Daily Market Outlook by Kate Curtis from Trader's Way

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katetrades

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Forex Major Currencies Outlook (July 29 – Aug 2)

BOJ, BOE and FED will hold their meetings this week accompanied with NFP on Friday and slew of economic data worldwide.

USD

Preliminary durable goods for the month of June came in at 2% m/m vs 0.7% m/m as expected. Huge beating on the headline number has been dented by the revision down for the previous month to -2.3% m/m from -1.3% m/m. Capital goods orders non-defense ex-air (core durable orders) came in at 1.9% m/m vs 0.2% m/m as expected. Core orders also strongly beat expectations and there was only mild downward revision for the previous month to 0.0% m/m. Another data point that will strengthen belief in 25bps vs 50bps rate cut.

GDP beat the expectations in Q2 coming in at 2.1% vs 1.8% as expected. Personal consumption led the way with 4.3% vs 4% as expected with prior reading showing 0.9%. Consumer spending on durables jumped to 12.9% vs 0.3% the previous quarter and consumption added 2.85bp to GDP. Trade balance and inventories were not as big of a drag to growth as expected but business and home investment dropped which is concerning. Although we can expect for housing investment to pick up in time with rising wages. Yet another data point that will lower the probability of a 50bps rate cut.

This week will have inflation, housing and trade balance data as well as final PMI numbers for the month of July. Main event of the week will be FED interest rate decision followed by FOMC press conference. A 25Bps rate cut is expected with some chances of 50bps cut, it will be important to see in press conference accompanying the decision if this is an insurance cut or beginning of a rate cut cycle. Nonfarm payrolls will be the second highlight of the week with headline number expected around 160k and the unemployment rate expected to drop to 3.6%.

Important news for USD:

Tuesday:
  • -- PCE
  • -- Pending Home Sales
  • -- Consumer Confidence Index
Wednesday:
  • -- ADP Nonfarm Employment
  • -- FED Interest Rate Decision
  • -- FOMC Press Conference
Thursday:
  • -- Markit Manufacturing PMI
  • -- ISM Manufacturing PMI
Friday:
  • -- Nonfarm Payrolls
  • -- Unemployment Rate
  • -- Average Hourly Earnings
  • -- Trade Balance
  • -- Exports
  • -- Imports
EUR

Preliminary consumer confidence reading for the month of July came in at -6.6 vs -7.2 as expected. Improvement in confidence did not bring strength to EUR as investors were expecting preliminary PMI numbers which came in weaker than expected. Manufacturing PMI for the Eurozone came in at 46.4 vs 47.6 the previous month on the back of French PMI dropping to 50 from 51.9 the previous month and German dropping down to 43.1 from 45 the previous month. This is the lowest reading from Germany in 7 years and it raises concerns about Germany falling into recession. Services PMI came in at 53.3 as expected supported by climb in German services. Composite PMI was dragged down by the manufacturing PMI to 51.5 vs 52.2 as expected.

German Ifo business climate index dropped down to 95.7 vs 97.2 as expected and down from 97.5 the previous month. Expectations and current assessment categories also missed the expectations and came lower than previous month indicating continuing weaknesses in German economy as we start Q3. Also, this reading adds more to the already raised concerns about Germany falling into recession.

ECB has left key interest rates unchanged at their July meeting with comment that they see rates at present or at lower levels at least through H1 of 2020. Statement said that ECB will examine options for tiering and potential reintroduction of QE program. EUR jumped on the initial no-rate-change news but was subsequently pushed lower after dovish comments on forward guidance and mentioning of additional easing measures. Governor Draghi stated that data points to somewhat weaker growth in Q3 and Q4 and characterized that weakness as due to softer global growth. He stated that outlook is getting "worse and worse" in manufacturing sector and added that "it is hard to be gloomy" as the current situation is of continued growth, emphasizing ongoing rises in wages. Significant monetary stimulus is needed and risks around growth outlook are still tilted to the downside. He said that he wants to see the next round of projections before taking action and added that risk of recession is pretty low. In this way he effectively postponed the decision for the September meeting. Overnight index swaps are pricing in an 85% probability of a cut by the September meeting. ECB released the results of its latest survey of professional forecasters and it showed inflation cut down in 2019 to 1.3% from 1.4% previously, down to 1.4% from 1.5% previously in 2020 and down to 1.5% from 1.6% previously in 2021. Long term inflation is at 1.7% from 1.8% previously.

This week we will have data on business climate, preliminary inflation reading and final manufacturing PMI for the month of July, preliminary Q2 GDP, employment and consumption data.

Important news for EUR:

Tuesday:
  • -- Business Climate Indicator
  • -- Economic Sentiment Indicator
Wednesday:
  • -- CPI
  • -- GDP
  • -- Unemployment Rate (EU and Germany)
Thursday:
  • -- Markit Manufacturing PMI (EU, Germany and France)
Friday:
  • -- Retail Sales
GBP

Boris Johnson has become the new leader of the Tory party and thus the new prime minister of United Kingdom. He defeated Jeremy Hunt with 2/3 majority. Dominic Cummings is set to be named as senior adviser to Boris Johnson. He was the campaign director of Vote Leave during the Brexit referendum. Cummings is said to have stated that he will deliver Brexit by October 31 “however hard that is”. In addition, new PM has appointed pro-Brexit supporters at key positions. Dominic Raab is appointed as foreign secretary and Jacob Rees-Mogg as leader of the House of Commons. Sajid Javid is confirmed as Chancellor of the Exchequer which is a position of finance minister in other countries.

This week we will have PMI data and BOE interest rate decision. No change in the rate is expected but BOE may take more dovish stance in line with other central banks. The Parliament is set to observe a recess from 25 July until 3 September.

Important news for GBP:

Thursday:
  • -- Markit Manufacturing PMI
  • -- BOE Interest Rate Decision
  • -- BOE MPC Meeting Minutes
  • -- BOE Governor Carney Speech
Friday:
  • -- Construction PMI
AUD

RBA governor Lowe stated that RBA is ready to further ease the monetary policy if demand disappoints. He also added that it is reasonable to expect an extended period of low interest rates. The board is “strongly committed” to making sure that inflation returns to range however it will take some time before the inflation returns within target range. According to Lowe it is highly unlikely that RBA will be contemplating higher interest rates until they are confident that inflation will return to around the midpoint of the target range. Underlying foundations of Australian economy have been characterized as strong.

This week we will have inflation and consumption data from Australia as well as official manufacturing and non-manufacturing PMIs from China. Caixin manufacturing PMI will also be published from China.

Important news for AUD:

Wednesday:
  • -- Manufacturing PMI (China)
  • -- Non-manufacturing PMI (China)
  • -- CPI
Thursday:
  • -- Caixin Manufacturing PMI (China)
Friday:
  • -- Retail Sales
NZD

Trade balance for the month of June came in at $365m vs $100m as expected which helped push the deficit down to -$4.94bn y/y. Unfortunately, the number was achieved on both falling exports ($5.01bn vs $5.29bn as expected and $5.81bn the previous month) and falling imports ($4.65bn vs $5.2bn as expected and $5.54bn the previous month). The decline in imports was led by a 39% drop in fuel and a 16% drop in vehicles. Overall exports in Q2 rose 1.5%, led by a rise in infant formula 18% and aluminium 15%.

This week we will have housing data and data on business confidence.

Important news for NZD:

Tuesday:
  • -- Building Consents
Wednesday:
  • -- ANZ Business Confidence
CAD

Wholesale sales for the month of May came in at -1.8% m/m vs 0.5% m/m as expected. This is the largest drop in the reading in more than 3 years and a reversal of 1.6% m/m from the previous month. Motor vehicles and parts were the main drag coming in at -4.3% m/m vs 2.7% m/m the previous month. The report breaks a five-month streak of increases and showed declines across a majority of industries, with six out of seven sub-sectors being lower. Also troubling is the rise in inventories since it can signal a weak demand. Average weekly earnings climbed 3.4% in May thus increasing purchasing power of Canadian consumers.

This week we will have GDP for the month of May, manufacturing PMI and trade balance data.

Important news for CAD:

Wednesday:
  • -- GDP
Thursday:
  • -- Markit Manufacturing PMI
Friday:
  • -- Trade Balance
  • -- Exports
  • -- Imports
JPY

Preliminary PMI numbers for the month of July show manufacturing at 49.6 vs 49.3 the previous month, services at 52.3 vs 51.9 the previous month and composite climbed to 51.2 vs 50.8 the previous month. We can see slight improvements across the numbers but manufacturing is still in contraction territory for the third consecutive month. Tokyo CPI came in at 0.9% y/y vs 1% y/y as expected and 1.1% y/y the previous month. CPI excluding fresh food, energy came in at 0.8% y/y vs 0.7% y/y as expected. Inflation staying subdued at the beginning of Q3.

This week we will have consumption and employment data followed by preliminary industrial production data for the month of June and final manufacturing PMI for the month of July. The main event will be BOJ interest rate decision. BOJ is not expected to ease, however there are chances that they will reduce its inflation outlook down from current level of 1.1%. We will also get minutes from monetary policy meeting.

Important news for JPY:

Monday:
  • -- Retail Sales
Tuesday:
  • -- Unemployment Rate
  • -- Jobs to Applicants Ratio
  • -- Industrial Production
  • -- BOJ Interest Rate Decision
  • -- BOJ Outlook Report
  • -- BOJ Press Conference
Thursday:
  • -- Manufacturing PMI
Friday:
  • -- BOJ Monetary Policy Meeting Minutes
CHF

Talks about intervention from SNB are intensifying. The CHF is already trading at its strongest level against the euro in two years and as the FT writes SNB would really prefer to intervene to prevent it from getting strong but fears repercussions from US president Trump.

This week we will have inflation data.

Important news for CHF:

Friday:
  • -- CPI
 
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katetrades

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Forex Major Currencies Outlook (Aug 5 – Aug 9)

After a wild ride the previous week put through, we continue in a similar fashion with Q2 GDP data from UK and Japan, RBA and RBNZ rate decisions and Canadian employment report.

USD

PCE deflator, FED’s preferred inflation measure, came in at 1.4% y/y vs 1.5% y/y as expected in the month of June. Core PCE came in at 1.6% y/y same as the previous month vs 1.7% y/y as expected. Personal income came in at 0.4% as expected and as previous month while personal spending came in at 0.3% as expected but down from 0.5% the previous month. Consumer confidence for the month of July smashed expectations coming in at 135.7 vs 125.0 as expected with prior reading showing 124.3. US consumers post a lot of faith in US economy at the start of Q3. ISM manufacturing PMI came in at 51.2 vs 51.7 the previous month. The biggest drag was employment which came in at 51.7 vs 54.7 the previous month. A nice positive in the reading is that new orders rose to 50.8 from 50 the previous month.

FED has cut interest rate by 25bps to 2-2.25% range at their July meeting as widely expected. This was the first rate cut in a decade. George and Rosengren dissented from a rate cut. Labour market remains strong and balance sheet runoff will end on August 1. Chairman Powell stressed the rate cut was not necessarily the start of an easing cycle but was rather a stimulative measure aimed at insuring against downside risks coming from global developments. He also highlighted trade uncertainty as being more prominent than expected and that it is a risk that has to be assessed in a new way. Chairman’s reference to the rate move as a “mid-cycle adjustment to policy” with an “insurance aspect” drove equities to their lows of the day. He later modified his statements saying that rate cuts are still possible indicating that this move is not “one-and-done”. Data dependence was stressed again as main factor when deciding about future rate moves.

In an unexpected move president Trump announced additional 10% tariffs on the remaining $300 billion of Chinese imports to the US. These goods have not been hit by tariffs before and these additional tariffs will be applied from September 1. The surprise move brought risk aversion to the markets making USDJPY fall over 200 pips. WTICrude was already down on the day but the news on tariffs sent it tumbling down for more than 7% on a day. China stated that if tariffs are applied it will retaliate. Speculations are rising that this move by president Trump was motivated by his desire to push FED toward future rate cuts.

Nonfarm payrolls came in at 164k as expected. This is a rare case that number comes in as expected. The unemployment rate has stayed at 3.7% vs 3.6% as expected due to the rise in participation rate that ticked up to 63%. Average hourly earnings beat expectations and came in at 0.3% m/m vs 0.2% as expected and 3.2% y/y vs 3.1% y/y as expected. The thing that takes away the shine from the report is downward revision of 41k to the headline number for previous two months.

This week we will have non-manufacturing PMI data.

Important news for USD:

Monday:

• ISM Non-Manufacturing PMI

EUR

Consumer confidence in July, first month of Q3, came in at -6.6 as expected. Economic confidence dropped to 102.7 from 103.3 the previous month and in combination with falling industrial and service confidence readings it shows a sluggish start to Q3 for Euro area. Preliminary CPI for the month of July came in at 1.1% y/y as expected but core CPI slipped down to 0.9% y/y from 1.1% the previous month. Another blow to the EU economy at the start of Q3.

Preliminary Q2 GDP came in line with expectations at 0.2% q/q and the unemployment rate in June ticked down to 7.5%, to lowest levels since July of 2008. Final manufacturing PMI came in at 46.5 vs 47.6 the previous month indicating recession-like symptoms in manufacturing sector with all of the major countries showing readings below 50. Retail sales in June came in at 1.1% m/m vs 0.3% m/m as expected. Very nice beat but dent to the reading is placed by downward revision of previous month to -0.6% m/m.

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

Important news for EUR:

Monday:
• Markit Services PMI (EU, Germany, France)
• Markit Composite PMI (EU, Germany, France)

GBP


Boris Johnson and his ministers took the firm stance over the weekend about Withdrawal Agreement thus increasing the likelihood of No-Deal Brexit and GBP suffered because of it. GBPUSD dropped below 1.22 mark which is a 29-month low. EU officials are said to be ready to hold a no-deal summit on October 17. Chancellor of the Exchequer Sajid Javid has announced an additional budget of GBP2.1bn toward preparations for a hard exit.

BOE left bank rate unchanged at 0.75% with 0-0-9 vote rate. Detailed projections continue to assume smooth Brexit and do not account for no-deal Brexit. According to board members gradual and limited tightening remains appropriate and while labour market is no longer tightening pay growth is stabilising. They have estimated Q2 GDP to be flat while 2019 and 202 GDP forecasts have been slashed down to 1.3% from previous 1.5% and 1.6% respectively. 2021 GDP is seen at 2.3%. Inflation is seen rising to 1.9% in one year’s time and 2.23% in two years’ time. Governor Carney stated that perceived chance of no-deal Brexit has risen and that updated version of worst-case Brexit scenario will be delivered after September. Impact of trade tensions is larger than anticipated. Manufacturing PMI for the month of July came in at unchanged at 48. Markit has reported that some clients are moving their supply chains away from the UK ahead of Brexit. Before the BOE rate decision GBPUSD fell below 1.21 for the first time since January 2017.

This week we will have PMI and trade balance data, preliminary Q2 GDP reading which is expected to come out negative, industrial and manufacturing data as well as data on business investment.

Important news for GBP:

Monday:
• Markit Services PMI
Friday:
• GDP
• Industrial Production
• Manufacturing Production
• Trade Balance
• Business Investment

AUD

Building approvals for the month of June came in at -1.2% m/m vs 0.2 m/m as expected making the drop on year to -25.6% y/y vs -24.3% y/y as expected and -19.6% the previous month. CPI for Q2 came in at 0.6% q/q vs 0.5 q/q as expected and 1.6% y/y vs 1.5% y/y as expected. Inflation is moving back towards the middle of 1-3% target range. Retail sales came in at 0.4% m/m vs 0.3% m/m as expected and 0.1% m/m the previous month. A drop in building approvals was going to raise claims for a rate cut in September or October but inflation and consumption readings have eased them.

Manufacturing PMI from China for the month of July came in at 49.7 vs 49.4 the previous month. Although this is the third month of contraction in a row there is a slight uptick in the right direction. Additionally, sub-indexes show nice improvement in new orders, new export orders and employment while inventories show decrease. Non-manufacturing PMI missed the expectations and came in at 53.7 vs 54.2 the previous month. New orders and new export orders declined but there was a jump in employment index. Composite PMI was a tad stronger at 53.1 vs 53 the previous month. Caixin manufacturing PMI came in at 49.9 vs 49.4 the previous month. It is on the cusp of going back into expansion territory. New orders showed a decent move up but employment is still weak and falling.

This week we will have trade balance data and RBA decision on interest rate. No change is expected at the meeting after last month’s cut and monetary policy statement will be published and scrutinized for more details later during the week. We will also get trade balance and inflation data from China.

Important news for AUD:

Tuesday:
• RBA Interest Rate Decision
• RBA Rate Statement
• Trade Balance
• Exports
• Imports
Thursday:
• Trade Balance (China)
• Exports (China)
• Imports (China)
Friday:
• RBA Monetary Policy Statement
• CPI (China)

NZD

Building permits for the month of June came in at -3.9% m/m vs 13.2% m/m the previous month. This data has a tendency to be volatile from month to month so it is better to use 3-month average which is at 0.6% and 6 month average which is at 1.5%. ANZ business confidence continued to deteriorate in July down to -44.3 vs -38.1 the previous month. This just adds more to the speculations about rate cut next week.

This week we will have employment data and bi-monthly GDT auction. Highlight of the week will be RBNZ interest rate decision. A cut is expected in order to prop up New Zealand’s economy amidst escalating global tensions.

Important news for NZD:


Tuesday:
• Employment Change
• Unemployment Rate
• GDT Price Index
Wednesday:
• RBNZ Interest Rate Decision
• RBNZ Monetary Policy Statement
• RBNZ Press Conference

CAD

GDP for the month of May came in at 0.2% m/m vs 0.1% m/m as expected which put it at 1.4% y/y vs 1.3% y/y as expected. The report showed that 13 out of 20 industrial sectors expanded and the biggest contributors to GDP were manufacturing and construction while wholesale trade and mining were the biggest drag. Better than expected reading but after previous readings of 0.5% and 0.3% it raises concerns about slowdown of Canadian economy. Trade balance for the month of June came in at $0.14bn vs -$0.30bn as expected. Previous month’s surplus has been revised down to $0.56bn. Second straight month of trade surpluses, however this one was achieved on both falling exports (-5.1% m/m with volume dropping -1.5%) and falling imports (-4.3% m/m with volume dropping -3.6%).

This week we will have employment data.

Important news for CAD:

Friday:
• Employment Change
• Unemployment Rate
• Building Permits

JPY

Retail sales for the month of June came in flat vs -0.3% m/m as expected and 0.5% y/y vs 0.2% y/y as expected. Japanese government downgraded its economic growth forecast for current fiscal year to 0.9% from 1.3% previously. Consumer inflation is estimated at 0.7%. Weaker exports caused by global slowdown have been cited as the main reason for the downgrade. Export growth is estimated at 0.5% vs 3% estimation made back in January. The unemployment rate slipped down to 2.3% thus being lowest since 1993. Preliminary industrial production data did not paint such a pretty picture. It came in at -3.6% m/m vs -1.7% m/m as expected and the previous month it was 2% m/m. Shipments fell -4.2% m/m vs -1.8% m/m the previous month while inventories rose 2.9% m/m vs 1.5% m/m the previous month indicating low demand and overall global slowdown. Final manufacturing PMI came in at 49.4 vs 49.3 the previous month for a third month of contraction in a row, same as in China.

BOJ has left short-term interest rates unchanged at -0.1% as widely expected. Guidance on rates has also not been changed, they state that low rates will stay for an extended period of time, at least through the spring of 2020. They have lowered GDP projections for 2019 to 0.7% vs 0.8% previously. Core CPI for 2019 including sales tax coming in October is projected at 1% versus 1.1% previously and for 2020 it is seen at 1.3% vs 1.4% previously. They still see inflation gradually increasing toward 2% target but risks are skewed toward downside for the economy. Governor Kuroda added that economy is expanding moderately and that risks from overseas’ economies are high.

This week we will have final PMI data for the month of July, household spending and wages data as well as preliminary Q2 GDP reading which is expected to come out negative.

Important news for JPY:

Monday:
• Markit Services PMI
Tuesday:
• Household Spending
• Labour Cash Earnings
Friday:
• GDP

CHF

CPI for the month of July came in at -0.5% m/m vs -0.4% m/m as expected, down from being flat the previous month. Headline CPI came in at 0.3% y/y vs 0.5% y/y as expected and 0.6% y/y the previous month while core CPI came in at 0.4% y/y vs 0.6% y/y and 0.7% y/y the previous month. CHF has been gaining a lot of strength across the markets due to its safe haven status. Combined with weakening inflation and further expected easing from ECB the SNB could react by introducing additional stimulus or taking action in currency markets to combat CHF strength.

This week we will have data on consumer confidence, consumption and employment.

Important news for CHF:

Monday:
• Consumer Confidence
• Retail Sales
Friday:
• Unemployment Rate
 

katetrades

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Forex Major Currencies Outlook (Aug 12 – Aug 16)

The week ahead of us will have US and China consumption, preliminary Germany Q2 GDP, wages data from UK as headlines.

USD

ISM non-manufacturing for the month of July came in at 53.7 vs 55.5 as expected, down from 55.1 the previous month. New orders and new export orders came in weaker than expected while employment category improved. Biggest drop was in business activity which fell to 53.1 vs 58.2 the previous month.

This week we will have inflation, consumption and housing data.

Important news for USD:

Tuesday:
  • CPI
Thursday:
  • Retail Sales
Friday:
  • Housing Starts
  • Building Permits

EUR

Final services and composite PMIs for the month of July came in at 53.2 and 51.5 as preliminary reading showed. However, they were both down from the previous month’s readings of 53.6 for the services and 52.2 for the composite. Particularly worrying is the downward revision to the German reading which can indicate that effects of slowdown in manufacturing sector are spilling over across the economy. Markit even noted that, although it is still early, we could be up for another weak GDP performance over Q3. Sentix investor confidence came in at -13.7 vs -7 as expected for the worst reading since October of 2014. The prior reading was -5.8 and incoming data points to increased investors concerns regarding slowdown in Q3.

German factory orders in June bounced back and beat the expectations coming in at 2.5% m/m vs 0.5% m/m as expected and up from -2% m/m the previous month. Much needed positive data from Germany showing strongest reading in 2 years. German government would issue new debt in order to fight climate change. Reuters cited senior German government source as saying that no new debt is no longer tenable in light of climate changes. A change in fiscal stance from EU’s largest economy is a very positive thing for common currency and EUR gained strength on the news.

This week we will have data on economic sentiment, employment change, industrial production, trade balance, second estimate of Q2 GDP for Euro area and preliminary German Q2 GDP.

Important news for EUR:

Tuesday:
  • ZEW Economic Sentiment Indicator (EU and Germany)
Wednesday:
  • Employment Change
  • Industrial Production
  • GDP (EU and Germany)
Friday:
  • Trade Balance

GBP

Services PMI for the month of July came in at 51.4 vs 50.3 as expected and up from 50.2 the previous month. Very positive beat that dragged services away from 50 level and brought composite PMI back to the expansion territory at 50.7 from 49.7 the previous month.

Preliminary Q2 GDP came in at -0.2% q/q vs 0% q/q as expected and down from 0.5% q/q in Q1 and 1.2% y/y vs 1.4% y/y as expected and down from 1.8% y/y previously. Total business investment came in at -0.5% q/q down from 0.4% q/q previously. Brexit uncertainties keep business investments on the side and it is showing how much it impacts UK’s economy. Private consumption came in at 0.5% q/q, better than expected but down from 0.6% q/q previously. This is the first time UK economy had a quarterly contraction since 2012. Manufacturing and industrial production continued their decline and came in at -1.4% y/y vs 0% y/y previously and -0.6% y/y vs 0.9% y/y previously. Manufacturing sector was supposed to profit from weaker GBP. Construction output also fell into negative coming in at -0.2% y/y vs 1.7% y/y previously. Cable has dropped below 1.21 after the news making new year-lows. The sole positive reading was visible trade balance which came in at -£7bn vs -£11.8bn as expected. Exports rose 7.6% m/m while imports fell -3.6% m/m.

This week we will have employment, inflation and consumption data.

Important news for GBP:

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

AUD

RBA has left cash rate unchanged at 1% as expected. They will keep the rates low for an extended period of time and will react to adjust monetary policy if need arises to sustain economic growth. Developments in the labour market will be closely monitored and they expect Australian economy to grow at 2.5% in 2019. They acknowledged that “it is likely to take longer than earlier expected for inflation to return to 2 per cent”.

Caixin services PMI came in lower at 51.6 vs 52 as expected and previous month while composite rose to 50.9 from 50.6 the previous month on the back of stronger manufacturing reading. As part of retaliation against newly imposed tariffs China has let its currency fall below previously set level of 7. The move lower for yuan was market driven. Additionally, reports suggest that China has asked state-owned buyers and private buyers to cease the purchases of US soy beans due to trade concerns. US have labelled China as “currency manipulator” for the first time in 25 years. Weaker currency helps exporters, however in case of big fall in currency capital outflows are possible, therefore China has re-evaluated its currency higher with comments from PBOC that China doesn't manipulate its currency. Trade balance for the month of July came in at $45.06bn vs $42.65bn as expected. Exports were up 3.3% y/y while imports were down -5.6% y/y vs -9% y/y as expected. These numbers are in USD terms while trade with US is expressed in Yuan terms and it shows that exports are down -2.1% y/y while imports are down staggering -24% y/y. Trade balance with US is 11.1% y/y. CPI in July came in at 2.8% y/y vs 2.7% as expected while PPI came in at -0.3% y/y vs -0.1% y/y as expected. Inflation is safe in the PBOC range, however drop in PPI will negatively affect business profits.

This week we will have data on consumer confidence, wages and employment from Australia as well as consumption, investment and industrial production data from China.

Important news for AUD:

Wednesday:
  • Westpac Consumer Confidence
  • Wage Price Index
  • Retail Sales (China)
  • Industrial Production (China)
  • Fixed Asset Investment (China)
Thursday:
  • Employment Change
  • Unemployment Rate

NZD

The employment report for Q2 smashed the expectations with employment change coming in at 0.8% q/q vs 0.3% q/q as expected and up from -0.2% q/q the previous month. The unemployment rate plunged from 4.2% to 3.9%! It was expected for it to tick up to 4.3%. Participation rate stayed the same at 70.4% but average hourly earnings and private wages both beat the expectations thus completing a very strong report. NZD has jumped higher after the report across the markets but its rise was reduced by 2 year inflation expectation which came in below previous 2.01% at 1.86%.

RBNZ surprised the markets with their rate cut of 50bps which puts official cash rate at 1%. Markets were expecting a 25bps cut and reaction was fierce plunging NZD. RBNZ has said that rate cut represents a commitment to reaching the inflation target and employment objectives. Lower rates and higher government spending will support demand. Global economic outlook has weakened which lead to reduced investments which in turn highlighted the risk of more prolonged slowdown in global economic growth. Governor Orr stated that this rate cut does not rule out further action. He added that this cut reduces the risk of having to use negative rates, however there is a possibility that rates will have to go into negative territory. Although questions about effectiveness of low rates are raised across the Globe governor Orr states that low interest rates are just as effective as ever. Ultra dovish remarks by the governor and NZD will stay low for a long time as other banks call for more cuts to come at November meeting.

This week we will have data on consumption via electronic cards and business PMI data, both will be for the month of July.

Important news for NZD:

Monday:
  • Electronic Card Retail Sales
Friday:
  • BusinessNZ PMI

CAD

Canadian employment change came in at -24.2k vs 15k as expected and down from -2.2k the previous month. The unemployment rate went higher to 5.7% from 5.5% the previous month while participation rate ticked down to 65.6%. Both full-time and part-time employment data came in negative. This is another in line of reports from Canada that missed the expectations. Whether it will be attributed to “one month off” or if this is the start of bad employment data is yet to be seen.

JPY

Household spending in June came in at 2.7% y/y vs 1.1% y/y as expected. Both labour and real cash earnings beat the expectations and came in better than previous month at 0.4% y/y vs -0.5% y/y the previous month and -0.5% y/y vs -1% y/y the previous month respectively. Potential for pushing inflation higher is kinda there but this is the sixth straight month of dropping real cash earnings despite beating on estimates.

Preliminary reading of Q2 GDP came in at 0.4% q/q vs 0.1% q/q as expected and 1.8% y/y vs 0.5% y/y as expected. Data was much stronger than expected and it represents third straight quarter growth. It showed that Japan's economy is in moderate recovery due to strong private consumption and capital expenditure. Private consumption, which accounts for about 60% of Japan's GDP, rose 0.6% q/q while business investment rose 1.5% q/q. Economy is expected to continue moderate recovery due to improvements in jobs and income conditions.

This week we will have data on industrial production.

Important news for JPY:

Thursday:
  • Industrial Production

CHF

Retail sales bounced back in June and came in at 0.7% y/y from -1.7% y/y the previous month which was revised up to -1.1% y/y. On a monthly basis it rose 1.5%. The unemployment stayed at 2.1% and 2.3% seasonally adjusted.
 

katetrades

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Forex Major Currencies Outlook (Aug 19 – Aug 23)

Preliminary PMI data from Europe and Japan for the month of August are in the week ahead of us accompanied by final inflation data from Europe, Canada and Japan as well as New Zealand retail sales for Q2.

USD

CPI for the month of July came in at 1.8% y/y vs 1.7% y/y as expected and up from 1.6% y/y the previous month. Core CPI came in at 2.2% y/y vs 2.1% y/y as expected and previously. With inflation figures rising it will be hard for FED to continue with dovish rhetoric and this should lower the possibility of two rate cuts by the end of the year. Wages tell a different story. Both hourly and weekly earnings came in weaker than previous month. Real average hourly earnings came in at 1.3% y/y while real average weekly earnings came in at 0.8% y/y. Retail sales for the month of July came in at 0.7% m/m vs 0.3% m/m as expected. Control group came in at 1% m/m vs 0.4% m/m as expected announcing strong consumption by US consumers which pushed Atlanta FED’s Q3 projection up to 2.2% from 1.9% previously. Building permits came in at 1336k vs 1270k as expected for a huge jump of 8.4% indicating that lower interest rates will help housing.

The White House announced a delay of some new tariffs on Chinese imports from September 1 to December 15. The move is intended to assist US shoppers and support demand for consumer goods ahead of Christmas.

This week we will have housing data, FOMC minutes and Jackson Hole Economic Symposium, gathering of Central Bankers. Leaders of G7 group will meet on Saturday August 24 in France.

Important news for USD:

Wednesday:

- Existing Home Sales
- FOMC Minutes

Thursday:

- Jackson Hole Economic Symposium

Friday:

- Jackson Hole Economic Symposium
- New Home Sales

Saturday:

- G7 Meeting

EUR

ZEW published its survey of current situation in Germany for the month of August and results showed another huger drop, it came in at -13.5 vs -6.3 as expected, down from -1.1 the previous month for a lowest reading since 2010. Economic sentiment was also published and it painted even worse picture coming in at -44.1 vs -28 as expected with -24.5 the previous month for the Germany and -43.6 vs -20.3 for the Euro Area. After 0.4% q/q growth in the Q1 German Q2 GDP came in at -0.1% q/q as expected. Private consumption and business investment improved compared to Q1 but construction activity and falling exports contributed to contraction. Looking ahead, the PMI numbers are not encouraging so the potential for recession in Germany, two quarters of negative GDP, is rising. Markets are pricing about 62% of a 10bps rate cut by ECB at their September meeting.

Eurozone’s Q2 GDP came in at 0.2% q/q as the preliminary reading showed. Industrial production for June, included in Q2 GDP, came in at -1.6% m/m down from 0.8% m/m the previous month. It is a sharp drop for the lowest reading in over three years. A drop on the yearly reading to -2.6% y/y vs -1.2% y/y as expected is very concerning. Looking forward into Q3 the problems and weakening conditions are mounting. Trade balance came in at EUR17.9 bn vs EUR18.5 bn as expected down from EUR19.6 bn the previous month on the back of falling exports (-1.2%) and falling imports (-0.8%).

This week we will have final inflation numbers for July and preliminary consumer confidence index as well as preliminary PMI data for the month of August. Italian Senate is set to hold a vote of no-confidence on August 20 with prospects of new elections.

Important news for EUR:

Monday:

- CPI

Tuesday:

- No-confidence Vote (Italy)

Thursday:

- Markit Manufacturing PMI (EU, Germany, France)
- Markit Services PMI (EU, Germany, France)
- Markit Composite PMI (EU, Germany, France)
- Consumer Confidence Index

GBP

The employment report for the month of June showed average weekly earnings coming in at 3.7% 3m/y as expected vs 3.5% 3m/y the previous month. The unemployment rate has ticked higher to 3.9% but the claimant count has dropped to 28k vs 38k the previous month which was revised down to 31.4k. Rise in wages is very encouraging, it should put upward pressures on inflation and although the unemployment rate ticked higher the overall report shows very strong labour market conditions. The name of the game for GBP is Brexit and this report will not have an immediate impact on pound’s strength.

CPI for the month of July came in unchanged vs -0.1 m/m as expected and 2.1% y/y vs 1.9% y/y as expected and up from 2% y/y the previous month. ONS stated that the increase in CPI is due to bigger rises in prices of hotel rooms. Computer games and games consoles rose by 8.4%. They added that they are not seeing any clear evidence that weaker pound is attributing to the rise in consumer prices. Retail sales presented another good data for Q3 coming in at 0.2% m/m vs -0.2% m/m as expected. The rise was led by online sales which jumped 6.9% m/m.

AUD

Employment change for the month of July came in at 41.1k vs 14k as expected. The unemployment rate stayed at 5.2% while participation rate ticked up to 66.1%. Full time employment change came in at 34.5k vs 21.1k the previous month. Headline number is a nice beat and the fact that most of the jobs are full time is a great boost for AUD. Wage price index for Q2 came in at 0.6% q/q vs 0.5% q/q as expected. Rising wages are great news for Australian workers and RBA. Impact of wage rise on inflation is expected. Reports have cut down probability of September rate cut in half.

Data from China for the month of July came in much weaker than expected. Industrial production came in at 4.8% y/y vs 6% y/y as expected and down from 6.3% y/y the previous month. This is the slowest growth in industrial production since February of 2012. The main culprit is the contraction in production of cars and related manufacturing parts. Retail sales came in at 7.6% y/y vs 8.6% y/y as expected and down from 9.8% y/y the previous month. Car sales showed the biggest decline (-2.6%) due to a sales boom in previous month caused by clearing old inventories. In order to keep GDP at or above 6% level additional stimulus is needed. Required reserve ratio (RRR) cuts of 50 bps are expected in Q3.

This week we will have RBA meeting minutes from the August meeting.

Important news for AUD:

Tuesday:

- RBA Meeting Minutes

NZD

Electronic card spending for the month of July came in at -0.1% m/m vs 0.5% m/m as expected. Due to the fact that electronic card spending attributes around 70% to retail sales we can expect a weaker reading next week. BusinessNZ manufacturing PMI came in at 48.2 vs 51.3 the previous month. This is the first time that index fell below 50 since 2012. Sub-index production came in at 51.1 but new orders dropped to 48.9 and employment continued its three-month decline and came in at a weak 42.6 which is the lowest in a decade.

This week we will get services PMI, bi-monthly GDT auction and consumption data for Q2 which is forecasted to come in weaker than previous quarter.

Important news for NZD:

Monday:

- ServicesNZ PMI

Tuesday:

- GDT Price Index

Friday:

- Retail Sales

CAD

Existing home sales in July came in at 3.5% m/m vs 3.3% m/m as expected up from -0.2% m/m the previous month. Vancouver was leading the charge with 26.4% rise from the previous month although the average price fell by 5.6%. Still housing prices in Vancouver are by far the highest among major Canadian cities. ADP employment came in at 73.7k vs 30.4k the previous month which got a huge downward revision to -9.6k. All employment categories counted were positive for a strong employment report.

This week we will have data on manufacturing sales, inflation in july, wholesale sales and consumption for the month of June.

Important news for CAD:

Tuesday:

- Manufacturing Sales

Wednesday:

- CPI

Thursday:

- Wholesale Trade

Friday:

- Retail Sales

JPY

Corporate goods price index, which is equivalent to PPI in the rest of the World, came in for the month of July at -0.6% y/y vs -0.5% y/y as expected and down from -0.1% y/y the previous month. The reading is lowest since December of 2016. Although CGPI in Japan is not directly linked to CPI the data will be closely monitored by BOJ since the reading is giving deflationary signals. Core machinery orders for the month of June, the proxy for capital expenditure, came in at 13.9% m/m vs -1% m/m as expected and -7.8% m/m the previous month. Although the data is historically very volatile, this is the best monthly reading in history.

This week we will have trade balance data, preliminary PMIs for the month of August as well as national inflation for the month of July.

Important news for JPY:

Monday:

- Trade Balance
- Exports
- Imports

Thursday:

- Markit Manufacturing PMI
- Markit Services PMI
- Markit Composite PMI

Friday:

- CPI

CHF

Swiss sight deposits came in at CHF585.5 bn vs CHF 582.7 bn previously. This is a jump of CHF2.8 bn, which is the highest jump in deposits in two years. This jump is interpreted as evidence that the SNB intervened last week to ease the CHF appreciation to new two-year highs against the EUR.

This week we will have trade balance and industrial production data.

Important news for CHF:

Tuesday:

- Trade Balance
- Exports
- Imports

Thursday:

- Industrial Production
 
Last edited:

katetrades

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Forex Major Currencies Outlook (Aug 26 – Aug 30)

Durable goods, PCE inflation and second reading of Q2 GDP from US along with preliminary August inflation from EU and PMI numbers from China are main events in the week ahead of us.

USD

Existing home sales in July came in at 5.42m vs 5.39m as expected and up from the 5.29m the previous month. Sales were up 2.5% m/m and prices were up 4.3% y/y. Currently lower interest rates seem to assist housing market. New home sales came in at 635k vs 647k as expected with prior reading showing big revision up to 728k from 646k.

FOMC meeting minutes showed that most FED officials viewed rate cut as mid-cycle adjustment. A couple of officials were for 50bp rate cut while several of them were for no change. A few participants expressed the concern that a cut could be misinterpreted as a negative signal about the strength of US economy. Three reasons that FED saw for cutting rates according to minutes are 1) Deceleration in business fixed investment, manufacturing and overseas. 2) Risk management 3) Inflation.

China announced that it will retaliate and levy tariffs on additional $75bn of US goods. New tariffs will range from 5% to 10% and will start on September 1 and December 15. This news has completely dampened the risk mood in the markets. Response by president Trump is expected, he will not let this go by. And as expected Trump announced increase in tariffs on Chinese goods by 5%.

This week we will have data on durable goods, second reading of Q2 GDP, housing data, PCE inflation and data on personal income and spending.

Important news for USD:

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

EUR

Final CPI for the month of July came in at 1% y/y vs 1.1% y/y according to the preliminary reading but core CPI came in at 0.9% y/y as preliminary reading showed so there was no reaction in the market. Construction output in June came in unchanged vs -0.3% m/m the previous month which was revised down to -0.5% m/m. One good month to stop the further bleeding but yearly number illustrates the fall coming in at 1% y/y vs 1.7% y/y the previous month revised down from 2% y/y. Although this data was already calculated in Q2 the trend is to the downside so we can expect further declines in Q3.

Preliminary PMI data for the month of August for the EU Area came in at 47 vs 46.2 as expected for manufacturing, 53.4 vs 53 for services and 51.8 vs 51.2 for the composite. The rise was achieved thanks to jump in French manufacturing (51 vs 49.5 as expected) while the German manufacturing also came in better than expected at 43.6 vs 43 and up from 43.2 the previous month. Germany is still in the deep whole as far as manufacturing goes, but markets were very happy to see a rebound in the reading. EURUSD managed to climb over 1.11 on these data. Consumer confidence for the month of August came in at -7.1 vs -6.6 the previous month. It is interesting that according to this reading consumer confidence has not been in the positive territory for at least 30 years. Still it is trending in the wrong direction.

German Finance Minister Scholz stated that Berlin could make available up to 50 billion EUR of extra spending in case of a slowdown thus opening the possibility that German will loosen up their frugal fiscal policy which would have positive impact on EUR. Italian Prime Minister Conte resigned thus preventing early elections. Conte attacked deputy prime minister Salvini in a speech saying that it wasn't in Italy’s interests to hold elections every year. Talks about forming new government are under way.

This week we will have data on sentiment, final consumer confidence reading, preliminary inflation reading for the month of August and July unemployment rate from EU, while there will be readings on business climate, final Q2 GDP and employment data from Germany.

Important news for EUR:

Monday:
  • Ifo Business Climate
  • Ifo Business Expectations
Tuesday:
  • GDP (Germany)
Thursday:
  • Unemployment Change (Germany)
  • Unemployment Rate (Germany)
  • Consumer Confidence Index
  • Economic Sentiment Indicator
Friday:
  • CPI
  • Unemployment Rate

GBP

New prime minister Johnson met with chancellor Merkel and president Macron. Merkel said that "Maybe we can find that solution in the next 30 days, why not?" while the French are taking much tougher stance on the Brexit issue with Macron stating that Irish backstop is indispensable and acting as the protector of stability in Ireland. An unnamed French official said that the baseline scenario now seems to be a no-deal Brexit.

AUD

RBA meeting minutes stated that board would consider further easing measures if necessary but first they will assess developments in domestic and global economies. They see “extended period” of low interest rates as reasonable. Lower AUD will assist exports and tourism. There is more spare capacity in the labour market than previously thought which will limit wage growth. Risk to the economy are tilted to the downside in near term but are more balanced further out. Escalations in US-China trade are presenting downside risks for the global growth. Positive effects of tax cuts, infrastructure spending and lower AUD have been emphasized putting overall neutral tone.

This week we will have private capex and housing data from Australia as well as official manufacturing and non-manufacturing August data from China.

Important news for AUD:

Thursday:
  • Private New Capital Expenditure
Friday:
  • Building Approval
Saturday:
  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)

NZD

NZD was trending down at the beginning of the week due to speculations about introduction of QE programme. GDT price auction saw decline of -0.2%. making it the second consecutive negative auction. Retail sales for Q2 came in at 0.2% q/q vs 0.3% q/q as expected and down from 0.7% q/q for the previous quarter. After soft card reading last week the drop in retail sales was expected. Weaker consumer confidence and higher petrol prices attributed to weaker than expected reading.

Speaking at Jackson Hole meeting governor Orr stated that they will do whatever is necessary to support NZ economy. He added that after 50bp rate cut they can afford to wait, watch and observe the happenings. Inflation expectation have become very important signal to watch and he stated that QE is not bank’s central scenario.

This week we will have trade balance data and data on business confidence.

Important news for NZD:

Monday:
  • Trade Balance
  • Exports
  • Imports
Thursday:
  • ANZ Business Confidence

CAD

Manufacturing sales came in -1.2% m/m vs -1.8% m/m as expected, down from 1.6% m/m the previous month. The petroleum/coal product industry (-3.8%) and food (-2.5%) attributed most to the decline. On the other hand, primary metals were the biggest positive contributor. Wholesale trade rebounded in June to 0.6% m/m from abysmal reading of -1.8% m/m in May. Sales have risen 1.3% in Q2 for a thirteenth consecutive quarter of rising sales with 4 out of 7 subsectors showing increase in sales. Inventories came in at 1.5% m/m for a tenth consecutive month of rising inventories which puts a worrying sign.

CPI for the month of July came in at 2% y/y vs 1.7% y/y as expected and 0.5% m/m vs 0.2% m/m as expected. Core measures came in at: median 2.1% y/y as expected, common 1.9% y/y vs 1.8% y/y as expected and trim 2.1% y/y vs 2% y/y as expected. Better than expected readings across all the measures remove expectations of possible near term rate cut by BOC. Retail sales for the month of June came in unchanged vs -0.3% m/m as expected and up from -0.1% m/m the previous month. Ex-autos category heavily beat the expectations coming in at 0.9% m/m vs 0% m/m as expected.

This week we will have data on Q2 GDP.

Important news for CAD:

Friday:
  • GDP

JPY

Trade balance for the month of July came in at -JPY249.6 bn vs -JPY194.5 bn as expected. Both exports and imports came in negative but not as bad as expected and better than the previous month. Exports came in at -1.6% m/m vs -2.3% m/m as expected for the eighth consecutive month of falling exports while imports came in at -1.2% m/m vs -2.3% m/m as expected. Exports to China fell by 9.3% y/y thus increasing the concerns about the magnitude of global slowdown. CPI came in at 0.5% y/y down from 0.7% y/y the previous month. CPI ex fresh food and energy came in at 0.6% y/y vs 0.5% y/y as expected and previous month. Drop in headline number but rise in core number. Still far away from targeted 2%.

Preliminary PMI data for August showed that manufacturing PMI ticked up to 49.5 from 49.4 the previous month and services came in at 53.4 vs 51.2 the previous month. Although manufacturing ticked up it is still below 50 level, for the fourth consecutive month. The data is trending in the right direction but it will need to speed up in order to get back to expansion territory.

This week we will have Tokyo CPI for the month of August, employment and consumption data as well as data on industrial production.

Important news for JPY:

Friday:
  • CPI
  • Retail Sales
  • Unemployment Rate
  • Industrial Production

CHF

Trade balance for the month of July came in at CHF3.63 bn vs CHF4.1 bn the previous month. Exports were down -1.8% m/m while exports were down -0.5% m/m. Industrial production in Q2 came in at 4.8% y/y vs 4.3% y/y the previous quarter. Nice and steady rise in industrial production, although Swiss economy is primarily service oriented.

This week we will have data on number of employees in the Swiss economy.

Important news for CHF:

Thursday:
  • Employment Level
 

katetrades

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Forex Major Currencies Outlook (Sep 2– Sep 6)

NFP, Swiss and Australian Q2 GDP along with BOC and RBA rate decisions will be main data points to look at in the coming week.

USD

In his speech at Jackson Hole FED chair Powell stated that the bank would “act as appropriate” and removed the phrase “mid-cycle adjustment” thus implying that potential rate cuts are coming. Markets have increased the probability for a September rate cut based on the statement and thus the USD suffered.

Preliminary durable goods for the month of July came in at 2.1% m/m vs 1.2% m/m as expected. The headline number is very strong, but digging deeper we find less reason to be joyful. Core orders came in at 0.4% m/m vs 0% m/m as expected but the beating was made based on the previous month revision from 1.5% m/m down to 0.9% m/m. Capital goods shipments fell -0.7% m/m vs 0.1% m/m as expected adding more to the slowdown and influencing lower Q3 GDP forecasts. US consumer confidence has jumped to 135.1 vs 129 as expected with the present situation jumping as well to 177.1 vs 170.9 the previous month for the highest reading since 2000. Expectations however have declined to 107 vs 112.2 the previous month indicating that consumers have some doubts about the future due to trade wars.

Second reading of Q2 GDP came in at 2% q/q as expected, down from 2.1% q/q as preliminary reading showed. Personal consumption has been revised up to 4.7% from 4.3%. Home investment and exports were the main drags on GDP. According to the reading, US economy is very dependent on US consumer as it contributed 3.1% to the growth. A small drop in personal consumption can push GDP below 2%. Core PCE came in as expected at 0.2% m/m and 1.6% y/y. Personal spending rose to 0.6% from 0.3% the previous month while personal income fell to 0.1% from 0.4% the previous month.

This week we will have ISM PMI data for the month of August, July trade balance data and on Friday the NFP. Projections are for the number of around 155k with the unemployment rate ticking down to 3.6% while average hourly earnings remain at 0.3%. New tariffs will be imposed starting from September 1.

Important news for USD:

Tuesday:

--ISM Manufacturing PMI

Wednesday:

--Trade Balance

--Exports

--Imports

Thursday:

--ADP Nonfarm Employment Change

--ISM Non-Manufacturing PMI

Friday:

--Nonfarm Payrolls

--Unemployment Rate

--Average Hourly Earnings

EUR

German Ifo business climate dropped down to 94.3 vs 95.1 as expected making it the weakest reading since November of 2012. Situation in German economy continues to deteriorate according to numerous surveys and it points toward technical recession. Ifo economist stated that industrial sector is in a recession with services now following. He acknowledged that latest trade war escalation, rising of tariffs by both China and US, was not reflected in the latest survey, thus indicating that future survey data from Germany could paint even grimmer picture. Final Q2 GDP reading confirmed negative growth of -0.1% q/q.

Final consumer confidence came in at -7.1 as preliminary reading showed down from -6.6 the previous month. Economic confidence and business climate indicator rebounded coming in at 103.1 vs 102.7 the previous month and 0.11 vs -0.12 the previous month. Although the numbers are still at the 2016 low levels small relief for Euro area will be welcomed. The unemployment rate came in unchanged at 7.5% as expected. Preliminary August CPI came in at 1% y/y as expected, tick down from 1.1% y/y the previous month while the core CPI came in at 0.9% y/y vs 1% y/y as expected but unchanged from previous month. Inflation continues to stay in place which pushes ECB to act at their next meeting.

This week we will have final August PMI numbers, consumption and employment data as well as final reading of Q2 GDP which is expected to be lowered.

Important news for EUR:

Monday:

--Markit Manufacturing PMI (Germany, France, EU)

Wednesday:

--Markit Services PMI (Germany, France, EU)

--Markit Composite PMI (Germany, France, EU)

--Retail Sales

Friday:

--Employment Change

--GDP

GBP

PM Johnson sought legal advice on how to close the Parliament in order to prevent them from stopping his plans of UK leaving the EU on October 31. He is looking to extend the recess period from September 9 to October 14, when Queen will give her speech which is needed to set out legislative programme, meaning that Parliament will start work next week on September 3 but they will work for one or two weeks before going back to recess. In this way he diminishes chances of Parliament blocking hard Brexit. The Queen has prorogued the Parliament no earlier than September 9 and no later than September 12 to October 14. The main plan for the opposition now remains a vote of no-confidence.

This week we will have PMI data and Parliament is returning from recess on Tuesday. There will be heated debates in the Parliament that can seriously impact GBP, especially now that it will be open for about a week.

Important news for GBP:

Monday:

--Markit Manufacturing PMI

--Tuesday:

--Markit Construction PMI

Wednesday:

--Markit Services PMI

AUD

Private capital expenditure (capex) for the Q2 came in at -0.5% q/q vs 0.4% q/q as expected. A huge miss on expectations but better than the Q1 reading which showed -1.7% q/q. Building permits for the month of July plunged and came in at -9.7% m/m vs 0% m/m as expected. Although the monthly data is very volatile the yearly reading also shows the huge drop to -28.5% y/y vs -22.2% y/y as expected. The housing market is still facing problems and effects of lower rates still do not produce desired effects on the housing due to low wages and high household debt.

This week we will have consumption and trade data with RBA rate decision taking the central stage. Expectations are for RBA to leave the rate unchanged but to acknowledge the concerns in Australian and global economy which could lead to cut in October. We will also get Caixin PMI and trade data from China.

Important news for AUD:

Monday:

--Caixin Manufacturing PMI (China)

Tuesday:

--RBA Interest Rate Decision

--RBA Rate Statement

--Retail Sales

Wednesday:

--GDP

--Caixin Services PMI (China)

Thursday:

--Trade Balance

--Exports

--Imports

Sunday:

--Trade Balance (China)

--Exports (China)

--Imports (China)

NZD

Trade balance for the month of July came in at -NZD685m vs -NZD254m as expected. Exports came in lower at 5.03bn vs 5.05bn as expected while imports surged to 5.71bn vs 5.2bn as expected and up from 4.65bn the previous month. A small consolation is that domestic demand is keeping strong hence the rise in imports. ANZ business confidence for the month of August further deteriorated to -52.3 vs -44.3 the previous month for a 11-year low. Inflation expectations also dropped down to 1.7% from 1.81% the previous month. RBNZ has stated that they will follow inflation closely so this reading puts additional downward pressure on NZD.

This week we will have bi-monthly GDT auction.

Important news for NZD:

Tuesday:

--GDT Price Index

CAD

Q2 GDP smashed the expectations and came in at 3.7% q/q vs 3% q/q as expected. Exports rose 13.4% in Q2 thus making the fastest rise since 2014 and making trade contribute to GDP with 4.1pp. Household savings rate climbed to 1.7% from 1.3% the previous quarter. Business non-residential investment and household consumption were the low points of the reading with former coming in at -16.2%, thus cutting GDP by 1.64pp, and latter coming at 0.5% for the weakest reading since 2012.

This week we will have trade balance and employment data. The employment report will be published at the same time as NFP so it may cause greater volatility in the markets. We recommend caution in trading. Highlight of the week will be BOC rate decision. We have not had communication from BOC since their last meeting but markets are pricing mere 14% chance of a rate cut.

Important news for CAD:

Wednesday:

--Trade Balance

--Exports

--Imports

--BOC Interest Rate Decision

--BOC Rate Statement

Friday:

--Employment Change

--Unemployment Rate

JPY

There have been numerous data points coming from Japan with mixed results. The unemployment rate in July ticked down to 2.2% vs 2.3% previously and as expected. Tokyo CPI for the month of August came in at 0.6% y/y as expected but down from 0.9% y/y previously. CPI excluding food and energy came in at 0.7% y/y as expected but also down from 0.8% y/y previously. Retail sales in July were the weakest data point. They came in at -2% y/y vs -0.7% y/y as expected. Slow wage growth has impacted Japanese consumers so they refrained from spending. On the other hand, preliminary reading for the same month of industrial production shows a great beat on expectations coming in at 0.7% y/y vs -0.6% y/y as expected giving push to the Q3 GDP.

This week we will have final August PMI data, speech from governor Kuroda and data on spending and wages.

Important news for JPY:

Monday:

--Manufacturing PMI

Wednesday:

--Services PMI

--BOJ Governor Kuroda Speech

Friday:

--Household Spending

--Labour Cash Earnings

CHF

CHF has benefited from the risk off sentiment caused by uncertainties around US – China trade war and Brexit. It has strengthened based on its safe haven appeal. SNB has sporadically intervened in open markets just to ease the appreciation of the CHF. Member of SNB governing board Machler stated that they still have a lot of room to intervene in the forex market and added that she is satisfied with the way that negative rates are working.

This week we will have consumption and inflation data as well as Q2 GDP reading. Additionally, we will have a speech from SNB Chairman Jordan which will be closely monitored since CHF has strengthened a lot in the past month and SNB is surely not fond of that.

Important news for CHF:

Monday:

--Retail Sales

Tuesday:

--CPI

Thursday:

--GDP

--SNB Chairman Jordan Speech
 

katetrades

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Points
25
Forex Major Currencies Outlook (Sep 9– Sep 13)

ECB rate decision will be the highlight of the week followed by consumption data from US and employment reports from UK and Australia.

USD

ISM manufacturing PMI for the month of August came in at 49.1 vs 51.2 as expected. This is the first time in 3 years that PMI has fallen below 50 level into contraction territory. New orders and employment categories plunged from 50.8 and 51.7 to 47.2 and 47.4 respectively. New export orders category also saw a huge drop from 48.1 to 43.3. The reading had increased the chance of a 50bp rate cut in September to 20%. July trade balance came in at -$54bn vs -$53.4bn as expected with prior month’s reading showing -$55.5bn. Exports were up 0.6% m/m while imports were down -0.1% m/m. US-China trade deficit was increased despite the tensions due to the trade war. ISM non-manufacturing PMI came in at 56.4 vs 54 as expected. New orders component smashed expectations coming in at 60.3 while employment came in weaker than previous month.

Nonfarm payrolls for the month of August came in at 130k vs 160k as expected. Although the headline is below estimate and below three-month average of 156k, other data point to rather good reading with participation rate ticking up to 63.2% from 63% previously and the unemployment rate stayed the same at 3.7%. Average hourly earnings came in at 0.4% m/m vs 0.3% m/m as expected and 3.2% y/y vs 3% y/y as expected. A rise in wage growth is always a good sign and if it manages to translate to inflation FED will be overwhelmed.

This week we will have inflation and consumption data.

Important news for USD:

Thursday:
  • CPI
Friday:
  • Retail Sales

EUR

Final manufacturing PMI for August for Eurozone came in at 47 and with services coming in at 53.5 this put composite at 51.9. Services are holding the EU economy with manufacturing well below 50 but question remains if and when will there be a spillover from manufacturing to services. July retail sales came in -0.6% m/m as expected. Final Q2 GDP came in at 0.2% q/q as preliminary and 1.2% y/y vs 1.1% y/y preliminary.

This week we will have data on industrial production, trade balance and wages. Main event will be ECB rate decision. Additional stimulus is widely expected but it is yet to be seen in which form will it be delivered (rate cuts, QE). Tiering system would help commercial banks deal with bigger negative rate cuts.

Important news for EUR:

Thursday:
  • Industrial Production
  • ECB Interest Rate Decision
  • ECB Monetary Policy Press Conference
Friday:
  • Trade Balance
  • Wage Cost

GBP

Manufacturing PMI for the month of August came in at 47.4 vs 48 the previous month thus continuing with declines. Output component and business confidence fell to the lowest readings ever recorded. New export orders also continued to plunge. Political and economic uncertainties weigh heavily on manufacturing all around the World and UK is not exempt from that. Construction PMI came in at 45 vs 46.5 as expected and down from 45.3 the previous month. Services PMI came in at 50.6 vs 51 as expected. This is a hard hit since UK is service oriented economy. Markit added that based on current observations, the UK economy is expected to contract by 0.1% q/q in Q3 thus putting UK in recession.

Cable fell below 1.20 on Brexit fears before Parliament started their session. A conservative MP has switched sides and thus the government lost the majority in the Parliament. Parliament voted to seize control of the House agenda and block no deal until at least January 31, 2020 which leads us closer to the general election. 21 Conservative MPs voted against the government. PM Johnson wants to set it for October 15 while opposition parties want for Brexit delay bill to be passed before the election is called. According to the law Government can change the election date, thus there is a fear that PM Johnson can move the election after October 31 in order to push no deal Brexit. Early election vote proposition has been defeated but if the bill to block no deal Brexit gains Royal Assent, the Labour will support the next election vote thus making it pass and sending Britain to the polls.

This week we will have trade balance, industrial, manufacturing and construction data as well as employment data. Recess in Parliament should also begin.

Important news for GBP:

Monday:
  • Trade Balance
  • Manufacturing Production
  • Industrial Production
  • Construction Output
Tuesday:
  • Claimant Count Change
  • Unemployment Rate
  • Average Weekly Earnings

AUD

Retail sales in July came in at -0.1% m/m vs 0.2% m/m as expected with prior month’s reading showing 0.4% m/m. A weak start of Q3 for Australian consumers. Q2 GDP came in at 0.5% q/q as expected. Public spending and net exports were positives, pushing the GDP up while construction, retail and wholesale trade were drags. With yearly GDP of 1.4% it is a slowest pace since GFC. Trade balance came in at AUD7.268 bn vs AUD7 bn as expected. With exports rising 1% m/m and imports 3% showing increase in domestic demand.

RBA has left the cash rate unchanged at 1% as was widely expected. In their statement they have stated that they will ease policy further if the need arises to support sustainable growth and that extended period of low rates is reasonable for lowering the unemployment and pushing inflation toward the target. Inflation is likely to remain subdued according to RBA and consumption remains the main uncertainty in the domestic economy, as the latest retail sale reading showed. They have praised strong employment growth and easy global credit conditions. Although the statement shows that RBA is not in a hurry to further cut interest rate, markets are still pricing in around 89% of a rate cut by the end of the year with around 62% chance of a cut at the October meeting.

Official PMI data from China for the month of August show manufacturing at 49.5 vs 49.7 the previous month. This is the fourth consecutive month that the reading is in contraction territory and after creeping slowly back to 50 the previous month it has again turned away and went deeper into contraction. Trade wars and slower domestic demand are persistent negatives. Services PMI came in at 53.8 vs 53.7 the previous month and composite PMI came in at 53. Caixin manufacturing PMI returned to expansion with 50.4 vs 49.8 as expected. The improvement was driven by the recovery in production with production sub index rising to a five-month high, which signals improving market demand. Employment sub index jumped almost to the 50 level while new orders sub index remained in expansion territory. On the other hand, new export orders sub index remained below 50 and fell to the lowest levels for the year indicating declining foreign demand due to escalations in US-China trade war. Caixin services PMI rose to 52.1 from 51.6, and the composite rose to 51.6 from 50.9 for the second consecutive monthly increase.

This week we will have employment data from Australia and inflation and PPI data from China

Important news for AUD:

Tuesday:
  • CPI (China)
  • PPI (China)
Friday:
  • Employment Change
  • Unemployment Rate

NZD

GDT price index came in at -0.4% for a third consecutive auction with negative numbers. Chinese buyers are the largest participants in the auction while the prices are in USD and with fall in Yuan auctions produce weaker results.

This week we will have data on manufacturing and electric card retail sales.

Important news for NZD:

Monday:
  • Manufacturing Sales
Tuesday:
  • Electronic Card Retail Sales

CAD

July trade balance came in at -CAD1.12 bn vs -CAD0.35 bn as expected. Back to the deficit and last month’s surplus has been revised down to -CAD0.06 bn. Imports rose 1.2% m/m while exports dropped -0.9% m/m with exports falling in 6 out of 11 categories. Surplus was achieved in trade with US while deficit was in trade with the rest of the World. Slow start of Q3 in regards to the trade.

BOC has left the rate unchanged at 1.75% as widely expected. They reiterated that current level of monetary stimulus remains appropriate. Uncertainty caused by trade wars is weighing in on Canadian and global economy and its Governing Council will pay more attention on its influence over growth and inflation in Canada. They acknowledged that wages rose but consumer spending has been unexpectedly soft and business investment fell sharply due to trade uncertainties. Canada’s economy is operating close to potential and inflation is on target.

Employment report for August showed a net change in employment of 81.1k vs 20k and back into positive territory from -24.2k the previous month. The unemployment rate stayed the same at 5.7% while participation rate increased to 65.8% from 65.6% the previous month. Full time employment amounted to 23.8k. Hourly wages dropped to 3.8% from 4.5% the previous month but still shows very healthy rise.

This week we will have housing data.

Important news for CAD:

Tuesday:
  • Building Permits

JPY

Capex data for Q2 came in at 1.9% y/y vs 1.7% y/y as expected. Small beating on the expectations will have positive impact on Q2 GDP. On the other hand, company profits came in at -12%, very disturbing number for future capex and GDP data. Final services PMI in August came in at 53.3 vs 51.2 the previous month bringing some good news. Household spending came in line with expectations at 0.8% y/y while labour earnings missed and came in at -0.3% y/y vs 0.7% y/y as expected. Wage growth will not be able to sustain the spending especially with October’s retail sales tax hike.

This week we will have final Q2 GDP reading, machinery orders and final July industrial data.

Important news for JPY:

Monday:
  • GDP
Thursday:
  • Machinery Orders
Friday:
  • Industrial Production

CHF

Retail sales in July came in at 1.4% y/y vs -0.7% y/y the previous month. CPI for the month of August came in unchanged vs -0.1% m/m as expected and 0.3% y/y as expected with core reading coming in at 0.4% y/y as expected. Inflation continues to be stubbornly low which may prompt additional stimulus from SNB at their next meeting. Q2 GDP came in at 0.3% q/q vs 0.2% q/q as expected with household consumption leading the way and trade being the biggest drag.

This week we will have employment data.

Important news for CHF:

Monday:
  • Unemployment Rate
 

katetrades

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Forex Major Currencies Outlook (Sep 16– Sep 20)

The week of central banks, no less than 4 central banks will decide on interest rates and future monetary policy actions with FED leading the way as most important and most watched risk event of the week.

USD

August CPI came in at 1.7% y/y vs 1.8% y/y as expected but core CPI came in at 2.4% y/y vs 2.3% y/y as expected. Average weekly earnings also added to the shine of the report coming in at 1.2% y/y vs 0.9% y/y as expected with real hourly earnings coming in at 1.5% y/y vs 1.4% y/y as expected. Advanced retail sales came in at 0.4% m/m vs 0.2% m/m as expected. Control group came in at 0.3% m/m as expected. US consumer continues to be the main driving force of the US economy giving the FED reason to be more bullish.

President Trump stated that planned increase in tariffs from 25% to 30% on $250bn worth of Chinese goods will be delayed for 2 weeks from October 1 to October 15. He stated that this was done as a sign of goodwill. In response China said that it may allow companies to resume purchases of US farm products ahead of the October talks indicating that relationship begins to improve and markets liked it with risk on mover, AUD up and JPY down.

This week we will have industrial production and housing data. FOMC rate decision is the highlight of the week. Markets are expecting 25bp cut with almost 100% certainty. Economic projections, dot plot, will give us more insight regarding expected future moves by FOMC. FED’s view on trade war will also be scrutinized.

Important news for USD:

Tuesday:
  • Industrial Production
Wednesday:
  • Housing Starts
  • Building Permits
  • FOMC Interest Rate Decision
  • FOMC Statement
  • FOMC Economic Projections
  • FOMC Press Conferece
Thursday:
  • Existing Home Sales

EUR

Ifo has cut the German GDP growth for 2019 to 0.5% from 0.6% and to 1.2% from 1.7% for the year 2020. They expect Q3 GDP to fall to -0.1% q/q with possible slight recovery in Q4. This would mark second consecutive quarter of negative GDP, thus indicating a technical recession. They also noted that weakness from the industrial sector is starting to spread to other sectors which is particularly worrisome. Industrial production for the Eurozone in July came in at -0.4% m/m vs -0.1% m/m as expected with all the major economies showing a decline in industrial activity. Trade balance came in at EUR19 bn vs EUR17.5 bn as expected. Exports were up 0.6% m/m while imports were flat.

ECB has decided to cut the deposit facility rate by additional 10bp thus putting it at -0.50%. Reintroduction of QE in the amount of EUR20 bn starting from November 1. There is no time frame regarding duration of purchases, they will stop them shortly before raising rates. Tiering system will be introduced. ECB president Draghi stated that risks are tilted to the downside and urged for a looser fiscal policy. Global uncertainties are hitting the eurozone manufacturing hard while services show resilience. Both GDP and inflation forecasts were lowered with former now seen at 1.1% for 2019 and 1.2% for 2020 and the latter at 1.2% for 2019 and 1% for 2020. The baseline scenario does not take into account the escalation of trade tensions. All measures ECB takes are intended to raise inflation close to but below 2%. The fact that QE does not have a perceived end date gives dovish note to the decision although the amount is far lower than feared, EUR60 bn.

This week we will get ZEW reading, final inflation data for August as well as preliminary consumer confidence data for September.

Important news for EUR:

Tuesday:
  • ZEW Economic Sentiment Indicator (Germany and EU)
Wednesday:
  • CPI
Friday:
  • Consumer Confidence Index

GBP

GDP in July came in at 0.3% m/m vs 0.1% m/m as expected and thus surprised to the upside with services output being the biggest contributor. The headline number shows a good start for the Q3, at least there is a great possibility of avoiding the recession, but ONS states that weakening growth is still present. Factory data also beat the expectations with manufacturing coming in at 0.3% m/m vs -0.3% m/m as expected, industrial production at 0.1% m/m vs -0.3% m/m as expected and construction at 0.5% m/m vs 0.2% m/m as expected. Very strong month for the UK economy.

July employment report showed wages continuing their rise to 4% 3m/y vs 3.7% 3m/y as expected for the highest reading since June 2008. Real total wages increased by 2.1% y/y which is the fastest pace since Q3 of 2015. The unemployment rate dropped to 3.8% from 3.9% the previous month. The employment change came in at 31k vs 55k and claimant count rate rose to 3.3% to put some shade on the report, but wage rise is the highlight. BOE will be satisfied with the reading, however Brexit dominates the UK so all data plays second fiddle to it.

MPs have voted against a motion to hold elections prior to the October 31 and Parliament was prorogued at the end of the day according to the Queen’s decision. They will continue with their sessions on October 14. Reports state that UK and the EU could agree to maintain Northern Ireland under the European customs regime thus avoiding the backstop issue which gave GBP a boost.

This week we will get inflation and consumption data for August as well as BOE rate decision. Due to the Brexit uncertainties BOE has its hands tied but their input on the economy will be highly valuable. No change in interest rate is expected.

Important news for GBP:

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

AUD

Trade balance data from China in August missed expectations coming in at CNY299.3 bn vs CNY310.26 bn as expected. Exports were up 2.6% y/y vs 6.3% y/y as expected and down from 10.3% y/y the previous month. Exports to the US were down 16% y/y. Global slowdown and US tariffs combined to put a heavy toll on Chinese exporters. Imports came in at -2.6% y/y vs -3.1% y/y as expected. A drop in imports indicating slower domestic demand will be feared by all exporting countries who have China as their main market, namely Germany. CPI came in at 2.8% y/y while PPI plunged deeper into negative territory coming in at -0.8% y/y. Low PPI reading will impact business profits which will in turn lead to halts in employment and business investment. China has already cut their reserve ratio rate in order to stimulate economy and will evaluate if further stimulus is still needed but with such low PPI reading, we can expect more stimulus in the future.

This week we will get RBA meeting minutes and employment data from Australia as well as consumption, industrial production and investment data from China.

Important news for AUD:

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

NZD

Manufacturing sales and activity were both down in Q2 coming in at -0.7% q/q vs 1% q/q the previous quarter and -2.7% q/q vs 2% q/q the previous quarter respectively. Drops in meat and dairy manufacturing were the main drags and concerns. Analysts are lowering their projections for Q2 GDP. Electronic card retail sales and spending overall came in better than expected at 1.1% m/m and 1.3% m/m respectively. Positive impact on private consumption.

This week we will have bi-monthly GDT auction as well as Q2 GDP data.

Important news for NZD:

Tuesday:
  • GDT Price Index
Thursday:
  • GDP

CAD

Housing starts in August came in at 226.6k vs 212.5k as expected and building permits rose to 3% m/m vs 2% m/m as expected and up from -3.1% m/m the previous month indicating improving conditions in the housing market.

This week we will have manufacturing sales, inflation and consumption data.

Important news for CAD:

Tuesday:
  • Manufacturing Sales
Wednesday:
  • CPI
Friday:
  • Retail Sales

JPY

Final Q2 GDP came in at 1.3% y/y and 0.3% q/q as expected but down from preliminary readings of 1.8% y/y and 0.4% q/q. The number was revised down due to lower business investment. Private consumption is still the main driver of GDP and it came at 0.6% q/q. Core machinery orders, a good proxy for capex six to nine months in the future, came in for the month of July at -6.6% m/m vs -8% m/m as expected and 0.3% y/y vs -3.7% y/y as expected. Although the data was weaker than the previous month and it is very volatile in its nature it beat the expectations. The final industrial production data for July came in line with preliminary readings at 1.3% m/m and 0.7% y/y for a good start of Q3.

This week we will have trade balance and national inflation data along with BOJ rate decision. According to Reuters survey most economists expect BOJ to ease further with their next move due to JPY strength caused by global slowdown, but they are not in agreement whether the move will be at this meeting.

Important news for JPY:

Wednesday:
  • Trade Balance
  • Exports
  • Imports
Thursday:
  • BOJ Interest Rate Decision
  • BOJ Monetary Policy Statement
Friday:
  • CPI

CHF

Seasonally adjusted unemployment rate in August came in at 2.3% as expected. The unemployment rate continues to be at the lows but it still does not influence inflation pressures so talks about more easing from SNB at their meeting in two weeks are intensifying.

This week we will have trade balance data and SNB rate decision. CHF has strengthened a lot during the past month and with ECB easing further we can see SNB taking further easing measures.

Important news for CHF:

Thursday:
  • Trade Balance
  • Exports
  • Imports
  • SNB Interest Rate Decision
  • SNB Monetary Policy Statement
Please note that there will be no reports for the following two weeks and we will return for the second week of October.
 

katetrades

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Forex Major Currencies Outlook (Oct 7– Oct 11)

This week is crucial for the Brexit negotiations since the EU ambassadors have set a deadline of October 11 for the two sides, US-China trade talks will resume on October 10 while Canadian employment report and US inflation will be most closely watched economic events.

USD

ISM manufacturing index for the September came in at 47.8 vs 50 as expected. This is a 10-year low reading, continuation of a downtrend and plunging deeper into contraction. Slowing global demand and trade war tensions have been labelled as main culprits for the disastrous reading. Employment subindex fell the most to 46.3 while new orders basically came unchanged with new export orders tumbling down to 41. ISM non-manufacturing index came in at 52.6 vs 55.0 as expected and down from 56.4 the previous month. The reading represents a new three-year low. Most visibly new orders category collapsed to 53.7 from 60.3 the previous month. Employment category came just above expansion level at 50.4, down from 53.1 the previous month for a five-year low. Poor ISM readings moved probability of an October rate cut to over 80% from 39% at the beginning of the week. Trade balance for August came in at -$54.9bn vs -$54.5bn as expected. Exports rose 0.2% m/m while imports rose 0.5% m/m. Deficit in trade with China was lowered by little more than $1bn which will make president happy ahead of all-important meeting on October 10. After abysmal ISM data rumours about possible interim deal intended to provide short-term economic relief to US economy are gaining more traction. However, interim deal could damage the chances of striking a “real” deal in the near future.

US treasury announced that it will impost new tariffs of 10% on EU aircraft and 25% on EU agricultural and industrial goods such as French wine and cheese, Spanish olive oil, Scotch whiskey and German knives, scissors and metalwork tools. These tariffs will take effect on October 18 and they have been imposed in retaliation to WTO Airbus aircraft subsidies case. There is a possibility for tariffs to be avoided if both sides can reach a deal, but so far there were no serious negotiations and both sides blame each other.

September NFP came in at 136k vs 145k as expected, up slightly from 130k the previous month but the number was revised up to 168k. The unemployment rate was the highlight of the report as it slipped down to 3.5% from 3.7% while the participation rate stayed the same at 63.2%. Additionally, the U6 underemployment level, which accounts for people who work part-time and seek a full-time job, has dropped to 6.9% from 7.2%. Wage data missed with average hourly earnings coming in flat vs 0.2% m/m as expected and 2.9% y/y vs 3.2% y/y as expected.

This week we will have minutes from the latest FOMC meeting and CPI inflation data.

Important news for USD:

Wednesday:

--FOMC Minutes

Thursday:

--CPI


EUR

The unemployment rate continues to shrink and it came in at 7.4% from 7.5% the previous month. Final manufacturing PMI for the September came in at 45.7 vs 45.6 preliminary with output and new orders subindexes falling further. Core CPI came in at 1% as expected showing that inflation still holds at the low levels. Final services PMI came in at 51.6 vs 53.5 the previous month which dragged down the composite to 50.1. Weakness from manufacturing sector is transferring to services sector. Retail sales in August came in at 0.3% m/m as expected, up from -0.5% m/m the previous month.

This week we will have manufacturing data from Germany.

Important news for EUR:

Monday:

--Factory Orders (Germany)

Tuesday:

--Industrial Production (Germany)


GBP

Q2 GDP came in at -0.2% q/q as expected with yearly number ticking up at 1.3% y/y vs 1.2% y/y as expected. Manufacturing PMI in September surprised to the upside by coming at 48.3 vs 47 as expected with “Stocks of purchases, input buying volumes rise as some UK manufacturers have restarted Brexit preparations”. Services PMI came in at 49.5 vs 50.3 as expected and brought down composite to 49.3, both readings back into contraction territory. Construction PMI continues to plunge coming in at 43.3 vs 45 the previous month. Data points to contraction of UK economy in Q3.

PM Johnson will have to ask for extension of Article 50 if a deal is not approved by October 19. His latest proposal that was dubbed “two borders, four years” because it would instate two borders, one on the side of Republic of Ireland and one on the side of Northern Ireland with time frame of four years received support from Brexit supporters and was not outright rejected by EU. However, EU remains unconvinced by the new plan which pushed the pound down after it shoot up on initial deal optimism. Finally, the EU has rejected the plan which dragged pound to new lows. PM Johnson seems to have a plan B which is based on time limit on the backstop.

This week we will have GDP, trade balance and production data.

Important news for GBP:

Thursday:

--GDP

--Trade Balance

--Manufacturing Production

--Industrial Production

--Construction Output


AUD

RBA has once again cut the cash rate this year by 25 bp, this time down to 0.75%. They have stated that they will ease further if needed and that it is reasonable to expect extended periods of low rates., however they have added that “gentle turning point has been reached” thus leaving investors guessing. RBA governor Lowe stated that progress on employment and inflation goals is slower than liked and that rate cut should help in achieving those goals. Retail sales for August came in weaker than expected at 0.4% m/m vs 0.5% m/m as expected but much better than the previous reading of -0.1% m/m.

Official manufacturing PMI from China for September came in at 49.8 vs 49.5 the previous month. It is a small and welcomed bounce back but the reading still stays in the contraction territory, for the fifth consecutive month. Caixin manufacturing PMI showed a great jump to 51.4 vs 50.4 the previous month. New orders and output subindexes improved significantly while new export orders improved but stayed in the contraction territory indicating that demand for manufacturing products was driven by the domestic market.

This week we will have RBA report on financial stability and Caixin services PMI data from China.

Important news for AUD:


Tuesday:

--Caixin Services PMI (China)

Friday:

--RBA Financial Stability Review


NZD

ANZ business confidence continues to drop, now coming in at -53.5 vs -52 previously. There is also a drop in activity outlook to -1.8 which shows activity at its lowest levels since the crisis of 2008/09. Investment and profit expectations continue falling along with inflation expectations. Yet another data point weighing on kiwi increasing chances for additional rate cut by the end of the year. Talks about NZDUSD below 0.60 mark are also heating. GDT price index came in at 0.2% for some positive kiwi news.

This week we will have data on electronic card spending.

Important news for NZD:

Thursday:

--Electric Card Retail Sales


CAD

GDP for July came in flat vs 0.1% m/m as expected and 1.3% y/y vs 1.4% y/y as expected. Wholesale trade was the biggest contributor to the GDP while oil and gas were the biggest drag with drop of -3.5% for a largest decline in more than 3 years. Trade balance deficit in August fell to -CAD0.96 bn vs -CAD1.2 bn as expected. Both exports and imports rose with former rising 1.8% m/m and latter 1% m/m indicating good conditions. Trade deficit with China was lowered by around CAD300 million.

This week we will have housing and employment data.

Important news for CAD:

Tuesday:

--Building Permits

--Housing Starts

Friday:

--Employment Change

--Unemployment Rate


JPY

Retail sales for August came in at 4.8% m/m vs 2.4% m/m and 2% y/y vs 0.7% y/y as expected thus smashing expectations. New sales tax, raising the rate to 10% from 8%, was introduced on October 1 so the increase most likely shows the purchases made to avoid additional taxes. Preliminary industrial production for August came in at -1.2% m/m vs -0.5% m/m as expected. Projections show that production will pick up in September. Jobless rate continues to impress and it fell to 2.2%.

Important news for JPY:

Tuesday:

--Household Spending

--Labour Cash Earnings

Thursday:

--Core Machinery Orders


CHF

Retail sales in August reversed and came in at -1.4% y/y vs 1.4% y/y the previous month while CPI for September came in at -0.1% m/m vs 0.1% m/m as expected lowering inflation to meekly 0.1% y/y.


Important news for CHF:


Tuesday:

Unemployment Rate
 

katetrades

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Forex Major Currencies Outlook (Oct 14 – Oct 18)

The strength of the US consumer, employment data from UK and Australia, slew of economic data from China headlined by Q3 GDP and European Council summit will be the highlights of the week.

USD

FED Chairman Powell reiterated the FED’s data-dependency stance and stated that they will closely monitor incoming data and adjust monetary policy accordingly. He also added that global economic slowdown and geopolitical risks are a factor that impacts policy decisions. In addition, FED will buy Treasury bills in order to calm the money market and although this will expand FED’s balance sheet, it should not be viewed as another round of QE.

FOMC meeting minutes showed increased concern by members regarding global economy and trade tensions. Labour market and overall economy are strong according to the readings. There was a division within with several policymakers favouring keeping the rates steady while couple of policymakers stated that a rate cut might be too much insurance.

September CPI came in at 1.7% y/y vs 1.8% y/y as expected with core CPI staying the same at 2.4% y/y. Earnings data came weaker than expected with average weekly earnings at 0.9% y/y vs 1.1% y/y as expected and average hourly earnings 1.2% y/y vs 1.5% y/y as expected. The small drop in headline number as well as drops in wages could add additional reason for the rate cut at the end of the month. Odds of an October rate cut rose to almost 82%

This week we will have consumption, housing and industrial data.

Important news for USD:

Wednesday:
  • Retail Sales
Thursday:
  • Housing Starts
  • Building Permits
  • Industrial Production

EUR

Factory orders from Germany for August came in at -0.6% m/m and -6.7% y/y indicating further deterioration in the manufacturing sector. Foreign orders were up and previous numbers have been revised up so that is a small positive from the report, but data will continue to deteriorate until there is some sort of an agreement in US-China trade war. German industrial production surprised to the upside by coming in at 0.3% m/m vs -0.1% m/m as expected. Positive news was welcomed by the markets and EUR strengthened on the news, however EURUSD stayed below 1.10 level. Later on, during the week 1.10 level was breached due to weaker USD.

ECB accounts from the September policy meeting showed that although re-introduction of QE had a “clear majority” some members were against it on the basis of it not being an efficient instrument given low yields. Some policy members argued for a 20 bps rate cut if no QE was introduced. Rate tiering had “majority” while 10 bps rate cut had “very large majority”. Divisions within ECB are shown also with some members questioning growth forecasts that were too optimistic according to them.

This week we will have industrial and inflation data, ZEW economic sentiment reading and summit of the European council where talks about the Brexit situation will be the main subject.

Important news for EUR:

Monday:
  • Industrial Production
Tuesday:
  • ZEW Economic Sentiment Indicator (EU and Germany)
Wednesday:
  • CPI
Thursday and Friday:
  • European Council Summit

GBP

GDP figure for August came in at -0.1% m/m vs flat as expected. Reading from previous month was revised up to 0.4% m/m which pushed 3m/3m figure to 0.3% vs 0.1% as expected. According to the latest reading UK will most likely avoid technical recession, but Q3 outlook is not rosy. Manufacturing and industrial production data dropped from the previous month and came in weaker than expected at -0.7% m/m vs 0.2% m/m as expected and -0.6% m/m vs 0.1% m/m as expected respectively. Construction output was a bright spot coming in at 0.2% m/m vs -0.4% m/m as expected. Trade balance data showed a deficit of -£9.8bn vs -£10bn as expected with imports increasing by 0.1% m/m due to Brexit stockpiling while exports fell -0.5% m/m. Markets were not moved by the data as Brexit developments continue to drive the pound.

The UK government plans to challenge Parliament's effort to block a no-deal exit with the Supreme Court. PM Johnson will have to make a deal by October 19, otherwise he would have to ask EU for an extension of Brexit by January 31 according to the newly created parliament bill. Government stance is still that UK will leave EU on October 31. The risk of no deal has been postponed but it still lingers. Parliament is currently suspended until the Queen delivers her speech on Monday. Talks between PM Johnson and Irish PM Leo Varadkar were on the positive side with comments such as that they “see a pathway to a possible deal”. Markets accepted it and pushed GBPUSD some 250 pips in about 3 hours of trading. Overall the optimism in the markets is elevated as more and more financial institutions go bullish on GBP.

This week we will have employment, inflation and consumption data but all of that will be topped by the approaching deadline date for requesting an extension regarding the Brexit date.

Important news for GBP:

Tuesday:
  • Average Weekly Earnings
  • Unemployment Rate
Wednesday:
  • CPI
Thursday:
  • Retail Sales

AUD

Caixin services PMI for September came in at 51.3 vs 52 as expected thus making composite at 51.9 vs 51.6 the previous month due to strengthened growth in the manufacturing sector. New business sub index rose to the highest reading since the beginning of 2018 which reflects a stable demand in services sector. Employment sub index also rose on the back of rise in new orders.

This week we will have RBA minutes from the latest meeting as well as employment data from Australia and trade balance, inflation, consumption and industrial data capped with Q3 GDP reading from China.

Important news for AUD:

Monday:
  • Trade Balance (China)
  • Exports (China)
  • Imports (China)
Tuesday:
  • RBA Meeting Minutes
  • CPI (China)
  • PPI (China)
Thursday:
  • Employment Change
  • Unemployment Rate
Friday:
  • GDP (China)
  • Retail Sales (China)
  • Industrial Production (China)

NZD

Electronic card retail sales, precursor for the retail sales reading as it attributes with up to 70% to retail sales, in September came in weaker than expected. Readings showed 0.4% m/m and 0.3% y/y vs 0.5% expected in both readings. Manufacturing PMI came in at 48.4, same as the previous month for the third consecutive month of contraction. New orders sub index returned to expansion with 50.1 but due to the weak readings in previous months it pulled production down to 46.2 which is the lowest reading since April of 2012.

This week we will have bi-monthly GDT auction as well as inflation data for Q3.

Important news for NZD:

Tuesday:
  • GDT Price Index
  • CPI

CAD

The September employment report smashed all expectations. Employment change came in at 53.7k vs 7.5k as expected, the unemployment rate dropped to 5.5% vs 5.7% as expected and hourly wages jumped to 4.3% vs 3.8% the previous month. All the important categories handily beat the expectations and as icing on the cake full time jobs rose by 70k. This very strong report should drop rate cut expectations for the end of month to 0 and keep CAD supported during the week. Housing starts in September came in line with expectations at 221.2k. Building permits surprised to the upside with a huge beat coming in at 6.1% vs 1% as expected.

This week we will have inflation data and data on manufacturing sales.

Important news for CAD:

Wednesday:
  • CPI
Thursday:
  • Manufacturing Sales

JPY

Wages keep being negative, although they improved from the previous month. They came in as expected in August, labour cash earnings at -0.2% y/y and real cash earnings at -0.6% y/y. With absence of a wage rise, inflation will stay low and with a new October sales tax hike it will have a detrimental effect on retail sales readings. Household spending for the same month came in at 1% y/y vs -1% y/y as expected, for the ninth month of y/y gains, reflecting potentially increased spending due to the sales tax hike. Spending on food, furniture, household utensils, and clothing and footwear were higher according to the report. Core machinery orders, reading that is a good indicator of capex for 6 to 9 months in the future, in August came in at -2.4% m/m vs -1% m/m as expected and -14.5% y/y vs -8.4% y/y as expected for the biggest drop in almost 10 years.

This week we will have final industrial production reading for August and national inflation rate for September.

Important news for JPY:

Tuesday:
  • Industrial Production
Friday:
  • CPI

CHF

The unemployment rate in September stayed at 2.1% as previously. One of the lowest unemployment rates in the world is still not contributing to the rise in inflation, so talks about further easing measures from SNB are becoming louder.

This week we will have trade balance data.

Important news for CHF:

Thursday:
  • Trade Balance
  • Exports
  • Imports
 
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