Weekly Wrap – The Greenback Led the Way on Safe Haven Demand
It was a relatively quiet week on the economic calendar in the week ending 27th September.
A total of 44 stats were monitored throughout the week, compared with 52 in the week prior.
Of the 44 stats, 16 came in ahead forecasts, with 25 economic indicators coming up short of forecast. 3 stats were in line with forecasts in the week.
Looking at the numbers, just 16 of the stats reflected an upward trend from previous figures. Of the remaining 28, 26 stats reflected a deterioration from previous.
While the economic data was skewed to the negative, the Dollar found strong support through the week, with geopolitical risk the key driver.
The U.S Dollar Index (“DXY”) rose by 0.66% to end the week at $99.109.
Out of the U.S
It was a relatively busy week. Prelim private sector PMI numbers for September kicked the week off. Both the manufacturing and services sectors reported a marginal pickup in activity.
Focus then shifted to the all-important CB Consumer Confidence figures for September, which disappointed. A slide in consumer confidence pinned back the Greenback and the U.S equity markets on Tuesday.
In a particularly busy 2nd half of the week, 3rd estimate GDP figures on Thursday were in line with 2nd estimates. Trade data failed to impress, however. The goods trade deficit widened in August, in spite of the ongoing trade war, with the initial jobless claims seeing a marginal increase in the week.
On Friday, August durable goods orders, the FED’s preferred Core PCE Price Index figures, and consumer sentiment numbers were in focus.
On the positive, core durable goods orders rose by 0.5%, reversing a 0.5% fall in July. Durable goods orders increased by just 0.2%, however, following a 2% rise in July. Consumer sentiment and expectations saw a pickup in September, according to the University of Michigan surveys.
On the negative, the Core PCE Price Index rose by just 0.1% in August, following a 0.2% increase in July. Personal spending also disappointed, with a 0.1% rise. In July spending had increased by 0.5%.
While the stats were skewed the negative, impeachment talk weighed on risk sentiment in the week. Improved sentiment towards a possible resolution to the U.S – China trade war prevented a meltdown, however. The jump in demand for the Dollar reflected its status as the safe haven of choice…
In the equity markets, the U.S majors closed out the week in the red for a 2nd consecutive week. The NASDAQ led the way, falling by 2.19%, with the S&P500 and Dow declining by 1.01% and 0.43% respectively.
Out of the UK
It was a particularly quiet week on the economic calendar.
Economic data was limited to September’s CBI Industrial Trend Orders, which failed to impress on Tuesday. The Survey slumped from -13 to -28, reflecting a sharp decline in orders that were attributed to Brexit uncertainty.
It wasn’t the data that brought down the Pound in the week, however, with Brexit and UK politics continuing to be the key drivers.
The Supreme Court ruling on the suspension of Parliament being unlawful was certainly negative. A lack of progress ahead of an imposed 30th September deadline to deliver alternatives to the Irish backstop also weighed.
The Pound ended the week down by 1.49% to $1.2292.
For the FTSE100, a softer Pound provided support, with the index rising by 1.11%.
Out of the Eurozone
It was a relatively busy week on the economic data front.
On Monday, prelim private sector PMI numbers for September caused alarm. The Eurozone’s Composite Output Index slid to a 75-month low, with the Manufacturing Output Index falling to an 81-month low. Service sector activity also failed to support, with the Activity Index falling to an 8-month low.
Economic data out of Germany on Tuesday and Thursday provided some support. The German Ifo Business Climate Index rose from 94.3 to 94.6, with the current assessment index rising from 97.4 to 98.5. On the negative, however, was a fall in the expectations index from 91.3 to 90.8.
On Thursday, the GfK consumer climate figures for September surprised the markets, with the index rising by 9.7 to 9.9. The uptick was attributed to the ECB’s monetary policy easing.
On Friday, French consumer spending and inflation figures failed to impress, however. Consumer spending stalled in August, with consumer prices falling by 0.3%, month-on-month in September.
Outside of the numbers, the ECB Economic Bulletin on Thursday delivered few surprises. ECB President Draghi also reiterated the ECB’s commitment to providing support at the start of the week.
For the week, the EUR fell by 0.70% to $1.0940.
For the European major indexes, the CAC40 fell by 0.88%, while the DAX30 and EuroStoxx600 declined by 0.70% and by 0.30% respectively.
It was a mixed week for the Aussie and Kiwi Dollars.
The Aussie Dollar fell by 0.03% to $0.6764, while the Kiwi Dollar rose by 0.61% to $0.6296.
For the Aussie Dollar
It was a quiet week, with no material stats to provide the Aussie Dollar with direction.
The lack of stats left the Aussie in the hands of market sentiment towards the U.S – China trade war and the coming RBA interest rate decision.
On the trade war front, hopes of progress provided support, while expectations of a rate cut pinned back the Aussie in the week.
On Tuesday, RBA Governor Lowe hinted at rate cut that had already been widely anticipated by the markets…
For the Kiwi Dollar
August trade data failed to impress on Wednesday. The trade deficit widened from NZ$700m to NZ$1,565m in August. While the trade data was skewed to the negative, the RBA interest rate decision and rate statement provided support.
The latest rate statement failed to hint at any near-term rate cuts, providing the Kiwi with the upside.
For the Loonie
It was a quiet week on the economic data front. July Wholesale sales figures provided support on Monday. Sales rose by 1.7%, following a 0.7% rise in June. Economists had forecast a 0.3% rise.
Falling oil prices failed to pin the Loonie back, with monetary policy divergence delivering the upside in the week.
The Loonie ended the week up by 0.12% to C$1.3247 against the Greenback.
For the Japanese Yen
Economic data disappointed throughout the week.
On Tuesday, Japan’s manufacturing PMI fell from 49.3 to 48.9, reflecting more doom and gloom. The services PMI also disappointed, falling from 53.3 to 52.8.
At the end of the week, inflation figures also failed to impress, with Tokyo’s core annual rate of inflation easing from 0.7% to 0.5%.
For the week, the Japanese Yen fell by 0.33% to ¥107.92.
Out of China
It was a quiet week on the economic calendar, with no material stats out to rock the boat.
Trade war chatter was a key driver in the week. News of China ramping up agricultural goods imports from the U.S was positive, as were more optimistic comments from the U.S President.
The Yuan fell by 0.45% to CNY7.1227 against the Greenback.