The Weekly Wrap – Stats, Monetary Policy, and COVID-19 Drove the MajorIt was quite a week for the global financial markets, with the bulls coming out on top. COVID-19 will remain the headline for now…
It was a relatively busy week on the economic calendar, in the week ending 14th February.
A total of 46 stats were monitored, following 60 stats from the week prior.
Of the 46 stats, 20 came in ahead forecasts, with 15 economic indicators coming up short of forecast. 11 was in line with forecasts in the week.
Looking at the numbers, 30 of the stats reflected an upward trend from previous figures. Of the remaining 16, 12 stats reflected a deterioration from previous.
For the Greenback, it was a bullish week, with economic data and sentiment towards monetary policy providing support. The Dollar Spot Index rose by 0.45% to 99.124 in the week.
Out of the U.S
It was a quiet start to the week for the Dollar.
The markets had to wait until inflation figures due out on Thursday for direction. With the annual rate of inflation holding steady at 2.3% and initial jobless claims sitting at 205k, the Dollar found support on Thursday.
On Friday, the stats were mixed, however, which limited the upside for the Dollar on the day.
While consumer sentiment jumped to a 15-year high in February, retail sales figures failed to impress. Retail sales rose by 0.3%, month-on-month in January, with core retail sales also rising by 0.3%. In December, core retail sales had risen by 0.6%, while retail sales had increased by just 0.2%.
If February’s consumer sentiment numbers are anything to go by, however, retail sales should get a boost in February.
On the production side, the numbers were also disappointing, with industrial production falling by 0.3% in January.
December JOLTs job openings on Tuesday had a muted impact on the Dollar.
On the monetary policy front, FED Chair Powell gave testimony to Congress over 2-days.
The Dollar came under fire on Tuesday as Powell raised concerns over the spread of COVID-19. While highlighting the risks, the FED Chair noted that monetary policy would stay pat should the economy remain resilient as anticipated.
In the equity markets, the Dow gained 1.02%, with the S&P500 and NASDAQ up by 1.58% and by 2.21% respectively.
Out of the UK
It was a busy start to the week on the economic calendar.
4th quarter GDP numbers together with December industrial and manufacturing production figures were in focus.
In the 4th quarter, the UK economy stalled, with the UK GDP up by 1.1% year-on-year, easing from a 3rd quarter 1.2%.
Industrial and manufacturing production both came up short of forecasts, whilst returning to growth following slides in November.
Trade data also saw a material shift, with both the UK’s trade balance and non-EU trade balance shifting from a deficit to a surplus.
While growth stalled and production figures disappointed it could have been worse, delivering some relief to the Pound.
Following better than anticipated private sector PMIs last week, hopes of the BoE standing pat near-term had provided the Pound with support before the slide to $1.28 levels.
Negative sentiment towards Johnson being able to garner a no-strings-attached trade agreement with the EU pressured the Pound.
Ahead of Tuesday’s numbers, talks of Britain and trade talks with Japan delivered early support in the week.
In the 2nd half of the week, the Pound got a 2nd boost, with the departure of the Chancellor of the Exchequer Javid raising the prospects of a loosening of the purse strings.
The Pound ended the week up by 1.20% to $1.3047.
The FTSE100 reversed gains from earlier in the week to end the week down by 0.77%. A stronger Pound contributed to the 100’s demise.
Out of the Eurozone
It was a quiet start to the week on the economic data front.
A lack of stats left the markets to focus on investor confidence figures from the Eurozone and Italian industrial production figures.
The Sentix Investor Confidence Index came fell from 7.6 to 5.2. Economists had forecast a fall to 4.1.
While concerns over the impact of the coronavirus had materially shifted sentiment towards the global economic outlook, European investors were rather calm at the time of the survey.
The Asia ex-Japan index slid by a more sizeable 11.3 points as the Asian region struggled to contain the spread.
With the numbers on the negative side and sentiment towards the Eurozone economy bearish, the EUR struggled early in the week.
Out of Italy, industrial production slumped by 2.7% month-on-month to leave production by 4.3% year-on-year. Economists had forecast a 0.5% decline in the month and a 0.2% decline year-on-year.
For key stats, the markets had to wait until Wednesday for industrial production figures from the Eurozone. Production slid by 2.1% in December, which was worse than a forecasted fall of 1.5%.
Things were not much better at the end of the week. GDP numbers out of Germany and the Eurozone added further pressure on the EUR.
Germany’s economy stalled in the 4th quarter, with growth year-on-year coming in at just 0.3%. Things would have been far worse for the EUR had the economy contracted…
For the week, the EUR fell by 1.05% to $1.0831.
For the European major indexes, it was a bullish week, with a softer EUR proving support. The DAX30 and EuroStoxx600 rose by 1.70% and by 1.49% respectively. The CAC40 saw a more modest 0.66% gain for the week.
It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.
The Aussie Dollar rose by 0.61% to end the week at $0.6714, with the Kiwi Dollar up by 0.59% to $0.6438.
For the Aussie Dollar
It was a relatively quiet week for the Aussie Dollar.
Economic data was limited to January business confidence figures on Tuesday and consumer confidence figures on Wednesday.
Business confidence figures on Tuesday provided support early in the week. While coming up short of forecasts, a rise from -2 to -1 in January eased jitters of a further pullback in business investment.
On Wednesday, consumer confidence figures impressed, with the Westpac Consumer Confidence Index rising by 2.3%.
While the numbers were Aussie Dollar positive, sentiment towards COVID-19 ultimately delivered the upside.
A bounce back to $0.67 levels on Tuesday came off the back of less alarming numbers out of China.
The upside was limited, however, with a spike in cases and deaths mid-week testing appetite for riskier assets.
For the Kiwi Dollar
It was a busier week on the economic calendar.
Key stats included electronic retail card sales and Business PMI numbers on Wednesday and Friday.
Retail sales fell by 0.1%, following a 0.8% decline in December, while the Business PMI rose from 49.3 to 49.6.
The numbers were certainly not good enough to deliver the upside in the week.
Monetary policy ultimately delivered strong support on Wednesday as the RBNZ stood pat on interest rates.
While holding rates steady, which was expected, the RBNZ delivered a more hawkish outlook on growth.
Talk of a pickup in economic growth in the 2nd half of the year eased any bets of further policy easing. The RBNZ also saw the effects of COVID-19 as a short term, 1st quarter issue…
For the Loonie
It was also quiet week, with economic data limited to housing sector data on Monday.
Housing starts and building permits delivered positive news but not enough to drive the Loonie into positive territory.
A shift in risk sentiment on Tuesday reversed losses from Monday, as crude oil prices bounced back from a Monday reversal.
Crude oil prices rallied in the week, in spite of both OPEC and the IEA cutting demand forecasts.
Expectations of OPEC and Russia cutting production to support prices delivered the upside in the week.
The bounce in crude oil prices and pick up in risk appetite provided the Loonie with much-needed support.
The Loonie ended the week up by 0.42% to C$1.3252 against the Greenback.
For the Japanese Yen
It was a particularly quiet week on the data front. There were no major stats in focus to provide the Yen with direction.
The lack of stats left the Yen in the hands of market risk appetite in the week.
We saw the pendulum swing both ways in the week, leaving the Yen relatively flat at the end of the week.
The Japanese Yen ended the week down by 0.03% to ¥109.78 against the U.S Dollar.
Out of China
January inflation figures were in focus through the 1st half of the week.
Inflationary pressures picked up at the start of the year. While inflationary pressures built, S&P and a number of banks downgraded growth forecasts for China in the 1st quarter.
There remains plenty of uncertainty over just how much impact the spread of the virus will have.
On Tuesday, China returned to work, however, which contributed to the pickup in risk appetite across the global markets on the day.
Through the 2nd half of the week, COVID-19 figures delivered dire news, weighing on risk appetite.
In spite of the shift in sentiment that saw the Yuan fall by 0.14% on Friday, the Yuen ended the week up by 0.22% to CNY6.9869.
The CSI300 rose by 2.25%, while the Hang Seng saw a more modest 1.50% gain.
Anticipated support from Beijing to mute the effects of COVID-19 delivered the upside in the week.