Weekly Wrap – Stats and Trade Round off a Dire Month

A bearish week rounds off a bearish month, with economic indicators and Trump delivering an inverted U.S Treasury yield curve.
Bob Mason
Currencies 10

 The Stats

It was another relatively quiet week on the economic calendar in the week.

A total of 49 stats were monitored through the week ending 31st May.

Of the 49 stats, 27 came in below forecasts, with just 15 coming in ahead of forecasts. 7 stats were in line with forecasts through the week.

Looking at the numbers, 29 of the stats reflected a deterioration from previous figures. Of the remaining 20, 15 stats reported an upward trend.

With the economic data heavily skewed to the negative, the Dollar managed to eke out a 0.14% gain for the week.

Partially reversing a 0.39% fall from the previous week, the U.S Dollar Index (“DXY”) ended the week at $97.75.

For the month, the Dollar ended up 0.28% to give a 1.78% gain year-to-date.

In another relatively choppy week, the EUR slipped by 0.3%, weighed by particularly disappointing stats out of the Eurozone.

The losses came in spite of the EUR managing to recover from a Thursday intraweek low $1.1116.

Out of the U.S,

On the data front, key stats were skewed to the negative in the week.

Following Memorial Day on Monday, May consumer confidence figures provide direction on Tuesday.

The CB Consumer Confidence Index continued its upward trajectory, rising from 129.2 to 134.1. The move back to close to 18-year highs provided the Greenback with support early in the week.

Following a quiet Wednesday, 1st quarter GDP, trade, jobless claims, and pending home sales provided direction on Thursday.

While 2nd estimate GDP numbers were in line with forecasts and the weekly jobless claims figures held relatively steady, pending home sales and a widening in the U.S trade deficit were negatives on the day.

In spite of the U.S President’s efforts to address trade imbalances, the goods trade deficit widened from $71.33bn to $72.12bn in April

Perhaps of greater interest, however, was more disappointing numbers from the housing sector.

Pending home sales fell by 1.5% in April. The numbers came off the back of a 0.4% fall in existing home sales and a 6.9% slide in new home sales in April. The pullback came in spite of the downward trend in mortgage rates from last November’s latest high.

Wrapping up the week, the FED’s preferred inflation numbers, personal spending, Chicago PMI and finalized consumer sentiment figures were released on Friday.

Lackluster personal spending figures, core inflation at 1.6% and weaker than prelim economic sentiment figures weighed on the day.

Outside of the stats, the markets continued to focus on Trump and trade war chatter.

With China looking to up the ante, Trump shifted attention to Mexico on Friday, adding to the market angst in the week.

In the equity markets, the U.S majors ended the week in the red again. The Dow fell by 3.01%, with the NASDAQ S&P500 falling by 2.41% and 2.62% respectively.

A particularly bearish month left the NASDAQ down by 7.93% for the month of May. The Dow and S&P500 fell by 6.69% and by 6.58% respectively.

Out of the UK,

There were no material stats to provide direction in the week.

The lack of stats left the markets to react to the EU Parliamentary elections and focus on Brexit and UK Parliament.

A Brexit Party and Liberal Democrat 1-2 put the Pound under pressure at the start of the week. While Theresa May’s decision to step down had provided support to the Pound in the previous week, concerns over the next PM’s stance on Brexit weighed in the week.

A Pro-Brexiteer raises the prospects of a no-deal departure, which is Sterling negative.

The Pound fell by 0.67% in the week. Following on from the previous week’s 0.08% fall, the Pound ended the week at $1.2714. For the month, the lack of progress on Brexit and political uncertainty in Britain left the Pound down by 3.09%.

For the FTSE100, the softer Pound failed once more to provide support, with the index ending the week down 1.59%. The loss left the index down by 3.46% for the month.

Trade war jitters and general sentiment towards the global economy weighed on the week.

Out of the Eurozone,

The stats were skewed to the negative in the week.

Positives in the week were limited to a jump in French consumer spending, fewer jobseekers and an upward revision to 1st quarter economic growth.

While the numbers out of France were skewed to the positive, it was a different story from Germany.

The GfK Consumer Climate Index hit reverse in May, with unemployment rising to 6% following a 60k increase in the number of unemployed.

At the end of the week, German retail sales also tumbled.

On the inflation front, inflationary pressures eased in May, according to prelim figures.

Outside of the stats, the ECB released its financial stability review on Wednesday, which continued to reflect the dovish sentiment towards the economy and outlook.

The negative bias left the EUR down by 0.3% for the week and down by 0.41% for the month of May. The reversal came in spite of a 0.36% gain on Friday.

In the equity markets, the majors hit reverse once more. Leading the way down was the DAX30, which fell by 2.37% to leave the index down by 5% for the current month.

The CAC40 and EuroStoxx600 fell by 2.05% and by 1.85% respectively. For the month, the CAC40 ended May with a 6.78% loss…

Yet more disappointing economic data and trade war jitters weighed on the European majors in the week.

Elsewhere,

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

The Aussie Dollar managed to gain 0.16% to end the week at $0.6938. The Kiwi Dollar ended the week down by 0.34% at $0.6531.

For the Aussie Dollar,

Economic data included April building approval and 1st quarter new CAPEX figures on Thursday and April private sector credit numbers on Friday.

A continued fall in building approvals, a slide in new CAPEX and softer private sector credit numbers were all negative for the Aussie Dollar.

The gains came in spite of the stats being skewed to the negative, with a U.S yield curve inversion supporting the Aussie Dollar.

For the Kiwi Dollar,

Economic data delivered mixed results in the week. While business confidence saw a marginal improvement in May, building consents tumbled for a 2nd month in a row.

Adding to the negative bias was the RBNZ’s financial stability report and the annual budget release.

For the Loonie,

The stats were skewed to the positive.

The April RMPI jumped by 5.6% on Friday, with the economy growing by 0.5% in March, month-on-month. While the economy grew by just 0.1% in the 1st quarter, the annualized GDP figure came in at 0.4%, falling short of a forecasted 0.7% growth rate.

In spite of the relatively positive numbers, the BoC monetary policy decision on Wednesday did most of the damage, sending the Loonie to C$1.35 levels against the Greenback.

To make matters, worse, crude oil prices tumbled through the week adding pressure on the Loonie. WTI ended the week down 8.75%, with Brent down by 6.11%.

The Loonie ended the week down 0.59% at C$1.3516 against the Greenback.

For the Japanese Yen,

The Japanese Yen found support in the week, to end the week at ¥108.29.

Market risk sentiment drove demand for the Yen on Friday, with Trump’s focus on Mexico leading to a 1.21% rally on the day.

For the month, the negative sentiment across the markets gave the Yen a 2.81% gain.

Out of China,

May NBS private sector PMI figures added to the risk aversion in the week. The government numbers showed that the manufacturing sector contracted in May. Steady output from the services sector eased some of the pain…

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