The tone in the Banks rate statement, whether they cut or not, will also be watched closely. If they dont cut, the statement will likely be even more important than if they do cut. If the Bank does not cut rates this meeting, the market will be looking for any indication of if and when the Bank will cut again depending on their tone in their statement. The main data release this week will be fourth quarter GDP data which I expect will very likely show a decline in growth for that time period in Australia.

Overall Sentiment Indicator

Economic Calendar

Asset Overall Sentiment Strength

US Dollar Positive 3

Euro Negative 4

Pound Positive 2

Canada Dollar Negative 3

US Dollar Positive 3

Japanese Yen Negative 4

New Zealand Dollar Positive 2

Region Event/Data Expected Date Time (EST)

Japan Q4 Capital Spending 4.2 3/01 6:50pm

Euro Zone Core CPI (Feb) y/y 0.6% 3/02 5am

Euro Zone CPI (Feb) y/y -0.5% 3/02 5am

United States ISM Manufacturing PMI 53.4 3/02 10am

Australia RBA Interest Rate 2 3/02 11:30pm

Australia RBA Rate Statement 3/02 11:30pm

Canada GDP m/m 0.2% 3/03 7:30am

Canada GDP Annualized Q4 q/q 2% 3/03 8:30am

Australia GDP q/q Q4 0.7% 3/03 7:30pm

Australia GDP y/y Q4 2.6% 3/03 7:30pm

Canada BoC Rate Decision 0.75% 3/04 10am

Canada BoC Rate Statement 3/04 10am

United States ISM Non-Manufacturing PMI 56.5 3/04 10am

United Kingdom BoE Interest Rate Decision 0.5% 3/04 6am

United Kingdom BoE Asset Purchase Facility GBP 375 billion 3/04 6am

Euro Zone ECB Rate Decision 0.05% 3/04 7:45am

Euro Zone ECB Rate Statement and Press Conference 3/04 8:30am

United Kingdom Inflation Expectations 3/05 4:30am

United States Nonfarm Payrolls (Feb) 238K 3/05 8:30am

United States Unemployment Rate 5.7% 3/05 8:30am