The Weekly Wrap – Economic Data Took a Back Seat as the Coronavirus Wreaked Havoc on the Dollar

The Stats

It was a relatively busy week on the economic calendar, in the week ending 6^th March.

A total of 66 stats were monitored, following the 59 stats in the week prior.

Of the 66 stats, 27 came in ahead forecasts, with 28 economic indicators coming up short of forecast. 11 stats were in line with forecasts in the week.

Looking more closely at the numbers. 27 of the stats reflected an upward trend from previous figures. Of the remaining 39 stats, 33 stats reflected a deterioration from previous.

For the Greenback, it was another particularly bearish week, as the markets responded to the emergency FED rate cut and a priced in 2^nd rate cut later in the month.

Economic data from the U.S took a back seat in the week, with economic uncertainty seeing the Dollar lose its safe-haven status.

The Dollar Spot Index slid by 2.08% to end the week at 96.093. In the week prior, the Dollar Spot Index had fallen by 1.21%.

Out of the U.S

It was a relatively busy first half of the week. Economic data included February private sector PMIs and the ADP’s nonfarm figures.

According to the market’s preferred ISM survey, the Manufacturing PMI fell from 50.9 to 50.1.

While the manufacturing sector stalled, the ISM Non-Manufacturing PMI jumped from 55.5 to 57.3. This was in stark contrast to the Markit survey that had reported a Services PMI of 49.4…

ADP numbers were also upbeat, the 183k nonfarm payrolls added in February.

Through the 2^nd half of the week, factory orders and the government’s labor market numbers were on focus.

While factory orders fell by 0.5% in January, nonfarm payrolls impressed, with a 273k jump in February. The increase led to a fall in the unemployment rate to 3.5%, while the participation rate held steady at 63.4%.

Outside of the numbers and of greater significance, however, was the FED’s 50 bps emergency rate cut on Tuesday.

Ultimately, however, there are doubts over just how much influence monetary policy support will have, as governments and central banks look to cushion the blow from the coronavirus.

The U.S government also approved emergency funding of $8.3bn to fight the coronavirus outbreak, which also failed to prevent an end of week reversal.

In the equity markets, the Dow rose by 1.79%, with the S&P500 and NASDAQ gaining 0.61% and by 0.10% respectively.

The upside came in spite of 2 consecutive days in the red at the end of the week, with a Friday sell-off coming in spite of impressive NFP numbers…

Out of the UK

It was a relatively quiet week on the economic calendar.

Key stats included finalized manufacturing and service PMI numbers and February’s construction PMI.

February figures were upbeat, in spite of both finalized manufacturing and service PMIs being revised down from prelims.

While the markets had priced in a BoE rate cut later this month, the latest numbers suggest another hold could be on the cards.

BoE Gov. Carney had previously stated that, while the BoE is willing and able, it wouldn’t move until necessary…

Outside of the stats, Brexit chatter failed to shake the Pound, in spite of a lack of progress in Brexit talks. Fisheries were the stumbling block in the week…

In the week, the Pound rallied by 1.75% to $1.3048, while the FTSE100 ended the week down by 1.79%. Mining and resource stocks weighed heavily on the index, with a stronger Pound providing further downward pressure.

Out of the Eurozone

It was a busy week economic data front.

Private sector PMIs, retail sales, and Germany were back in focus in the week.

The stats had a muted impact on the EUR and the European Major boerses, however.

The Eurozone’s Composite PMI rose from 51.3 to 51.6 in February, supported by service sector activity. A rise in retail sales and a 5.5% jump in German factory orders were also positives for the EUR.

In the week, the focus continued to be on the coronavirus and the stats had yet to reflect the effects of the virus on the economy,

On the monetary and fiscal policy front, doubts over whether the ECB and member states would deliver support weighed on the European major indexes.

For the EUR, however, a likely hold on monetary policy and the positive numbers contributed to the weekly gain.

In the week ending 6th March, the EUR rallied by 2.34% to end the week at $1.1284.

For the European major indexes, it was another bearish week. The CAC40 led the way down, falling by 3.22%, with the DAX30 and EuroStoxx600 declining by 2.93% and 2.36% respectively.

Elsewhere

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

In the week ending 6^th March, the Aussie Dollar rallied by 1.86% to $0.66.36, with the Kiwi Dollar up by 1.67% to $0.6350.

For the Aussie Dollar

It was a busy week for the Aussie Dollar on the economic data front.

In the 1^st half of the week, manufacturing and company gross operating profit figures failed to pin the Aussie back. This was in spite of profits sliding by 3.5% in the 4^th quarter and manufacturing sector activity contracting at a faster pace.

Housing sector figures on Tuesday also had a muted impact on the Aussie Dollar.

In the 2^nd half of the week, 4^th quarter GDP numbers impressed, with the economy growing by 2.2% year-on-year. In the 3^rd quarter, the economy had grown by 1.7%. Trade date was also skewed to the positive for January, while a 0.3% fall in retail sales tested the Aussie on Friday.

Outside of the numbers, the RBA cut interest rates by 25 bps on Tuesday, which provided the Aussie Dollar with support.

Upward momentum through the early part of the week came off the back of plans by the G7 to deliver a coordinated response to the coronavirus.

The FED also delivered an emergency rate cut on Tuesday, with tumbling U.S Treasury yields giving the Aussie Dollar the upside.

Stats out of China, which included the worst manufacturing PMI on record, also had little impact.

For the Kiwi Dollar

It was a particularly quiet week on the economic calendar.

Stats were limited to January building consents, which fell by 2%. The Wednesday numbers had little influence on the Kiwi, however.

Tracking the Aussie Dollar, the Kiwi also found support from the promise of fiscal policy support and early moves by the RBA, FED, and Bank of Canada.

For the Loonie

It was another busy week on the economic calendar.

In a quiet start to the week, economic data was limited to 4^th quarter labor productivity numbers on Tuesday.

A 0.1% fall did little to influence, however, with the Bank of Canada in action. In line with expectations, the BoC cut interest rates by 50 bps, while delivering a dovish rate statement.

In response, the Loonie fell back to C$1.34 levels against a U.S Dollar that was also on the back foot.

At the end of the week, the stats were skewed to the negative adding to the Loonie’s troubles.

While employment rose by a further 30.3k in February, the unemployment rate increased from 5.5% to 5.6%.

The trade deficit widened from C$0.73bn to C$1.47bn, with the Ivey PMI falling from 57.3 to 54.1.

Following the promise of more policy easing on Tuesday, Friday’s numbers suggested that there may be more to come.

Unlike many central banks, the BoC does have further room to maneuver…

The Loonie fell by 0.08% to end the week at C$1.3418 against the Greenback.

For the Japanese Yen

It was a relatively busy week on the data front.

In the 1^st half of the week, 4^th quarter capital spending and finalized private sector PMIs failed to influence.

Capital spending slid by 3.5% in the 4^th quarter, delivering the markets and the BoJ with yet another red flag.

Upward revisions to private sector PMI numbers in the week were of little consolation, however.

Both the BoJ and the Japanese government will need to provide some form of support.

At the end of the week, a further slide in household spending provided the government with yet another reason to attempt to counter the effects of the coronavirus and last year’s sales tax hike.

On the monetary policy front, BoJ Gov. Kuroda spoke at the start of the week, assuring the markets of support. It was Kuroda’s speech that led to the expectation of a coordinated G7 move early in the week.

The Japanese Yen rallied by 2.32% to end the week at ¥105.39 against the U.S Dollar. Risk aversion at the end of the week and a stronger Yen weighed on the Nikkei, which fell by 1.86%.

Out of China

Private sector PMI numbers for February gave the markets a taste of what’s to come.

The Caixin Manufacturing PMI fell to a record low 40.3, with the Services PMI falling to a record low 26.5.

While the markets would traditionally balk at such figures, the markets expect the PBoC and Beijing to continue to support.

A coordinated move by the G7 to counter the effects of the coronavirus was also key in preventing a market meltdown in response to the numbers.

The CSI300 rallied by 5.04%, while the Hang Seng eked out a 0.06% gain in the week.

In the week ending 6^th March, the Yuan rose by 0.85% to CNY6.9329 against the Greenback.