The US Dollar strengthened against most major counterparts as the S&P 500 Index demonstrated a solid rebound from a sharp fall on Monday. In Europe, stocks climbed to a 6-year high, with the DAX recording its biggest weekly gain in almost a month, as retail sales and industrial output showed resilience. The US Dollar performed slightly better than its European counterpart.
The Euro started the week at 1.3670, falling gradually during the week, as data from the United States empowered the US Dollar pushing the single currency to a low of 1.3582. The single currency managed to regain some of its losses working its way back up to 1.3650. The Euro then dropped to break the previous lows, as speculation intensified over the Federal Reserve reducing their stimulus for a second time, ending the week at 1.3641.
The Sterling Pound endured big swings against the US Dollar. The Pound opened the week at 1.6482, dropping sharply on Monday to 1.6347, following reports that showed that the British factory output stagnated in November. The Pound then regained most of its losses as retail sales surged dramatically, exceeding all economists’ forecast, to close the week at 1.6424
The Japanese Yen was one of the biggest losers last week, as it weakened almost 100 basis points against the greenback. The currency opened the week at 104.18, gaining against the US Dollar on Monday to touch a high of 102.86. The Japanese Yen then fell slowly as the greenback strengthened against most major peers, dropping to a low of 104.92. The Yen closed at 104.32.
The Australian Dollar showed similar performance to that of its Asian counterpart. The Aussie Dollar opened the week at 0.8995, only to gradually weaken against a stronger US Dollar, after labor market reports showed that Australian employers have cut payrolls during the month of December. The currency dropped to its lowest level in more than 3-years, reviving the prospects of another interest rate cut by the central bank. The Aussie touched a low of 0.8764, and closed the week at 0.8781.
Retail sales in the US rose in December as freezing temperatures urged Americans to buy discounted winter apparel, ending the strongest quarter for consumer spending in 3-years. The 0.7 percent gain followed a 0.1 percent revised increase in November, and exceeding the forecasted 0.4 percent rise. Excluding a drop in auto demand that carmakers partly attributed to bad weather, sales jumped the most in almost a year. The retail sales figures helped economists crank up estimates for household spending in the fourth quarter, as consumer buy more with higher confidence from lower unemployment and higher home values.
The Federal Reserve Bank of Philadelphia’s factory index rose to a 3-month high this month, as the labor market and retails sales advanced, indicating moderate growth. The Philly Fed Factory Index rose to 9.4, beating the forecasted 8.8, and considerably higher than December’s revised figure of 6.4. The survey’s future indicators have recently shown moderating optimism about growth in manufacturing. This month, the future general activity index fell 10 points, from a revised reading of 44.8 in December to 34.4 this month.
Fewer Americans filed applications for unemployment benefits than expected, indicating that the US labour market is strengthening. Jobless claims dropped by 2,000 to 326,000, beating the expected figure of 328,000, the lowest in more than a month. The gains in business and consumer spending are boosting growth prospects, allowing employers to sustain their workers in anticipation of stronger demand. The four-week moving average declined to 335,000 from 348,500, a decrease of 13,500 from the week before.
Europe
Industrial Production m/m
Eurozone Industrial production grew faster than expected in November. The industrial production index rose by 1.8 percent from the previous month, adding to a series of positive data on the European economy. The rise in production was the biggest since May 2010. The forecasted figures were set at a 1.4 percent increase. A better than expected figure along with solid retail sales, gives a sign that the Eurozone recovery is gaining momentum. On the other hand, investors are still wary of the European economy, as unemployment is still at record highs.
United Kingdom
BOE Carney Speaks
Bank of England Governor, Mark Carney, appeared before the Treasury Select Committee in the British parliament last week, claiming that “the central bank won’t discuss an interest rate hike until the unemployment rate in the country goes below 7 percent”. Mr. Carney criticised the quality of some economic data that officials receive from the UK’s statistics agency, including data that is believed decisive to setting monetary policy. Governor Carney commented about house prices in the UK, stating that “expectation has been for a continuation of current momentum - house price momentum, mortgage activity, credit growth momentum - into 2014, before decelerating around the middle of 2015”. When asked on the expiry of the funding for lending scheme, Mr. Carney stated that the central bank’s “observations are that funding conditions for commercial lenders are very strong”.
Commodities
West Texas Intermediate
West Texas Intermediate registered its first weekly gain in 2014, as figures such as unemployment and manufacturing from the United States, the worlds’ biggest oil consumer, signaled a strong and continuous economic expansion. Crude oil touched a low of USD 91.24 per barrel since the beginning of the year, only to regain some of its losses ending the week at 94.37.THE PENINSULA
