The dollar started this past Monday quiet on the macroeconomic data front, with the US Empire State Manufacturing Survey for the month of October kicking off the week. The result came in higher than expected rising from 24.4 to 30.2 in October. The US import prices released on Tuesday recorded a better than expected result up by 0.7% from the previous 0.6%. US building permits and housing starts for September both headlined below expectations at -4.5% and -4.7% respectively.
Federal Chair Janet Yellen had an interview at the White House for a job she already holds. There is speculation that Donald Trump could replace Fed Chair Yellen, and if that happens Chair Yellen in a few months may find herself as part of the Initial Jobless Claims statistics, which was expected to decline to 240k from previous 244k. However it dropped further than expected to 222k.
Philadelphia Fed Manufacturing Index also recorded a better than expected print of 27.9 which is higher than the previous 23.8.
Friday we saw that the greenback edged higher after the approval of a budget plan from the US Senate that will allow them to overhaul the tax plan in 2018. Existing Home Sales for September was expected at 5.30m but the actual reading came in higher than that at 5.39m, beating the forecast and the previous reading of 5.35m.
The loonie had a soft start this past week, trading weaker against the greenback on Monday. Due to lack of economic data the Canadian dollar was forced to trade on the broader market sentiment for a couple of days of the week. The most significant risk event was the Consumer Price Index and Retail Sales, and both disappointed.
August Retail Sales printed -0.3% and -0.7%, and both massively missed the consensus of 0.5% and 0.3% respectively. These fundamental releases have come at the right time as we know the data dependent Bank of Canada is due to make an interest rate announcement next week after two hikes this year already.
The Eurozone inflation release came in as expected at 0.4% m/m and 1.5% y/y. German economic sentiment survey rose in October to 17.6 but missed the consensus of 20.0. Regardless of the weaker than expected print, Germany’s economy is still strong heading into the end of the year. Eurozone economic sentiment survey dropped from the previous month and printed at 26.7.
Draghi spoke this past week, but there were no hints toward future monetary policy, specifically whether they will extend or not.
German Producer Prices in September exceeded expectations and printed 0.3% m/m and 3.1% y/y.
September inflation in the UK printed as expected at 3.0% y/y on the headline and 2.7% y/y on the core. Retail Price Index fell below expectations of 0.3% m/m and 4.0% y/y and printed at 0.1% m/m and 3.9% y/y. BOE’s Carney made some comments during his appearance before the Treasury, he said that inflation had not peaked yet after hitting 3%, which was a 5 year high. Carney also addressed that a weak sterling is to blame and that naturally inflation will eat into the wages of workers.
Employment data for August came in mixed. The unemployment rate remained steady at 4.3% as expected, Employment Change dropped to 94k from the 148k forecast. Weekly earnings exceeded expectations and printed at 2.2% and 2.1%. UK Retail Sales in September dipped from the previous month and printed at -0.7% m/m and 1.6% y/y, expectations were -0.2% m/m and 2.2% y/y. This has not altered expectations of a rate hike in November that the market is still in favour of.
Public Sector Net Borrowing in September printed better than expected at GBP 5.9B, beating the expected mark of GBP 6.5B.
We also got some light from the EU summit as reports suggested that the UK and EU are progressive in Brexit negotiations.
The Australian Dollar started the week with a focus on the RBA meeting minutes for October. The minutes showed optimism for the local economy, with the continuation of a neutral stance on monetary policy. The RBA stated that any policy change will be dependent on domestic economic conditions and will not be influenced by tighter monetary policy elsewhere.
The Australian jobs data surprised to the upside. The Australian economy added 19.8k of jobs, beating the forecast of 14.1k. Unemployment Rate dropped from 5.6% to 5.5%.
The Kiwi moved sideways for most of Monday trading in a 30-point range in the absence of headline data events.
Consumer prices rose by 0.5% in the September quarter, which was slightly higher than the expected 0.4%. On an annual basis, consumer prices were up 1.9%, just shy of the mid-point target range. Prices were boosted by food and housing costs. The latest dairy auction was disappointing. Figures showed that the GDT price index dropped 1% in the auction and whole milk powder declined 0.5%.
The focus however was with Winston Peters of the New Zealand First Party. The news broke that Peters would enter into a coalition deal with Labour making Jacinda Arden, the next New Zealand Prime Minister.
The NZD/USD fell sharply after that and ending at 0.69681 at the close of trade for the week. Investors fear that the Labour Party may have a potential impact on the economy and may also take measures to correct the Kiwi’s over evaluation.