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The Weekly Wrap – Monetary Policy and a Busy Economic Calendar Delivered Dollar Support

By:
Bob Mason
Published: Nov 5, 2021, 22:10 UTC

Monetary policy and a busy economic calendar delivered support for the Greenback, while sinking the Pound. It's a quieter week ahead, with inflation back in focus...

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In this article:

The Stats

It was another busy week on the economic calendar, in the week ending 5th November.

A total of 57 stats were monitored, which was down from 56 stats in the week prior.

Of the 57 stats, 31 came in ahead forecasts, with 20 economic indicators coming up short of forecasts. There were 6 stats that were in line with forecasts in the week.

Looking at the numbers, 32 of the stats reflected an upward trend from previous figures. Of the remaining 25 stats, 24 reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive week in the green. Market reaction to the FED delivered the upside in the week. The upside came in spite of FED Chair Powell looking to mute market expectations of any shift in interest rate policy. In the week ending 5th November, the Dollar Spot Index rose by 0.10% to 94.219. In the previous week, the Dollar had risen by 0.53% to 94.134.

Out of the U.S

In the first half of the week, private sector PMI and ADP nonfarm employment change figures were in focus.

The stats were skewed to the positive.

In October, the ISM Manufacturing PMI slipped from 61.1 to 60.8, while the Non-Manufacturing PMI rose from 61.9 to 66.7.

According to the ADP, nonfarm payrolls increased by 571k in October, following a 523k rise in September.

On Thursday, jobless claims were also positive. In the week ending 29th October, initial jobless claims fell from 283k to 269k.

At the end of the week, nonfarm payrolls delivered further market support. In October, nonfarm payrolls increased by 531k after a 312k rise in September.

As a result, the unemployment rate fell from 4.8% to 4.6%.

While the stats were upbeat, the FED’s monetary policy decision was the main event of the week.

In line with market expectations, the FED delivered on tapering, while playing down any shift in interest rate policy. FED Chair Powell continued to stand by the view that the spike in inflation was transitory.

Over the week, the NASDAQ rallied by 3.05%, with the Dow and the S&P500 seeing gains of 1.42% and 2.00% respectively.

Out of the UK

It was a relatively quiet week, with finalized private sector PMIs in focus.

While the stats were Pound positive, it was the BoE’s monetary policy decision that sank the Pound.

Fewer than expected votes in favor of a rate hike took the markets by surprise, sending the Pound to sub-$1.35 levels.

In the week, the Pound slid by 1.34% to end the week at $1.3498. In the week prior, the Pound had fallen by 0.53% to $1.3682.

The FTSE100 ended the week up by 0.92%, following a 0.46% gain from the previous week.

Out of the Eurozone

Early in the week, German retail sales and Eurozone and member state Manufacturing PMIs were in focus.

The stats were skewed to the negative.

In September, retail sales slid by 2.5%, reversing a 1.2% increase from August.

There were also downward revisions to German and Eurozone Manufacturing PMIs.

An upward revision to France’s Manufacturing PMI and a jump in sector activity in Italy was of some comfort, however.

In October, the Eurozone’s manufacturing PMI slipped from 58.5 to 58.3.

On Thursday, German factory orders and service sector PMIs for member states and the Eurozone delivered mixed results.

In September, factory orders increased by 1.3%, partially reversing an 8.8% tumble from August.

The Eurozone’s composite PMI fell from 56.2 to 54.2 in October, which was a negative.

At the end of the week, German industrial production and Eurozone retail sales also disappointed.

Industrial production fell by a further 1.1% after having fallen by 4.0% in August.

Retail sales across the Eurozone declined by 0.3%, partially reversing a 1.0% increase from August.

For the week, the EUR rose by 0.08% to $1.1567. In the week prior, the EUR had fallen by 0.73% to $1.1558.

The CAC40 led the way, rallying by 3.08%, with the DAX30 and the EuroStoxx600 ending the week with gains of 2.33% and 1.64% respectively.

For the Loonie

Key stats included trade and employment figures.

In September, Canada’s trade surplus widened from C$1.51bn to C$1.86bn.

Also positive was a fall in Canada’s unemployment rate from 6.9% to 6.7%. The larger than expected fall came in spite of a lower-than-expected increase in employment.

While the stats were skewed to the positive, sliding oil prices weighed throughout the week.

In the week ending 29th October, the Loonie fell by 0.56% to C$1.2457. In the week prior, the Loonie had fallen by 0.17% to C$1.2388.

Elsewhere

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

The Aussie Dollar slid by 1.57% to $0.7400, with the Kiwi Dollar ending the week down by 0.75% to $0.7117.

For the Aussie Dollar

Manufacturing sector data disappointed, with the AIG Manufacturing Index falling from 51.2 to 50.4 in October.

Also negative was a narrowing in Australia’s trade surplus from A$15.077bn to A$12.243bn.

While the stats were negative, the RBA provided Aussie Dollar support early in the week.

A more hawkish outlook on the Australian economy suggested an early than 2024 move on cash rates. It wasn’t enough, however, to prevent a slide against the Greenback.

For the Kiwi Dollar

Building consent and employment figures were key stats in the week.

In September, building consents fell by 1.9% after having risen by 3.8% in August.

Of greater significance, however, was a 2% rise in employment in the 3rd quarter. In the previous quarter, employment had risen by 1.0%.

As a result, New Zealand’s unemployment rate fell from 4.0% to 3.4% in the quarter.

From the RBNZ, the financial stability report was also upbeat, but not enough to prevent a Kiwi pullback against the Greenback.

For the Japanese Yen

The stats were skewed to the positive.

In October, Japan’s services PMI rose from 47.8 to 50.7, with household spending on the rise in September.

Month-on-month, spending jumped by 5.0%, reversing a 3.9% decline from August.

The Japanese Yen rose by 0.47% to ¥113.410 against the U.S Dollar. In the week prior, the Yen had fallen by 0.40% to ¥113.950.

Out of China

Private sector PMIs were in focus.

In October, the Caixin Manufacturing PMI rose from 50.0 to 50.6, with the Services PMI up from 53.4 to 53.8.

In the week ending 5th November, the Chinese Yuan rose by 0.10% to CNY6.3989. In the week prior, the Yuan had ended the week down by 0.32% to CNY6.4056.

The CSI300 and the Hang Seng ended the week down by 1.35% and by 2.00% respectively.

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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