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Inflation data set to heat up in this week's High Impact economic data forecast 🔥 Start the new week with Q and save the free schedule graphic now for the week starting 08 November 2021
Policymakers, Positive Economic Data deliver Dollar support
It was a fine week of employment data releases for US policymakers at the Federal Reserve.
With data emerging from the private sector PMI (purchasing mangers index) and ADP non-farm employment change figures reflecting positive changes, the anticipated US Non-Farm Payrolls (NFP) delivered further support to the dollar by rising to 531K in October versus a 312K increase in September.
US Federal Reserve Chairman Jerome Powell appears to remain steadfast in his perspective of inflation being transitory. Recent data further bolsters the market’s expectation of the Fed’s proposed timeline for tapering.
Overview of Last Week’s Session Close
Encouraged by confidence in the US economy, major local equity markets saw robust gains in the week ending Friday the 5th of November 2021.
The NASDAQ (NQ100) rallied by 3.05%, while the Dow Jones (DJIA30) and the Standard and Poor’s index (SP500) saw gains of 1.42% and 2.00% respectively.
While new data for the Pound-Sterling (GBP) was mostly positive, the Bank of England’s (BoE) updated policy decision deflated hopes of a return upside for the Pound with price action descending by 1.34% to conclude the week at US$1.3498 from the previous weekly close at US$1.3682.
The FTSE100 made further gains from the previous week’s 0.46% rise, finishing the last week up by 0.92%
In the Eurozone, negative German retail sales (-2.5% in September versus +1.2% from August) and disappointing production figures (-1.1% in September versus -4.0% in August) were met by a seemingly mixed-bag of results from the Eurozone member states.
In October, the Eurozone manufacturing PMI slid from 58.5 to 58.3 while the composite PMI fell from 56.2 to 54.2 in October. Retail sales across the EU declined by 0.3%, which partially reverses the 1.0% rise in August.
As such, the EUR rose by 0.08% to end the week at US$1.1567, paring back some of the 0.73% loss from the prior week’s close at US$1.1558. The French index (CAC40) rallied most by 3.08% with the DAX40 and EuroStoxx600 closing out weekly gains of 2.33% and 1.64% respectively.
Key changes in trade and employment statistics saw the Canadian trade surplus expand from C$1.51bn to C$1.86bn. Meanwhile, a noteworthy reduction in unemployment rate from 6.9% to 6.7% appears to offset expectations of a sub-par rise in employment. Despite the apparently positive week of new data, receding oil prices saw increased downside pressure on the Canadian currency.
The Canadian Dollar (CAD) fell further by 0.56% to C$1.2457 against the US Dollar compared to the previous week’s fall to C$1.2388 (0.17%).
Japanese services PMI rose to 50.7 from 47.8 in the previous month, with household spending leaping up 5.0% to reverse the 3.9% decline from August.
As a result, the Yen (JPY) rose by 0.47% to ¥113.410 against the dollar, paring back a 0.40% fall to ¥113.950 in the week prior.
PMI in the private sector took focus, with the Caixin Manufacturing PMI rising from 50.0 to 50.6 and services PMI up from 53.4 to 53.8.
Last week’s session close saw the Chinese Yuan (CNY) rise by 0.10% to CNY 6.3989 versus the US Dollar, which is a partial recovery from the previous week’s decline to CNY 6.4056 (-0.32%).
Both the CSI300 and Hang Seng indices saw weekly losses by 1.35% and 2.00% respectively.
Down Under saw disappointing manufacturing sector data with the AIG Manufacturing Index falling to 50.4 from 51.2 in September, inflamed by a narrowing Aussie trade surplus to A$12.243bn down from A$15.077bn. Although the Reserve Bank of Australia (RBA) had earlier offered support to the AUD in the face of negative economic data, the currency saw losses against the US dollar finishing the week down by 1.57% to US$0.7400.
Similarly, the Kiwi dollar experienced a slide against the Greenback despite an upbeat financial stability report from the RBNZ and a reduction in quarterly unemployment from 4.0% to 3.4%. Building consents were down in September by 1.9%, losing ground against August figures of a 3.8% increase. As a result, the Kiwi finished the week 0.75% weaker at US$0.7117.
Now, moving to the new week ahead...
Qluster analysts return to the fresh week ahead with a renewed focus towards key employment and inflationary data coming from the US.
Market interest surrounding further spikes in inflation continues to surge - with any unexpected surges likely to raise more doubt around the transitory perspective held by the Fed.
In Australia, local employment figures for October look to take precedence. As the economy moves forward with plans for reopening, a rise in confidence is likely to lend support to the Australian Dollar.
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