Daily Market Outlook by Kate Curtis from Trader's Way

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katetrades

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Forex Major Currencies Outlook (May 20 – May 24)

USD

President Trump has been touting China over Twitter to accept a deal and not to retaliate since things will only get worse. China has announced that it will impose import tariffs on $60bn worth of US goods starting from June 1 and they will range between 5% – 25%. It is reported that China may stop purchasing US agricultural products and energy, cut Boeing orders and restrict US service trade with China. Also, there are talks about dumping US Treasuries.

Advance retail sales for the month of April came in at -0.2% m/m vs 0.2% m/m as expected. Industrial production came in at -0.5% m/m vs 0% m/m as expected. The main culprit for the drop in industrial production was manufacturing output. Weaker than expected results lead Atlanta FED GDP tracker to lower growth in Q2 to 1.2% vs 1.6% as was previously seen. These data conflict with rhetoric about strong and robust US growth.

This week we will have housing data, FOMC minutes, preliminary PMI data for the month of May as well as durable goods.

Important news for USD:

Tuesday:
  • -- Existing Home Sales
Wednesday:
  • -- FOMC Minutes
Thursday:
  • -- Markit Manufacturing PMI
  • -- Markit Services PMI
  • -- Markit Composite PMI
  • -- New Home Sales
Friday:
  • -- Durable Goods
EUR

ZEW survey of the current situation in Germany for the month of May rose for the first time in eight months to 8.2 vs 6.3 as expected, however expectations for the outlook in both Germany and EU dropped into negative territory on the back of new escalations in US – China trade war. Preliminary German Q1 GDP came in at 0.4% q/q as expected for a great rebound after 0% q/q GDP in Q4 of 2018. President Trump and US administration have delayed imposing auto tariffs for 180 days which gave a relief rally to EUR.

Trade balance for the month of March came in at EUR17.9bn vs EUR19.4bn as expected. Exports rose 0.9% m/m while imports rose 2.5% m/m which ultimately lead to the narrowing of the trade surplus. Rising exports amidst global tensions is a very welcoming sign for the EU economy. Final inflation numbers for the month of April came in at 1.7% y/y as expected while core CPI ticked to 1.3% y/y vs 1.2% y/y as expected. Rise in inflation is attributed to the Easter holiday.

This week we will have data on consumer confidence and preliminary PMI data for the month of May as well as final Q1 GDP reading and Ifo business climate data from Germany.

Important news for EUR:

Tuesday:
  • -- Consumer Confidence
Thursday:
  • -- GDP (Germany)
  • -- Markit Manufacturing PMI (EU, Germany, France)
  • -- Markit Services PMI (EU, Germany, France)
  • -- Markit Composite PMI (EU, Germany, France)
  • -- Ifo Business Climate (Germany)
GBP

Employment data came mixed. The unemployment rate has dropped down to 3.8% from 3.9% previously but employment change came in at 99k vs 140k as expected with prior reading showing 179k. Average weekly earnings came in at 3.2% 3m/y vs 3.4% 3m/y as expected. A drop in wages is not very concerning when compared to the wage growth in previous years. Strong labour conditions are still present in Britain and were there no Brexit uncertainties BOE would be hiking rates.

The cross-party talks are not progressing well, opposition party is hardening, with an increasing demand to hold a second referendum for any Brexit deal. Both main parties suffered in the local elections in early May and are set for humiliating results in the European Parliament polls on May 26 according to the recent survey. The government has officially announced a fourth vote on Brexit deal in the first week of June. Sir Graham Brady, chairman of an influential committee of backbench Tory MPs, confirmed that PM May is expected to resign whether or not the Brexit deal passes in June. She will resign after the results of the vote. A leadership election this summer is now certain. Labour party is looking more toward the second referendum claiming that cross-party talks have gone as far as they can.

This week we will have data on inflation and consumption.

Important news for GBP:

Wednesday:
  • -- CPI
Friday:
  • -- Retail Sales
AUD

Employment change came in at 28.4k vs 15k as expected. The unemployment rate came in higher at 5.2% vs 5% as expected while the previous figure was revised higher to 5.1%. Part of the jump in the unemployment rate can be attributed to rise in participation rate from 65.7% to 65.8%. Full time employment was -6.3k so the headline number was entirely made up from part time employment which came in at 34.7k. Overall not a bad report and RBA will not feel pressured to cut rates immediately. Market is pricing over 50% chance for a rate cut in June and many analysts call for rate cut in August. Wage price index for Q1 came in at 0.5% q/q vs 0.6% q/q as expected. Continuation of slow wage will keep inflation pressures low thus making inflation subdued.

Chinese data came out weaker than expected with fixed asset investments coming in at 6.1% y/y vs 6.4% y/y as expected. Industrial production came in at 5.4% y/y vs 6.5% y/y as expected and retail sales came in at 7.2% y/y vs 8.6% y/y. NBS has looked at this data and stated that “China will implement countercyclical adjustments to maintain steady healthy economic development” meaning more stimulus.

This week we will have minutes from the latest RBA meeting as well as Governor Lowe’s speech. Pressures are building for RBA to cut rates so the speech will be closely monitored in the markets.

Important news for AUD:

Tuesday:
  • -- RBA Meeting Minutes
  • -- RBA Governor Lowe Speech
NZD

Manufacturing PMI for the month of April came in at 53 vs 52 the previous month. Deliveries index holds high at 56.3. All indices are above 50, showing expansion but new orders cooled off to 52.4 which can be worrisome.

This week we will have biweekly GDT auction, consumption data as well as trade balance data.

Important news for NZD:

Tuesday:
  • -- GDT Price Index
Wednesday:
  • -- Retail Sales
Friday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
CAD

CPI for the month of April came in at 2% y/y as expected for an uptick from 1.9% y/y the previous month. Core measures came in a bit weaker than expected with median coming in at 1.9% y/y vs 2% y/y as expected, common came in at 1.8% y/y as expected and trim came in at 2% y/y vs 2.1% y/y as expected. Weaker core numbers are not very concerning since they still hover around the 2% target. Year over year, the main upward contributor to the CPI were mortgage interest costs (8.2%) and the main downward contributor were traveller accommodation (-9.6%). Manufacturing sales for the month of March came in at 2.1% m/m vs 1.5% m/m as expected with prior reading showing -0.2% m/m.

This week we will have consumption data.

Important news for CAD:

Wednesday:
  • -- Retail Sales
JPY

During the week JPY has played its safe heaven role, strengthening during risk off situation. Japan will host G20 Summit in June and they announced that they will not intervene to seek solutions to US-China trade frictions. Finance minister Aso stated that additional easing would help the economy and characterized the problem in economy as lack of demand. Governor Kuroda reiterated the need for rates to stay low for a long period of time in order to support the economy. Current conditions warrant low rates until Spring of 2020 however it is possible for BOJ to keep rates low even after that period if conditions call for it. The Japanese government confirmed that the next round of trade talks with US will take place on May 21 in Washington.

This week we will have preliminary Q1 GDP data, final industrial production data for the month of March, trade balance data, preliminary manufacturing PMI data for the month of May and national inflation data.

Important news for JPY:

Monday:
  • -- GDP
  • -- Industrial Production
Wednesday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
Thursday:
  • -- Nikkei Manufacturing PMI
Friday:
  • -- CPI
CHF

The CHF has benefited from risk off conditions and is up around 0.25% for the week.
This week we will have data on industrial production.

Important news for CHF:

Thursday:
  • -- Industrial Production
 
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katetrades

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Forex Major Currencies Outlook (May 27 – May 31)

USD

Existing home sales for the month of April came in at 5.19m vs 5.35 as expected. The number came in weaker but it is still in the middle of this year’s range. New home sales also came in line expectations at 673k vs 675k as expected. Durable goods for the month of April came in at -2.1% vs 2% as expected with prior reading being revised down to 1.7%. Capital goods orders non-defence ex air (core) came in at -0.9% vs -0.3% as expected with previous reading being revised from 1% all the way down to 0.3%. A weak reading with very little to show for, with drop in core number particularly worrying.

The main message from FOMC May meeting was patience. The patient approach was characterized as appropriate for some time even if global conditions improved. Inflation was again characterized as transitory by many FED officials. Discussions about pros and cons of shortening bond portfolio maturity were held.

This week we will have data on consumer confidence, second estimate of Q1 GDP, goods trade balance, housing and inflation data.

Important news for USD:

Tuesday:
  • -- Consumer Confidence Index
Thursday:
  • -- GDP
  • -- Goods Trade Balance
  • -- Pending Home Sales
Friday:
  • -- PCE
  • -- Personal Spending
  • -- Personal Income
EUR

Preliminary PMI numbers for the month of May came in at 47.7 vs 48.1 as expected for manufacturing, 52.5 vs 53.0 as expected for services and 51.6 vs 51.7 as expected for composite. Drop in the manufacturing PMI was due to a drop in Germany’s reading, which stays deep in contraction, while French manufacturing PMI moved up to 50.6. Conditions in the EU remain stable but rebound recovery in Q2 is still missing according to these data. Preliminary consumer confidence for the month of May came in at -6.5 vs -7.7 as expected. Better than expected reading, still in the negatives but moving in the right direction. German Ifo business climate index continues to drop coming in at 97.9 vs 99.2 the previous month. Ifo economists state that German export dynamic is very weak. Consumption and construction are the main pillars of support.

This week we will have data on sentiment and confidence from EU and results or EU parliamentary elections will be announced. Additionally, Germany will publish employment and inflation data.

Important news for EUR:

Tuesday:
  • -- Economic Sentiment Indicator
  • -- Business Confidence
Wednesday:
  • -- Unemployment Change (Germany)
  • -- Unemployment Rate (Germany)
Friday:
  • -- CPI (Germany)
GBP

Inflation numbers for the month of April came in at 0.6% m/m vs 0.7% m/m as expected and 2.1% y/y vs 2.2% y/y as expected. Core CPI also came in a bit weaker than expected at 1.8% y/y vs 1.9% y/y as expected. All readings are higher than in March which can be attributed to seasonality, Easter holiday. ONS notes that energy bill prices were the biggest upwards driver of inflation in April. Inflation is still holding strong in the UK, however due to the Brexit uncertainties BOE will not be able to react. They will come out with hawkish statements on the back of inflation numbers and strong Labour market but a rate hike will not happen in the near-term. Retails sales for the same month came in at 0% m/m vs -0.3% m/m as expected. Consumption remains robust since the start of the year.

PM May is planned to include in withdrawal agreement bill requirement to vote on whether to hold a 2nd referendum, a vote on different customs arrangements with the EU and provide safeguards on the Northern Irish backstop as well as guarantees on workers’ rights and environmental protection. Leader of the Labour party Jeremy Corbyn stated that Labour cannot support new Brexit deal. Andrea Leadsom, leader of the House of Commons, resigned and in her statement said “I urge PM May to make the right decisions in interest of the country”. Then on Friday May 24 PM May announced that she will be stepping down as PM and leader of Conservative party on June 7. Nominations for new leader of the Conservative party will end in the week of June 10.

This week we will have data on consumer confidence as well as continuation of political saga as 1922 Committee reportedly said that they want May to stay in office while Tory leadership race takes place.

Important news for GBP:

Friday:
  • -- Consumer Confidence
AUD

RBA meeting minutes showed that rate cut would be appropriate if there are no further improvements in the labour market. It was reiterated that there is “no strong case” for a near-term move in policy. The board recognized that lower rates would have less of an impact than in the past. Later on, governor Lowe made a speech in which he stated that RBA is considering a rate cut in June since lower rates would support employment and help lift inflation toward the target. Dovish words by the governor signalling a shift in RBA’s stance. After the Governor’s speech, the odds of rate cut in June (June 4) are around 70%.

Construction work done in Q1 came in at -1.9% q/q vs 0% q/q as expected. The weakening of activity was relatively broadly based, across housing, public works and private infrastructure. This data set will be included in Q1 GDP that will be published on June 5 and it will drag it down.

This week we will have housing and Q1 capex data from Australia along with PMI data from China.

Important news for AUD:

Thursday:
  • -- Building Approvals
  • -- Private Capital Expenditures
Friday:
  • -- Manufacturing PMI (China)
  • -- Non-Manufacturing PMI (China)
NZD

After rise in manufacturing PMI we have a drop in services PMI for the month of April as the reading came at 51.8 vs 52.3 the previous month, revised lower from 52.9. This is the third consecutive drop in the reading, now falling to the lowest since September of 2012. Activity/sales index and employment index, which is in contraction, dropped to the lowest since 2012. Retail sales excluding inflation for the Q1 of 2019 came in at 0.7% q/q vs 0.6% q/q as expected. Trade balance for the month of April came in at NZD433m vs NZD450m as expected. Lower than expected surplus was achieved on both beats in exports and in imports so it will be welcomed. Demand for products from New Zealand, mainly dairy, is still present around the Globe and domestic demand is still going strong.

This week we will have financial stability report along with housing data and budget release.

Important news for NZD:

Tuesday:
  • -- RBNZ Financial Stability Report
Thursday:
  • -- Building Consents
  • -- Budget Release
CAD

Retail Sales for the month of March came in at 1.1% m/m vs 1.2% m/m as expected. Ex-auto category (core) has beaten the expectations by wide margin coming in at 1.7% m/m vs 0.9% m/m. Both headline and ex-auto numbers for the previous month have been revised higher. Sales rose in 7 out of 11 sectors. The largest contributor were gasoline stations with 0.64% while the largest contributor on the downside was new-car dealers -0.46%. Positive revisions gave CAD a boost pushing it up across the markets. Wholesale trade for the same month came in at 1.4% m/m vs 0.9% m/m as expected increasing for the fourth consecutive month and by fastest pace in two years. Wholesale trade rose in 6 out of 7 sectors with motor vehicles being the only one that declined. Prior month was revised lower to 0.2% m/m from 0.3% m/m and that eased the positive impact of this reading.

This week we will have GDP figures, monthly for March and quarterly for Q1 and all-important BOC interest decision. It is widely expected that BOC will keep rates on hold. After a strong jobs report and retail sales we can expect a change in the tone to more hawkish one.

Important news for CAD:

Wednesday:
  • -- BOC Interest Rate Decision
Friday:
  • -- GDP (monthly and quarterly)
JPY

Preliminary Q1 GDP came in at 0.5% q/q vs -0.1% q/q as expected and 2.1% y/y vs -0.2% y/y as expected. This is an unexpectedly huge beat. Digging deeper into the GDP numbers we find some troubling signs. Both consumer and business spending, capex, were down and the headline number was accomplished due to net positives from the trade, rising inventories and government spending, similarly to US Q1 GDP. Gains from trade are not sustainable and they were achieved with both a drop in exports -2.4% q/q and a drop in imports -4.6% q/q.

Trade balance for the month of April came in at JPY60.4bn vs JPY232.7bn as expected. Exports were a huge miss, coming in at -2.4% y/y vs -1.6% y/y as expected showing that trade wars take their toll on the Japanese exporters. This is the fifth consecutive month of falling exports. Imports came in at 6.4% y/y vs 4.5% y/y as expected demonstrating robust domestic demand.

Preliminary manufacturing PMI for the month of May came in at 49.6 vs 50.2 the previous month. Back into contraction territory. Outlook and new export orders fell at a faster rate dragging the number down. New export orders fell at the sharpest rate in four months. The continuation of US-China trade war increases concerns among Japanese goods producers which in turn reflects in the reading.

National inflation for the same month came in at 0.9% y/y as expected up from the 0.5% y/y the previous month. Core CPI excluding fresh food and energy came in at 0.6% y/y as expected from 0.4% y/y the previous month. Small movements in the right direction toward the 2% inflation target. Still a long way from there but at least on the right track.

This week we will have speech from governor Kuroda as well as inflation data for Tokyo area for the month of May, employment data, retail sales data and preliminary industrial production data for the month of April.

Important news for JPY:

Monday:
  • -- BOJ Governor Kuroda Speech
Friday:
  • -- Tokyo CPI
  • -- Unemployment Rate
  • -- Jobs to Applicants Ratio
  • -- Retail Sales
  • -- Industrial Production
CHF

SNB’s board member Moser reiterated that the central bank will intervene if it considers it to be appropriate. Q1 industrial output surprised with a huge beat coming in at 4.3% y/y vs -0.3% y/y as expected.

This week we will have employment data and Q1 GDP data as well as trade balance and consumption data.

Important news for CHF:

Monday:
  • -- Employment Level
Tuesday:
  • -- GDP
  • -- Trade Balance
  • -- Exports
  • -- Imports
Friday:
  • -- Retail Sales
 

katetrades

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Forex Major Currencies Outlook (June 3 – June 7)

USD

Consumer confidence for the month of May came in at 134.1 vs 130 as expected. This is the best reading of the year and it shows that US consumers are not phased with the trade war. Present situation and expectations both came out better than expected with jobs hard-to-get index falling to the lowest number since September of 2000. President Trump has announced 5% tariffs on all goods from Mexico starting on June 10. If Mexico does not do more to halt illegal immigration into the US the tariff will jump to 25% by October 2019. Jump will not be sudden; it will be done in steps.

Second reading of the Q1 GDP came in at 3.1% vs 3% as expected. Initial reading was 3.2%. Digging deeper into the numbers we can see that there was an unwelcome downgrade in business investment. Exports were revised up but overall there is no huge difference between initial and second reading. This drop in inflation can be worrisome if Q2 GDP comes in soft. Pending home sales for the month of April came in at -1.5% m/m vs 0.5% m/m as expected.

Core PCE came in at 1.6% y/y as expected. PCE deflator came in at 1.5% y/y vs 1.6% y/y as expected. Results are in line with the expectations and not as bad as feared. On the consumer side personal income came in at 0.5% vs 0.3% as expected and personal spending came in at 0.3% vs 0.2% as expected signalling strong consumer confidence reported earlier.

This week we will have PMI data, trade balance data and employment data. All-important NFP will be traditionally published on first Friday in the month. Projections are for a headline number of 170k, rise in average hourly earnings to 3.4% and rise in unemployment rate to 3.8% on the back of the rise in participation rate.

Important news for USD:

Monday:
  • -- ISM Manufacturing PMI
Tuesday:
  • -- Factory Orders
Wednesday:
  • -- ADP Nonfarm Employment Change
  • -- ISM Non-Manufacturing PMI
Thursday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
Friday:
  • -- Nonfarm Payrolls
  • -- Unemployment Rate
  • -- Average Hourly Earnings
EUR

European Parliament elections have shown us the clear rise in support for nationalist parties. The leading example is Mateo Salvini’s Lega party in Italy which won about 30-35% of the votes thus making them the leading party in Italy. In France, Marrie Le Pen’s National Rally party took 24% of the votes and beat President Marcon’s party which garnered 22.5% of the votes. In the UK Nigel Farage’s Brexit party won around 1/3 of the votes.

Although nationalist achieved notable results, it will have more impact on a national level than in the European Parliament where existing EPP and S&D alliances still dominate. EPP’s total vote percentage will fall below 25% for the first time since 1989 and S&D had lowest support since first elections in 1979.

The European Commission is considering implementing the Excessive Deficit Procedure (EDP) in response to the Italy’s blatant disregard of European budget laws. Penalty can go up as high as $4bn. Italy’s Salvini continues to state that EU should not aim for budget deficit below 3% of GDP, but it should aim at cutting unemployment. Germany unemployment change came in at 60k signalling largest one month increase in unemployment in last 10 years. The unemployment rate ticked up to 5% from 4.9%.

This week we will have final PMI numbers for the month of May, inflation, employment and consumption data as well as final Q1 GDP estimate. Inflation is expected to dip down due to lower oil prices and the fact that rise in inflation in April was due to Easter holiday. Headline of the week will be ECB interest rate decision and press conference that follows it. There are no plans to change interest rate, it will stay the same, however the latest economic happenings and data will be assessed by ECB and markets will closely monitor it for further clues on development of monetary policy.

Important news for EUR:

Monday:
  • -- Markit Manufacturing PMI (EU, Germany, France)
Tuesday:
  • -- CPI
  • -- Unemployment Rate
Wednesday:
  • -- Markit Services PMI (EU, Germany, France)
  • -- Markit Composite PMI (EU, Germany, France)
  • -- Retail Sales
Thursday:
  • -- Employment Change
  • -- GDP
  • -- ECB Interest Rate Decision
  • -- ECB Monetary Policy Press Conference
GBP

Current president of EU commission Jean Claude Juncker stated that there will be no renegotiations of Brexit withdrawal agreement. Currently 11 Conservatives have announced their aspirations to become new party leader and PM. Boris Johnson has the best chances according to the polls. Jeremy Corbyn stated that first priority should be an election and pledged to support a second referendum on any Brexit deal put to Parliament. Some Labour MPs are opposed to second referendum leaving the opposition torn on the matter. A second referendum on Brexit could lead to a second referendum on Scottish independence.

This week we will have PMI data and it will be the last week of Theresa May in the role of the Prime Minister.

Important news for GBP:

Monday:
  • -- Markit Manufacturing PMI
Tuesday:
  • -- Markit Construction PMI
Wednesday:
  • -- Markit Services PMI
AUD

Private capex data for the Q1 came in at -1.7% q/q vs 0.5% q/q for a huge miss. Global tensions, primarily the US-China trade war, were the main reason business withdrew from investing in Q1. Business approvals continue to slide with -4.7% m/m drop in the month of April. Chinese official manufacturing PMI dropped into contraction territory coming in at 49.4 vs 49.9 as expected and 50.1 the previous month. New export orders fell to 46.5 indicating negative effect trade war has on China’s economy. Non-Manufacturing PMI came in line with expectations at 54.3.

This week we will have PMI data from China, consumption, Q1 GDP and trade balance from Australia. RBA will take centre stage with their interest rate decision and rate statement. Markets are pricing an almost 95% chance of a rate cut. It is possible that rate cut has been completely priced in so we can see a surge in AUD, therefore we advise trading smaller lot sizes than usual.

Important news for AUD:

Monday:
  • -- Caixin Manufacturing PMI (China)
Tuesday:
  • -- Retail Sales
  • -- RBA Interest Rate Decision
  • -- RBA Rate Statement
Wednesday:
  • -- Caixin Services PMI (China)
  • -- GDP
Thursday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
NZD

Building approvals for the month of April came in at -7.9% m/m vs -7.4% m/m the previous month and -4.5% y/y. It is a volatile data, but the second month of falling data cannot be welcomed. Budget surplus forecast has been cut to NZD 1.3bn.

This week we will have bi-weekly GDT auction.

Important news for NZD:

Tuesday:
  • -- GDT Price Index
CAD

BOC has left rates unchanged at 1.75% as widely expected. It is reiterated in the statement that accommodative policy interest rate continues to be warranted. BOC will stay data dependent and economic data are in line with projections. The oil sector is beginning to recover and housing is becoming more stable. Escalation of trade conflicts casts doubt on global outlook. Recent economic data from Canada have been very strong which reinforces BOC view that the slowdown in Q4 and Q1 was temporary and there is more evidence of a pick-up in Q2, however the lack of new and improved projections along with perceived shift in tone to neutral was a surprise which hurt CAD. Q1 GDP data came in at 0.4% q/q vs 0.7% q/q as expected. The main driver was household spending which grew the fastest since 2017. Exports declined while imports rose thus making net trade the biggest drag on growth.

This week we will have trade balance data, Ivey PMI and employment data. Employment data will be announced at the same time as NFP which can produce increased volatility on USDCAD pair so we would advise you to be cautious and use small lot sizes. BOC reiterated its data dependency which added additional importance to employment report.

Important news for CAD:

Thursday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
  • -- Ivey PMI
Friday:
  • -- Employment Change
  • -- Unemployment Rate
JPY

Tokyo CPI for the month of May came in at 1.1% y/y vs 1.2% y/y as expected. Excluding food and energy CPI came in at 0.8% y/y as expected but down from 0.9% y/y from the previous month. Inflation is again heading in the wrong direction. The unemployment rate for the month of April ticked down to 2.4% as expected from 2.5% the previous month. Jobs to applicant ratio stayed at 1.63 as expected. Retail sales came in unchanged at 0% m/m vs 0.6% m/m as expected. A drop in consumption along with drop in inflation. Preliminary industrial production data came in at 0.6% m/m vs 0.2% m/m as expected. Japan’s industry was hit hard by trade war so this data is a great result.

This week we will have PMI data as well spending and earnings data.

Important news for JPY:

Monday:
  • -- Nikkei Manufacturing PMI
Wednesday:
  • -- Nikkei Services PMI
Friday:
  • -- Household Spending
  • -- Labour Cash Earnings
CHF

Q1 GDP data came in at 0.6% q/q vs 0.3% q/q as expected with prior Q4 reading being revised up to 0.3% q/q. A strong reading looking even better with positive revision of Q4 GDP. GDP is 1.7% y/y vs 1% y/y as expected. Rise in GDP has been achieved thanks to improvements in investments and consumption. The Swiss government stated that growth was achieved due to one-off factors and that negative factors affecting the economy are still present. They will not upgrade annual forecasts and general outlook for the economy remains murky. Trade balance for the month of April came in at CHF2.29bn vs CHF3.18bn the previous month. Exports came in at -0.6% m/m which is concerning but due to global tensions and overall slowdown not surprising and imports came in at 1.5% m/m showing that domestic demand is still robust. Retail sales came in at -0.7% y/y vs -0.8% y/y as expected. Consumption still stays on the weaker side.

This week we will have inflation and employment data.

Important news for CHF:

Monday:
  • -- CPI
Friday:
  • -- Unemployment Rate
 

katetrades

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Forex Major Currencies Outlook (June 10 – June 14)

USD

ISM manufacturing index came in at 52.1 vs 53 as expected. This is the lowest reading in 31 months. On the back of the reading and falling 2-year and 10-year bond yields odds of a rate cut in the July meeting have jumped to 50%. St Louis FED president Bullard was the first FED official to state the possibility of rate cut scenario. Bullard is a well-known dove but he is a voting member. He stated that main reason would be to “prop up inflation”. FED chairman Powell stated that likelihood that rates will fall to effective lower bound in a downturn is much higher, indicating that if the trade war continues or escalates a rate cut can be appropriate. Market participants are now pricing in a 92% probability of a rate cut by the September meeting.

ISM non-manufacturing index for the month of May came in at 56.9 vs 55.4 as expected. Employment category jumped to 58.1 from 53.7 the previous month. All categories were well over the 50 mark with inventories making the highest jump after the employment. The New Order category climbed to 58.6 from 58.1 the previous month. Trade balance for the month of April came in at -$50.8bn vs -$50.7bn as expected. Both exports and imports came in at -2.2%. Main culprit in exports were aircraft, the issue with Boeing, while on the import side chemicals, cars and semi-conductors showed the biggest decline.

NFP number came in at 75k vs 175k as expected. The lowest estimates were for an 80k increase. The unemployment rate and participation rate stayed the same at 3.6% and 62.8% respectively. Average hourly earnings came in at 3.1% y/y vs 3.2% y/y. Misses on the headline number and earnings pushed USD lower. This is the second month of the year with below a 100k NFP number, although the 4-month average is 127k. Will the FED brush off this reading or will it give significance and hint toward rate cut is yet to be seen.

This week we will have inflation and consumption data.

Important news for USD:

Wednesday:
  • -- CPI
Friday:
  • -- Retail Sales
EUR

The final manufacturing PMI for the Eurozone in the month of May came in at 47.7 as preliminary reading showed. German and French PMIs remained the same while Spanish dropped and Italian jumped coming in at 49.7, almost back into the expansion territory. Services PMI came in a bit better at 52.9 vs 52.5 preliminary with composite reading showing 51.8 vs 51.6 preliminary. Revisions up were done in Spain, Italy and German while French PMIs were revised slightly to the downside.

Preliminary CPI for the month of May came in at 1.2% y/y vs 1.3% y/y as expected. Previous month it was 1.7% y/y and a drop was expected since higher inflation was achieved due to Easter holiday. Core CPI came in at 0.8% y/y vs 0.9% y/y as expected signalling that inflation pressures are still very weak in the EU and that they will continue to pose problems for ECB. The unemployment rate for the month of April ticked down to 7.6%. Retail sales for the month of April came in at -0.4% m/m vs -0.5% m/m as expected while coming at 1.5% y/y as expected.

ECB has left the key rates unchanged as expected. They see rates at the present levels at least through H1 2020. New TLTRO is priced at MRO + 10bps. The main refinancing operations (MRO) rate is the interest rate banks pay when they borrow money from the ECB for one week. Consensus for TLTRO was MRO – 20bps so new TLTRO rate is hawkish decision that will help financial institutions in EU area and it propped EUR higher. GDP forecast for 2019 has been revised up to 1.2% and downgraded to 1.4% from 2020 and 2021. Inflation for 2019 is seen at 1.3%, for 2020 at 1.4% and for 2021 at 1.6%.

This week we will have data on industrial production and since German industrial production data was terrible, we can expect a miss.

Important news for EUR:

Thursday:
  • -- Industrial Production
GBP

The manufacturing PMI for the month of May came in at 49.4 vs 52.2 as expected. This is a huge miss, a drop into contraction territory for the first time July of 2016. Previous stockpiling due to Brexit uncertainties has eased and we got a big drop in the reading. New orders component fell to 46.2 which is lowest reading since October 2014. Construction PMI came in at 48.6 vs 50.6 as expected. The drop was led by the fall in the employment component which fell to the lowest since November 2012. Return to contraction territory for the construction PMI putting another PMI into the contraction territory. Services PMI came in at 51 vs 50.5 as expected thus beating the expectations and moving further into the expansion territory.

This week we will have monthly GDP data, data on trade balance, industrial and manufacturing production as well as construction output, employment and wages data and speech by governor Carney.

Important news for GBP:

Monday:
  • -- GDP
  • -- Trade Balance
  • -- Construction Output
  • -- Manufacturing Production
  • -- Industrial Production
Tuesday:
  • -- Unemployment Rate
  • -- Claimant Count Change
  • -- Average Weekly Earnings
Friday:
  • -- BOE Governor Carney Speech
AUD

Caixin manufacturing PMI for the month of May came in at 50.2 vs 50 as expected. This is the third consecutive month above 50. New orders accelerated rapidly according to Caixin and new export orders rebounded significantly to high levels. Caixin services PMI came in at 52.7 vs 54.5 the previous month and composite PMI came in at 51.5 vs 52.7 the previous month.

Retail sales for the month of April came in at -0.1% m/m vs 0.2% m/m as expected. The weak stream of data from Australia continues, however reaction in the markets was missing because everyone was concentrating on the rate decision. RBA delivered rate cut of 25bp putting the cash rate to 1.25% which is a record low. The decision to cut rates was primarily motivated by desire to support job growth and make progress towards inflation target. They acknowledged household consumption as main domestic uncertainty and April’s numbers confirmed their thesis. Downside risks from trade tensions have increased. Markets had this move priced at 100% and text of the statement did not leave room for speculations about further rate cuts so there were no volatile movements. Later during the day governor Lowe stated that future rate cuts are “not unreasonable” and that RBA will be data dependent. UBS reckons that the unemployment rate should be higher than 5.4% in order for future rate cuts to be made in July.

Q1 GDP came in at 0.4% q/q vs 0.5% q/q as expected and 1.8% y/y as expected. Growth rate is slowest in 5 years. Government spending was the main contributor to the growth. Household spending slowed and contributed a 0.1% to growth. Investment continued to detract and housing market continued to slow down. Trade balance for the month of April came in at AUD4.871bn vs AUD 5bn as expected. Exports were up 2.5% m/m and staggering 17.2% y/y while imports were up 2.8% m/m and 5.4% y/y.

This week we will have employment data from Australia as well as trade balance, inflation, consumption and industrial production data from China.

Important news for AUD:

Monday:
  • -- Trade Balance (China)
  • -- Exports (China)
  • -- Imports (China)
Wednesday:
  • -- CPI (China)
Thursday:
  • -- Employment Change
  • -- Unemployment Rate
Friday:
  • -- Retail Sales (China)
  • -- Industrial Production (China)
  • -- Fixed Asset Investment (China)
NZD

GDT price index came in at -3.4% at latest auction making it second straight auction with falling dairy prices. After an impressive run of 11 straight rising auctions we see a pullback in prices.

This week we will have data on consumption via electronic cards.

Important news for NZD:

Wednesday:
  • -- Electronic Card Retail Sales
CAD

Manufacturing PMI for the month of May came in at 49.1 vs 49.7 the previous month. This is the seventh consecutive month of dropping numbers with final reading being lowest since December of 2015 and plunging deeper into the contraction territory. Output and new orders category continued their decline while employment category came better than previous month. Global slowdown and trade tensions takes its toll on Canadian manufacturers. Trade balance for the month of April came in at -$0.97bn vs -$2.80bn as expected. Exports rose 1.3% while imports dropped -1.4%. Decline in trade deficit will have positive effect on Q2 GDP.

Employment change came in at 27.7k vs 5k as expected. All of the employment came in from full-time employment. The unemployment rate dropped to 5.4% from 5.7% the previous month and it is the lowest since 1976. Annual hourly wages accelerated to 2.8% from 2.5% in April and were steady at 2.6% for permanent employees. Another strong report from Canada indicating tight labour market conditions.

This week we will have housing data.

Important news for CAD:

Monday:
  • -- Housing Starts
  • -- Building Permits
JPY

The final manufacturing Nikkei PMI for the month of May came in at 49.8 vs 49.6 preliminary and 50.2 the previous month. Output and new orders dropped for the fifth consecutive month. Domestic and external demand conditions are getting weaker while the firms slow down on hiring and production. Services PMI came in at 51.7 vs 51.8 the prior month and composite was 50.7 vs 50.8 the previous month. Japan’s economy proves resilient in the wake of trade wars and other headwinds.

Labour cash earnings for the month of April came in at -0.1% y/y vs -0.7% y/y as expected. Household spending came in at 1.3% y/y vs 2.6% y/y as expected. Low wages, missing wages even, cannot prop up spending. Real wages came in at -1.1% y/y, falling for the fourth consecutive month.

This week we will have final Q1 GDP and industrial production data.

Important news for JPY:

Monday:
  • -- GDP
Friday:
  • -- Industrial Production
CHF

Headline inflation for the month of May came in at 0.3% m/m as expected while core CPI surprised to the upside and came in at 0.6% y/y vs 0.5% y/y prior. Seasonally adjusted unemployment rate came in at 2.4% as expected.

This week we will have SNB interest rate decision followed by monetary policy assessment. It is expected that the rate will stay the same but we could see some dovish comments intended to weaken the currency since CHF is appreciating, according to its safe heaven role, due to global tensions.

Important news for CHF:

Thursday:
  • -- SNB Interest Rate Decision
  • -- SNB Monetary Policy Assessment
 

katetrades

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Forex Major Currencies Outlook (June 17 – June 21)

USD

President Trump has stated over the weekend that deal with Mexico was reached thus delaying tariffs indefinitely. This brought a risk on effect in the markets, making gold and USDCAD gap on the opening.

Headline CPI for the month of May came in at 1.8% y/y vs 1.9% y/y as expected. Core CPI dipped down to 2% y/y vs 2.1% y/y as expected. Core CPI has been at or above 2% for 15 months now. Average hourly and weakly earnings both came higher than previous month coming in at 1.3% and 1% respectively. Although CPI is not FEDs preferred inflation measure, a drop in inflation, especially core one, may add more fuel to the fire of rate cuts. Markets are already pricing almost 80% probability of rate cut in July.

Advanced retail sales for the month of May came in at 0.5% m/m vs 0.6% m/m as expected with prior reading being revised to 0.3%. Control group came in at 0.5% m/m vs 0.4% m/m as expected with prior reading being revised to 0.4%. Revisions give additional boost to the reading, especially satisfying is the beating on control group reading since it is a component of GDP. This will lead to increase in estimates for Q2 GDP. Industrial production came in at 0.4% m/m vs 0.2/% m/m as expected to add more strength to the USD and US economy. Latest data may prevent FED from going too dovish at the meeting next week.

This week we will have housing data and preliminary PMI numbers for the month of June. The main event of the week will be FED’s interest rate decision. FOMC may leave the rate unchanged but signal future rate cuts via changes in the dot plot projections.

Important news for USD:

Tuesday:
  • -- Housing Starts
  • -- Building Permits
Wednesday:
  • -- FED Interest Rate Decision
  • -- FOMC Press Conference
Friday:
  • -- Markit Manufacturing PMI
  • -- Markit Services PMI
  • -- Markit Composite PMI
  • -- Existing Home Sales
EUR

Inflation expectation continue to fall. The Euruzone 5 year inflation swap forward, which is the key gauge of long-term inflation expectations in the Eurozone, has fallen to new record low of 1.16% thus breaking the 2016 low. Industrial production in Eurozone for the month of April came in at -0.5% m/m as expected on the backs of a notable drop in German industrial production.

This week we will have wage data, ZEW economic sentiment, final inflation data for the month of may and preliminary consumer confidence as well as PMI data for the month of June.

Important news for EUR:

Monday:
  • -- Wage Costs
Tuesday:
  • -- ZEW Economic Sentiment Indicator (EU and Germany)
  • -- CPI
  • -- Trade Balance
Thursday:
  • -- Consumer Confidence
Friday:
  • -- Markit Manufacturing PMI
  • -- Markit Services PMI
  • -- Markit Composite PMI
GBP

GDP data for the month of April came in at -0.4% m/m vs -0.1% m/m as expected. Worst month on month reading since March of 2016. Manufacturing production came in at -3.9% m/m vs -1.4% m/m as expected and industrial production came in at -2.7% m/m vs -1% m/m as expected. Huge drops in data. Effects of Brexit stockpiling start to show dragging down growth. ONS notes that the weak April reading can also be attributed to the "dramatic fall" in UK car production, which fell 24% m/m, due to planned shutdowns linked to Brexit uncertainty. Trade balance deficit narrowed coming in at -£12.1 bn vs -13bn as expected. Digging into the numbers we get some ugly data. Exports fell -8.4% m/m while imports fell -12.7% m/m adding more worries to the state of UK economy.

Average weekly earnings came in at 3.1% 3m/y vs 3% 3m/y as expected. The unemployment rate stayed at the historic lows of 3.8%. The employment change came in at 32k vs 4k as expected and claimant count came in at 23.2k. Overall a solid report with unemployment holding low and wages rising plus it gave some nice news from UK economy after abysmal GDP and production data.

Boris Johnson reiterated that he is not aiming for no-deal Brexit and that UK must leave EU on October 31. He expects that it will be done on the better negotiated Brexit deal. The first ballot of the conservative leadership race shows Boris Johnson firmly in the lead with 114 votes followed by Jeremy Hunt in distant second with 43 votes and Michael Gove in third place with 37 votes. Andrea Leadsom, Mark Harper and Esther McVey did not gather enough votes (17) and they are out of the race.

This week we will have inflation and consumption data as well as interest rate decision by BOE. No changes are expected due to the Brexit uncertainties. On the political docket we will have the continuation of the race for PM with minimum votes required for going into the next round raised to 33.

Important news for GBP:

Wednesday:
  • -- CPI
Thursday:
  • -- Retail Sales
  • -- BOE Interest Rate Decision
  • -- BOE MPC Meeting Minutes
AUD

Chinese trade balance for the month of May came in at $41.65bn vs $23.2bn as expected. Trade surplus almost doubled. Exports have risen 1.1% y/y vs -3.8% y/y as expected while the imports have fallen -8.5% y/y vs -3.3% y/y as expected. Domestic demand has eased down but exports are still rising despite the trade war. Inflation came in at 2.7% y/y as expected. Food inflation was the main pusher of overall inflation coming in at 7.17% y/y due to the outbreak of African swine flu, thus increasing pork prices. Non food component came in at 1.6% y/y. Industrial production came in at 5% y/y vs 5.4% y/y as expected. Lowest reading since February of 2002. Retail Sales were up 8.6% y/y vs 8.1% y/y as expected. Consumption is holding very strong. A drop in fixed asset investments along with a drop in industrial production may lead to further easing by the authorities to prop up the economy. National stats bureau came out and stated that month-to-month economic data fluctuations are normal thus implicitly saying that there is no need for concern.

Employment change for the month of May came in at 42.3k vs 16k as expected. Another big beat on the headline number. The unemployment rate stayed at 5.2% but it was projected for it to drop to 5.1% however participation rate has risen to 66% from previous and expected 65.8%. Full time employment change came in only at 2.4k so this will offset otherwise strong number, since majority of employment change was part time. Underemployment rate ticked up to 8.5% which is worrisome.

This week we will have minutes from the latest RBA meeting and speech from governor Lowe.

Important news for AUD:

Tuesday:
  • -- RBA Meeting Minutes
Thursday:
  • -- RBA Governor Lowe Speech
NZD

Electronic card retail sales came in mixed, it came -0.5% m/m vs 0.5% m/m as expected and 3.2% y/y vs 1.6% y/y as expected. Electronic card retail sales are big component of core retail sales so according to the monthly reading we may have a drop in core data. Manufacturing PMI for the month of May showed a huge drop coming in at 50.2 vs 53 the previous month. Lowest level since 2012 with production sub index coming in at 46.4 way below expansion territory.

This week we will have services PMI, hopefully they will not be as bad as manufacturing PMI, GDT price index and Q1 GDP data. Potential weakness in GDP could signal more rate cuts from RBNZ.

Important news for NZD:

Monday:
  • -- Services PMI
Tuesday:
  • -- GDT Price Index
Thursday:
  • -- GDP
CAD

Building permits came in at 14.7% vs 1.8% as expected. A huge beat but it was caused due to new regulations in British Columbia so the builders were seeking permits ahead of the new regulations. Building permits actually were down for the month in other provinces. New home prices came in at 0% for the third month.

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:
  • -- CPI
Friday:
  • -- Retail Sales
JPY

The final GDP data for Q1 of 2019 came in at 0.6% q/q vs 0.5% q/q preliminary. Business capex came in at 0.3% y/y and it is up from the preliminary reading, however personal consumption came in at -0.1% q/q and GDP deflator, a measure of inflation, dropped down to 0.1% y/y. Consumption and inflation remain the biggest problem for BOJ. There are calls for more easing from BOJ at their September meeting. Core machinery orders rose 5.2% m/m and 2.5% y/y for the first positive y/y reading in 2019. Looks like capital spending begun Q2 on a strong note. The final industrial production data for April came in at 0.6% m/m and -1.1% y/y as expected. Improvement on the month, down for the year.

This week we will have trade balance, manufacturing PMI and national inflation data. The main event will be BOJ rate decision. No change is expected but pressures are mounting and more easing could be on the table. Press conference will be important as markets will look for any signs of more easing to come.

Important news for JPY:

Wednesday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
Thursday:
  • -- BOJ Interest Rate Decision
  • -- BOJ Monetary Policy Statement
  • -- BOJ Press Conference
Friday:
  • -- CPI
  • -- Nikkei Manufacturing PMI
CHF

SNB has left sight deposit interest rate unchanged at -0.75% as widely expected. They reiterated their view that Franc is highly valued and that they will intervene in FX market if necessary. They also added that there is still room for more expansionary policy. Swiss government raised 2019 GDP projection to 1.2% from 1.1% previously while SNB keeps its projection of 2019 GDP at 1.5%.

This week we will have data on trade balance.

Important news for CHF:

Thursday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
 

katetrades

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Forex Major Currencies Outlook (June 24 – June 28)

Dovish tones continue to dominate statements from major Central Banks.

USD

FOMC voted to leave rates unchanged at 2.25% to 2.5%. The rate vote was not unanimous, St. Louis FED president Bullard, the biggest dove, voted for the rate cut while only one member, presumably George, president of Kansas City FED, expects a rate hike in 2019. The FOMC statement changed the wording on future policy changes. The change was from “patient” to ‘closely monitor the implications of incoming information”. The phrase “act as appropriate sustain the expansion” was also added to the statement. For the first time, Dot Plot signals interest rate cut with 8 out of 17 members seeing rate cut this year and 7 of those favour two rate cuts. The biggest change to projections was made regarding PCE inflation. Core PCE has been downgraded to 1.8% this year from 2% and to 1.9% next year from 2%. Chairman Powell stated at the press conference that “The case for somewhat more accommodative policy has strengthened” adding that they want to see more deteriorating data and want to react to genuine trends, not one or two data points or swings in sentiment. After the statement was released and press conference was held FED funds futures showed a 100% probability of a rate cut at the July meeting.

This week we will have housing data, consumer confidence data, final reading of Q1 GDP and PCE inflation. FED has downgraded their projections for inflation so data on personal spending and income will be closely monitored. G20 Summit starts on Friday with long awaited Trump – Xi meeting. Investors will be hoping for some warming in the relationship between two states.

Important news for USD:

Tuesday:
-- New Home Sales
-- Consumer Confidence Index
Wednesday:
-- Durable Goods Orders
Thursday:
  • -- GDP
  • -- Pending Home Sales
Friday:
  • -- PCE
  • -- G20 Summit
EUR

The ECB President Mario Draghi has said that cutting interest rates remains part of the bank's repertoire and added that negative rates have proven to be a very important tool. He added that if the outlook does not improve additional stimulus will be needed and not only in the form of rate cuts. Is there a possibility of re-entering the QE program? Markets are now pricing in additional 10bp rate cut in September of 2019 moving it closer from December of 2019. The ECB Vice President Luis de Guindos supports rate cuts if the inflation outlook does not improve.

German ZEW survey of current situation came in at 7.8 vs 6.1 as expected, but expectation component has plummeted to -21.1 vs -5.6 as expected and -2.1 the previous month. Expectation for Eurozone have also sunk coming in at -20.2 vs -1.6 the previous month. Trade balance for the Eurozone in the month of April came in at 15.3bn EUR vs 17bn EUR as expected. Exports were down 2.4% while imports were down 0.8%. Advanced consumer confidence continues to drop in the month of June with preliminary reading coming in at -7.2 vs -6.5 as expected. Preliminary June PMI data came in stronger than previous month. Manufacturing PMI came in at 47.8 vs 47.7 the previous month on the back of strong French reading with German reading also showing an improvement coming in at 45.4. Services PMI came in at 53.4 vs 52.9 the previous month and composite PMI came in at 52.1 vs 51.8 the previous month.

This week we will have data on business climate from EU and Germany and preliminary inflation data for the month of June.

Important news for EUR:

Monday:
  • -- Ifo Business Climate (Germany)
Thursday:
  • -- Business Climate Indicator
  • -- Economic Sentiment Indicator
Friday:
  • -- CPI
GBP

Inflation for the month of May came in at 0.3% m/m and 2% y/y as expected. A slight drop in the headline inflation from 2.1% y/y while core CPI came in better than expected, thus falling less from the previous month than expected, at 1.7% y/y. Retail sales came in at -0.5% m/m as expected but 2.3% y/y vs 2.7% y/y as expected. A bit softer reading on the yearly basis is concerning. ONS notes that the slightly softer figures here can be attributed to a drop in clothing sales. Fall in retail sales will negatively impact GDP growth in Q2.

BOE has left the bank rate unchanged at 0.75% with. The decision was made unanimously with all 9 members voting for no change. BOE has cut the Q2 GDP forecast to 0 from 0.2% q/q previously. Inflation will likely fall below 2% later this year but inflation expectations remain well-anchored. There are increasing signs that wage growth rates might level off. Downside risks have increased since May as global trade tensions intensify. Although it was acknowledged that “ongoing tightening of monetary policy at gradual and limited pace is needed” hawkish bias of BOE is being slowly deflated.

The final result of the voting for Tory leadership are: Boris Johnson 160 votes and Jeremy Hunt 77 votes. Almost 160 000 Tory party members will now cast their votes via post for one of the two candidates. New leader and PM will be announced on July 22.

This week we will have final Q1 GDP data and data on business investment.

Important news for GBP:

Friday:
  • -- GDP
  • -- Business Investment
AUD

Latest RBA meeting minutes show that monetary policy board agreed that “more likely than not” further easing of monetary policy would be appropriate. The role of labour market has been characterized as “particularly important” for the future decisions regarding easing. The lower rates would push down value of AUD thus reducing household debt repayments. The board is aware that lower rates will hurt savers, but they would also stimulate the overall economy.

This week we will have speech from governor Lowe and PMI data from China.

Important news for AUD:

Monday:
  • -- RBA Governor Lowe Speech
Sunday:
  • -- Manufacturing PMI (China)
  • -- Non-manufacturing PMI (China)
NZD

After last week’s huge drop in manufacturing PMI services PMI for the month of May improved and came in at 53.6 vs 52 the previous month. All sub-indices were over 50 with inventory making the highest jump from 48.5 to 56.8 this month. GDT price index came in at -3.8% making it a third consecutive negative auction. Q1 GDP came in at 0.6% m/m as expected and 2.5% y/y vs 2.3% y/y as expected. RBNZ was the first one to cut the rates and this data point will ease the need for further cuts. They can afford to be patient and decide based on more incoming data.

This week we will have trade balance data and RBNZ interest rate decision. After good GDP data it is expected that rates stay on hold.

Important news for NZD:

Tuesday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
Wednesday:
  • -- RBNZ Interest Rate Decision
  • -- RBNZ Rate Statement
CAD

Manufacturing sales for the month of April missed by a big margin. They came in at -0.6% m/m vs 0.4% m/m as expected. The drop was due to lower car sales. New orders also dropped due to temporary assembly plant shutdowns. Retail sales for the month of May came in at 0.1% m/m vs 0.2% m/m as expected but prior month’s reading was revised higher to 1.3% m/m. Ex autos component came in at 0.1% m/m vs 0.4% m/m as expected but prior month’s reading was revised higher to 1.8% m/m. Small misses have been offset by revisions higher for previous month. Higher sales at gasoline stations, along with new cars, food and beverage stores contributed to the increase.

CPI for the month of May surprised to the upside and came in at 2.4% y/y vs 2.1 % y/y as expected. This is the highest reading in the last seven months. Prices increased in all 8 major components with food leading the way at 3.5%. Prices of fresh vegetables rose 16.7% y/y. Core CPI measures show that Median came in at 2.1% vs 1.9% as expected, Common came in at 1.8% vs 1.9% as expected and Trim came in at 2.3% vs 2.1% as expected. These numbers will be very well received by BOC, showing that their monetary policy is effectively stimulating economy. Counties worldwide are struggling with inflation while all major components in Canada showed an increase in prices.

This week we will have data on wholesale trade and GDP for the month of April as well as OPEC meeting that will impact the price of oil, closely related to the value of CAD.

Important news for CAD:

Tuesday:
  • -- OPEC Meeting
  • -- Wholesale Trade
Wednesday:
  • -- OPEC Meeting
Friday:
  • -- GDP
JPY

Trade balance for the month of May came in at -JPY967bn vs -JPY1200bn as expected. Exports were down -7.8% y/y vs -8.2% y/y as expected caused by drops in exports to China -9.7% y/y and Asia -12.1% y/y. Imports came in at -1.5% y/y vs 1% y/y as expected. Lowering of trade deficit was achieved due to falling imports which can’t be a good sign regarding domestic demand. Exports fell less than expected but trade wars and global slowdown weigh in heavily. Chips and auto parts were main culprits for decline in exports.

BOJ has left the short-term interest rate at -0.1% as widely expected. The forward guidance has been left unchanged and they confirmed that low rates will be kept at least through spring of 2020. Japan's economy is expanding moderately as a trend although exports and output are affected by overseas slowdown. Assessments are kept unchanged.

Inflation on national level for the month of May came in at 0.7% y/y as expected but down from 0.9% y/y the previous month. Excluding fresh food component came in better than expected at 0.8% y/y vs 0.7% y/y as expected but also down from the 0.9% y/y the previous month. Struggle with inflation continues in Japan, one month it is on the right track, the other it turns back down. We are still far away from the targeted 2% level. This will give BOJ more reasons to ease further. Preliminary manufacturing PMI for the month of June came in at 49.5 vs 49.8 the previous month. New orders component showed the biggest fall in three years. Disappointingly low sales led to largest accumulation of finished goods inventories for more than six and-a-half years.

This week we will have minutes from the latest BOJ meeting, consumption data, inflation data from Tokyo area, employment data and preliminary industrial production data for the month of May. BOJ summary of opinions will provide more information whether board members discussed about expanding the stimulus program.

Important news for JPY:

Tuesday:
  • -- BOJ Monetary Policy Meeting Minutes
Thursday:
  • -- Retail Sales
Friday:
  • -- CPI
  • -- Unemployment Rate
  • -- Jobs to Applicants Ratio
  • -- BOJ Summary Of Opinions
  • -- Industrial Production
CHF

Trade balance data for the month of May came in at CHF3.41bn vs CHF2.29bn the previous month. Exports were down -1.2% m/m reflecting difficulties caused by global trade tensions. Domestic demand is holding stable with imports coming in at 0.7% m/m.
 

katetrades

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Forex Major Currencies Outlook (July 1 – July 5)

Final PMI readings across the world will dominate throughout the week, RBA rate decision and highlight will be NFP on Friday.

USD

New home sales in May missed expectations coming in at 626k vs 684k as expected, down from the April number of 673k. Consumer confidence dropped significantly in the month of June coming in at 121.5 vs 131 as expected. Prior number was revised down to 131.3 but it does not improve the picture by much. Both present situation and expectations categories missed expectations and came much weaker than the numbers in the previous month even with downward revisions. Jobs hard-to-get category showed a huge jump which is worrying since labour market is a bright spot in the US economy. FED chairman Powell hinted that there will be only one cut and emphasised the strength of US economy.

Durable goods orders for the month of May came in at -1.3% m/m vs -0.2% m/m as expected. Headline number looks abysmal butt core number, capital goods orders non-defence ex air, shows a much better number coming in at 0.4% m/m vs 0.1% m/m as expected. Advanced goods trade balance came in at -$74.5bn vs -$71.8bn as expected. Exports were down -2.5% y/y while imports were up 2.6% y/y presumably because importers look to boost their inventories before another batch of tariffs. Core PCE came in at 1.6% y/y vs 1.5% y/y as expected. Personal income came in at 0.5% m/m vs 0.3% m/m as expected while personal spending came in at 0.4% m/m vs 0.5% m/m as expected with previous month being revised up to 0.6% m/m. Since spending constitutes almost 70% of US GDP these numbers are very encouraging. Rise in personal income is also a welcoming sign for future inflation and additional spending.

This week we will have final PMI data for the month of June, trade balance data and big event on Friday will be NFP. NFP number is expected to bounce back to 176k and with all the talks about rate cuts FED will base their future decisions on this data. Average hourly earnings data will also be taken into the account by FED.

Important news for USD:

Monday:
  • -- Markit Manufacturing PMI
  • -- ISM Manufacturing PMI
Wednesday:
  • -- Markit Services PMI
  • -- Markit Composite PMI
  • -- ISM Non-manufacturing PMI
  • -- Trade Balance
  • -- Exports
  • -- Imports
  • -- ADP Nonfarm Employment Change
  • -- Factory Orders
Friday:
  • -- Nonfarm Payrolls
  • -- Unemployment Rate
  • -- Average Hourly Earnings
EUR

German Ifo Business climate index came in at 97.4 as expected continuing a drop from 97.9 the previous month. Expectations category also showed a decline painting a grim picture of the German economy. Current assessment of the economic situation improved a bit. Global slowdown is hitting export and manufacturing oriented German economy very hard. The US-China trade dispute is the main cause of uncertainty while Brexit and the Iran conflict are not playing a dominant role at the moment according to the Ifo economist.

Final consumer confidence for the month of June came in at -7.2 as the preliminary reading showed. However, all other indicators, business climate indicator, economic, industrial and services confidence, dropped. Economic confidence fell lowest since August of 2016. Preliminary CPI for the same month came in at 1.2% y/y as expected but core CPI came in at 1.1% y/y which is stronger than 1% y/y as expected and 0.8% y/y the previous month. The rise in core inflation will be welcomed by ECB as they very closely monitor it, however they need to see that this is a trend and not just one-month thing.

This week we will have final PMI data for the month of June, employment data and consumption data.

Important news for EUR:

Monday:
  • -- Markit Manufacturing PMI (EU, Germany, France)
  • -- Unemployment Rate
Wednesday:
  • -- Markit Services PMI (EU, Germany, France)
  • -- Markit Composite PMI (EU, Germany, France)
Thursday:
  • -- Retail Sales
GBP

Final Q1 GDP data came in at 0.5% q/q and 1.8% y/y as the preliminary reading showed. Total business investment dipped a bit to 0.4% q/q from 0.5% q/q preliminary and -1.5% y/y vs -1.4% y/y preliminary. Strength of Q1 GDP reading was achieved due to stockpiling ahead of Brexit which will not be transferred to Q2 strength as recent economic data showed.

This week we will have PMI data for the month of June.

Important news for GBP:

Monday:
  • -- Markit Manufacturing PMI
Tuesday:
  • -- Markit Construction PMI
Wednesday:
  • -- Markit Services PMI
AUD

RBA Governor Lowe said that it is legitimate to ask how effective monetary easing would be globally and added that the exchange rate effect of cutting rates is offset if everyone cuts.

This week we will have PMI data from China, trade balance data and consumption data. The main event will be RBA interest rate decision and markets are pricing around 80% probability for a rate cut.

Important news for AUD:

Monday:
  • -- Caixin Manufacturing PMI (China)
Tuesday:
  • -- RBA Interest Rate Decision
  • -- RBA Rate Statement
Wednesday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
  • -- Caixin Services PMI (China)
  • -- Caixin Composite PMI (China)
Thursday:
  • -- Retail Sales
NZD

Trade balance data for the month of May show a trade surplus of $264m vs $250m as expected. Exports beat expectations and prior month data coming in at $5.81bn which is an all-time high. The leading contributor to the rise was exports of milk powder, butter, and cheese. Imports, as well, beat expectations and prior month data coming in at $5.54bn. Majority of imports were crude oil imports.

RBNZ has left the official cash rate at 1.5% as expected. They have acknowledged weaker global economic growth and risk of prolonged subdued domestic growth. Given the downside risks around the employment and inflation outlook, a lower OCR may be needed over time. RBNZ took a dovish stance opening more room for the rate cuts as soon as August. OIS markets are now pricing about 80% chance of a rate cut in August. ANZ business confidence for the month of June dropped down to -38.1 from -32 the previous month. The economy is facing credit and cost headwinds while the global outlook is deteriorating. Such a drop in the data adds more certainty to future rate cuts, possibly even two cuts this year.

This week we will have bi-weekly GDT auction and housing data.

Important news for NZD:

Tuesday:
  • -- GDT Price Index
  • -- Building Permits
CAD

Wholesale sales for the month of April came in at 1.7% m/m vs 0.2% m/m as expected. This is the fifth consecutive monthly increase. Wholesale sales climbed in five of seven major categories representing 86% of total receipts. GDP for the month of April came in at 0.3% m/m vs 0.2% m/m as expected. Better than expected resulted was achieved due to rise in oil and gas. Along with wholesale trade GDP added another strong data point from Canadian economy. BOC cannot follow suit of other central banks and start with dovish rhetoric after incoming strong data similar to this signalling recovery in Q2 of 2019.

This week we will have OPEC meeting where there will be talks about cutting production in order to prop up the oil price. Additionally, we will have trade balance data and employment data on Friday which will be released at the same time as NFP so they might cause increased volatility.

Important news for CAD:

Monday:
  • -- OPEC Meeting
Tuesday:
  • -- OPEC Meeting
Wednesday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
Friday:
  • -- Employment Change
  • -- Unemployment Rate
JPY

Retail sales for the month of May came in at 0.3% m/m vs 0.6% m/m as expected but a beat of -0.1% m/m the previous month and 1.2% y/y as expected with 0.5% the previous month. Slow moves in the right direction but nothing suggests that these movements are sustainable. The unemployment rate stayed the same at 2.4% as expected. CPI for the Tokyo area came in same as previous month at 1.1% y/y vs 1% y/y as expected. Excluding food and energy category came in at 0.8% y/y vs 0.7% y/y as expected. Small improvement in the core reading toward the 2% target but still far away from it. Industrial production showed a great beat in May coming in at 2.3% m/m vs 0.7% m/m as expected and -1.8% y/y vs -2.9% y/y as expected.

This week we will have final PMI data for the month of June, Tankan data, data on consumer confidence as well as data on household spending.

Important news for JPY:

Monday:
  • -- Nikkei Manufacturing PMI
  • -- Tankan Manufactures Index
  • -- Consumer Confidence
Wednesday:
  • -- Nikkei Services PMI
Friday:
  • -- Household Spending
CHF

Due to geopolitical risks and general risk-off mode in the markets CHF has appreciated as a safe haven currency. SNB does not think that too strong CHF is good for the economy so they might intervene in the markets which in turn keeps market participants wary of adding more to their CHF positions.

This week we will have consumption and inflation data.

Important news for CHF:

Monday:
  • -- Retail Sales
Thursday:
  • -- CPI
 

katetrades

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Forex Major Currencies Outlook (July 8 – July 12)

BOC rate decision to dominate as we get more information about the thought process of lone neutral central bank.

USD

Presidents Trump an Xi met in Osaka at G20 meeting and agreed to forego new tariffs and restart trade negotiations. The ban for US companies from selling products to Huawei will be lifted. In turn China agreed to resume purchases of American goods and buy a "tremendous amount" of American food and agricultural products. The Trump administration is now turning towards Japan and Europe adding more tariffs on goods from Europe in order to fight against Europe’s “illegal” subsidies for Airbus.

The ISM manufacturing index for the month of June came in at 51.7 vs 51 as expected. It was down from 52.1 the previous month but still well in the expansion territory and when comparing with manufacturing PMI from other major economies it came immensely strong which gave USD a boost across the markets. The employment component rose to 54.7 while new orders dropped but still came in at 50. The ISM non-manufacturing index came in at 55.1 vs 56 as expected. Business activity, new orders and employment categories came in weaker than the previous month. Trade balance in May came in at -$55.5bn vs -$54bn as expected. Deficit continues to rise with imports (3.3%) coming in higher than exports (2%). Trade deficit with China widens to $30.2bn vs $26.9bn the previous month indicating China’s upper hand in the trade conflict.

NFP payrolls for the month of June beat the expectations and came in at 224k vs 160k as expected. Headline number was well monitored due to the poor reading of 75k the previous month which was revised down to 72k. The unemployment rate ticked up to 3.7% with participation rate also climbing to 62.9%. Average hourly earnings came in at 3.1% y/y vs 3.2% y/y as expected. Initial reaction on the headline number was USD strength. FED will not feel pressured to cut rates after the report so probability of a 50bp cut in July has drastically fallen. We could expect FED to stop with rate cuts after one 25bp rate cut in July.

This week we will have minutes from latest FOMC meeting, inflation and budget data.

Important news for USD:

Wednesday:
  • -- FOMC Minutes
Thursday:
  • -- CPI
  • -- Federal Budget Balance
EUR

Final manufacturing PMI for the month of June came in at 47.6 vs 47.8 preliminary. Data was pushed down on the big miss from Spanish PMI which came in at 47.9 vs 49.5 preliminary which is weakest since April 2013. Italy’s PMI also came in weaker than preliminary reading showed while France and Germany had an improvement in the data compared to the last month but weaker than preliminary readings. Final services PMI came in at 53.6 vs 53.4 preliminary. The unemployment rate has slipped down to 7.5% vs 7.6% as expected again reflecting tight labour market conditions present in the EU. Retail sales in May came in at -0.3% m/m vs 0.3% m/m as expected with previous month being revised up to -0.1% m/m which is a bit of positive news from overall bad report.

Italy has forecast a smaller budget deficit in 2019. It has been reduced from 2.4% to 2.04%. This new projection will help in avoiding conflict with the European Commission at least after the summer when 2020 budget comes into the play. German retail sales in May came in at -0.6% m/m vs 0.5% m/m as expected. EU leaders have nominated candidates for the key institutions. Former IMF president Christine Lagarde has been nominated for the president of ECB, a successor to Mario Draghi. Lagarde stated in her recent blog posts with IMF that additional stimulus is needed to assist economies around the globe, she is considered a bigger dove than Draghi. The fact that she is a career politician and lawyer by education raises questions about political independence of ECB.

This week we will have data on industrial production.

Important news for EUR:

Monday:
  • -- Eurogroup meeting
  • -- Industrial Production (Germany)
Friday:
  • -- Industrial Production
GBP

Manufacturing PMI for the month of June came in at 48 vs 49.5 as expected and down from 49.4 the previous month. Deeper plunge into contraction territory caused by a drop in the output component from 50.3 to 47.2. Construction PMI has plunged deeper into contraction territory coming in at a miserable 43.1 vs 49.2 as expected. This is the lowest reading in 10 years and shows just how deep uncertainties around Brexit hurt the construction sector. Services PMI rounded up weak PMI readings for the month of June coming in at 50.2 vs 51 as expected. Composite PMI was dragged into contraction territory and came in at 49.7. That is the first contraction since July 2016.

This week we will have data on industrial and manufacturing production, construction output and trade balance.

Important news for GBP:

Wednesday:
  • -- Industrial Production
  • -- Manufacturing Production
  • -- Construction Output
  • -- Trade Balance
AUD

Official Chinese manufacturing PMI data for the month of June came in at 49.4, same as the previous month and still in contraction territory. New export orders category showed additional decline. Services PMI came in at 54.2 as expected, deep into expansion territory. Caixin manufacturing PMI came in at 49.4 vs 50.1 as expected and 50.2 the previous month. A drop into contraction territory led by new orders and new export orders categories. Sub index measuring sentiment toward future output plunged further, although staying in expansionary territory. Caixin services PMI came in at 52 vs 52.6 as expected and composite PMI was dragged down to 50.6 vs 51.5 the previous month. New export business dropped back to contraction territory, pointing to subdued foreign demand. The employment measure also fell further but remained in positive territory.

RBA has cut official cash rate by 25bp to 1% as widely expected. This is the lowest level for rates in history. The move was made in order to support job creation, reduce spare capacity and move inflation toward the target since inflation pressures remain subdued across much of the economy. Inflation is still anticipated to pick up and will be boosted in the June quarter by increases in petrol prices. The central scenario remains for underlying inflation to be around 2 per cent in 2020 and a little higher after that. The Global economic outlook remains reasonable and global financial conditions remain accommodative according to RBA. The Australian dollar is at the low end of its narrow range of recent times. Overall neutral statement since there are possibilities for further rate cuts, but they are not urgent. Employment, inflation and GDP will be closely monitored by RBA and they will influence their further moves.

Trade balance for May came in at AUD 5745m vs AUD 5250m as expected which is the new record surplus. Better than expected result and bigger surplus was achieved due to better exports, 4% m/m, while imports came in at 1% m/m still showing strong domestic demand for foreign goods. Retail sales came in at 0.1% m/m vs 0.2% m/m as expected but up from -0.1% m/m the previous month.

This week we will have inflation and trade balance data from China and data on business and consumer confidence from Australia.

Important news for AUD:

Tuesday:
  • -- NAB Business Confidence
Wednesday:
  • -- Westpac Consumer Confidence
  • -- CPI (China)
Friday:
  • -- Trade Balance (China)
  • -- Exports (China)
  • -- Imports (China)
NZD

GDT price index came in at -0.4% for the fourth consecutive negative auction. NZD continues to follow market sentiment until major data givse more ammunition for monetary policy decisions.

This week we will have consumption and PMI data.

Important news for NZD:

Thursday:
  • -- Electronic Card Retail Sales
Friday:
  • -- Business NZ PMI
CAD

Trade balance in May came in at $0.76bn vs -$1.7bn as expected for the first trade surplus in almost 3 years. Imports were up 1% while exports were up staggering 4.6% for the record number of $53.1bn. Trade surplus with US jumped to $5.9bn vs $4.4bn the previous month, that is highest surplus in a decade. The main contributor to big export numbers was the automotive sector.
Employment number for the month of June was -2.2k vs 9.9k as expected. The unemployment rate ticked up to 5.5% while the participation rate stayed the same. Hourly wage for permanent employees came in at 3.6% vs 2.7% as expected, this is a huge beat and benefit for the workers. Full time employment came in at 24.1k for another positive sign.

This week’s main event will be BOC rate decision. It is widely expected that rate will stay the same, but due to the great recent data investors will be looking for hawkish statement or at least maintaining the neutral stance.

Important news for CAD:

Wednesday:
  • -- BOC Interest Rate Decision
  • -- BOC Rate Statement
  • -- BOC Monetary Policy Report
  • -- BOC Monetary Policy Report Press Conference
Thursday:
  • -- OPEC Monthly Oil Market Report
JPY

Tankan report for the Q2 of 2019 showed worse than expected numbers in manufacturing sector. The large manufacturing index came in at 7 for the worst reading in 3 years showing the accumulated pressure of trade war and global slowdown. At the same time final Nikkei manufacturing PMI for the month of June came in at 49.3 vs 49.5 preliminary and down from 49.8 the previous month. There was a sharp decline in the new export orders category. Household spending in May surprised and came in at 4% y/y vs 1.5% y/y as expected.

This week we will have final data on industrial production.

Important news for JPY:

Friday:
  • -- Industrial Production
CHF

Retail sales for the month of May came in at -1.7% y/y vs -0.7% y/y as expected. Consumption in Switzerland continues to deteriorate without noticeable effect on CHF. Manufacturing PMI for the month of June came in at 47.7 vs 49 as expected and down from 48.6 the previous month. Although manufacturing is not the main driver of the economy, drops like these are worrying. SNB's vice president Zurbruegg stated that they have seen some pressure on the CHF and reiterated that SNB is ready to intervene to reduce attractiveness of the CHF. Headline CPI for June came in at 0.6% y/y vs 0.5% y/y as expected. There was also a very welcoming tick up in core CPI component which came in at 0.7% y/y vs 0.6% y/y as expected.

This week we will have employment data.

Important news for CHF:

Tuesday:
  • -- Unemployment Rate
 

katetrades

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Forex Major Currencies Outlook (July 15 – July 19)

Inflation and consumption data will dominate the week in front of us.

USD

FED chairman Powell began his testimony to Congress with remarks that uncertainties and concerns about global economy since June meeting continue to weigh in on the US economic outlook. The FED will act as appropriate to sustain US growth. There is a risk weak inflation will be even more persistent than what FED currently anticipates. Current levels of wage growth are not enough to put upwards pressure on inflation. Concerns were raised about high and rising federal debt and relative stagnation of middle and lower incomes, also housing manufacturing looks to have dipped again in Q2. Overall dovish tone of the statement sent USD lower across the markets and all but cemented the rate cut in July.

CPI for the month of June came in at 1.6% y/y as expected down from 1.8% y/y the previous month while core CPI surprised to the upside coming in at 2.1% y/y vs 2% y/y as expected and as previous month. Real average hourly earnings climbed to 1.5% y/y vs 1.3% y/y the previous month and real average weakly earnings came in better than expected at 1.2% y/y. Rise in real earnings is a very encouraging sign for the US workers and US economy as a whole.

This week we will get consumption and housing data as well as data on industrial production.

Important news for USD:

Tuesday:
  • -- Retail Sales
  • -- Industrial Production
Wednesday:
  • -- Building Permits
EUR

German industrial production for the month of May came in at 0.3% m/m vs 0.4% m/m as expected but yearly figure shows the full scope of the issue coming in at -3.7 y/y for a deep plunge. The drop in y/y reading indicates that recovery in the economy will not be achieved in Q2. After the drop in business investor confidence survey concerns about possible resumption of QE program started to mount. Industrial production in the Eurozone came in at 0.9% m/m vs 0.2% m/m as expected with -0.5% m/m for the previous month. Great rebound can be attributed to jump in French numbers which were boosted by Airbus aircraft production. Italy also published better than expected data.

European Commission has cut outlook for Euro Area citing rising downside risks in the form of trade tensions and political uncertainties. GDP growth for 2019 in unchanged but 2020 GDP is lowered for Eurozone as well as for Germany and France. For all the areas GDP has been lowered to 1.4% from 1.5% previously. Inflation in Eurozone has also been cut to 1.3% from 1.4% previously.

This week we will get economic sentiment data for both EU and Germany, trade balance and final inflation numbers for the month of June in the Eurozone.

Important news for EUR:

Tuesday:
  • -- ZEW Economic Sentiment Indicator (EU and Germany)
  • -- Trade Balance
Wednesday:
  • -- CPI
GBP

GDP for the month of May came in at 0.3% m/m as expected. The main contributor to the headline reading was car production which bounced back from the lows of the previous month. However, due to the weak GDP reading in April it will take a June GDP reading of 0.8% m/m in order for Q2 GDP to turn flat and likelihood of that happening is very low. Therefore, we are in for a negative Q2 GDP reading. Manufacturing and industrial production as well as construction output missed the estimates but came in positive for the month thus showing a rebound from the previous month when all three categories were negative. Trade balance came in at -£11.5bn vs -£12.6bn as expected and -£12.8bn the previous month. Lowering of deficit was achieved with exports rising 3.5% and imports falling -0.6%.

Financial stability report published by BOE shows that the risk of a no-deal Brexit has risen and that it could cause a material economic disruption, however UK banks could withstand it. Governor Carney stated that UK financial system is ready for Brexit regardless of the form it takes. However, other parts of the UK economy still has more preparing to do for the Brexit.

This week we will have employment data as well as inflation and consumption data.

Important news for GBP:

Tuesday:
  • -- Unemployment Rate
  • -- Claimant Count Change
  • -- Average Weekly Earnings
Wednesday:
  • -- CPI
Thursday:
  • -- Retail Sales
AUD

CPI from China for the month of June came in at 2.7% y/y as expected. The number is distorted since food prices have risen by 8.3% due to bad weather while non-food prices rose by mere 1.4% which represents third month in a row of easing pressures. PPI on the other hand came in flat at 0% y/y, lowest reading since August of 2016. These data add more wind to the idea that PBOC will further ease their policy. Chinese customs released trade balance data first for H1 and it showed trade surplus of 1.23 trillion Yuan. Exports were up 6.1% y/y while imports were up 1.4% y/y. Total trade with US was down 9% y/y but trade surplus increased by 12% y/y to 954.8bn Yuan on the back of plunging imports -25.7% y/y for H1 and lower exports -2.6% y/y. Monthly exports in June declined 1.3% while imports declined 7.3% vs 4.8% decline as expected for a surplus of $50.98bn vs $45bn as expected.

This week we will have GDP, consumption, industrial production and investment data from China. From Australia we will get RBA meeting minutes along with employment data. Since employment is one of RBA’s mandate it will be very closely monitored for decisions on possible future rate cuts.

Important news for AUD:

Monday:
  • -- GDP (China)
  • -- Retail Sales (China)
  • -- Industrial Production (China)
  • -- Fixed Asset Investment (China)
Tuesday:
  • -- RBA Meeting Minutes
Thursday:
  • -- Employment Change
  • -- Unemployment Rate
NZD

Card spending for the month of June came in flat at 0% m/m vs 0.7% m/m as expected with prior month showing -0.5% m/m. A decent rebound from the previous month, albeit weaker than expected and since card spending constitutes around 70% of core retail sales we can expect a rebound in the reading. BusinessNZ Manufacturing PMI came in at 51.3 vs 53.1 as expected but up from 50.2 the previous month. Less than expected rise in the reading which was achieved with huger rise in finished stocks which rose to 57.6.

This week we will have inflation data for Q2. Latest data incoming has not been encouraging and if inflation slips, we will increasing pressures for the rate cut in August. We will also get bi-weekly GDT price index which has been slipping for four consecutive months and services PMI.

Important news for NZD:

Monday:
  • -- Services PMI
Tuesday:
  • -- CPI
  • -- GDT Price Index
CAD

BOC has kept the overnight rate at 1.75% as widely expected. In the statement they have acknowledged material effect on the global economic outlook produced by the trade tensions and added that trade conflicts between the United States and China, in particular, are curbing manufacturing activity and business investment and pushing down commodity prices. They feel that accommodation provided by current rate remains appropriate. Annual Q1 GDP has been raised to 0.4%, Q2 has been raised to 2.3% from 1.3% while Q3 GDP has been projected at 1.5%. Q2 growth came stronger than predicted due to temporary factors, including reversal of weather-related slowdowns and a surge in oil output. Key factors behind the improvement in Canada’s economy are jobs growth, wages growth, rebound in consumer spending, exports and business investment.

This week we will get inflation and consumption data as well as data on manufacturing sales.

Important news for CAD:

Wednesday:
  • -- CPI
  • -- Manufacturing Sales
Friday:
  • -- Retail Sales
JPY

Wages data showed a drop in both cash earnings and real cash earnings in May with former coming in at -0.2% y/y vs -0.6% y/y as expected and latter coming in at -1% y/y vs -1.5% y/y as expected. Both categories came in better than expected but this is the fifth consecutive month of falling wages and it cannot act to spur any consumption and economic growth.

This week we will have trade balance data and national inflation data.

Important news for JPY:

Thursday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
Friday:
  • -- CPI
CHF

The seasonally adjusted unemployment rate for the month of June slipped down to 2.3% indicating even tighter conditions in the labour market. These are the lowest numbers since April of 2002.

This week we will have trade balance data.

Important news for CHF:

Thursday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
 

katetrades

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Forex Major Currencies Outlook (July 22 – July 26)

ECB rate decision will dominate the week ahead of us accompanied by preliminary PMI figures for the month of July, election of the new UK Prime Minister and US Q2 GDP data.

USD

Retail sales for the month of June came in at 0.4% m/m vs 0.2% m/m as expected with prior reading being revised down to 0.4% from 0.5%. Core retail sales were particularly strong coming in at 0.7% m/m vs 0.3% m/m as expected with prior reading being revised up to 0.6% from 0.4%. US consumers are still going strong and this reading will raise GDP projections for Q2 that will be published next week. Atlanta FED raised Q2 GDP forecast to 1.6% from 1.4% before the report.

FED’s Williams gave a speech with very dovish tones stating that it is better to react prematurely than late which weakened the dollar mentioning even neutral rates at 0.5%. FED funds futures were pricing in a 59% chance for 50 bps cut in July. Later on, the NY FED said that Williams’s speech was not about potential policy actions at the July FOMC meeting, it was an academic speech based on research which lowered the chances of 50 bps rate cut to around 42%.

This week we will have housing data, preliminary PMI numbers for the month of July, data on durable goods and preliminary Q2 GDP reading.

Important news for USD:

Tuesday:
  • -- Existing Home Sales
Wednesday:
  • -- New Home Sales
  • -- Markit Manufacturing PMI
  • -- Markit Services PMI
  • -- Markit Composite PMI
Thursday:
  • -- Durable Goods Orders
Friday
  • -- GDP
EUR

Trade balance for the month of May came in at EUR20.2bn vs EUR17.8bn as expected and big jump from EUR15.7bn the previous month. Exports grew 1.3% m/m, always a good thing for export-oriented economies, while imports fell 1.1% m/m which raises some concerns about domestic demand. German ZEW survey of the current situation for the month of July came in at -1.1 vs 5 as expected and 7.8 the previous month. A drop into negative territory and weakest reading in almost a decade. Expectations for German economy dropped to -24.5 from -21.1 the previous month and Eurozone expectations slipped to -20.3 vs -20.2 the previous month. Pessimistic numbers for the start of Q3, signalling missing expected rebound in H2. Final CPI for the month of June came in at 1.3% y/y vs 1.2% y/y preliminary while core held its ground at 1.1% y/y as preliminary reading showed.

Ursula von der Leyen, former German minister of defence who is considered a key and close ally of Chancellor Angela Merkel, has been narrowly elected president of the EU Commission, becoming the first woman to fill the post and the first German at the helm in over half a century. She received 383 votes while 374 votes where needed to confirm her appointment.

This week we will have preliminary PMI numbers and consumer confidence for the month of July, ifo business climate from Germany and highlight of the week will be ECB rate decision. Overnight index swaps are showing that markets price in an 85 percent probability of a rate cut by the September meeting. Further talks about monetary easing are expected and they can drag the euro down.

Important news for EUR:

Tuesday:
  • -- Consumer Confidence Index
Wednesday:
  • -- Markit Manufacturing PMI (EU, Germany, France)
  • -- Markit Services PMI (EU, Germany, France)
  • -- Markit Composite PMI (EU, Germany, France)
Thursday:
  • -- Ifo Business Climate (Germany)
  • -- ECB Interest Rate Decision
  • -- ECB Monetary Policy Press Conference
GBP

Employment change for the month of May came in at 28k vs 45k as expected. The unemployment rate stayed at 3.8% while claimant count rose to 38k from 24.5k the previous month which is the highest number in a decade. Average weekly earnings beat the expectations coming in at 3.4% 3m/y vs 3.1% 3m/y as expected. When calculated in real terms, average weekly earnings came in at 1.4% 3m/y for the fastest growth since October 2015. The employment report was on the strong side but we have entered Q3 and Brexit uncertainties still loom over so its effect was not supportive of GBP.

Inflation came out flat in the month of June as was expected. CPI was 2% y/y as expected and core CPI was 1.8% y/y as expected and it ticked up from 1.7% y/y the previous month. ONS stated that motor fuel prices fell on the month but rose relative to a year ago thus helping to offset the decline in clothing prices and keep the inflation flat for the month. Retail sales beat expectations by coming in at 1% m/m vs -0.3% m/m as expected with reading from the previous month being revised down to -0.6% m/m. Year over year figure came in at 3.8% vs 2.6% as expected. ONS notes growth in non-food stores was the main contributors to the rise in retail sales. Retail sales excluding auto fuel were also very strong which means that underlying demand is robust. Food stores sales fell for the first time this year and department store sales continued to decline in Q2.

The race for the leader of Tory party and PM of the UK ends on July 23. Boris Johnson who will very likely become the new PM next week stated that plans to hold an early election “while Jeremy Corbyn is still around” thus considering Corbyn for an unfit opponent. The Benn amendment has been passed in Parliament. The Benn amendment will require parliament to be recalled in September and October thus preventing the possibility of no-deal Brexit by running out the clock until October 31.

This week on Tuesday July 23 we will find out who will be UK’s new Prime Minister, Boris Johnson or Jeremy Hunt. The new PM will have a tough task of navigating the country through the Brexit mess.

AUD

Apart from Q2 GDP which came in at 6.2% y/y as expected Chinese data came stronger than expected including quarterly measure of GDP which came in at 1.6% q/q vs 1.5% q/q as expected. Q1 GDP came in at 6.4% and reading of 6.2% represents the slowest growth in almost 30 years. Retail sales for the month of June came in at 9.8% y/y vs 8.5% y/y as expected. This is a big beat propped by rising car sales. Industrial production came in with a bang at 6.3% y/y vs 5.2% y/y. During increasing global tensions and global slowdown Chinese industrial production did not back down. Fixed asset investments came in at 5.8% y/y vs 5.6% y/y as expected.

RBA meeting minutes emphasized importance of labour market conditions when considering further rate cuts. Employment change for June came in at 0.5k vs 9k as expected. The unemployment rate and participation stayed the same at 5.2% and 66% respectively. Full time employment came in at 21.1k while part time employment was down 20.6k. A soft headline number but the steady unemployment rate buys RBA more time so they can wait with further rate cuts.

This week we will have Q2 inflation data which is expected to rise and speech from RBA governor Lowe.

Important news for AUD:

Thursday:
  • -- CPI
  • -- RBA Governor Lowe Speech
NZD

Inflation for the Q2 came in as expected at 0.6% q/q and 1.7% y/y. Prior readings showed 0.1% q/q and 1.5% y/y. The biggest contributor to the inflation were fuel prices. RBNZ’s core inflation reading came in at 1.7% y/y, same as the previous quarter. GDT price index came in at 2.7% thus breaking the trend of four consecutive negative auctions.

This week we will have trade balance data.

Important news for NZD:

Wednesday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
CAD

CPI for the month of June came in at 2% y/y as expected and down from previous month highs of 2.4% y/y due to drop in gasoline prices. If we exclude energy CPI came in at 2.6% y/y. The main contributors to inflation were food prices which came in 3.5% y/y, fresh vegetables rose 17.3% y/y. Regarding the core measures median came in at 2.2% y/y vs 2.1% y/y as expected, common came in at 1.8% y/y as expected while trimmed came in at 2.1% y/y vs 2.2% y/y as expected. Strong numbers that are in line with BOC’s expectations and while they will keep monetary policy makers happy as they will not make them stir away from the current course.

Manufacturing sales for the month of May came in at 1.6% m/m vs 2% m/m as expected but still up from -0.4% m/m the previous month. Sales were up in 12 of 21 industries, representing 66.2% of total Canadian manufacturing, with transportation equipment making the biggest turnaround coming in at 8.1% vs -5.8% the previous month. Inventory levels were up in 13 of 21 industries, with the largest increases being energy in storage. Retail sales came in at -0.1% m/m vs 0.3% m/m as expected thus making the first miss in the long line of data beating the expectations. Retail sales have risen in previous four months. Ex autos category came in at -0.3% m/m vs 0.3% m/m as expected. Sales were down in 4 of 11 subsectors. The biggest drop was in food and beverage stores which dropped 2%. Interestingly, sales at cannabis stores rose 14.8% marking the third consecutive month of double-digit growth.

This week we will have data on wholesale sales.

Important news for CAD:

Monday:
  • -- Wholesale Sales
JPY

Trade balance for the month of June came in at JPY589.5bn vs JPY403.5bn and up from -JPY968.3bn the previous month. Exports fell -6.7% y/y vs -5.4% y/y as expected which is the seventh consecutive month of dropping exports. Imports plunged -5.2% y/y from -1.5% y/y the previous month. These numbers show very weak trading activity from Japan and only because of a huge drop in imports the balance showed a surplus.

National CPI for the month of June came in at 0.7% y/y as expected. CPI excluding fresh food came in at 0.6% y/y as expected but down from 0.8% y/y the previous month. CPI excluding fresh food and energy came in at 0.5% y/y as expected. Inflation remains stubbornly low, not moving in the desired direction towards the 2% target thus giving more incentives for further easing of monetary policy.

This week we will have preliminary PMI numbers for the month of July as well as inflation data for the Tokyo area.

Important news for JPY:

Wednesday:
  • -- Markit Manufacturing PMI
  • -- Markit Services PMI
Friday:
  • -- CPI
CHF

Trade balance for the month of June came in at CHF4.1bn vs CHF3.4bn the previous month. Exports were up 0.1% m/m vs -1.2% m/m the previous month while imports were down -1.4% m/m vs 0.7% m/m the previous month. The rise in trade surplus was caused by slowdown in domestic demand.
 
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