The Weekly Wrap – A Dovish FED Pegs Back the Greenback

The Stats

It was a relatively quiet week on the economic calendar, in the week ending 9^th April.

A total of 36 stats were monitored, following 60 stats from the week prior.

Of the 36 stats, 23 came in ahead forecasts, with 11 economic indicators coming up short of forecasts. There were 2 stats that were in line with forecasts in the week.

Looking at the numbers, 24 of the stats reflected an upward trend from previous figures. Of the remaining 12 stats, 11 reflected a deterioration from previous.

For the Greenback, it was a first weekly loss in 4-weeks. In the week ending 9^th April, the Dollar Spot Index fell by 0.92% to 92.163. In the previous week, the Dollar had risen by 0.28% to 93.022.

A dovish FED left the Dollar in the red for the week.

Out of the U.S

It was a quieter week on the economic data front.

Key stats included service sector PMI, factory orders, and weekly jobless claim figures.

It was a mixed set of numbers for the Greenback.

The market’s preferred ISM Non-Manufacturing PMI rose from 55.3 to 63.7 in March. It was the only positive, however.

In February, factory orders fell by 0.8%, partially reversing a 2.7% rise from January.

Jobless claims figures were also disappointing, with initial jobless claims rising from 728k to 744k in the week ending 2^nd April. Economists had forecast a fall to 680k.

Other stats in the week included JOLTs job openings, trade data, wholesale inflation, and Markit service PMIs.

These stats had a relatively muted impact on the Dollar and the broader markets, however.

On the monetary policy front, the FOMC meeting minutes reaffirmed FED Chair Powell’s stance on low for longer. Late in the week, Powell also delivered a speech talking of the need for unwavering monetary policy support.

In the equity markets, the NASDAQ rallied by 3.12%, with the Dow and the S&P500 gaining 1.95% and 2.71% respectively.

Out of the UK

It was a quiet week on the economic data front.

Finalized service and composite PMI numbers for March were in focus.

Downward revisions from prelim figures had a relatively muted impact on the Pound, however. Service sector and the broader private sector returned to growth in March, delivering Pound support.

Government plans on easing COVID-19 containment measures thanks to progress on the vaccination front also remained Pound positive.

In the week, the Pound fell by 0.90% to end the week at $1.3707. In the week prior, the Pound had risen by 0.31% to $1.3832.

The FTSE100 ended the week up by 2.65%, reversing a 0.05% loss from the previous week.

Out of the Eurozone

It was another particularly busy week on the economic data front.

Mid-week, service sector PMIs for March were in focus after impressive manufacturing numbers from the week prior.

The stats were skewed to the positive, with only Italy reporting a decline in its services PMI.

For the Eurozone, the composite PMI increased from 48.8 to 53.2, which was up from a prelim 52.5. A return to growth across the private sector came in spite of containment measures across a number of Eurozone member states.

From Germany, factory orders, industrial production, and trade data were also in focus.

Orders rose for a 2^nd consecutive month, albeit at a slower pace, driven by domestic demand.

Industrial production and trade data disappointed, however.

Industrial production fell by 1.6% in February, month-on-month, following a revised 2% decline in January. Economists had forecast a 1.5% rise.

In February, Germany’s trade surplus narrowed from €22.2bn to €19.1bn, versus a forecasted narrowing to €20.0bn.

On the monetary policy front, the ECB meeting minutes were also in focus. While highlighting downside risks to the economy near-term, optimism was evident over the medium-term outlook.

In line with Lagarde’s assurances from the press conference, the minutes revealed a plan to ramp up bond purchases in the near-term. The minutes did discussed a quarterly review, however…

For the week, the EUR rose by 1.19% to $1.1899. In the week prior, the EUR had fallen by 0.30% to $1.1759.

The DAX30 rose by 0.84%, with the CAC40 and EuroStoxx600 ended the week with gains of 1.09% and 1.16% respectively.

For the Loonie

It was a busier week.

Trade data for February and March Ivey PMI numbers were in focus mid-week.

The stats were mixed. While the Ivey PMI jumped from 60.0 to 72.9, the trade surplus narrowed from C$1.21bn to C$1.04bn.

At the end of the week, employment figures for March were more significant, however.

Employment surged by 303.1K at the end of the quarter, following an impressive 259.2k jump in February.

The unemployment rate fell from 8.2% to 7.5% as a result of the surge in hiring.

In the week ending 9^th April, the Loonie rose by 0.38% to C$1.2530. In the week prior, the Loonie had fallen by 0.01% to C$1.2578.

Elsewhere

It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 9^th April, the Aussie Dollar rose by 0.17% to $0.7623, with the Kiwi Dollar ending the week up by 0.01% to $0.7033.

For the Aussie Dollar

It was a particularly quiet week.

There were no material stats to provide the Aussie with direction.

While there were no stats, the RBA was in action early in the week.

In line with market expectations, the RBA stood pat on policy.

The Rate Statement talked of a hold on the cash rate until wage growth is substantially higher and inflation is sustainably within the 2% to 3% target range. According to the statement, the Board does not expect these conditions to be met until 2024 at the earliest.

For the Kiwi Dollar

It was also a particularly quiet week.

There were no material stats in the week to provide the Kiwi with direction.

For the Japanese Yen

It was a relatively quiet week.

At the start of the week, finalized service PMI figures were in focus. In March, the services PMI increased from 46.3 to 48.3, its highest reading since 2020.

In spite of the continued contraction, optimism hit its highest level since 2013 on vaccine hopes.

Household spending figures for February also provided some hope. Month-on-month, spending increased by 2.4%, partially reversing a 7.3% slump from January.

The Japanese Yen rose by 0.92% to ¥109.67 against the U.S Dollar. In the week prior, the Yen had fallen by 0.96% to ¥110.69.

Out of China

It was a relatively quiet week on the data front.

The Caixin Services PMI for March was in focus early in the week.

Following softer growth across the manufacturing sector, service sector activity picked up in March.

The Services PMI rose from 51.5 to 54.3.

At the end of the week, inflation figures also drew attention, with the PMI surveys highlighting a marked increase in input price.

In March, consumer prices fell by 0.5%, reversing a 0.6% increase in February. In spite of the fall in March, inflationary pressure returned. The annual rate of inflation accelerated from -0.2% to 0.4%. Economists had forecast consumer prices to fall by 0.4%, month-on-month, and to rise by 0.3% year-on-year.

Wholesale inflationary pressures surged at the end of the 1^st quarter. The producer price index increased by 4.40%, year-on-year, which was well above a forecasted 3.5% increase. The PPI had risen by 1.7% in February.

In the week ending 9^th April, the Chinese Yuan rose by 0.22% to CNY6.5526. In the week prior, the Yuan had fallen by 0.40% to CNY6.5670.

The CSI300 slid by 2.45%, with the Hang Seng ending the week down by 0.83%.