Weekly Wrap – Corporate Earnings and the Greenback Stole the Show

The Stats

It was a relatively quiet week on the economic calendar, though there was certainly enough for the markets to chew on.

The Dollar was on a tear through the week, with a shift in sentiment towards monetary policy providing support. For the week, the greenback rallied by 0.64% to hit 98 levels. Not bad when considering the fact that the Dollar Spot Index had just crawled out of sub-90 levels this time last year…

Economic data out of the Eurozone continued to disappoint, while a combination of decent earnings and positive economic data supported the Dollar revival.

The EUR was not alone, with the Aussie and Kiwi Dollar, the Loonie and the Pound all struggling through the week.

Of a total of 32 stats monitored during the week, 14 came in ahead of forecasts, with 17 coming in below forecasts. Just 1 stat was in line with forecasts over the week.

Looking at the numbers, out of the total 32 stats, 18 economic indicators reflected a deterioration from prior. Of the remaining 14, 11 economic indicators reported better figures from previous.

Through the week, there was no threat of a yield curve inversion, with yields for 10-year Treasuries ending the week at 2.50 versus 2.41% for 3-month Treasuries.

There was a narrowing, despite the economic data out of the U.S at the end of the week. In spite of the narrowing, however, the spread remained supported by the view that the FED may be able to avoid a rate cut until later in the year.

Out of the U.S,

On the data front, key stats were once more skewed to the negative.

Negative stats out of the U.S included a slide in existing home sales, a larger than expected increase in initial jobless claims and a softer GDP Price index figure for the 1^st quarter.

While new home sales came in well ahead of a forecasted 3% fall, a 4.5% increase in March was softer than a 5.9% jump in February.

Durable goods orders ex Transport also unexpectedly fell in March, down by 0.2%, though impressive headline figures offset any negativity on the day.

All in all, while orders were skewed to the positive, with durable goods orders jumping by 2.7% in March, the U.S GDP number failed to impress. While 3.2% was well ahead of a forecasted 2%, the figure failed to shift sentiment towards a possible rate cut later in the year. Private consumption and investment were down, supporting the IMF’s downward revision to growth for the year.

In the equity markets, the U.S majors were mixed in the week. The Dow ended the week down by 0.06%, while the S&P500 and NASDAQ gained 1.20% and 1.85% respectively.

The decline in the Dow came in spite of better than expected GDP figures and corporate earnings skewed to the upside.

Tech stocks ultimately led the NASDAQ out in front, with Amazon.com and Microsoft impressing.

Out of the UK,

Key stats through the week were limited to mortgage approval figures that had no impact on the Pound.

A lack of economic data and a lack of progress on Brexit ultimately pinned the Pound back in the week.

The Pound fell by 0.59% to $1.2916 in the week.

The FTSE100 failed to benefit from the weaker Pound, falling by 0.42% through the week.

Out of the Eurozone,

It was a sea of red for the EUR.

In the early part of the week, Eurozone consumer confidence figures hit the EUR with a first blow. The numbers removed hope of a consumption fueled pickup in economic activity in the region.

Business sentiment figures out of Germany also reflected more doom and gloom on Tuesday.

There was nowhere for the EUR to hide and, with Eurozone economic indicators flashing red, monetary policy easing may well be on the cards…

For the week, the EUR ended the week down 0.84%, with a 0.17% gain on Friday limiting the damage.

It was a mixed week for the European equity markets. The DAX gained 0.76%, supported by 10 days of gains out of the last 11. In contrast, the CAC fell by 0.2% in the week. The EuroStoxx600 ended the week up 0.14%.

Elsewhere,

For the Loonie, a dovish Bank of Canada weighed on the Loonie mid-week. Coupled with a resurging U.S Dollar, the Loonie ended the week down 0.48%. A 0.22% gain on Friday came in spite of tumbling crude oil prices, with U.S GDP numbers leading to a pullback in the greenback.

The Japanese Yen rose by 0.04% against the Greenback on Friday to end the up 0.30% to ¥111.58.

Through the week, the Yen found plenty of support in spite of a particularly dovish BoJ. The BoJ revised downwards both growth and inflation. The bank also stated that extra low-interest rates would be maintained to 2020 at the earliest.

For the Aussie Dollar and Kiwi Dollar, it was another week in the red.

The Aussie Dollar tumbled by 1.54 %, with the Kiwi Dollar falling by 0.33%.

For the Kiwi Dollar, the previous week’s disappointing inflation figures had raised the prospects of a near-term RBNZ rate cut. Trade data released on Friday suggested that there may be a possible pause. The uncertainty led to a 0.54% rally on Friday to cut the deficit for the week.

For the Aussie Dollar, there was no cushion. Both wholesale and consumer price inflation were on the softer side. The dire consumer price figures led to the sell-off and a rise in expectations of an RBA rate cut.

There were no stats out of China to muddy the waters in the week. Corporate earnings were ultimately the key risk driver throughout the week.