The Weekly Wrap – Sentiment Towards Trade and the Middle East Overshadowed the Stats

It was a mixed week, as risk appetite hit reverse in the 2nd half of the week in response to U.S military action in the Middle East.
Bob Mason
Europe (and euro) economic crisis concept.

The Stats

It was a quiet week on the economic calendar, in the week ending 3rd January 2020.

Just 30 stats were monitored over the New Year. A whopping 94 stats had been monitored in the week leading into the Christmas Holidays, before a particularly quiet week last week.

Of the 30 stats, 12 came in ahead forecasts, with 14 economic indicators coming up short of forecast. 4 stats were in line with forecasts.

Looking at the numbers, 14 of the stats reflected an upward trend from previous figures. Of the remaining 16, 13 stats reflected a deterioration from previous.

For the Greenback, it was another bearish week, in spite of rising tensions in the Middle East.

For the week, the Dollar Spot Index fell by 0.08% to 96.838.

Out of the U.S

It was a relatively busy week for the Dollar, with the stats skewed to the negative.

November trade and pending home sales figures, together with December’s Chicago PMI kicked things off.

The goods trade deficit narrowed from $66.53bn to $63.19bn, with pending home sales rising by 1.2%. In October sales had fallen by 1.3%.

Manufacturing sector activity in Chicago contracted at a slower pace, with the PMI rising from 46.3 to 48.9.

The focus then shifted to consumer confidence figures, with the CB Consumer Confidence Index falling from 126.8 to 126.5. The numbers had a muted impact on the Dollar, however, as sentiment towards trade continued to overshadow the stats.

On Thursday, initial jobless claims rose by 222k, coming in ahead of a forecasted 225k increase.

Things were less impressive for the manufacturing sector, however.

The markets preferred ISM Manufacturing PMI fell from 48.1 to 47.2, with the numbers on Friday pinning back the Dollar.

Outside of the numbers, it was a mixed week for the Greenback. Positive sentiment towards trade weighed on the Dollar while rising tensions in the Middle East provided support.

In the equity markets, the Dow & S&P500 fell by 0.04% and by 0.16% respectively, while NASDAQ rose by 0.16%. A Friday sell-off did the damage as the markets reacted to rising tensions in the Middle East.

Out of the UK

It was a relatively quiet week on the economic calendar.

Finalized manufacturing PMI and construction PMI numbers provided direction in the 2nd half of the week.

In a shortened week, the manufacturing PMI came in at 47.5, falling short of a forecast of 47.7 on Thursday.

On Friday, the construction PMI fell from 45.3 to 44.4.

Unimpressive numbers contributed to the Pound’s downside in the 2nd half of the week, reversing gains from the 1st half.

For the week, the Pound rose by 0.04% to end the week at $1.3083. The Pound had hit $1.32 levels at the year-end…

The FTSE100 fell by 0.29% in the week. The fall coming in spite of a trend-bucking 0.24% gain on Friday. A jump in crude oil prices and a softer Pound provided support at the end of the week.

Out of the Eurozone

It was a busy week on the economic data front.

Ahead of the holidays, 3rd quarter GDP and December inflation figures from Spain were in focus.

The numbers had a muted impact, however, with prelim inflation numbers mixed and GDP numbers in line with forecasts.

Manufacturing PMI numbers for December did provide direction on Thursday, however.

Upward revisions from prelims for France, Germany, and the Eurozone were positives, while a faster pace of contraction in Italy was negative.

The Eurozone’s manufacturing PMI, while revised upwards, continued to paint a bleak picture, however. The ECB Economic Bulletin from the week prior had suggested a stabilization in the manufacturing sector.

While there was improved optimism, employment declined at the sharpest pace since records began. New orders also fell at a sharper pace, with 7 out of 8 member states seeing weaker PMIs compared with November.

On Friday, employment figures out of Germany and Spain were also less than impressive, while there was evidence of a pickup in inflationary pressures.

For the week, the EUR fell by 0.14% to $1.1161, with a pullback at the start of the year seeing the EUR give up $1.12 levels.

For the European major indexes, the DAX30 and EuroStoxx600 fell by 0.88% and by 0.34% respectively. The CAC40 eked out a 0.11 gain. A 1.25% slide on Friday left the DAX in the deep red, while the CAC40 managed to avoid red to close out the week in positive territory.

Elsewhere

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

For the week, the Aussie Dollar fell by 0.43% to $0.6950, with the Kiwi Dollar down by 0.52% to end the week at $0.6664.

Positive sentiment towards the U.S – China trade agreement had provided support, ahead of a Friday sell-off.

For the Aussie Dollar

There were no material stats to provide the Aussie Dollar with direction in the week. The lack of stats left sentiment towards trade to provide support in the early part of the week.

Risk aversion stemming from rising tensions in the Middle East, however, saw the Aussie give up $0.70 levels in the 2nd half.

For the Kiwi Dollar

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

Tracking the Aussie Dollar, the Kiwi also hit reverse in the 2nd half of the week, as risk aversion weighed.

The Kiwi had hit $0.67 levels at the start of the week before a 0.57% slide on Friday…

For the Loonie

It was a quiet week for the Loonie, with no material stats to provide direction in the week.

Positive sentiment towards the economic outlook provided support in the week. The phase 1 trade agreement between the U.S and China and the USMCA are both positives.

A 0.15% fall on Friday, stemming from tensions between the U.S and Iran, limited the upside in the week, however.

The Loonie was rose by 0.60% to C$1.3001 against the Greenback.

For the Japanese Yen

It was a quiet start to the year on the data front.

There were no material stats to provide direction, with Japanese markets closed on 3 of the 5 days.

A lack of stats was a positive for the Yen, however. A combination of positive sentiment towards trade and risk aversion provided support.

The Japanese Yen ended the week up by 1.23% to ¥108.09, against the U.S Dollar.

Out of China

Economic data included December’s NBS private sector PMI numbers for December on Tuesday and the Caixin Manufacturing PMI on Thursday.

The numbers were skewed to the negative for December.

While the NBS Manufacturing PMI held steady at 50.2, the Caixin PMI fell from 51.8 to 51.5, with new orders weighing…

Also negative was a fall in the NBS Non-Manufacturing PMI, which slipped from 54.4 to 53.5.

The markets were in a forgiving mood, however. News of the PBoC lowering the Reserve Requirement Ratio and the phase 1 trade agreement offset the negative numbers in the week.

The CSI300 rallied by 3.06% in the week, with the Yuan rising by 0.42% to CNY6.9663 against the Greenback.

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