The Weekly Wrap – The Pound took a Brexit Tumble, with Central Banks Also in Focus

Out of the U.S

It was a quieter week on the economic data front.

Key stats in the week included August inflation figures and the weekly jobless claims figures.

In a shortened week, the stats were skewed to the positive relative to forecasts.

Both wholesale and consumer inflationary pressures eased less than had been anticipated in August. July JOLT’s job openings also painted a more optimistic view on labor market conditions.

Weekly jobless claims figures disappointed, however, with initial jobless claims sitting at 884k in the week ending 4th September. Economists had forecast jobless claims of 846m. The good news, however, was that there was no increase. In the week prior claims also stood at 884k.

While the stats suggested that the Dollar should have been on the back foot, some jawboning and risk aversion supported the Greenback in the week.

In the equity markets, the NASDAQ and S&P500 slid by 4.06% and by 2.51% respectively. The Dow ended the week down by a more modest 1.66%.

Out of the UK

It was a busy week on the economic calendar. The markets had to wait for a Friday data deluge, however, to get a sense of what lies ahead on the monetary policy front.

The BoE is set to deliver next week and the stats were not conclusive on what the BoE will deliver.

Both industrial and manufacturing production rose by more than expected in July, while easing from a June spike.

GDP numbers did disappoint, however, coming up short of forecasts, with trade data also raising red flags.

In July, the manufacturing production rose by 6.3%, following an 11% jump in June. Economists had forecast a 5% rise.

All in all, however, the Pound was under the Brexit hammer in the week. The chances of a no-deal Brexit rose sharply amidst economic doom and gloom. A reintroduction of COVID-19 containment measures from 14th September was also negative for the Pound.

In the week, the Pound tumbled by 3.64% to $1.2796. In the week prior, the Pound had fallen by 0.55% to $1.3279

The FTSE100 ended the week up by 4.02%, reversing a 2.76% slide from the previous week.

Out of the Eurozone

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

The focus was in the 1st half of the week, with economic data from Germany and the Eurozone in the spotlight.

Stats from German were mixed in the week, while numbers from the Eurozone were skewed to the positive.

In July, industrial production fell by 0.9%, following a 0.6% decline in June. While production was in decline, Germany saw its trade surplus widen from €14.5bn to €18.0bn.

The widening was positive, with exports rising by 4.7% versus a 1.1% increase in imports.

On the GDP front, the Eurozone’s 2nd quarter GDP figures were revised upwards. Nothing convincing enough, however, to support a EUR rebound.

For the 2nd quarter, the economy contracted by 11.8%. In the 1st quarter, the economy had contracted by 3.6%.

While the numbers influenced, the focus was on the ECB, the monetary policy decision, and the Lagarde press conference.

The EUR had spiked at a 5-day high $1.1977 before easing back during the ECB press conference.

For the current year, while the ECB revised up its economic forecasts from 8.7% to 8.0%, the ECB did note that the economic recovery would likely be slower.

On the exchange rate front, Lagarde stated that the ECB does not target the exchange rate. She did say, however, that the ECB will monitor the EUR from a price stability perspective.

For the week, the EUR rose by 0.07% to $1.1846. In the week prior, the EUR had fallen by 0.55% to $1.1838.

For the European major indexes, it was a bullish week. The DAX30 rallied by 2.80%, with the CAC40 and EuroStoxx600 gaining 1.39% and 1.67% respectively.

For the Loonie

It was a quiet week on the economic calendar.

While economic data was limited to housing start numbers, the Bank of Canada’s monetary policy decision was the main event.

Following the FED’s revision to its monetary policy framework, the BoC delivered a dovish message. While dovish, the BoC did hold policy unchanged on Wednesday.

On the positive, the BoC acknowledged that an economic bounce-back looked to be faster than previously forecasted. The BoC did warn, however, of indicators pointing to a slow and choppy recovery process.

A slide in crude oil prices in the week added downward pressure in the week.

The Loonie fell by 0.90% to end the week at C$1.3179. In the week prior, the Loonie had risen by 0.28%.

Elsewhere

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

In the week ending 11th September, the Aussie Dollar rose by 0.03% to $0.7284, while the Kiwi Dollar fell by 0.82% to $0.6666.

For the Aussie Dollar

It was a quiet week for the Aussie Dollar on the economic calendar.

Key stats including August business confidence and September consumer confidence figures.

Both showed improvement following the negative reaction to the Victoria lockdown measures in the month prior.

With the RBA looking for business investment and consumer spending to support recovery, the numbers delivered much-needed support.

For the Kiwi Dollar

It was also a quieter week on the economic calendar.

Key stats included August electronic retail sales and business PMI numbers.

Both were skewed to the negative, weighing on the Kiwi Dollar in the week.

In August, electronic card retail sales slumped by 7.9%, with the Business PMI falling from 58.8 to 50.7.

A reintroduction of COVID-19 containment measures weighed on spending and the PMI.

Following the RBNZ’s talk of negative rates, there will need to be an improvement in September. Further downside and expect the Kiwi Dollar to give up more ground.

For the Japanese Yen

It was a busier week on the economic calendar.

Household spending and 2nd quarter GDP numbers were in focus in the early part of the week. Neither set of numbers were positive, however, as the Japanese economy continues to struggle.

In July, household spending slid by 6.5%, following a 13% bounce in June. In the 2nd quarter, Japan’s economy contracted by 7.9%, which was a downward revision from a prelim 7.8%.

At the end of the week, there was some positive data, however. The BSI Large Manufacturing Conditions Index rebounded from -52.3 to 0.10 for the 3rd quarter.

With the BoJ in action next week, however, the 3rd quarter indicator may be of little consolation.

The Japanese Yen rose by 0.08% to ¥106.16 against the U.S Dollar. In the week prior, the Yen had fallen by 0.83%.

Out of China

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

Key stats included August’s trade data and inflation figures.

The stats delivered mixed results in the week.

China’s USD trade surplus narrowed from $62.33bn to $58.93bn in August. While exports rose by 9.5%, imports fell by 2.1%, raising concerns over demand.

Inflation figures delivered mixed results. While wholesale deflationary pressures eased in August, inflation softened.

The annual rate of inflation eased from 2.7% to 2.4%. By contrast, the producer price index fell by 2%, year-on-year, following a 2.4% decline in July.

In the week ending 11th September, the Chinese Yuan rose by 0.12% to CNY6.8344. In the week prior, the Yuan had risen by 0.34%.

The CSI300 and the Hang Seng struggled in the week, with losses of 3.00% and 0.78% respectively.


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