The Weekly Wrap – The Greenback Slides for a Second Week in a Row
It was a quieter week on the economic calendar for the week ending May 27, 2022.
A total of 46 stats were monitored, following 60 stats in the week prior.
Of the 46 stats, 11 beat forecasts, with 28 economic indicators falling short of forecast. Seven stats were in line with forecasts.
Looking at the numbers, 12 of the stats reflected an upward trend. Of the remaining 34 stats, 32 stats were weaker.
Out of the US
In the first half of the week, private sector PMIs and core durable goods orders were the key stats.
The numbers were skewed to the negative, supporting the negative sentiment towards the economy.
In May, the services PMI fell from 55.6 to 53.5, with core durable goods orders rising by just 0.3%. Core durable goods orders had risen by 1.2% in April.
On Thursday, the stats were also Dollar negative, with the US economy contracting by more than expected.
Inflation and personal spending numbers wrapped things up on Friday.
In April, the core PCE price index increased by 4.9% year-on-year, softer than a 5.2% rise in March.
Personal spending increased by a further 0.9% in April, following a 1.4% jump in March.
While the stats influenced, the FOMC meeting minutes on Wednesday also drew plenty of interest. The minutes were hawkish, showing members’ willingness to deliver multiple 50 basis point rate hikes. Aligned with previous Fed Chair Powell’s commentary, members were also willing to move beyond neutral to curb inflation.
The minutes did talk of a shift in policy in the coming months, however, which eased investor fears of a move beyond neutral.
In the week ending May 27, 2022, the Dollar Spot Index slid by 1.44% to end the week at 101.668. In the week prior, the Index fell by 1.35% to 103.150.
Out of the UK
A quiet week left the Pound in the hands of private sector PMI numbers for May, which were Pound negative.
In May, the all-important services PMI slumped from 58.9 to 51.8 versus a forecasted fall to 56.9. With manufacturing sector activity also slowing, the Composite PMI tumbled from 58.2 to 51.8.
While the numbers were Pound negative, Dollar weakness prevailed to deliver a return to $1.26 levels.
In the week, the Pound rose by 1.21% to end the week at $1.2631. The Pound rallied by 1.78% to $1.2480 in the week prior.
The FTSE100 ended the week up 2.65%, reversing a 0.38% loss from the previous week.
Out of the Eurozone
It was a busy first half of the week, with German business and private sector PMIs in focus.
The stats were market positive, with German business sentiment and German manufacturing sector activity delivering support.
Germany’s ifo Business Climate Index increased from 91.9 to 93.0 in May, with the manufacturing sector PMI up from 54.6 to 54.7.
For France and the Eurozone, however, the private sector numbers were EUR negative.
The Eurozone manufacturing PMI fell from 55.5 to 54.4, with the composite declining from 55.8 to 54.9.
Mid-week, German GDP and consumer climate figures failed to impress, with consumer sentiment still weak in June. The second estimate GDP numbers were in line with the first estimate, with the German economy expanding by 0.2% in the first quarter.
While the stats were mixed, hawkish ECB chatter delivered EUR support, with the ECB talking of a shift from negative rates.
For the week, the EUR jumped by 1.62% to $1.0735. In the previous week, the EUR rallied by 1.46% to $1.05064.
The EuroStoxx600 rose by 2.98%, with the CAC40 and the DAX seeing gains of 3.67% and 3.44%, respectively.
For the Loonie
Economic data was limited to retail sales figures for March. It was a mixed set of numbers, with core retail sales jumping by 2.4% to deliver support. Retail sales were flat, however, falling well short of a forecasted 1.4% rise.
In the week ending May 27, the Loonie rose by 0.90 to C$1.2724 against the greenback. The Loonie rose by 0.69% to C$1.2840 in the week prior.
The Aussie Dollar rose by 1.73% to $0.7162, with the Kiwi Dollar rallying by 2.16% to end the week at $0.6532.
For the Aussie Dollar
Retail sales delivered support late in the week, with sales up 0.9% in April. In March, retail sales had risen by 1.6%.
Other stats included construction work done and private new CAPEX numbers that had a muted impact on the Aussie Dollar.
For the Kiwi Dollar
Retail sales were also the key stat in the week, which disappointed. In the first quarter, retail sales fell by 0.5% quarter-on-quarter. Retail sales had jumped by 8.6% in the previous quarter.
While the stats disappointed, the RBNZ lifted the cash rate by 50 basis points with the talk of more to come delivering Kiwi Dollar support.
For the Japanese Yen
Early in the week, private sector PMI numbers were Yen positive, with inflation figures also delivering support.
According to prelim figures, Japan’s service sector PMI increased from 50.7 to 51.7.
Tokyo’s core annual rate of inflation held steady at 1.9% in May.
While the stats were Yen positive, a shift in sentiment towards Fed monetary policy delivered the upside for the Yen. The latest stats from Japan are unlikely to pressure the Bank of Japan to make a move.
The Japanese Yen rose by 0.59% to end the week at ¥127.12 against the dollar. In the week prior, the Yen ended the week up 1.04% to ¥127.88.
Out of China
There were no major stats to influence.
In the week ending May 20, the Chinese Yuan slipped by 0.10% to CNY6.6994. The Yuan rose by 1.42% to CNY6.7930 in the week prior.
The Hang Seng Index and the CSI300 ended the week down by 0.10% and by 1.87%, respectively.