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.

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.

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.

U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to 99.200 Pivot Sets the Tone

The U.S. Dollar is edging lower against a basket of major currencies on Tuesday while trading inside yesterday’s range. The price action suggests investor indecision and impending volatility.

Based on the price action since Friday, investors are trying to decide whether the dollar is strong because of its safe-haven status or overpriced due to signs of a weakening U.S. economy.

On Friday, the dollar index sold off sharply after the release of disappointing U.S. manufacturing and services reports. Yesterday it closed higher, but showed little signs of safe-haven status as U.S. equity markets plunged.

Today’s price action is likely to be influenced heavily by the Conference Board’s Consumer Confidence report, due to be released at 15:00 GMT. It is expected to come in at 132.6, up slightly from the previously reported 131.6. This report is important because the consumer has been the main driver of the economy.

Some traders may discount the results because conditions have changed drastically since the survey was taken. It’s highly likely that the CB survey was taken when all investors had to worry about was China’s containment of the coronavirus. This report may not reflect the fact that the virus has now spread beyond China’s borders and has become a major threat to the global economy.

At 11:39 GMT, March U.S. Dollar Index futures are trading 99.235, down 0.049 or -0.05%.

Daily March U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 99.815 will signal a resumption of the uptrend. The main trend will change to down on a trade through 97.165. This is highly unlikely, but there is room for a normal 50% to 61.8% correction of its last rally.

The minor trend is also up. A trade through 98.580 will change the minor trend to down and shift momentum to the downside.

The minor range is 98.580 to 99.815. The market is currently straddling its 50% level or pivot at 99.200.

The short-term range is 97.165 to 99.815. Its retracement zone at 98.490 to 98.180 is the primary downside target.

Daily Technical Forecast

Based on the early price action and the current price at 99.235, the direction of the March U.S. Dollar Index the rest of the session on Tuesday is likely to be determined by trader reaction to the pivot at 99.200.

Bullish Scenario

A sustained move over 99.200 will indicate the presence of buyers. However, given the series of Gann angles on the upside, any rally is likely to be a labored event.

The index will strengthen on the bullish side of the uptrending Gann angle at 99.290, but then buyers face potential resistance at downtrending Gann angles coming in at 99.440, 99.630 and 99.720. The latter is the last potential resistance angle before the 99.815 main top.

Bearish Scenario

A sustained move under 99.200 will signal the presence of sellers. Taking out yesterday’s low at 99.030 will indicate the selling is getting a little stronger.

The daily chart indicates there is plenty of room to the downside with targets coming in at 98.490, 98.395, 98.230 and 98.180. However, we don’t know at this time if the index will spike into these targets or plunge.

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.

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.

How the Coronavirus Impacted the Forex Market

The novel coronavirus (COVID-19 ) which emerged in December 2019 has now killed more than 2,100 people and infected more than 75,000 people. In this article we’ll explore how the epidemic has affected the global foreign exchange market so far.

To understand how the news influenced the market it’s important to review the major coronavirus headlines that emerged since the beginning of the year.

January 11th: Wuhan health authorities reported the first known death caused by the virus.

January 20th: The first confirmed cases of the coronavirus outside mainland China in Japan, South Korea and Thailand are reported.

January 23rd: Wuhan is cut off by Chinese authorities as all air, road and train links out of the city are suspended.

January 26th: China’s health commission minister warns that Coronavirus’s ability to spread is getting stronger.

January 30th: The World Health Organization (WHO) declares a global health emergency, as the outbreak continues to spread outside China.

February 7th: Li Wenliang, a Chinese doctor who tried to warn others about the deadly outbreak, dies from the coronavirus.

February 9th: The death toll in China surpasses the number killed worldwide by the 2002-3 SARS epidemic.

EUR/USD

EUR/USD has taken a beating in 2020 so far. The euro has been under pressure due to disappointing economic releases, most recently the German ZEW survey which showed a decrease in investor confidence. Meanwhile, the US dollar has been boosted by its safe haven appeal amid the coronavirus epidemic. The greenback has also been underpinned by positive US economic data, increasing the odds that the Federal Reserve will keep interest rates on hold. Ongoing negative news about the coronavirus and its impact on the global economy will likely weigh on the euro.

AUD/USD

China is Australia’s largest trading partner and news relating to the Chinese economy has a major impact on the Australian dollar. Since the Chinese renminbi is restricted to trading within a designated range, investors often use the Aussie dollar as a proxy for China. More broadly, the Australian dollar is viewed as a ‘risk currency’ that investors tend to avoid in periods of instability. Further negative news about the coronavirus will likely pressure the beleaguered Australian dollar, while signs of containing it will provide support.

USD/JPY

The Japanese yen is a leading financial safe haven, in part due to Japan’s status as the world’s largest creditor nation. Other safe haven assets include the Swiss franc, the US dollar and gold. We can see the yen strengthening against the dollar during the period when the most unsettling coronavirus headlines were being published. However, the dollar has since rebounded to make fresh highs against the yen, undermining the yen’s safe haven status. Investors have preferred gold over the yen as a safe haven due to Japan’s proximity to and dependence on China. Gold prices rallied this week to their highest levels since 2013. Elsewhere, Bitcoin rebounded sharply while the coronavirus spread and the case is building for it to be viewed as a legitimate safe haven asset alongside gold.

USD/CAD

The risk sensitive Canadian dollar weakened as fears mounted over the coronavirus and crude oil prices fell. However, oil prices rose last week as a slowdown in new coronavirus cases began to ease fears over its global economic impact and the Canadian dollar in turn received a boost from the uptick. The Loonie has a positive correlation with crude oil because Canada is one of the largest oil producing countries in the world.

The Bottom Line

A Reuters poll of economists predicted that China’s annual economic growth in the first quarter of 2020 will slow to 4.5% from 6.0% in the previous quarter, illustrating the drastic toll of the coronavirus. The knock-on effect globally was starkly visible earlier this week as Apple’s (AAPL) stock price fell sharply after cutting its quarterly revenue forecast due to the outbreak. Recent reports that the number of confirmed new cases in China appear to be slowing has inspired some optimism in the markets. However, experts have also warned that the crisis may have not yet reached its peak.

By Dan Blystone, Scandinavian Capital Markets

 

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.

USD/CAD Expectedly Bouncing off the POC Zone

Dear Traders,

The USD/CAD is in uptrend. The price made the move towards the POC zone and now it is spiking up.

1.3215-30 is the POC zone. At this point we could see another move to the upside targeting 1.3255, 1.3276 and eventualy 1.3302. The market is slower so you need to be patient. The ATR(5) is only 40 pips. However, it is a stable market and its trending, so buying the dips is the scenario.

As long as the price is kept above 1.3200, bulls are in advantage.

The Analysis has been done with the CAMMACD.Core and Sit Systems

 

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.

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.

The Week Ahead – Economic Data, COVID-19 Updates and Geopolitics in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 64 stats to monitor in the week ending 21st February. In the previous week, just 46 stats had been in focus.

For the Dollar:

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

Through the 1st half of the week, NY Empire State Manufacturing figures will influence on Tuesday, ahead of a busy 2nd half.

We saw Chicago PMI figures recently have a material influence on the Dollar and risk sentiment. Expect the same from the NY State figures.

On Wednesday, while wholesale inflation numbers are the key driver, housing sector figures will need to continue to support upbeat sentiment towards the sector.

On Thursday, the focus will then shift to the all-important Philly FED manufacturing numbers, which are due out ahead of a busy Friday.

While existing home sales figures will garner some attention, the U.S Services PMI will have the greatest impact on Friday.

For the housing sector, mortgage rates saw 3-consecutive weekly declines before a slight uptick last week, which should drive demand…

Outside of the numbers, expect market sentiment towards monetary policy and risk appetite to also influence.

The Dollar Spot Index ended the week up by 0.45% to 99.124.

For the EUR:

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

The markets will need to wait until Tuesday to digest business sentiment figures out of Germany and the Eurozone. The ZEW number will influence and we can expect businesses to factor in the coronavirus spread this time around.

Germany’s ZEW Economic Sentiment figure will have the greatest impact.

The focus will then shift to Germany’s GfK consumer climate figures due out on Thursday. Consumer spending continues to be a key area of focus for the ECB, so we can expect sensitivity to the numbers this week.

Wrapping up the week, we’ve got prelim February private sector PMI numbers out of France, Germany, and the Eurozone.

Upward momentum will need to continue towards a return to growth in the manufacturing sector to support the EUR.

The spread of the coronavirus in China and beyond, however, may give the EUR another blow.

Germany’s manufacturing PMI and the Eurozone’s composite will likely have the greatest influence.

Barring material deviation from prelim, finalized inflation figures out of France, Germany, Italy, and the Eurozone will likely have a muted impact in the week.

The EUR/USD ended the week up down by 1.05% to $1.0831.

For the Pound:

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

Key stats include employment and wage growth figures due out on Tuesday and retail sales figures due out on Thursday.

We saw last month’s employment figures temper market expectations of a BoE rate cut, which leaves the Pound exposed to this month’s numbers.

Off the back of labor market numbers, January inflation figures are due out on Wednesday that will also influence sentiment towards monetary policy. Forecasts are for an uptick in inflationary pressure that should further ease expectations of a near-term rate cut. Much will depend on employment and retail sales figures, however.

The retail sales figures will likely be the key driver on the data front. A bounce back in spending would support the BoE’s initial outlook on economic growth following Brexit.

Of less influence in the week is CBI Industrial Trend Orders due out on Friday.

Outside of the numbers, expect chatter on trade negotiations to also influence. While there may be no progress with the EU, progress elsewhere is a must early on.

The GBP/USD ended the week up by 1.20% to $1.3047.

For the Loonie:

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

December manufacturing sales figures due out on Tuesday will garner some attention ahead of an important 2nd half of the week.

Sales are forecast to fall by a further 0.2% in December, following a 0.6% slide in November. Positive numbers would be needed to deliver the Loonie with support.

In the 2nd half of the week, January inflation figures on Wednesday and December retail sales figures on Friday will be key.

A negative set of numbers and the BoC may well have a green light to ease policy further….

Outside of the numbers, the news wires and sentiment towards the global economy and oil consumption will also be key.

The Loonie ended the week up by 0.42% to C$1.3252 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively quiet week ahead.

Key stats include 4th quarter wage growth figures due out on Wednesday and January employment numbers due out on Thursday.

Expect both sets of numbers to influence.

Wage growth has been tepid, which has raised concerns over the outlook for domestic consumption.

The RBA sees that the current low in interest rates and a pickup in wage growth would drive spending.

On Thursday, the employment numbers will also need to reflect a tightening in the slack to support a positive outlook on wage growth.

While the numbers will influence, expect news from China and any further moves by Beijing and the PBoC to deliver support.

The Aussie Dollar ended the week up by 0.61% to $0.6714.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic data front. Key stats are limited to 4th quarter wholesale inflation numbers due out on Thursday.

We can expect updates from China and beyond on the impact of the coronavirus on productivity to be key, however.

The Kiwi Dollar ended the week up by 0.59% to $0.6438.

For the Japanese Yen:

It’s a busy week on the economic calendar. Key stats include 4th quarter GDP numbers due out on Monday alongside February industrial production figures,

The focus will then shift to January trade data due out on Wednesday.

GDP numbers are forecasted to be quite dire, which may force the BoJ to show what it has on offer.

Trade data will also garner plenty of attention as the markets look to assess the impact of COVID-19 on regional growth.

At the end of the week, January inflation figures will likely have a muted impact, barring a spike…

Outside of the numbers, economic data from the U.S could continue to give the Dollar the upper hand.

A jump in COVID-19 related deaths and an increase in fatalities outside of China would likely drive demand for the Yen, however.

News from China on the weekend was market risk positive…

The Japanese Yen ended the week down by 0.03% to ¥109.78 against the U.S Dollar.

Out of China

It’s a particularly quiet week on the economic data front. There are no material stats due out of China to provide direction to the global financial markets.

The lack of stats leaves the COVID-19 updates, and impact analysis in focus. We are expecting the government to continue to drive liquidity near-term…

News of new cases in decline should provide early support.

The Chinese Yuan rose by 0.22% to CNY6.9869 against the U.S Dollar in the week.

Geo-Politics

Trade Wars: While the global financial markets remained gripped by the COMVID-19 spread, there was some chatter on the news wires of an imminent trade war between the U.S and the EU.

The U.S President will certainly want to return the narrative to making American great again, going into the campaign trail.

Any threat of tariffs on EU autos and expect tensions to rise.

UK Politics: The European Parliament laid down the gauntlet last week, calling on the UK to retain EU policies in a range of areas in exchange for that ambitious trade deal…

The EU’s opening position is scheduled to be agreed on 25th February, when EU ministers meet. This will be the starting point for the EU and will give the markets some idea of what lies ahead.

Iran and the Middle East: It’s been relatively quiet in the Middle East. In the U.S, however, the Senate has been busy debating a resolution to shackle the U.S President’s ability to go to war with Iran. Interestingly, a number of Republicans have supported the bill that is expected to pass. While Trump is expected to veto the bill, it’s the first chink in the Republican armor.

Corporate Earnings

It’s another busy week ahead on the corporate earnings calendar. Marquee names releasing earnings include:

From the U.S: Walmart Inc. (Tue) and Kraft Heinz (Thurs).

Out of Germany: Deutsche Boerse AG (Mon) Deutsche Telekom AG (Wed), and Allianz SE (Fri) are big releases in the week ahead.

From the UK: HSBC Holdings PLC (Mon), Anglo American PLC (Thurs), BAE Systems (Thurs), Barclays PLC (Thurs), Lloyds Banking Group PLC (Thurs), and Pearson PLC (Fri) also scheduled to release earnings results.

The Weekly Wrap – Stats, Monetary Policy, and COVID-19 Drove the Major

The Stats

It was a relatively busy week on the economic calendar, in the week ending 14th February.

A total of 46 stats were monitored, following 60 stats from the week prior.

Of the 46 stats, 20 came in ahead forecasts, with 15 economic indicators coming up short of forecast. 11 was in line with forecasts in the week.

Looking at the numbers, 30 of the stats reflected an upward trend from previous figures. Of the remaining 16, 12 stats reflected a deterioration from previous.

For the Greenback, it was a bullish week, with economic data and sentiment towards monetary policy providing support. The Dollar Spot Index rose by 0.45% to 99.124 in the week.

Out of the U.S

It was a quiet start to the week for the Dollar.

The markets had to wait until inflation figures due out on Thursday for direction. With the annual rate of inflation holding steady at 2.3% and initial jobless claims sitting at 205k, the Dollar found support on Thursday.

On Friday, the stats were mixed, however, which limited the upside for the Dollar on the day.

While consumer sentiment jumped to a 15-year high in February, retail sales figures failed to impress. Retail sales rose by 0.3%, month-on-month in January, with core retail sales also rising by 0.3%. In December, core retail sales had risen by 0.6%, while retail sales had increased by just 0.2%.

If February’s consumer sentiment numbers are anything to go by, however, retail sales should get a boost in February.

On the production side, the numbers were also disappointing, with industrial production falling by 0.3% in January.

December JOLTs job openings on Tuesday had a muted impact on the Dollar.

On the monetary policy front, FED Chair Powell gave testimony to Congress over 2-days.

The Dollar came under fire on Tuesday as Powell raised concerns over the spread of COVID-19. While highlighting the risks, the FED Chair noted that monetary policy would stay pat should the economy remain resilient as anticipated.

In the equity markets, the Dow gained 1.02%, with the S&P500 and NASDAQ up by 1.58% and by 2.21% respectively.

Out of the UK

It was a busy start to the week on the economic calendar.

4th quarter GDP numbers together with December industrial and manufacturing production figures were in focus.

In the 4th quarter, the UK economy stalled, with the UK GDP up by 1.1% year-on-year, easing from a 3rd quarter 1.2%.

Industrial and manufacturing production both came up short of forecasts, whilst returning to growth following slides in November.

Trade data also saw a material shift, with both the UK’s trade balance and non-EU trade balance shifting from a deficit to a surplus.

While growth stalled and production figures disappointed it could have been worse, delivering some relief to the Pound.

Following better than anticipated private sector PMIs last week, hopes of the BoE standing pat near-term had provided the Pound with support before the slide to $1.28 levels.

Negative sentiment towards Johnson being able to garner a no-strings-attached trade agreement with the EU pressured the Pound.

Ahead of Tuesday’s numbers, talks of Britain and trade talks with Japan delivered early support in the week.

In the 2nd half of the week, the Pound got a 2nd boost, with the departure of the Chancellor of the Exchequer Javid raising the prospects of a loosening of the purse strings.

The Pound ended the week up by 1.20% to $1.3047.

The FTSE100 reversed gains from earlier in the week to end the week down by 0.77%. A stronger Pound contributed to the 100’s demise.

Out of the Eurozone

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

A lack of stats left the markets to focus on investor confidence figures from the Eurozone and Italian industrial production figures.

The Sentix Investor Confidence Index came fell from 7.6 to 5.2. Economists had forecast a fall to 4.1.

While concerns over the impact of the coronavirus had materially shifted sentiment towards the global economic outlook, European investors were rather calm at the time of the survey.

The Asia ex-Japan index slid by a more sizeable 11.3 points as the Asian region struggled to contain the spread.

With the numbers on the negative side and sentiment towards the Eurozone economy bearish, the EUR struggled early in the week.

Out of Italy, industrial production slumped by 2.7% month-on-month to leave production by 4.3% year-on-year. Economists had forecast a 0.5% decline in the month and a 0.2% decline year-on-year.

For key stats, the markets had to wait until Wednesday for industrial production figures from the Eurozone. Production slid by 2.1% in December, which was worse than a forecasted fall of 1.5%.

Things were not much better at the end of the week. GDP numbers out of Germany and the Eurozone added further pressure on the EUR.

Germany’s economy stalled in the 4th quarter, with growth year-on-year coming in at just 0.3%. Things would have been far worse for the EUR had the economy contracted…

For the week, the EUR fell by 1.05% to $1.0831.

For the European major indexes, it was a bullish week, with a softer EUR proving support. The DAX30 and EuroStoxx600 rose by 1.70% and by 1.49% respectively. The CAC40 saw a more modest 0.66% gain for the week.

Elsewhere

It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar rose by 0.61% to end the week at $0.6714, with the Kiwi Dollar up by 0.59% to $0.6438.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Economic data was limited to January business confidence figures on Tuesday and consumer confidence figures on Wednesday.

Business confidence figures on Tuesday provided support early in the week. While coming up short of forecasts, a rise from -2 to -1 in January eased jitters of a further pullback in business investment.

On Wednesday, consumer confidence figures impressed, with the Westpac Consumer Confidence Index rising by 2.3%.

While the numbers were Aussie Dollar positive, sentiment towards COVID-19 ultimately delivered the upside.

A bounce back to $0.67 levels on Tuesday came off the back of less alarming numbers out of China.

The upside was limited, however, with a spike in cases and deaths mid-week testing appetite for riskier assets.

For the Kiwi Dollar

It was a busier week on the economic calendar.

Key stats included electronic retail card sales and Business PMI numbers on Wednesday and Friday.

Retail sales fell by 0.1%, following a 0.8% decline in December, while the Business PMI rose from 49.3 to 49.6.

The numbers were certainly not good enough to deliver the upside in the week.

Monetary policy ultimately delivered strong support on Wednesday as the RBNZ stood pat on interest rates.

While holding rates steady, which was expected, the RBNZ delivered a more hawkish outlook on growth.

Talk of a pickup in economic growth in the 2nd half of the year eased any bets of further policy easing. The RBNZ also saw the effects of COVID-19 as a short term, 1st quarter issue…

For the Loonie

It was also quiet week, with economic data limited to housing sector data on Monday.

Housing starts and building permits delivered positive news but not enough to drive the Loonie into positive territory.

A shift in risk sentiment on Tuesday reversed losses from Monday, as crude oil prices bounced back from a Monday reversal.

Crude oil prices rallied in the week, in spite of both OPEC and the IEA cutting demand forecasts.

Expectations of OPEC and Russia cutting production to support prices delivered the upside in the week.

The bounce in crude oil prices and pick up in risk appetite provided the Loonie with much-needed support.

The Loonie ended the week up by 0.42% to C$1.3252 against the Greenback.

For the Japanese Yen

It was a particularly quiet week on the data front. There were no major stats in focus to provide the Yen with direction.

The lack of stats left the Yen in the hands of market risk appetite in the week.

We saw the pendulum swing both ways in the week, leaving the Yen relatively flat at the end of the week.

The Japanese Yen ended the week down by 0.03% to ¥109.78 against the U.S Dollar.

Out of China

January inflation figures were in focus through the 1st half of the week.

Inflationary pressures picked up at the start of the year. While inflationary pressures built, S&P and a number of banks downgraded growth forecasts for China in the 1st quarter.

There remains plenty of uncertainty over just how much impact the spread of the virus will have.

On Tuesday, China returned to work, however, which contributed to the pickup in risk appetite across the global markets on the day.

Through the 2nd half of the week, COVID-19 figures delivered dire news, weighing on risk appetite.

In spite of the shift in sentiment that saw the Yuan fall by 0.14% on Friday, the Yuen ended the week up by 0.22% to CNY6.9869.

The CSI300 rose by 2.25%, while the Hang Seng saw a more modest 1.50% gain.

Anticipated support from Beijing to mute the effects of COVID-19 delivered the upside in the week.

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.

The Mid-Week Wrap Up – Coronavirus and Impact on the Major Currencies

It’s been a mixed week for the global financial markets. A jump in risk appetite, off the back of coronavirus numbers from China, drove demand for riskier assets.

The EUR suffered, however, as doom and gloom shrouded the region. It was not just sentiment towards the economy, but also a rise in geopolitical risk that did the damage…

Are there any major events on the economic calendar that could impact the major currencies?

The Dollar

After a quiet start to the week, it gets busier for the Greenback. Key stats include January inflation figures due out on Thursday and retail sales figures due out on Friday.

We can expect retail sales figures to have a material impact on the Dollar. During testimony to Congress, FED Chair Powell was clear that the FED would stand pat on monetary policy should economic indicators support the view that the U.S economy would likely be unscathed from the coronavirus outbreak.

On Friday, consumer sentiment figures will also need to support the positive outlook on spending.

January wage growth and nonfarm payrolls, low-interest rates and low mortgage rates should support spending near-term.

The EUR

For the EUR, the focus will be on 4th quarter GDP numbers due out of Germany on Friday. Other than a 5-month high composite PMI for January, economic data has been disappointing, to say the least.

We could see the EUR under more pressure at the end of the week should Germany’s economy contract in the 4th.

When considering the likely effects of the coronavirus on China’s economy and demand from overseas, it is going to need to be quite a stimulus package to offset weakness in the 1st quarter.

The Eurozone economy is unlikely to be as resilient as that of the U.S economy. We may even see Trump turn the screw on the EU and try to get a favorable trade agreement…

The Pound

For the Pound, we saw that the UK avoided a contraction in the 4th quarter, delivering support.

Coupled with decent employment figures and survey-based PMI numbers, the BoE looks vindicated in standing pat.

With no material stats due out through the rest of the week, however, the focus will likely return to Brexit and trade.

The good news is that the EU’s Van Der Leyen is looking for a remarkable trade agreement with Britain while mocking Johnson.

It may ultimately boil down to what strings are attached, though the British PM may prefer to go without an agreement than to be tied to the EU.

Interestingly, the EU could come under pressure should Britain make sound progress beyond the EU. The last thing that the EU needs is for Britain to be able to go it alone and not even need the EU as a partner, or at least a material one.

All in all, there are too many uncertainties near-term, however, to allow the Pound to break out from current levels.

Seems like it was a quiet beginning of the week. How have other countries performed during this period? Let’s discuss the commodity currencies.

It’s been quite a start to the week for the commodity currencies.

For the Aussie Dollar

Business and consumer sentiment figures on Tuesday and Wednesday provided much-needed support. For the RBA, rate cuts last year were to spur both business investment and consumer spending. Weak confidence across the board would certainly question whether more rate cuts would be needed.

Rain in regions devastated by bush fires led to reports that the fires are contained supporting the improved sentiment. This was also Aussie Dollar positive.

Over the remainder of the week, there are no stats to consider, leaving the Aussie in the hands of risk sentiment. News from China and beyond on the coronavirus will remain the key driver.

For the Kiwi Dollar

The RBNZ followed on from a more hawkish than anticipated RBA from last week. While holding rates unchanged, the RBNZ talked up the economic outlook for the 2nd half of the year. The RBNZ also viewed the impact of the coronavirus as short-term, aligned with the RBA.

This view may be on the assumption that Beijing will deliver a sizeable enough stimulus package to mute the effect of the virus on the economy.

On the data front, credit card retail sales disappointed ahead of the RBNZ decision on Wednesday but had a muted impact as the Kiwi surged.

Later in the week, the focus will shift to the Business PMI numbers. Following the RBNZ’s outlook on the economy, the markets make be somewhat forgiving to any weak numbers…

For the Loonie

It’s been a quiet week on the economic data front, with stats limited to housing sector figures. While upbeat, there was a limited impact, as sentiment towards the global economy and impact on crude oil prices provided direction.

With no material stats due out over the remainder of the week, the focus will remain on OPEC. OPEC slashed its demand forecasts. While this is traditionally negative for the Loonie, expectations are for OPEC and Russia to cut output to support prices.

Over the remainder of the week, the IEA monthly report and updates on the coronavirus will remain the key driver.

It was an uncertain beginning of the week for the commodity currencies. In the meanwhile, how have the Asian currencies done?

For the Japanese Yen

There has been little influence from the economic calendar, with stats limited to current account figures that failed to move the dial.

The lack of stats left the Yen in the hands of the news wires that dictated market risk sentiment in the week.

We see the Yen set for a surge should there be a marked pickup in new coronavirus infections and increases in the mortality rate.

Last week, we had heard that the Chinese government was looking to change the narrative and shift focus away from the numbers. The better than anticipated coronavirus cases in the early part of the week may have been just that…

Elsewhere, there was an increase in the number of cases, which suggested that the virus had yet to peak.

For the Chinese Yuan

We’ve seen the bounce back to sub-CNY7 against the greenback. This came off the back of a jump in inflation and assured support from Beijing to limit the effects of the virus on the economy.

Assuming that there are no major shocks, this strengthening should continue, particularly if Beijing delivers a sizeable stimulus package.

China has returned to work and a partial tariff rollback at the end of the week will need to be met with overseas demand to make it meaningful.

On the data front, new loan figures at the end of the week will garner attention. The markets are expecting a jump that would support Beijing’s assurances of support.