The Weekly Wrap – The EUR and Yen Come Out on Top as the Equity Markets Hit Corrective Territory

The Stats

It was a relatively busy week on the economic calendar, in the week ending 28th February.

A total of 56 stats were monitored, following the 72 stats in the week prior.

Of the 56 stats,  26 came in ahead forecasts, with 21 economic indicators coming up short of forecast. 9 stats 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 31, 25 stats reflected a deterioration from previous.

For the Greenback, it was a particularly bearish week, as the markets reversed bets that the U.S economy would be unscathed from the spread of the coronavirus.

Not only did economic data continue to disappoint, but the markets also raised the probability of multiple rate cuts by the FED.

When gold takes a tumble as investors look for liquidity to meet margin calls, it’s never a good thing…

The Dollar Spot Index fell by 1.21% to end the week at 98.132.

Out of the U.S

It was a quiet first half of the week, with economic data limited to February consumer confidence figures.

A slight uptick in consumer confidence had a muted impact on the dollar on Tuesday.

Market risk aversion and updates from the U.S on the coronavirus pinned the Dollar back early in the week.

In the 2nd half of the week, durable goods orders on Thursday also failed to impress ahead of a busy Friday.

While core durable goods orders rose by 0.90% in January, durable goods orders fell by 0.2%, sending mixed signals to the market.

At the end of the week, the annual rate of inflation continued to fall short of the FED’s 2% objective.

Personal spending rose by just 0.2% in January, which was softer than a 0.4% rise in December.

Chicago PMI numbers were somewhat better than anticipated, however, with the PMI rising from 42.9 to 49.0.

The February numbers suggested that next week’s ISM numbers may not be as dire as the Markit PMI numbers.

It wasn’t enough to support the U.S equity markets or the Dollar, however.

Housing sector numbers and 2nd estimate GDP numbers for the 4th quarter had a muted impact in the week.

In the equity markets, the Dow slumped by 12.36%, with the S&P500 and NASDAQ tumbling by 11.49% and by 10.54% respectively.

Out of the UK

It was a particularly quiet week on the economic calendar.

There were no material stats to provide the Pound with direction.

The lack of stats left the Pound in the hands of Brexit chatter as the EU and Britain prepare to return to the negotiating table.

A visit to $1.30 levels early in the week was brief, with the British Prime Minister spooking the markets once more.

Johnson spoke on Thursday, stating that Britain would walk away from negotiations should there be a lack of progress by the end of June.

With so much to iron out and the 2-sides worlds apart, hopes of having a framework in place by June are slim…

In the week, the Pound fell by 1.09% to $1.2823, with the FTSE100 ending the week down by 11.12%.

Out of the Eurozone

It was a relatively quiet start to the week economic data front.

Germany was in focus, with February IFO Business Climate Index figures and 2nd estimate GDP numbers in focus.

On the positive side for the EUR was a slight pickup in the Business Climate Index. This came off the back of a rise in optimism, as the current assessment index eased back.

Ultimately, however, March numbers will give a better indication of whether the coronavirus has affected business sentiment.

With GDP numbers in line with 1st estimates, the focus then shifted to a busy Friday.

Key stats included French consumer spending and German unemployment numbers.

While Germany’s unemployment rate held steady, French consumer spending took a hit in January. The slide came ahead of the coronavirus news, which suggests that a further pullback in spending could be on the cards.

The stats failed to influence, however, as the markets punished the Dollar through much of the week.

Prelim inflation figures out of Spain and France, French GDP numbers and finalized consumer confidence figures out of the Eurozone also failed to move the dial…

On the monetary policy front, ECB President Lagarde spoke late in the week. She was of the view that the virus had yet to impact inflation to the point where the ECB needs to step in…

That is in stark contrast to the outlook towards FED monetary policy…

For the week, the EUR rose by 1.65% to $1.1026.

For the European major indexes, it was a particularly bearish week. The DAX30 tumbled by 12.44%, with the CAC40 and the EuroStoxx600 ending the week down by 11.94% and 12.25% respectively.

Elsewhere

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

In the week ending 28th February, the Aussie Dollar slid by 1.69% to $0.6515, with the Kiwi Dollar down by 1.62% to $0.6246.

For the Aussie Dollar

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

Key stats included 4th quarter construction work done and private new CAPEX figures on Wednesday and Thursday.

Both sets of figures disappointed, though a 2.8% slide in new CAPEX in the 4th quarter was more alarming.

RBA monetary policy has not only been in favor of consumer spending but also business investment. The slide suggests a lack of confidence and raised the prospects of a near-term rate cut.

On Friday, the private sector credit figure also failed to impress, with total credit rising by just 0.3% month-on-month.

With the numbers skewed to the negative, risk aversion added to the downside in the week.

Negative sentiment towards the economic outlook led to a slide in commodities and commodity currencies.

For the markets, uncertainly over when the spread of the coronavirus will abate also influenced.

For the Kiwi Dollar

It was a relatively quiet start to the week on the economic colander.

4th quarter retail sales figures failed to impress at the start of the week, with sales rising by 0.7%. In the 3rd quarter, retail sales had risen by 1.7%.

Later in the week, trade data and business confidence figures delivered mixed results that added pressure on the Kiwi.

While trade exports to China rose further, January’s trade was not impacted by China’s shut down.

Business confidence figures, however, suggested some doom and gloom ahead.

With exports to China accounting for 27% of total New Zealand exports in January, it could be quite dire reading next month…

For the Loonie

It was a busy week on the economic calendar. Key stats included wholesale sales figures on Monday and RMPI and GDP numbers on Friday.

A rise in wholesale sales in December failed to provide support at the start of the week, as crude oil prices got hammered.

Market fears of a marked slowdown in the global economy, stemming from the spread of the coronavirus, weighed.

At the end of the week, with the Loonie already under the cosh, GDP numbers also failed to support.

While the economy fared better in December, there was a marked slowdown in the 4th quarter. When considering the economic disruption anticipated in the 1st quarter and beyond, it doesn’t look good.

RMPI numbers also failed to impress, with the RMPI falling by 2.2% in January, reversing most of a 2.7% rise in December.

With the BoC in action next week, the chances of a rate cut certainly jumped in the week…

The Loonie slid by 1.38% to end the week at C$1.3407 against the Greenback.

For the Japanese Yen

It was a relatively quiet week on the data front.

The markets had to wait until Friday for key stats that had little to no influence on the Japanese Yen.

For the Government, the impact of the coronavirus on consumer spending is a blow following last year’s sales tax hike. That suggests that government support is likely to come.

In the meantime, however, retail sales fell by 0.4% in January, following a 2.6% slide in December.

The annual rate of core inflation also eased, with the Ku-area seeing core inflation easing from 0.7% to 0.5% in February.

With the jobs/applications ratio falling from 1.57 to 1.49, the only bright data set was industrial production.

A 0.8% rise in production in January was of little consolation, however, when considering the anticipated drop in demand.

Risk aversion ultimately drove demand for the Yen in the week, with concerns over the U.S economy restoring the Yen’s position as the “go-to” currency.

The Japanese Yen surged by 3.33% to end the week at ¥107.89 against the U.S Dollar. Risk aversion in the week weighed heavily on the Nikkei, which slumped by 9.59%, leaving the index down by 8.89% for February.

Out of China

There were no material stats to provide direction ahead of private sector PMIs on the weekend.

A lack of stats left updates on the coronavirus to provide direction that was ultimately positive for the Yuan.

In contrast, the sell-off across the global stock markets weighed on the CSI300 and Hang Seng, though they did fare better than the pack.

The CSI300 fell by 5.05%, with the Hang Seng falling by 4.32% in the week.

In the week ending 28th February, the Yuan rose by 0.50% to CNY6.9920 against the Greenback.

Crude Oil Weekly Price Forecast – Crude Oil Markets Take a Beating for the Week

WTI Crude Oil

The WTI Crude Oil market broke down rather significantly during the trading week, slicing down through the $45 level. Ultimately, this is a market that looks as if it is going to try to make its way down to the $40 level, where there should be a significant amount of support. The crude oil markets continue to suffer at the hands of the coronavirus, and therefore there is no real way to measure risk, and that’s one of the biggest problems with this market right now. When you look at the candlestick, it’s clearly negative and there is no real attempt to rally. Ultimately, I think that the $40 level will offer a significant about the support, but it’s almost going to have to be something OPEC does as far as production cuts on an emergency meeting. Otherwise, any bounce that we get could be somewhat technical but slicing through the $40 level would be a horrific turn of events. For what it’s worth, looking at the daily chart, it looks as if we had formed a very flat, and that does measure for a move to $35 albeit being a bit optimistic for the sellers. Rallies are to be sold.

WTI Oil Video 02.03.20

Brent

Brent markets also have broken down a bit during the week as well, slicing through the $50 level. Ultimately, the market then goes looking towards the $42.50 level. At this point in time I think that rallies are to be sold into, unless something structurally changes. Demand for crude oil is falling through the floor, and quite frankly there is far too much in the way of supply to think that we have a real chance of recovering for any length of time.

Crude Oil Price Forecast – Crude Oil Markets Break Down Yet Again on Friday

WTI Crude Oil

The West Texas Intermediate Crude Oil market has broken down significantly during the trading session on Friday to slice down below the $45 level. It is possible that we get a bit of a bounce from here, but any bounce should be sold into, especially if we get closer to the $50 level. OPEC needs to cut production to have any hope of a bounce for a longer-term move, and quite frankly even then I don’t think that will be enough as people are worried about global demand and the longer-term oversupply that we already have. With that being the case, I am a seller. However, if we break down below the lows again, we could go looking towards the $40 level.

Crude Oil Video 02.03.20

Brent

Brent markets have also broken down, to slice down below the $50 level. It’s very likely that the market may go looking towards the $45 level given enough time, but in the short term a little bit of a recovery may be possible. That recovery should continue to be sold into as there are far too many reasons to think that this market is going to fall apart again. Granted, we can’t go in one direction forever but clearly buying is all but impossible less something drastically changes. We would need to see the coronavirus situation suddenly disappear, something that’s not going to happen. Ultimately, this is a market that seems as if it is going to go lower given enough time but with all things, you don’t chase the trade.

Crude Daily Forecast – Crude Slips Below $45 as Demand Slides

Crude prices continue to lose ground this week. Currently, U.S. crude oil is trading at $45.20, down $0.95 or 2.09% on the day. Brent crude oil is trading at $50.26, down $1.15 or 2.24%.

Crude Slips to 13-Month Low

As the coronavirus continues to spread, the economic fallout to the global economy is growing. This has been the catalyst behind a plunge in oil prices. Crude has declined by 14.7% this week and briefly fell below the $45 level earlier on Friday. This is its lowest level since January 2018. With analysts warning that things could worsen before they improve, oil prices will likely remain under downward pressure.

The bleak economic situation in China, with much of the industrial sector paralyzed, has led to a sharp reduction in demand for oil. China is the world’s second-largest oil producer, and the deteriorating situation is taking its toll on Saudi Arabia, which is China’s top supplier of oil. Starting in March, Saudi Arabia will sharply reduce its oil exports to China, which currently stands at about 2 million barrels per day (bpd). Analysts say that this amount could be cut significantly, perhaps as much as 300,000 bdp.  Chinese refineries have sharply cut refinery runs, leading to a growing oversupply of crude on global markets.

Technical Analysis

WTI/USD continues to fall and break below support levels this week. The pair tested support at 45.50 earlier on Friday and this line could break before the end of the trading week. The next support level is at 43.55.

On the upside, there is resistance at 47.50, followed by resistance at .$49.50, which is just below the symbolic $50 level.

Crude Oil Price Forecast – Crude Oil Markets Continue To Fall Apart

WTI Crude Oil

The West Texas Intermediate Crude Oil market has broken down rather significantly during the trading session on Thursday, as we continue to see a lot of markets worry about the spreading of the coronavirus and its impact on the demand for crude oil. As we have sliced down so drastically, it looks as if we will test the $45 level in the rallies should continue to be selling opportunities going forward. With that, I believe that the $50 level now offers a significant amount of resistance that will come into play and therefore shorting signs of exhaustion will more than likely continue to reap benefits for those who are patient enough to wait for them.

Crude Oil Video 28.02.20

Brent

Brent markets also have broken down significantly during the trading session on Thursday to press the $50 level. The $50 level underneath is a large, round, psychologically significant figure the people will be paying attention to, and the fact that we bounce from there suggests that at least the technical analysis standpoint of that level is still significant. That being said, it does look like any rally at this point should be a selling opportunity, especially near the $53 level. The $55 level above is the top of that resistance barrier, and if we can break above there then the market may have an argument towards the $60 level. All things being equal, this is a market that continues to suffer at the hands of the virus outbreak, and the slowing global demand, not only in Asia, but possibly in the European Union as well.

Oil Price Fundamental Daily Forecast – Traders Betting on Drop in US Gasoline Demand as Virus Spreads

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday shortly after the regular session opening. Brent crude only is trading below the major bottom put in at $52.78 on December 24, 2018. Meanwhile, U.S. crude oil is rapidly moving closer to its next downside target, the December 24, 2018 min bottom at $45.92.

At 13:07 GMT, April WTI crude oil is at $47.29, down 1.44 or -2.98% and April Brent crude oil is at $51.93, down $1.50 or -2.81%.

Coronavirus Continues to Cause Demand Worries

Oil prices are down for a fifth day on Thursday as a growing number of new coronavirus cases outside of China fuelled fears of a pandemic which could slow the global economy and lower crude demand.

On Wednesday, for the first time ever, the number of new coronavirus infections outside China, the source of the outbreak, exceeded the number of new Chinese cases.

Late Wednesday, Donald Trump tried to calm investor nerves by telling Americans that the risk from coronavirus remained “very low,” and placed Vice President Mike Pence in charge of the U.S. response to the looming global health crisis.

He also said the spread of the virus in the United States was not “inevitable” and then went on to say: “It probably will, it possibly will. It could be at a very small level, or it could be at a larger level. Whatever happens we’re totally prepared.”

Global Fuel Demand Limited

The coronavirus’ spread to large international economies including South Korea, Japan and Italy has caused concerns that fuel demand growth will be limited. On Wednesday, consultants Facts Global Energy forecast oil demand growth will only be 60,000 barrels per day in 2020, or practically “zero”, because of the widening outbreak.

Coronavirus Spread in US Fuels Fresh Round of Selling

Speculators, betting that coronavirus may spread in the United States, prompted a fresh round of selling on Wednesday that has carried over into Thursday’s session. If the outbreak continues to worsen in the U.S. then look for energy prices to continue to fall with the move led by gasoline. The United States is the world’s largest oil producer and consumer.

Gasoline stockpiles dropped by 2.7 million barrels in the week to February 21 to 256.4 million, the U.S. Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1 million barrels to 138.5 million.

U.S. crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the EIA report showed. This was less than the 2-million barrel rise analysts had expected.

Daily Forecast

The outlook for crude oil prices is bearish. If April Brent crude oil prices fall below $50.00 per barrel, expect OPEC and its allies to sit up and take notice. OPEC+ plans to meet in Vienna over March 5-6.

Crude Daily Forecast – Crude Slips Below $48 on Demand Concerns

Crude prices have fallen for a fifth straight day.  Currently, U.S. crude oil is trading at $47.40, down $1.03 or 2.1% on the day. Brent crude oil is trading at $52.14, down $1.22 or 2.27%.

Crude Sags as Coronavirus Spreads

It has been a dismal week for crude, which has plummeted 10.8 percent. Investor risk apprehension continues to rise as the coronavirus outbreak has spread to Western Europe. Italy has reported 11 fatalities, while France confirmed its second victim on Wednesday. Spain, Austria and Switzerland have also reported coronavirus cases. It appears to be only a case of time before the virus reaches the United States.

The coronavirus is taking a toll on the global economy, with the disruption to supply chains and the plunge in the global tourism industry. The drop in economic activity has also weighed on the demand for crude, dragging prices lower. Crude fell to a daily low of 47.35 on Thursday, its lowest level since January 2018. With analysts warning that things could worsen before they improve, oil prices will likely remain under downward pressure.

EIA Shows Unexpectedly Small Surplus

The U.S. Department of Energy crude inventory report indicated a small surplus of 0.5 million barrels. This was well below the forecast of 2.3 million barrels. This reading was almost a repeat of the gain of 0.4 million a week earlier. Although the surplus was smaller than expected, the reading failed to stem crude’s slide.

Technical Analysis

WTI/USD continues to fall and break below support levels this week. The pair tested 47.50 earlier on Thursday and this line remains fluid. Below, there is support at 45.50. On the upside, there is resistance at 49.50, followed by resistance at 52.50.

WTI/USD 1-Day Chart

Will U.S Durable Goods Orders Give the Markets More Angst as the Number of U.S Cases Rise?

Earlier in the Day:

It was a relatively busy day on the Asian economic calendar this morning. The Kiwi Dollar and Aussie Dollar were in action.

For the Kiwi Dollar

New Zealand’s trade deficit narrowed from NZ$4,460m to NZ$3,870 year-on-year in January. Month-on-month, the trade balance fell from an NZ$384m surplus to an NZ$340m deficit.

According to NZ Stats,

  • Total exports rose by NZ$382m (8.8%) from January 2019 to hit NZ$4.7bn.
    • Exports to China jumped by NZ$302m (31%) to NZ$1.3bn in January, compared with January 2019.
    • A jump in dairy, meat, and log exports led the way.
    • The rise in exports to China meant that China accounted for 27% of total exports, all of which came before the extended CNY holidays and quarantines across the country.
  • Total imports fell by NZ$212m (4.0%) to NZ$5.1bn in January 2020.
    • A slide in the import of vehicles, parts, and accessories (NZ$116m) weighed on imports. Motor car imports were the main driver.
    • Imports from China stood at NZ$1.1bn in January 2020, which accounted for 22% of total monthly imports. On an annual basis, 20% of total imports were from China.

The New Zealand Dollar moved from $0.62898 to $0.62900 upon release of the figures that preceded January business confidence figures.

In January, the ANZ Business Confidence Index fell from -13.2 to -19.4. Economists had forecast a rise to -7.9.

According to the latest ANZ Report,

  • A net 12% of firms expect stronger activity ahead for their own business, falling by 5.
  • Agriculture sector own activity tumbled from +16 to -30, with manufacturing own activity down from +24 to +4.
  • Expected profitability, investment and employment intentions were all in decline.
  • The downward trend was attributed to the spread of the coronavirus. ANZ noted that survey responses received after the COVID-19 outbreak hit the headlines were more negative. These accounted for one-third of the total respondents.
  • On the bright side, the construction sector saw a rosier outlook, with retail sector pricing intentions jumping to the highest level since 2008.

The Kiwi Dollar moved from $0.62866 to $0.62900 upon release of the numbers. At the time of writing, the Kiwi Dollar down by 0.05% to $0.6290.

For the Aussie Dollar

Private new capital expenditure slid by 2.8% in the 4th quarter, following on from a revised 0.4% decline in the 3rd quarter. Economists had forecast a 0.4% rise.

According to the ABS,

  • Building and structures saw a 5.9% slide, while new CAPEX expenditure on equipment, plant, and machinery rose by 0.8%.
  • In the 3rd quarter, investments in building and structures had risen by 2.5%, while expenditure on equipment, plant, and machinery had fallen by 3.6%.

The Aussie Dollar moved from $0.65511 to $0.65535 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.18% to $0.6556.

While the Aussie Dollar was up in the early hours, the slump in new CAPEX expenditure gives the RBA further reason to cut rates. The low-interest-rate environment was not only meant to support consumers but also fuel business spending.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.16% to ¥110.25 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Key stats include prelim February inflation figures out of Spain and finalized Eurozone consumer confidence figures.

Barring a material pullback in inflation, however, we would expect the numbers to have a muted impact on the EUR.

Expect any revision to Eurozone consumer confidence figures to influence, however, as the markets search for sentiment towards the spread of the coronavirus.

Outside of the numbers, expect market risk sentiment to continue to provide direction. For the EUR, early support kicked in as the markets reacted to news of a rise in new coronavirus cases in the U.S. The upward swing has come as the markets reverse bets on the U.S economy being unscathed from the spread of the virus.

At the time of writing, the EUR was up by 0.26% at $1.0909.

For the Pound

It’s also a quiet day ahead on the economic calendar, with no material stats to provide the Pound with direction.

While there are no stats to consider, the British Government is due to release its terms for trade negotiations with the EU.

It will all come down to how far apart the 2-sides are from the get-go and how the EU responds and Boris Johnson and David Foster react in return.

Expectations are for a difficult road ahead, which should peg the Pound back at $1.29 levels and bring $1.28 levels back into play.

On the monetary policy front, BoE MPC member Cunliffe is scheduled to speak in the early afternoon. Following Cunliffe’s concerns over the negative effects of prolonged monetary policy easing, expect any dovish chatter to weigh on the Pound.

We’ve yet to hear of central banks wanting to step in as the coronavirus continues to spread. This may well change in the coming weeks…

At the time of writing, the Pound was up by 0.12% to $1.2921.

Across the Pond

It’s a relatively busy day ahead on the U.S economic calendar. January durable goods orders and 2nd estimate GDP numbers for the 4th quarter are due out.

Barring deviation from 1st estimate numbers, expect the core durable goods and durable goods orders to have the greatest impact.

Following last week’s particularly disappointing PMI numbers, any slide in orders will pressure the Greenback further.

Initial weekly jobless claims and pending home sales figures for January are also due out. We will also expect the numbers to have a muted impact on the Dollar, however.

Outside of the numbers, market risk sentiment will continue to influence.

At the time of writing, the Dollar Spot Index was down by 0.06% to 98.939.

For the Loonie

It’s a quiet day ahead on the economic calendar, with key stats limited to 4th quarter current account figures out of Canada.

We can expect the numbers to have a muted impact on the Loonie, however.

Focus through the day will be on the economic outlook and demand for crude oil, which remains Loonie negative.

The Loonie was down by 0.06% at C$1.3341 against the U.S Dollar, at the time of writing.

Crude Oil Price Forecast – Crude Oil Markets Continue to Hang On To Vital Levels

WTI Crude Oil

The West Texas Intermediate Crude Oil market has broken down to a fresh, new low but then bounced enough to form a bit of support. It looks as if somebody out there is hanging onto the $50 level desperately, perhaps OPEC is starting to get involved in the market again. At this point, the inventory number and the US states was better than anticipated, although it was still a build. There was a refinery explosion on the West Coast which may have helped as well, but at this point if we bounce from here it’s likely that we will see sellers above. Ultimately, if we break down below the bottom of the candlestick, then we are likely to go down to the $47.50 level, possibly even the $45 level.

Crude Oil Video 27.02.20

Brent

Brent markets also have broken down initially during the trading session on Wednesday, testing the lows again but then bouncing at that point. Ultimately, this is a market that is very likely to find sellers above so I like the idea of showing signs of exhaustion, so that I can start selling yet again. Ultimately, if we break down below the bottom of the candlestick for the session on Wednesday, then we should continue to go down towards the $50 level. At this point, the market is very bearish, so rallies are to be faded as the demand for crude oil will continue to suffer due to the coronavirus and a slower global economic situation anyway. Crude oil continues to get hammered not only due to demand issues, but a stronger US dollar has not helped either.

Crude Oil Forecast – Crude Slips to 13-Month Low on Coronavirus Fears

In the European session, U.S. crude oil is trading at $48.97, down $0.89 or 1.80% on the day. Brent crude oil is trading at $53.66, down $1.30 or 2.36%.

Coronavirus Jitters Sends Crude Below 50.00

It has been a dreadful week for crude, which has slumped 7.1 percent. Investor risk apprehension continues to rise as the coronavirus outbreak has spread to Western Europe. Italy has reported 11 fatalities, while France confirmed its second victim on Wednesday. Spain, Austria and Switzerland have also reported coronavirus cases. The European Union had considered imposing border controls, but has decided that such a severe move would do little to contain the virus.

The outbreak has caused significant economic damage in China and its ramifications are being felt worldwide, such as the toll on the global tourism industry. With the disruption to economic activity, the demand for crude has also dropped, dragging prices lower. Crude fell to a daily low of 48.81 on Wednesday, its lowest level since January 2018. With analysts warning that things could worsen before they improve, oil prices will likely remain under downward pressure.

Meanwhile, OPEC members are watching nervously as oil prices continue to fall. OPEC is keenly interested in cutting production to stabilize prices, but it needs Russia on board if the cut to output will lift oil prices. However, Russia does not appear in any rush to lower production. With OPEC+ oil ministers meeting next week in Vienna, we could see significant movement in oil prices, dependent on whether an agreement is reached to cut output.

Technical Analysis

WTI/USD broke below the key 50.00 level on Tuesday and continues to lose ground. There is support at 47.50, followed by support at 45.50. On the upside, there is immediate resistance at 49.50, followed by resistance at 52.50 and 54.00. This is followed by the 50-day EMA at 54.30.

WTI/USD 1-Day Chart
WTI/USD 1-Day Chart

Oil Price Fundamental Daily Forecast – Coronavirus Fears Likely to Wipe Out 2019 Gains

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower for a fourth straight session, putting them in a position to challenge their December 24, 2018 lows that launched last year’s rally.

With the global demand picture weakening everyday as the coronavirus spreads around the world, OPEC not likely to make a decision on whether to make additional production cuts and U.S. supply growing, there are no strong reasons to think the markets can turnaround anytime soon.

At 09:38 GMT, April WTI crude oil is trading $49.25, down $0.65 or -1.30% and April Brent crude oil is at $54.11, down $0.84 or -1.53%.

Crude oil prices rose earlier in the session on short-covering and profit-taking, but then aggressive sellers erased those gains as fears deepened that the rapid spread of the coronavirus will lead to a global pandemic that could end up producing a global recession.

American Petroleum Institute Weekly Inventories Report

The API reported late Tuesday a smaller than anticipated crude oil inventory build of 1.3 million barrels for the week-ending February 21. Analysts were looking for a 3.0 million barrel build in inventory.

The API also reported a small build of 74,000 barrels of gasoline for the week-ending February 21, after last week’s 2.67-million-barrel draw. This week’s small build compares to analyst expectations for a 2.245-barrel draw for the week.

Distillate inventories were down by 706,000 barrels for the week, compared to last week’s 2.63-million-barrel draw, while Cushing inventories rose by 411,000 barrels.

Daily Forecast

As the coronavirus panic set in, traders are going to become more and more interested in how it affects global demand and less interested in weekly inventory reports. Furthermore, they don’t seem to care about the steep drop in Libyan output either and whether OPEC and its allies are going to trim production.

A week or two ago, I said that crude prices would jump if OPEC+ announced additional production cuts, but I’ve changed my mind about that. We may see some short-covering, but I don’t think the news will be enough to change the trend.

Furthermore, I’m not so sure OPEC+ will even agree to make any additional cuts in output since the move could be deemed irrelevant without final figures on the loss of demand. In other words, I think they are going to wait for the coronavirus to run its course and for governments to release fresh economic data as to its impact before they make across the board cuts. By then, there may not even by an OPEC+.

Finally, today’s U.S. Energy Information Administration (EIA) weekly inventories report is expected to show a 2.3 million barrel build.

Asian Selloff Continues As Pandemic Fears Rise

South Korea now has more than 1,100 cases, adding to the worldwide tally that has exceeded 80,000, with more confirmed cases in Europe and the Middle East. Pandemic fears are stoking the risk-off mode in the markets, with the MSCI Asia Pacific index in the red in 9 out of the last 10 sessions, while the South Korean Won is leading Asian currencies’ decline against the US Dollar.

The rout in stock markets suggests that the divergence between valuations and fundamentals need to be reconciled, especially in light of the uncertainties surrounding Covid-19’s eventual toll on the global economy and the efficacy of incoming stimulus measures. Equity investors have deemed that the gains so far this year have run its course for the time being and need stronger conviction to etch out new record highs. The pullback in risk-taking activities however should bode well for safe haven assets, creating a supportive environment for the likes of Gold and US Treasuries in the interim.

Dollar could drop further on Fed easing bets

The Dollar index (DXY) has seen a technical pullback from overbought territory, falling by about one percent since breaching the 99.9 mark last week. If the U.S. Centers for Disease Control and Prevention’s warning of a potential outbreak stateside indeed materialises, that could prompt the Greenback to surrender more of its gains of late.

Should the incoming data on consumer spending, home sales and ISMs come in below market expectations, that could prompt investors to ramp up bets that the Federal Reserve may have to lower US interest rates sooner than expected. Such dovish expectations could also lead to more Dollar softness.

Still, the DXY is expected to remain at relatively elevated levels, with other G10 currencies offering little threat to King Dollar’s throne at present, considering that the US economy is currently in a better place compared to other major, developed economies.

Gold moderates to $1640s, upside bias to remain

Despite shedding over three percent since breaching the $1689 level earlier this week, Gold is expected to remain supported above $1580 as investors continue to cling to safety while assessing the coronavirus’ impact on global economic conditions. Bullion could yet make another run towards the psychological $1700 mark, especially if the negative virus impact shows up in the hard data out of major economies over the coming months.

Demand-side risks still primary driver for Oil

Oil’s sensitivity to coronavirus-linked concerns has made for a tumultuous 2020 so far for Brent futures. Brent futures could see another sharp drop towards $50/bbl, especially if the CDC’s warning of an outbreak stateside materialises. Should OPEC+ decide to trigger more supply cuts at next week’s meeting, that may only have a limited effect on Oil prices, as demand-side concerns are expected to continue having a major sway on the commodities complex.

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Crude Oil Price Forecast – Crude Oil Markets Continue to Break Down

WTI Crude Oil

The WTI Crude Oil market initially tried to rally during the trading session on Tuesday but gave back the gains yet again. It looks as if crude oil will continue to suffer at the hands of the coronavirus and the weakening demand around the world. This is further exacerbated by the fact that South Korea now shows a multitude of cases, and it is starting to affect the semiconductor business. That is a huge amount of traffic coming from Asia to Europe and North America, and therefore demand will continue to be a major concern. At this point, it looks as if the market is trying to break down through the $50 region, which of course would be a major breakdown.

Crude Oil Video 26.02.20

Brent

Brent markets also got crushed, initially tried to rally but then turning around to show signs of weakness again. It looks as if the market is going to go down to the $55 level, and then perhaps even try to break down below there. Rallies at this point will more than likely continue to be looked at with suspicion, as Brent is even more sensitive to China and Asia than the West Texas Intermediate Crude Oil market is concerned.

Ultimately, this is a market that is in a downtrend and should continue to be so going forward. If we break down to a fresh, new low, then the market could go down to the $50 level. I have no interest in buying crude oil right now, because we need to see a major turnaround when it comes to risk appetite in global growth.

Crude Oil Forecast – Crude Takes Pause After Slide

In the Tuesday session, U.S. crude oil is trading at $50.98, down $0.16 or 0.32% on the day. Brent crude oil is unchanged, trading at $56.00.

Are OPEC and Russia Parting Ways?

The China coronavirus has caused havoc in China’s economy and is threatening the global economy as well. China is the world’s number two consumer of oil, so it’s no surprise that demand has plunged, resulting in crude prices falling heavily early in 2020. This has left oil producers with a major headache, as they face falling oil revenues. OPEC has proposed cutting production in order to shore up sagging demand, but not without Russia onboard.

However, Russia, who has increased production year after year, is clearly hesitant to cut production. A showdown between OPEC and Russia could occur when oil ministers from OPEC and non-OPEC meet on March 5-6 in Vienna. Although Saudi Arabia has denied there is a rift with Russia, most analysts aren’t buying it. According to Manish Raj, chief financial officer at Velandera Energy, “the tussle between OPEC and Russia raises substantial doubt about continuation of production cuts and therefore a return to a heavily oversupplied market.”

Bottom line? I expect to see some intense jockeying between OPEC and Russia in the days ahead of the upcoming meeting. If Saudi Arabia is able to drag Russia on board the proposal to cut output, we could see a sharp rebound in crude prices.

Technical Analysis

WTI/USD is hovering around the 50.90 level, which was tested in support on Monday and again in the European session on Tuesday. Below, there is strong support just below the symbolic 50-level, at 49.50. This is followed by support at 47.50. On the upside, there is resistance at 52.50, followed by resistance at 54.00. The 50-day EMA is situated at 54.56.

WTICOUSD daily chart

Crude Oil Price Forecast – Crude Oil Markets Break Down Yet Again

WTI Crude Oil

The West Texas Intermediate Crude Oil market has gapped lower to kick off the week and broke down below the bottom of the hammer that formed on Friday. This is a very negative turn of events, but there is support underneath around the $50 level. That obviously will attract a certain amount attention, but I believe at this point the market is hell-bent on trying to break it. That doesn’t mean that I’m willing to sell and hang on right here, just that the relentless selling continues to be a major issue. As long as there are concerns about demand coming out of places like China, oil is going to be flat on its back. Furthermore, if the global economy is in fact slowing down anyway, that’s a double whammy.

Crude Oil Video 25.02.20

Brent

Brent markets also look horrible, as they are looking to break down below the $55 level again. Ultimately, the market looks likely to try to break to a fresh, new low, but the one thing I think you can count on is a lot of major volatility and headline risks out there. The coronavirus continues to cause mass chaos in China and now is threatening South Korea, which of course is also a major production facility for the world. With that in mind, it’s very unlikely that the market is going to be able to recover significantly without some type of major change in China and South Korea. The 50 day EMA above offers resistance, so if we were to break above the $60 level, then it’s very likely to continue going higher. Until then, I would be leery of any rallies.

Oil Price Fundamental Daily Forecast – Don’t Be Surprised if OPEC, IEA Issues Revised Demand Forecasts

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower on Monday. After closing higher for a second consecutive week on Friday, the market has now wiped out more than 62% of its recent rally and if momentum is any indication, sellers are likely to challenge the multi-month lows hit earlier in the month.

At 14:12 GMT, April WTI crude oil is at $50.76, down $2.62 or -4.91%. April Brent crude oil is at $55.76, down $2.74 or -4.67%.

Demand concerns are at the forefront again, but this time expectations of lower demand in Italy and South Korea are joining already dismal expectations from China. While the focus of lower demand in Italy is primarily on local transportation and airlines for tourism, these factors along with lower factory demand in South Korea and China are the main issues that are expected to drive down demand at least in the first quarter.

OPEC and IEA Likely to Revise Forecasts

Earlier in the month both OPEC and the International Energy Agency (IEA) presented forecasts calling for lower demand. Since these reports were primarily based on the virus being contained in China, they are likely to issue revisions to their numbers now that the virus has spread outside of mainland China.

Recently, in a closely-watched report, OPEC cut its forecast for oil demand growth this year, saying the coronavirus outbreak was the primary reason.

The cartel said it now expects 2020 daily oil demand growth to be 990,000 barrels per day (bpd), which is 230,000 bpd below prior forecasts. Expect OPEC to cut demand growth further.

Additionally, the IEA said demand is set to fall year on year in the first quarter for the first time since the depths of the financial crisis in 2009.

In the second quarter it said it expected oil demand to grow 1.2 million barrels per day before normalizing in the third quarter with growth of 1.5 million bpd on likely economic stimulus measures in China.

The second quarter forecast has to change because the virus is no longer only China’s problem, but a major global issue.

OPEC+ Production Cuts

I don’t expect OPEC to make any changes until it meets in March. This is because cutting now would be futile since no one know how bad conditions are, or how bad they are going to get. There are going to be losses, but it’s anyone’s guess how much oil demand will drop.

If OPEC+ cuts now, they could be just chasing the market. I think they are going to wait for conditions to stabilize before making a decision and this may delay the production cuts by months.

Crude Oil Forecast – Crude Slides as Coronavirus Spreads

In the European session, U.S. crude oil is trading at $51.16, down $2.02 or 3.83% on the day. Brent crude oil is trading at $56.12, down $2.29 or 3.95% on the day.

Markets Jittery as Coronavirus Reaches Italy

The China coronavirus is weighing on the markets, as the outbreak continues to spread. With growing fears that the virus is becoming a pandemic, investors are nervous that crude demand will continue to fall and drag prices lower.

Earlier on Monday, Italy reported that 200 confirmed cases, the largest number of cases outside of Asia. Italy’s health officials have imposed severe restrictions, which include limiting transport and the quarantine of individuals in affected areas. There is extreme concern that that virus could quickly spread throughout western Europe, as the Schengen Area, which covers 26 countries, allows for borderless travel. The European Union has said that it will not impose travel bans, but that could change if other European countries report coronavirus cases.

World Health Organization Director-General Tedros Adhanom Ghebreyesus said on Saturday that there was still a chance to contain the virus beyond China, “but the window of opportunity is narrowing.” Tedrus added that the increase in cases in Italy, South Korea and Iran “is also a matter of concern and how the virus is now spreading to other parts of the world.”

Technical Analysis

WTI/USD is down sharply on Monday, putting strong pressure on the 50.90 line. This line could be tested later in the Monday session. Below, there is support at the symbolic 50.00 level, followed by support at 49.30.

On the upside, there is resistance at 52.50, followed by resistance at 54.00. Above, the 50-day EMA is situated at 54.71.

WTICOUSD Daily Chart

Oil Price Fundamental Weekly Forecast – Industry Preparing for Demand Shock Due to Coronavirus

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures closed higher last week despite elevated concerns about the coronavirus’ impact on global demand growth. The markets hit one-month highs early in the week, but began to weaken on Friday after weak Asian economic data generated more uncertainty about the region’s economic outlook. Additionally, traders continued to grow more impatient with OPEC and its allies’ inability to make a decision about additional production cuts.

Last week, April WTI crude oil settled at $53.38, up $1.06 or +2.03% and April Brent crude oil finished at $58.50, up $1.18 or +2.02%.

Early in the week, three factors contributed to the markets’ strength. They were fresh stimulus from China, a drop in new coronavirus cases at the epicenter of the outbreak and supply concerns in Venezuela and Libya. The selling pressure reemerged on Friday as the coronavirus death toll rose and the virus was reported in several areas outside of China.

China Lowers Benchmark Lending Rate

China’s move to cut its benchmark lending rate on Thursday helped ease worries about slowing demand in the world’s second-biggest oil consumer and largest crude oil importer. However, the move was already priced into the market. Furthermore, the reaction to this news may have been muted because it takes time for the change to circulate through the economy. Secondly, the number of factories open for business is still low so it’s difficult to see demand stabilizing at this time.

Traders Show Little Reaction to Minor Supply Adjustments

On Wednesday the U.S. sanctioned a trading unit of Russian oil giant Rosneft for its ties with Venezuela’s state-run PDVSA, a move which could choke the OPEC member’s crude exports even further. At the same time, conflict in Libya that has led to a blockade of its ports and oilfields shows no signs of a resolution.

Cutting supply is nearly always bullish for crude oil prices. In this case, I think the moves are underpinning prices rather than driving them higher. The main driver of the price action in my opinion remains speculation that OPEC and its allies will cut production further when they meet in March. The reaction in the market could come sooner if Russia says it will go along with the plan.

U.S. Energy Information Administration Weekly Inventories Report

The EIA revealed on Thursday that U.S. crude supplies edged up by 400,000 barrels for the week-ended February 14. Analysts were looking for a rise of 3.3 million barrels.

The EIA data also showed a supply decline of 2 million barrels for gasoline, while distillate stocks fell by 600,000 barrels. Analysts were expecting a 300,000 barrel increase in gasoline supplies, but distillates were forecast to fall by 1.6 million barrels.

Major Asian Economies Showing Weakness

The week started with Japan reporting its economy shrank 1.6% in the fourth quarter of 2019. The decline from the third quarter was the biggest contraction since 2014. The drop was even more severe – a 6.3% plunge – when measured as an annualized rate.

Thailand announced that economic growth slowed last quarter. Meanwhile, Singapore’s Ministry of Trade and Industry downgraded its economic outlook for the year because of fears about the spread of the virus.

Weekly Forecast

Even if the outbreak begins to recede, the damage is done, which means crude oil demand growth will take a near-term hit before bouncing back over the remainder of the year.

Last week, IMF Managing Director Kristalina Georgieva said she hoped the economic impact of the virus would be “a V-shaped curve” with a sharp decline in China and sharp rebound after containment of the virus. “But we are not excluding that it might turn to be different scenario,” she said.

However, this forecast means very little because the International Monetary Fund said it was too early to tell what impact the virus would have on global growth.

Traders are likely to keep pressure on crude oil because of an expected supply surplus in the first quarter and the need for OPEC+ to take further action at their meeting in early March. Furthermore, the rapidly rising U.S. Dollar is likely to lead to a drop in demand for dollar-denominated crude oil.

Last week, oil traders thought additional production cuts from OPEC+ were imminent, but Russian Energy Minister Alexander Novak dampened those thoughts on Thursday when he said that global oil producers understood it would no longer make sense for OPEC and its allies to meet before their gathering in March.

U.S. officials will have a better idea of how the coronavirus outbreak will impact the economy in “three or four weeks,” U.S. Treasury Secretary Steven Mnuchin said Sunday.

Mnuchin’s assessment likely means the market will be subject to more two-sided trading and elevated volatility.

The Week Ahead – Economic Data and COVID-19 Updates to Drive the Majors

On the Macro

It’s a relatively busy week ahead on the economic calendar, with 55 stats to monitor in the week ending 28th February. In the previous week, just 64 stats had been in focus.

For the Dollar:

It’s a busy week ahead for the Dollar.

The markets will have to wait until Tuesday, however, to assess the impact of COVID-19 on the U.S consumer, with the all-important CB Consumer Confidence figures for February due out.

FED Chair Powell had talked of economic resilience and with the U.S equity markets close to record highs, there’s little reason to expect any deterioration. Forecasts are Dollar positive.

The focus will then shift to January durable goods orders and 4th quarter GDP numbers due out on Thursday. Barring revision from 1st estimates, we expect the durable goods orders to have the greatest influence.

COVID-19 is expected to have a material impact on key economies. The markets will want to ensure that the U.S economy remains unscathed… After all, there remains a distinct difference between survey-based and actual data.

At the end of the week, January inflation and personal spending figures are due out along with the Chicago PMI for February.

Barring material deviation from prelims, we would expect finalized consumer sentiment numbers to be brushed aside.

Over the week, housing sector figures will also draw attention mid-week, with new home and pending home sales figures due out.

The Dollar Spot Index ended the week up by 0.21% to 99.337.

For the EUR:

It’s a relatively busy week ahead on the economic data front.

In the 1st half of the week, Germany is on focus once more. February’s IFO Business Climate Index numbers are due out on Monday, ahead of 2nd estimate GDP numbers on Tuesday.

While the IFO numbers will be the key driver, any revisions to the GDP numbers will have a greater impact…

In the 2nd half of the week, French consumer spending and GDP numbers are due out along with German unemployment figures on Friday.

Expect Germany’s unemployment numbers to have the greatest influence on the day.

Through the 2nd half of the week, prelim inflation figures for February will likely have a muted impact on the EUR.

The EUR/USD ended the week up down by 0.15% to $1.0847.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar.

There are no material stats scheduled for release, which leaves the hand firmly in the hands of Brexit.

On 25th February, the EU is due to deliver its starting terms for trade negotiations that begin next week. France has already talked of a tough time ahead and Britain has been clear that there can be no strings attached.

Expect chatter on trade to be the key driver in the week. Economic data out of the UK impressed last week. That should remove the near-term focus on the BoE and monetary policy.

The GBP/USD ended the week down by 0.64% to $1.2964.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

In a quiet 1st half of the week, however, economic data is limited to December’s wholesale sales figures due out on Monday. While the numbers will provide direction, the focus will be on GDP numbers due out on Friday.

Any weak numbers and expect the chances of a rate cut to rise, which should send the Loonie back to C$1.33 levels.

Outside of the stats, market risk sentiment will also be a key driver.

The Loonie ended the week up by 0.20% to C$1.3225 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week ahead.

Key stats include 4th quarter construction work done and new CAPEX figures due out on Wednesday and Thursday.

While housing sector conditions have improved and are key to supporting consumer spending, CAPEX numbers will likely have a greater influence.

Business confidence has failed to bounce back at the turn of the year. Weak investment numbers will weigh on Thursday.

On Friday, private sector credit figures are unlikely to have a material impact on the Aussie.

Outside of the numbers, expect updates on COVID-19 to also provide direction.

The PBoC and Chinese Government have delivered support and will likely deliver more if the need arises. Will it be enough to support the RBA’s view that the impact of the virus will be short-lived?

The Aussie Dollar ended the week down by 1.30% to $0.6627.

For the Kiwi Dollar:

It’s a relatively busy week ahead on the economic data front. At the start of the week, 4th quarter retail sales figures will influence on Monday. The attention will then shift to January trade data and business confidence figures due out on Thursday.

Expect the retail sales and trade figures to have a greater impact, however.

On the trade front, there will be particular interest in export figures to China that are likely to have seen a sizeable decline.

In December, exports to China had accounted for 28% of NZ exports…

The Kiwi Dollar ended the week down by 1.38% to $0.6349.

For the Japanese Yen:

It’s a relatively busy week on the economic data. The markets will need to wait until Friday, however, for key stats.

Expect prelim January industrial production and retail sales figures to have the greatest influence.

Following some particularly dire numbers out of Japan last week, more doom and gloom should test the BoJ’s resolve…

Outside of the numbers, updates from China and the region on the coronavirus will also provide direction.  Expect any rise in cases within the region to weigh on the Yen.

The Japanese Yen ended the week down by 1.67% to ¥111.61 against the U.S Dollar.

Out of China

It’s a quiet week on the economic data front. Key stats are limited to February private sector PMI numbers that are due out on Saturday.

Outside of the numbers, chatter from Beijing and COVID-19 updates will continue to be the main area of focus.

The Chinese Yuan fell by 0.58% to CNY7.0271 against the U.S Dollar in the week.

Geo-Politics

Trade Wars: It’s simmering in the background. U.S President Trump may be quietly concerned over the impact of the coronavirus on his trade win against China… China is unlikely to meet any of the terms any time soon. With the Presidential Election campaign beginning to heat up, U.S farmers may not be getting the demand that Trump had promised…

Looking across to the EU, the Airbus v Boeing battle could send the EU into a trade dispute with the U.S. While hopes are of a resolution, progress on talks will need monitoring…

UK Politics: Terms of the EU’s starting point ahead of trade negotiations are due to be delivered on 25th February.

Expect plenty of reaction from Parliament and the markets from the terms that are likely to point to that tough time ahead…

Corporate Earnings

It’s a quieter week ahead on the corporate earnings calendar, as earnings season begins to wind down. Marquee names releasing earnings include:

From the U.S: Macy’s Inc. (Tue), JC Penny Co. Inc. (Thurs),

From of the UK: Standard Chartered PLC (Mon), Rio Tinto (Wed), British American Tobacco (Thurs), and International Consolidated Airlines Group SA (Thurs)

The Weekly Wrap – U.S PMIs and the Coronavirus Drive Risk Aversion

The Stats

It was a busy week on the economic calendar, in the week ending 21st February.

A total of 72 stats were monitored, following the 46 stats in the week prior.

Of the 72 stats, 39 came in ahead forecasts, with 24 economic indicators coming up short of forecast. 9 stats were in line with forecasts in the week.

Looking at the numbers, 27 of the stats reflected an upward trend from previous figures. Of the remaining 45, 36 stats reflected a deterioration from previous.

For the Greenback, it was a particularly bullish week, with risk aversion and positive economic data driving demand for the Dollar. That was the story until Friday when the Dollar hit speed bumps as private sector activity waned.

The Dollar Spot Index rose by 0.21% to 99.337, in the week.

Out of the U.S

In the 1st half of the week, key stats in the week included manufacturing numbers out of NY State and January wholesale inflation figures.

Any concerns over the impact of the coronavirus on U.S manufacturing sector activity would have eased. The Index jumped from 4.80 to 12.90 in February.

Wholesale inflationary pressures were also on the rise. Core producer prices rose by 0.5% in January, following a 0.1% rise in December. Producer prices also rose by 0.5%, following a 0.1% increase in December.

The focus then shifted to Philly FED Manufacturing and U.S prelim private sector PMI numbers for February.

On Thursday, the Philly FED Manufacturing Index jumped from 17.0 to 36.7 in February. Economists had forecast a fall to 10.0.

Private sector PMIs failed to impress on Friday, however.

The all-important U.S service sector contracted in February. According to prelim February figures, the Services PMI fell from 53.4 to a 76-month low 49.4.

Things were not much better for the manufacturing sector, with the PMI falling from 51.9 to 6-month low 50.8. As a result, the U.S Composite Output Index slumped to a 76-month low 49.6.

Friday’s numbers will have created some uncertainty over the U.S economic outlook that struggled in February. The ISM numbers will be key… Did the FED Chair get it that wrong?

On the monetary policy front, the FOMC meeting minutes from Wednesday had limited impact. FED Chair Powell’s testimony from last week was considered more current.

In the equity markets, the Dow fell by 1.38%, with the S&P500 and NASDAQ down by 1.25% and by 1.59% respectively.

Out of the UK

It was a busy week on the economic calendar.

In the early part of the week, employment and inflation figures provided direction.

In December, average wages plus bonuses rose by 2.9%, easing from 3.2% in November. While wage growth slowed, employment continued to rise at a solid clip in the final quarter. Employment rose by 180k in December, following on from a 208k rise in the 3-months to November.

A 5.5k rise in claimant counts in January suggests that the unemployment rate will hold steady at 3.8%.

On Wednesday, inflationary pressures picked up at the start of the year, with the annual rate of inflation accelerating to 1.8%.

While the stats were skewed to the positive in the 1st half of the week it was not enough to support the Pound, however.

In the 2nd half of the week, retail sales and private sector PMI numbers also impressed.

Core retail sales rose by 1.6% in January, with retail sales rising by 0.9%, the pickup coming in spite of rising consumer prices.

Wrapping things up on Friday, private sector PMI numbers delivered support to the Pound.

The Manufacturing PMI rose from 50.0 to 51.9, while the Services PMI fell from 53.9 to 53.3, leaving the Composite unchanged at 53.3.

Upbeat stats in the week further eased any expectation of a BoE rate cut near-term, leading the Pound back to $1.29 levels.

Outside of the numbers, Brexit chatter was also in focus as France looked to send a strong message of intent across the Channel.

Britain’s chief negotiator David Frost delivered Britain’s goals on Monday, while also stating that signing up to EU standards would defeat the purpose of Brexit. The comments came in response to warnings from the French government as the EU and Britain prepare to begin trade negotiations…

France’s warnings and Britain’s stance suggest a tough time ahead, which left the Pound in the red early in the week.

In the week, the Pound fell by 0.64% to $1.2964, with the FTSE100 ending the week down by 0.07%.

Out of the Eurozone

It was a quiet start to the week economic data front, with economic data limited to economic sentiment figures out of Germany and the Eurozone.

The numbers were skewed to the negative, with investor concerns over the effects of the coronavirus weighing.

The Eurozone’s Economic Sentiment Index fell from 25.6 to 10.4, with the German Sentiment Index falling from 26.7 to 8.7.

In the 2nd half of the week, however, the stats were skewed to the positive.

Consumer confidence seemed unaffected by the spread of the coronavirus. Germany’s GfK Consumer Climate Index fell by 9.9 to 9.8, with the Eurozone’s consumer confidence rising from -8.1 to -6.6.

At the end of the week, prelim private sector PMI numbers were also skewed to the positive.

Manufacturing sector activity picked up in February, with the Eurozone’s PMI hitting a 12-month high.

While the Eurozone’s Composite rose from 51.3 to 51.6, it wasn’t all smooth sailing, with new orders continuing to weigh.

Finalized inflation figures from member states and the ECB monetary policy meeting minutes had a muted impact on the EUR.

For the week, the EUR rose by 0.15% to $1.0847, with a 0.57% rally on Friday reversing losses from the week.

For the European major indexes, it was a bearish week. The DAX30 fell by 1.20% to lead the way, with the CAC40 and the EuroStoxx600 ending the week down by 0.65% and by 0.61% respectively.

Elsewhere

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

In the week, the Aussie Dollar fell by 1.30% to $0.6627, with the Kiwi Dollar down by 1.38% to $0.6349.

For the Aussie Dollar

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

Key stats included 4th quarter wage growth numbers on Wednesday and January employment figures on Friday.

It was a mixed set of numbers, however. Wage growth continued to grow at a tepid pace of 0.5%, with the unemployment rate rising from 5.1% to 5.3%.

There was a 46.2k jump in full-time employment to limit the negative sentiment towards the Aussie Dollar on the day.

On the monetary policy front, the RBA Meeting Minutes added further pressure on the Aussie Dollar on Tuesday.

The rate statement released on 4th February had shown little concern over the likely effects of the coronavirus on the economy.

The minutes, however, sent a different message, with members also considering a rate cut at the meeting. All of this was in spite of the RBA expecting economic activity to pick up in the 2nd half of the year.

With the RBA minutes on the dovish side, risk aversion in the week added pressure on the Aussie Dollar. While numbers out of China showed the spread of the coronavirus slowing, cases elsewhere caused alarm.

For the Kiwi Dollar

It was a particularly quiet start to the week on the economic colander, with no material stats to provide direction.

A likely extended period of soft demand for goods from New Zealand weighed on the Kiwi Dollar in the week.

China’s measures to continue to contain the spread of COVID-19 is expected to weigh on demand for overseas goods.

In the 2nd half of the week, 4th quarter wholesale inflation figures on Thursday did little to support the Kiwi. Input price inflation eased from 0.9% to 0.1% in the 4th quarter. Economists had forecast an easing to 0.4%.

For the Loonie

It was a busy week on the economic calendar. Key stats included January inflation figures on Wednesday and December retail sales figures on Friday.

The numbers were mixed in the week, with a pickup in the annual rate of core inflation providing support mid-week.

Retail sales figures did little to impress, however, with retail sales stalling in December.

While the stats did provide direction, crude oil supply disruption provided support.

The Loonie rose by 0.20% to end the week at C$1.3225 against the Greenback.

For the Japanese Yen

It was a busy week on the data front.

At the start of the week, 4th quarter GDP numbers and finalized industrial production figures caught the markets off-guard on Monday.

In the 4th quarter, the economy shrank by 1.6%. Compared with the 4th quarter of 2018, the economy slumped by 6.3%.

Economic woes were attributed to the sales tax hike, typhoons, and the U.S – China trade war.

Of concern for the BoJ will be the fact that the contraction came before COVID-19 began to spread…

On Wednesday, trade figures were not much better, with Japan’s trade deficit widening from ¥154.6bn to ¥1,312.6bn.

While exports fell by 2.6% year-on-year, the numbers were not as bad as had been anticipated. February figures will give the markets a better idea of what impact the coronavirus has had on the Japanese economy.

At the end of the week, it was weak stats once more, however.

Japan’s Manufacturing PMI fell from 48.8 to 47.6, with the Services Sector PMI falling from 51.0 to 46.7.

Market jitters over the spread of the coronavirus weighed heavily on the Yen. Rising cases in Japan and the region led to the markets seeking safety elsewhere.

Economic data out of Japan suggested that there is more trouble ahead for the Japanese economy. Uncertainty over the coronavirus spread across the region was also a key driver to the Yen’s demise.

The Japanese Yen fell by 1.67% to end the week at ¥111.61 against the U.S Dollar.

Out of China

Economic data was on the lighter side in the week, with key stats limited to new loans for January.

New loans surged by CNY3,340.0bn in January, following a CNY1,140.0bn rise in December.

Outside of the numbers, the PBoC cut loan prime rates on Thursday, though not by the extent that the markets had anticipated.

The PBoC cut 1-year loan prime rates from 4.15% to 4.05%, with the 5-year LPR cut from 4.8% to 4.75%.

While the more modest cuts weighed on the markets on Thursday, updates on the coronavirus provided support. The number of cases in China was in decline in the week, with the number of deaths also falling.

Earlier in the week, fiscal and monetary policy support had given the Yuan a boost before a pullback to CNY7 levels against the Dollar.

The CSI300 rallied by 4.06%, while the Hang Seng slid by 1.82% in the week.

In the week ending 21st February, the Yuan fell by 0.58% to CNY7.0271 against the Greenback.