The Week Ahead – Alarming China PMIs to Set the Tone in a Busy Week Ahead

On the Macro

It’s a busy week ahead on the economic calendar, with 61 stats to monitor in the week ending 7^th March. In the previous week, 56 stats had been in focus.

For the Dollar:

It’s a busy week ahead on the economic calendar.

Through the 1^st half of the week, private sector PMI numbers and ADP nonfarm employment change figures are in focus.

Expect the markets preferred ISM Survey based numbers due out on Monday and Wednesday to have the greatest impact.

There is more downside risk on the cards for the Greenback, however, should ADP numbers disappoint.

We saw the Markit Survey based PMI numbers report a contraction in the U.S services sector. Pressure on the Dollar and risk aversion could build should the ISM figures affirm a contraction.

In the second half of the week, labor market numbers due out on Friday will also influence.

Expect wage growth and nonfarm payrolls to be the main area of focus. Any hint of weaker labor market conditions and there could be yet more drama for the Dollar.

Outside of the numbers, expect news updates on the coronavirus and chatter from the Oval Office to also influence.

The Dollar Spot Index ended the week down by 1.21% to 98.132.

For the EUR:

It’s also a busy week ahead on the economic data front.

In the 1^st half of the week, the private sector is back in focus with the manufacturing and service sector PMI numbers out of Italy and Spain.

Finalized numbers are also due out of France, Germany, and the Eurozone. Expect Germany, Italy and the Eurozone’s numbers to have the greatest influence on Monday and Wednesday.

On Tuesday, the Eurozone’s unemployment rate will also provide the EUR with direction.  Any rise in the unemployment rate will raise doubts over consumers providing support through spending.

The proof will be in the pudding, with retail sales figures due out of Germany and the Eurozone on a particularly busy Wednesday.

In the 2^nd half of the week, Germany is back in focus, with January factory orders due out on Friday.

After December’s 2.1% slide, any weak set of numbers would weigh on the EUR.

Outside of the numbers, updates on the coronavirus will influence. Currently, Lagarde is unwilling to deliver support, while the markets are pricing in FED rate cuts…

The EUR/USD ended the week up by 1.65% to $1.1026.

For the Pound:

It’s a busier week ahead on the economic calendar.

Key stats include finalized manufacturing and service sector PMI numbers due out on Monday and Wednesday.

Expect any upward revisions to provide support in the 1^st half of the week.

On Tuesday, the construction PMI would need to hold steady, however, to avoid a pullback to sub-$1.28 levels.

While the stats are in focus, geopolitics will have a greater impact in the week. The EU and Britain return to the negotiating table and that’s tended to be Pound negative.

The GBP/USD ended the week down by 1.09% to $1.2823.

For the Loonie:

It’s another relatively busy week ahead on the economic calendar.

In a quiet 1^st half of the week, however, with economic data limited to 4^th quarter labor productivity numbers due out on Wednesday.

We would expect the numbers to have a muted impact on the Loonie, however, with the Bank of Canada in action on Wednesday.

In the 2^nd half of the week, employment, trade, and the Ivey PMI will provide direction on Friday.

Outside of the numbers, the BoC’s forward guidance will be key to the Loonie’s sensitivity to the numbers.

Concerns over the impact of the coronavirus on global trade will likely leave the BoC on a dovish footing. The real question is whether the stats have been bad enough to support a cut. Oil prices alone suggest the need for more support.

On the risk front, expect updates on the coronavirus to continue to impact crude oil prices and the Loonie.

The Loonie ended the week down by 1.38% to C$1.3407 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly busy week ahead.

In the 1^st half of the week, stats include Manufacturing and gross operating profit numbers on Monday and building approval figures on Tuesday.

Expect gross operating profits and manufacturing figures to influence ahead of 4^th quarter GDP numbers due out on Wednesday.

In the 2^nd half of the week, the focus will then shift to January trade data and retail sales figures due out on Thursday and Friday.

Expect plenty of sensitivity to the numbers. The markets may need February figures, however, for some early indications of the effect of the coronavirus on trade and consumer sentiment towards the spread of the virus.

The main event of the week, however, is the RBA monetary policy decision on Tuesday. February’s minutes revealed that members had considered a rate cut, which will leave the Aussie Dollar on the defensive. Much will depend on the news wires and the spread of the coronavirus. The RBA is unlikely to consider the impact to just be through the 1^st quarter…

If China’s private sector PMI numbers from the weekend are anything to go by…

The Aussie Dollar ended the week down by 1.69% to $0.6515.

For the Kiwi Dollar:

It’s a quiet week ahead on the economic data front. Key stats are limited to building consent numbers for January that will unlikely have an impact on the Kiwi.

We expect market risk sentiment and economic data from key economies, including China’s private sector PMIs from the weekend and Monday to be the key drivers.

The Kiwi Dollar ended the week down by 1.62% to $0.6246.

For the Japanese Yen:

It’s a relatively busy week on the economic calendar. Key stats include 4^th quarter capital spending figures on Monday and January household spending figures on Friday.

Barring revision from prelim numbers, February’s finalized manufacturing and service sector PMIs should have a muted impact on Monday and Wednesday.

Outside of the numbers, updates from China and beyond on the coronavirus will remain the key driver.

The Japanese Yen ended the week up by 3.33% to ¥107.89 against the U.S Dollar.

Out of China

It’s a relatively busy week on the economic data front. Key stats include private sector PMI numbers due out on Monday and Wednesday. We expect February’s PMIs to give an early indication of just how badly private sector activity took a hit…

From the weekend NBS numbers for the private sector will likely weigh on risk appetite at the Monday open.

China’s Manufacturing PMI tumbled from 50.0 to 35.7, with the Non-Manufacturing PMI slumping from 54.1 to 29.6.

The only other time that the Manufacturing PMI had sat at sub-40 was back in December 2008.

Outside of the numbers, expect chatter from Beijing and COVID-19 updates to continue to be the main area of focus.

So far so good in China’s containment exercise, though the opening of factories will raise concerns over another breakout.

The Chinese Yuan rose by 0.50% to CNY6.9920 against the U.S Dollar in the week.

Geo-Politics

Trade Wars: On hold as the world battles the spread of the coronavirus… With the U.S equity markets in corrective territory, will the U.S president look to change the narrative? The handling of the coronavirus as given the Democrats a lifeline. The slide in the equity markets and the clear reliance on China for the demand of U.S goods will be another thorn for Trump to deal with.

UK Politics: The EU and Britain begin trade negotiations, with chatter from both sides likely to have a material impact on the Pound. The two sides sit far apart at the starting point, which can’t be too good for the Pound near-term…

U.S Politics: Bernie Sanders market negative, Bloomberg market positive, Trump the devil we know… Expect Super Tuesday to garner plenty of attention, with 34% of the delegates up for grabs. As Michael Bloomberg enters the race, Tuesday’s outcome will give an idea of who are the front runners to take on Trump and the Republicans…