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The Weekly Wrap – Another Spike in Inflation Delivered a Dollar Boost

Out of the U.S

At the start of the week, inflation was back in focus, with the U.S annual rate of inflation accelerating from 7.9% to 8.5%. In March, the core annual rate of inflation picked up from 6.4% to 6.5%.

On Thursday, the market focus shifted to retail sales, jobless claims, and consumer sentiment.

In March, retail sales increased by 0.5%, with core retail sales rising by 1.10%. Economists had forecast increases of 0.6% and 1.0%, respectively.

Jobless claims held below the 200k level. In the week ending April-08, jobless claims increased from 167k to 185k.

While of less influence, consumer sentiment also drew interest amidst the shift in FED policy forced by the surge in consumer prices.

In April, the Michigan Consumer Sentiment Index jumped from 59.4 to 65.7.

In the week ending April 15, 2022, the Dollar Spot Index rose by 0.71% to end the week at 100.50. The Index jumped by 1.18% to 99.796 in the week prior.

Out of the UK

GDP and production, inflation, and employment figures were the key stats of the week.

It was a mixed set of numbers for the Pound, with the UK economy growing slower than forecast.

In February, the UK economy grew by 0.1%, slowing from 0.8% growth in March. Year on year, the economy also expanded at a slower pace, easing from 10.5% to 9.5%.

Manufacturing and industrial production figures were disappointing, while the UK’s unemployment rate slipped from 3.9% to 3.8% in February. Claimant counts for March were also positive, falling by 46.9k. In February, claimant counts declined by 58.0k.

On Wednesday, inflation figures added further pressure on the BoE to take a more aggressive stance on monetary policy.

In March, the UK’s annual rate of inflation accelerated from 6.2% to 7.0%.

In the week, the Pound rose by 0.27% to end the week at $1.3060. The Pound fell by 0.68% to $1.3025 in the week prior.

The FTSE100 ended the week down 0.68%, following a 1.73% gain from the previous week.

Out of the Eurozone

It was a quieter week, with the markets focused on economic sentiment and ECB monetary policy.

Economic sentiment figures for Germany and the Eurozone weakened further. In April, Germany’s ZEW Economic Sentiment Index slipped from -39.3 to -41.0, with the Eurozone’s falling from -38.7 to -43.0.

While inflation expectations softened, limiting the damage, fears of stagflation and the war in Ukraine weighed on sentiment.

Other stats in the week included finalized inflation figures for member states that had a muted impact on the EUR and European bourses.

On the monetary policy front, the ECB left the deposit and cash rates unchanged on Thursday. The EUR took a hit in response to the ECB falling short of market policy expectations. For the European majors, the more cautious stance was market positive.

Unlike other central banks, the ECB left interest rates unchanged and talked of downside risks to the economy stemming from the war in Ukraine.

For the week, the EUR fell by 0.62% to $1.0810. In the previous week, the EUR slid by 1.50% to $1.0877.

In the week, the CAC40 rose by 0.63%, while the DAX and the EuroStoxx600 saw losses of 0.84% and 0.25%, respectively.

For the Loonie

It was a particularly quiet week, with stats limited to manufacturing and wholesale sales figures.

The stats had a muted impact on the Loonie, with the Bank of Canada monetary policy decision the main event.

In line with market expectations, the BoC lifted interest rates by 50 basis points to 1.00%, with more rate hikes to come in a bid to curb inflation.

In the week ending April-15, the Loonie fell by 0.30 to C$1.2610 against the Greenback. The Loonie fell by 0.40% to C$1.2572 in the week prior.

Elsewhere

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

The Aussie Dollar fell by 0.84% to $0.7395, with the Kiwi Dollar sliding 1.24% to end the week at $0.6764.

For the Aussie Dollar

Business and consumer confidence and employment were the key areas of focus in the week.

The stats were mixed. While business confidence improved, consumer sentiment waned once more. The Westpac Consumer Sentiment Index fell by 0.9% after a 4.2% slide in March.

Of greater significance was weaker than expected employment data. In March, employment increased by 17.9k, falling short of forecasts, and a 77.4k jump in February. As a result, the unemployment rate held steady at 4.0% versus a forecasted fall to 3.9%.

For the Kiwi Dollar

Key stats in the week included electronic card retail sales, business confidence, and Business PMI numbers.

The stats were also mixed. Electronic card retail sales fell again, with business confidence also deteriorating. In March, the Business PMI rose from 53.6 to 53.8, the only positive stat of the week.

While the stats drew interest, the RBNZ monetary policy decision was the main event.

On Wednesday, the RBNZ lifted rates by 50 basis points to 1.5% to offer greater flexibility to tackle economic uncertainty. Economists had forecast a 25-basis point hike. The RBNZ raised rates to curb inflation.

For the Japanese Yen

There were no stats to provide the Japanese Yen with direction. The lack of stats left the Yen on the defensive against the Dollar, with monetary policy divergence favoring the Greenback.

The Japanese Yen slid by 1.71% to end the week at ¥126.46 against the Dollar. In the week prior, the Yen ended the week down by 1.49% to ¥124.34.

Out of China

In a relatively quiet week, the market focused on inflation and trade data from China.

The stats were mixed. A 14.7% rise in exports, year-on-year, was market positive, while a pickup in inflationary pressure weighed on riskier assets.

In March, China’s annual rate of inflation accelerated from 0.9% to 1.5% as supply chain disruption intensified.

In the week ending April-15, the Chinese Yuan fell by 0.10% to CNY6.3715. The Yuan fell by 0.03% to CNY6.3650 in the week prior.

The Hang Seng Index ended the week down 1.62%, with the CSI300 falling by 0.99%.


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