The markets saw another rough week and this time, the US Dollar was at the mercy of the markets. Continued weak and slow economic data from the US saw investors eventually hit the sell button on the US Dollar, which fell to October lows of 96.25. Weak ISM manufacturing data, which is now into the fourth month of declining below the 50 level which marks a contraction, was more than enough of a reason for the markets to scale back their bets. As a result, losses in the US Dollar increased by Tuesday. Most of its peers, the AUD, JPY, EUR, NZD, GBP, CAD and the CHF posted strong gains in a one-day rally which saw the USD peers gain by over 2.0% on average. It was but an obvious move as we noted earlier this week in the weekly preview that US economic data would gain more attention as it signals US economic healthy after the rate hike in December 2015.
The markets, however, turned around after Friday after the January jobs report showed the US unemployment rate falling to a 7-year low of 4.90% with a modest pickup in average earnings which increased 2.50% above estimates of 2.0%, with the previous month being revised higher to 2.70% annualized. The monthly payroll change was, however, weak as was anticipated by the markets. Jobs grew at a slower pace of 151k, falling below estimates of 190k while previous month’s numbers were revised lower from 292k to 262k.
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This week also saw the Bank of England and the RBA’s monetary policy decisions. Both the Central Banks held rates steady at 0.50% and 2.0% respectively. However, the RBA’s statement was dovish as China continues to worry the Australian economy, whose trade balance numbers released during this week showed a stronger than expected deficit on falling exports to China. Data was also weaker by Friday with retail sales staying flat. AUDUSD which touched a new monthly high to 0.724 soon gave back some of its gains by Friday’s NY session. The Kiwi, on the other hand, was the top performer with NZDUSD testing a 3-week high to 0.675. The NZD found support on rather hawkish comments from RBNZ’s Wheeler and better than expected quarterly unemployment data.
The Bank of England’s monetary policy was a non-event if not for the MPC votes, which was unanimous this time with the previous dissenter, Ian McCafferty also voting to keep rates steady after nearly 5-months of voting for a rate hike. GBPUSD rallied strongly to trade near 1.465 before turning lower after the BoE’s MPC mandate and the economic forecasts which were very subdued.
From the Eurozone, the single currency obviously emerged stronger this week. Views from ECB officials were rather guarded this time around with ECB’s Mersch noting that the ECB is keeping all its options open and nothing was decided yet. Draghi had two opportunities to speak this week and did not reference much on what the ECB will do in March. EURUSD hit a high of 1.12 before the NFP release.
The Yen was the talk of the town this week as USDJPY erased all the BoJ led gains from the previous Friday. USDJPY fell back to 116 before managing to stabilize higher. The market moves questions the Central Bank’s policy on monetary easing. The Yen held on to its gains despite some BoJ officials coming out strongly noting that rates could fall as much as -0.20% from the current -0.10%, but the markets did not heed much.
The commodity markets managed to post gains this week too, with Gold leading the lot. Gold prices touched $1160 this week, last seen in October 2015, as strong risk aversion sentiment led by a weaker US Dollar managed to propel the Gold to new heights. Oil prices which were wobbly for the most part on comments and rumors from various OPEC countries were volatile but looks to be closing the week flat. WTI Crude Oil is trading at $31.6 a barrel at the time of writing, after initially rallying to above $33 after posting an intra-week low to $29.45
Economic events this week
Australia
- RBA leaves cash rate unchanged at 2.0%
- Building approvals m/m 9.20% vs. 4.80%
- Trade balance -3.54bn vs. -2.45bn
- RBA releases monetary policy statement
- Retail sales m/m 0.0% vs. 0.50%
New Zealand
- GDT Price index -7.40% vs. -1.40% previously
- Employment change 1/1 0.90% vs. 0.80%
- Unemployment rate 5.30% vs. 6.10%
- Labor cost index q/q 0.40% vs. 0.50%
- RBNZ Gov. Wheeler speech
Japan
- Final manufacturing PMI 52.3 vs. 52.4
- BoJ releases monetary policy minutes
- BoJ Gov. Kuroda speech
- Consumer confidence 42.5 vs. 42.8
- Leading indicators 102.0% vs. 102.8%
China
- Non-manufacturing PMI 53.5 vs. 54.4 previously
- Manufacturing PMI 49.4 vs. 49.6
- Caixin Manufacturing PMI 48.4 vs. 48.1
- Caixin Services PMI 52.4 vs. 50.5
Switzerland
- Manufacturing PMI 50.0 vs. 51.0
- Retail sales y/y -1.60% vs. -1.30%
- SNB Chairman Jordan speech
- Foreign currency reserves 575bn vs. 560bn
Eurozone
- Final manufacturing PMI 52.3 vs. 52.3
- Unemployment rate 10.40% vs. 1050%
- PPI m/m -0.80% vs. -0.40%
- Final services PMI 53.6 vs. 53.6
- Retail sales 0.30% vs. 0.40%
Canada
- Employment change -5.7k vs. 6k
- Trade balance -0.59bn vs. -2.2bn
- Unemployment rate 7.2% vs. 7.10%
US
- Core PCE Price Index m/m 0.0% vs. 0.10%
- ISM Manufacturing PMI 48.2 vs. 48.6
- ISM Manufacturing prices 33.5 vs. 34.7
- ADP nonfarm payroll change 205k vs. 193k
- ISM non-manufacturing PMI 53.5 vs. 55.1
- Weekly unemployment claims 285k vs. 279k
- Factory orders m/m -2.90% vs. -2.50%
- Average hourly earnings m/m 0.5% vs. 0.30%; y/y 2.50% vs. 2.30%
- Unemployment rate 4.90% vs. 5.0%
- Non-farm employment change 151k vs. 190k
- Trade balance -43.4bn vs. -43.2bn