The Weekly Wrap – Brexit, Earnings, Stats and Trade Give Direction

The Stats

It was a relatively quiet week on the economic calendar in the week ending 25^th October.

A total of 34 stats were monitored throughout the week, following 58 stats from the week prior.

Of the 34 stats, 8 came in ahead forecasts, with 24 economic indicators coming up short of forecast. 2 stats were in line with forecasts in the week.

Looking at the numbers, 15 of the stats reflected an upward trend from previous figures. Of the remaining 19, 17 stats reflected a deterioration from previous.

In spite of expectations of a FED rate cut in the week ahead, the Dollar found much-needed support. Optimism over trade and a pause in Brexit provided the upside, together with global economic data that was skewed to the negative.

The U.S Dollar Index (“DXY”) rose by 0.56% to end the week at $97.831.

Out of the U.S

It was a relatively quiet week on the economic data front. September durable goods orders and October prelim private sector PMIs, on Thursday, were the key drivers.

On the negative were a larger than expected 0.3% fall in core durable goods orders and a 1.1% slide in durable goods orders.

While private sector activity picked up in October, both PMIs came up short of economic forecasts. The manufacturing PMI rose from 51.1 to 51.5, with the services PMI rising from 50.9 to 51.0.

A combination of positive updates on trade and a slight uptick in activity supported the Dollar.

Housing sector stats were also negative, as were finalized consumer expectation figures for October. The stats had a muted impact on the Dollar, however.

Outside of the stats, geopolitics remained in focus. The combined effects of a Brexit stumble and positive updates on trade provided Dollar support throughout the week.

In the equity markets, the Dow rose by 0.70%, while the S&P500 and NASDAQ gained 1.22% and by 1.90% respectively. Gains for the week came off the back of corporate earnings and the positive updates on trade.

Out of the UK

It was a quiet week on the economic calendar.

Economic data was limited to October’s CBI Industrial Trend Orders that slid from -28 to -37.

While the numbers were dire, the Pound brushed aside the stats, with positive updates on Brexit in the early part of the week providing support. Brexit was the key driver in the week. While Johnson got the necessary votes on the renegotiated Brexit deal, he lost control of the timetable.

With the extension pending, the British PM is looking to force a general election, which should favor the Brexiteers. Assuming the polls are reliable this time around…

The Pound reached a week high $1.30125 on Monday before hitting reverse.

The Pound ended the week down by 1.21% to $1.2827.

For the FTSE100, a weaker Pound coupled with positive sentiment towards trade provided support. The FTSE100 rallied by 2.43% in the week.

Out of the Eurozone

It was a busy week on the economic data front.

Key stats included France, Germany, and the Eurozone’s prelim October PMIs on Thursday. On Friday, German consumer and business confidence figures were also of influence.

The stats were skewed to the negative. While France reported a pickup in both manufacturing and service sector activity, things were still dire for Germany and the Eurozone.

Germany’s manufacturing PMI rose from 41.7 to 41.9, coming up short of a forecast of 42. The service sector PMI fell from 51.4 to 51.2 adding to the market angst.

With the Eurozone’s composite rising from 50.1 to 50.2 and the manufacturing PMI holding steady at 45.7, there was a negative bias for the EUR.

On Friday, confidence figures were no better. November’s GfK Consumer Climate Index fell from 9.8 to 9.6.

The Ifo Business Climate Index delivered mixed results for October. While the Business Expectations Index rose from 90.9 to 91.5, the current assessment index fell from 98.5 to 97.8. While progress on the U.S – China trade talks had provided some support to the expectations index, the headline Business Climate Index held steady at 94.6.

On the monetary policy front, Draghi’s final ECB press conference provided few fireworks on Thursday. Following September’s policy easing, there was little for the markets to chew on.

With the data skewed to the negative and Brexit uncertainty returning, the EUR ended the week in the red.

For the week, the EUR fell by 0.78% to $1.1080.

For the European major indexes, the DAX30 led the way, rising by 2.07%. The EuroStoxx600 and CAC40 weren’t far behind, with gains of 1.57% and 1.52% respectively.

Elsewhere

It was a week in the red for the Aussie Dollar and Kiwi Dollar.

The Aussie Dollar fell by 0.48% to $0.6823, with the Kiwi Dollar down by 0.52% to $0.6349.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar.

There were no material stats to provide the Aussie Dollar with direction. Support for the Greenback ultimately weighed over the course of the week.

Demand for the safe havens pinned the Aussie Dollar back, with Brexit uncertainty and the extended U.S – China trade war weighing.

While updates on trade have been upbeat, trade tariffs remain and there’s yet to be any hint of an end to tariffs.

For the Kiwi Dollar

The stats were on the lighter side once more.

September trade data, released on Wednesday, provided some support mid-week. The monthly trade deficit narrowed from NZ$1,628m to NZ$1,242m.

While the narrowing was positive, expectations of further RBNZ rate cuts in the months ahead continued to weigh.

For the Loonie

It was another relatively busy week for the Loonie.

Key stats included August retail sales figures on Tuesday and August wholesale sales figures on Wednesday.

The stats were skewed to the negative ahead of the coming week’s Bank of Canada monetary policy decision.

Month-on-month, core retail sales, and retail sales fell by 0.2% and by 0.1% respectively. Economists had forecast rises for both.

Wholesale sales slid by 1.2% versus a forecasted 0.3% rise.

In spite of the negative numbers, a 5.36% jump in WTI and a 4.38% rise in Brent crude oil prices provided support in the week.

On the political front, there was a largely muted reaction to Trudeau’s victory on Monday.

The Loonie ended the week up by 0.53% to C$1.3058 against the Greenback.

For the Japanese Yen

It was a relatively busy week on the data front. Stats included September trade data on Monday and prelim October PMIs on Friday.

The stats were skewed to the negative once more. While the trade balance shifted from a ¥143.5bn deficit to a ¥123.0bn surplus, exports slid by 5.2% year-on-year. Economists had forecast a 4.2% fall following an 8.2% slide in August.

On Friday, the manufacturing PMI fell from 48.9 to 48.5, with the service sector PMI sliding from 52.8 to 50.3.

In spite of the negative numbers, the Yen’s loss in the week was modest, with safe-haven demand providing support.

The Japanese Yen fell by 0.20% to ¥108.67, against the U.S Dollar.

Out of China

It was a quiet week on the economic data front.

There were no material stats to provide direction. Positive updates from Beijing on trade provide support to the market bulls in the week.

The CSI300 rose by 0.71%, with the upside coming in spite of tariffs continuing to weigh on growth.

The Yuan rose by 0.23% to CNY7.0653 against the Greenback.