The Weekly Wrap – US inflation and FED comments delivered a choppy week for markets

Statistics

It was a calmer week on the economic calendar, with the week ending on the 14thand January.

A total of 44 stats were monitored, up from 63 stats the previous week.

Of the 44 statistics, 19 are ahead of forecasts, with 19 economic indicators below forecasts. 6 statistics were in line with the forecast for the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous numbers. Of the remaining 25 stats, 23 reflected a deterioration from the previous ones.

For the greenback, it was back in the red. In the week ending 14and In January, the Dollar Spot Index fell 0.58% to end the week at 95.167. A 0.65% drop on Wednesday did the most damage as markets reacted to US inflation figures. The previous week, the index rose 0.07% to 95.739.

Outside the United States

It was a big week for the dollar. During the first half of the week, testimony from Fed Chairman Powell and December inflation figures were the main drivers.

While the Fed Chairman talked about the need for rate hikes, there was no mention of the need for more than 3 this year. This was seen as positive for riskier assets and negative for the dollar.

On Wednesday, a new spike in inflation failed to scare the markets. This despite the annual US inflation rate at its highest since 1982. An easing in energy prices for the first time since the uptrend was seen as a sign of a possible plateau.

Unemployment claims failed to impress on Thursday, with initial jobless claims rising from 207,000 to 230,000 in the week ending the 7th.and January.

December retail sales figures were concluded on Friday. In December, retail sales fell 1.9% from an expected decline of 0.1%. Core retail sales fell 2.3% from an expected 0.2% increase.

Outside the UK

Retail sales were in focus at the start of the week. In December, the BRC Retail Sales Monitor rose 0.6% year-on-year versus a forecast rise of 0.3%. In November, retail sales rose 1.8%.

More importantly, however, are the manufacturing output and GDP figures at the end of the week.

The data was skewed towards the positive, supporting the more hawkish outlook on the BoE’s monetary policy.

Manufacturing output rose 1.1% in November versus 0.2% expected. In October, manufacturing production increased by 0.1%.

On a month-to-month basis, the economy grew 0.9% in November, following growth of 0.2% in October, which was also positive for the pound.

During the week, the pound rose 0.64% to end the week at $1.3675. The previous week, the pound was up 0.41% at $1.3588.

The FTSE100 ended the week up 0.77% after gaining 1.36% from the previous week.

Outside the euro zone

Key statistics included eurozone unemployment, industrial production and trade data for November.

The statistics were skewed towards the positive. The eurozone unemployment rate fell from 7.3% to 7.2%, with industrial production up 2.3% over the month. Production fell 1.3% in October.

However, trade data was negative for the Euro, while final inflation figures for France and Spain had a moderate impact on the Euro. The euro zone’s trade balance narrowed from a surplus of 3.3 billion euros to a deficit of 1.5 billion euros in November. This is the euro zone’s first trade in goods deficit since January 2014.

From the ECB, the Economic Bulletin sent mixed signals, while suggesting that inflation was more than transitory.

For the week, the euro rose 0.44% to $1.1411. The previous week, the euro had fallen 0.08% to $1.1361.

The DAX30 slid 0.40%, with the CAC40 and EuroStoxx600 ending the week down 1.05% respectively.

For the loon

There were no hard stats for the markets to consider. The lack of data left market sentiment towards the BoC’s monetary policy swaying, with market expectations of an imminent move providing support.

A rise in crude oil prices during the week was also positive for the Loonie.

In the week ending 14and In January, the Loonie rebounded 0.72% to C$1.2552 against the greenback. The previous week, the Loonie had fallen 0.05% to C$1.2643.

Somewhere else

It was a bullish week for the Australian Dollar and the Kiwi Dollar.

The Australian dollar rose 0.36% to $0.7207, with the Kiwi dollar gaining 0.37% to end the week at $0.6804. A sell-off on Friday limited the rise for the week.

For the Australian dollar

Retail sales and trade data were the focus, which produced mixed results.

The key, however, was a 7.3% jump in retail sales in November compared to a forecast increase of 3.9%. In October, retail sales rose 4.9%.

Australia’s trade surplus fell from A$11.22 billion to A$9.423 billion in November. Economists had forecast a surplus of A$10.60 billion.

For the kiwi dollar

Economic data was limited to construction permits, which had a moderate impact on the Kiwi Dollar during the week.

For the Japanese yen

There were no material statistics to provide the yen with direction in the week.

The Japanese yen rebounded 1.19% to ¥114.190 against the US dollar. The previous week, the yen had fallen 0.42% to ¥115.560.

Outside of China

It was a relatively busy week on the economic data front. Inflation and trade data were the focus of the week.

In December, inflationary pressures eased, with China’s annual inflation rate falling from 2.3% to 1.5%. China’s annual wholesale inflation rate fell from 12.9% to 10.3%. However, these were positive for riskier assets.

Trade data was upbeat for December. China’s trade surplus in USD fell from $71.72 billion to $94.46 billion. Exports increased by 20.9% year-on-year, while imports increased by 19.5%. Exports increased by 22.0% and imports by 31.7% in November.

In the week ending 14and In January, the Chinese yuan rose 0.39% to CNY 6.3528. The previous week, the yuan ended the week down 0.34% at CNY 6.3778.

The Hang Seng index ended the week up 3.79%, while the CSI300 slipped 1.98%.

This article originally appeared on FX Empire

More from FXEMPIRE: