The Weekly Wrap – Inflation and Consumer Sentiment Sink the Greenback…

The Stats

It was a quieter week on the economic calendar, in the week ending 13^th August.

A total of 40 stats were monitored, which was down from 50 stats in the week prior.

Of the 40 stats, just 8 came in ahead forecasts, with 28 economic indicators coming up short of forecasts. There were 4 stats that were in line with forecasts in the week.

Looking at the numbers, 17 of the stats reflected an upward trend from previous figures. Of the remaining 23 stats, 21 reflected a deterioration from previous.

For the Greenback, a string of disappointing economic data from the U.S sent the Dollar into the red. In the week ending 13^th August, the Dollar Spot Index fell by 0.30% to 92.518. In the previous week, the Dollar had risen by 0.68% to 92.800.

Out of the U.S

Key stats in the week included inflation, jobless claims, and consumer sentiment figures.

In July, inflation numbers came in softer than expected, with the core annual rate of inflation softening from 4.5% to 4.3%.

While the annual rate of inflation held steady at 5.4%, however, consumer prices rose by just 0.5% in July. In June, consumer prices had risen by 0.9%.

Weekly jobless claims fell from 387k to 375k in the week ending 6^th August. Economists had forecast a decline to 365k.

All in all, the numbers looked to have eased pressure on the FED following the impressive NFP numbers from the week prior.

At the end of the week, consumer sentiment added further downward pressure on the greenback.

According to prelim figures, the Michigan Consumer Sentiment Index slid from 81.2 to 702. Economists had forecast an increase to 81.5. The Michigan Consumer Expectations Index also took a hit, falling from 79.0 to 65.2.

Out of the UK

Economic data was on the busier side, with GDP numbers for the 2^nd quarter the key stats of the week.

In the 2^nd quarter, the economy expanded by 4.8%, quarter-on-quarter, versus a forecasted 5.1%. The economy had contracted by 1.6% in the previous quarter.

Year-on-year, the economy expanded by 22.2%, falling short of a forecasted 22.5%. In the 1^st quarter, the economy had contracted by 6.1%.

Manufacturing and industrial production figures also fell short of forecasts.

Manufacturing production was up 13.9%, year-on-year, versus a forecasted 14.0%. Industrial production was up 8.3%, falling short of a forecasted 10.8%.

Trade data also failed to impress, with the trade deficit widening from £0.2bn to £2.5bn in June.

Ahead of the stats, sentiment towards monetary policy and the UK government had weighed on the Pound.

News of Boris Johnson threatening to sack Rishi Sunak was Pound negative. There was also talk of MPC member Saunders being the only hawk, raising doubts of an imminent move on policy.

In the week, the Pound slipped by 0.04% to end the week at $1.3866. In the week prior, the Pound had fallen by 0.23% to $1.3872.

The FTSE100 ended the week up by 1.34%, following a 1.29% gain from the previous week.

Out of the Eurozone

It was a mixed set of numbers on the economic data front.

German and Eurozone trade and economic sentiment figures drew plenty of attention.

Germany’s trade surplus widened from €12.5bn to €16.3bn, with the Eurozone’s widening from €12.3bn to €18.1bn.

Economic sentiment figures were disappointing, however.

Germany’s ZEW Economic Sentiment Index fell from 63.3 to 40.4 in August. The Eurozone’s Index slid from 61.2 to 41.7.

Also negative was an unexpected fall in Eurozone industrial production, which declined by 0.3% in June. Production had fallen by 1.1% in May.

For the week, the EUR rose by 0.30% to $1.1797. In the week prior, the EUR had fallen by 0.91% to $1.1762.

The CAC40 rose by 1.16%, with the DAX30 and the EuroStoxx600 ending the week up by 1.37% and by 1.25% respectively.

For the Loonie

It was a particularly quiet week on the economic data front.

There were no major stats out of Canada to provide the Loonie with direction in the week.

In the week ending 13^th August, the Loonie rose by 0.31% to C$1.2515. In the week prior, the Loonie had fallen by 0.63% to C$1.2554.

Elsewhere

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

The Aussie Dollar rose by 0.19% to $0.7370, with the Kiwi Dollar ending the week up by 0.46% to $0.7042.

For the Aussie Dollar

Business and consumer confidence figures were in focus in the week.

The stats were skewed to the negative, with fresh lockdown measures weighing on sentiment.

In July, the NAB Business Confidence Index fell from 11 to -8. For August, the Westpac Consumer Confidence Index fell by 4.4% to 104.1.

While consumer confidence weakened, this was still considered a solid number, limiting the impact on the Aussie Dollar.

For the Kiwi Dollar

It was a quiet week, with the July Business PMI the key stat of the week.

In July, the Business PMI rose from 60.7 to 62.6, coming in ahead of a forecasted fall to 60.0.

Looking at the sub-components, a pickup in the pace of hiring and a more marked increase in new orders were key.

For the Japanese Yen

It was a particularly quiet week, with no major stats from Japan to provide direction.

The Japanese Yen rose by 0.60% to ¥109.59 against the U.S Dollar. In the week prior, the Yen had fallen by 0.48% to ¥110.25.

Out of China

Inflation figures were in focus at the start of the week.

In July, the annual rate of inflation softened from 1.1% to 1.0%, while consumer prices rose by 0.3% in the month. Consumer prices had fallen by 0.4% in June.

Wholesale inflationary pressures continued to pick up, however.

The annual rate of wholesale inflation accelerated from 8.8% to 9.0% in July. July’s figures suggested that a further pickup in inflationary pressures could be on the horizon.

In the week ending 13^th August, the Chinese Yuan rose by 0.03% to CNY6.4774. In the week prior, the Yuan had ended the week down by 0.34% to CNY6.4831.

The CSI300 and the Hang Seng ended the week up by 0.81% and by 0.50% respectively.