The Weekly Wrap – Private Sector PMIs, Monetary Policy, and Geopolitics Drove the Majors

The Stats

It was a relatively busy week on the economic calendar, in the week ending 21^st August.

A total of 57 stats were monitored, following 69 stats from the week prior.

Of the 57 stats, 30 came in ahead forecasts, with 25 economic indicators coming up short of forecasts. 2 stats were in line with forecasts in the week.

Looking at the numbers, 30 of the stats also reflected an upward trend from previous figures. Of the remaining 27, 25 stats reflected a deterioration from previous.

For the Greenback, it was a mixed week that led to a fall to 92.2 levels before recovering to 93 levels and into the green. In the week ending 21^st August, the Dollar Spot Index rose by 0.16% to 93.247. In the week prior, the Dollar had fallen by 0.36% to end a run of 6 consecutive weekly losses.

Private sector PMIs on Friday rounded off a recovery. Positive PMIs from the U.S and negative PMIs from the Eurozone led to a 0.44% gain on Friday to deliver the upside in the week.

Out of the U.S

It was another busy week on the economic data front.

Key stats in the week included August manufacturing numbers and the weekly jobless claims figures.

The stats delivered some red flags in the week.

Both the NY Empire State Manufacturing Index and Philly FED Manufacturing Index saw marked declines.

Initial jobless claims also disappointed, rising to 1.106m in the week ending 14^th August.

At the end of the week, the Markit survey’s prelim PMI numbers for August eased some concern, however.

The manufacturing PMI rose from 50.9 to a 19-month high 53.6, with the services PMI rising from 50.0 to a 17-month high 54.8. Economists had forecast PMIs of 51.9 and 51.0 respectively.

Housing sector numbers continued to be the bright spot but failed to deliver any material support.

On the monetary policy front, the FOMC meeting minutes delivered a cautious note, with the FED showing very little optimism. Friday’s private sector PMIs will ease some of the negativity surrounding the U.S economy.

In the equity markets, the NASDAQ and S&P500 rose by 2.65% and by 0.72% respectively. The Dow ended the week flat, however.

Out of the UK

It was another busy week on the economic calendar. On Wednesday, July inflation figures were in focus.

A pickup in inflationary pressures provided support for the Pound mid-week.

The focus then shifted to a busy Friday. Retail sales continued to rise in July, coming in ahead of forecasts.

Private sector PMI numbers were also positive. The all-important services PMI rose from 56.5 to a 72-month high 60.1 in August, according to prelim figures.

Manufacturing sector activity also got a boost, with the PMI rising from 53.3 to 30-month high 55.3.

For the week, the only blemish on the report card was a worse than expected increase in CBI industrial trend orders. In August, the index increased from -46 to -44. Economists had forecast a rise to -35.

On the Brexit front, talks between Britain and the EU resumed and then ended. While Britain looked to push the trade agreement envelope, a lack of progress on fisheries left talks in deadlock once more.

In the week, the Pound rose by 0.03% to $1.3090. A 0.94% slide on Friday left the Pound flat for the week. In the week prior, the Pound had risen by 0.26% to $1.3086.

The FTSE100 ended the week down by 1.45%, reversing a 0.96% gain from the previous week.

Out of the Eurozone

It was another relatively busy week economic data front.

The markets had to wait for a busy Friday, however, for August’s prelim private sector PMIs that sounded the alarm bells.

It was grim reading and came in the week of the ECB’s monetary policy meeting minutes on Thursday that frequently talked of uncertainty…

From France, manufacturing PMI slid from 52.4 to 49.0, with the services PMI tumbling from 57.3 to 51.9.

It was a little better from Germany. The all-important manufacturing PMI rose from 51.0 to 53.0, while the services PMI slid from 55.6 to 50.8.

For the Eurozone, the manufacturing PMI slipped from 51.8 to 51.7, while the services PMI slid from 54.7 to 50.1.

The Eurozone’s Composite PMI fell from 54.9 to 50.1. Economists had forecast the PMI to hold steady at 54.9.

The loss of momentum and stagnation across the private sector reflected the impact of fresh COVID-19 spikes across the EU and beyond.

As a result, hopes of a v-shaped economic recovery evaporated. The numbers ultimately reflected the ECB’s concerns over the economic recovery…

Other stats in the week included inflation and consumer confidence figures that had a muted impact on the EUR.

For the week, the EUR fell by 0.38% to $1.1797, reversing a 0.47% gain from the previous week.

For the European major indexes, it was a bearish week. The CAC40 and DAX30 ended the week with losses of 1.34% and 1.06%, with the EuroStoxx600 falling by 0.81%.

For the Loonie

It was a busier week on the economic calendar.

Economic data included July inflation figures and June retail sales figures.

It was a mixed bag for the Loonie. While inflationary pressures eased in July, retail sales saw another jump in June.

Disappointing consumer prices for July suggested a possible waning in consumption in July. It wasn’t enough to leave the Loonie in the red, however.

Looking at the crude oil inventory numbers in the week, it was also mixed, with the IEA reporting lower than expected drawdowns.

The Loonie rose by 0.67% to end the week at C$1.3177. In the week prior, the Loonie had risen by just 0.88%.

Elsewhere

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

In the week ending 21^st August, the Aussie Dollar fell by 0.14% to $0.7161, with the Kiwi Dollar slipping by 0.02% to $0.6541.

For the Aussie Dollar

It was a quiet week for the Aussie Dollar.

Economic data prelim retail sales figures for July. The numbers were impressive on Friday, with retail sales rising by 3.3% in July. With the RBA’s reliance on consumption and concerns over the impact of the spike in new COVID-19 cases in Melbourne, the numbers were well received.

It wasn’t enough to prevent a 0.43% loss to leave the Aussie Dollar in the red for the week, however.

On the monetary policy front, the RBA meeting minutes on Tuesday tested support for the Aussie Dollar, however.

Dovish chatter and talk of uncertainty over what lies ahead failed to weigh on the Aussie early in the week, however.

For the Kiwi Dollar

It was a quiet week on the economic calendar.

Key stats included 2^nd quarter wholesale inflation figures, which weighed on the Kiwi mid-week.

Ultimately, however, the Kiwi was unable to shake RBNZ talk of negative rates.

Away from the economic calendar, rising tension between the U.S and China certainly didn’t help.

For the Japanese Yen

It was a busy week on the economic calendar.

Key stats included 2^nd quarter GDP numbers, July trade figures, and August’s prelim private sector PMIs.

In the week, the stats were skewed to the negative.

Japan’s economy contracted by 7.8% in the 2^nd quarter versus a 0.6% contraction in the 1^st quarter.

Trade figures also painted a gloomy picture, with both imports and exports taking another hit in July.

Core machinery orders slumped in June and private sector PMIs delivered mixed signals for August.

The only highlight was a slightly slower pace of contraction in the manufacturing sector. It was of little comfort, however, with service sector activity contracting at a quicker pace in August.

All in all, the Japanese economy looks unlikely to come out of the slump anytime soon.

The Japanese Yen rose by 0.75% to ¥105.80 against the U.S Dollar. In the week prior, the Yen had fallen by 0.64%.

Out of China

It was a quiet week on the economic data front.

There were no material stats to influence in the week,

On the monetary policy front, the PBoC left loan prime rates unchanged, leaving geopolitics in focus.

In the week prior, news had hit the wires of Trump canceling trade talks with China.

The decision to hold back had little impact, however, as the U.S administration targeted Chinese tech firms.

What’s next for Beijing remains to be seen. Beijing could be biding their time, however. Biden leads in the polls, suggesting that Trump’s days are numbered.

In the week ending 21^st August, the Chinese Yuan rose by 0.45% to CNY6.9194. In the week prior, the Yuan had risen by 0.25%.

The CSI300 rose by 0.30%, supported by a 0.85% gain on Friday, while the Hang Seng slipped by 0.27%. A 1.30% rally on Friday limited the downside for the Hang Seng.