The Weekly Wrap – Inflation Took Centre Stage, Questioning the Transitory Views of Central Banks

The Stats

It was a quieter week on the economic calendar, in the week ending 12^th November.

A total of just 39 stats were monitored, which was down from 57 stats in the week prior.

Of the 39 stats, 17 came in ahead forecasts, with 19 economic indicators coming up short of forecasts. There were 3 stats that were in line with forecasts in the week.

Looking at the numbers, 24 of the stats reflected an upward trend from previous figures. Of the remaining 15 stats, all 15 reflected a deterioration from previous.

For the Greenback, it was a 3^rd consecutive week in the green. Market reaction to October inflation figures delivered the upside in the week. In the week ending 12^th November, the Dollar Spot Index rose by 0.85% to 95.122. In the previous week, the Dollar had risen by 0.10% to 94.219.

Out of the U.S

Through the 1^st half of the week, inflation was in focus, driving Dollar demand and questioning the FED’s transitory view.

In October, the annual rate of core wholesale inflation held steady at 6.8%, with the PPI up 0.4% in the month.

The annual rate of wholesale inflation also held steady at 8.6%

Of greater influence were October consumer price inflation figures, however.

In October, the annual core rate of inflation accelerated from 4.0% to 4.6%.

With the markets focused on inflation, the weekly jobless claims garnered little attention on Wednesday. In the week ending 5^th October claims slipped from 271k to 267k.

At the end of the week, consumer sentiment figures disappointed.

According to prelim figures for November, the Michigan Consumer Sentiment Index fell from 71.7 to 66.8. Economists had forecast for an increase to 72.4.

Out of the UK

It was a busier week, with 3^rd quarter GDP and industrial and manufacturing production were in focus.

Other stats included retail sales, house price, and trade data that had a muted impact on the Pound.

According to prelim figures, the UK economy grew by 1.3% in the 3^rd quarter, which was softer than the 2^nd quarter 5.5% rebound. Year-on-year, the economy expanded by 6.6% compared with 23.6% in the previous quarter.

Month-on-month, however, the economy grew by 0.6% in September, compared with 0.4% in August.

Manufacturing and industrial production were also skewed to the negative, pegging back the Pound on Thursday.

Manufacturing production slipped by 0.1%, with industrial production down by 0.4% at the end of the third quarter.

In the week, the Pound fell by 0.62% to end the week at $1.3414. In the week prior, the Pound had slumped by 1.34% to $1.3498.

The FTSE100 ended the week up by 0.60%, following a 0.92% gain from the previous week.

Out of the Eurozone

Early in the week, German trade data was in focus alongside ZEW Economic Sentiment figures for Germany and the Eurozone.

While there was a modest increase in Germany’s trade surplus, sentiment towards the German and Eurozone economies impressed.

Germany’s ZEW Economic Sentiment Index jumped from 22.3 to 31.7, with the Eurozone’s rising from 21.0 to 25.9.

At the end of the week, industrial production figures for the Eurozone failed to impress, however.

In September, production fell by a further 0.2% after having declined by 1.7% in August.

Other stats in the week included finalized October inflation figures for France, Germany, and Spain. The numbers failed to move the dial, however, ahead of the euro area numbers next week.

From the ECB, the Economic Bulletin was also in focus, though there was little change in the narrative.

For the week, the EUR slid by 1.05% to $1.1445. In the week prior, the EUR had risen by 0.08% to $1.1567.

The DAX30 rose by 0.25%, with the CAC40 and the EuroStoxx600 ending the week with gains of 0.72% and 0.70% respectively.

For the Loonie

There were no major stats from Canada to provide the Loonie with direction.

In the week ending 29^th October, the Loonie declined by 0.75% to C$1.2550. In the week prior, the Loonie had fallen by 0.56% to C$1.2457.

Elsewhere

It was another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 0.92% to $0.7332, with the Kiwi Dollar ending the week down by 1.03% to $0.7044.

For the Aussie Dollar

Business and consumer sentiment figures were in focus mid-week, with the numbers Aussie Dollar positive.

The NAB Business Confidence Index jumped from 10.0 to 21.0, with the Westpac Consumer Sentiment Index up 0.6%.

Key, however, were employment figures for October that sent the Aussie Dollar deeper into the red.

In October, Australia’s unemployment rate increased from 4.6% to 5.2% as a result of a 46.3k fall in employment. There was also a slight increase in the participation rate to 64.7%, contributing to the increase.

For the Kiwi Dollar

Electronic card retail sales and business confidence figures were in focus ahead of Business PMI numbers on Friday.

It was a mixed bag for the Kiwi Dollar.

In October, electronic card retail sales jumped by 10.1% in response to the easing of lockdown measures.

Business confidence weakened further, with the index falling by 18.1%, according to prelim numbers from ANZ.

In October, the Business PMI increased from 51.4 to 54.3, however, to provide some support.

For the Japanese Yen

There were no major stats to consider ahead of key stats in the week ahead.

The Japanese Yen fell by 0.42% to ¥113.89 against the U.S Dollar. In the week prior, the Yen had risen by 0.47% to ¥113.410.

Out of China

Inflation figures were in focus following trade data from the weekend prior.

In October, China’s U.S Dollar trade surplus widened from US$66.76bn to US$84.54bn. Economists had forecast a narrowing to US$65.55bn.

• Year-on-year, exports were up 27.7% versus a forecasted 24.5%. In September, exports had risen by 28.1%.
• Imports increased by 20.6%, versus a forecasted 25.0%. Imports had risen by 17.6% in September.

On the inflation front, another marked pickup in wholesale inflationary pressure tested support for riskier assets.

In October, China’s annual rate of inflation accelerated from 0.7% to 1.5% versus a forecasted 1.4%.

Month-on-month, consumer prices increased by 0.7% following a 0.1% rise in September. Economists had forecast a 0.7% increase.

In the week ending 12^th November, the Chinese Yuan rose by 0.30% to CNY6.3797. In the week prior, the Yuan had ended the week up by 0.10% to CNY6.989.

The CSI300 and the Hang Seng ended the week up by 0.95% and by 1.84% respectively.