The Dollar Takes a Hit as Economic Data Continues to Play 2nd Fiddle to the Coronavirus

Earlier in the Day:

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

For the Japanese Yen

Economic data included, February inflation figures and January’s job to applications ratio, industrial production, and retail sales figures.

According to consumer price figures released by the Ministry of Internal Affairs and Communication. The Ku-area of Tokyo saw the annual core rate of inflation ease from 0.7% to 0.5%, falling beyond a forecasted 0.6%.

  • Prices for Education slid by 6%, with prices for fuel, light and water charges falling by 2.8%.
  • There were solid increases in prices for clothes & footwear (+2.4%) and furniture and household utensils (+2.0%), however.
  • Prices for medical care (+1.3%), transportation and communication (+1.0%), culture and recreation (+0.9%) also provided support.
  • Prices for housing rose by just 0.5%, however.

With inflationary pressures easing in February, jobs available also eased, as the jobs/applications ratio fell from 1.57 to 1.49. The ratio last stood at sub-1.50 levels back in May 2017, when the ratio had also stood at 1.49.

The Japanese Yen moved from ¥109.638 to ¥109.616 upon release of the figures that preceded the industrial production and retail sales figures.

Retail Sales and Industrial Production

According to the Ministry of Economy, Trade, and Industry, retail sales fell by 0.4% in January, year-on-year, following a 2.6% slide in December. Economists had forecasted a 1.1% decline.

Industrial production increased by 0.8% in January, according to prelim figures, following a 1.2% rise in December. Economists had forecast a 0.2% rise.

According to the Ministry of Economy, Trade, and Industry,

Industries that mainly contributed to the increase were:

  • Motor vehicles, transport equipment (excl. motor vehicles), and other manufacturing.

Industries that mainly contributed to a decrease were

  • Production machinery, general-purpose and business orientated machinery, and electrical machinery, and information, and communication electronics equipment.

The Japanese Yen moved from ¥109.652 to ¥109.571 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.06% to ¥109.52 against the U.S Dollar.

For the Aussie Dollar

According to figures released by RBA, total credit increased by 0.3%, month-on-month, in January. In December, credit had risen by 0.2%.

  • Business credit jumped by 0.5%, following a 0.2% rise in December, supporting the marginal uptick.
  • Personal credit fell at a sharper pace, however. Following a 0.4% decline in December, personal credit fell by 0.6% in January.
  • Housing credit rose by 0.3%, following a 0.3% increase in December.

The Aussie Dollar moved from $0.65811 to $0.65832 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.20% to $0.6582.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.03% to $0.6309.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Key stats include German unemployment and French consumer spending figures.

Barring material deviation from 1st estimate numbers, 2nd estimate GDP figures out of France will likely have a muted impact on the EUR.

Later in the European session, prelim Italian and German inflation figures for February will also likely have a muted impact on the EUR.

Outside of the numbers expect news updates on the coronavirus to also provide direction. We’ve seen the Dollar take a hit as the coronavirus spreads across the U.S, leaving the U.S economy at risk of a slowdown.

At the time of writing, the EUR was down by 0.03% at $1.0998.

For the Pound

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

We can expect the Pound to be under pressure as the markets shift attention to negotiations that commence next week.

At the time of writing, the Pound was up by 0.04% to $1.2892.

Across the Pond

It’s a busy day ahead on the U.S economic calendar.

Key stats include Chicago PMI, personal spending, inflation and trade data. With the markets now beginning to expect monetary policy easing, today’s stats will have a material influence.

We expect finalized consumer sentiment figures for February to have a muted impact on the day.

Outside of the numbers, news updates on the coronavirus will also influence.

The Dollar Spot Index slid by 0.49% to 98.508 on Thursday.

For the Loonie

It’s a busy day ahead on the economic calendar, with key stats including GDP and RMPI numbers.

With the Bank of Canada in action next week, any soft numbers and expect the markets to price in a rate cut.

The BoC had previously talked of a willingness to make a move should economic indicators support a cut. With the coronavirus spreading globally and weighing on global trade and consumption, expect the numbers to do the talking.

The Loonie was down by 0.02% at C$1.3393 against the U.S Dollar, at the time of writing.

The Mid-Week Wrap – Asian Markets and Stocks

The last week of the month usually is pretty quiet. Is it also the case this week?

For the U.S Dollar

It was a quiet start to the week on the economic data front. The markets needed until Tuesday for consumer confidence figures that failed to impress.

We saw the Dollar under pressure at the start of the week, with last week’s PMI numbers raising the chances of a FED rate hike in the 1st half of the year.

The shift in sentiment saw demand for the Dollar ease early in the week. Following FED Chair Powell’s testimony, the markets had anticipated a resilient U.S economy. Recent economic indicators suggested otherwise, with the U.S private sector contracting in February.

Throw in the rising number of cases of the coronavirus and the CDC’s outlook and the U.S economy also faces headwinds.

Through the remainder of the week, inflation and personal spending figures on Friday will garner plenty of attention. Personal spending figures will be of particular interest as it will indicate any consumer concerns over the virus.

Ahead of the numbers, 2nd estimate GDP numbers for the 4th quarter are due out along with durable goods orders on Thursday.

Expect the durable goods orders to have a greater impact, as the markets look for coronavirus impact on demand.

For the EUR

It was also a relatively quiet start to the week. Germany’s business confidence 2nd estimate GDP numbers were in focus.

While 2nd estimate GDP figures were in line with 1st estimate, there was an improvement in business sentiment.

February’s IFO survey came ahead of the spread of the coronavirus through Europe, however, limiting any upside for the EUR.

Over the remainder of the week, the focus will shift to consumer spending and 4th quarter GDP numbers out of France. There are also unemployment numbers out of Germany to also consider.

For now, we’ve seen the EUR find support as the sentiment shifts towards the U.S economy. Ultimately, however, the Eurozone economy remains more at risk to a marked slowdown that that of the U.S, which suggests the upside to be limited.

A more material spread of the virus across the U.S, however, would alter that outlook.

For the Pound

It’s a particularly quiet week on the economic data front and there have been no material stats to provide support.

We saw the Pound bounce back to $1.30 levels on Tuesday following the EU member states desire to form an ambitious trade agreement with Britain.

That comes with strings attached, however, which Britain is unwilling to agree to.

On Thursday, the British government is due to announce its starting terms, which will give an idea of just how far apart the 2-sides are.

Expect reaction to influence the Pound over the remainder of the week.

Stocks go down due to the virus in an environment of no macroeconomic data releases. In the meantime, how have the commodity currencies reacted to the recent developments in the markets?

We saw the commodity currencies fair better in the early part of the week, in spite of the risk aversion.

This was largely due to the shift in sentiment towards the U.S economy and monetary policy

That being said, it’s still been a bearish week for the commodity currencies.

For the Aussie Dollar, new CAPEX figures for the 4th quarter failed to impress this morning.

With business investment on the slide, any slide in consumer spending would add further pressure on the RBA to make a move.

In the last meeting, the RBA had raised some concerns over the likely impact of the coronavirus on the global economy. Since then, we can expect that concern to have spiked as the virus reaches new countries.

It certainly looks set for a particularly dovish RBA next week, which should limit any upside for the Aussie Dollar.

Things are not much better for the Kiwi Dollar.

Retail sales rose by just 0.7% in the 4th quarter, following a 1.7% rise in the 3rd, with the numbers coming ahead of key stats on Thursday.

While January trade data delivered support, with exports to China on the rise once more in January, it was business confidence that weighed.

The trade figures failed to capture the effects of the extended Chinese New Year and quarantines across the country. February’s figures are expected to be quite dire, however, if business confidence numbers are anything to go by.

That leaves the Kiwi under immense pressure, with economic disruption expected to continue beyond the 1st quarter.

A slight decline in all of the commodity currency charts. Meanwhile, how have the major Asian countries fared during this period? I assume they have been hit the most by the coronavirus.

For the Japanese Yen

We saw the Japanese Yen find renewed interest this week, at the expense of the Greenback. With risk aversion continuing to plague the markets, the rise in the number of cases in the U.S and weak data provided the upside.

The markets had previously moved away from the Yen over concerns that the region would be harder hit by the virus.

This is likely to be the case, however, which should limit any return to ¥107 – 108 levels against the Greenback.

On the economic data front, retail sales and industrial production figures due out on Friday will unlikely reflect the effects of the virus.

Dire numbers, however, would suggest that the BoJ will need to make a move of some sort…

For the rest of the Asian Majors

Unsurprisingly, the rest of the Asian majors have struggled in the week.

We’ve seen the Taiwanese Dollar, Singapore Dollar, Korean Won, and Chinese Yuan struggle as disruption to trade is expected to hurt the respective economies.

Monetary and fiscal policy support has been delivered by a number of central banks in the region.

Uncertainty over the time frame involved, however, and how bad it could get continues to pressure the majors. This will likely continue near-term or at least until the pace of the global spread abates.

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.

Risk Aversion Likely to Linger, with Economic Data on the Lighter Side Today

Earlier in the Day:

It was another quiet day on the Asian economic calendar this morning. The Aussie Dollar was in action, with housing sector data in focus.

For the Aussie Dollar

Construction work done slid by 3% in the 4th quarter, following a 0.4% fall in the 3rd quarter. Economists had forecast a decline of 1%.

According to the ABS,

  • Total building work done fell by 4.1%, while total engineering work down fell by 1.5%

The Aussie Dollar moved from $0.65979 to $0.65989 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.17% to $0.6593.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.01% to ¥110.21 against the U.S Dollar, with the Kiwi Dollar down by 0.14% to $0.6312.

Outside of the numbers, the markets reacted to the overnight slide in the U.S majors and news updates on the spread of the coronavirus.

The risk aversion weighed on the Aussie Dollar and Kiwi Dollar and the Asian equity markets, with the Nikkei down by 1.96% at the time of writing. The ASX200 led the way down, however, tumbling by 2.12%.

The Day Ahead:

For the EUR

It’s another quiet day ahead on the economic calendar. Key stats include French jobseeker figures. Barring a marked increase, the numbers are unlikely to have a material impact on the EUR, however.

Outside of the numbers, risk sentiment will continue to pressure the EUR. Economic disruption stemming from the spread of the coronavirus is expected to materially affect the Eurozone economy.

ECB President Lagarde, due to speak later today, could raise the prospects of further support. She may, however, also call on member states to deliver fiscal policy support. Such calls from the ECB have fallen on deaf ears until now.

At the time of writing, the EUR was down by 0.09% at $1.0872.

For the Pound

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

We saw the Pound find strong support on Tuesday as EU ministers talked of a substantial, ambitious and wide-ranging partnership with the UK.

With talks scheduled to commence next week, the British government is due to release its terms of negotiations tomorrow. The markets will get an idea of just how far apart the two sides are…

At the time of writing, the Pound was down by 0.02% to $1.3003.

Across the Pond

It’s a relatively quiet day ahead on the U.S economic calendar. January’s new home sales figures are due out later today.

With a lack of stats for the markets to consider, expect some Dollar sensitivity to today’s numbers. Mortgage rates and labor market conditions are all supportive of the housing sector. Any weakness in sales may test risk sentiment.

Ultimately, however, the Dollar will be wedged between sentiment towards monetary policy and safe-haven demand.

Last week’s private sector PMIs and the continued spread of the coronavirus has raised the probability of the FED cutting rates.

At the time of writing, the Dollar Spot Index was up by 0.07% to 99.035.

For the Loonie

It’s a quiet day ahead on the economic calendar, with no material stats due out of Canada to provide direction.

The lack of stats will continue to leave the Loonie in the hands of market risk appetite and crude oil prices.

A steadying of crude oil prices early in the day eased pressure on the Loonie.

The Loonie was down by 0.02% at C$1.3281 against the U.S Dollar, at the time of writing.

GDP Numbers and U.S Consumer Confidence Put the EUR and USD in Focus

Earlier in the Day:

It was a quiet day on the Asian economic calendar this morning, with no material stats to provide direction on the day.

The lack of stats left the markets to lick its wounds following Monday’s risk aversion.

For the Majors

At the time of writing, the Japanese Yen was down by 0.07% to ¥110.8 against the U.S Dollar. The Aussie Dollar was up by 0.18% to $0.6617, with the Kiwi Dollar was up by 0.13% to $0.6348.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats include Germany’s 2nd estimate GDP numbers for the 4th quarter.

Barring deviation from 1st estimates, however, the numbers are unlikely to have too much of an impact on the EUR.

Following Monday’s sell-off, support through the early part of the day will likely continue through to the U.S session.

Any slide in U.S consumer confidence and risk aversion could return later in the day, however, which would be EUR negative.

At the time of writing, the EUR was up by 0.11% at $1.0866.

For the Pound

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

Risk sentiment will be the key driver on the day, with Brexit chatter also in focus. EU member states are due to deliver the finalized terms for trade negotiations.

Unrealistic demands would be Pound negative.

At the time of writing, the Pound was up by 0.11% to $1.2938.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. December house price and February consumer confidence figures are due out later today.

Expect consumer confidence figures to be the key driver. Following some disappointing private sector PMI numbers last week, weak consumer confidence figures would be another red flag.

Fears of a U.S recession had disappeared at the turn of the year. That could change should we see consumer confidence slump.

At the time of writing, the Dollar Spot Index was down by 0.15% to 99.214.

For the Loonie

It’s a quiet day ahead on the economic calendar, with no material stats due out of Canada to provide direction.

The lack of stats will leave the Loonie in the hands of market risk appetite and crude oil prices.

A steadying of crude oil prices early in the day eased pressure on the Loonie this morning.

The Loonie was up by 0.07% at C$1.3284 against the U.S Dollar, at the time of writing.

Coronavirus Updates Drive Demand for the Dollar as Riskier Assets Slide

Earlier in the Day:

It was a relatively quiet day on the Asian economic calendar this morning. The Kiwi Dollar was in action, with 4th quarter retail sales figures in focus.

Outside of the numbers, risk aversion plagued the markets once more as news updates on the spread of the coronavirus hit the wires.

For the Kiwi Dollar

Retail sales rose by 0.7% in the 4th quarter, following a 1.7% increase in the 3rd quarter.

According to NZ Stats,

  • Electronics, including appliances mobile phones, and computers had the largest sales volume increase for a 3rd consecutive quarter. Sales volume rose by 4.3% following a 4.4% increase in the 3rd
  • 9 of 15 retail industries saw higher sales volumes in the 4th
  • Department stores had the largest fall in sales volume, with volume down by 3.8%. In the 3rd quarter, volumes had increased by 3.8%.

At the time of writing, the Kiwi Dollar was down by 0.46% to $0.6320.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.04% to ¥111.57 against the U.S Dollar, with the Aussie Dollar down by 0.32% to $0.6606.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Key stats include Germany’s IFO Business Climate Index figures for February.

Following better than expected consumer confidence figures last week, any improvement would provide the EUR with much-needed support.

The stats will need to be impressive, however, to offset the early slide stemming from news updates on the coronavirus.

At the time of writing, the EUR was down by 0.23% at $1.0822.

For the Pound

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

The lack of stats will leave chatter on Brexit and market risk appetite to influence.

Strong demand for the Dollar weighed early in the day as the spread of the coronavirus in South Korea continued to hit risk appetite.

At the time of writing, the Pound was down by 0.21% to $1.2937.

Across the Pond

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

Following Friday’s pullback that came in response to the PMI numbers, the Dollar was on the move early this morning.

Risk aversion continued to drive demand for the Dollar, as Korea announced that its disease alert level was hoisted to its highest level.

At the time of writing, the Dollar Spot Index was up by 0.29% to 99.5470.

For the Loonie

It’s a relatively quiet day ahead on the economic calendar, with December wholesale sales figures due out of Canada.

While the stats will garner some interest, we don’t expect any long-lasting influence on the Loonie.

News of a further spread of the coronavirus through the weekend weighed on crude oil prices at the start of the week. Demand is expected to take a bigger hit than had been initially anticipated, which led to the early pullback, leading to the early slide in the Loonie.

The Loonie was down by 0.30% at C$1.3265 against the U.S Dollar, at the time of writing.

Private Sector PMIs and the Coronavirus in Focus as Risk Aversion Hits

Earlier in the Day:

It was a relatively busy day on the Asian economic calendar this morning. The Japanese Yen was in action, with January inflation figures and prelim February private sector PMIs in focus.

Outside of the numbers, risk aversion plagued as the markets responded to news updates on the spread of the coronavirus.

For the Japanese Yen

The annual rate of core inflation picked up from 0.7% to 0.8% in January, while the annual rate of inflation eased from 0.8% to 0.7%. The numbers were in line with forecasts. Consumer prices stalled in January, following a 0.1% rise in December.

The Japanese Yen moved from ¥112.048 to ¥112.030 upon release of the figures that preceded the PMIs.

In February, the Manufacturing PMI fell from 48.8 to 47.6, with the Services PMI falling from 51.0 to 47.6, according to prelim numbers.

The Japanese Yen moved from ¥112.118 to ¥112.0132 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.13% to ¥111.95 against the U.S Dollar.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.41% to $0.6307, with the Aussie Dollar down by 0.29% to $0.6596.

The Day Ahead: 

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include France, Germany and the Eurozone’s prelim private sector PMIs for February.

Finalized January inflation figures from Italy and the Eurozone are also due out but will likely have a muted impact on the EUR.

Forecasts are EUR negative and we can expect plenty of sensitivity to the numbers. The PMIs will give the markets an indication of just how bad things are likely to get on the economic front.

From the U.S, private sectors PMIs are also due out and will also influence risk sentiment later in the day.

At the time of writing, the EUR was up by 0.07% at $1.0793.

For the Pound

It’s another relatively busy day ahead on the economic calendar. Key stats include prelim private sector PMI numbers for February.

We saw January’s private sector activity give the BoE reason to pause in the last MPC meeting. Expect any dire numbers to raise expectations of BoE support near-term. The market focus will be on the services PMI…

Outside of the numbers, there is always Brexit chatter to also impact.

At the time of writing, the Pound was up by 0.09% to $1.2893.

Across the Pond

It’s a relatively busy day ahead on the U.S economic calendar. Key stats include February’s prelim private sector PMIs and January existing home sales figures.

Expect the PMI numbers to have the greatest impact on the Dollar and risk appetite.

While the focus will be on service sector PMI numbers, the manufacturing PMI will need to hold its ground.

The markets are expecting a resilient U.S economy amidst the spread of the coronavirus.

At the time of writing, the Dollar Spot Index was down by 0.06% to 99.6803.

For the Loonie

It’s a relatively busy day ahead on the economic calendar, with December retail figures due out of Canada.

With the BoC sitting on the fence digesting economic data, expect the Loonie to be particularly responsive to the numbers.

Any slide in spending and we can expect the BoC to begin leaning towards providing further support.

The Loonie was up by 0.07% at C$1.3250 against the U.S Dollar, at the time of writing.

Economic Data Puts the EUR, the GBP and the U.S Dollar in the Spotlight

Earlier in the Day:

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

Later today the PBoC will also be the spotlight.

For the Kiwi Dollar

4th quarter wholesale inflation figures were in focus at the start of the day. The producer price input price index rose by 0.1% in the 4th quarter. Economists had forecast a 0.4% rise. In the 3rd quarter, the index had risen by 0.9%.

According to NZ Stats,

  • Farm expenses (excl. livestock) stalled in the 4th quarter, following a 0.8% rise in the 3rd
  • Inputs were up by just 0.3% from the 4th quarter of 2018, softening from 2.1% in the 3rd

The Kiwi Dollar moved from $0.63871 to $0.63851 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.42% to $0.6359.

For the Aussie Dollar

Employment rose by 13.5k in January, following a 28.9K rise in December. Economists had forecast a 10k rise.

According to the ABS,

  • The total number of people in full-time employment increased by 46,200, while people in part-time employment slid by 32.700.
  • Since January 2019, full-time employment increased by 143,800 people, while part-time employment increased by 103,500 people.
  • The employment to population ratio held steady at 62.6% in December 2019 and was up by 0.2 pts since January 2019.
  • The unemployment rate crept up from 5.1% to 5.3%, however, as the participation rate rose by 1 point to 66.1%.

The Aussie Dollar moved from $0.66911 to $0.66797 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.46% to $0.6644.

On the Monetary Policy front

The PBoC is scheduled to deliver its loan prime rates for February. Expectations are for the PBoC to cut 1-year loan prime rates from 4.15% to 3.95% and to cut 5-year loan prime rates cut from 4.80% to 4.65%.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.07% to ¥111.29 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 German consumer confidence and Eurozone consumer confidence figures.

Wholesale inflation figures out of Germany and finalized inflation figures for January are due out France.

Barring particularly dire inflation numbers, we expect German and Eurozone consumer confidence figures to be the key drivers.

Concerns over the spread of COVID-19 and impact on the global economy will likely weigh on the confidence figures. With the manufacturing sector in the doldrums, consumer spending will be all the more important through the 1st quarter to support growth.

Outside of the numbers, monetary policy divergence will continue to go against the EUR near-term, following the FOMC meeting minutes overnight.

As the markets respond further to the FOMC meeting minutes, the ECB monetary policy meeting minutes, due out later today, will also garner interest.

At the time of writing, the EUR was down by 0.06% at $1.0799.

For the Pound

It’s another relatively busy day ahead on the economic calendar. Key stats include January retail sales figures due out later this morning.

Expect today’s figures to have a material impact on the Pound and sentiment towards BoE monetary policy.

While numbers will provide direction, there’s always Brexit chatter to offset the effects of any positive numbers.

Trade negotiations between Britain and the EU are due to start in March and the EU is already talking tough…

At the time of writing, the Pound was down by 0.04% to $1.2915.

Across the Pond

It’s a relatively busy day ahead on the U.S economic calendar. Key stats include the weekly jobless claims and the Philly FED Manufacturing Index figures for February.

Barring a jump in initial jobless claims beyond 220k, the focus will be on the Philly FED figures. Forecasts are Dollar negative.

At the time of writing, the Dollar Spot Index was down by 0.07% to 99.635.

For the Loonie

It’s a relatively quiet day ahead on the economic calendar, with January new housing price index figures due out of Canada.

We would expect the numbers to have a muted impact on the Loonie, however. The focus will remain on updates from China and risk appetite on the day.

The Loonie was down by 0.04% at C$1.3226 against the U.S Dollar, at the time of writing.

The Mid-Week Wrap and Look Ahead – 20th January 2020

The middle of February has been reached. How have the major currencies been doing in regards to data during the last half week?

For the U.S Dollar

It’s been a quiet start to the week for the U.S Dollar, with the U.S holiday on Monday.

In spite of the quiet start, economic data impressed on Tuesday, with the NY Empire State Manufacturing Index on the rise in February.

The figures supported FED Chair Powell’s outlook towards the U.S economy, which he expected to remain resilient.

A pickup in manufacturing sector activity as other economies see manufacturing woes was certainly impressive.

Coupled with risk aversion on Tuesday, stemming from the prospect of COVID-19 having a greater impact on the global economy, the Dollar rallied by 0.44% on Tuesday to reverse losses from the start of the week.

Over the remainder of the week, there’s still plenty to consider.

On Wednesday, the FOMC meeting minutes are due out after housing sector figures due out earlier in the day.

The focus will then shift to Philly FED Manufacturing Index figures on Thursday and private sector PMIs on Friday.

Expect February’s prelim Service PMI to have the greatest impact.

For the EUR

It’s also been a relatively quiet start to the week on the economic calendar.

ZEW Economic Sentiment figures out of Germany and the Eurozone weighed on the EUR on Tuesday.

Concerns over the impact of COVID-19 on global trade had a greater impact on sentiment than had been anticipated.

A combination of disappointing data and risk aversion on Tuesday saw the EUR pullback to $1.07 levels.

Apple’s earnings warning on Monday delivered the markets with a reality check early in the week.

The Eurozone economy is certainly more reliant upon global trade. With the Eurozone economy stuttering in the 4th quarter, it’s not looking good for H1 2020, even with fiscal and monetary policy support.

Over the remainder of the week, German and Eurozone consumer confidence figures will influence ahead of private sector PMIs on Friday.

On the monetary policy front, the ECB monetary policy meeting minutes shouldn’t provide too many surprises…

For the Pound

January claimant count figures and another sizeable jump in employment provided support on Tuesday. The better than expected numbers left the unemployment rate at 3.8% in December.

While wage growth was on the rise, wages + bonuses eased in December, limiting any major upside for the Pound.

Ultimately, negative chatter from France and Britain’s chief trade negotiator David Frost weighed on the Pound early in the week.

France talked of tough talks ahead.  Frost made it clear that Britain was not interested in having strings attached.

Through the remainder of the week, inflation figures are due on Wednesday, with retail sales figures due out on Thursday.

Positive numbers would leave monetary policy out of the equation near-term, allowing the markets to focus on Brexit…

It appears that, with the exception of the GBP, most currencies had no macroeconomic data impacting them. In the meantime, how have commodity currencies behaved?

It’s been a choppy week for the commodity currencies, with the Aussie Dollar and Kiwi Dollar under pressure.

While there were no material stats due out of Australia or NZ to provide direction, sentiment towards the economic outlook weighed on Tuesday.

For the Aussie Dollar

The RBA meeting minutes from 4th February added further pressure on the Aussie Dollar on Tuesday. While the RBA statement had been somewhat calm over the likely impact of COVID-19, the minutes suggested otherwise.

There was also a discussion on cutting rates further, which added further pressure on the Aussie Dollar.

Through the remainder of the week, 4th quarter wage growth figures on Wednesday and employment figures on Thursday will provide direction.

For the Kiwi Dollar

There were no stats to provide direction through the 1st half of the week. That didn’t stop the Kiwi from sliding, however. Economic disruption in China that extends beyond the 1st quarter will have a material impact on the NZ economy.

At the end of last year, China accounted for 28% of NZ exports. That’s quite a substantial number…

Through the remainder of the week, 4th quarter wholesale inflation figures will provide direction on Thursday.

Ultimately, however, it will be sentiment towards the global economic outlook that will ultimately drive the pair. Any pick in the rate of infections in China and beyond would be negative.

It appears that the commonwealth currencies have traded flat. What about the dominant currencies in Asia, the Yen, and the Yuan?

For the Japanese Yen

4th quarter GDP numbers on Monday sounded the alarm bells. A 1.6% contraction in the 4th quarter came ahead of what is likely to be an even tougher 1st quarter.

While typhoons, a sales tax, and the U.S – China trade war weighed, its COVID-19 that will hurt quite possibly into Q2.

On Wednesday, trade data came in better than expected though the trade deficit saw a marked widening in January.

Exports fell by 6.4% to China, by 7.7% to the U.S and by 5.4% to Germany.

While the stats were skewed to the negative, the Yen continued to find support as risk aversion gripped the markets early in the week.

Expect more of the same through the remainder of the week. The BoJ must be under some pressure to make a move, however…

For the Chinese Yuan

There were no material stats to provide direction, leaving the Yuan in the hands of risk appetite.

Mixed sentiment towards China’s economic outlook and COVID-19 updates provided direction.

The government announced tax and fee cuts, with the PBoC allowing banks to let NPLs rise to support the economy.

In spite of the support, the Yuan was on the back foot in response to Apple’s earnings warning…

Disruption to the Chinese economy and the region may well be greater than currently anticipated.

Expect the PBoC and Beijing to continue to look to deliver support. This may be positive near-term, but a weakening in the Yuan will also be needed.

On Thursday, the PBoC is in action, with the markets expecting loan prime rates to be cut further.

Economic Data Puts the GBP, USD and Loonie in the Spotlight, with the FOMC Minutes also in Focus

Earlier in the Day:

It was a busier day on the Asian economic calendar this morning. The Japanese Yen and Aussie Dollar were in action through the early part of the day.

Out of Japan, January trade figures were in focus ahead of 4th quarter wage growth numbers out of Australia.

For the Japanese Yen

Japan’s trade deficit widened from ¥154.6bn to ¥1,312.6bn in January. Economists had forecast a widening to ¥1,684.9bn.

According to figures released by the  Ministry of Finance,

  • Exports fell by 2.6%, following a 6.3% slide in December. Economists had forecast a 6.9% fall.
    • Exports to China fell by 6.4% and by 12.1% to Korea.
    • There were also notable declines in exports to the U.S (-7.7%) and to Germany (-5.4%).
    • Exports to the UK surged by 20.3% to make the Western European numbers more palatable.
  • Imports fell by 3.6% in January, following a 4.9% slide in December. Economists had forecast a 1.3% decline.
    • Imports from China and HK fell by 5.7% and by 42.4% respectively.
    • From the U.S, imports fell by 11.5% and by 9.1% from Germany.

The Japanese Yen moved from ¥109.894 to ¥109.943 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.04% to ¥109.91 against the U.S Dollar

For the Aussie Dollar

Wages grew by 0.5% in the 4th quarter, following a 0.5% increase in the 3rd quarter. In the 2nd quarter, wage growth had risen by 0.6%. Economists had forecast a 0.5% rise.

According to the ABS,

  • In the quarter, private sector wages grew by 0.5%, while public sector wages increased by 0.4%.
  • Annually, both private and public sector wages rose by 2.2%. This was the lowest public sector growth rate since records began back in the 4th quarter of 1997.

The Aussie Dollar moved from $0.66911 to $0.66916 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.07% to $0.6691.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.19% to $0.6398.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

A lack of stats will likely leave the EUR under pressure ahead of German consumer confidence figures and private sector PMI numbers due out later in the week.

Barring fiscal support from the likes of the German and French governments, the onus will remain on the ECB to provide support. ECB President Lagarde may be a little unwilling, particularly with a number of finance ministers up in arms over ECB monetary policy.

At the time of writing, the EUR was up by 0.06% at $1.0799.

For the Pound

It’s a relatively busy day ahead on the economic calendar. Key stats include January inflation figures due out later this morning.

Barring a marked pickup in inflationary pressures, the stats will likely have less of an impact ahead of tomorrow’s retail sales figures.

Outside of the numbers, sentiment towards trade negotiations will likely limit any material breakout from current levels.

At the time of writing, the Pound was up by 0.02% to $1.3001.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. Key stats include wholesale inflation and housing sector numbers for January.

While wholesale inflation figures will have the greatest impact, expect housing sector numbers to also provide direction.

Building permits and housing start numbers due out later today should continue to paint a positive outlook for the sector.

Labor market conditions and low mortgage rates continue to provide support.

On the monetary policy front, the FOMC monetary policy meeting minutes are due out later in the day.

While FED Chair Powell talked of a resilient U.S economy, it remains to be seen whether other Committee members share a similar view.

Ultimately, however, economic indicators from the U.S have supported Powell’s and the FED’s outlook on growth until now.

At the time of writing, the Dollar Spot Index was down by 0.02% to  99.420.

For the Loonie

It’s a relatively busy day ahead on the economic calendar, with January inflation figures due out of Canada.

Expect plenty of sensitivity to today’s numbers, though expect market risk sentiment and impact on crude oil prices to also influence.

The Loonie was up by 0.05% at C$1.3253 against the U.S Dollar, at the time of writing.

The RBA Pins Back the Aussie as Focus Shifts to German Business Sentiment and the EUR

Earlier in the Day:

It was a relatively quiet day on the Asian economic calendar this morning. There were no material stats through the Asian session to provide the markets with direction.

While there were no stats, the RBA meeting minutes from the 4th February meeting garnered some attention in the early part of the day.

Updates from China and the rest of the world on COVID-19 cases and the number of deaths also influenced early on.

According to the latest numbers, the total number of deaths in China rose to 1,868, up by 98. Across China, the number of cases had increased from 70,548 to 72.436 on Monday.

While the numbers continued to show a slower pace of infection, companies were busy delivering warnings, with Apple announcing that it would not meet its quarterly earnings forecast due to the virus outbreak.

Risk aversion early on in the day drove demand for the safe havens…

For the Aussie Dollar

The RBA meeting minutes once more weighed on the Aussie Dollar, with the minutes revealing a willingness to ease policy further.

According to the 4th of February minutes,

  • The Board reviewed the case for a further cast rate reduction and took into account current interest rate levels and long and variable lags in the transmission of monetary policy.
  • It was also noted that incremental benefits of further rate cuts needed to be weighed against the risks associated with very low-interest rates.
  • In considering the policy decision:
    • The outlook for the global economy remained reasonable, with signs that the slowdown in global growth was coming to an end.
    • Progress in addressing the U.S – China trade and tech disputes reduced downside risk to the economy.
    • The Covid-19 outbreak, however, was a source of uncertainty.
    • For the Australian economy, the outlook was for growth to improve, while the effects of the bushfires were temporarily weighing on domestic growth.
    • Household spending remained weak. While house prices have been recovering, it was too soon to see household spending figures respond.

The Aussie Dollar moved from $0.67067 to $0.66954 upon release of the minutes. At the time of writing, the Aussie Dollar was down by 0.36% to $0.6690.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.15% to ¥109.72 against the U.S Dollar, while the Kiwi Dollar was down by 0.34% to $0.6414.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. ZEW economic sentiment figures out of the Eurozone and Germany for February.

Forecasts are EUR negative, with the expected impact of COVID-19 likely to affect business sentiment.

Hopes of fiscal support, however, should ease any material impact on the EUR, however.

Through the early part of the day, risk aversion pinned the EUR pack as the markets responded to profit warnings hitting the news wires.

At the time of writing, the EUR was down by 0.06% at $1.0829.

For the Pound

It’s a particularly busy day ahead on the economic calendar. Key stats include December wage growth and unemployment figures, together with January’s claimant count figures.

Last month’s figures had given the Pound support, with better than expected numbers. More of the same is going to be needed to prevent a slide.

At the time of writing, the Pound was down by 0.08% to $1.2998.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Key stats are limited to NY Empire State Manufacturing Index numbers for February.

Expect market sensitivity to the numbers, with any weaker than forecasted figures likely to test the Dollar.

The talk has been of a resilient U.S economy. Weak numbers could question that outlook…

At the time of writing, the Dollar Spot Index was up by 0.21% to  99.206.

For the Loonie

It’s a relatively quiet day ahead on the economic calendar, with December manufacturing sales figures due out of Canada.

While we can expect the numbers to influence later today, expect market risk sentiment and any further fiscal support chatter to be the key driver.

The Loonie was down by 0.10% at C$1.3248 against the U.S Dollar, at the time of writing.

The Japanese Economy Takes a Beating as Focus Shifts Brexit and the Pound

Earlier in the Day:

It was a relatively quiet day on the Asian economic calendar this morning. Economic data was limited to 4th quarter GDP numbers out of Japan.

Updates from China and the rest of the world on COVID-19 cases and the number of deaths also influenced early in the day.

According to the latest numbers, the total number of deaths in China rose to 1,770, up by 105 from Saturday. Across China, there were 2,048 new confirmed infections, taking the total to 70,548.

Later today, finalized industrial production figures out of Japan will likely have a muted impact on the Yen.

For the Japanese Yen

The Japanese economy shrunk by 1.6% in the 4th quarter, compared with the 3rd quarter, following 0.4% growth in the 3rd. Economists had forecast a 0.9% contraction.

Year-on-year, the economy contracted by 6.3%, which was far worse than a forecasted 3.7% contraction. In the 3rd quarter, the economy had grown by 1.8%.

The worst economic numbers since a 7.1% slump in the 2nd quarter of 2014 came as Japan got hit by typhoons, the U.S – China trade war and the sales tax hike.

The Japanese Yen moved from ¥109.821 to ¥109.759 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.05% to ¥109.83 against the U.S Dollar.

Elsewhere

The Aussie Dollar was up by 0.18% to $0.6726, with the Kiwi Dollar was up by 0.02% to $0.6439.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar.

There are no material stats due out of the Eurozone to provide the EUR with direction.

Through the early part of the day, the EUR found some relief as COVID-19 numbers out of China showed the pace of infection slow.

We can expect the EUR to remain under pressure, however, as concerns over the economic outlook linger.

At the time of writing, the EUR was up by 0.06% at $1.0837.

For the Pound

It’s a particularly quiet day ahead on the economic calendar, with no material stats due out of the UK to provide direction.

Following last week’s rebound to $1.30 levels coming off the back of hopes that the government will loosen the purse strings, the focus will likely return to trade.

Spending is just one piece of the jigsaw for the Pound, with a free trade agreement between the UK and the EU a must as far as the markets are concerned.

Expect any chatter from the EU to influence, with the French continuing to send hostile messages across La Manche.

Later today, Britain’s chief negotiator, David Frost is scheduled to speak and will likely look to change the tone following the threats from France.

At the time of writing, the Pound was down by 0.02% to $1.3045.

Across the Pond

There are no material stats due out of the U.S, with the U.S markets closed today.

While there are no stats, any chatter from the Hill could catch the markets off-guard…

At the time of writing, the Dollar Spot Index was flat at 99.122.

For the Loonie

It’s a quiet start to the week on the economic calendar, with Canada also on holiday today.

A lack of stats and lighter volumes will leave the Loonie in the hands of market risk sentiment.

COVID-19 numbers out of China this morning provided early support.

The Loonie was up by 0.07% at C$1.3243 against the U.S Dollar, at the time of writing.

Japan’s Economy is Feeling the Chills from Coronavirus

As the coronavirus continues to preoccupy the financial markets, the ramifications of the outbreak are being felt worldwide. Those countries with extensive commercial links with China are facing the growing possibility that the virus will cause extensive damage to their economies. Pacific countries such as Australia and Japan are scrambling to deal with the outbreak, with no indications that Chinese authorities will be able to contain the virus anytime soon.

Japan’s economy has been lukewarm, and the coronavirus is putting a severe strain on some key sectors of the economy. The Japanese tourist industry relies heavily on Chinese tourists, which make up some 30 percent of all visitors to Japan. As a result of the virus, China has banned overseas group tours and Japan has barred entry to tourists from the two provinces most affected by the outbreak, Zhenjiang and Hubei.

These severe travel restrictions could not have occurred at a worse time, as the period of the Chinese Lunar New Year (between February and March) is a peak travel time. The loss of over a million Chinese tourists has taken a toll on Japan’s services sector, with restaurants, retail stores and other establishments reporting a sharp drop in business. The dramatic scenes of the Princess Diamond, a cruise ship which has been detained in Yokohama since many passengers have the virus, are likely to deter many potential tourists from visiting Japan. Analysts estimate that the economic toll on the tourist industry will reach $1.8 billion.

Coronavirus has also disrupted supply chains for major Japanese companies, particularly in the auto industry. Toyota, Honda and Mazda have all been forced to close down their Chinese plants due to the outbreak, with workers barred from reporting to work. The outbreak is expected to significantly lower China’s GDP in 2020 and this will have a chilling effect on Japan’s critical export sector.

The grim news coming out of China is also putting pressure on the Japanese yen. USD/JPY has dipped 1.3% in February and the yen is likely to weaken as the extent of the outbreak’s toll on Japan’s economy becomes clearer.

German GDP and U.S Retail Sales are in Focus as COVID-19 Numbers Continue to Spook

Earlier in the Day:

It was a relatively quiet day on the Asian economic calendar this morning, with economic data limited to Business PMI numbers out of New Zealand.

Updates from China and the rest of the world on COVID-19 cases and the number of deaths also influenced early in the day. Numbers were on the rise as health authorities in the UK scrambled to avert a spread…

For the Kiwi Dollar

The Business PMI increased from 49.3 to 49.6 in January, falling short of a forecast of 51.0.

The Kiwi Dollar moved from $0.64398 to $0.64373 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.02% to $0.6436.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.02% to ¥109.90 against the U.S Dollar, with the Aussie Dollar was up by 0.07% to $0.6724.

The latest updates from China on the number of COVID-19 cases and related deaths tested the majors early on.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Economic data includes 1st estimate GDP numbers out of Germany and 2nd estimate GDP numbers for the Eurozone.

Finalized January inflation figures are also due out of Spain along with December trade data for the Eurozone.

Barring a downward revision to Eurozone GDP numbers, the focus will be on Germany’s GDP figures.

In spite of some quite disappointing numbers out of Germany of late, economists are expecting Germany to avoid a contraction.

With the spread of COVID-19 and slash in China’s growth forecasts for the 1st quarter, however, any contraction in the 4th quarter will weigh heavily.

Outside of the numbers, market risk sentiment will also influence as the global financial markets digest the latest updates from China.

At the time of writing, the EUR was down by 0.06 at $1.0835.

For the Pound

It’s yet another particularly quiet day ahead on the economic calendar, with no material stats due out of the UK to provide direction.

We saw the Pound find support on Thursday following Chancellor of the Exchequer Sajid Javid’s resignation. Expectations are for the Government to loosen the purse strings in next month’s budget. The latest cabinet reshuffle points to just that, which was considered Pound positive.

The question now will be just how far the government will go, as plenty of uncertainty lies ahead.

At the time of writing, the Pound was flat at $1.3046.

Across the Pond

It’s a busier day ahead on the data front. January retail sales figures, industrial production, and prelim February consumer sentiment figures are due out. Business inventory numbers for December are also due out.

Barring a marked jump in business inventories, however, the figures will likely have a muted impact on the day.

For the Dollar, the retail sales and consumer sentiment figures will be the key drivers.

At the time of writing, the Dollar Spot Index was up by 0.04% to 99.117.

For the Loonie

It’s yet another quiet day ahead on the economic calendar, with no material stats due out of Canada to provide the Loonie with direction.

The Loonie will remain in the hands of market risk sentiment and crude oil prices.

We saw crude oil prices get a boost on Thursday, which delivered the Loonie with much-needed support. The markets will need to continue to expect that Russia and OPEC will cut production to deliver price stability.

While it is doom and gloom near-term, expectations are for crude oil demand to rebound in the 2nd quarter, however…

The Loonie was up by 0.04% at C$1.3262 against the U.S Dollar, at the time of writing.

EIU Trims Global Growth Forecast Due to Coronavirus

The Economist Intelligence Unit (EIU), which is well-respected for its economic outlook reports, recently published a report on the global forecast for growth in Q4 of 2019. The report said that economic activity across the globe, both for industrialized and developing countries, was projected to be weak. The report blamed the malaise on global trade tensions, such as the U.S-China trade war, as well as a fall in GDP growth in the U.S. and China, the world’s largest two economies.

In another report released on Wednesday, the EIU revised downwards its global growth forecast in 2020 to 2.2 percent, down from its previous forecast of 2.3 percent. Not surprisingly, the reason for the lower projection was the China coronavirus. The report noted that “Chinese authorities are taking unprecedented quarantine measures to halt the spread of the pathogen, which is likely to have consequences on the global economy”.

The EIU has slashed its 2020 forecast for China’s growth from 5.9 percent to 5.4 percent, on the assumption that the coronavirus will be contained by mid-March. It remains to be seen if that scenario is overly optimistic; if so, the drop in Chinese growth could be even sharper. If the EIU estimate is accurate, the plunge in Chinese GDP next year is sure to have economic ramifications which will be felt worldwide.

In the worst-case scenario, the coronavirus outbreak could trigger a global recession. Already, countries with extensive trade links with China, such as Australia and Japan, are feeling the bite in their tourist and services industries. Multinational plants in China have had to lay off workers and suspend or reduce operations, and the disruption to the Chinese economy has resulted in falling oil prices. Investors will be hoping that the coronavirus can be contained quickly so that China, the number two economy in the world, can get back on its economic feet.

U.S Inflation Figures Puts the USD in Focus as the Markets Monitor News from China

Earlier in the Day:

It was a quiet day on the Asian economic calendar this morning, with economic data limited to UK RICS house price figures.

While there were no material stats, monetary policy was in focus, with RBA Governor Lowe speaking this morning.

Bank of Canada Governor Poloz and RBNZ Governor Orr were also scheduled to speak early in the day.

While monetary policy chatter drew interest, updates from China provided direction early in the session.

News of a sharp jump in coronavirus COVID-19 deaths on Wednesday and spike in new cases reversed the market’s laissez-faire sentiment from Wednesday.

A reported 242 people died of the virus in Hubei Province on Wednesday. This was the largest daily loss since the outbreak began. There were also 14,840 people diagnosed with the virus. On Tuesday, the total number of new cases had risen by just 2,015 that had fueled demand for riskier assets.

For the Aussie Dollar

In the early part of the day, RBA Governor Lowe was speaking in Canada alongside Bank of Canada Governor Poloz.

The RBA Governor stated that there was not an obsession amongst board members to return inflation to its 2% to 3% target range in a hurry.

His comments had limited influence, however, as updates on COVID-19 cases weighed on risk appetite.

At the time of writing, the Aussie Dollar was down by 0.15% to $0.6727.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.13% to ¥109.95 against the U.S Dollar, with risk aversion supporting the Yen early on. By contrast, the Kiwi Dollar was down by 0.29% to $0.6448.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Economic data is limited to finalized January inflation figures out of Germany.

Barring a material upward revision, the numbers are unlikely to have a material influence on the EUR.

Negative sentiment towards the Eurozone economy will continue to pin back the EUR ahead of tomorrow’s 4th quarter GDP numbers.

As things stand, monetary policy diversion remains in favor of the Dollar. The EUR would have seen a much larger decline had the FED taken a more hawkish outlook on policy for the year ahead.

With Lagarde’s hands tied, for now, parity remains off the table though that could change if we begin to see a more marked spread of the coronavirus beyond Asia… That really would bring down the ECB’s hope of support from consumer spending.

At the time of writing, the EUR was flat at $1.0874.

For the Pound

It’s another particularly quiet day ahead on the economic calendar, with no material stats due out of the UK to provide direction.

Brexit chatter will remain in focus as the EU prepares its list of demands for negotiations on trade…

At the time of writing, the Pound was flat at $1.2960.

Across the Pond

It’s a busier day ahead on the data front, with January inflation figures and the weekly jobless claims figures due out later today.

While we can expect the Greenback to be sensitive to the inflation numbers, a softer annual rate of inflation is unlikely to shift sentiment towards FED monetary policy.

Barring a marked jump in claims, we would also expect the markets to brush aside the jobless claims figures.

For the Dollar, retail sales and consumer sentiment figures due out tomorrow are the key drivers for the week.

At the time of writing, the Dollar Spot Index was down by 0.05% to 98.998.

For the Loonie

It’s another quiet day ahead on the economic calendar, with no material stats due out of Canada to provide the Loonie with direction.

Expect market risk sentiment to provide direction later in the day.

We saw oil prices bounce back on Wednesday. While OPEC slashed demand forecasts. The downward revision is expected to force OPEC and Russia to cut output to ensure price stability, all of which remains Loonie positive.

The Loonie was up by 0.05% at C$1.3243 against the U.S Dollar, at the time of writing.

The RBNZ Gives the Kiwi a Boost ahead as the Focus Shifts to the EUR and USD

Earlier in the Day:

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

Key stats included the electronic credit card retail sales figures out of New Zealand and consumer confidence figures out of Australia,

On the monetary policy front, the RBNZ was also in action, delivering its first monetary policy decision of the year.

For the Kiwi Dollar

Electronic card retail sales fell by 0.1% in January, following on from a 0.9% decline in December. Economists had forecast a 1% rise.

According to NZ Stats,

  • Spending on hospitality saw the largest decline in January, falling by 1%.
  • Groceries and liquor recorded a 0.3% decline, while spending on apparel and vehicles (excl. fuel) remained largely unchanged.
  • Spending on fuel increased by 1.5%.
  • Core retail spending fell by 0.2%, following a 1.0% decline in December.
  • The total value of electronic card spending, including the two non-retail categories (services and non-retail), rose by 0.3%. In December, spending had fallen by 0.6%.

The Kiwi Dollar moved from $0.64020 to $0.64017 upon release of the figures that preceded the RBNZ policy decision and press conference.

Monetary Policy

The RBNZ held rates unchanged at 1% this morning, which was in line with expectations. Salient points from the Rate Statement included:

  • Employment is at or slightly above its maximum sustainable level, while inflation is close to the 2% mid-point of the target range.
  • Low-interest rates remain necessary to maintain current employment and inflation levels.
  • Economic growth is expected to accelerate in the 2nd half of 2020, supported by both monetary and fiscal stimulus and favorable trade terms.
  • The outlook for government spending is positive as is the outlook for household spending growth.
  • Soft momentum in economic growth continued into 2020, with softer global growth in 2019 acting as a headwind to the domestic economy.
  • The global economy has shown signs of stabilizing, with trade tensions easing, while the coronavirus outbreak remains a downside risk.
  • The RBNZ assumes that any impact of the coronavirus to the NZ economy will be short-term and within the 1st half of 2020.

The Kiwi Dollar moved from $0.64118 to $0.64580 upon release of the rate statement and monetary policy statement. At the time of writing, the Kiwi Dollar was up by 0.87% to $0.6462.

Next up is the RBNZ Press Conference…

For the Aussie Dollar

The Westpac Consumer Sentiment Index jumped by 2.3% to 95.5 in February. In January, the index had fallen by 1.8% to 93.4. Economists had forecast a more modest 1.4% rise.

According to the latest Westpac Report,

  • The rise was attributed to easing concerns over the bushfires and a more optimistic RBA…
  • The spread of the coronavirus had a limited impact on sentiment, which was reportedly the case back during the SARS outbreak in 2003.
  • Looking at the components, contribution came from consumer sentiment towards the economic outlook.
    • Economic conditions the next 12-months increased by 5.4% to 89.3. This was still down by 13.3% over the year and well below the long-run average of 90.9.
    • Economic conditions next 5-years rose by 4.3% to 91.6. Whilst down by 8.5% from the previous year, the sub-index rose above the long-run average of 91.3.
    • Supported by the better sentiment towards the economic outlook, the time to buy a major household item sub-index rose by 2.7% to 116.4. While down by just 1.9% over the year, the sub-index sat well below a long-run average of 127.1.
  • The numbers were less impressive on the finance front, however.
    • Family finances vs a year ago fell by 1.0% to 81.2. Down by 9.2% over the year, the sub-index was well-below a long-run average 89.3.
    • The family finances the next 12-months rose by just 0.1% to 99.1.
  • The Unemployment Expectations Index increased by 0.6% to 134.7. Up by 12.3% over the year, the Index sat above a long-run average of 130.1, which is negative.

The Aussie Dollar moved from $0.67173 to $0.67202 upon release of the stats. At the time of writing, the Aussie Dollar was up by 0.19% to $0.6727.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.05% to ¥109.84 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Industrial production figures are due out of the Eurozone later today.

Following some particularly disappointing production numbers out of France, Germany, and Italy, today’s figure will need to be particularly dire to move the dial.

Expectations are for production to fall by 1.5% in December, so expect the EUR to soften on any weaker numbers.

Outside of the stats, geopolitical risk is on the rise once more. Tensions return in Italy, with the Irish election result also raising some uncertainty. Things are not much better in Germany, as Merkel’s CDU Party sees Merkel’s chosen successor resign.

Expect chatter from Italy and Germany to garner plenty of attention. The last thing the EU needs is discord as it prepares to negotiate with Britain on trade.

At the time of writing, the EUR was up by 0.02% to $1.0918.

For the Pound

It’s a particularly quiet day ahead on the economic calendar, with no material stats due out of the UK to provide direction.

Economic data from the UK on Tuesday appeared to vindicate MPC members who decided to vote in favor of a hold on interest rates.

The UK managed to avoid an economic contraction, in spite of soft manufacturing and industrial production at the end of the year.

Hopes are that Johnson’s landslide victory will deliver a near-term boost to growth ahead of next month’s budget.

Whether the Pound can hold onto $1.29 levels and eye a return to $1.30 levels remains to be seen, however.

Much will depend on how the government progresses with key trading partners on trade talks.

At the time of writing, the Pound was up by 0.07% to $1.2961.

Across the Pond

It’s a quiet day ahead on the data front, with no material stats due out later today to provide the Greenback with direction.

The lack of stats will leave FED Chair Powell and his 2nd day of testimony in focus.

At the time of writing, the Dollar Spot Index was up by 0.04% to 98.765.

For the Loonie

It’s a quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

Crude oil prices will influence on the day, with OPEC’s monthly report and the weekly IEA numbers due out later today.

The Loonie was up by 0.01% at C$1.3285 against the U.S Dollar, at the time of writing.

Fed Concerned About Coronavirus, But Not Expected to Raise Rates

With the China coronavirus outbreak in full swing and taking a toll on the global economy, there has been speculation that the Federal Reserve might be forced to lower rates sooner than it would have liked.

However, this scenario appeared to be have been laid to rest on Tuesday, as Fed Chair Jerome Powell testified before the House Financial Services Committee. Powell acknowledged that the outbreak could pose serious economic risks, but he maintained that the Fed did not plan to change its current monetary policy. Powell told lawmakers that the Fed was “closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy”. Although the coronavirus posed a risk to the economic outlook, Powell said that “the current stance of monetary policy will likely remain appropriate.”

Powell has now been at the helm of the U.S. central bank for two years, and he has shown an ability to be aggressive – in 2019, the Fed trimmed rates three times, in response to weak global growth and the fallout from the ongoing trade war with China. The U.S. and China have since reached a limited trade agreement, although many tariffs still remain in place. The economic wildcard is, of course, the China coronavirus. The outbreak has severely disrupted China’s economy and damaged countries with close economic links to China, such as Japan and Australia. If the virus is not contained shortly, the damage to the global economy will be substantial, and Powell and his colleagues at the Fed may have to revisit the possibility of lowering interest rates.

US Stock Market: NASDAQ Hits Record High Even as Apple Deals with China iPhone Problems

U.S. stock markets climbed on Monday as investors shed worries over the likely economic impact of the spreading coronavirus to push the major indexes to record highs. Risk appetite started to climb in the futures markets after a lower opening shortly before the cash market opening.

While Asian investors and to some extent European and U.S. investors are trying to figure out whether the rate of contagion from the coronavirus is stabilizing even as the death toll climbed above 1,000, higher than the SARS outbreak, and one estimate put the mortality rate from the disease at 1%, U.S. investors continued to focus on corporate earnings and individual stocks.

In the U.S. cash market on Monday, the benchmark S&P 500 Index settled at 3352.09, up 24.38 or +0.75%. The blue chip Dow Jones Industrial Average finished at 29276.82, up 174.31 or +0.60% and the technology-based NASDAQ Composite closed at 9628.39, up 107.88 or +1.18%.

US Stock Market Recap

Wall Street picked up where it left off last week on Monday, with the NASDAQ hitting a record high on Monday, as a recent batch of strong domestic economic data and largely upbeat earnings overshadowed fears about the impact of the coronavirus epidemic on global growth.

The price action indicates that some people believe the outbreak may only have a negative impact on growth in China. Meanwhile, corporate earnings and U.S. economic data have been strong enough to instill confidence in U.S. investors.

Of the 324 S&P 500 companies that have reported quarterly results so far, about 71% have beaten earnings estimates, which is above the long-term average of 65%, according to IBES data from Refinitiv.

Amazon Up, Apple Down, Tesla Volatile

Amazon rose 2.6% to a record high, breaking above $2,100 per share for the first time. Netflix and Alphabet both closed more than 1% higher while Facebook eked out a gain. Tesla, meanwhile gained more than 3% in another volatile session for the electric car maker.

Notably absent from this list was Apple. Its shares fell as much as 1.9% on Monday amid concerns the outbreak will hurt production of the tech giant’s bestselling product, the iPhone. Foxconn, one of Apple’s biggest suppliers, got approval to resume production at a key manufacturing plant but only 10% of its workforce has returned, Reuters reported.

iPhone Manufacturing in China in Limbo Amid Coronavirus Outbreak

The ripple effect of the novel coronavirus outbreak in China continues this week, leaving iPhone production in the region in limbo.

Apple supplier Foxconn was approved to resume production in Zhengzhou, a key manufacturing plant in the region, Reuters reported Sunday citing an unnamed source with direct knowledge.

So far only 10% of the workforce, about 16,000 people, have returned, the source told Reuters, adding requests to reopen a plant in Shenzhen were not approved.

The Zhengzhou plant is “the most critical iPhone production site,” making the iPhone 11 series and a new special edition, cheaper iPhone, top Apple analyst Ming-Chi Kuo said in a note to clients Sunday.

Tesla’s Wild Ride Continues as Stock Tops $800

Shares of Tesla climbed as high as the $800 level it hit during last week’s wild swing.

Part of the reason appears to be positive news from China, after the Shanghai municipal government said it would help companies like Tesla “resume production as soon as possible” in the midst of the coronavirus. Tesla’s Shanghai factory has been closed as the Chinese government looks to contain the epidemic.

Tesla’s wild ride is being driven by speculation and a so-called short squeeze, detaching shares from the company’s fundamentals. As a whole, Wall Street is the most pessimistic it’s ever been about Tesla’s stock. Many analysts say Tesla’s valuation looks stretched, with nearly half of analysts having a sell rating on the stock. Just 19% of analysts say to buy Tesla’s stock.

Economic Data and FED Chair Powell Put the GBP and USD in the Spotlight

Earlier in the Day:

It was a relatively quiet day on the Asian economic calendar this morning. The British Pound and the Aussie Dollar were in action early on.

Key stats included the UK’s BRC Retail Sales Monitor figures for January and January business confidence numbers out of Australia.

Outside of the numbers, news of the coronavirus death toll hitting 1,011 on Monday left the markets wary.

China returning to work after the extended break provided some support to riskier assets early on, however.

For the Aussie Dollar

The NAB Business Confidence Index rose from -2 to -1 in January. Economists had forecast a rise to 0.

According to the NAB,

  • While there was some evidence of the effects of the bushfire, the Business Sentiment Index held relatively steady.
  • The Business Conditions Index held steady at +3, with profitability rising from +1 to +2, while the Employment Index fell from +4 to +1.
  • Sentiment towards forward orders remained weak, with the sub-index holding steady at -1.

The Aussie Dollar moved from $0.66856 to $0.66916 upon release of the stats. At the time of writing, the Aussie Dollar was up by 0.24% to $0.6703.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.06% to ¥109.84 against the U.S Dollar, while the Kiwi Dollar was up by 0.05% to $0.6387.

The Day Ahead:

For the EUR

It’s yet another quiet day ahead on the economic calendar, with no material stats due out of the Eurozone to provide direction.

A lack of stats will continue to leave the EUR in the hands of market sentiment towards the Eurozone economy and geopolitical risk.

We saw the EUR take a hit on Monday as the continued spread of the virus led to further delays in the opening of factories in China.

On the monetary policy front, ECB President Lagarde is due to speak later today. Expect any dovish chatter to add further pressure on the EUR.

At the time of writing, the EUR was up by 0.03% to $1.0914.

For the Pound

It’s a particularly busy day ahead on the economic calendar. Key stats include 4th quarter GDP numbers and December industrial and manufacturing production figures.

Following some disappointing numbers of late, forecasts for today’s stats are also skewed to the negative.

We will expect December’s trade figures to have a muted impact on the Pound.

Earlier in the day, the BRC Retail Sales Monitor stalled in January after having risen by 1.7% in December.

At the time of writing, the Pound was up by 0.04% to $1.2920, the upside coming in spite of the soft retail sales figures.

Across the Pond

It’s a relatively quiet day ahead on the data front. December’s JOLT’s job openings are due out later today.

Following last week’s nonfarm payroll figures for January, we would expect the numbers to have a muted impact, however.

The focus on the day will be on FED Chair Powell’s first day of testimony to Congress. Economic data out of the U.S has supported the Dollar of late. It will be interesting to see whether the FED Chair expects any material fallout from the coronavirus. There’s also inflation to consider.

At the time of writing, the Dollar Spot Index was up by 0.02% to 98.855.

For the Loonie

It’s a quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

The lack of stats will continue to leave the Loonie in the hands of market risk appetite and influence on crude oil prices.

With the Loonie back at C$1.33 levels against the Greenback, there could be some near-term support should OPEC and Russia agree to a material cutback in production.

There’s been no sign of such a move yet, however…

The Loonie was up by 0.05% at C$1.3310 against the U.S Dollar, at the time of writing.