The Weekly Wrap – The Loonie, the EUR and the Pound Took the Spotlight

It was quite a week, with central banks in action and economic indicators raising more concerns over the global economic outlook. The Greenback was the clear winner…
Bob Mason
Europe and USA flag on human male hands

The Stats

It was another big week for the global financial markets and some of the FX world suffered more than others.

On the data front, a packed economic calendar, not only gave the markets a slew of stats to digest but also deliver a number of key monetary policy decisions.

The data count was skewed to the positive, with a total of 32 out of 71 stats monitored coming in above market forecasts in the week. A total of 27 out of the 71 stats came in below forecasts, with the remaining 12 in line with forecasts.

Out of the U.S,

The market’s preferred ISM non-manufacturing PMI gave the Dollar a boost on Tuesday, with better than expected figures. In contrast, December’s trade deficit widened to a 10-year high, which likely perplexed the U.S President. The extended U.S – China trade war did little through last year to rebalance the apple cart. Weaker demand for U.S goods and sustained demand for foreign goods delivered the largest deficit in 10-years.

Mid-week, the ADP nonfarm employment change also came in softer than had been forecasted. The numbers were not quite as bad as the government’s labor market numbers, however.

Nonfarm payrolls increased by just 20k in February. Forecasts had pointed to a 181k increase. It’s not the first time we’ve seen such numbers and the February cold will certainly have contributed to the lowest increase since September 2017.

While payrolls disappointed, wage growth impressed and the U.S unemployment rate fell from 4% to 3.8%.

The weak NFP was telling on the Dollar at the end of the week, but it wasn’t enough to reverse the week’s gains. In spite of a 0.37% loss on the day, the Dollar closed out the week up 0.81%.

Concerns over the global economic outlook and Brexit were the supporters of the Dollar through the week.

Out of the UK,

Key stats through the week were limited to February’s construction and service sector PMI numbers. While the construction sector contracted, service sector activity bounced in February. Following stagnation in January, service sector activity was forecasted to contract in February.

The numbers had little influence, however, with Brexit continuing to be the key driver ahead of possibly 2 key parliamentary votes in the week ahead.

There was no love for the Pound in the week, with Cable sliding by 1.42% to leave it down by 3.69% year-to-date.

While hopes of Britain avoiding a “no-deal” departure from the EU has been recently supportive of the Pound, there’s still plenty of risks to consider. British negotiators failed to make progress and the EU’s chief negotiator, Michel Barnier, appeared hell-bent on ensuring Brexit gets put on ice. An unwillingness to make concessions to the backstop would ultimately leave Theresa May’s deal destined for failure.

Out of the Eurozone,

Draghi delivered the tank of all tanks for the EUR on Thursday. A particularly dovish ECB press conference led the EUR to $1.11 levels.

Downside risks to the economy and a likelihood that rates would not be raised until 2020, at the earliest, did the damage. Added to that was a downward revision to growth forecasts for this year, down from 1.7% to 1.1%.

The EUR tumbled by 1.01% on Thursday alone, making it a 1.14% loss for the week. Year-to-date, the EUR’s down 6.41% and there could be more to come if the doom and gloom continue.

On the data front, German factory orders tumbled by 2.6% in January. 4th quarter GDP numbers out of the Eurozone were also of concern. The economy grew by 1.1% in the 4th quarter, year-on-year, easing from a prelim 1.2% and a 3rd quarter 1.6%.

Interestingly, the ECB’s did avoid delivering a revision to growth that was below last year’s number. The revision suggests that the ECB expects that the economy will stabilize in the months ahead.

On the positive side, the service sector PMI numbers were better than expected on Tuesday. Both France and Italy saw growth following contractions in January.

U.S President Trump could put the cat amongst the pigeons with tariffs and China’s economic indicators are flashing redder than before.

The Loonie,

The Loonie saw yet more red, sliding by 0.89% through the week. The loss came off the back of a 1.23% slide the previous Friday. An expectedly dovish Bank of Canada delivered the telling blow.

Economic data provided little respite for a Loonie already on the ropes. The trade deficit widened in December, labor productivity slid in the 4th quarter and the Ivey PMI reflected stagnation February.

The only highlight was another jump in hiring. Employment rose by 55.9k, following a 66.9k increase in January.


The Aussie Dollar fell by 0.48% in the week. It could have been a lot more had it not been for a 0.41% bounce on Friday.

In the early part of the week, the RBA caught the markets off–guard. Governor Lowe’s had previously talked of the chances of a rate hike or rate cut being finely balanced. Tuesday’s RBA statement failed to deliver similar language, leading to a run at $0.71 levels.

A crystal ball would have been useful, however, with weak economic data later in the week pulling the Aussie Dollar into the red. The economy grew 2.3%, year-on-year, in the 4th, slowing from 2.8% in the 3rd. Retail sales also disappointed, rising by just 0.1% following a 0.4% slide in December. A widening in the trade surplus was positive, but with the RBA focused on domestic consumption, the latest retail sales figures will be a worry.

When considering Australia trade data, a 20.7% slide in Chinese exports in February and a 5.2% slide imports suggest that Australia’s trade surplus may well reverse next month. The Chinese government projected growth to between 6% and 6.5% for the year. If recent economic indicators are anything to go by, it may well be on the lower side of the range.

Geo-Political Risk,

The focus remained on the U.S – China trade talks and Brexit.

Brexit remained on course for an extension and possible reversal.  On trade, the U.S President announced that no deal would be signed unless it was great.

Progress has been slow and both sides have stated that a deal is not imminent.

Throwing the cat amongst the wolves, Huawei filed a lawsuit against the U.S. government in the week. While the focus remains on Beijing and Washington, Huawei’s lawsuit against the U.S government over the banning of its products will provide some distraction in the weeks ahead.

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