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Bob Mason
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The Stats

It was a relatively busy week on the economic calendar in the week commencing 9th December.

A total of 54 stats were monitored through the week, following 62 stats from the week prior.

Of the 54 stats, 18 came in ahead forecasts, with 24 economic indicators coming up short of forecast. 12 stats were in line with forecasts in the week.

Looking at the numbers, 21 of the stats reflected an upward trend from previous figures. Of the remaining 33, 26 stats reflected a deterioration from previous.

The Greenback was on a downward trend from the get-go, weighed by negative sentiment towards trade ahead of the FOMC decision.

A more dovish projection on interest rates for 2020 added further pressure on the dollar late on Wednesday.

While there was support early on Thursday, it didn’t last long as geopolitical risk took a dive. A 0.1% gain on Friday did, however, end a run of 4 consecutive days in the red.

The Dollar Spot Index ended the week down by 0.54% to 97.172.

Out of the U.S

It was a relatively busy week on the economic calendar. Economic data included November inflation figures on Wednesday that preceded the FED’s last monetary policy decision of the year.

Inflation figures on Wednesday were skewed to the positive. While the annual rate of core inflation held steady at 2.3%, consumer prices rose by 0.3% in November, coming in ahead of a forecast of a 0.2% rise. In October, consumer prices had risen by 0.4%.

On Thursday, wholesale inflation figures and disappointing initial jobless claims figures were brushed aside as the markets responded to Trump Tweets of an imminent deal with China.

Late on Thursday, news hit the wires of China and the U.S reaching an in-principal phase 1 agreement.

On Friday, retail sales figures failed to influence. A fall in consumer spending was of little interest following the news on trade… We had expected as much in the early hours of the day…

On the Monetary Policy Front

While the FED held rates steady on Wednesday, as expected, the economic projections garnered plenty of attention.

From the economic projections’ median numbers,

  • Economic growth for 2020 was projected to grow by 2.0%, which was in line with September forecasts.
  • For inflation, the Core PCE Price Index was forecast to pick up to 1.9% in 2020 and to hit 2.0% by 2021. This was up from 1.5% for 2019.
  • On unemployment, while predicting an unemployment rate of 3.5% for 2020, revised from 3.7% in September, the FED predicts a longer-run rate of 4.1%.
  • Finally, on the projected path for interest rates, FOMC members saw rates unchanged through 2020, with 1 rate hike in 2021.
  • The Federal funds rate had a median of 1.6% for 2020 and 1.9% for 2021. In September, the medians had stood at 1.9% and 2.1% respectively.
  • Trump may not like the anticipated hold and longer run FED Funds Rate of 2.5%, however…
  • When looking at the dot plot, just 4 members of the Committee predicted a single rate hike next year. The remaining 14 members saw rates on hold throughout the year.

All in all, no downward revisions to growth forecasts and an accommodative FED were considered positives for the equity markets.

Following late Thursday’s eureka moment, the first exit poll from the UK came shortly after, adding further demand for riskier assets.

In the equity markets, the Dow gained 0.43%, with the S&P500 and NASDAQ up 0.73% and by 0.91% respectively.

Out of the UK

It was a busy week on the economic calendar.

Tuesday was the big day on the data front. The stats were mixed and unimpressive.

On the positive, industrial and manufacturing production rose in October. The upside was miner, however, with industrial production rising by 0.1% and manufacturing production by 0.2%.

Trade data was dire, with the October trade deficit seeing a marked widening.

On the GDP front, the economy stalled in October, after having stalled in the 3rd quarter. Year-on-year, the economy also saw slower growth, down from 0.9% to 0.7%.

If stats in the week ahead are also skewed to the negative, more dissent should be expected at next week’s MPC meeting.

While the stats were skewed to the negative, it was ultimately the UK General Election that drove the Pound.

Ahead of the big today, a narrowing in the YouGov’s final opinion poll had led to a pullback in the Pound on Wednesday. The Pound had hit 8-month highs earlier in the week…

A pullback to $1.30 levels was short-lived, however. The first exit poll early in the Asian session on Friday projected an 86 seat majority for the Tories. In response, the Pound surged to $1.35 levels as we had forecast on Thursday morning.

For the Johnson and the Brexiteers, it was the largest majority since 1987, when Thatcher won with a majority of 102.

The Pound rallied by 1.45% to $1.3331 in the week. It could have been more, with the Pound having spiked at 1.35 levels early on Friday…

For the FTSE100, the markets shrugged off a jump in the Pound, with the Index ending the week up by 1.57%. The news of an in-principal trade agreement between China and the U.S offset the negative effects of the Pound…

Out of the Eurozone

It was a relatively quiet week on the economic data front.

Economic data included German trade data, German and Eurozone business sentiment, and Eurozone industrial production figures.

Germany defied gravity, delivering a widening in the trade surplus in October, supported by strong exports to countries outside of the EU.

On Tuesday, sentiment towards the economy also improved. Eurozone industrial production fell, however. The fall was in line with forecasts, limiting any downside for the EUR.

While chatter on trade and the UK General Election were the main events, Lagarde’s first press conference as ECB President was an impressive one.

There was no major slide, with Lagarde describing herself as an owl and not a dove or a hawk…

Outside of the numbers, it was the FED and the more dovish outlook on interest rates for 2020 that provided the EUR with gains.

For the week, the EUR rose by 0.55% to $1.1121.

For the European major indexes, the EuroStoxx600 led the way, rising by 1.15%. The CAC30 and DAX30 ended the week up by 0.88% and 0.80% respectively.


It was a bullish week for the Aussie Dollar and the Kiwi Dollar, which recovered from losses from early in the week.

The Aussie Dollar rose by 0.51% to $0.6876, with the Kiwi Dollar up by 0.50% to $0.6599.

The upside came off the back of a late Wednesday rally, with both recovering from negative territory on the day. The Aussie surged by 0.98% on Wednesday, with the Kiwi up by 0.63%.

While monetary policy divergence provided the upside, sentiment towards RBA and RBNZ monetary policy going into 2020 should see some of these gains reverse…

It remains to be seen whether the in-principal trade agreement will give both central banks some breathing room before needing to commit to a move. A 0.48% pullback in the Aussie Dollar on Friday suggested that $0.69 maybe a little too rich for the Aussie…

For the Aussie Dollar

On the data front, it was a relatively quiet week for the Aussie Dollar.

The stats were on the negative side, which will likely further test the RBA’s current stance on policy.

Key stats included November business confidence and December consumer confidence figures.

On Tuesday, the NAB Business Confidence Index fell from 2 to 0 in November.

From Wednesday, the Westpac Consumer Sentiment Index fell by 1.9% in December.

Both sets of numbers raised doubts over whether the RBA can stand pat on policy near-term.

Following some disappointing numbers in the weeks prior and the latest stats, the chances of a February rate cut will have risen…

For the Kiwi Dollar

It was a quiet week on the economic colander.

Economic data was limited to Electronic Card Retail Sales figures for November. While the numbers were impressive, sales up by 2.6%, the Kiwi Dollar hit reverse.

Concerns over economic growth prospects weighed on the Kiwi after an initial rally on Monday.

The Monday rally had come in response to news of the New Zealand government’s plan to support through infrastructure spending.

In the end, it was the FED and Trump’s in-principal trade deal that led the Kiwi back to $0.66 levels, its highest level since July, before easing back.

For the Loonie

It was a quiet week for the Loonie.

November housing start and October building permit figures were in focus early in the week. Disappointing numbers had a limited impact on the Loonie, however.

While the stats were negative, positive updates from Canada on the U.S – Mexico – Canada Agreement (USMCA) provided support early in the week.

The upside for the Loonie came in spite of rising crude oil inventory numbers and mixed sentiment towards a U.S – China phase 1 trade agreement.

Mid-week, a dovish FED led the Loonie back to C$1.31 levels ahead of the news of an in-principal trade agreement hitting the wires.

The Loonie ended the week up by 0.67% to C$1.3166 against the Greenback.

For the Japanese Yen

It was a busy week on the data front. In the 1st half of the week, stats included finalized 3rd quarter GDP numbers and BSI Large Manufacturing Conditions figures for the 4th quarter.

It was a mixed bag on the data front, with finalized GDP numbers impressing on Monday.

Upward revisions to capital expenditures, household consumption, and domestic demand contributed to the upward revision.

On Wednesday, however, the negative effects of the ongoing U.S – China trade war were evident in manufacturing numbers. The BSI Large Manufacturing Conditions Index fell from -0.2 to -7.8 in the 4th quarter.

On Friday, the quarterly Tankan survey numbers for the 4th quarter also delivered mixed results.

The good news for the BoJ and the broader markets is that a U.S – China trade deal should alleviate the extended stress on the global trade environment. Or so the story goes…

For the Yen, a Tory Party victory and news of a trade deal weighed. A more dovish outlook on FED monetary policy had had a muted impact on Wednesday…

The Japanese Yen fell by 0.74% to ¥109.38, against the U.S Dollar.

Out of China

It was a quiet start to the week on the economic data front, with November inflation figures having a muted impact.

It was all about trade in the week, which ultimately gave the Yuan a boost on Friday.

The U.S administration announced an in-principal trade agreement. While the devil will be in the details, this was the first concrete evidence of a deal since the start of the trade war.

The CSI300 rose by 1.69% in the week, driven by a 1.98% rally on Sunday, with the Yuan up by 0.71% to CNY6.9852 against the Greenback. It was the first close at sub-CNY7.00 levels since 8th November.

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