Daily Market Outlook by Kate Curtis from Trader's Way

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katetrades

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Forex Major Currencies Outlook (May 25 – May 29)

Inflation data from US and EU along with second estimate of Q1 US GDP and initial reading of Canadian Q1 GDP will be the highlights of the shortened week since Monday is holiday in US and UK and liquidity will be thin in the markets, therefore we advise caution with trading.

USD

Housing market started to crumble with housing starts coming in at 891k, down 30.2% from the previous month and building permits fell 20.8% to 1074k. Sales of existing homes fell from 5.27m in March to 4.33m in April. Increasingly mounting uncertainties, including rising unemployment, are weighing on people and long-term investment in houses is not on their minds. Initial jobless claims showed 2438k new claims for the week which is more than expected but down from the previous week. This puts the total number to over 38 million from their initial rise nine weeks ago. Continuing claims have surpassed the 25 million mark which is a devastating number with grave socioeconomic consequences.

This week we will have second estimate of Q1 GDP, durable goods orders data and Fed’s preferred inflation measure PCE along with personal spending data.

Important news for USD:

Thursday:
  • GDP
  • Durable Goods Orders
Friday:
  • PCE
  • Personal Spending
EUR

Preliminary PMI data for May showed improvements with EU manufacturing climbing to 39.5, services to 28.7 and composite to 30.5. Data for May shows improving business conditions compared to April but it does not show any sign of significant recovery yet. Markit states that data adds more credence to the belief that downturn bottomed in April. Demand is expected to remain weak for a prolonged period of time and Q2 GDP is expected to drop almost 10% compared to Q1 GDP.

Germany and France announced a plat to increase EU fiscal support by €500bn, coming from new debt raised by the European Commission and distributed as grants. This proposal needs to be approved by all 27 EU state members which may pose a problem, but markets have reacted positively to it pushing EUR higher.

This week we will have sentiment data as well as preliminary May inflation data.

Important news for EUR:

Thursday:
  • Economic Sentiment Indicator
Friday:
  • CPI
GBP

Jobless claims in April have skyrocketed to 856.5k from 12.1k previously which pushed claimant count rate to 5.8%. Average weekly earnings came in at 2.4% 3m/y down from 2.8% 3m/y the previous month indicating downward pressures on wages and subsequently inflation. The unemployment rate came in at 3.9%, but as a reminder, this is reading from March when country was not under lockdown for the entire month so we can expect much higher print for April’s reading.

Inflation in April almost halved from previous month’s 1.5% y/y to 0.8% y/y due to the unprecedented drop in energy prices. Core CPI came in at 1.4% y/y as expected, down from 1.6% y/y the previous month. Preliminary May PMI data showed an improvement compared to the previous month reaffirming that bottoming occurred in April. Output and jobs continued to decline, although at a slower pace than in April. Markit states that recovery is very slow and could take years, not months. Retail sales just added to more woes coming in at -18.1% m/m and -22.6% y/y with ex fuel category coming in at -15.2% m/m and -18.4% y/y. The worst retail sales reading in the series. Governor Bailey stated that due to the effects of pandemic on the economy possibility of introducing negative rates is under active review. That along with the data put a lot of downward pressure on GBP.

AUD

RBA May minutes showed that bank is monitoring financial and economic developments. Stimulus package was introduced recently, therefore members opted to maintain current policy and continue monitoring developments. They reiterated their willingness to keep the rates low and credit available to households and businesses in order to support the economy. Global recovery is expected to start in late 2020. H1 GDP is seen falling -10% while personal consumption is expected to drop -15%. Outlook for H2 depends on the easing of restrictions and their overall impact on the economic activity.

This week we will have PMI data from China.

Important news for AUD:

Sunday:
  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)
NZD

Retail sales in Q1 came in at -0.7% q/q and 2.3% y/y. The country was under lockdown only in the late part of March so the reading is devastating, indicating that with normal conditions during 85% of Q1 consumption plunged. Additionally, Q4 2019 reading was revised down to 0% q/q which just added another blow to the already weak report.

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

Important news for NZD:

Tuesday:
  • Trade Balance
Thursday:
  • ANZ Business Confidence
CAD

Headline inflation number for April came in at -0.2% y/y indicating deflationary conditions caused by the big drop in energy prices. This is the first time since the crisis of 2009 that inflation fell below 0. These conditions should not be prevailing as we have seen oil prices rebound so we can expect May reading to go back into the positive territory. A drop in inflation is also seen with clothing and footwear while food prices showed an increase due to stockpiling caused by virus outbreak. Core measures came in line with the expectations: median at 2% y/y, common at 1.6% y/y and trim at 1.8% y/y. Retail sales in March came in at -10% m/m with ex autos category coming in at -0.4% m/m. Retail ecommerce reported a jump of 16.3% while food and beverage category rose 22%. On the other side, motor vehicle and parts dealers came in at -35.6%. Statistics Canada expects April reading to come at -15.6% m/m.

This week we will get Q1 GDP reading.

Important news for CAD:

Friday:
  • GDP
JPY

Preliminary Q1 GDP came in at -0.9% q/q vs -1.1% q/q as expected and -3.4% q/q annualised vs -7.1% q/q as expected. Although data came in better than expected this is the second consecutive quarter of negative GDP which puts Japan into recession for the first time since H2 of 2015. Both private consumption and business investment came in negative but stronger than the previous quarter while exports dropped -6% which is the biggest drop in almost a decade. Economy minister Nishimura stated that significant slump is expected in Q2 due to weak overseas demand. Additionally, lockdowns are still in place along the provinces which will add to Q2 GDP woes which is already seen contracting more than 20%.

Trade balance data for April show a deficit of -JPY930.4bn, almost double than it was expected. Exports were down -21.9% y/y, of which most notable are falls in exports to US -37.8% y/y and EU -28% y/y, while imports were down -7.2% y/y. Preliminary May PMI data show continuation in drop of manufacturing reading to 38.4 while services improved from their lows to 25.3 and pushed composite to 27.4 from 25.8 the previous month. Markit notes that PMI numbers for April and May indicate GDP falling at an annual rate greater than 10%. Headline inflation came in at 0.1% y/y, excluding fresh food category slipped into deflation for the first time since 2016 coming in at -0.2% y/y due to a drop in prices of energy and services while ex fresh food, energy category came in at 0.2% y/y. Japan’s fight with deflation continues and they are slowly losing the battle.

This week we will have Tokyo inflation data, employment, consumption as well as preliminary April industrial production data.

Important news for JPY:

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

Total sight deposits for the week ending with May 15 came in at CHF673.5, up from CHF669.1bn the previous week. SNB continues to relentlessly fight Swissy’s strength as EURCHF is getting dangerously close to 1.05 level.

This week we will have industrial production and trade data.

Important news for CHF:

Monday:
  • Industrial Production
Thursday:
  • Trade Balance
 
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katetrades

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Forex Major Currencies Outlook (June 1 – June 5)

Employment data from North America, ECB, BOC as well as RBA meetings and PMI data from China are set to capture the most attention in the week to come.

USD

Second estimate of Q1 GDP came in at -5% vs down from -4.8% that preliminary reading showed. Private consumption improved compared to the preliminary reading but the gross private fixed investment came in much worse than preliminary reported. Initial jobless claims for the week ending May 23 came in at 2123k which puts total amount of jobless claims from mid-March to almost 41 million. This is the tenth week of claims above 2 million per week. Analysts are expecting weekly jobless claims to remain above 1 million through at least June. Continuing claims have fallen for the first time since the virus outbreak and although they reached devastating 21 million people it shows a glimmer of hope before next week’s NFP report.

PCE for April came in at 0.5% y/y while core PCE slipped to 1% y/y. Personal spending continued to plunge and came in at -13.6%. An interesting reading is personal income which rose 10.5%. The increase is achieved due to unemployment benefits that were designed to put income received to the national average level. However, due to the fact that great majority of laid-off workers were earning considerably less than average wages, it has led to them being better paid than if they were working. Unemployment benefits will be paid until July 31.

This week we will have PMI data from ISM, trade balance data and NFP report on Friday. Expectations are for drop of a bit below 5 million with the unemployment rate shooting to almost 20%.

Important news for USD:

Monday:
  • ISM Manufacturing PMI
Wednesday:
  • ISM Non-Manufacturing PMI
Thursday:
  • Trade Balance
Friday:
  • Nonfarm Payrolls
  • Unemployment Rate
EUR

German Ifo data for May showed a rebound from April data. The hope for a recovery is based on gradual lifting of lockdown. Germany reportedly wants to support medium-sized companies that have less than 250 employees by paying them up to €50 000 per month from the period of June to December. In order to be eligible for assistance, a company should have recorded at least a 60% y/y drop in sales for the months of April and May, meaning those companies that were hardest hit by the virus impact. Economic sentiment in May showed a small improvement compared to April readings, however services sentiment dropped further down shattering hopes of fast recovery.

European Commission is reportedly said to propose €750bn virus recovery fund as a means of aid member states. It is said that €500bn will be in grants and €250bn will be in loans. Italy is set to receive €82bn in grants, Spain €77bn while France will get €39bn. Additionally, Italy will get €91 bn in loans while Spain will be getting €63bn in loans. Initial market reaction was very favourable, pushing EURUSD over 1.10 mark and reaching 1.11 on Friday. Preliminary May inflation came in at 0.1% y/y for the lowest reading in the past four years. A small comfort can be found in core inflation, which held steady at 0.9% y/y. The inflation data are taking the back seat due to the markets focus on virus related data, however once that settles inflation data will gain in importance.

This week we will have final May PMI data, consumption data and ECB rate decision. Expectations are for ECB to ramp up their PEPP (Pandemic Emergency Purchase Programme) by €500bn and prolong it for at least a year.

Important news for EUR:

Monday:
  • Markit Manufacturing PMI (EU, Germany, France)
Wednesday:
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
Thursday:
  • Retail Sales
  • ECB Interest Rate Decision
  • ECB Monetary Policy Press Conference
GBP

Brexit talks continued throughout the week. EU seemed prepared to ease their “maximalist approach” on fishing rights, thus making first concession in negotiations. There is still a long road ahead but this may be interpreted as a first step in the right direction. Special adviser to the Prime Minister, Dominic Cummings, violated the lockdown rules which he helped devise. This is causing PM’s approval ratings to decline and some members of Tory party are calling for Cummings’ resignation. There is also a turmoil among common people. If they see Cummings’ act as one set of rules that apply for the elite and the other set of rules for all the rest it can lead to more and more people breaking the rules thus slowing the return to normal.

This week we will have final May PMI data and since we are entering June we can expect trade negotiations between the UK and EU to intensify. June 30 is the deadline when Britain must decide whether it wants an extension to the transition period. If not, a no-deal Brexit at the end of the year becomes the default.

Important news for GBP:

Monday:
  • Markit Manufacturing PMI
Wednesday:
  • Markit Services PMI
  • Markit Composite PMI
AUD

RBA Governor Lowe stated his satisfaction with the introduced economic package. The bank will keep its expansionary monetary policy until progress is made towards full employment and they are confident on inflation. Current cash rate of 0.25% is effectively the lowest it can go and negative rates are extraordinary unlikely. Rates will stay this low for years to come and bigger role of fiscal policy is needed.

Private capital expenditure for Q1 came in at -1.6% q/q beating both the expectations and the previous quarter which was at -2.8% q/q. Estimates for Q2 are much more bleak. AUD was the second biggest beneficiary of the risk-on mood in the markets with AUDUSD shooting up to 0.66559 where its advance was capped by 200 DMA.

This week from Australia we will have trade balance and consumption data, as well as RBA meeting which is expected to be a tnon-event while Q1 GDP has potential to move the markets. Caixin PMI data along with trade balance data will come from China.

Important news for AUD:

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

Trade balance in April came in at NZD1267mn for a largest monthly surplus on record. This was achieved on the back of plunging imports which came in at NZD3.99bn, down from NZD5.14bn the previous month. Exports also dropped, not as dramatically as imports, due to the lockdown caused by the virus outbreak and stoppage in the economy. Business confidence in May improved to -41.8 vs -66.6 the previous month with activity outlook also improving. NZD was the biggest beneficiary of the risk-on mood in the markets with NZDUSD shooting up to 0.62100 level with some analyst seeing it rise to 0.64 in the coming months. Currently its rise is capped by 100 DMA.

CAD

Q1 GDP came in at -8.2%, a significant drop from 0.3% in Q4 of 2019. The reading is a biggest drop since Q1 of 2009 and household spending with -2.3% is the worst quarter reading ever. These historical lows will quickly be surpassed as Q2 is expected to show even bigger drops. Prime Minister Trudeau considers scaling back on some relief programs as the economy re-opens.

This week we will have BOC meeting, trade balance and employment data. This will be the first BOC meeting presided by new governor Macklem so his views on policy will garner more attention.

Important news for CAD:

Wednesday:
  • BOC Interest Rate Decision
  • BOC Rate Statement
Thursday:
  • Trade Balance
Friday:
  • Employment Change
  • Unemployment Rate
JPY

Tokyo area inflation for the month of May came in at 0.4% y/y, ex fresh food category came in at 0.2% y/y while ex fresh food, energy category came in at 0.5% y/y. There are beatings on both expectations and previous month’s reading, however there is little place for joy since numbers are miles away from the target of 2%. April unemployment rate ticked to 2.6%. Preliminary industrial production for April plunged to -9.7% m/m and -14.4% y/y. The decline was led by -33% m/m drop in auto production, the biggest drop since 2013. Waning global demand is shattering the auto industry. Retail sales added to the horrific data dropping -9.6% m/m and -13.7 y/y for the biggest year on year drop in more than two decades.

Prime minister Abe has announced nationwide lifting of state of emergency. He added that plan is for introduction of contract tracing app in the mid-June. If the number of virus infections rise government will consider reimposing state of emergency. Government has announced new stimulus package that will amount to JPY117 trillion.

This week we will have final May PMI data as well as data on household spending.

Important news for JPY:

Monday:
  • Markit Manufacturing PMI
Wednesday:
  • Markit Services PMI
  • Markit Composite PMI
Friday:
  • Household Spending
CHF

Total sight deposits for the week ending May 22 continued to climb and are now at CHF679.9bn vs CHF673.5bn the previous week. Prevailing risk appetite in the previous week assisted them in pushing EURCHF to test 1.06 level. European Commission stimulus gave boost to EUR making EURCHF shoot to 1.07 level which may ease SNB’s intervention in the markets. SNB Chief Jordan reiterated their willingness to intervene more strongly if the need arises. Trade balance in April came in at CHF4.04bn, up from downwardly revised CHF3.96bn the previous month. Both exports (-10%) and imports (-17.8%) completely plunged amid virus peak.

This week we will have consumption and inflation data along with Q1 GDP.

Important news for CHF:

Tuesday:
  • Retail Sales
Wednesday:
  • GDP
Thursday:
  • CPI
 

katetrades

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Forex Major Currencies Outlook (June 8 – June 12)

Fed’s meeting with their assessment of latest NFP report and economic projections will be the highlight of the upcoming week.

USD

ISM manufacturing PMI for the month of May came in at 43.1 vs 41.5 the previous month. Improvements were seen in all indices with production and employment, which represent consumption, rising the most. New orders and new export orders, which represent demand, improved but at a slow rate and are still deep in contraction territory. Non-Manufacturing PMI came in at 45.4 vs 41.8 the previous month. Business activity showed the biggest jump followed by new orders and new export orders while employment improved only marginally. Still, all of the relevant readings are below the 50 level. Initial jobless claims for the week ending May 29 came in at 1877k for the first reading below 2000k in 2 months. Total number of initial jobless claims climbed to 42.7 million.

Nonfarm payrolls completely surprised expectations by coming in at 2509k vs -7500k as expected. The unemployment rate fell to 13.3% while participation rate rose to 60.8%. Those are still very weak numbers but they represent significant improvement compared to last month. The leisure and hospitality sector showed the biggest gain with 1239k followed by education, healthcare, retail trade and construction jobs. Wages fell -1% m/m indicating that low-earning workers returned to their jobs.

Riots are still raging across America triggered by the murder of Afro-American George Floyd by a police officer. President Trump at first signaled that martial law could be implemented, which would be the first time that it is implemented since the 1992 and Los Angeles riots, however he later eased his tone.

This week we will have inflation data as well as Fed’s meeting. Lower rates are still not an option so there will be no change in rates. Macroeconomic projections and press conference will garner all of the attention.

Important news for USD:

Wednesday:
  • CPI
  • Fed Interest Rate Decision
  • FOMC Economic Projections
  • FOMC Press Conference
EUR

Eurozone manufacturing PMI for May came in at 39.4 vs 39.5 preliminary on the back of the weaker final German reading. May reading shows improvement from April, but it is rather weak reflecting the prevailing economic conditions in the Eurozone. Markit notes that both domestic and external demand looks set to remain subdued. Additionally, the labour market and profits could deteriorate further thus preventing any meaningful recovery. Final services reading came in at 30.5 vs 28.7 as preliminary reported with composite rising to 31.9 from 30.5 as preliminary reported. Improvements are made from April but they are still in contraction and are lacking strength to push the economy toward meaningful recovery. Recovery of output to pre-pandemic levels may take years according to Markit.

ECB left key policy rates unchanged and it upped PEPP programme by €600bn now reaching €1.35 trillion. PEPP will be extend at least until end of June 2021. Expectations were for an increase of €500bn. Germany has announced a €130bn stimulus package. Two packages combined sent EURUSD rallying to 1.12720 and it moved toward 1.14 by the week’s end. Lagarde stated that Q2 contraction will be unprecedented and that they see 2020 GDP at -8.7%. Rebound of 5.2% is expected in 2021 and 3.3% in 2022. Downward price pressures are expected to continue and inflation target of 2% will not be reached by 2022. They see it at 1.3% in 2022.

This week we will have final Q1 GDP reading.

Important news for EUR:

Tuesday:
  • GDP
GBP

Manufacturing PMI for May was slightly upgraded to 40.7 vs 40.6 preliminary. Services PMI improved to 29 pushing the composite to 30. Lackluster improvements in PMI readings indicating serious issues with the economy.

Chancellor of the Exchequer Sunak is said to be drawing up plans for an emergency stimulus package in early July, in a further attempt to restart the UK economy. He fears that the UK hospitality sector could lose as many as two million jobs if it is not re-opened by the summer. BOE Governor Bailey encouraged banks to prepare for the failure of trade agreement between UK and EU by the end of the year. BOE executive director for markets Hauser stated that negative rates will not occur in the near-term and if the decision is made to introduce them it will be the right thing to do at that moment. UK Brexit negotiator Frost stated that progress in trade talks has been “limited”.

This week we will have GDP as well as trade balance data.

Important news for GBP:

Friday:
  • GDP
  • Manufacturing Production
  • Industrial Production
  • Trade Balance
AUD

RBA has left the cash rate at 0.25% as widely expected. This accommodative approach will be maintained as long as it is required. The rise in iron ore prices as well as risk appetite in the markets led AUDUSD up over 5% in May. Q1 GDP came in at -0.3% q/q and 1.4% y/y, both in line with expectations. This is the first contraction in 9 years. Q2 will be a worse reading as the full effect of the lockdown is shown, which will put Australia in recession for the first time in 29 years. April retail sales came in at devastating -17.7% m/m due to the countrywide lockdown. Trade balance showed a smaller surplus of AUD8800m due to the higher drop in exports (-11%) than in imports (-10%).

Official manufacturing PMI from China for May came in at 50.6 vs 51.1 as expected. Non-Manufacturing PMI came in at 53.6 and helped keep composite PMI at 53.4, same as the previous month. All three readings came well in expansion territory with new orders category picking up. Caixin manufacturing PMI returned to expansion territory with 50.7 reading. Caixin services PMI leaped back into the expansion territory with 55 from 44.4 the previous month. Composite also returned to the expansion territory with 54.5 reading completing the V-shape recovery for Caixing PMI.

This week we will get inflation data from China.

Important news for AUD:

Wednesday:
  • CPI (China)
NZD

GDT auction came in 0.1% for a second consecutive positive auction. Kiwi was the best performer of the week gaining more than 250 pips vs USD bouncing from 100 DMA and breaking through 200 DMA.

CAD

BOC has left rate at 0.25% as widely expected as they have emphasized in their recent statements that they see 0.25% level as effective lower bound. Q2 GDP is expected to show a decline of 10-20%. They see the economy resuming growth in Q3. Short-term funding conditions have improved. Therefore, BOC is reducing the frequency of its term repo operations to once per week, and its program to purchase bankers' acceptances to bi-weekly operations.

Trade balance in April came in at -CAD3.25bn. Exports plunged -29.7% m/m while imports plunged a bit less -25.1% m/m. Crude oil exports fell -55.1% m/m. Interesting data is that Canada recorded its first service surplus since 2007. Canada historically runs deficits on travel services due to residents seeking warm weather abroad, however the majority of foreign travel has been shut down amid virus outbreak which led to the lowering of travel services deficit.

Employment change in May surprised to the upside by coming in at 289.6k vs -500k as expected. The great majority of those jobs were full-time (219.4k) with part-time job also showing an increase (70.3k). The unemployment rate grew to 13.7% for the highest unemployment on record. Participation rate rose to 61.4%.

JPY

Capex for the Q1 surprised and came in at 4.3% y/y vs -5% y/y as expected. On the other hand, company profits in Q1 dropped -32% y/y for the biggest drop since Q3 2009. This huge drop in profits will lead to a drop in Q2 Capex. May manufacturing PMI came in at 38.4 as preliminary reported but down from 41.9 in April. Services PMI came in at 26.5 vs 21.5 the previous month and composite climbed to 27.8 from 25.8 the previous month. Both readings show an improvement but it is very anemic. Demand for services for in Japan continues to crumble while employment falls the sharpest in a decade.

This week we will have final Q1 GDP reading as well as earnings data.

Important news for JPY:

Monday:
  • GDP
Tuesday:
  • Labour Cash Earnings
CHF

SNB total sight deposits for the week ending May 29 came in at CHF681.6bn vs CHF679.9bn previous week. Deposits increased at a slower pace since EURCHF crossed the 1.07 level. Retail sales in April plunged -19.9% y/y since the entire country was under lockdown. Q1 GDP showed contraction coming in at -2.6% q/q and -1.3% y/y. Headline inflation in May came in at -1.3% y/y with core coming in at -0.6% y/y. Both came in as expected but both showed a drop compared to April’s numbers indicating mounting deflationary pressures in the economy.
 

katetrades

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Forex Major Currencies Outlook (June 15 – June 19)

This week we will have BOE, BOJ and SNB meetings coupled with employment data from UK and Australia as well as consumption data from US, UK and Canada.

USD

Fed has kept rates at the current bound of 0-0.25% as widely expected and did not talk about potential introduction of negative rates. They will keep their holdings of bonds “over the coming months” at least at the current pace. Buying will continue across the curve, meaning both short and long-term bonds, and they buy approximately $80bn a month in Treasuries and $40bn a month in agency MBS. They have reiterated their intent to fully support the economy. Projections for 2020 show GDP at -6.5%, unemployment at 9.3% and PCE inflation at 0.8%. The projections for the Fed funds rate at the end of 2020 comes in at 0.1% with the same rate for 2021 and 2022. Fed Chairman Powell stated in press conference stated Fed’s strong commitment to using all their tools for as long as necessary to get back to full employment adding that yield curve control effectiveness “remains an open question”. "We will continue to use our powers forcefully. aggressively and proactively," Powell’s words emphasize Fed’s determination. He also asked for more fiscal stimulus as there are limits on monetary policy. The dovish tone has been dominating the press conference reflecting very well Fed’s stance and viewpoint cemented with expression: The FOMC “is not even thinking about thinking about raising rates,”

Inflation data for May came in at 0.1% y/y, dangerously close to deflation territory. Declines in the indexes for motor vehicle insurance, energy, and apparel more than offset increases in food and shelter indexes. Core CPI came in at 1.2% y/y vs 1.4% y/y the previous month. This is the first time since core CPI is measured, starting from 1957, that reading was declining for the third consecutive month. Initial jobless claims for the week ending June 5 came in at 1542k continuing the declining trend. Continuing claims climbed to almost 21 million.

This week we will have consumption and housing data.

Important news for USD:

Tuesday:
  • Retail Sales
Wednesday:
  • Housing Starts
  • Building Permits
EUR

Final Q1 GDP reading was revised up to -3.6% q/q from -3.8% q/q preliminary and -3.1% y/y from -3.2% y/y preliminary. These small improvements in the reading did not have an impact in the markets as it is widely expected that Q2 GDP will be negative in the double digits. Industrial production in April showed horrific numbers coming in at -17.1% m/m and -28% y/y.

This week we will have ZEW survey as well as final inflation data for May.

Important news for EUR:

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

April’s GDP came in at -20.4% m/m vs -18.7% m/m as expected. Manufacturing production came in at -24.3% m/m, industrial production at -20.3% m/m and construction output at -40.1% m/m. Terrible numbers all around -, the worst in the history -, for the month when the entire economy was stopped due to the virus outbreak. Since the economy reopened in May, we can expect better numbers in the coming month.

Negotiations on future EU-UK relations are at a standstill. Michel Barnier, Chief EU Negotiator, stated that Britain wants all the benefits of the EU membership without the obligations. If no extension of the transition period is agreed by June 30 it raises chances of a no deal. European Commission stated that post-Brexit negotiations will be held on June 29 to 3 July, it will be a restricted meeting, followed by meetings on the weeks of 6 July, 13 July, 20 July, 27 July, and 17 August.

This week we will have employment, inflation and consumption data capped with BOE interest rate decision. No change in the rate is expected but we should see increase in asset purchase program supporting the pound. Special attention will be paid to the possibility of introducing negative rates.

Important news for GBP:

Tuesday:
  • Claimant Count Change
  • Unemployment Rate
  • Average Weekly Earnings
Wednesday:
  • CPI
Thursday:
  • BOE Interest Rate Decision
Friday:
  • Retail Sales
AUD

AUDUSD has reached 0.7063 level intraday but its advance was capped at 0.70 and it has been on decline after the FOMC meeting. Hourly 100 and 200 SMA have been broken to the downside and although retest of the levels is expected we see them as the new resistance and the price bouncing lower from them toward daily 200 SMA.

Trade balance data for May from China showed surplus rising to $62.93bn from $45.33bn the previous month. Exports fell -3.3% while imports fell whopping -16.7%. Exports of medical devices showed the biggest surge, almost doubling, followed by rise in exports of textiles, primarily face masks. A drop in oil prices as well as in soybeans and natural gas led to declining value of imports. Inflation slipped to 2.4% y/y. Food prices kept it elevated while non-food came in at 0.4% y/y. PPI continued to decline and came in at -3.7% y/y.

This week we will have meeting minutes and employment data from Australia as well as consumption and industrial production data from China.

Important news for AUD:

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

Electronic card retail sales have posted a tremendous monthly rise in May coming in at 78.9% m/m. This result was influenced by catastrophic reading in April and year-on-year figure attests to that coming in at -6%. Kiwi was continuing its advance against dollar during the first part of the week, but then it weakened after the Powell’s conference.

This week we will have Q1 GDP data.

Important news for NZD:

Thursday:
  • GDP
CAD

Housing starts in May came in at 193.5, up from downwardly revised 166,4k the previous month. This constitutes a healthy rise of 16.2%.

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:
  • CPI
Friday:
  • Retail Sales
JPY

Final Q1 GDP data came in at -0.6% q/q vs -0.9% q/q preliminary and -2.2% annualised vs -3.4% as preliminary reported. Improvements were achieved thanks to strong business investment which came in at 1.9% vs -0.5% as preliminary reported. Private consumption came in a bit weaker at -0.8%. Expectations are for a bigger drop in Q2 due to weaker export and fall in private consumption caused by the virus outbreak. Cash earnings for April came in at -0.6% y/y vs -1% y/y as expected. Core machinery orders, a good proxy for capex 6 to 9 months ahead, for the same month came in much worse than expected at -12% m/m and -17.7% y/y.

This week we will have trade balance and national inflation data along with BOJ interest rate decision. There will be no change in the rate, however further stimulus may be announced, especially in the corporate sector as well as potential introduction of loans with negative interest rates.

Important news for JPY:

Tuesday:
  • BOJ Interest Rate Decision
  • BOJ Monetary Policy Statement
Wednesday:
  • Trade Balance
Friday:
  • CPI
CHF

SNB sight deposits for the week ending June 5 showed a first decline in over a month coming in at CHF680.1bn vs CHF681.6bn the previous week. With EUR gaining significant strength and EURCHF almost at 1.09 level SNB can stay on the sidelines for time being.

This week we will get trade balance data as well as the SNB interest rate decision. Swissy has been weakening lately which will make it easier for SNB to stand pat and reiterate their willingness to intervene in FX markets if need arises.

Important news for CHF:

Thursday:
  • SNB Interest Rate Decision
  • SNB Monetary Policy Assessment
  • Trade Balance
 

katetrades

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Forex Major Currencies Outlook (June 22 – June 26)

This week we will have RBNZ meeting, PCE and personal spending data from US as well as preliminary June PMI data from EU, GBP and Japan.

USD

Retail sales in May rebounded more than double than expected coming in at 17.7% m/m vs 8.6% m/m as expected. In addition to the strong headline reading previous month’s number was revised higher giving more strength to the report. Clothing stores along with furniture stores were the biggest contributors. This should ease the negative impact of lockdown on Q2 GDP, however the reading is down -6.1% compared to May 2019. Initial jobless claims for the week ending June 13 came in at 1508k vs 1290k as expected. This is the 13th week of claims above 1 million. Continuing claims are hovering around 20.5 million.

The Secondary Market Corporate Credit Facility (SMCCF), worth $750bn, was announced in March. With this program Fed will buy debt in markets, even directly from companies, rather than via ETFs as was done previously. The new program will involve purchases of corporate bonds issued by investment-grade US. Companies as well as corporate bonds issued by companies that were investment-grade rated as of March 22, 2020.

This week we will have housing data, final Q1 GDP reading, durable goods data as well as PCE inflation and personal spending data.

Important news for USD:

Monday:
  • Existing Home Sales
Tuesday:
  • New Home Sales
Thursday:
  • GDP
  • Durable Goods Orders
Friday:
  • PCE
  • Personal Spending
EUR

German ZEW survey of the current situation came in at -83.1 vs -93.5 the previous month for a small move in the right direction. Expectations category for both Germany and EU came in stronger than previous month (64.4 and 58.6 respectively) indicating optimism regarding possible economic recovery in second part of the year. Final May inflation data showed headline number at 0.1% y/y and core number at 0.9% y/y, both same as preliminary reported.

This week we will have preliminary June PMI readings.

Important news for EUR:

Tuesday:
  • Markit Manufacturing PMI (EU, Germany, France)
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
GBP

Jobless claims for May came in at 528.9k with claimant count rate jumping to 7.8% from 5.8% the previous month. In period from March to May they surged astonishing 125.9%. The ILO unemployment rate, which is measured as the number of unemployed workers divided by the total civilian labour force, stayed the same in April at 3.9%. Around 9,1 million people were furloughed. A huge drop was seen in wages with average weekly earnings dropping to 1% 3m/y from 2.3% 3m/y the previous month. Slower wage growth indicates lower consumption which in turn will put downward pressure on inflation. Inflation in May came in at 0.5% y/y as expected with core sliding to 1.2% y/y vs 1.3% y/y as expected. Retail sales came in at 12% m/m vs 6.3% m/m as expected and up from -18% m/m the previous month. Core retail sales (ex autos, fuel) also bounced back more than exepected coming in at 10.2% m/m from -15% m/m the previous month. Although the monthly figures show a great rebound, yearly figures show that consumption is still very much subdued compared to the previous year.

BOE has left the rate unchanged at 0.10% and they have expanded their asset purchase program by £100bn. MPC have voted 8-1 in favour to increase QE program target with BOE chief economist Andy Haldane the only one to dissent. MPC members expect total stock of asset purchases to be hit around the turn of the year. They have stated their readiness to increase the amount of purchases if necessary. There was no mention of negative rates or yield curve control.

Prime Minister Johnson had an hour-long videoconference call with European Commission President Ursula von der Leyen and other EU officials with both sides agreeing to work toward a deal. According to the document from German government they expect negotiations to intensify only after September.

This week we will have preliminary June PMI readings.

Important news for GBP:

Tuesday:
  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI
AUD

Employment change in May came in at -227.7k vs -78.8k as expected, almost a threefold miss. The unemployment rate jumped to 7.1% from 6.4% the previous month while participation rate fell to 62.9% from 63.5% the previous month. Full-time employment change was -89.1 k while part-time employment change came in at -138.6k. This is a very weak report compounded with negative revisions to the previous numbers as well as the fact that drop in the participation rate smoothed the jump in the unemployment rate and still it jumped almost full percentage point. Preliminary retail sales report showed a bounce to 16.3% m/m from – 17.7% m/m the previous month. Prime Minister Morrison announced a new spending program of AUD1.5bn, 2/3 of which will be spent on infrastructure. Additionally, Australia will raise minimum wage by 1.75% to stimulate aggregate demand and ease negative effects of the virus on the labour market.

Industrial production in May in China came in at 4.4% y/y vs 5% y/y as expected but up from 3.9% y/y the previous month. Retail sales came in at -2.8% y/y vs -2.3% y/y as expected for a fourth consecutive month of decline in consumption. Previous month’s reading was at -7.5% y/y so both consumption and industrial production are improving albeit at slower than expected rate.

NZD

RBNZ Governor Orr stated in an interview his satisfaction with impact of QE, pointing to flatter yield curve. Next steps could include increase in QE, increase in number of instruments included in QE as well as negative interest rates indicating that RBNZ still has many tools to support the economy. Q1 GDP came in at -1.6% q/q vs -1% q/q as expected. Since Q2 GDP will be negative. due to the effects of the lockdown, this signals a recession in New Zealand (two consecutive quarters of negative GDP growth). GDT price index came in at 1.9% for the third consecutive auction of rising dairy prices.

This week we will have RBNZ rate decision, no change is expected, they should stand the pat and let the already taken measures produce results as well as trade balance data.

Important news for NZD:

Wednesday:
  • RBNZ Interest Rate Decision
  • RBNZ Rate Statement

Thursday:
  • Trade Balance
CAD

Headline inflation for May came in at -0.4% y/y vs 0% y/y as expected. Food and shelter category contributed positively to the reading but reading was overturned by drops in clothing, transportation and recreation, education and reading categories. Core measures came as expected: median at 1.9% y/y, common at 1.4% y/y and trimmed at 1.7% y/y, all of them weaker than the previous month. Retail sales in April were horrific, coming in at -26.4% m/m vs 15.1% m/m as expected with the ex-auto category coming in at -22% vs -12% as expected. April was the worst month with full lockdown throughout. Early retail sales estimates for May from Statistics Canada see them rebounding by 19.1% m/m.

JPY

BOJ kept the short-term interest rate at -0.10% as widely expected. The state of Japan’s economy has been characterized as severe with exports, outputs and consumption falling sharply while the pace of increase in capex is clearly slowing. They will increase their pandemic combat program to around JPY110 trillion from JPY75 trillion previously. Governor Kuroda reiterated that BOJ sees the situation in the economy as extremely severe, added that they will take additional steps if needed and sees a recovery in second part of the year. Additionally, he added that the BOJ will not be able to raise interest rates before Fed hikes its rate. Since Powell stated last week that they are “not even thinking about thinking about raising rates” we will see a prolonged period of negative interest rates from Japan.

Trade balance for May came in at -JPY833.4bn vs -JPY1030bn as expected. Exports have plunged -28.3% y/y for the 18th consecutive month drop while imports fell -26.8% y/y for the 13th consecutive month drop. Exports to US have fallen amazing -50.6% y/y while exports to EU dropped -33.8% y/y. Exports to China, Japan’s biggest trade partner, were down -1.9% y/y. National inflation in May came in at 0.1% y/y, same as the previous month, vs 0.2% y/y as expected. Ex-fresh food category remained in the negative at -0.2% y/y while ex-fresh food, energy measure came in at 0.4% y/y vs 0.2% y/y the previous month. The battle with deflation intensifies and so far it looks that BOJ is on the loosing side.

This week we will have preliminary June PMI readings as well as inflation data from Tokyo area.

Important news for JPY:

Tuesday:
  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI
Friday:
  • Tokyo CPI

CHF

Total sight deposits for the week ending June 12 came in at CHF679.5bn vs CHF680.1bn the previous week. Second week in a row of declining deposits as SNB eases their action in the markets ahead of the meeting. SNB left the policy rate unchanged at -0.75% as widely expected. They have lowered inflation expectations to -0.7% for 2020 and see inflation going back to positive only in 2022 (0.2%). Estimations are for -6% GDP contraction in 2020. SNB chief Jordan stated that Swissy is still highly valued and confirmed that they made substantial currency interventions since March. We have written about it and followed it through the rise in total sight deposits.
 

katetrades

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Forex Major Currencies Outlook (June 29 – July 3)

NFP, PMI data from China as well as preliminary June inflation from EU will headline the week. Please note that due to the Independence Day holiday US markets will be closed on Friday, causing lower liquidity and increased volatility, thus NFP data will be published on Thursday.

USD

Final Q1 GDP reading came in at -5%, same as the second reading. In comparison to the second reading personal consumption and investments declined but they were supplemented by the rise in government spending. Bounce back was seen in durable goods orders which came in at 15.9% m/m vs -18.1% m/m the previous month. Initial jobless claims continued to fall down but slower than expected and for the week ending June 20 they came in at 1480k vs 1320k as expected bringing the total number of claims since March 21 to over 47 million. Continuing claims for the week ending June 13, the week in which NFP is calculated, came in at 19 522k vs 20 000k as expected. Personal spending data came in at 8.2%, up from -12.6% the previous month while personal income fell to -4.2% from upwardly revised 10.8% the previous month. Once economy reopened spending rebounded propped by government stimulus cheques.

White House trade adviser Peter Navarro stated that President Trump decided to terminate the China trade deal saying it was over. The statement led to huge risk off sentiment in the market and Navarro retracted it later on saying that his comment “was taken out of context” which lead to the return of risk sentiment in the markets. President Trump tweeted that the deal is fully intact in order to clear things up and appease the markets. After stress test for banks was conducted the Fed has capped dividend payouts at Q2 levels and banned share buybacks in Q3.

This week we will have ISM manufacturing PMI, FOMC minutes, trade balance data and this week on Thursday NFP numbers. Expectations are very wide with headline number ranging from -1.2 million to 3 million with the unemployment rate expectations ranging from 15.1%. to over 20%.

Important news for USD:

Wednesday:
  • ISM Manufacturing PMI
  • FOMC Minutes
Thursday:
  • Nonfarm Payrolls
  • Unemployment Rate
  • Trade Balance
EUR

Preliminary PMI numbers for June all showed improvements compared to May. Manufacturing came in at 46.9 up from 39.4 the previous month, services came in at 47.3 up from 30.5 the previous month and composite came in at 47.5. French and German readings attributed to positive numbers. French readings even went above 50 level indicating expansion; however, it is only due to the reading being compared to previous month. Markit noted that output and demand are still falling in EU but at the slower pace. "The job market remains a particular area of concern, especially if demand fails to pick up sharply in coming months. We therefore continue to expect GDP to slump by over 8% in 2020 and, while the recovery may start in the third quarter, momentum could soon fade meaning it will likely take up to three years before the Eurozone regains its pre-pandemic level of GDP."

Ifo business climate rose to 86.2 from 79.5 the previous month while expectations category jumped to 91.4 from 80.1 the previous month. Ifo economist Wohlrabe stated that the economy is on the upward path now with expectations for German Q3 GDP growth of around 7%. ECB introduced new repo facility, EUREP for central banks outside of the euro area in order to provide more euro liquidity. Central banks will be able to borrow funds and use euro-denominated debt as a collateral. This program will run through June of 2021.

This week we will have sentiment data, preliminary inflation data for June as well as final June PMI data.

Important news for EUR:

Monday:
  • Economic Sentiment Indicator
  • Consumer Confidence
Tuesday:
  • CPI
Wednesday:
  • Markit Manufacturing PMI (EU, Germany, France)
Friday:
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
GBP

Preliminary manufacturing PMI for June returned to expansion territory with 50.1 while services improved to 47 and lifted the composite to 47.6. The return of manufacturing above 50 level coincides with the reopening of plants. Markit states that economy is likely to return to growth in Q3 and add "Uncertainty over recovery prospects and job prospects also mean demand for many goods, especially non-essential big-ticket items, is likely to remain weak for many months, with Brexit uncertainty also continuing to cast a shadow over the economy."

Prime Minister Johnson announced relaxation of lockdown measures. Tourism and hospitality can resume on July 4 and social distancing rules will be relaxed as well. New social distancing requirement will be for 1 meter instead of 2 meters previously. The decision is positive for pound and it sent GBP pairs up at the beginning of the week.

This week we will have final Q1 GDP data as well as final June PMI data.

Important news for GBP:

Tuesday:
  • GDP
Wednesday:
  • Markit Manufacturing PMI
Friday:
  • Markit Services PMI
  • Markit Composite PMI
AUD

RBA Governor Lowe stated that they are not concerned with current level of AUD but they would like to see it lower at some point. He stated that it is hard to argue that AUD is overvalued and reiterated that rates will stay at current level for years in order to support economic recovery.

This week we will have trade balance and consumption data from Australia as well as official and Caixin PMI data from China.

Important news for AUD:

Tuesday:
  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)
Wednesday:
  • Caixin Manufacturing PMI (China)
Friday:
  • Trade Balance
  • Retail Sales
  • Caixin Services PMI (China)
  • Caixin Composite PMI (China)
NZD

RBNZ has left the official cash rate unchanged at 0.25% as widely expected. They have also left their QE program unchanged at NZD60bn adding that they will review the program regularly. The appreciation of the Kiwi puts additional pressure on export earnings and tilt the balance of economic risks to the downside. The meeting was a non-event although it had a dovish tone with RBNZ leaving the option of increasing QE open. Trade balance in May came in at NZD1253m vs NZD1290m as expected with

CAD

In his first public speech as the Governor of BOC Tiff Macklem stated that they will continue purchasing at least CAD5bn a week in federal bonds until the economy is on the right path to recovery. He also added that the bank prefers asset purchase programs over negative interest rates. Fitch rating agency has downgraded Canada’s credit rating from AAA to AA+ with a stable outlook due to the emergency spending which raised debt to GDP ratio to go over 100% level (115%).

This week we will have GDP for April and trade balance data.

Important news for CAD:

Tuesday:
  • GDP
Thursday:
  • Trade Balance
JPY

Preliminary manufacturing PMI number for June continued to decline and came in at 37.8 vs 38.4 the previous month while services staged a comeback to 42.3 from 26.5 the previous month, pushing the composite reading to 37.9. Manufacturing falling with services and composite below 50 indicates a rough path ahead for the economy. Headline Tokyo area inflation data for June came in at 0.3% y/y, ex-fresh food category came in at 0.2% y/y while ex-fresh food, energy came in at 0.4% y/y. All of the readings came as expected.

This week we will have consumption, employment and industrial production data as well as final June PMI data.

Important news for JPY:

Monday:
  • Retail Sales
Tuesday:
  • Unemployment Rate
  • Industrial Production
Wednesday:
  • Markit Manufacturing PMI
Friday:
  • Markit Services PMI
  • Markit Composite PMI
CHF

SNB total sight deposits for the week ending June 19 came in at CHF680.1bn vs CHF679.5bn the previous week. Swissy was on the decline during first half of the week, therefore there was no need for SNB to react at first, however Swissy started gaining strength in the second part of the week which lead to rise in total sight deposits.

This week we will have consumption and inflation data.

Important news for CHF:

Tuesday:
  • Retail Sales
Thursday:
  • CPI
 
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