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The Weekly Wrap – COVID-19, Economic Data, and U.S Stimulus Weigh on Riskier Assets

The Stats

It was a relatively busy week on the economic calendar, in the week ending 15th January.

A total of 46 stats were monitored, following 61 stats from the week prior.

Of the 46 stats, 21 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. There were 8 stats that were in line with forecasts in the week.

Looking at the numbers, 17 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 23 reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive weekly gain, with the Dollar Spot Index rising by 0.75% to $90.772. In the previous week, the Dollar had risen 0.18% to 90.098.

Out of the U.S

It was a relatively busy week on the economic data front.

It was a quiet 1st half of the week, however, with stats limited to JOLTs job openings and inflation figures.

While job openings fell in November, inflation held steady, with the annual rate of core inflation holding at 1.6%.

Consumer prices rose by 0.4%, month-on-month, while core consumer prices increased by a modest 0.1%.

In a busy 2nd half of the week, key stats included the weekly jobless claims, retail sales, and consumer sentiment figures.

Jobless claims figure disappointed on Thursday, with initial jobless claims jumping from 784k to 965k.

In December, core retail sales slid by 1.4%, with retail sales falling by 0.7%, both following on from declines in November.

Consumer sentiment figures also disappointed.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 80.7 to 79.2.

The downside was limited, however, supported by COVID-19 vaccines and hopes of a bipartisan shift.

The survey noted that the fall was minor when considering the sharp rise in COVID-19 related deaths, insurrection, and Trump’s impeachment.

Other stats included industrial production, NY Empire State Manufacturing, and business inventory figures. These stats had limited impact on the markets, however.

On the monetary policy front, FED Chair Powell assured the markets that rates were not going up any time soon. The FED Chair also stated that there would be no tapering of bond purchases near-term.

In the equity markets, the NASDAQ and the S&P500 slid by 1.54% and by 1.48% respectively. The Dow fell by a more modest 0.91%.

Out of the UK

It was a relatively busy week on the economic data front.

Monday through Thursday economic data was limited to BRC retail sales and RICS house price figures.

Retail sales rose by a further 4.8% in December, following a 7.7% rise in November according to the BRC.

House prices were also on an upward trend, with the RICS house price balance coming in at 65%. While down marginally from October’s 66%, upward pressure on house prices is expected to remain.

At the end of the week, industrial and manufacturing production and GDP figures were in focus.

In November, industrial production fell by 0.1%, following a 1.1% rise in October. Manufacturing production rose by 0.7%, following a 1.6% increase in October. Both fell short of forecasts.

GDP figures were not much better. In November, the economy contracted by 2.6% reversing 0.4% growth from October. On a 3-month rolling basis, the economy grew by 4.1%, slowing from a 10.2% to October.

Trade data released on Friday had a muted impact on the Pound, however. In November, the trade deficit widened from £13.29bn to £16.01bn, with the non-EU deficit widening from £5.82bn to £8.01bn.

Away from the economic calendar, a pickup in vaccination rates in the UK offset the negative sentiment towards lockdown measures.

In the week, the Pound rose by 0.16% to $1.3590. In the week prior, the Pound had fallen by 0.76% to $1.3568. A 0.72% slide on Friday pared some of the gains from earlier in the week.

The FTSE100 ended the week down by 2.00%, partially reversing a 6.39% gain from the previous week.

Out of the Eurozone

It was a relatively quiet week on the economic data front.

Industrial production and trade figures for the Eurozone, together with full year GDP numbers for Germany were in focus.

It was a mixed set of numbers for the EUR and the European majors.

For the Eurozone, industrial production jumped by 2.5% in November, following a 2.3% increase in October.

Trade data disappointed, however, with the trade surplus narrowing from €30.0bn to €25.8bn in November. Weak numbers were expected, however, following Germany’s trade data from last week.

While economic data from Germany has been impressive of late, GDP figures disappointed.

For the full year 2020, the economy contracted by 5.0%, following 0.6% growth in 2019. Economists had forecasted a 5.1% fall, however, which limited the damage.

ECB President Lagarde had spoken the day before the release of the GDP numbers. Lagarde continued to stand by the ECB’s economic forecasts, in spite of the extended lockdown measures in the EU. Lagarde pointed out that the forecasts had factored in lockdowns through the 1st quarter.

At the end of the week, finalized inflation figures for France and Spain had a muted impact on the EUR.

On the monetary policy front, the ECB’s monetary policy meeting minutes also failed to move the dial in the week.

For the week, the EUR slid by 1.11% to $1.2082. In the week prior, the EUR had risen by 0.02% to $1.2218.

For the European major indexes, it was a bearish week. The EuroStoxx600 fell by 0.81%, with the CAC40 and DAX30 sliding by 1.67% and 1.86% respectively.

A continued spike in new COVID-19 cases weighed. Across the EU, member states were reporting particularly low vaccination rates that added to the negative mood.

For the Loonie

It was a particularly quiet week on the economic data front. There were no material stats to provide the Loonie with direction.

At the start of the week, the BoC’s Business Outlook Survey failed to move the dial.

Market optimism, fueled by expectations of a sizeable U.S stimulus package, had supported crude oil prices and the Loonie.

A Friday sell-off, however, left the Loonie in the red. Concerns over the COVID-19 pandemic and market reaction to the Biden stimulus package weighed on riskier assets.

In the week ending 15th January, the Loonie fell by 0.24% to C$1.2732. In the week prior, the Loonie had risen by 0.2% to C$1.2702.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar, following solid gains from the previous week.

In the week ending 15th January the Aussie Dollar fell by 0.70% to $0.7703, with the Kiwi Dollar ended the week down by 1.51% to $0.7133.

For the Aussie Dollar

It was a quiet week on the economic calendar.

November retail sales, building permit, and new home loan figures were in focus in the week.

Retail sales impressed in November, supported by an easing of containment measures in Victoria. Sales jumped by 7.1%, following a 1.4% rise in October.

Building permits rose by 2.6%, following a 3.3% increase in October, with new home loans surging by 5.5%.

Home loans hit a record high mid-way through the 4th quarter.

From elsewhere, trade data from China also provided support, with imports and exports on the rise in December.

For the Kiwi Dollar

It was also a particularly quiet week on the economic calendar.

There were no material stats from New Zealand to provide the Kiwi Dollar with direction.

For the Japanese Yen

It was a relatively quiet week on the economic calendar. Core machinery orders were in focus in the week.

Month-on-month, orders rose by 1.5% in November, following October’s 17.1% surge. Economists had forecast a 6.2% slide. Year-on-year, orders were down by 11.3%, after having risen by 2.8% in October. Economists had forecast a more severe 15.4% slump.

The stats ultimately had a muted impact on the Japanese Yen, however. COVID-19 news and chatter from Capitol Hill remained key drivers in the week.

The Japanese Yen rose by 0.09% to ¥103.85 against the U.S Dollar. In the week prior, the Yen had fallen by 0.72% to ¥103.94.

Out of China

Inflation and trade data for December were in focus.

The stats were skewed to the positive, supporting riskier assets in the week.

Inflationary pressures returned at the end of the year, with consumer prices rising by 0.7%, month-on-month. In November, consumer prices had fallen by 0.6%. As a result, consumer prices were up by 0.2% year-on-year, partially reversing a 0.5% decline from November.

Wholesale deflationary pressures also eased at the end of the year.

Trade data was more impressive, however, with exports surging by 19.1% following a 21.1% jump in November. Imports increased by 6.5%, leading to a widening in the USD trade surplus from $75.4bn to $78.16bn.

While the stats were positive, a spike in new COVID-19 cases in China was a concern in the week.

In the week ending 15th January, the Chinese Yuan fell by 0.10% to CNY6.4809. In the week prior, the Yuan had risen by 0.81% to CNY6.4746.

The CSI300 slipped by 0.68%, while the Hang Seng ended the week up by 2.50%.