Weekly Wrap – Monetary Policy, Stats and Trump Drove the Majors

The Stats

It was a particularly busy week on the economic calendar in the week ending 2nd August.

A total of 71 stats were monitored throughout the week, compared with just 29 in the week prior.

Of the 71 stats, 31 came in ahead forecasts, with 27 economic indicators coming up short of forecast. 13 stats were in line with forecasts in the week.

Looking at the numbers, 34 of the stats reflected an upward trend from previous figures. Of the remaining 37, 30 stats reflected a deterioration from previous.

While the economic data ultimately balanced to the positive, the Dollar found support from the FED to end the week in the green.

Central bank monetary policy, geopolitical risk and economic data were all in focus throughout the week. The U.S Dollar Index (“DXY”) rose by just 0.09% in the week to 98.096.

Out of the U.S

In spite of a busy week on the data front, the stats were balanced through the week, based on forecasts.

A lack of stats on Monday left the markets to look ahead to inflation, consumer confidence and personal spending figures on Tuesday.

A jump in consumer confidence was positive on the day, with the CB Consumer Confidence Index rising from 124.3 to 135.7 in July.

The FED‘s preferred Core PCE Price Index also reflected a pickup in inflationary pressures. Whilst rising from 1.5% to 1.6%, however, inflation continued to sit below the FED’s 2% target.

On the personal spending front, a 0.3% rise in June came off the back of a 0.4% rise in July.

Another busy day on Wednesday saw ADP nonfarm employment rose by 156k in July. While better than a forecasted 150k rise and June 112k rise, however, the focus was on the FED.

Late on Wednesday, the FOMC delivered the baked in 25 basis point rate cut. In spite of the cut, a more hawkish than anticipated rate cut limited the downside to the Dollar on the day.

Through the latter part of the week manufacturing PMIs on Thursday failed to impress ahead of labor market numbers on Friday.

According to the latest government numbers, wage growth picked up in July, while nonfarm payrolls rose by 164k. Whilst in line with forecast, the number sat well below a 194k increase in June.

Of less influence in the week were the Chicago PMI, weekly jobless claims figures, factory orders, trade data, and finalized consumer sentiment numbers.

While the FED and the stats provided plenty of direction, the resumption of the U.S – China trade talks and Trumps Twitter account also influenced.

Slow progress on trade talks and Trumps announcement of fresh tariffs on Chinese goods hit market risk sentiment late in the week.

In the equity markets, the U.S majors closed out the week in the red. The NASDAQ and S&P500 led the way down, sliding by 3.92% and by 3.1% respectively. The Dow fell by 2.6% in the week.

Out of the UK

It was another particularly quiet week on the economic data front.

Key stats included July manufacturing PMI and construction PMI numbers.

The figures were mixed on the week. While the manufacturing PMI held steady at 48, the construction PMI rose from 43.1 to 45.3.

In spite of the mixed results, with both sectors remaining in contraction, Brexit and monetary policy were the main drivers.

On the Brexit front, the rising prospects of a no-deal departure from the EU hurt the Pound, which fell to $1.20 levels. The Pound last visited $1.20 levels in January 2017…

While the Pound was on the defensive, the BoE delivered a more hawkish than anticipated outlook on the policy front. The lack of a commitment to cut rates near-term limited the downside for the Pound.

The Pound ended the week down by 1.79% to $1.2162.

For the FTSE100, it was red for the week. The index slid by 1.88% in the week, with 2.34% tumble on Friday pulling the 100 into the red. The fall in the Pound had provided support for the 100 ahead of Fridays Trump driven sell-off.

Out of the Eurozone

It was another particularly busy week.

Key stats included consumer sentiment and spending figures out of France, Germany, and the Eurozone.

German and Eurozone unemployment and French, Spanish and Eurozone GDP numbers were also in focus.

Finalized manufacturing PMIs out of France, Germany and the Eurozone and Spanish and Italian PMIs had limited impact.

Of less influence throughout the week were prelim July inflation figures out of Spain, Germany, France, Italy, and the Eurozone.

The stats were skewed to the positive in the week. Better than expected retail sales and manufacturing PMI figures out of Germany and the Eurozone provided support.

2nd quarter GDP figures out of the Eurozone also limited the downside for the EUR.

The EUR ended the week down by 0.18% to $1.1108 against the Dollar.

For the European major indexes, it was a particularly bearish week. In spite of the FED rate cut and economic data skewed to the positive, a broad-based Friday sell-off left the majors deep in the red for the week.

The DAX30 slid by 4.41%, with the CAC40 tumbling by 4.48% for the week.

Elsewhere

It was another particular bearish week for the Aussie and Kiwi Dollars.

The Aussie Dollar slid by 1.59% to $0.6801, with the Kiwi Dollar down by 1.51% to $0.6536.

For the Aussie Dollar

A relatively busy week saw 2nd quarter inflation numbers from Wednesday and retail sales figures from Friday provide support.

According to the ABS, the annual rate of inflation accelerated from 1.3% to 1.6% in the 2nd quarter. While sitting below the 2% mark, the upward trend supported the RBAs expectation of a gradual move towards 2%.

At the end of the week, retail sales rose by 0.4% in June, which also provided support. The rest of the majors were reeling over Trumps latest tariff threat to China on the day.

Of less influence in the week were building approval, private sector credit and manufacturing PMI numbers.

From outside of Australia, better than expected China manufacturing PMIs were positive, though sentiment towards the U.S – China trade talks weighed.

Trumps tweets late in the week also added pressure on the Aussie Dollar ahead of the weekend.

For the Kiwi Dollar

Economic data was limited to June building consent and July business confidence numbers. Both sets of numbers disappointed to leave the Kiwi Dollar deep in the red for the week.

Market reaction to Trumps trade war tweets added further downward pressure. Manufacturing PMIs out of China provided limited support.

For the week, however, a more hawkish than anticipated FED and Trump left the Kiwi back at $0.65 levels.

For the Loonie

It was a relatively busy week.

Key stats included May GDP numbers and June RMPI and Trade data.

Better than forecasted GDP numbers on Wednesday were brushed aside as FED monetary policy drove the pairing on Wednesday.

A marginal narrowing in the trade balance also failed to spur a Loonie rally on Friday. Market reaction to a hawkish FED rate cut and Trumps latest tweets led to volatile swings in crude oil prices to limit interest in the Loonie.

While better than forecast, softer economic growth and trade figures also suggested that the Bank of Canada could begin to signal further easing.

The Loonie ended the week down by 0.31% to C$1.3207 against the Greenback.

For the Japanese Yen

The stats were limited to June retail sales figures on Monday and prelim June industrial production numbers on Tuesday.

It was a mixed bag on the data front. Retail sales rose by 0.5% in June, year-on-year, following on from a 1.3% rise in May. Industrial production, however, slid by 3.6%. The slide reversed a 2% rise in May.

While stats garnered attention, the BoJs monetary policy decision on Tuesday and trade war chatter were the key drivers.

The BoJ failed to announce imminent monetary policy easing, which provided much-needed support early on in the week.

Late on in the week, Trumps trade war banter also drove demand for the Yen, which rose by 0.7% on Friday

For the week, the Japanese Yen rose by 1.92% to ¥106.59.

Out of China

Julys NBS private sector PMIs delivered mixed results on Wednesday. While coming in ahead of forecast, the manufacturing PMI rose from 49.4 to 49.7 failed to support risk appetite.

The markets preferred Caixin manufacturing PMI on Thursday also failed to drive the global equity markets. Whilst rising from 49.4 to 49.9, negative sentiment towards trade offset the improvement in manufacturing sector activity.