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Bob Mason
GBP/USD daily chart, March 15, 2019

The Stats

There were some big swings in the FX world last week, with the Dollar on the defensive through the week.

On the data front, a relatively busy economic calendar provided some direction for the majors.

The data count was skewed to the negative, with a total of 27 out of 62 stats monitored coming in below market forecasts in the week. A total of 22 out of the 62 stats came in above forecasts, with the remaining 13 in line with forecasts.


Out of the U.S,

January’s delayed retail sales figures, February inflation numbers, and durable goods orders provided direction.

Manufacturing and industrial production figures on Friday were also of influence along with consumer sentiment numbers.

Of greatest impact, however, was a revision to December retail sales figures that suggested a more material slowdown in the U.S economy in the 4th quarter.

The stats continued to support the more FED’s more dovish stance on monetary policy.

Following disappointing NFP numbers in the previous week, durable goods orders, industrial production figures and manufacturing numbers out of NY State also disappointed. With the annual rate of core inflation softening in February, risk appetite added to the Dollar’s demise in the week.

Optimism over a trade agreement between the U.S and China combined with sentiment towards monetary policy supported demand for riskier assets through the week. News of China approving a new law to prohibit technology transfers was further evidence of the progress being made by both sides.

While the U.S Dollar Spot Index fell by 0.73% in the week, it was a different story for the U.S equity markets. The NASDAQ led the way, rallying by 3.8% off the back of the news from China, with the S&P500 and Dow up by 2.89% and 1.57% respectively.

Out of the UK,

In spite of a relatively busy economic calendar, 3 key parliamentary votes drove the Pound.

The first vote was on Theresa May’s deal, which Parliament overwhelmingly voted against. Theresa May’s last-ditch efforts and a marginally revised deal had provided support to the Pound at the start of the week. The vote led to the Pound sliding from $1.32 levels to $1.30 levels

The second vote also left Theresa May looking red-faced. A divided Conservative Party voted against a no-deal Brexit. The outcome of the vote, not only support the Pound but also led to a vote in favor of an extension to Brexit.

While off the week’s high $1.33806, the Pound jumped by 2.11% in the week, reversing losses from earlier in the month.

Glancing at the economic data, February GDP numbers and January industrial and manufacturing production figures were positive. The numbers support the more hawkish view of a late in the year rate hike, on the assumption that Brexit goes smoothly, if at all.

In spite of the jump in the Pound, the FTSE100 gained 1.74% in the week. The index weighted towards multinationals traditionally leaves the index struggle in periods of Pound dominance. Hopes of a trade deal between the U.S and China and relief over the no-deal Parliamentary vote were the key drivers.

While the Pound found much-needed support, more trouble could be on the way, however.

Theresa May could find herself being pushed out of Number 10 as soon as next week and that would spell yet more political uncertainty for Britain.

Out of the Eurozone,

Economic data out of Germany disappointed once more. Germany’s trade balance narrowed in January, with industrial production sliding by 0.8%.

Industrial production for the Euro bloc rose by 1.4% in January. The rise came in spite of weak numbers out of Germany, offsetting the negative effects on the EUR.

The EUR brushed aside finalized inflation figures in the week. The annual rate of core inflation eased from 1.1% to 1.0% in February. Traditionally negative for the EU, a dovish ECB has seen the EUR largely ignore inflation figures out of late.

For the week, the EUR was up 0.81%, with market risk appetite the key driver through the week. The uptick in the EUR failed to pin back the European majors. The CAC and EuroStoxx50 rallied by 3.33% and 3.12% respectively. The gains in the DAX were more modest, up 1.99%. Weak economic indicators and the stronger EUR had a bigger impact on the more export-orientated index.


The Bank of Japan delivered a more dovish economic outlook in its March monetary policy statement. In spite of the negative outlook, Governor Kuroda ruled out further policy easing. Particularly weak trade and industrial production figures suggest dire numbers ahead. The BoJ may ease monetary policy further. However, much will depend on whether the U.S and China can resolve their differences.

The Japanese Yen fell by 0.28% to ¥111.48 against the greenback. Market risk appetite pinned the Yen back in the week.

For the Aussie Dollar and Kiwi Dollar, it was a positive end to the week. News out of China on tech transfer laws drove optimism over trade. The Aussie Dollar ended the week with a 0.57% gain, while the Kiwi was up by 0.62%.

The gains in the Aussie Dollar came in spite of weak economic data through the week. Both business and consumer confidence disappointed. For the Kiwi Dollar, the stats were on the more positive side. Electronic card sales saw further upside, with the Business PMI also reflecting a pickup in activity.

Geo-Political Risk,

The focus remained on the U.S – China trade talks and Brexit.

Theresa May will have one last attempt at getting a deal pushed through, following the vote in favor of a Brexit extension.

Following Huawei’s lawsuit filing in the previous week, lawmakers in China looked to appease the U.S administration. The prohibition of tech transfers is expected to lead to a resolution to the extended U.S – China trade war.

The CSI300 and Hang Seng gained 2.39% and 2.78% respectively in the week.

Of less material influence but possibly a consideration in the weeks ahead was news of North Korea pulling out of further talks with the U.S on denuclearization. For risk aversion to hit, however, missile testing would need to resume, along with the rhetoric…

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