The Weekly Wrap – Inflation Trumped Weak GDP Numbers to Give the Greenback a Boost

The Stats

It was another busy week on the economic calendar, in the week ending 29^th October.

A total of 56 stats were monitored, which was down from 61 stats in the week prior.

Of the 56 stats, 29 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. There were 10 stats that were in line with forecasts in the week.

Looking at the numbers, 30 of the stats reflected an upward trend from previous figures. Of the remaining 26 stats, 19 reflected a deterioration from previous.

For the Greenback, it was back in the green, with a Friday rally delivering the upside. The upside came in spite of weaker than expected GDP numbers in the week. Persistent inflationary pressure delivered support ahead of the FED’s policy decision next week. In the week ending 29^th October, the Dollar Spot Index rose by 0.53% to 94.134. In the previous week, the Dollar had fallen by 0.31% to 93.642.

Out of the U.S

Early in the week, Consumer confidence and core durable goods and durable goods orders were in focus.

The numbers were skewed to the positive, with a jump in consumer confidence key. In October, the CB Consumer Confidence Index rose from 109.8 to 113.8.

Core durable goods orders increased by a further 0.4% in September following a 0.3% rise in August.

In the 2^nd half of the week, the stats were mixed, however.

GDP numbers for the 3^rd quarter disappointed, with the U.S economy growing by just 2.0%. In the 2^nd quarter, the economy had expanded by 6.7%.

Jobless claims were more upbeat, however, with initial jobless claims falling from 291k to 280k in the week ending 22^nd October.

At the end of the week, inflation and personal spending wrapped things up.

In September, personal spending rose by 0.6% following a 1.0% increase in August.

More significantly, however, was persistent inflationary pressure at the end of the 3^rd quarter.

In September, the Core PCE Price Index was up by 3.6% year-on-year. The annual rate of inflation held steady from August, while falling short of forecasts.

Out of the UK

It was a particularly quiet week, with no material stats to provide the Pound with direction.

From the UK government, the Autumn Budget failed to give the Pound a boost in the week.

In the week, the Pound fell by 0.53% to end the week at $1.3682. In the week prior, the Pound had risen by 0.03% to $1.3755.

The FTSE100 ended the week up by 0.46%, reversing a 0.41% loss from the previous week.

Out of the Eurozone

Early in the week, German business and consumer sentiment figures were in focus.

In October, the Ifo Business Climate Index fell from 98.9 to 97.7, weighed by business expectations. The Business Expectations sub-index slid from 97.4 to 95.4, while the current assessment sub-index slipped from 100.4 to 100.1.

Consumer sentiment improved, however, with the GfK Consumer Climate Indicator up from 0.4 to 0.9.

In the 2^nd half of the week, German unemployment figures were upbeat for October.

A 39k fall in unemployment led to a fall in the unemployment rate from 5.5% to 5.4%.

At the end of the week, 3^rd quarter GDP numbers and Eurozone inflation figures for October were key, however.

With GDP numbers from France, Germany, and Spain delivering mixed results, the Eurozone economy grew by 2.2% in the 3^rd quarter. The economy had expanded by 2.1% in the previous quarter.

More significantly, however, was another marked pickup in inflationary pressure.

According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 3.4% to 4.1%.

On the monetary policy front, the ECB left policy unchanged, which was in line with expectations.

With inflationary pressures persisting, however, the ECB continued to view inflationary pressures as transitory. The comments suggested status quo on interest rates for the foreseeable future, weighing on the EUR.

For the week, the EUR fell by 0.73% to $1.1558. In the week prior, the EUR had risen by 0.36% to $1.1643.

The DAX40 rose by 0.94%, with the EuroStoxx600 and the CAC40 ending the week up by 1.47% and 1.44% respectively.

For the Loonie

Economic data was on the lighter side.

In August, the Canadian economy expanded by 0.4%, recovering from a 0.1% contraction in July.

Also positive was a 2.5% increase in the RMPI in September, reversing a 2.4% slide from August.

Of greater significance, however, was the Bank of Canada’s monetary policy decision and forward guidance.

A more hawkish than anticipated BoC delivered Loonie support mid-week. The central bank ended its bond-buying programme, leading to the expectations of an earlier rate hike.

In the week ending 29^th October, the Loonie fell by 0.17% to C$1.2388. In the week prior, the Loonie had risen by 0.01% to C$1.2367.

Elsewhere

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

The Aussie Dollar rose by 0.70% to $0.7518, with the Kiwi Dollar ending the week up by 0.20% to $0.7171.

For the Aussie Dollar

Inflation and retail sales figures were in focus in the week.

Persistent inflationary pressure delivered support, with retail sales also on the rise in spite of continued lockdown measures.

In the 3^rd quarter, the annual rate of inflation softened from 3.8% to 3.0%. The annual wholesale rate of inflation accelerated from 2.2% to 2.9%, however.

After having fallen by 1.7% in August, retail sales rose by 1.3% in September.

For the Kiwi Dollar

Economic data was also on the quieter side.

Trade data was in focus mid-week, with imports hitting a record high for a 3^rd consecutive month.

As a result, New Zealand’s trade deficit widened from NZ$2,940m to NZ$4,090m year-on-year.

For the Japanese Yen

The stats were skewed to the negative.

In September, retail sales were down by 0.6% year-on-year after having been down by 3.2% in August.

Tokyo’s annual core rate of inflation held steady at 0.1%, however, with industrial production on the slide.

In September, industrial production fell by 5.4% after having declined by 3.6% in August.

On the monetary policy front, the BoJ was also in action but delivered few surprises.

The Japanese Yen fell by 0.40% to ¥113.950 against the U.S Dollar. In the week prior, the Yen had risen by 0.63% to ¥113.500.

Out of China

It was a particularly quiet week, with no major stats for the markets to consider.

In the week ending 29^th October, the Chinese Yuan fell by 0.32% to CNY6.4056. In the week prior, the Yuan had ended the week up by 0.79% to CNY6.3850

The CSI300 and the Hang Seng ended the week down by 1.03% and by 2.87% respectively.