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The Weekly Wrap – COVID-19, Economic Data, and FED Monetary Policy Delivered a Choppy Week

The Stats

It was a particularly busy week on the economic calendar, in the week ending 7th January.

A total of 63 stats were monitored, which was up from 15 stats in the week prior.

Of the 63 stats, 34 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There 6 stats that 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 38 stats, 31 reflected a deterioration from previous.

For the Greenback, it was back into the green. In the week ending 7th January, the Dollar Spot Index rose by 0.07% to 95.739. A 0.60% slide on Friday limited the upside, however. In the previous week, the Dollar Spot Index declined by 0.36% to 95.670. While finding strong support from the more hawkish FOMC meeting minutes on Wednesday, disappointing NFP numbers on Friday weighed.

Out of the U.S

Private sector PMIs and labor market stats were in focus ahead of Friday’s all-important nonfarm payrolls.

The stats were skewed to the negative, with private sector growth slowing. In December, the ISM Manufacturing PMI fell from 61.1 to 58.7. More significantly, the ISM Non-Manufacturing PMI declined from 69.1 to 62.0.

Labor market stats were also skewed to the negative in the week. In November, JOLT’s job openings stood at 10.562m, which was down from 11.091m in October. Initial jobless claims increased from 200k to 207k in the week ending 31st December.

More significantly, however, was a modest 199k increase in nonfarm payrolls in December. Economists had forecast a 400k rise. The markets were likely expecting more following an 800k increase in nonfarm payrolls according to the ADP. In spite of the lower number, the U.S unemployment rate fell from 4.2% to 3.9%.

On the monetary policy front, the FOMC meeting minutes were also in focus mid-week. The U.S equity markets responded negatively to more hawkish minutes than expected, which drove demand for the Dollar. The minutes revealed that the FED may need to lift rates sooner than had been previously priced in.

Out of the UK

Finalized private sector PMIs were in focus, with the stats Pound positive for the week. In December, the manufacturing PMI rose from 57.6 to 57.9, with the services PMI up from 53.2 to 53.6. As a result, the composite PMI increased from 53.2 to 53.6. All 3 were revised up from prelim figures.

In the week, the Pound rose by 0.41% to end the week at $1.3588 In the week prior, the Pound had rallied by 1.09% to $1.3532.

The FTSE100 ended the week up by 1.36% following a 0.17% gain from the previous week.

Out of the Eurozone

Private sector PMIs for the Eurozone and member states, inflation, and the German economy were in focus.

Manufacturing sector growth remained relatively stable in December, while the services sector took a hit.

The Eurozone’s manufacturing PMI fell from 58.4 to 58.0, while the services PMI declined from 55.9 to 53.1. As a result, the Eurozone Composite PMI fell from 55.4 to a 9-month low 53.3.

For Germany, retail sales, unemployment, and industrial production figures were all upbeat for November. With the sharp rise in Omicron cases late in the year, however, the numbers had a relatively muted impact on the EUR. A sharp narrowing in Germany’s trade surplus also failed to move the dial.

On the inflation front, however, the prelim numbers pointed to another pickup in inflationary pressure in December.

While France’s annual rate of inflation held steady at 2.8%, Germany’s picked up from 5.2% to 5.3%. Italy’s annual rate of inflation accelerated from 3.7% to 3.9%. As a result, the Eurozone’s annual rate of inflation ticked up from 4.9% to 5.0%. The uptick will likely put more pressure on the ECB to make a move, particularly after the FED’s shift in stance on interest rates.

For the week, the EUR slipped by 0.08% to $1.1361. In the week prior, the EUR had risen by 0.45% to $1.1370.

The EuroStoxx600 slipped by 0.40%, while the CAC40 and the DAX30 ended the week up by 0.91% and by 0.40% respectively.

For the Loonie

Trade data, together with employment and Ivey PMI numbers were in focus. The stats were skewed to the positive for the Loonie.

In November, Canada’s trade surplus widened from C$2.26bn to C$3.13bn. Employment rose by a further 54.7k in December, after a 153.7k jump in November. As a result, Canada’s unemployment rate fell from 6.0% to 5.9%.

The only negative for the Loonie was a sharp fall in the Ivey PMI from 61.2 to 45.0 in December.

Adding support to the Loonie in the week, was a pickup in crude oil prices. WTI Crude ended the week up by 4.91% to $78.9 per barrel.

In the week ending 7th January, the Loonie slipped by 0.05% to C$1.2643 against the Greenback. In the week prior, the Loonie had rallied by 1.39% to C$1.2637.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar slid by 1.13% to $0.7181, with the Kiwi Dollar falling by 0.69% to end the week at $0.6779.

For the Aussie Dollar

There were no major stats to provide direction.

For the Kiwi Dollar

It was also a quiet week for the Kiwi Dollar, with no major stats for the markets to consider.

For the Japanese Yen

Finalized private sector PMIs, household spending, and inflation were key stats in the week.

It was a mixed set of numbers, however. The all-important services sector PMI fell from 53.0 to 52.1, with household spending also on the slide. In November, household spending fell by 1.2%, month-on-month.

Inflation figures were positive, however, with Tokyo’s core annual rate of inflation picking up from 0.3% to 0.5% in December.

The Japanese Yen declined by 0.42% to ¥115.560 against the U.S Dollar. In the week prior, the Yen had fallen by 0.61% to ¥115.080.

Out of China

It was a relatively quiet week on the economic data front. Private Sector PMIs were back in focus.

In December, the Caixin Manufacturing PMI rose from 49.9 to 50.9, with the services PMI increasing from 52.1 to 53.1.

In the week ending 7th January, the Chinese Yuan fell by 0.34% to CNY6.3778. In the week prior, the Yuan had ended the week up by 0.18% to CNY6.3561.

The Hang Seng Index ended the week up by 0.41%, while the CSI300 slid by 2.39%.