The Weekly Wrap – COVID-19 and U.S Politics Drove Risk Sentiment

The Stats

It was a busier week on the economic calendar, in the week ending 20^th November.

A total of 62 stats were monitored, following 48 stats from the week prior.

Of the 62 stats, 33 came in ahead of forecasts, with 20 economic indicators came up short of forecasts. 9 stats were in line with forecasts in the week.

Looking at the numbers, 31 of the stats also reflected an upward trend from previous figures. Of the remaining 31 stats, 25 reflected a deterioration from the previous.

For the Greenback, it was back into the red after the previous week’s partial recovery. The Dollar Spot Index fell by 0.39% to 92.392. In the week prior, the Dollar had risen by 0.53% to 92.721.

While a continued spike in new COVID-19 cases tested support for riskier assets, progress towards a COVD-19 vaccine delivered support in the week. Impressive efficacy rates from Moderna Inc. and Pfizer Inc. eased demand for the Dollar in the week.

Out of the U.S

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

In the 1^st half of the week, October retail sales and industrial production figures were in focus.

The stats were skewed to the negative, with retail sales disappointing at the turn of the quarter.

While industrial production figures were positive, consumer spending remains the key driver for the U.S economy. Continued failure to deliver on a COVID-19 stimulus package is likely to deliver weaker numbers ahead on the spending front.

In the 2^nd half of the week, the Philly FED Manufacturing and weekly jobless claims figures also disappointed.

Initial jobless claims rose from 711k to 742k in the week ending 13^th November. The Philly FED Manufacturing Index fell from 32.3 to 26.3.

Other stats in the week included manufacturing numbers from NY State, housing sector data, and inventories.

The stats had a muted impact on the Dollar and broader market risk sentiment, however.

In the equity markets, the NASDAQ rose by 0.22%, while the Dow and S&P500 fell by 0.73% and by 0.77% respectively.

Out of the UK

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

Early in the week, October inflation figures were in focus. A pickup in inflationary pressures was Pound positive. The annual rate of inflation picked up from 0.5% to 0.7%.

That was the only positive, however, with consumer prices stalling in October and wholesale inflationary pressures easing.

Mid-week, the CBI Industrial Trend Orders index also came in negative, with a fall from -34 to -40 in November.

Wrapping things up were retail sales figures at the end of the week. In October, core retail sales rose by 1.3%, following a 1.5% increase in September. Retail sales increased by 1.2%, following a 1.4% rise in September. Both sets of figures came in ahead of forecasts, whilst softer than September figures.

Year-on-year, core retail sales were up by 7.8%, with retail sales up by 5.8%.

Away from the economic calendar, negotiators suspended Brexit negotiations. Members of the EU negotiating team self-isolated due to one member testing positive for COVID-19. Talks of a possible extension provided the Pound with support as did hopes of an agreement.

In the week, the Pound rose by 0.65% to $1.3275. In the week prior, the Pound had risen by 0.26% to $1.3189.

The FTSE100 ended the week up by 0.56%, following on from a 6.88% gain in the previous week.

Out of the Eurozone

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

Finalized October inflation figures for Italy and the Eurozone provided little direction in the week.

The finalized numbers were in line with prelim figures, with the Eurozone’s core annual rate of inflation holding steady at 0.2%.

Following ECB President Lagarde’s assurances of more monetary policy support, there was little EUR reaction.

At the end of the week, wholesale inflation figures from Germany also had a muted impact.

With the COVID-19 2^nd wave hitting the Eurozone, the Eurozone’s consumer confidence figure drew some attention.

The Flash Consumer Confidence Indicator fell from -15.5 to -17.6, which was better than a forecasted -17.7. Downside risks to the economic recovery were affirmed by the number. Lockdown measures are expected to sink the Eurozone economy, as a result, in the 4^th quarter.

For the week, the EUR rose by 0.19% to $1.1857. In the week prior, the EUR had fallen by 0.34% to $1.1834.

For the European major indexes, it was another bullish week. The CAC40 rallied by 2.15%, with the DAX30 and EuroStoxx600 gaining 0.46% and 1.15% respectively.

For the Loonie

It was a busy week on the economic data front.

Manufacturing and wholesale sales figures for September were skewed to the positive providing support.

Mid-week, October inflation figures were also Loonie positive, with the core annual rate of inflation holding steady at 1%. Rising core consumer prices and consumer prices in October delivered support.

At the end of the week, retail sales figures for September were also Loonie positive.

Core retail sales rose by 1.0%, month-on-month, following on from a 0.5% increase in August. Retail sales were also on the up, rising by 1.1% off the back of a 0.4% increase in August.

While the stats were skewed to the positive, progress towards a COVID-19 vaccine was key in the week.

In the week ending 20^th November, the Loonie rose by 0.32% to C$1.3095. In the week prior, the Loonie had fallen by 0.67% to C$1.3137.

Elsewhere

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

In the week ending 20^th November, the Aussie Dollar rose by 0.44% to $0.7302, with the Kiwi Dollar rallying by 1.23% to end the week at $0.6929.

For the Aussie Dollar

It was a relatively quiet week on the economic calendar.

Key stats included 3^rd quarter wage growth and October employment and retail sales figures.

While wage growth figures disappointed, employment and retail sales figures impressed.

A 178.8k jump in employment and a 1.6% increase in retail sales were positives for the Aussie Dollar.

On the monetary policy front, however, the RBA meeting minutes revealed the willingness to deliver more support. While unwilling to drop rates into negative territory, the commitment to delivering more support pegged the Aussie Dollar back.

COVID-19 vaccine news provided support, however, to offset the negative sentiment towards the rise in new cases.

For the Kiwi Dollar

It was a particularly quiet week on the economic calendar.

3^rd quarter wholesale inflation figures were in focus. A pickup in input prices was considered Kiwi positive, though falling output prices remained a concern.

While the stats were positive, positive economic data from China and progress towards a COVID-19 vaccine were positives.

For the Japanese Yen

It was a busy week on the economic calendar.

3^rd quarter GDP numbers were in focus at the start of the week. While rebounding from the 2^nd quarter woes, growth was not enough to reverse the contraction from the 2^nd quarter.

Quarter-on-quarter, the economy grew by 5%, partially reversing an 8.2% contraction from the 2^nd quarter.

Trade data also failed to impress mid-week, with imports tumbling by 13.3% to widen the trade surplus. Exports also declined, though at a slower pace than in September.

Wrapping things up were inflation figures at the end of the week. A buildup of deflationary pressures was yet another negative for the Japanese economy.

A market grappling with a continued spike in new COVID-19 cases and hopes of a vaccine supported the Yen, however.

The Japanese Yen rose by 0.74% to ¥103.86 against the U.S Dollar. In the week prior, the Yen had fallen by 1.24% to ¥104.63.

Out of China

It was a busy week on the economic data front.

October fixed asset investment, industrial production, retail sales, and unemployment figures were in focus.

The stats were skewed to the positive, reaffirming market sentiment towards the Chinese economic recovery.

Fixed asset investments rose by 1.8%, year-on-year, following a 0.8% rise in September. Industrial production increased by a further 6.9%, following a 6.9% rise in September.

Retail sales also impressed, jumping by 4.3%. In September, retail sales had risen by 3.3%.

Labor market conditions improved, with the unemployment rate falling from 5.4% to 5.3%.

The figures continued to reflect Beijing’s goal to reignite the economy from within.

In the week ending 13^th November, the Chinese Yuan rose by 0.66% to CNY6.5630. In the week prior, the Yuan had risen by 0.09% to CNY6.6065.

The CSI300 rose by 1.78%, with the Hang Seng ended the week up by 1.13%.