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The Weekly Wrap – COVID-19 Vaccine, Brexit, Stimulus Talks, and Stats Were in Focus

Out of the U.S

It was a busy week on the economic data front.

At the start of the week, industrial production figures showed slower output in November.

Retail sales figures for November, also disappointed, with core retail sales and retail sales on the slide. Core retail sales fell by 0.9%, with retail sales falling by 1.1%.

Adding to the negative sentiment ahead of the FED were disappointing service sector PMI numbers.

In December, the service sector PMI fell from 58.4 to 55.3, reflecting the effects of the spike in new COVID-19 cases.

On Thursday, weekly jobless claims and Philly FED Manufacturing figures wrapped up a busy week.

Yet another red flag on the labor market front, with initial jobless claims jumping to 885k in the week ending 11th December.

Philly FED manufacturing numbers also disappointed, with the Index falling from 26.3 to 11.1.

On Wednesday, the FED added to the negative sentiment towards the Dollar, delivering a dovish tone.

While holding monetary policy unchanged and revising up growth forecasts, the promise of holding bond purchases and interest rates at current levels weighed.

In the equity markets, the S&P500 rose by 1.25%, with the Dow and the NASDAQ ending the week with gains of 0.44% and 3.05% respectively.

Out of the UK

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

Employment figures on Tuesday disappointed, with claimant counts and the unemployment rate on the rise.

On Wednesday, the focus shifted to inflation and private sector PMI numbers.

The stats were skewed to the negative once more. Inflationary pressures eased in November, with the services sector contracting in December.

With the stats skewed to the negative, the focus then shifted to the BoE on Thursday.

In line with market expectations, the BoE left monetary policy unchanged, citing economic uncertainties.

At the end of the week, November retail sales figures wrapped things up. While the numbers were positive relative to forecasts, the figures reflected the reintroduction of lockdown measures.

Month-on-month, core retail sales fell by 2.6%, with retail sales tumbling by 3.8%.

While the stats were skewed to the negative, agreement to continue Brexit negotiations drove demand for the Pound.

In the week, the Pound rallied by 2.27% to $1.3524. In the week prior, the Pound had fallen by 1.61% to $1.3224.

The FTSE100 ended the week down by 0.27%, following a 0.05% loss from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

Prelim private sector PMI numbers for December were the main area of focus in the week.

Better than expected PMIs from France, Germany, and the Eurozone provided EUR support.

In December, Germany’s manufacturing PMI hit a 34-month high of 58.6. Coupled with a return to expansion in France, the Eurozone’s manufacturing PMI rose from 53.8 to 55.5.

Service sector activity remained a drag, however. In spite of a slower rate of contraction, the Eurozone’s composite came in at 49.8, up from 45.3 in November.

At the end of the week, Germany’s IFO Business Climate Index figures also drew attention.

In December, the Business Climate Index rose from 90.9 to 92.1, with the Business Expectations sub-Index up from 91.8 to 92.8. The Current Assessment sub-Index also got a boost, rising from 90.0 to 91.3.

Economic resilience and less skepticism towards the next 6-months supported the pickup in December. The upside came in spite of certain sectors being impacted by fresh lockdown measures.

With the stats skewed to the positive, hopes of vaccine approvals by the EMA next week added support for the EUR and the European majors.

For the week, the EUR rose by 1.20% to $1.2257. In the week prior, the EUR had fallen by 0.07% to $1.2112.

For the European major indexes, it was a bullish week. The DAX30 led the way, rallying by 3.94%, with the CAC40 and the EuroStoxx600 rising by 0.37% and by 1.48% respectively.

For the Loonie

It was a busier week on the economic data front. Key stats included November inflation and October retail sales figures.

A pickup in inflationary pressures in November delivered support mid-week. The annual rate of core inflation picked up from 1.0% to 1.5%.

At the end of the week, retail sales and core retail sales were skewed to the negative, however. Core retail sales were flat in October, after a 1% rise in September. Retail sales rose by 0.4%, easing from a 1.1% rise in September.

In the week ending 11th December, the Loonie fell by 0.15% to C$1.2788. In the week prior, the Loonie had risen by 0.12% to C$1.2769.

Elsewhere

It was another bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 18th December, the Aussie Dollar rose by 1.18% to $0.7622, with the Kiwi Dollar ending the week up by 0.73% to $0.7136.

For the Aussie Dollar

It was a relatively quiet week on the economic calendar.

Key stats included November employment figures. Another pickup in employment led to a fall in the unemployment rate from 7.0% to 6.8%.

The fall in unemployment came in spite of a rise in the participation rate, another boost for the Aussie Dollar.

On the monetary policy front, the RBA meeting minutes had a relatively muted impact on the Aussie Dollar. There were no major surprises, with the RBA likely to leave cash rates unchanged for at least 3-years.

Progress towards a global COVID-19 vaccine also delivered support for riskier assets.

For the Kiwi Dollar

It was a busier week on the economic calendar.

Key stats included consumer and business confidence, trade, and GDP figures.

The stats were skewed to the positive supporting the Kiwi Dollar’s return to $0.71 levels.

In the 4th quarter, consumer confidence saw a marked increase, with business confidence turning positive in December.

GDP figures also impressed, with the economy expanding by 14% in the 3rd quarter. In the 2nd quarter, the economy had contracted by 11%.

While a widening in the trade surplus was also positive, a slide in imports contributed to the widening. COVID-19 vaccinations and a return to normal at NZ ports should support a rebound in imports, however.

For the Japanese Yen

It was a particularly busy week on the economic calendar.

At the start of the week, Tankan survey figures were in focus and skewed to the positive. Private sector conditions improved in the 4th quarter.

The Large Manufacturers Index rose from -27 to -10, with the Large Non-Manufacturers Index rising from -12 to -5.

Trade data and private sector PMI figures disappointed mid-week, however.

In November, the trade surplus narrowed from ¥871.7bn to ¥366.8bn, with exports sliding by 4.2%.

While the service and manufacturing PMIs saw a slight rise in December, both sectors continued to contract.

Wrapping things up at the end of the week were inflation figures that were also negative. Deflationary pressures picked up in November, with core consumer prices falling by 0.9%. In October, core consumer prices had fallen by 0.7%.

On the monetary policy front, the BoJ left policy unchanged at the end of the week, while extending COVID-19 support measures by an additional 6-months.

The Japanese Yen rose by 0.71% to ¥103.3 against the U.S Dollar. In the week prior, the Yen had risen by 0.12% to ¥104.04.

Out of China

Industrial production, retail sales, and unemployment figures for November were in focus early in the week.

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

Year-on-year, industrial production rose by 7.0%, following a 6.9% increase in October. Retail sales increased by 5%, following a 4.3% rise in October, supported by improving employment conditions.

The unemployment rate fell from 5.3% to 5.2% in the month.

In the week ending 18th December, the Chinese Yuan fell by 0.10% to CNY6.5400. In the week prior, the Yuan had fallen by 0.23% to CNY6.5463.

The CSI300 rose by 2.26%, while the Hang Seng ended the week down by 0.03%.


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