The Weekly Wrap – Risk Aversion Swept the Markets, Delivering USD and JPY Support
It was a busy week on the economic calendar, in the week ending 21st January.
A total of 57 stats were monitored, which was up from 45 stats in the week prior.
Of the 57 stats, 22 came in ahead forecasts, with 28 economic indicators coming up short of forecasts. 7 stats were in line with forecasts in the week.
Looking at the numbers, 20 of the stats reflected an upward trend from previous figures. Of the remaining 37 stats, 33 reflected a deterioration from previous.
For the Greenback, it was back into the green. In the week ending 21st January, the Dollar Spot Index rose by 0.49% to end the week at 95.636. In the week prior, the Index had fallen by 0.58% to 95.167.
Out of the U.S
It was a shortened week, with stats on the lighter side.
Key stats were limited to weekly jobless claims and Philly FED Manufacturing numbers.
In the week ending 14th January, initial jobless claims jumped from 231k to 286k.
On the positive, however, was a rise in the Philly FED Manufacturing Index from 15.4 to 23.2 in January.
Other stats that included housing sector and NY Empire State manufacturing numbers had a muted impact on the markets.
Market sentiment towards FED monetary policy drove U.S Treasury yields northwards, supporting Dollar demand.
Out of the UK
It was a particularly busy week.
Early in the week, claimant counts and the unemployment figures were upbeat. In December, claimant counts fell by 43.3k following a 95.1k slide in November. A continued rise in hiring supported a fall in the unemployment rate from 4.2% to 4.1% in November.
Mid-week, inflationary pressures picked up once more in December. The UK’s annual rate of inflation accelerated from 5.1% to 5.4% in December.
At the end of the week, retail sales figures were Pound negative, however.
In December, retail sales tumbled by 3.7%, reversing a 1.0% rise in November. Core retail sales slid by 3.6%, reversing a 0.7% increase in November.
In the week, the Pound fell by 0.89% to end the week at $1.3553. In the week prior, the Pound had risen by 0.64% to $1.3675.
The FTSE100 ended the week down by 0.65% partially reversing a 0.77% gain from the previous week.
Out of the Eurozone
ZEW Economic Sentiment figures from Germany and the Eurozone impressed early in the week. Germany’s ZEW Economic Sentiment jumped from 29.9 to 51.7 in January. The Eurozone ZEW Economic Sentiment Index rose from 26.8 to 49.4.
Through the week, finalized inflation figures for member states and the Eurozone were also in focus. There were no revisions from prelim figures, however, to influence. The Eurozone’s annual rate of inflation picked up from 4.9% to 5.0% in December.
A key stat that did draw interest, however, was German wholesale inflation. In December, Germany’s annual wholesale rate of inflation accelerated from 19.2% to 24.2%.
On the monetary policy front, the ECB monetary policy meeting minutes continued to reflect the transitory view on inflation.
For the week, the EUR fell by 0.59% to $1.1344. In the week prior, the EUR had risen by 0.44% to $1.1411.
The DAX30 slid by 1.76%, with the CAC40 and the EuroStoxx600 ending the week down by 1.04% and by 1.40% respectively.
For the Loonie
Inflation and retail sales were key stats from Canada.
In December, Canada’s annual core rate of inflation accelerated from 3.6% to 4.0%. The pickup in inflationary pressure supported the markets expectations on BoC monetary policy.
At the end of the week, retail sales for November failed to impress, however. Core retail sales rose by 1.1% month-on-month versus a forecasted 1.2% increase. Retail sales rose by 0.7% versus a forecasted 1.2% increase. In October, core retail sales had risen by 1.3% and retail sales by 1.5%.
In the week ending 21st January, the Loonie fell by 0.23% to C$1.2581 against the Greenback. The Loonie had rallied by 0.72% to C$1.2552 in the week prior.
The Aussie Dollar fell by 0.31% to $0.7185, with the Kiwi Dollar sliding 1.28% to end the week at $0.6717.
For the Aussie Dollar
Consumer sentiment and employment figures were in focus in the week.
It was a mixed bag for the Aussie Dollar. While consumer confidence waned further, employment conditions continued to improve.
In December, Australia’s unemployment rate fell from 4.6% to 4.2%, the lowest since 2008.
For the Kiwi Dollar
A relatively busy week failed to support a breakout for the Kiwi Dollar, with stats skewed to the negative.
In the 4th quarter, business confidence deteriorated, following on from disappointing numbers for Q3. Electronic card retail sales also failed to impress, rising by just 0.4% in December. Card retail sales had risen by 9.5% in November.
On the positive, was a pickup in private sector activity but it was not enough to pull the Kiwi out of the deep red. In December, the Business PMI rose from 50.6 to 53.7.
For the Japanese Yen
December trade and inflation figures were in focus in the week. A narrowing of Japan’s trade deficit from ¥955.6bn to ¥582.4bn was the only positive stat of the week.
Japan’s annual core rate of inflation held steady at just 0.5%, falling short of forecasts.
On the monetary policy front, the BoJ was also in action but provided few surprises.
The Japanese Yen rose by 0.45% to ¥113.680 against the U.S Dollar. In the week prior, the Yen had rallied by 1.19% to ¥114.190.
Out of China
It was a busy week on the economic calendar. 4th quarter GDP and industrial production figures were key stats in the week.
In the 4th quarter, the Chinese economy expanded by 1.6% versus a forecasted 1.1%. The economy had grown by just 0.2% in the previous quarter. Year-on-year, the economy grew by 4.00%. While slower than 4.9% in the 3rd quarter, growth was better than forecasts.
Industrial production figures were also upbeat. In December, production was up 4.3% year-on-year. Production had been up by 3.8% in November.
In the week ending 21st January, the Chinese Yuan rose by 0.22% to CNY6.3387. In the week prior, the Yuan had ended the week up by 0.39% to CNY6.3528.
The Hang Seng Index ended the week up by 2.39%, with the CSI300 rising by 1.11%.