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The Weekly Wrap – COVID-19, Geopolitics, and Economic Data Drove the Majors
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It was a hectic week for the markets, with geopolitics, COVID-19, and economic date delivering a 5th consecutive week in the red for the Greenback.
The Stats
It was a quieter week on the economic calendar, in the week ending 24th July.
A total of just 41 stats were monitored, following the 74 stats from the week prior.
Of the 41 stats, 23 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. Just 1 stat was in line with forecasts in the week.
Looking at the numbers, 33 of the stats reflected an upward trend from previous figures. Of the remaining 8, 7 stats reflected a deterioration from previous.
For the Greenback, it was a 5th consecutive week in the red. In the week ending 24th July, the Dollar Spot Index fell by 1.57% to 94.435. In the week prior, the Dollar had fallen by 0.73%.
For the U.S, the Dollar was on the back foot throughout the week. News of progress towards a COVID-19 vaccine weighed on the Dollar in the early part of the week.
Domestic issues will have also tested demand for the Dollar, however. News of the U.S administration sending Federal agents to control protests tested the Dollar. Rising tension between the U.S and China didn’t help as Trump looked to distract voters from the continued spike in new COVID-19 cases.
Looking at the latest coronavirus numbers
At the time of writing, the total number of coronavirus cases stood at 15,930,779 for Friday, rising from last Friday’s 14,189,223 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,741,556 on a global basis. This was higher than the previous week’s increase of 1,584,328 in new cases.
In the U.S, the total rose by 478,299 to 4,248,311. In the week prior, the total number of new cases had risen by 484,462.
Across Germany, Italy, and Spain combined, the total number of new cases increased by 17,404 to bring total infections to 771,051. In the previous week, the total number of new cases had risen by 10,432. Spain continued to see larger rises over the week.
Out of the U.S
It was another relatively quiet week on the economic data front.
Key stats included the weekly jobless claims figures and July’s private sector PMI numbers.
In the week ending 17th July, jobless claims rose by 1.416m following 1.3m from the previous week. It was yet more evidence that the economic recovery has more speed bumps to come.
Private sector PMIs also failed to impress. While manifesting sector activity returned to expansion in July, the services sector continued to contract.
With the stats on the negative, the Dollar was on the slide for the wrong reasons.
Rising tensions between the U.S and China, the use of Federal agents, and COVID-19 also weighed on the Greenback.
In the equity markets, the NASDAQ fell by 1.33%, with the Dow and S&P500 declining by 0.76% and 0.28% respectively.
Out of the UK
It was another busy week on the economic calendar.
Key stats included June retail sales and prelim private sector PMI numbers.
The stats were skewed to the positive for the Pound.
In June, retail sales surged by 13.9%, month-on-month, with core retail sales jumping by 13.5%.
A 2nd consecutive monthly jump saw sales return to pre-COVID-19 levels.
Private sector activity also impressed. According to prelim figures, the all-important services PMI jumped from 47.1 to 56.6. With the Manufacturing PMI rising from 50.1 to 53.6, the composite increased from 47.7 to 57.1.
The only negative for the Pound was weaker than expected recovery in industrial trend orders. In July, industrial trend orders rose from -58 to -46. Economists had forecast a rise to -38.
Away from the economic calendar, the Pound also found support in the week. A combination of improved economic indicators and positive progress on trade talks delivered the upside.
In the week, the Pound rallied by 1.80% to $1.2794 in the week, reversing a 0.43% loss from the previous week. The FTSE100 ended the week down by 2.65%, partially reversing a 3.20% gain from the previous week.
Out of the Eurozone
It was a busy week on the economic data front.
Key stats included German and Eurozone consumer confidence figures and prelim private sector PMIs.
The stats were skewed to the positive.
While the consumer confidence slipped in the Eurozone, confidence in Germany improved in August.
More importantly, private sector activity continued to see a pickup in activity in July.
The Eurozone’s Services PMI jumped from 48.3 to 55.1, with the Manufacturing PMI rising from 47.4 to 51.1.
Supported by a marked pickup in service sector activity in both France and Germany, the Eurozone Composite rose from 48.5 to 54.8.
On the geopolitical risk front, rising tension between the U.S and China was EUR negative.
At the start of the week, agreement on the mechanism of the EU Recovery Fund delivered a boost, however.
For the week, the EUR rallied by 2.00% to $1.1656, following a 1.13% gain from the previous week.
For the European major indexes, it was a bearish week. The CAC30 and EuroStoxx600 slid by 2.23% and 1.45% respectively, while the DAX40 slipped by 0.63%.
For the Loonie
It was a relatively busy week on the economic calendar.
Economic data included May retail sales and June inflation figures.
Retail sales bounced back from April’s slump, with inflationary pressures picking up in June.
Crude oil prices also headed northwards in the week, providing the Loonie with support.
The Loonie rose by 1.22% to end the week at C$1.3415 against the Greenback. In the week prior, the Loonie had risen by 0.09% to C$1.3415.
Elsewhere
It was a bullish week for the Aussie Dollar and the Kiwi Dollar.
In the week ending 24th July, the Aussie Dollar rose by 1.56% to $0.7105, with the Kiwi Dollar gaining 1.28% to $0.6641.
For the Aussie Dollar
It was a relatively quiet week for the Aussie Dollar.
Retail sales figures disappointed on Wednesday, in spite of a 2.40% rise off the back of a 16.9% surge in May. Economists had forecast a 7.1% gain.
Also negative was a fall in business confidence. In the second quarter, the NAB Quarterly Business Confidence fell from -12 to -15, which was to be expected. The decline reflected the impact of the COVID-19 pandemic on the business sentiment.
On the monetary policy front, the RBA meeting minutes provided few surprises.
The upside in the week came as a result of the news of progress towards a COVID-19 vaccine. Even rising tensions between the U.S and China failed to send the Aussie into reverse.
For the Kiwi Dollar
It was another relatively quiet week on the economic data front.
Key stats were limited to June trade figures.
A rise in exports and little movement in imports led to a narrowing of the trade deficit in June. The stats ultimately had a muted impact on the Kiwi Dollar, however, with geopolitics in focus on Friday.
Tracking the Aussie Dollar, hopes of a COVID-19 vaccine to boost the global economy supported the Kiwi.
For the Japanese Yen
It was a busy first half of the week on the data front, with Japan on holiday on Thursday and Friday.
June trade figures and July’s prelim private sector PMIs were in focus in the week.
The stats were mixed. In June, exports slid by 26.2%, following a 28.3% tumble in May. A more marked decline in imports, however, led to a narrowing of the trade deficit to ¥268.8bn.
From the private sector, both the manufacturing and services sectors reported a slower pace of contraction. It was of little consolation, however, with the rises in the PMIs only marginal.
The Manufacturing PMI rose from 40.1 to 42.6, with the Services PMI rising from 45.0 to 45.2.
Over the week, the stats had a muted impact on the Japanese Yen, however.
A weakening U.S Dollar stemming from the progress towards a COVID-19 vaccine supported the Yen.
The Japanese Yen rose by 0.82% to end the week at ¥106.14 against the Greenback. In the week prior, the Yen had fallen by 0.08%.
Out of China
It was a quiet week on the economic data front.
There were no material stats to provide the markets with direction.
On the monetary policy front, the PBoC left the 3-year and 5-year loan prime rates unchanged. This was in line with expectations, with the PBoC having pre-warned the markets of the likely end to policy easing near-term.
Over the week, rising tensions between the U.S and China weighed on the Yuan.
In the week ending 24th July, the Chinese Yuan fell by 0.37% to CNY7.0184 against the Dollar. In the week prior, the Yuan had gained 0.10%.
The CSI300 declined by 0.86% in the week, with the Hang Seng falling 1.53%, as U.S – China tensions weighed once more.
About the Author
Bob Masonauthor
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.
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