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The Weekly Wrap – Another Tumultuous Week that Saw the FED Slash Rates to Zero

The Dollar takes the crown once more as the markets get battered. Monetary and fiscal policy provided little comfort in the week.
Bob Mason
Arms trade business concept.

The Stats

It was a busier busy week on the economic calendar, in the week ending 20th March.

A total of 58 stats were monitored, following the 49 stats in the week prior.

Of the 58 stats, just 23 came in ahead forecasts, with 26 economic indicators coming up short of forecast. 9 stats were in line with forecasts in the week.

Looking at the numbers, 22 of the stats reflected an upward trend from previous figures. Of the remaining 36, 33 stats reflected a deterioration from previous.

For the Greenback, it was a particularly bullish week. The U.S Dollar Spot Index surged by 4.12% to end the week at 102.817. In the previous week, the U.S Dollar Spot Index had risen by 2.76%.

Economic data from the U.S took a back seat in the week, with the coronavirus, the FED and the U.S administration in focus.


Out of the U.S

It was a busy week on the economic calendar. March NY Empire State Manufacturing Index numbers drew attention on Monday. The Index slumped from 12.9 to -21.5, reflecting the impact of the coronavirus on the sector. On Thursday, the Philly FED Manufacturing Index suffered a similar fate, with the Index tumbling from 36.7 to -12.7.

Of greater significance in the week, however, was a surge in weekly initial jobless claims, from 211k to 281k. The only good news was that the 300k threshold was not breached. This may well be on the cards next week, however. We’ve not seen 300k levels since March 2015…

On the consumption front, retail sales fell unexpectedly in February, with core retail sales falling by 0.4%. Economists had forecast a 0.2% rise, following a 0.3% increase in January. We’re not expecting great numbers in the coming months, with the coronavirus spread, though hoarding may limit the damage in March.

With the manufacturing sector taking a big hit in March, there was little interest in February industrial production figures. While production rose by 0.6% in February, we’re expecting production to also hit reverse in the coming months.

The stats, skewed to the negative, had a muted impact on the dollar, as did the FED move on Sunday.

U.S President Trump got his wish of zero rates, with the FED also delivering $700bn in QE. The response, however, was not what Trump was looking for.

Equity markets sank, while the Dollar surged in the week.

In the equity markets, the Dow tumbled by 17.30%, with the S&P500 and NASDAQ sliding by 14.98% and by 12.64% respectively.

Out of the UK

It was a relatively quiet week on the economic calendar.

February Employment figures on Tuesday weighed, in spite of better than expected numbers.

Wage growth picked up in January, with average earnings plus bonus rising by 3.1%, year-on-year. In December average earnings plus bonus had risen by 2.9%. Employment over 3-months to January increased by 184k, following a 180k increase in 3-months to December.

These were the only positives, however, with claimant counts rising by 17.3k and the unemployment rate up from 3.8% to 3.9%.

The numbers were certainly not bad enough to deliver the slump in the Pound, which visited sub-$1.15 levels.

Market reaction to the government’s measures to tackle the coronavirus contributed to the slide in the week. This was coupled with the government’s failure to deliver a more significant fiscal stimulus package.

In the week, the BoE delivered a 2nd emergency rate cut, leaving interest rates at 0.1% and ramped up its bond-buying program. The BoE increased the Bond-buying program from £435bn to £645bn.

In the week, the Pound slumped by 5.29% to $1.1629, following on from a 5.90% tumble in the previous week. The FTSE100 ended the week down by a relatively modest 3.27%.

Out of the Eurozone

It was a relatively busy week economic data front.

It was ZEW Economic Sentiment figures for March that drew the greatest interest in the week.

Germany’s ZEW Economic Sentiment Index tumbled from 8.7 to -49.5. Things were no better for the Eurozone, with the Economic Sentiment Index slumping from 10.4 to -49.5.

Mid-week, trade figures were also disappointing, with the Eurozone’s trade surplus narrowing from €23.1bn to €1.3bn. While the numbers were for January, China’s shut down in February and the EU’s shutdown in March suggests some sizeable deficits on the horizon…

On Friday, wholesale inflation figures out of Germany added further pressure on the EUR. In February, Germany’s Producer Price Index fell by 0.4%, partially reversing a 0.8% rise from January. Deflationary pressures are likely to build further as the manufacturing sector hits more than a speed bump…

On the monetary policy front, the ECB stepped into action. On Wednesday, the ECB announced a €750bn Pandemic Emergency Purchase Programme (PEPP) that will extend until the end of 2020. The Governing Council also stated that it would do everything necessary to deliver support. This was good enough for the European equity markets, which found support on Thursday and Friday.

For the week, the EUR slid by 3.77% to end the week at $1.0688.

For the European major indexes, it was another bearish week. The DAX30 led the way down, falling by 3.28%, with the CAC40 and EuroStoxx600 declining by 1.69% and 2.05% respectively.


It was another particularly bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 20th March, the Aussie Dollar slumped by 6.74% to $0.5785, with the Kiwi Dollar tumbling by 7.08% to $0.5700.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar on the economic data front.

Economic data was limited to 4th quarter house price figures and February employment numbers.

The numbers were skewed to the positive, with house prices rising by 3.9% in the 4th, following a 2.4% rise in the 3rd quarter.

On the employment front, the unemployment rate fell from 5.3% to 5.1%, though it wasn’t enough to support the Aussie.

Sliding commodity prices and a surge in demand for the Greenback sank the Aussie for the 2nd week. Demand for commodities is expected to slide further as more countries go into shutdown mode.

For the Kiwi Dollar

It was also a relatively busy week on the economic calendar.

1st quarter consumer sentiment took a hit, with the Westpac Consumer Sentiment Index sliding from 109.9 to 104.2. Global dairy prices were also on the slide. The Global Dairy Trade Price Index slid by 3.9% in the 2-weeks to 17th March, following a 1.2% fall.

On Thursday, 4th quarter GDP numbers also disappointed, with the growth slowing from 0.7% to 0.5%.

A slowdown in the 4th was an ominous sign, with the global economy hitting the brakes in the 1st quarter.

On the monastery policy front, the RBNZ joined the FED in delivering a rate cut ahead of the Asian open on Monday. The RBNZ cut the OCR by 75 basis points to 0.25% on Monday and stated that it would remain at 0.25% for at least 12-months.

While the RBNZ held back from using alternative measures, they did also state that a large scale asset purchasing program would be the next step…

Monetary policy easing and sliding commodity prices were the Kiwi Dollar’s downfall in the week.

For the Loonie

It was a busy week on the economic calendar.

Key stats included February inflation figures on Wednesday and retail sales figures on Friday.

The numbers were mixed, with the annual rate of inflation holding steady at 1.8%, while core retail sales fell by 0.1%.

Manufacturing sales and house price figures had a muted impact in spite of better than forecasted numbers.

On the monetary policy front, there were no further moves by the BoC. On Friday 13th, the Bank of Canada had lowered the overnight rate target by 50 basis points to 0.75%, effective 16th March.

While the stats were skewed to the positive, it was tumbling crude oil prices that added further pressure on the Loonie.

Brent and WTI tumbled by 20.30% and by 29.31% in the week, with an oil industry bailout now anticipated. Western Canadian Select slumped by more than 50% on Friday alone…

The Loonie fell by 4.06% to end the week at C$1.4366 against the Greenback. It could have been much worse, however, with the Loonie visiting C$1.46 levels in the week.

For the Japanese Yen

It was a relatively busy week on the data front.

February trade data on Wednesday and inflation figures on Thursday were in focus.

A 14% slide in imports in February led to a trade surplus of ¥1,109.8bn, as imports fell by just 1%.

Inflationary pressures eased further in February, with the core annual rate of inflation easing from 0.8% to 0.6%. Consumer prices fell by 0.1% in February after having stalled in January.

The numbers ultimately had a muted impact on the Yen, with the Dollar regaining its safe haven crown. News updates on the coronavirus and border shutdowns across the globe weighed on risk appetite in the week.

The Japanese Yen slid by 3.08% to end the week at ¥110.93 against the U.S Dollar.

Out of China

It was a relatively busy week on the economic data front.

Risk assets took a beating on Monday. As the markets were digesting the FED’s rate cut, economic data out of China also hit riskier assets further.

Industrial production tumbled by 13.5%, year-on-year, in February, which was far worse than a forecasted 1.5% increase.

Fixed asset investments slumped by 24.5%. Economists had forecast a 2.8% increase year-on-year.

On the monetary policy front, the PBoC left loan prime rates unchanged at the end of the week, which was a positive sign, however.

China reported no new cases of the coronavirus for the 1st time since the outbreak, which was also positive news. It wasn’t enough to offset the economic data, however, which paints a dismal picture for the 1st half of the year.

In the week ending 20th March, the Yuan fell by 1.25% to CNY7.0962 against the Greenback.

The CSI300 slid by 6.21%, with the Hang Seng falling by 5.11% in the week.

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