The Weekly Wrap – A Dollar Slump, The Stimulus Bill, and The Coronavirus Grabbed the Headlines
It was a busy week on the economic calendar, in the week ending 27th March.
A total of 52 stats were monitored, following the 58 stats in the week prior.
Of the 52 stats, 21 came in ahead forecasts, with 25 economic indicators coming up short of forecast. 6 stats were in line with forecasts in the week.
Looking at the numbers, just 12 of the stats reflected an upward trend from previous figures. Of the remaining 40, 36 stats reflected a deterioration from previous.
For the Greenback, it was a particularly bearish week. The U.S Dollar Spot Index slid by 4.33% to end the week at 98.365. The weekly loss was one of the worst weeks since the GFC. In the previous week, the U.S Dollar Spot Index had surged by 4.12%.
Economic data from the U.S certainly contributed to the downside, with coronavirus numbers adding pressure.
Out of the U.S
It was a busy week on the economic calendar. Prelim March private sector PMIs and weekly jobless claims figures drew the greatest attention, however.
In March, while the U.S Manufacturing PMI fell from 50.7 to 49.2, the Services PMI tumbled from 49.4 to 39.1. That led to a fall in the Composite PMI from 49.6 to 40.5.
Both the Composite PMI and Services PMI fell to new series low, while the Manufacturing PMI fell to a 127-month low.
On Thursday, the initial jobless claims surged to a record high 3.283m in the previous week. The surge reflected the impact of the shutdown in a bid to slow the spread of the coronavirus.
At the end of the week, downward revisions to March consumer sentiment figures didn’t help.
The Michigan Consumer Sentiment Index was revised from a prelim 95.9 to 89.1 for March.
The $2tn Stimulus Bill drove demand for riskier assets that contributed to the Dollar’s demise.
News updates on the coronavirus were also negative.
In the week, the U.S passed China with the total number of cases surging to 104,142.
In the equity markets, the Stimulus Bill drove demand for the majors. The Dow rallied by 12.84%, with the S&P500 and NASDAQ gaining 10.26% and 9.05% respectively.
Out of the UK
It was a busy week on the economic calendar.
Key stats included prelim March private sector PMI numbers.
There were no surprises in the numbers, with the UK Services PMI falling to a record low. The UK manufacturing sector fared relatively better. The prelim PMI fell to a 3-month low in March. With private sector activity in the doldrums elsewhere, there was little influence on the Pound.
February inflation and retail sales figures were also brushed aside in spite of a fall in retail sales and softer inflationary pressure.
The Pound had fallen back to $1.15 levels at the start of the week before a slide in the dollar led to a rebound in Cable.
On Thursday, the BoE’s decision to stand pat on monetary policy added further upside to the Pound that hit $1.22 levels in response.
For the British government, the decision to lockdown was also an important one in the week. The Pound had suffered over concerns of the UK succumbing to the virus in the week prior… While the coronavirus cases were on the rise, they were minor relative to other countries in Europe.
In the week, the Pound surged by 7.15% to $1.246, reversing a 5.29% slide from the previous week. The FTSE100 ended the week up by 6.16%.
Out of the Eurozone
It was also a busy week on the economic data front.
Prelim March private sector PMI numbers were in focus at the start of the week. A common theme across the West was the marked deterioration in service sector activity.
The Services PMIs for France, Germany and the Eurozone fell to record lows. Things were not much better for the manufacturing sector, with the Eurozone Manufacturing PMI falling to a 99-month low.
German business and consumer confidence also took a hit in March. The IFO Business Climate Index and GfK Consumer Climate Index both saw heavy declines.
From the ECB, the Economic Bulletin added to the doom and gloom, with the ECB revising down growth forecasts. For 2020, the ECB revised down growth by 0.3 percentage points to 0.8%…
Dollar weakness prevailed, however, leaving the EUR with solid gains in spite of the dire numbers.
While the spread of the coronavirus continued at an alarming pace, there was some positive news mid-week. Italy stated that the pace of the spread had abated, with Germany also announcing that the infection rate was plateauing.
For the week, the EUR rallied by 4.24% to $1.1141, reversing a 3.77% slide from the previous week.
For the European major indexes, it a bullish week. The DAX30 rallied by 7.88% to lead the way, with the CAC40 and EuroStoxx600 gaining 7.48% and 6.09% respectively.
It was a particularly bullish week for the Aussie Dollar and the Kiwi Dollar.
In the week ending 27th March, the Aussie Dollar surged by 6.62% to $0.6168, with the Kiwi Dollar rallying by 5.88% to $0.6035.
For the Aussie Dollar
It was a particularly quiet week for the Aussie Dollar on the economic data front. There were no material stats to provide direction.
The sharp pullback in the U.S Dollar and fiscal policy support delivered the upside in the week.
A pickup in market risk appetite, reflected in the global equity market rally ultimately drove demand for the commodity currencies.
The gains came in spite of the continued spread of the coronavirus and some quite dire PMI numbers. PMI numbers from Europe and the U.S suggest that the near-term consumption will likely remain weak at best…
For the Kiwi Dollar
It was a relatively quiet week on the economic calendar. Economic data was limited to February trade figures that were skewed to the positive. The markets had anticipated some quite dire numbers for February. A jump in milk powder prices offset a fall in exports to China. Imports were also on the slide, leading to a February trade surplus.
It was ultimately market risk appetite, however, that drove demand for the Kiwi in the week.
For the Loonie
It was a quiet week on the economic calendar.
Key stats were limited to January wholesale sales figures that had a muted impact on the Loonie.
While the U.S Stimulus Bill supported the demand for riskier assets, a continued fall in oil prices limited the upside in the week.
On the monetary policy front, the Bank of Canada delivered another emergency rate cut on Friday that also pinned the Loonie back.
The BoC cut rates by a further 50 basis points to 0.25%, with a new bond-buying program also announced.
The Loonie rose by 2.65% to end the week at C$1.3985, partially reversing a 4.06% fall from the previous week.
For the Japanese Yen
It was a relatively busy week on the data front.
Key stats included prelim March private sector PMI and March inflation figures.
A fall in both the Manufacturing and Services and softer inflation had a muted impact on the Yen, however.
Dollar weakness coupled with concerns over the continued spread of the coronavirus delivered support.
The Japanese Yen rose by 2.70% to end the week at ¥107.94. In the week prior, the Yen had fallen by 3.08% against the U.S Dollar.
Out of China
It was a quiet week on the economic data front. February industrial profit figures at the end of the week failed to spook the markets.
Profits tumbled by 38.3% year-to-date. The markets had anticipated dire numbers, however, following the private sector PMIs released earlier in the month.
There had been positive news from China mid-week, with Beijing planning to loosen containment measures.
Late in the week, however, a ban on the entry of all foreigners and news of a rise in new cases was of concern.
In the week ending 27th March, the Yuan ended the week flat at CNY7.0960 against the Greenback.
The CSI300 rose by a relatively modest 1.56%, with the Hang Seng gaining 2.98%.