Greenback regains momentum
Opening the week on a weaker note, questions were raised whether the US dollar was heading for a correction. But the Greenback managed to turn around and quickly regain its spot continuing its bullish momentum. Although economic data was mixed, from the broader scope of things, the US Dollar managed to remain strong against most of the fundamentally weaker currencies. The monthly jobs numbers for November saw a record beating 321k new jobs being added to the economy with an upward revision to the previous month, while unemployment rate remained unchanged. Boosted by the better than expected jobs report, focus will be on whether the US Dollar index will manage to break the resistance level at 89.20 levels in the coming week.
- ISM manufacturing 58.7 vs.27.9
- Construction spending m/m 1.1% vs. 0.6%
- ADP non-farm payroll change 208k vs. 223k
- Revised non-farm productivity q/q 2.3% vs. 2.3%
- Final services PMI 56.2 vs. 56.3
- ISN non-manufacturing PMI 59.3 vs. 57.5
- Monthly non-farm payroll employment change 321k vs. 231k
- US unemployment rate 5.8% vs. 5.8%
Markets disappointed on ECB
The Euro started the week strong, but mostly riding on the Greenback’s weakness, which soon flipped over to decline starting Tuesday as services PMI started to pour in. The markets also started pricing in a possibility of QE measures being announced and most importantly the timeline for the start of QE. The markets were in for a shock when Draghi’s opening statement and the preceding press conference failed to shed any new light on QE plans, which saw the Euro stage a very strong rally, reversing from lows of 1.23 to end up trading near 1.24 towards the end of ECB’s press conference. Focus now shifts to the Q1 of 2015 as far as the Eurozone’s QE is concerned.
- Eurozone final manufacturing PMI 50.1 vs. 50.4; services PMI 51.1 vs. 51.3
- Retail sales m/m soft at 0.4%
- ECB minimum bid rate 0.05%
- German factory orders m/m 2.5% vs. 0.5%; y/y 2.4% vs. 0%
- Eurozone revised Q3 GDP unchanged at 0.2%
Yen, weak but stabilized
There were no major shifts in the Japanese Yen which continued to drift along the previous week’s themes of the BoJ’s QQE stimulus expansion and the snap election due on December 14th. The Japanese premier Shinzo Abe called for snap elections and expects to see his LDP party gain a majority share in the seats and if the results come in line with expectations, the markets will see this as an overwhelming approval of Abenomics, which could pave way for more easy monetary policy. There was no major news released this past week from Japan.
- Capital spending q/y up 5.5%
- Final manufacturing PMI 52 vs. 52.1
- Coincident leading indicator 104% vs. 104.2%
Sterling fails to capitalize on gains
The British Sterling saw a mixed week with Construction PMI coming in weaker but better than expected results in manufacturing and services sector. The Cable managed to rally but it was short lived as the pair struggled to keep up its momentum. With BoE leaving interest rates unchanged, the monetary landscape in the UK remains largely unchanged with the main theme coming in from the US as far as the Cable was concerned. The UK’s autumn forecast statement saw some upward revisions to GDP for 2014.
- Manufacturing PMI 53.5 vs. 53.1; construction PMI 59.4 vs. 61.1; services PMI 58.6 vs. 56.6
- BRC shop price index y/y -1.9%
- Halifax HPI m/m 0.4% vs. 0.2%
- BoE leaves interest rates unchanged at 0.5%
Aussie weakens on possible rate cuts
The Australian Dollar remained subdued and failed to make any gains on rising commodity prices this week. The RBA left interest rates unchanged and stuck to its rhetoric that the Aussie was fundamentally overvalued. Economic data this week included the quarterly GDP which saw weaker than expected growth but a better than expected retail sales data. The Aussie simply couldn’t compete with the Greenback, trading in a range near the 0.84 support level. Expectations are building up for a possible rate cut around Q2 of 2015.
- AIG Manufacturing index 50.1
- Building approvals m/m 11.4% vs. 5.2%
- RBA cash rate 2.5%
- GDP q/q 0.3% vs. 0.7%
- Retail sales m/m 0.4% vs. 0.1%