The World Overall 02:08 - Week in Review

8/9/2019 The World Overall 02:08 - Week in Review

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The World Overall

One Financial | Andrei Wogen| [email protected]|For the Week of: 02/08

Last Week in Review

USD — Monthly jobs figures showed yet another strongincrease in the number of jobs added in January. Figures fromDecember and November were also revised higher withNovember showing a gain of over four-hundred thousand. Asfor wages, which is starting to gain some attention by themarkets and the Fed, they rose higher with their biggestincrease since mid-2011. As for the unemployment rate though,

this was the only down-side to the report as it showed anincrease in this rate. Overall though the US jobs market seems to

be rolling along nicely even as manufacturing and now the oilindustry are slowing down some now. The manufacturingsector once again last week showed yet more weakness as theISM Manufacturing PMI number came in lower once againthough the internals, including new business, improved. As forthe USD, this rose in response to the NFP number but endedmixed to weaker for last week as data overall from the US has

been a bit weaker lately.

EUR — The biggest news last week were the developments inGreece as they continue to look for ways to reduce their debt

burden and the austerity currently in place there right now.

Meetings occurred between EU officials and German officialand Greece government officials as they tried to hammer outsome sort of deal that will allow Greece to stay in the EuroZone. However, the Eurogroup Chairman has given Greece adeadline of February 16th to get a new bailout extension. Thisreally puts the pressure on both sides to figure something outand I can only envision things getting more heated between theparties. The thing is though, Greece doesn’t really have much tooffer in terms of leverage to get what they want. This is usuallythe case though when the debtor is getting chased by thecreditor as is the case right now. There options were limitedeven more too when the ECB announced that Greek bankswould no longer be able to use their own government bonds ascollateral for loans they issue. They will however still be able touse the ECB emergency funding program in case of a shortagein funds in Greek banks. All in all then, the new Greekgovernment is at the point where they will have to either forgotheir campaign promises or let go of the Euro Zone and theEuro. And no…I don’t believe they will be able to have both.The other question that needs to be answered by both sides,especially Germany, the ECB and all the other leaders of theEuro Zone is whether or not they are truly committed to savingthe Euro Zone no matter what it takes. So for the next couple of

DXY - Daily Chart

EUR/USD - Daily Chart

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weeks and probably more, the markets will continue to befocused on Greece and how things proceed.

AUD — Last week the RBA finally cut rates. The “finally” ismore for me than anyone as I have been looking for a rate cutfor some time now. The reasons? (1) China slowing, (2) slowingAustralian economy driven especially by the slowdown in the

mining sector and (3) the RBA’s patience ending with how highthe AUD’s value is. Looking at the statement too, the highAUD’s value was actually the main reason for their rate cutonce again highlighting the war going on between the central

banks in the world as each is trying its best to weaken theircurrency. They also highlighted the weakness in domesticactivity and global economies. Overall though, it would appearthat the RBA is mainly focused on the high valuation of theAUD based on their estimates and how the negative effects ofthis are and will affect Australia’s economy. Looking aheadthen, I expect Australia’s economy to continue to weaken andfor the RBA to continue their desire to see the AUD move loweroverall . These things, as well as others, will therefore lead theRBA to cut at least once again by year’s end.

CNY — Data last week showed yet more weakness in both theservices sector and the manufacturing sector. This shows yetmore weakness in the domestic picture of China while China’smanufacturing continues to slow. I expect things to stay slow forthe time being in China as reforms continue to put pressure onthe consumer and businesses and investment within thecountry.

NZD — Employment data last week showed yet more strengthin the economy as more than expected number of jobs wereadded for the fourth quarter. Labor costs remained steady toowhich is a good thing in light of lower inflation plaguing theworld, including New Zealand. Participation rate also movedhigher showing that the increase in the number of employed isactually a good, real increase. This data too though continues tohighlight the struggle the RBNZ has in terms of policy goingforward as inflation continues to move lower but the overalleconomy continues to roll along nicely. The other importantdata last week, and which shows that the overall economycontinues to do well and may be improving in the recent weakcommodity sector, were milk prices that rose for the fourthdairy auction in a row. This is positive as milk prices, which area key component of New Zealand’s growth, will hopefullysupport consumer spending and consumption going forward.However, on a low note, commodity index numbers were loweragain with the 18 month of declines recorded last week. So notall is doing well yet in the commodity sector.

What to Watch this Week

GBP — This week’s inflation report will be the event of interestfor the market. In it the Bank of England will give theirassessment on the UK economy including growth and inflation.Recent minutes showed the two main hawkish members of the

AUD/USD - Daily Chart

CNY/USD - Daily Chart


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Bank pulling back on their calls for a rate hike and insteadopting to do what everyone else in the Bank is doing….wait.This in my opinion can only mean that the MPC members seemore weakness in the UK than before, hence their desire to staypat for a while in raising rates. I think too, that the surprise fromthis report will be if Gov. Carney gives a very positive report onthe economy, especially in comparison to last report. This will

be a key event though for the Pound and which direction it willlikely head in the near future. last week the BoE left rates andtheir QE program as expected and previous.

AUD — Along with employment data this week, RBA Gov.Stevens will be speaking twice. In light of the RBA’s actions lastweek, his words will be watched closely, more than usual. Hissecond speech, on Thursday, will be of most interest as he will

be testifying in front of the House of Representatives StandingCommittee on Economics. This is where we could get moreclarification on why the RBA cut rates last week and wherethings are headed from here. Also too, the other interestingstory I think will be what the AUD does. It fell initially (bothversus the Yen and the USD) after the RBA cut rates but then

rebounded to retract the whole move it made in response to theRBA’s actions. This to me tells me there is still much buyinginterest for the Aussie and so could cause the RBA to hardentheir tone in regards to their view that the Aussie is too high invalue at this point in time.

EUR — As already mentioned, the situation in Greece will bewatched by the markets as Greece’s deadline, set by both theEurogroup and their debt repayment schedule, draws nearer.On another note, how the Euro reacts will be interesting to seeas it fell initially on the news out of Greece to start last week butthen retraced the whole move and then some. Shows to me thatthe market is not too concerned yet about what is happening inGreece…yet. Not a surprise though as the market is thinkingwhat I am: we’ve been here before with Greece. As for data,prelim fourth quarter GDP from the Euro Zone and Germanywill be in focus with slightly better expectations than previous.

CNY — This week one of the key data releases will be CPI data.Inflation, as in the rest of the world, continues to fall while thePBoC continues to be reluctant in doing anything about it asidefrom some small measures at just the right moment to keepthings from getting too bad. If this week’s CPI release is worsethan expected, then whether or not the PBoC does something inresponse is anyone’s guess. The other data of interest is NewLoans data which continues to be watched as loan activity hasslowed in the last few months which is not a good sign ofoverall economic activity in China right now.


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Economic Calendar

Region Event/Data Expected Date Time (EST)

Australia RBA Stevens Speech 02/08 7:15pm

China CPI y/y 1% 02/09 8:30pm

China New Loans 1.350B 02/10 9:00pm

U.K. BoE Inflation Report 02/11 5:30pm

Australia Employment Change 5K 02/11 7:30pm

Australia Unemployment Rate 6.2% 02/11 7:30pm

U.S. Retail Sales ex-Autos m/m -0.4% 02/12 8:30am

Australia RBA Stevens Speech 02/12 5:30pm

GermanyQ4 GDP q/q

0.3% 02/13 2:00am

Germany Q4 GDP y/y 1% 02/13 2:00am

Euro Zone Q4 GDP q/q 0.2% 02/13 5:00am

Euro Zone Q4 GDP y/y 0.8% 02/13 5:00am

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The World Overall 02:08 - Week in Review