The Weekly Wrap – The Greenback Had the Final Say in a Busy WeekA bounce back in the Dollar and equity market rally on Friday painted a different picture of what preceded the U.S labor market figures.
It was a busy week on the economic calendar in the week commencing 6th December.
A total of 62 stats were monitored, following 60 stats from the previous week.
Of the 62 stats, 33 came in ahead forecasts, with 24 economic indicators coming up short of forecast. 5 stats were in line with forecasts in the week.
Looking at the numbers, 35 of the stats reflected an upward trend from previous figures. Of the remaining 24, 3 stats reflected a deterioration from previous.
Sentiment towards trade and disappointing stats out of the U.S pressured the greenback after the Thanksgiving break. That was before labor market figures that brought to an end a run of 5 days in the red for the Dollar.
4 consecutive days in the red, in the week, left the Greenback down by 0.58% to 97.700 for the week.
Out of the U.S
It was a busy week. Economic. In the 1st half of the week, data included private sector PMIs and ADP nonfarm employment figures for November.
It was a double whammy for the Dollar, with both the ISM Manufacturing and Non-Manufacturing PMIs coming in weaker.
That combined with negative chatter on trade in the 1st half of the week left the Greenback in the deep red.
On Wednesday, the ADP’s nonfarm figures didn’t help, with the ADP reporting just a 67k increase in November. That fell well short of a forecast of 140k.
On the trade front, the pendulum swung on Wednesday, however, with talks of a deal ahead of the 15th December supporting riskier assets.
Through the 2nd half of the week, the weekly jobless figures impressed ahead of the November Labour market figures on Friday.
Also positive on Thursday was a narrowing in the trade deficit and a rise in factory orders.
It wasn’t enough for a Greenback recovery, however. While the U.S equity markets bought into the hope of a phase 1 agreement the FX world thought otherwise once more.
On Friday, it was an altogether different story, however, as nonfarm payrolls and wage growth gave the Dollar a much-needed boost.
Nonfarm payrolls surged by 266k, well ahead of a forecast of 186k, with wages growing by 3.1%. For nonfarm payrolls, that was the largest monthly rise in a 304k jump in January of this year. It was also the first over 200k rise since June’s 224k.
If the Dollar was looking for additional support, December’s prelim Michigan Consumer Sentiment and Expectations Indexes also wowed late in the day.
In the equity markets, the Dow fell by 0.13%, with the NASDAQ down 0.10%. The S&P bucked the trend, rising by 0.16%. A labor market fueled rally on Friday reversed heavy losses from earlier in the week…
Out of the UK
It was also a relatively busy 1st half of the week on the economic calendar.
Finalized private sector PMIs for November provided support, while retail sales figures delivered a dismal picture…
While both the manufacturing and services PMIs saw upward revisions, both were still down from October, however.
Through the 2nd half of the week, economic data was limited to November house prices figures. While house prices got a boost in November, there was no material impact on the Pound.
Throughout the week, the UK election opinion polls continued to be the key driver. The Tories found support back on the rise. With less than one week to go, the markets are now betting on a Tory victory, which led the Pound to levels not seen since back in May.
The Pound rallied by 1.66% to $1.3140 in the week.
For the FTSE100, the stronger Pound and negative sentiment towards trade weighed heavily on the index in the 1st half of the week. A Friday recovery was not enough to reverse the earlier losses. The index ended the week down by 1.45%.
Out of the Eurozone
It was a busy week on the economic data front.
Economic data included private sector PMI numbers out of Italy and Spain and finalized numbers for France, Germany, and the Eurozone.
The stats were skewed to the positive, with upward revisions to French, German and Eurozone manufacturing numbers a plus.
On Wednesday, service sector activity was also better than had been anticipated. The Eurozone’s composite was revised up from 50.3 to 50.5. This was still down from October’s 50.6, however, as manufacturing sector activity continued to drag.
While the stats were skewed to the positive side, it was the negative sentiment towards trade on Monday and Tuesday that provided the EUR upside. This came in spite of the U.S administration threatening tariffs on all French goods…
In the 2nd half of the week, the stats were skewed to the negative. Germany factory orders and industrial production tumbled in October, with Eurozone retail sales also in decline.
The disappointing numbers paint a gloomy picture at the start of the 4th quarter and will be of concern for the ECB.
On the economic growth front, the only good news was the fact that the Eurozone’s GDP numbers were in line with 2nd estimates…
For the week, the EUR rose by 0.38% to $1.1060.
For the European major indexes, the CAC40 led the way down, falling by 0.56%. The EuroStoxx600 and DAX30 fell by 0.02% and 0.53% respectively, the losses coming in spite of a bounce-back on Friday.
It was a bullish week for the Aussie Dollar and the Kiwi Dollar.
The Aussie Dollar rallied by 1.15% to $0.6841, with the Kiwi Dollar up by 2.24% to $0.6566.
For the Aussie Dollar
It was a busy week for the Aussie Dollar.
In the 1st half of the week, economic data included gross company profit figures for the 3rd quarter, November manufacturing and 3rd quarter GDP numbers.
Joining the EU, the UK, and the U.S, the manufacturing sector contracted in November, with the Index falling from 51.6 to 48.1.
Gross company operating profits were also dire, with profits falling by 0.8% in the 3rd quarter. In the 2nd quarter, profits had risen by 4.5%.
On Wednesday, GDP figures added further pressure on the Aussie Dollar early in the day.
The economy grew by 0.4%, quarter-on-quarter, slowing from 0.5% in the 2nd quarter.
Negatively skewed figures had a muted impact, however, as monetary policy and a slide in the Greenback provided the upside.
The RBA held back from any chatter of a rate cut in the last meeting of the year, driving the Aussie back to $0.68 levels against the Greenback.
Negative sentiment towards trade in the early part of the week had also pinned the U.S Dollar back, supporting 3 consecutive days in the green for the Aussie ahead of a Thursday pullback.
In the 2nd half of the week, economic data included October retail sales and trade data.
While the RBA refrained from talking about rate cuts, retail sales disappointed in October, with sales staling. Trade data also come in softer, with the trade surplus narrowing from A$7.18bn to A$4.52bn.
Ultimately, a more hawkish than expected RBA in the 1st half and risk appetite in the 2nd half supported the weekly gain. It certainly wasn’t the data…
For the Kiwi Dollar
It was a particularly quiet week on the economic colander.
There were no stats to provide direction for the Kiwi, which continued to find support. Market sentiment towards trade and RBNZ monetary policy fueled the upside in the week.
A shift in the RBNZ’s stance on bank capital requirements also fueled the rally, which led to 7 consecutive days in the green.
For the Loonie
It was a relatively busy but important week for the Loonie.
Economic data included October trade and November Ivey PMI numbers on Thursday and November employment figures on Friday.
It was a mixed bag for the Loonie. While trade and Ivey PMI numbers impressed, employment figures were woeful, leading to a heavy reversal on Friday.
In spite of the mixed stats, it was ultimately the BoC that delivered the boost in the week. In the previous meeting, members had been cautious over the economic outlook, which was in contrast to the latest meeting. This time around, the BoC saw the economy stabilizing.
The Loonie rose by 0.20% to C$1.3255 against the Greenback, a 0.61% slide on Friday limiting the upside.
For the Japanese Yen
It was a relatively quiet week on the data front, with stats limited to finalized November private sector PMIs, 3rd quarter capital spending, and October household spending figures.
In the 1st half of the week, private sector PMI figures did little to impress, while capital spending jumped by 7.1% in the 3rd quarter. In the 2nd quarter, capital spending had risen by 1.9%.
The stats had a muted impact, however…
A slump in household spending did influence at the end of the week, however. Household spending slid by 11.5%, month-on-month, in October, with sales sliding by 5.1%, year-on-year.
With trade terms continuing to adversely affect the Japanese economy, the latest household spending data could be the stat that forces the BoJ into action…
Sentiment towards trade and demand for the safe havens ultimately drove the Yen to ¥108 levels in the week.
The Japanese Yen rose by 0.83% to ¥108.58, against the U.S Dollar.
Out of China
It was a relatively quiet week on the economic data front, with private sector PMIs for November in focus.
A pickup in service sector activity provided support for riskier assets early in the week. This was in spite of negative sentiment towards a U.S – China trade agreement.
From the weekend, the NBS numbers set the mood going into the week.
The NBS Manufacturing PMI rose from 49.3 to 50.2, with the Services PMI rising from 52.8 to 54.4.
Aligned with the NBS numbers, the Caixin numbers were also positive.
The Manufacturing PMI rose from 51.7 to 51.8, coming in ahead of a forecast of 51.4, with the Services PMI rising from 51.1 to 53.5.
The CSI300 rose by 1.93% in the week, while the Yuan fell by just 0.03% to CNY7.0349 against the Greenback.