The Weekly Wrap – Dovish Central Banks and Concerns over the Recovery Delivered Dollar Support
It was a quieter week on the economic calendar, in the week ending 10th September.
A total of 42 stats were monitored, which was down from 81 stats in the week prior.
Of the 42 stats, 20 came in ahead forecasts, with 21 economic indicators coming up short of forecasts. There was just 1 stat that was in line with forecasts in the week.
Looking at the numbers, 21 of the stats reflected an upward trend from previous figures. Of the remaining 21 stats, 21 reflected a deterioration from previous.
For the Greenback, dovish FOMC member chatter failed to deliver Dollar weakness. Concerns over the economic recovery and dovish central banks drove Dollar demand in the week. In the week ending 10th September, the Dollar Spot Index rose by 0.59% to 92.582. In the previous week, the Dollar had fallen by 0.59% to 92.137.
Out of the U.S
Early in the week, JOLT’s job openings for July were upbeat with openings rising from 10.185m to 10.943m. Economists had forecast a decline to 10.000m.
On Thursday, jobless claims were also impressive. In the week ending 3rd September initial jobless claims fell from 345k to 310k.
At the end of the week, wholesale inflation was in focus. In August, the core PPI rose by 0.6% versus a forecasted 0.5%, with the Producer Price Index rising by 0.7% versus a forecasted 0.6%. Both had risen by 1.0% in July.
Out of the UK
Economic data was on the busier side. Early in the week, construction PMI and BRC retail sales monitor figures were skewed to the negative.
In August, the construction PMI fell from 58.7 to 55.2, with the BRC Retail Sales Monitor rising by just 1.5%. The Retail Sales Monitor had risen by 4.7%, year-on-year, in July.
At the end of the week, key stats included GDP, manufacturing and industrial production, and trade data.
In July, the UK economy expanded by 0.1% and grew by 7.5% year-on-year.
While industrial production rose by 1.2%, manufacturing production stalled in July.
Trade figures were mixed, however. The UK’s trade deficit widened from £11.99bn to £12.71bn in July, while the non-EU deficit narrowed from £7.19bn to £6.99bn.
In the week, the Pound fell by 0.23% to end the week at $1.3839. In the week prior, the Pound had risen by 0.78% to $1.3871.
The FTSE100 ended the week down by 1.53%, following a 0.14% loss from the previous week.
Out of the Eurozone
Economic data included factory orders, industrial production, and trade data from Germany.
While the stats were skewed to the positive, there was little support for the EUR, with the markets looking ahead to the ECB policy decision.
ZEW Economic Sentiment figures for Germany and the Eurozone were disappointing, however, pegging the EUR back.
At the end of the week, finalized inflation figures from Germany had a muted impact on the majors.
While there were plenty of stats for the markets to consider, it was ultimately the ECB monetary policy decision and press conference that was the main event.
In line with market expectations, the ECB held policy unchanged and talked of economic uncertainty stemming from the Delta variant. Lagarde did confirm plans to modestly reduce the asset purchasing program. The forward guidance was not enough to deliver a EUR rally, however.
For the week, the EUR fell by 0.56% to $1.1814. In the week prior, the EUR had risen by 0.70% to $1.1880.
The CAC40 fell by 0.39%, with the DAX30 and the EuroStoxx600 ending the week with losses of 1.09% and 1.18% respectively.
For the Loonie
Economic data included Ivey PMI and employment figures for August.
The stats were skewed to the positive. In August, the Ivey PMI rose from 56.4 to 66.0, with Canada’s unemployment rate falling from 7.5% to 7.1%.
While the stats were upbeat, the Bank of Canada’s monetary policy decision and forward guidance weighed.
In line with expectations, the BoC left policy unchanged, with the BoC also taking a cautious view on the economic recovery. Supply chain disruption and the Delta variant remained key concerns…
In the week ending 10th September, the Loonie fell by 1.34% to C$1.2692. In the week prior, the Loonie had risen by 0.76% to C$1.2524.
The Aussie Dollar slid by 1.39% to $0.7356, with the Kiwi Dollar ending the week down by 0.63% to $0.7113.
For the Aussie Dollar
There were no major stats for the markets to consider.
On Tuesday, the RBA delivered it’s September monetary policy decision, which was in line with expectations.
The RBA left policy unchanged and talked of the likely impact of the latest lockdown measures on the economy.
For the Kiwi Dollar
It was a quiet week, with retail sales in focus.
In August, electronic card retail sales tumbled by 19.8%, with the decline attributed to the latest lockdown measures introduced in mid-August.
The markets were forgiving, however, with a material decline in retail sales expected.
For the Japanese Yen
It was a relatively busy week, with the numbers skewed to the positive.
In July, household spending rose by 0.7%, month-on-month, coming in ahead of a forecasted 0.1% rise. Spending had tumbled by 5.1% in June. Year-on-year, spending was down by 0.9%, however, versus a forecasted 1.1% increase. Spending had been down by 3.2% in June, year-on-year.
In the 2nd quarter, the Japanese economy expanded by 0.5%, which was up from a prelim 0.4%. The economy had contracted by 0.9% in the previous quarter. Year-on-year, the economy grew by 1.9%, which was up from a prelim 1.6%. In the 1st quarter, the economy had contracted by 3.7%.
The Japanese Yen fell by 0.21% to ¥109.94 against the U.S Dollar. In the week prior, the Yen had risen by 0.12% to ¥109.72.
Out of China
Trade and inflation figures were in focus in the week.
In August, China’s U.S Dollar trade surplus widened from $56.59bn to $58.35bn. Economists had forecast a narrowing to $51.05bn. Exports rose by 25.6% versus a forecasted 17.1% increase, with imports up 33.1%. Economists had forecast imports to rise by 26.8%.
Inflation figures were skewed to the negative, however, with the annual rate of inflation softening from 1.0% to 0.8%. In August, consumer prices rose by just 0.1% after having risen by 0.3% in July.
Wholesale inflationary pressures were still evident, however. The annual rate of wholesale inflation picked up from 9.0% to 9.5% in August.
In the week ending 10th September, the Chinese Yuan rose by 0.18% to CNY6.4443. In the week prior, the Yuan had ended the week up by 0.25% to CNY6.4560.
The CSI300 and the Hang Seng ended the week up by 1.17% and by 3.52% respectively.