Weekly Sentiment Paper

Distributed by: One Financial

For the Week of: 12/21 through 12/27

Written by: Andrei Wogen

Email: finance.wogen@gmail.com

A Christmas Message!

Last Week in Review!

Australian Dollar!

New Zealand Dollar!

Japanese Yen!

China Renminbi; Onshore, Yuan!

Euro Area: Euro!

British Pound!

11

Canadian Dollar!

13

United States Dollar!

14

Charts!

17

A Christmas Message
I want to personally thank all of my readers who have faithfully read my report
throughout this year. I hope that the info that is presented in these reports each week is
beneficial to your investment or trading, whichever you do. I wish you all a very Merry
Christmas and Happy Holidays and as you gather with friends and family, remember
the true Reason for the Season.
Once again, thank you for your readership and I look forward to continuing to offer you
my knowledge and insight on the world and hte financial markets in the new year.
Thank you and Merry Christmas!
Andrei Wogen, Financial Market Speculator

P.S. Due to the holiday season there will be no report released until January 11th, 2015.

Last Week in Review

United Kingdom inflation falls again; month-over-month slips into negative territory
Euro Zone CPI stays steady but still weak overall
New Zealand Q3 GDP comes in mixed; year-over-year lower than expected but month-tomonth better; household consumption, investment rose but forestry activity fell
German ZEW sentiment survey shows improvement in investor sentiment
US CPI slips as well; month-to-month falls into negative territory; Core CPI also slips
lower
Swiss National Bank introduces negative rates while SNB Gov. Jordan gave a strong
message that the SNB is committed to defending the cap they have set in place to help
defend against deflation

Australian Dollar
Overall Picture and Its Tone
Overall the Australian is weak economically. The weak points continue to be weak mining
sector and the employment sector while the consumer also remains weak and feels weak as
both retail sales and consumer sentiment have been lower respectively. As for the business
sector, manufacturing and services sectors continue to weaken as does business sentiment.
Politically speaking, the country is doing well but recent budget problems have caused the
government to cut down on spending and adjust policy in order to keep debt from rising too
much. This action has also caused consumer sentiment to weaken and there is likely more cuts
on the way as the mining industry continues to slow. Another thing that has caused some worry
from the government is the strong housing market. Prices continue to rise which is helping to
support consumers some but has caused the government to voice their disproval of these high
prices worrying about a bubble forming. As for the central bank they continue to remain neutral
to slightly dovish while continuing to keep rates at historical levels. They continue to say that
rates are the right level to foster growth and investment but they also continue to verbally talk
down the Australian Dollar which they say is too high. Still no actual intervention though.yet.
Overall then the tone of Australia is neutral to slightly negative
. Overall Sentiment of the Australian Dollar

As for the overall sentiment towards the Australian Dollar, this is now fully
negative overall.
Last Week in Review
Last week was a short week for data. New Motor Vehicle sales slipped lower as did the
Westpac Leading Index number. Also RBA FX Transactions came in lower than previous with no
sign of intervention by the RBA in the FX market to help bring down the Aussie Dollar. So at
this point any intervention is still all talk and no action. For now. The other event for the week
was the release of the RBA meeting minutes. In it, the RBA did their usual jawboning of the
currency. The minutes also made mention that the RBA is aware of the markets expectations of
their being a rate hike sometime next year. However they also mentioned that the path for rates
is a period of stability. So it would appear at this point in time that the RBA is not getting
prepared to cut rates. They were also downbeat on their assessment of current growth and
consumption but were optimistic a bit on future growth and inflation. Things seem to be pretty

much the norm at the RBA right now though as they appear to be comfortable with keeping
rates as they are and shifting little to nowhere in terms of policy.

The Week Ahead and Other Thoughts

With Christmas around the world this week, including in Australia, there is little to speak
of in terms of data releases from Australia with CB Leading Index numbers on Tuesday the only
release. There is a good chance that the markets will take a break over this week due to the
holiday season but if Thanksgiving is any indication there could be some surprises nonetheless.

New Zealand Dollar

Overall Picture and Its Tone
New Zealand as a whole continues to do well though has weakened some over the past
few months, economically speaking. Lower commodity prices, lower house prices and lower
inflation have been the main weaknesses for the New Zealand economy. Other weaknesses have
been a deteriorating trade balance, along with falling exports and a fall in business and
consumer sentiment which has also translated into lower consumer spending via retail sales
data. However all is not bad in New Zealand and actually things are pretty good despite these
negatives. Though business sentiment is low, it is still high in historical terms which has been
seen in the manufacturing sector in particular which remains strong as well as does the
industrial sector. As for trade, imports and exports are rising now again while the labor market
also remains strong with falling unemployment and increased employment overall. However,
as is the case around the world overall, wages continue to remain weak. Looking to the housing
market now, after rising prices from the beginning of this year, they have fallen now from their
highs after implementation of policy to help cool the housing market went into effect several
months back. This, and now weaker building permits, continue to cause the housing market to
weaken overall though in some parts, construction remains active overall. As for the
government, they continue to remain strong as pro-growth policies and increased government
spending continue to help support the economy and with the recent elections keeping the
incumbent prime minister in power for another term, there will likely be little change. In
regards to the central bank, after having tightened policy by raising rates three times this year
beginning in March, the central bank is now on hold indefinitely after falling commodity prices
and lower inflation have caused them to reassess their estimates of future inflation in the
country. This is a pretty big turnaround for them from just a few months ago when they were

talking about seeing a need to raise rates pretty consistently due to what they used to see as
inflation pressures building. However these pressures have since diminished or left altogether
and so in response the central bank is expected to be on hold until at least the middle of next
year and possibly longer if inflation doesnt start to pick up soon. They have also voiced their
concerns about the high valuation of the New Zealand Dollar relative to other currencies. This
has caused the RBNZ to intervene in recent months in the currency market to bring down the
value of the Kiwi. This is an obvious statement by the Bank that they are not willing to let the
currency stay too strong and will do something to help bring it down and so in light of this
there continues to be speculation that they will continue to intervene in the markets going
forward. Overall then, the tone for New Zealand remains in neutral territory overall.

Overall Sentiment of the New Zealand Dollar

The overall sentiment for the New Zealand dollar is neutral now as expectations
that the RBNZ will raise rates has come into play again helping to put some life in the
Kiwi.
Last Week in Review
Third quarter GDP last week came in mixed. On a month-to-month basis growth came in
better than expected and previous but on a year-to-year basis, growth slipped lower than
expected and previous. As for the internals, investment rose, household consumption, mining
rose, agriculture was up and the manufacturing industry rose. The one weak spot was the
forestry and logging industry which is not so much a surprise given the fall in prices of these
things over the past few months, right along with dairy prices. Overall though, growth in New
Zealand continues to be strong. Other data for the week showed the current account improving
a bit while ANZ Business confidence slipped from last months reading. We also had visitor
arrivals data last week which showed another increase in the amount of new migrants coming
to New Zealand and last weeks data was the second highest on record. Overall though the
New Zealand economy continues to chug along quite well at this point.

The Week Ahead and Other Thoughts

Another country that will have a slow week in terms of data. Just Westpac Consumer
survey on Sunday and Trade Balance data on Monday will be the two key data points for this
week to watch for. The overall trade balance has deteriorated in the past few months, slipping
into negative territory. Both exports and imports though continue to be healthy overall with
exports in particular improving again now over the past couple of months or so after a time of
decline. With recent, more optimistic rhetoric coming from the RBNZ and now with another
strong print in growth, market focus will be on when the central bank will be raising rates
again.

Japanese Yen
Overall Picture and Its Tone
Japan as a whole is very weak right now, politically, socially and economically. On the
economic side, businesses continue to be weak as manufacturing, services and industrial sectors
continue to be weak however on a bright note, corporate profits continue to rise. On the
consumer side, consumer sentiment and consumption both remain weak as seen recently in
household spending and retail sales data. As for trade, imports and exports have been weak but
now both are improving some while the overall trade balance remains in negative territory.
Inflation also remains weak and continues to fall causing deflation to persist. On the
government side of things, debt remains high while recent tax hikes meant to bring down the
level of debt in the country have caused yet more weakness in the economy. The government in
general remains stuck in old ways and lacking reforms to help revise the economy. As for the
central bank they continue to remain very negative overall with low interest rates and and a
quantitative easing program that puts all others that have occurred or are occurring to shame as
its size is huge. A couple of weeks ago too, the central bank surprised the markets by
implementing and increasing their QE program. Finally, on the social side of things, as the
population continues to age the levels of debt continue to increase while other social
developments continue to cause weakness in the economy. Overall then the picture of Japan is
very negative right now.

Overall Sentiment of the Japanese Yen

The overall sentiment for the Japanese Yen is very negative right now as it
continues to move lower overall
Last Week in Review
The main event last week was the strong outcome in terms of the elections that occurred
for the lower parliament that favored PM Abes party, the LDP. The LDP party won a majority
in the house and this will help give Abe the power he needs to be able to push through his
reforms that he wants to push through to help improve the economy and the overall health of
Japan. Abe doesnt have to worry about too much opposition either in terms of new elections as
there are no major elections until 2016. There was a good bit of activity last week in terms of
data. To begin the week we had Tankan survey data of the manufacturing and nonmanufacturing sectors of Japan. Things were mixed and showed a pretty clear divide between
the two sectors as manufacturers continue to feel pretty downbeat while non-manufacturers are

feeling better overall. The outlook in particular that manufacturers have in Japan continues to
get weaker. Speaking of manufacturing data too, manufacturing index number weakened for
the month of December. Trade balance data for the month of November was also released last
week and showed an improvement in the deficit but yet more weakening in both exports and
imports with the latter slipping into negative territory for the month of November showing a
continued weakness in the consumer of Japan. Other data showed a decline in the All Industry
Activity data from previous while the Coincident index number strengthened compared to the
previous months release. The main event for the week last week was the BoJs monthly rate
decision, meeting, statement and press conference. The Bank left rates alone as well as their QE
amount that they are committed to doing. In their statement they sounded a bit more optimistic
on the economy including the export and industrial sectors as well as sounding more optimistic
on inflation. During the press conference, Kurodas rhetoric was nothing new saying that the
BoJ will adjust policy without hesitation if risks occur and saying that they expect inflation will
move to their target though also saying in pretty much the same breath that he expects inflation
to fall a bit further beginning next year. Overall though it is pretty much the same message as
the Bank of Japans last meeting. The minutes too showed a majority of 8-1 voting in favor of
the BoJs current policy with one decent. The decenter said that he believed that the policy
before the BoJs surprise increase in their QE amount was the best policy, in general. It is
interesting to me too though that the BoJ continues to strike a more optimistic tone on the
economy and inflation than the current data is showing. Will be interesting to see who is right
over the next few months going into the next year.

The Week Ahead and Other Thoughts

This week is a bit busy for the week in terms of data as Japan will not be taking off for
Christmas. So as for the data this week, CPI data on Thursday will be the highlight of the week.
Inflation continues to fall in Japan along with the rest of the world and I expect this to continue.
Also on Thursday we will get our monthly dose of household spending, unemployment data,
industrial production and retail trade data for the month of November. Expectations are that
industrial production will fall further, that the unemployment rate will rise and that household
spending will fall as well. So overall, pretty dismal expectations and expectations that I agree
with too as the industrial sector continues to weaken and household consumption is still weak
overall, as seen recently in growth data released a couple of weeks ago. Other data for the week
will be Housing starts data and the BoJ Meeting Minutes both being released on Wednesday.
The main focus for the week though will be whatever the government decides to do by the end
of Friday in Japan. About two weeks ago or so a top government official stated that the
government is to push through some sort of major reforms by the end of this year. By the 27th of
December to be exact. What they will push through is anyones guess but you can be sure the
markets will be paying attention. This could also mean yet another busy holiday for some
market participants; much like Thanksgiving was. Overall though the Japanese economy

continues to be very weak and so whatever reform or law is pushed through this week, if there
is, by the government will have to be a good one.

China Renminbi; Onshore, Yuan

Overall Picture and Tone
Overall China is weak right now economically and is changing politically and socially. As
for the economic picture, this has been weakening over the past few months. Inflation continues
to move lower which also includes food prices which continue to move lower. As for the
consumer, Consumer Confidence is improving some again after deteriorating over the past few
months while retail sales continue to move lower. As for the business side of things, the services
sector, manufacturing sector and industrial sector as well as business confidence all continue to
weaken overall. As for the employment picture this remains mixed to weak as labor costs
continue to weaken and the number of unemployed persons continues to move higher
highlighting the struggle of the Chinese economy to move from a strictly manufacturing based
economy to more of a services based country in terms of their main revenue and GDP growth
source. As for the housing market, prices continue to move lower as does loan growth putting
pressure on the consumer and the economy as a whole. With lower housing prices the demand
for existing and new housing is slowing and with the real estate market being such a big driver
of growth in China, this is putting a strain on its overall growth. On the government side of
things they continue to work on pushing through reforms to move the economy form a
centrally, government controlled economy, to a more market baed economy. During their recent
Fourth Plenum meeting they highlighted these reforms they are and want to implement
especially focusing on making the law system freer. As for the central bank, they continue to
implement reforms and easing measures to help revive the economy including reserve ratio for
certain banks and other reforms to help rural regions and the real estate market improve
including rate cuts recently. Interest rate liberalization is also one of the main things on the
central banks agenda in terms of reforms they want to implement. Overall then the tone of
China is a more negative one right now as reforms being implemented by the government and
central bank continue to cause weakness in the economy while overall global growth being
weak is causing the manufacturing industry to be weak right now.

Overall Sentiment of the Chinese Yuan (Onshore)

The overall sentiment for China is negative but as the Yuan is controlled by the

PBoC right now, the movements in their are not true in many ways. However, the Yuan
has now been weakening versus the USD over the past few weeks and continued to do
so last week as well.
Last Week in Review
Last week was a slower week in terms of data from China. HSBC Manufacturing data
slipped below the contraction/expansion level and now is in contraction mode. So yet more
signs of a weakening manufacturing sector in Japan. The other weak data release last week was
house price data which slipped further into negative territory highlighting yet more weakness
in the Chinese economy. It should be noted though that with the recent strength in the Chinese
stock market, this is likely a part of the reason for the falling house prices as investors move
their money out of real estate and into equities. Positive data last week was Business sentiment
data which showed improvement from last month and Foreign Direct Investment which also
rose from last month, though not really mitigating completely the fall into negative territory
that occurred last month.
The Week Ahead and Other Thoughts:
This will be another thin week in terms of data, at least based on what is planned at this
point. The only data release will be CB Leading Economic index data being released on Monday.
This data set has been steady over the past couple of months or so. Besides that, there is ever a
watchful eye of the market on the government and central bank of China and what new laws
and reforms they announce. They seem to be on a role recently announcing several new law
changes recently. This will likely only increase in amount and importance as the months go by
now and as the Chinese government moves closer to their objective of opening the markets and
economy up to be more free.

Euro Area: Euro

Overall Picture and Its Tone
The overall conditions of the Euro Zone are and continue to be very weak and negative.
Overall growth continues to move lower with some countries, including Germany, slipping into
negative growth in the most recent quarter. As for the business side of the economy, the services
and manufacturing and industries sectors all continue to move into weak territory while
business sentiment also continues to deteriorate. As for the consumer, consumption remains low
as seen in continued weakening retail sales data while sentiment also continues to move lower.

The labor market is also very weak with high unemployment, especially youth unemployment,
and wages continue to be low. Trade also remains weak with imports falling while exports are
actually remaining fairly supported. As far as the loan and money sector goes, loan growth
continues to be weak to both businesses and consumers. On the government side of things debt
levels remain very high and there is little ambition from some Euro Zone members to bring
those high debt levels down. In fact the recent budget presented by Italy to the European
Commission showed little in the way of actual reforms to bring down their debt level and was
accepted by the Commission showing once again, that these debt levels in the Euro Zone will
continue to rise until a day of reckoning comes and these countries have to default. Another
thing of continued concern continues to be the political divide between political members and
regions of the Euro Zone especially, now, in terms of how the ECB is allowed to deal with the
low growth and inflation. However disagreement and divide are also continuing to be present
in light of continued rising debt and lack of reforms from different countries, namely Italy and
France. As for the central bank, they continue to remain very dovish, recently implementing a
sort of QE program with the purchases of covered bonds and ABS assets in a bid to help revive
the Euro Zones struggling loan and banking industry in order to therefore revive economic
growth. They also have cut rates quite a good amount since about June of this year with one of
their rates now in negative territory. So overall the tone of the Euro Zone is negative.

Overall Sentiment of the Euro

The overall sentiment for the Euro currency is currently still negative overall but
this negativity has weakened over the past week or so.
Last Week in Review
Lsat week showed some improvement in the data coming from the Euro Zone and Euro
Zone nations. Manufacturing data from Germany and the Euro Zone came in better than
expected with Germanys manufacturing sector improving out of contraction territory. Services
data also showed improvement in France and the Euro Zone while Germanys service industry
weakened further. Other data that showed improvement was German ZEW sentiment survey
numbers which improved while the Euro Zone ZEW sentiment number came in lower than
expected and previous. The other sentiment data for the week was German GfK number which
improved for the month of January over the previous month. So mixed results in terms of
investor sentiment towards the Euro Zone right now while consumer confidence may be
starting to improve a bit more. Also IFO investor sentiment numbers showed improvement
overall from Germany, showing an improvement in business sentiment in Germany at least. The
other data of interest last week was CPI data from the Euro Zone which came in as expected
and overall as previous though month-to-month slipped lower yet again. Labor cost data for the
third quarter also slipped lower which is not good news for wages in the Euro Zone.

The Week Ahead and Other Thoughts

As for most of the rest of the world, this will be a slow week in terms of data due to
Christmas. German Retail sales on Tuesday along with quarter three GDP data from France on
the same day and Consumer Confidence for the Euro Zone Monday will be the data releases of
most interest for the week. As for consumer confidence this has taken a beating over the past
few months and so any improvement in the number will be encouraging on some small level
and whether consumer sentiment will follow last weeks investor and business sentiment
numbers which improved a bit. As for growth data from France, this reading will be the final
reading of this data with expectations of no change to the preliminary reading. Any more
weakness though will be taken notice of and increase expectations for more easing from the
ECB.

British Pound
Overall Picture and Its Tone
The overall economic picture is one of strong growth while some weakness has been seen
recently in some sectors. The recent weakness has been seen in particular in the manufacturing
and services industries with the latter being of some concern as the UKs economy is so
dependent on this sector for its growth. Other weakness has been seen in the countrys exports,
though not too surprising there as the Pound continues to be strong overall. Imports also have
fallen some over the last few months. As for the consumer, consumption has moved lower as
seen in recent weakening in Retail Sales data while sentiment numbers have begun to weaken.
This weakness in consumer sentiment has stemmed in part from a weakening housing market
as house prices fall as well as construction activity. As far as inflation goes, this also continues to
move lower as the UK follows the rest of the world (or a large part of it) into a world-wide
deflationary trend, in some respects. This low inflation and weaker growth has also kept the
BoE at bay in terms of them raising rates. They continue to be neutral on that fact and the
market is currently expecting them to keep rates on hold and not raise them until the middle
part of next year at the very least. Another concern of the BoE, which has kept them from
raising rates at this point is the low wage growth. However the labor market as a whole
continues to improve as the number of newly employed continues to rise and the number of
unemployed continues to fall. Overall then the tone of the United Kingdom is neutral to slightly
positive.

Overall Sentiment of Pound Sterling

Overall the sentiment for the Pound Sterling is neutral to negative.

Last Week in Review

Inflation data for last week showed yet another drop in prices for the month of November
with month-to-month data slipping into negative territory. This fall in prices is mainly due right
now to the fall in energy prices as oil in particular continues to weaken. Some good news
though for price data was PPI data which rose for the month of November but some
components of the PPI data, including output and import data continue to be in negative
territory. Retail prices also fell with month-to-month slipping into negative territory from the
last months reading and so it would appear that energy is not the only thing that is falling in
price though it continues to remain a main driver of lower prices right now. The other main
event last week was the release of the BoE meeting minutes. Overall there was no real change in
the tone of the BoE towards rate increases as the voting tally remained the same, two for rate
increases and seven against, while the tone in the statement pointed to a central bank that is fine
with leaving rates as they are for now. However they did show optimism on growth for the UK
but not for inflation. They also though expect that the low prices in oil right now will be a good
thing overall for the UK economy. So a mixed message coming from the BoE right now but still
the Bank is optimistic for growth. Other data for the week showed that house prices took
another fall from two sources of data as did consumer confidence for December. Positive data
for the week though was seen in the employment sector and retail sales sector. The employment
sector showed yet another drop in the number of unemployed in the UK and more than
expected while wages showed improvement as well with wages including and excluding
bonuses both improving for the month of October. An encouraging sign then as low wages have
been a concern of the BoE over the past few months. The one weakness in the employment data
was the unexpected rise in the unemployment rate. The other positive data from last week was
retail sales data which came in much better than expected overall both headline and core
numbers. However this could very well be due in part of holiday shopping as Christmas is right
around the corner.

The Week Ahead and Other Thoughts

This week in the UK will be another slow week for data however we will get the final
reading on third quarter GDP. Expectations are for a better reading than the preliminary reading
and if this is the case we could see the Pound gain again some more. This data will be released
on Tuesday along with the final reading of business investment. Services data and mortgage
approvals data will be released on the same day as well. But other than that, after Tuesday,
things will likely slow quite a bit with Christmas just a couple of days later.

Canadian Dollar
Overall Picture and Its Tone
The Canadian economy continues to be mixed overall. The positive side of things is that
inflation continues to be relatively stable and high, though this has likely changed now with oil
moving so low. Overall growth too continues to be supported. As for the consumer this is where
some of the weakness lies as spending remains subdued as seen via retail sales data. As for the
business side of things, this remains supported overall. Oil production also continues to
increase but with prices as low as they are, they are not helping the economy any right now. As
for the housing sector, this remains strong with high prices and good building activity both
being supported by low interest rates. As for trade, exports have started to increase some
recently especially as the US continues to bounce back. As for the labor market, this seems to be
improving as new jobs continue to increase in number and the unemployment rate continues to
move higher while wages remain weak, as seems to be norm right now. As for the central bank
they remain neutral to dovish in their tone towards the Canadian economy though they are
starting to sound a bit more optimistic now as the US economy, which Canada is very
dependent on, continues to improve. However, they continue to see recent inflation levels as
being just temporary and still continue to expect weaker growth for a while going forward.
Overall then the tone of Canada as a whole is neutral in relation to the monetary policy in
particular.

Overall Sentiment of the Canadian Dollar

Overall the sentiment for the CAD is currently neutral to negative.

Last Week in Review

The key data last week was inflation data for the month of November which came in
lower overall. The weaker number was driven by lower gasoline prices while other energy
prices actually rose, namely electricity and natural gas prices. This lower inflation data also give
some credence to the BoCs recent and continued message that the rise and steady height in the
inflation data in Canada has been just noise. However, what I find rather interesting, is that
while the rest of the worlds inflation data has been falling overall, Canadas has been staying
steadily high and rising in fact over the past few months. This to me tells me that there could be
more inflation pressures in Canada than some realize or than the BoC wants to admit. Also too,
with oil prices as low as they are and with as much as they have fallen in the last couple of
months, one would think that inflation would have come in even weaker. But it didnt a huge
amount this month. Something to watch then in my opinion. The other data of importance from

last week was retail sales data which came in mixed. Year-over-year came in weaker than
expected and previous while month-to-month came in better than expected but also weaker
than previous. Overall not a good message in terms of consumer demand in Canada. However
this data was from October and so we could see a pickup in in the following two months data
due to holiday shopping. Also last week, manufacturing shipments fell for October which does
not bode well for the manufacturing sector of Canada. Overall though the CAD continue to
move lower overall right now driven mostly by lower oil but also a weaker domestic economy
and a neutral to slightly dovish central bank.
The Week Ahead and Other Thoughts
Yet another country that will have sparse data this week. GDP data for the month of
October will be the one and only scheduled economic data release for this week and that is
scheduled for release on Tuesday. Expectations are for a lower number than previous. Besides
that oil will likely continue to be a main driver of the Loonie as both continue to move lower
overall right now.

United States Dollar

Overall Picture and Its Tone
The overall picture of the US one of positive growth overall, a central bank that is (very
slowly) turning more hawkish while the government has been pushed to one side in many
respects as it continues to wrangle with its differences and division. As for the economy: it
continues to improve overall though there has been some weakness seen recently, particularly
in the manufacturing sector due to the increasing value of the US Dollar. However this sector, as
well as the industrial and services sectors continue to grow. Business sentiment also remains
strong. The employment sector continues to be good overall with rising employment and falling
unemployment. However problems remain as long term unemployed people continue to
struggle to find jobs and the skills gap continues to widen as fewer and fewer have the skills
necessary to do high tech jobs that are so vital to a nations growth. As for the consumer, they
also remain pretty good though weak wage growth continues to be a problem and consumption
is down some now looking at retail sales data. Sentiment though for the consumer remains
strong overall. Trade continues to do well with both exports and imports strong though the
deficit in the US continues to deepen. As for inflation, this continues to stay steady, but steadily

below the Feds target. As for housing, after a good start this year this sector has weakened
some in the past few months as rate hike expectations continue to be in focus for this industry.
As for rates, and the Fed, in light of the overall US economic picture they have begun to turn
more hawkish in their tone and in their policy recently exiting their QE program completely in a
bid to begin to slowly tighten policy. The tone from the Fed is also changing, though also
changing as they are sounding more optimistic on the economy and jobs and so on but are still
concerned about low inflation. Looking to the government, this part of the US continues to be in
a wrangle with itself failing to pass any meaningful laws or policy changes to help the economy
grow. Recent mid-term elections have given some people some hope as the Republicans now
control both the House and Senate though with a stubborn President at the helm of things, little
will likely change until after presidential elections in two years. However we will have to see.
Maybe Congress will be able to pull a rabbit out of its hat after all. Overall though the tone of
the US economy is neutral to positive overall due to a more optimistic Federal Reserve and
stronger economic growth that continues to get stronger.

Overall Sentiment of the US Dollar

Overall the sentiment for the USD continues to be positive overall but this positiveness
has weakened a bit the past week or so.
Last Week in Review
Last week, inflation data showed yet another dip in prices in the US as both year-overyear and month-to-month headline inflation came in lower than expected and previous while
core also slipped lower. Month-to-month headline data in fact fell into negative territory, so
weakness in prices are present overall right now. Other data for the week were building permits
and housing starts data, both coming in lower tan expected and previous. As for the
manufacturing sector, this continued to show more weakness as Markit Manufacturing PMI and
Philly Fed data both came in weaker than expected and previous as the manufacturing part of
the US continues to weaken on the back of a stronger dollar and falling oil prices. As for the
internals for both these sets of data a couple of key internals was employment and prices paid,
both which fell for both sets of data. Services data also slipped lower for the month of
December. The main event last week though was the Feds monthly rate decision, rate statement
and last press conference of the year. Expectations going into the release were that the Fed
would remove the considerable time phrase from their statement signaling to the markets
that they were getting closer to their first rate hike. Well turns out they did remove it...or didnt
remove it...or both. Its all quite confusing; same as the market is right now after the release of
the statement. Basically, all the central bank did was move the considerable time phrase down
one sentence. Replacing the considerable time phrase was the word patience. Overall the
market took this as a hawkish move though the stock market too it as a more dovish tone as the
stock market rose quite a bit in response to the statement. Personally though, I am not seeing
how this shift in language is hawkish. To me it is just confusing and shows that the Fed is

confused as well and doing whatever they can to NOT raise rates. To me, the Fed is no closer to
raising rates any more than last months statement and in fact, I think the risk has increased that
the Fed will actually wait a bit longer than what the markets are expecting to raise rates after
last weeks rate statement release. During the press conference though, Yellen mentioned that
policy moves do not have to happen during press conference and that a couple means two in
terms of when policy could change to support rate hikes, i.e., a removal of the considerable time
and patience messages. As for the Feds growth and employment forecasts, growth was revised
higher overall both for this year and for three years from now while the unemployment rate
forecasts moved a bit lower. The Feds Dot forecasts remained pretty much the same but one
member did adjust their forecast to show that rates will be at 3% in September of 2015. So
overall a bit more hawkish tone to the forecasts. Could help explain the Dollar bid after the
statement released. All in all though, as I said I am not so sold on the idea that the Fed will be
raising rates when the markets expect they will; sometime within the first half of next year is
what the market expects at this point.

The Week Ahead and Other Thoughts

This week, leading up to the Christmas holiday break, things will be a bit busy in terms of
data for the US. The highlight of the week will be Durable Goods orders on Tuesday.
Expectations are for a better release than last months which showed some weakness in this part
of the US economy and which put some people in an uneasy state in terms of what fourth
quarter and year-end growth could likely be for the US. However, with the manufacturing
sector in particular having slowed as much as it has in the past couple of months or so, I am not
so optimistic on the Durable Goods orders data. I think there is a good amount of risk for a
weaker than expected number and possibly even weaker than previous. The other big data
release this week, also on Tuesday and on going with the growth theme, final reading of third
quarter GDP will be released. But, as the Durable Good orders is more forward looking this will
likely get more interest. Also for the week, and again on Tuesday, New Home Sales, Personal
Income, Personal Spending and Personal Consumption Expenditure data will be released. Other
data for the week will be existing home sales data on Monday and then weekly jobs claims
numbers and mortgage applications data on Wednesday. Then, after Wednesdays half-day
close of the markets, things should slow down for the rest of the week.

Charts

AUD/USD Weekly Chart - continues its decline...any correction coming?

Oil -- is a correction in the cards after weeks of declines?