Weekly Forex Wrap Up: February 2nd to February 6th
The week was marked by a weaker Dollar and a rising Euro and the British Pound, quite a stark contrast to the prevailing down trend seen for the past few quarters. If anything, this week could be potentially remembered for what seems like a correction to the major trends across the board.
Crude oil was in the news after what seems like a short term corrective rally. Prices lifted off from last week’s lows of 43.91, trading above the $50 handle.
Yen, muted for the week
The Japanese Yen was little changed largely due to lack of any fundamentals. The safe haven status of the Yen was reflected this week as the currency markets were mostly mixed. While the Yen managed to ease its gains against the Euro, it was rather choppy against the commodity risk currencies. USDJPY continues to look weaker.
- Final manufacturing PMI 52.2 vs. 52.1
- Average cash earnings y/y 37.4% vs. 40.1%
Mixed PMI’s and BoE non-event, yet Pound strengthens
The first week of the month was marked with the PMI releases and the BoE monetary policy meeting. While the PMI’s overall saw signs of growth, the Pound’s reaction was rather mixed. While the Cable lost ground on the manufacturing PMI release, the pair instantly reversed its losses on upbeat construction and services data. Despite this week’s BoE monetary policy remaining a non-event with interest rates unchanged, the Sterling managed to rise above 1.52 levels.
- Manufacturing PMI 53 vs. 52.9
- Services PMI 59.1 vs. 56.9
- Construction PMI 57.2 vs. 56.6
- Halifax HPI m/m 2% vs. 0.1%
- BoE official bank rate 0.5%
Euro pushes for a second week of gains
Despite the risks of the Greece debt negotiations which seemingly is looking to be a close call, the Euro performed remarkably better, in a way reflecting the view that the possibility of a Grexit will not rub off to the Eurozone peripheries. Spain led the way with better than expected growth, keeping in trend its upbeat GDP numbers last month. The Eurozone economic projections were also revised higher for 2015 and 2016.
- Spain manufacturing PMI 54.7 vs. 54.2; services PMI 56.7 vs. 54.5
- Italy manufacturing PMI 49.9 vs. 49.3; services PMI 51.2 vs. 49.9
- Eurozone final manufacturing PMI 51; services PMI 52.7 vs. 52.3
- Italy prelim CPI m/m -0.4% vs. -0.1%
- Eurozone retail sales m/m 0.3% vs. -0.1%; PPI m/m -1% vs. -0.7%
- German factory orders m/m 4.2% vs. 1.4%
- German industrial production m/m 0.1% vs. 0.4%
RBA follows the trend, cuts interest rates
Although it was closely contested, the RBA finally bit the dust by cutting interest rates to 2.25% while maintaining its usual rhetoric about a higher exchange rate hurting the export sector in the backdrop of falling commodity prices. Nonetheless, the Aussie was seen to be quite resilient managing to erase the losses from the rate cut to trade above 0.78 levels.
- RBA official bank rate 2.25%
- AIG manufacturing index 49 vs. 46.9
- Building approvals m/m -3.3% vs. -4.8%
- AIG services index 49.9 vs. 47.5
- Retail sales m/m 0.2% vs. 0.3%
Stronger US Dollar hurting exports
The significant rally in the US Dollar is starting to see its effect roll into the export sector as data this week came out weaker than expected from the manufacturing and construction. The weaker economic data comes after last week’s durable goods orders falling below estimates, in what seems to be the new down trend. The Greenback opened the week on a bearish note and today’s NFP was moderately bullish with the US economy adding 257k new jobs, above estimates of 230k. Previous month’s NFP numbers were revised higher to 329k from 252k. The unemployment rate however was higher at 5.7%, above 5.6% estimates.
There was a general pick up in the labor markets as various subcomponents of the unemployment report showed a marked improvement. Manufacturing payrolls were up 22k, despite recent weaknesses while private payrolls rose 267k, above estimates of 223k. There was also an uptick in the average hourly earnings, which rose 0.5%, above 0.3% estimates and 2.2% increase on an annualized basis.
- ISM manufacturing PMI 53.5 vs. 54.9
- Construction spending m/m 0.4% vs. 0.9%
- ISM manufacturing prices 35 vs. 40.1
- Factory orders m/m -3.4% vs. -1.8%
- ADP nonfarm employment change 213k vs. 224k
- Final services PMI 54.2 vs. 54.3
- ISM non-manufacturing PMI 56.7 vs. 56.6
- Trade balance -46.6bn vs. -38.2bn
- Prelim nonfarm productivity q/q -1.8% vs. 0.3%
- Nonfarm employment change 257k vs. 236k
- Unemployment rate 5.7% vs. 5.6%