Weekly Wrap – FED Chair Powell Testimony Drove the Majors…

The Stats

It was a relatively quiet week on the economic calendar in the week ending 12^th July.

A total of 46 stats were monitored throughout the week.

Of the 46 stats, 19 came in ahead forecasts, with just 17 economic indicators coming up short of forecast. 10 stats were in line with forecasts in the week.

Looking at the numbers, 25 of the stats reflected an upward trend from previous figures. Of the remaining 21, 14 stats reflected a deterioration from previous.

While the economic data was ultimately skewed to the positive, sentiment towards FED monetary policy weighed on the Greenback, supporting the majors. The U.S Dollar Index (“DXY”) fell by 0.49% in the week to 96.81.

Out of the U.S

A particularly light week on the data front saw the stats skewed to the positive.

Better than forecasted June inflation figures and initial jobless claims figures, released on Thursday provided Dollar support. On Friday, the stats were mixed. While the core producer price index came in ahead of forecasts, month-on-month, the producer price index rose at the same pace as in May, which was in line with forecasts.

Of less significance in the week were the JOLTs job opening and Federal budget balance numbers that came out on Monday and Thursday respectively.

While the stats were skewed in favor of the Dollar, FED Chair Powell’s 2-days of testimony to Congress did the damage.

Powell towed the Oval Office line and maintained the promise of monetary support, in spite of the solid June NFP numbers.

The dovish testimony, weighed on the Dollar while supporting the U.S equity markets, which hit fresh record highs in the week.

In the equity markets, the DOW led the way, rising by 1.51%. The NASDAQ and S&P500 gained 1.01% and 0.78% respectively.

Out of the UK

It was a relatively busy week, with the stats skewed marginally towards the negative.

Particularly disappointing BRC Retail Sales Monitor numbers for June weighed heavily on the Pound on Tuesday. A 1.6% slide in retail sales, year-on-year, off the back of a 3% fall in May, led the Pound to $1.24 levels on the day.

It was a different story on Wednesday, however. Whilst coming short of forecasts, both industrial and manufacturing production rose in May. The UK economy also saw upward momentum according to the government numbers, easing any immediate concerns ahead of Brexit.

The NIESR GDP figures released after the government numbers on Wednesday had a muted impact.

On Thursday, house price figures came in ahead of forecast, whilst prices remained on a downward trend in June. With the focus on the day shifting to the BoE’s financial stability report, the RICS House Price figures had a muted impact.

The content of the BoE Financial Stability Report delivered few surprises. The BoE’s focus continued to be on Brexit and the risks associated with a no-deal break from the EU.

The Pound ended the week up by 0.41% to $1.2572.

For the FTSE100, a stronger Pound weighed, with the index down by 0.62% for the week.

Out of the Eurozone

It was a relatively busy week.

For the EUR, the stats were skewed to the positive.

Things got off to a mixed start to the week. While Germany’s trade surplus widened from €17.0bn to €18.7bn, German industrial production rose by just 0.3% in May. Economists had forecast a 0.4% rise following April’s 2% slide.

In spite of the disappointing German industrial production numbers, the Eurozone’s figures came in well ahead of forecast.

Following a 0.4% fall in May, industrial production rose by 0.9%, month-on-month. Economists had forecast a 0.2% rise.

Finalized German, French and Spanish inflation numbers had a muted impact in the 2^nd half of the week.

Outside of the numbers, the ECB monetary policy meeting minutes maintained a dovish stance. The minutes showed that the ECB was also willing and able to provide further support should the need arise.

The EUR ended the week up 0.4% to $1.1270 against the Dollar.

For the European major indexes, it was a bearish week. In spite of dovish central bank chatter, an IMF report citing downside risks towards the Eurozone economy weighed. There were also profit warnings and some negative sentiment towards the U.S – China trade war to also influence.

The DAX30 fell by 1.95%, with the CAC40 slipped by 0.37% for the week.

Elsewhere

It was a bullish week for the Aussie and Kiwi Dollars.

The Aussie Dollar rose by 0.57% to $0.7020, with the Kiwi Dollar up by 0.98% to $0.6693.

For the Aussie Dollar

While the Aussie Dollar ended the week in the green, the stats were skewed to the negative.

On Tuesday, the NAB Business Confidence Index fell from 7 to 2. Whilst in line with forecast, the weaker confidence figures will be of concern following the RBA’s June rate cut.

Things were not much better for consumers, with the consumer confidence index falling by 4.1% following a 0.6% fall in June.

Support for the Aussie ultimately came from FED Chair Powell’s dovish testimony mid-week.

At the end of the week, home loan figures had a muted impact.

For the Kiwi Dollar

The stats were on the lighter side, with June electronic card retail sales and Business PMI numbers providing direction.

Card retail sales stagnated in June, coming up short of a forecasted 0.7% rise, according to figures released on Thursday. While the June Business PMI rose from 50.2 to 51.3, the headline number came up short of a forecasted rise to 53.1.

In spite of the weak numbers, negative sentiment towards the Greenback delivered upside for the week.

For the Loonie

It was a busy week.

On the economic data front, stats were limited to housing sector numbers that had a muted impact on the Loonie.

Of greater significance in the week was the Bank of Canada’s monetary policy decision and forward guidance on Wednesday.

The BoC appears to be happy to maintain a status quo on policy whilst citing downside risks stemming from the extended U.S – China trade war. Canada’s central bank stated that it would pay particular attention to the energy sector and the effect of trade on growth and inflation near-term. The BoC’s stance was considered less dovish than that of the FED.

The Loonie ended the week up 0.41% to C$1.3028 against the Greenback, supported by FED Chair Powell.

For the Japanese Yen

The stats were skewed to the negative.

At the start of the week, May core machinery orders raised more red flags. While coming in ahead of forecasts, orders fell by 3.7% year-on-year and by 7.8% month-on-month.

On Thursday, the tertiary industry activity index fell by 0.2%, partially reversing a 0.8% rise in the previous month. Finalized May industrial production figures came in weaker than prelim numbers on Friday. While softer than prelim, production was up from a 0.6% rise in April.

Movement through the week ultimately came off the back of FED Chair Powell’s 2-days of testimony to Congress.

For the week, the Japanese Yen rose by 0.52% to ¥107.91.

Out of China

It was a mixed bag on the data front.

The annual rate of inflation held steady at 2.7% in June, while consumer price fell by 0.1%, which were in line with forecast.

Wholesale inflation disappointed on the day, however, with the annual rate of wholesale inflation stalling. Economists had forecast a 0.3% rise following a 0.6% rise in May.

The Wednesday numbers had a muted impact on the global financial markets on the day.

Trade data on Friday had a greater influence. China exports fell less than forecast in June. The Dollar trade surplus widened in June, supported by a larger than expected fall in imports.

The fall in both imports and exports were negative, however, limiting any upside for the Asian equity markets on the day.

A 0.62% rise on Friday, left the CSI300 down by 2.17% for the week. The Hang Seng fared better, falling by 1.05% for the week.