6:00 PM (NZT)

Currency Commentaries:

NZD/USD                                      AUD/USD                                    GBP/USD
NZD/AUD (AUD/NZD)                    AUD/GBP (GBPAUD)                    GBP/EUR (EUR/GBP)
NZD/GBP (GBP/NZD)                    AUD/EUR (EUR/AUD)                   NZD/EUR (EUR/NZD)
NZD/CAD                                                            
NZD/YEN

Major Announcements last week:

·         Japanese prelim. GDP -.6% vs -.3% expected
·         Australian Home Loans 2.3% vs 1.9% expected
·         BOJ announce 10 Trillion YEN QE program
·         UK Inflation 3.6% YoY as expected
·         German Economic Sentiment 5.4 vs -11.8 expected
·         US Retail Sales +.7% vs .6% expected
·         NZ Retail Sales 2.9% vs 1.1% expected
·         European GDP -.3% as expected
·         Australian Unemployment rate 5.1% vs 5.3% expected
·         US Philadelphia Fed Manufacturing Index 10.2 vs 9.0 expected
·         UK Retail Sales .9% vs -.3% expected
·         Canadian Inflation .2% vs .1% expected
·         US Inflation .2% as expected

Market Overview:

Last week the financial markets saw further intraday volatility, whilst mostly within contained broader ranges. Generally the sentiment within markets remains positive, but there is an underlying vulnerability to shocks that it easily exposed. The uncertainty surrounding progress towards a Greek debt resolution remains the focus. Daily swings in the likelihood of success were seen last week. Most contention seems to surround EU Finance Ministers trust that Greek politicians will carry out the austerity measures they have pledged to make. Current expectations are of a positive announcement to be made at some stage in Europe today (Monday), but delays have been numerous and certainly would not surprise. Elsewhere in the markets, the focus came in Asia late last week. Japan surprised with a 10 trillion YEN quantitative easing (QE) initiative to help stimulate the Japanese economy, and provide a reason to lower demand for the YEN. In China authorities again lowered the reserve ratios on the banking sector. This has the effect of boosting lending and sustains economic growth. A cooling property sector and gloomy outlook for the export sector has prompted the move. Markets start the week with a positive tone, in expectation of progress in Europe, and increased appetite for risk assets following the stimulus added in China.
 
In Australia last week the news was all about the stronger than expected employment numbers. The debate now focuses on the effect of these numbers on the outlook for the cash rate. The Reserve Bank of Australia (RBA) are unlikely to feel further pressure to reduce the cash rate with numbers like these. This week sees the release of the RBA monetary policy meeting minutes on Tuesday, and these will be closely monitored. RBA Governor Stevens also speaks twice this week, first on Tuesday, and then again on Friday. Any comments with regards to monetary policy will see reaction from the market.
 
In New Zealand the record 4^th quarter retail sales figures released last week saw demand for the NZ dollar climb. This week is relatively quiet for NZ economic data, so the lead will come from the wider markets appetite for risk, and will be driven by outcomes in Europe. Tuesday does see the release on the Reserve Bank of New Zealand’s inflation expectations survey, but in the current environment the results will have very limited impact on the foreign exchange market.
 
In the United States the economic picture continued to brighten last week. Continued signs the labour market is improving will be welcomed by the Federal Reserve (FED). The labour and housing markets remain the primary concern in the US. With numbers showing improvement, the likelihood of further QE from the FED in the short term has been reduced. With a lower chance of further QE, longer term interest rates have continued to grind higher in the US, and this will support the US dollar overtime.
 
This week will certainly prove to be very interesting in Europe. The success of the European Central Bank’s (ECB) longer term funding program has reduced the financial vulnerability in Europe somewhat. Ironically, and understandably, as the financial stability has increased, the political gamesmanship has also increased. Greek politicians have seen further pressure from their Euro-zone partners, to provide assurances the spending targets will be met. It is easy to be skeptical of Greek intentions, given the inability to enact commitments to date. Euro-group meetings today (Monday), will hopefully come up with a positive result for Greece and enable the focus to move on to the next step towards the debt swap goal. Economic data will remain of secondary importance to EURO sentiment in the meantime.
 
The UK economy continues its slow return to growth. With its imported inflation problems finally starting to work their way through the system, the pressure will come off the consumer. Retail sales numbers on Friday were demonstrably better than expected and maybe a good indicator that the consumer is starting to grow in confidence. This week will see the focus on the Bank of England’s (BOE) monetary policy meeting minutes on Wednesday. A change from the previous unanimous decision to increase the level of QE, would indicate a  lower chance of further increases to the program. Friday sees the release of the revised GDP numbers for the 4^th quarter 2011, and this will be closely watched.
 
There was surprise in Japan last week, when the Bank of Japan (BOJ) announced a new 10 trillion YEN QE program. They will be very happy with the reaction from the foreign exchange market, as the YEN has given up ground almost across the board since the decision. This week coming sees little on the economic calendar in Japan. The Yen’s performance will likely be driven by its efforts against the US dollar, as it continues to move back from its historic highs. The GDP numbers on Monday showed a -.6% reduction in growth for the 4^th quarter 2011 and no doubt will have contributed to the BOJ’s decision to move ahead with the QE program.
 
The news on the Canadian economy was reasonably light last week. The focus was the inflation number released on Friday and at .2% for the month, this was .1% higher than expectation. This week will again see the lead predominantly from offshore, with only retail sales numbers on Wednesday to provide the focus. The Canadian dollar continues to be under pressure from both the Australian and New Zealand dollars, but should see demand pick up if the US economic numbers continue to improve in the coming months.

5.35 PM (NZT) This pairing continued to trade in its recent range, close to the record high of 1.0783. There has been little news in Canada this week, so most of the focus was based in Australia. The better than expected employment numbers certainly gave the AUD a boost, and will probably preclude any chance of a cash rate cut at next month’s monetary policy meeting from the RBA. This should underpin AUD support, should any softer price action eventuate. Whilst the global economic data enjoys its recent positive upswing, any dips in the AUD should be relatively shallow in the short term. The Greek debt swap situation remains the primary risk to the AUD fortunes in the short term.
 
The current interbank midrate is:                                                            AUDCAD  1.0731                                                                                         
 
The interbank range so far this week to date has been:                 AUDCAD 1.0641 - 1.0752

5:32 PM (NZT) The EUR has again been under pressure this week, after finishing last week on the front foot against the AUD. Further concerns about the political intent in Europe to release the extended bailout funds to Greece,  has created the uncertainty for the EURO. The AUD obviously gained a boost from the stronger than expected employment numbers and this further eased the way for its appreciation. However it remains back from its previous highs, and a clear resolution of the concerns at Mondays Euro-group meeting would open the way for some appreciation from the beleaguered EURO. Again, any further gains by the AUD from current levels are going to be harder fought, as previous investigations proved.   
 
The current interbank midrate is:                                                            AUDEUR  .8207                    EURAUD 1.2184                                                                                       
 
The interbank range so far this week to date has been:                 AUDEUR .8090 - .8228     EURAUD 1.2153 - 1.2361

5:30 PM (NZT) The AUD again set new record highs against the Pound Sterling this week. The unchanged RBA cash rate decision from last week, couple with the better than expected employment numbers this week, mean the AUD should remain in demand against the GBP in the short term. The BOE monetary policy meeting minute release next week will be crucial. A split decision on the increase in QE from the BOE would be beneficial to the GBP, as it would decrease the likelihood of any further QE in the coming months. Headway from the current levels will be harder fought for the AUD, as its upside moment slows at these record levels.  
 
The current interbank midrate is:                                                            AUDGBP  .6820                   GBPAUD 1.4663                                                                                         
 
The interbank range so far this week to date has been:                 AUDGBP .6761 - .6868     GBPAUD 1.4560 - 1.4791

5:29 PM (NZT) This pairing has spent this week trading within somewhat familiar territory. Whilst the AUD upside momentum has waned, the fact it has consolidated at these elevated levels, is somewhat ominous. The stronger than expected Australian employment numbers have increased the odds of an unchanged cash rate decision from the RBA, in the coming months. This has seen a certain amount investors who had sold AUD, reenter the market, to buy back their AUD. The US dollar may see some demand in the coming week, as the market lowers the expectations of imminent increases of the QE initiative from the FED, and any if further increases of tensions in the Greek debt swap debacle eventuate. Further upside from the AUD cannot be ruled out, but will prove harder fought from current levels, as the recent previous attempts have proven.
 
The current interbank midrate is:                                                            AUDUSD  1.0780                                                                                         
 
The interbank range so far this week to date has been:                 AUDUSD 1.0625 - 1.0799

5:28 PM (NZT) Following the better than expected NZ retail sales numbers on Wednesday, the NZ dollar hit six month highs against the Pound Sterling. However the retreat from the highs was swift, as the risk aversion increased as concerns about the Greek bailout funds rose. Ironically the strong Australian employment numbers saw the NZD under pressure on all cross rates, as resultant NZD selling against the AUD, flowed through to other pairings. With little NZ economic data next week, the lead will likely come from the UK, and wider market appetite for risk. As always, negative news in Euro zone developments, will lead to a drop in the risk appetite, and a corresponding drop in demand for the NZD. Further headway from the NZD will be harder fought from current levels, as was evidenced this week.
 
The current interbank midrate is:                                                            NZDGBP .5297                               GBPNZD 1.8879
                                                               
The interbank range so far this week to date has been:                 NZDGBP .5254 - .5364                GBPNZD 1.8642 - 1.9033

5:27 PM (NZT) It has been a very interesting week for this pairing. The NZD has continued its resurgent form against the YEN. The factors have been two fold. First was the better than expected retail sales number in NZ. Secondly, was the unexpected move by the BOJ to initiate further QE to the tune of 10 trillion YEN. The result is the pairing at levels not seen for six months. The 66.50 resistance level may provide a test for the NZD demand, but at the moment, the momentum is undeniable. This pairing will prove interesting to watch over the coming weeks. Any further complications surrounding the Greek debt issues, may slow the momentum of the NZD, so progress from current levels should be harder to make.
 
The current interbank midrate is:                                                            NZDYEN 66.23                              
                                                               
The interbank range so far this week to date has been:                 NZDYEN 64.09 - 66.33              

5:26 PM (NZT) The NZ dollar has finally seen its moment wane a little, as it approaches six month highs. It reached its peak this week, following the stellar NZ retail sales numbers. However it quickly retreated from the highs, amongst increased concerns about the chances of a successful bond swap in Greece. Further upside from current levels for the NZ dollar will be hard fought. Any clouding of the global recovery, or further concerns over progress in Greece, will see the NZD test the downside against the CAD.
 
The current interbank midrate is:                                                            NZDCAD .8334                              
                                                               
The interbank range so far this week to date has been:                 NZDCAD .8263 - .8372               

5:25 PM (NZT) The NZ dollar set new all time highs against the EURO this week, following the much better than expected 4^th quarter retail sales numbers. The spike higher from the NZD was made easier, by the EURO coming under a little pressure across the board, as progress towards a Greek debt swap became less clear. Expect the NZ dollar to remain in demand against the EURO, in the short term at least. Until there is some kind of conclusion to the concerns over Greek solvency, it will be hard for the EURO to take back much of the recently lost ground. These conditions may continue for some time yet.
 
The current interbank midrate is:                                                            NZDEUR .6374                               EURNZD 1.3580
                                                               
The interbank range so far this week to date has been:                 NZDEUR .6254 - .6411                EURNZD 1.5598 - 1.5989

5:24 PM (NZT) The NZ dollar remains close to the six month highs it set against the US dollar, on Wednesday this week. Momentum has weakened however, leaving it vulnerable to sell offs at present. The better than expected NZ retail sales data and Australian employment numbers have provided boosts, while concerns over the Greek bailout funds softened the demand at times, as the market sentiment turned negative. Generally the global economic data continues its recent upbeat nature and this should ensure that NZ dollar finds support in periods of weakness. The recent sideways range trading of this pair seems likely to continue in the short term.
 
The current interbank midrate is:                                                            NZDUSD .8373  
                                                                                         
The interbank range so far this week to date has been:                 NZDUSD .8242 - .8425
 

5:23 PM (NZT) The NZD dollar started the week with upward momentum against the AUD and looked poised to consolidate through the crucial NZDAUD .7800 level (down through AUDNZD 1.2820). The better than expected NZ retails sales numbers were enough to crack it through, and for the NZDAUD to set new four months highs (AUDNZD four month lows). However, yesterdays strong Australian employment numbers saw the AUD fight back, and again the pairing has pushed back into familiar territory. Looking forward, direction should be dictated the cash rate differentials. With this in mind, the upcoming data will be closely watched, and in Australian in particular. Expect the recent tight ranges to continue in the short term.
 
The current interbank midrate is:                                                            NZDAUD .7763                           AUDNZD 1.2880
                                                               
The interbank range so far this week to date has been:                 NZDAUD .7724 - .7813             AUDNZD  1.2799 - 1.2947

5:20 PM (NZT)
The Australian Economy:
This week’s focus for the Australian economy has been the employment numbers. These showed surprising jobs growth, especially in the part time sector. The Unemployment rate dropped from 5.2% to 5.1% and 30,000 more jobs were created than expected. This number will likely mean the Reserve Bank of Australia (RBA) are unlikely to cut the cash rate at their next meeting, and will likely be on hold for some time to come. Next week sees the release of the minutes from last week’s RBA monetary policy meeting. Given their surprise decision to hold the cash rate steady, the makeup of the minutes will be closely reviewed. The Chinese HSBC Manufacturing PMI numbers on Wednesday will also be closely watched, because of Chinas influence on Australia’s export sector.
 
The US Economy:
In the US the economic climate continues to improve, in a continuation of the trend we have seen since 4^th quarter 2011. Ironically, the labour market is leading the way this week, with further falls in the numbers of filing for weekly jobless claims. Mortgage delinquencies also fell and the manufacturing numbers beat the market expectations. The release of the FED monetary policy meeting minutes reveal that not all board members are as particularly downbeat as Chairman Bernanke and his comments in speeches made last week. This has seen the easing back of expectations of further quantitative easing (QE) from the FED. This has helped the US dollar halt its 2012 decline. Inflation numbers are due tonight and are not expected to cause too much reaction. Next week sees the main focus on existing and new home sales numbers on Thursday and Friday respectively.
 
The UK Economy:
UK inflation numbers this week reveal inflationary pressure is finally starting to fall, and is expected to be around 2% by the end of 2012. The Unemployment rate was as expected at 8.4%. Retail sales numbers are due this evening. It would appear the likelihood of further quantitative easing (QE) from the Bank of England (BOE) has reduced. Next week’s BOE monetary meeting minutes on Wednesday, will reveal how the board vote was split on last week’s decision to increase the QE program by 50 billion GBP. Final GDP numbers next Friday, will provide the other focus in the coming week.
 
The New Zealand Economy:
This week’s focus was the retail sales numbers for the 4^th quarter 2011, that were released on Wednesday. These numbers were undeniably strong and caught the market by surprise. The expectation for the core number was 1.1% growth. The actual number was a record for Q4, since the series began in 1995, and was growth of 2.9%. The details showed the positive growth was across the board. Next week is reasonably light for NZ top tier economic data. The RBNZ run Inflation Expectations survey will be released on Tuesday and will be of interest. On Wednesday the Chinese HSBC Manufacturing PMI will also be of some note, given the influence that the Chinese economy has on exports from NZ.
 
The Canadian Economy:
It has been a very quiet week for economic data in Canada. Later today the latest inflation numbers will be released, although with inflation being so tepid currently, these will be of limited impact. Next week sees the sole focus on the Retail Sales number on Wednesday. Current expectations for the Bank of Canada is to leave the cash rate unchanged for some time, most probably all of 2012.
 
The Japanese Economy:
Japanese 2011 Preliminary 4^th quarter GDP was released at -.6% on Monday, against an expectation of a .3% fall in activity. This may have contributed to the surprising  Bank of Japan (BOJ) quantitative easing initiative, to buy 10 trillion YEN worth of bonds. This is an effort to keep the longer term interest rates low, and stimulate the struggling economy. It also had the effect of weakening the incredibly strong YEN, which will certainly be seen as a positive externality by Japanese authorities.
 
The European Economy:
Some better economic news in Europe has been mildly encouraging this week. German economic sentiment numbers bounced back into positive territory, and French and German GDP numbers slightly beat expectations. Peripheral member bond yields also have maintained their recently lower levels for the most part, confirming the success of the European Central Banks longer term funding program for European banks. Greece remains the focus in the short term, but is not the absolutely critical concern to the wider global financial stability, that it once was.
 
Of note:
The Euro-group of finance ministers delayed the meeting where they were scheduled to commit further bailout funds to Greece. The new meeting is scheduled for Monday, but politically the situation has very ugly. The Greek populace are obviously upset at the austerity measures that have been passed by the interim parliament. Elections are due in April, and concerns from core European countries are that election pressure will see Greek politicians not follow through with the austerity measures, they have now agreed to. These measures are required in order to secure the bailout funds to action they debt swap plan, and ultimately avoid calamitous unmanaged debt default. German officials in particular have been openly skeptical of the Greek commitment to these austerity measures, and are seen as trying to inflict external control on the Greek nation. There is talk emerging that some kind of bridging loan maybe organized, to provide funds to avoid default, but ensure the austerity measures are followed through with, beyond the elections. One thing is certain, the wider market will continue to focus on this situation.

5 AM (AEST) The just released Australian employment numbers revealed a positive surprise. The unemployment rate fell .1% to 5.1% (5.3% expected) and the expectation of 10.5k of added jobs was trounced by the 46.3k number, albeit a large portion were part time jobs added.
 
The wider market sentiment remains mixed with some element of US dollar strength evident in the US session, and this helped contain the NZ and Australian dollars for the most part. Greece remains the big uncertainty, with the Euro-group meeting of European finance ministers delayed until Monday. It would appear that the progression towards a finalized debt swap in Greece is not a done deal.
 
The NZD has seen pressure across the board since the Australian employment numbers as the liquidity of the NZDAUD pairing (the biggest mover), pushes it lower again its other trading partners.
 
 

					Past 24 hours
	Current level	Pre-AU Emply	% Chge since AU Emply		Low	High
NZD/USD	0.8300	0.8316	-0.19%		0.8317	0.8425
AUD/USD	1.0720	1.0683	0.35%		1.0660	1.0779
NZD/AUD	0.7743	0.7785	-0.54%		0.7777	0.7813
AUD/NZD	1.2915	1.2845	0.54%		1.2799	1.2858
NZD/GBP	0.5292	0.5303	-0.21%		0.5300	0.5364
NZD/EUR	0.6367	0.6375	-0.13%		0.6344	0.6411
NZD/YEN	65.10	65.25	-0.23%		65.37	66.11
NZD/CAD	0.8307	0.8323	-0.19%		0.8314	0.8372

11:00 AM (NZT) The just released NZ retail sales numbers show surprising strength in the 4^th quarter of 2011. The market had expected an increase of 1.1% but the headline number shows a 2.9% increase in sales. The core retail sales increase was the largest of any 4^th quarter period since the data series began in 1995.
 
The release of these numbers has seen the NZD pushed higher across the board. Interestingly the NZ dollar has broken through the crucial .7800 (1.2820) level against the Australian dollar. Consolidation through these levels remains the key now, and if this happens it will open up the way for another leg higher from the NZ dollar.
 
The wider market conditions remain choppy , but contained within recent ranges. The EURO has seen a little further pressure ahead of the EU finance ministers meeting to hopefully confirm the release of the next bailout funds to Greece. Overnight it was revealed that Greece contracted by 7% in the 4^th quarter 2011, adding further to their woes.
 

					Past 24 hours
	Current level	Pre-NZ Retail Sales	% Chge since Retail Sales		Low	High
NZD/USD	0.8342	0.8325	0.20%		0.8272	0.8351
AUD/USD	1.0695	1.0691	0.04%		1.0625	1.0738
NZD/AUD	0.7802	0.7790	0.15%		0.7752	0.7790
AUD/NZD	1.2817	1.2837	-0.15%		1.2837	1.2900
NZD/GBP	0.5315	0.5307	0.15%		0.5270	0.5306
NZD/EUR	0.6353	0.6344	0.14%		0.6295	0.6339
NZD/YEN	65.44	65.30	0.21%		64.26	65.31
NZD/CAD	0.8330	0.8317	0.16%		0.8285	0.8348

6:00 PM (NZT)

Currency Commentaries:

NZD/USD                                      AUD/USD                                    GBP/USD
NZD/AUD (AUD/NZD)                    AUD/GBP (GBPAUD)                    GBP/EUR (EUR/GBP)
NZD/GBP (GBP/NZD)                    AUD/EUR (EUR/AUD)                   NZD/EUR (EUR/NZD)
NZD/CAD                                                            
NZD/YEN

Major Announcements last week:

·         Australian Retail Sales -.1% vs +.2% expected
·         UK House Price Index +.6% vs +.1% expected
·         Canadian IVEY manufacturing Index 64.1 vs 58.6 expected
·         NZ Labour Cost Index .7% vs .5% expected
·         RBA hold the cash rate unchanged at 4.25%
·         NZ unemployment rate 6.3% vs 6.5% , but employment growth slows
·         Chinese Inflation 4.5% vs 4.0% expected
·         UK Manufacturing 1.0% vs +.3% expected
·         BOE increase QE by 50 billion GBP, cash rate unchanged at .5%
·         ECB leave the cash rate unchanged at 1.00%
·         Chinese Trade Balance 27.3B vs 10.8B expected
·         Canadian Trade Balance 2.7B vs .7B expected
·         US Consumer Sentiment 72.5 vs 74.4 expected
·         Greek Parliament passes vote needed for EU/IMF bailout

Market Overview:

Last week improved sentiment, which has been the theme of 2012, continued for the most part. Globally the economic data continued its positive momentum. The foreign exchange market however, did not fully mirror the wider market sentiment, as the US dollar finally saw some demand creep back in. Many currencies saw mostly sideways movement, before losing ground to the greenback into the end of the week. The situation in Greece is reaching a short term crescendo, as the Greek Parliament this morning voted in the EU required spending cuts. This difficult vote came as rioters hit the streets in Athens and seven MP’s resigned in protest. Focus this week will remain in Greece, as the EU finance ministers are now set to agree on the next tranche of bailout funds are to be offered to Greece. Assuming this happens, it opens the way for the third step of the debt swap, which will see massive write downs on Greek debt, to enable Greece a chance to start to economically recover from its situation over the next decade. The only certainty is that this painful situation will continue to be an ongoing saga. Fortunately the time it has taken to come to this partial conclusion, has given the rest of Europe time to get its house in some as semblance of order, and financial stability is better in Europe generally.
The New Zealand labour market outlook remains clouded. Last week saw the unemployment rate fall to 6.3%, but employment growth fall. These factors were NZ dollar neutral for the most part and the domestic focus this week will be on the retail sales numbers on Wednesday. The NZDUSD lead therefore will no doubt come from offshore, and the wider market appetite for risk. The recent NZ dollar momentum does look like it may have run its course in the short term, as it backs off from the recent highs against its major trading partners.
Last week in Australia the Reserve Bank of Australia (RBA) provided the excitement, when they left the cash rate unchanged at 4.25%. Expectations had been for a 25pt cut to 4.0%. In their accompanying statement the RBA board made it clear that movements going forward would be very much dependent on the economic data, both domestically and offshore. Fridays release of their quarterly Monetary Policy Statement gave further insight to their thinking. They remain poised to cut the cash rate further if required, but were content at current levels given the stablisation of indicators in Asia and US. Thursdays Australian employment numbers will be the focus of the coming week.
In the US encouraging signs continue for most of the economy. Federal Reserve (FED) chief Bernanke remains concerned about the state of the housing market, commentating that it was holding up any decent economic recovery. This works in with other comments that the FED would tolerate a little inflation, as the economy started to recover. Higher house prices would immediately impact on wider sentiment in the US, and should be closely watched as 2012 unfolds. This week the retail sales number on Wednesday, manufacturing numbers Thursday, and inflation numbers on Friday will be closely watched.
In Europe, the economic situation in the core economies has brightened recently. The European Central Bank (ECB) announcement that the cash rate would remain unchanged last week was expected. But the tone of the accompanying statement was more upbeat that the previous one. The Greek debt swap remains the pivotal EURO news in the short term, so focus will squarely remain of the progress in Athens. The ECB will offer further long term funding facilities to banks towards the end of February, and this should further ease financial stability concerns in the region.
Sentiment in the UK should improve in the coming months if the better than expected manufacturing and housing numbers can continue their recent form. The increase in the Bank of England’s (BOE) quantitative easing (QE) program announced last week, should add further confidence overtime, through its lowering effect on longer term funding rates. This week sees inflation numbers on Tuesday. These are expected to move lower through 2012. Unemployment numbers come Wednesday and retail sales numbers on Friday. A higher than expected inflation number would benefit the GBP, as it would lower the chance of an increased QE program going forward.
In Japan the authorities continue to point out the negative impact of the strong YEN on their economy. Last week saw only second tier data on the calendar, with real estate and machinery numbers weaker than expected. Today saw the preliminary release of quarterly GDP numbers, which came in worse than expected. The Bank of Japan’s (BOJ) monetary policy decision will be released tomorrow. Expect further lip service to be given to the strong nature of the YEN after today’s GDP number, but no change to the already loose monetary conditions.
Last week the Canadian economy saw more encouraging signs in the form of better than expected manufacturing and construction numbers. Also adding to the positive sentiment was the trade balance that shows a materially larger trade surplus than expected. This week sees a quiet economic calendar, with just inflation numbers on Friday. Given the current environment, inflation is not of any concern, so expect the lead on the CAD pairing to come from external factors.