Week starting 19-02-2024
We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.
USD
- Last week, the US Dollar strengthened against 11 of the top 19 currencies we monitor. The most notable gains were against the Swiss Franc (CHF) (0.72%) and the Japanese Yen (JPY) (0.60%), whilst the most impactful moves to the downside were against the Chinese Yuan (CNY) (-0.85%) and the Norwegian Krone (NOK) (-0.72%).
- There was a mix of economic indicators in the US last week, prompting varied market reactions and speculation about future monetary policy. Notably, January's core inflation and inflation rates exceeded expectations, signalling sustained price pressures and fuelling concerns among traders that the US Federal Reserve could delay rate cuts. As a result, the US Dollar experienced gains early in the week. However, the simultaneous dip in retail sales for January highlighted potential consumer hesitancy amid inflation concerns. This scenario suggests a potential need for rate cuts to ease pressure on consumers, presenting a delicate balancing act for the Fed as they weigh managing inflation against sustaining consumer spending.
- As we embark on a shortened trading week due to the Presidents’ Day observance in the US today, 19 February, investors are gearing up for key events and data releases that could shape market sentiment. Eyes will be on the FOMC minutes on Wednesday, offering valuable insights into the Federal Reserve's policy stance and potential future moves. The initial jobless claims data will be released on Thursday, providing crucial information on the labour market's health. Additionally, investors will be keenly listening to speeches from prominent Fed officials, including Bostic on Wednesday, Jefferson on Thursday, and Harker on Friday. Moreover, keep an eye on economic indicators such as the Chicago Fed national activity index and S&P Global PMI flash readings for further market cues.
EUR
- Last week, the Euro weakened against 11 of the top 19 currencies we monitor. The greatest losses were against the Swedish Krona (SEK) (-0.88%) and the South African Rand (ZAR) (-0.84%), whilst the largest gains were against the CHF (0.64%) and the JPY (0.52%).
- In the week of 13 February, the Eurozone's economic data showed signs of stability and resilience. Notably, the GDP growth rate for the fourth quarter remained stagnant at 0%, a slight improvement from the previous -0.1%, indicating a halt in contraction and a move towards stabilisation. This contrasts with the UK's recent economic struggles. Additionally, industrial production had significant boost in December, rising by 2.6% (MoM), indicating strong activity in the sector. Despite a slight dip in the balance of trade, the overall picture suggests a Eurozone economy holding steady amidst global uncertainties, with prospects of gradual improvement in the quarters ahead.
- This week, economic releases include key indicators such as the consumer confidence flash for February on Wednesday, potentially reflecting sentiment shifts among consumers. Thursday's focus will be on the HCOB composite, manufacturing, and services PMI flash data for February, offering insights into sectoral performance. Of particular interest to the market will be the release of the inflation rate year-on-year for January, serving as a crucial indicator for the European Central Bank's future interest rate policy direction.
GBP
- Last week, the British Pound (GBP) weakened against 11 of the top 19 currencies we monitor. The most notable moves to the downside were against the ZAR (-0.97%) and the NOK (-0.61%), whilst the most significant gains were against the CHF (0.49%) and the Turkish Lira (TRY) (0.30%).
- It was an eventful week for the GBP, initially overshadowed by US data before turning to the UK's economic performance. The highlight was the UK's second consecutive quarter of negative GDP growth, plunging the nation into a technical recession. While there was a slight decrease in inflation, which provided some relief, the standout positive was the robust bounce in retail sales. Unfortunately, the contraction in GDP growth didn't bode well for the GBP and remains a significant concern for both the Bank of England and market participants. The data from 13 to 16 February paints a picture of mixed economic indicators in the UK, showcasing both resilience and challenges across various sectors.
- There will be minimal significant data from the UK this week, suggesting a relatively stable market environment likely to be influenced by global factors and data releases. However, data releases for the UK this week include the CBI industrial trends orders for February on Wednesday offering insights into the industrial sector. The GfK consumer confidence data for February will be released on Friday, shedding light on consumer sentiment.
ZAR
- Last week, the South African Rand strengthened against 18 of the top 19 currencies we monitor. The greatest gains were against the CHF (1.41%) and the JPY (1.33%), whilst the move to the downside was against the NOK (-0.12%).
- After enduring a string of weeks marked by downturns amidst turbulent global market conditions, the ZAR showed glimmers of resilience toward the end of last week, albeit amid ongoing uncertainties. Surprising movements in US and UK data played a pivotal role in this shift. Notably, while South Africa's retail sales data for December brought some relief, underscoring increased consumer spending and highlighting the fortitude of the South African consumer, challenges persist. The data table for the week of 13 to 15 February casts a sombre light on key economic indicators for South Africa. Despite a slight decline of 3.4% (YoY) in gold production and a significant 4.2% (MoM) drop in mining production, there's a glimmer of hope in the form of a notable uptick in retail sales, with growth of 1.4% (MoM) and 2.7% (YoY). These mixed figures underscore the nuanced economic landscape in South Africa, with simultaneous challenges and opportunities emerging across various sectors.
- As we approach the upcoming week, all attention will be on Wednesday's budget speech, although expectations remain modest, particularly with elections on the horizon, raising concerns about potential empty promises. At the same time, the market will be closely monitoring inflation data, seeking clues about potential moves by the South African Reserve Bank in the interest rate realm. Despite the uncertainty surrounding the budget, there's a glimmer of hope that positive inflation figures could indicate some relief to consumers. Key releases to watch include December's leading business cycle indicator, fourth quarter unemployment rate and number of unemployed persons, and January's inflation data, encompassing both month-over-month and year-over-year rates, along with core inflation figures.
AUD
- Last week, the Australian Dollar strengthened against 15 of the top 19 currencies we monitor. The most substantial gains were against the CHF (0.84%) and the JPY (0.73%), whilst the greatest moves to the downside were against the ZAR (-0.53%) and the SEK (-0.53%).
- Australia had notable shifts in economic indicators, particularly in consumer confidence. The Westpac consumer confidence index for February rose to 86 from the previous 81, signalling a significant increase in consumer optimism. This was supported by a 6.2% change in consumer confidence, indicating a strong positive sentiment among consumers. This together with the seesaw of global data put the AUD on the front foot.
- This week, economic releases include the Reserve Bank of Australia's meeting minutes on Tuesday, which will be closely watched as it provides insights into the future of interest rates in the country. The Westpac leading index for January will be released on Wednesday, offering indicators of future economic performance, as well as the wage price index for the fourth quarter, revealing trends in wage growth both quarterly and yearly, albeit with less significance. The Judo Bank's flash PMI data for February will be released on Thursday, covering manufacturing, services, and composite sectors, providing early signals of economic activity and sentiment in these critical areas.
If you would like further information on the market along with personalised hedging strategies for you or your business, you can get in touch with our team at [email protected].
