The Weekly Wrap – Optimism Delivered Riskier Assets a Boost as Lockdown Measures Eased

The Stats

It was a particularly busy week on the economic calendar, in the week ending 22^nd May.

A total of 57 stats were monitored, following the 61 stats from the week prior.

Of the 57 stats, 28 came in ahead forecasts, with 25 economic indicators coming up short of forecast. 2 stats were in line with forecasts in the week.

Looking at the numbers, however, just 24 of the stats reflected an upward trend from previous figures. Of the remaining 33, 31 stats reflected a deterioration from previous.

For the Greenback, it was the 1^st week in the red out of 3. The U.S Dollar Spot Index fell by 0.54% to end the week at 99.863. In the previous week, the Dollar had risen by 0.67%.

COVID-19 news, geopolitics, and central bank chatter continued to be key drivers in the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 5,297,959, rising from last Friday’s 4,617,740 total cases. Week-on-week, the total number of cases was up by 680,119, on a global basis. This was higher than the previous week’s increase of 616,865 in new cases.

In the U.S, the total rose by 163,260 to 1,645,094. In the week prior, the total number of new cases had risen by 163,330.

Across France, Germany, Italy, and Spain combined, the total number of new cases increased by 19,110 to bring total infections to 872,494. In the previous week, the total number of new cases had risen by 29,514.

Out of the U.S

It was a relatively busy week on the economic calendar. On the economic calendar, however, the main area of focus was on the weekly jobless claims figures for the week ending 15^th May.

Another 2.438m jump in jobless claims in the week tested risk sentiment and weighed on the Dollar.

While May’s prelim private sector PMIs were also out in the week, the numbers had a muted impact on the Dollar.

Housing sector conditions deteriorated drastically in April, by contrast, though much of this was attributed to the lockdown.

Existing new home sales slumped by 17.8%, in spite of U.S mortgage rates sitting at record lows.

FED Chair Powell had managed market expectations going into the week, talking of a slow economic recovery.

While the FOMC minutes and the FED Chair spoke of plenty of ammunition left to support the economy, rising tension between the U.S and China pressured the Dollar.

In the week, the House of Representatives passed a Bill to oust and ban Chinese companies from U.S exchanges.

China warned of retaliation and the rhetoric failed to ease over the course of the week.

In the equity markets, the Dow rose by 3.29%, with the NASDAQ and S&P500 gaining 3.44% and 3.20% respectively.

Out of the UK

It was a busy week on the economic calendar. April employment, inflation, and retail sales figures pinned the Pound back in the week.

A slower rate of contraction across the private sector failed to support a late rally in the Pound, with geopolitics in focus.

A lack of progress on Brexit and an extended lockdown were negatives for the Pound in the week. In spite of this, support kicked on off the back of Dollar weakness and hopes of a pickup in economic activity.

In the week, the Pound rose by 0.47% to $1.2173. The FTSE100 ended the week up by 3.90%, reversing a 2.29% loss from the previous week.

Out of the Eurozone

It was also a relatively busy week economic data front, with the stats skewed to the positive for once.

ZEW’s May economic sentiment and consumer confidence figures were in focus in the 1^st half of the week.

In Germany and the Eurozone, economic sentiment amongst economists improved, with consumer confidence also improving across the Eurozone in May.

May’s prelim private sector PMIs also pointed to a possible bottoming out in April, which supported the EUR.

Positive stats, progress towards a COVID-19 recovery fund and a continued easing of lockdown measures delivered the upside in the week.

From the ECB, the monetary policy meeting minutes had a muted impact. There were no surprises, with the minutes continuing to call for fiscal support from member states.

For the week, the EUR rose by 0.75% to $1.0901, reversing a 0.18% loss from the previous week.

For the European major indexes, it was a bullish week. The DAX30 rallied by 5.82%, with the CAC30 and EuroStoxx600 gaining 3.90% and 3.63% respectively.

Elsewhere

It was a particularly bullish week for the Aussie Dollar and the Kiwi Dollar, with a Friday pullback being the only day in the red.

In the week ending 22^nd May, the Aussie Dollar rose by 1.93% to $0.6537, with the Kiwi Dollar up by 2.68% to $0.6094.

For the Aussie Dollar

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

There were no material stats to provide the Aussie Dollar with direction. That left the Aussie Dollar in the hands of market risk sentiment and the RBA meeting minutes from Tuesday.

While the minutes painted a grim picture, however, upbeat sentiment towards an easing of lockdown measures delivered the upside.

The gains came in spite of rising tensions between the U.S and China. There was also talk of positive results in early COVID-19 vaccine trials…

For the Kiwi Dollar

It was a quiet week on the economic calendar.

Key stats included 1^st quarter wholesale inflation and retail sales figures.

While the numbers were skewed to the negative, there was little interest in the Q1 figures.

Rising demand for commodities from China and an easing of global lockdown measures delivered the upside.

For the Loonie

It was a busy week on the economic calendar. Economic data was limited to March and April stats, however, that garnered little attention.

As expected, inflationary pressures eased further, with consumer prices on the slide in April.

The effects of COVID-19 were evident in March retail sales figures as well, which disappointed on Friday.

Ultimately, a jump in crude oil prices in the week, fueled by news of a jump in demand and falling output delivered the upside.

The markets are expecting demand to pick up as lockdown measures ease further. This was also positive for the Loonie in the week.

A sharp pullback on Friday limited the upside, however, as the Loonie slid back from C$1.38 levels.

The Loonie rose by 0.80% to end the week at C$1.3996.

For the Japanese Yen

It was a busy week on the data front. Key stats included 1^st quarter GDP and April trade figures, and May private sector PMIs.

At the end of the week, April inflation figures were also in focus. It was a mixed bag on the data front, leaving the Yen in limbo.

While the economy contracted at a slower pace, trade data going into the 2^nd quarter was particularly dire. Exports tumbled by 21.9%, with imports also in decline.

Private sector PMIs delivered little confidence on Thursday, with manufacturing sector activity contracting at a faster pace.

Adding more angst was the return of deflation in April, with core consumer prices falling by 0.2% year-on-year…

In spite of a pickup in market risk appetite in the week, the Yen failed to find support.

The Japanese Yen fell by 0.54% to end the week at ¥107.64. In the week prior, the Yen had fallen by 0.38% against the U.S Dollar.

Out of China

There were no stats in the week for the markets to consider. On the monetary policy front, the PBoC also left loan prime rates unchanged, leaving geopolitical risk in focus.

There was plenty to consider in the week as a Bill to oust Chinese firms from U.S exchanges progressed.

China responded with threats of its own before the news hit the wires on Friday of a new security law heading HK’s way. The law is set to ban acts against the government in a bid to end future protests. Unsurprisingly, the threat of more protests and riots weighed heavily on risk sentiment at the end of the week…

In the week ending 22^nd May, the Yuan fell by 0.39% to CNY7.1294 against the Greenback.

The CSI300 and Hang Seng ending the week down by 2.27% and by 3.64% respectively. A Friday sell-off left the pair in the red as the markets responded to the news of China’s proposal to impose the security law on HK SAR.