BOC rate decision to dominate as we get more information about the thought process of lone neutral central bank.
USD
Presidents Trump an Xi met in Osaka at G20 meeting and agreed to forego new tariffs and restart trade negotiations. The ban for US companies from selling products to Huawei will be lifted. In turn China agreed to resume purchases of American goods and buy a “tremendous amount” of American food and agricultural products. The Trump administration is now turning towards Japan and Europe adding more tariffs on goods from Europe in order to fight against Europe’s “illegal” subsidies for Airbus.
The ISM manufacturing index for the month of June came in at 51.7 vs 51 as expected. It was down from 52.1 the previous month but still well in the expansion territory and when comparing with manufacturing PMI from other major economies it came immensely strong which gave USD a boost across the markets. The employment component rose to 54.7 while new orders dropped but still came in at 50. The ISM non-manufacturing index came in at 55.1 vs 56 as expected. Business activity, new orders and employment categories came in weaker than the previous month. Trade balance in May came in at -$55.5bn vs -$54bn as expected. Deficit continues to rise with imports (3.3%) coming in higher than exports (2%). Trade deficit with China widens to $30.2bn vs $26.9bn the previous month indicating China’s upper hand in the trade conflict.
NFP payrolls for the month of June beat the expectations and came in at 224k vs 160k as expected. Headline number was well monitored due to the poor reading of 75k the previous month which was revised down to 72k. The unemployment rate ticked up to 3.7% with participation rate also climbing to 62.9%. Average hourly earnings came in at 3.1% y/y vs 3.2% y/y as expected. Initial reaction on the headline number was USD strength. FED will not feel pressured to cut rates after the report so probability of a 50bp cut in July has drastically fallen. We could expect FED to stop with rate cuts after one 25bp rate cut in July.
This week we will have minutes from latest FOMC meeting, inflation and budget data.
Important news for USD:
Wednesday:
FOMC Minutes
Thursday:
CPI
Federal Budget Balance
EUR
Final manufacturing PMI for the month of June came in at 47.6 vs 47.8 preliminary. Data was pushed down on the big miss from Spanish PMI which came in at 47.9 vs 49.5 preliminary which is weakest since April 2013. Italy’s PMI also came in weaker than preliminary reading showed while France and Germany had an improvement in the data compared to the last month but weaker than preliminary readings. Final services PMI came in at 53.6 vs 53.4 preliminary. The unemployment rate has slipped down to 7.5% vs 7.6% as expected again reflecting tight labour market conditions present in the EU. Retail sales in May came in at -0.3% m/m vs 0.3% m/m as expected with previous month being revised up to -0.1% m/m which is a bit of positive news from overall bad report.
Italy has forecast a smaller budget deficit in 2019. It has been reduced from 2.4% to 2.04%. This new projection will help in avoiding conflict with the European Commission at least after the summer when 2020 budget comes into the play. German retail sales in May came in at -0.6% m/m vs 0.5% m/m as expected. EU leaders have nominated candidates for the key institutions. Former IMF president Christine Lagarde has been nominated for the president of ECB, a successor to Mario Draghi. Lagarde stated in her recent blog posts with IMF that additional stimulus is needed to assist economies around the globe, she is considered a bigger dove than Draghi. The fact that she is a career politician and lawyer by education raises questions about political independence of ECB.
This week we will have data on industrial production.
Important news for EUR:
Monday:
Eurogroup meeting
Industrial Production (Germany)
Friday:
Industrial Production
GBP
Manufacturing PMI for the month of June came in at 48 vs 49.5 as expected and down from 49.4 the previous month. Deeper plunge into contraction territory caused by a drop in the output component from 50.3 to 47.2. Construction PMI has plunged deeper into contraction territory coming in at a miserable 43.1 vs 49.2 as expected. This is the lowest reading in 10 years and shows just how deep uncertainties around Brexit hurt the construction sector. Services PMI rounded up weak PMI readings for the month of June coming in at 50.2 vs 51 as expected. Composite PMI was dragged into contraction territory and came in at 49.7. That is the first contraction since July 2016.
This week we will have data on industrial and manufacturing production, construction output and trade balance.
Important news for GBP:
Wednesday:
Industrial Production
Manufacturing Production
Construction Output
Trade Balance
AUD
Official Chinese manufacturing PMI data for the month of June came in at 49.4, same as the previous month and still in contraction territory. New export orders category showed additional decline. Services PMI came in at 54.2 as expected, deep into expansion territory. Caixin manufacturing PMI came in at 49.4 vs 50.1 as expected and 50.2 the previous month. A drop into contraction territory led by new orders and new export orders categories. Sub index measuring sentiment toward future output plunged further, although staying in expansionary territory. Caixin services PMI came in at 52 vs 52.6 as expected and composite PMI was dragged down to 50.6 vs 51.5 the previous month. New export business dropped back to contraction territory, pointing to subdued foreign demand. The employment measure also fell further but remained in positive territory.
RBA has cut official cash rate by 25bp to 1% as widely expected. This is the lowest level for rates in history. The move was made in order to support job creation, reduce spare capacity and move inflation toward the target since inflation pressures remain subdued across much of the economy. Inflation is still anticipated to pick up and will be boosted in the June quarter by increases in petrol prices. The central scenario remains for underlying inflation to be around 2 per cent in 2020 and a little higher after that. The Global economic outlook remains reasonable and global financial conditions remain accommodative according to RBA. The Australian dollar is at the low end of its narrow range of recent times. Overall neutral statement since there are possibilities for further rate cuts, but they are not urgent. Employment, inflation and GDP will be closely monitored by RBA and they will influence their further moves.
Trade balance for May came in at AUD 5745m vs AUD 5250m as expected which is the new record surplus. Better than expected result and bigger surplus was achieved due to better exports, 4% m/m, while imports came in at 1% m/m still showing strong domestic demand for foreign goods. Retail sales came in at 0.1% m/m vs 0.2% m/m as expected but up from -0.1% m/m the previous month.
This week we will have inflation and trade balance data from China and data on business and consumer confidence from Australia.
Important news for AUD:
Tuesday:
NAB Business Confidence
Wednesday:
Westpac Consumer Confidence
CPI (China)
Friday:
Trade Balance (China)
Exports (China)
Imports (China)
NZD
GDT price index came in at -0.4% for the fourth consecutive negative auction. NZD continues to follow market sentiment until major data givse more ammunition for monetary policy decisions.
This week we will have consumption and PMI data.
Important news for NZD:
Thursday:
Electronic Card Retail Sales
Friday:
Business NZ PMI
CAD
Trade balance in May came in at $0.76bn vs -$1.7bn as expected for the first trade surplus in almost 3 years. Imports were up 1% while exports were up staggering 4.6% for the record number of $53.1bn. Trade surplus with US jumped to $5.9bn vs $4.4bn the previous month, that is highest surplus in a decade. The main contributor to big export numbers was the automotive sector.
Employment number for the month of June was -2.2k vs 9.9k as expected. The unemployment rate ticked up to 5.5% while the participation rate stayed the same. Hourly wage for permanent employees came in at 3.6% vs 2.7% as expected, this is a huge beat and benefit for the workers. Full time employment came in at 24.1k for another positive sign.
This week’s main event will be BOC rate decision. It is widely expected that rate will stay the same, but due to the great recent data investors will be looking for hawkish statement or at least maintaining the neutral stance.
Important news for CAD:
Wednesday:
BOC Interest Rate Decision
BOC Rate Statement
BOC Monetary Policy Report
BOC Monetary Policy Report Press Conference
Thursday:
OPEC Monthly Oil Market Report
JPY
Tankan report for the Q2 of 2019 showed worse than expected numbers in manufacturing sector. The large manufacturing index came in at 7 for the worst reading in 3 years showing the accumulated pressure of trade war and global slowdown. At the same time final Nikkei manufacturing PMI for the month of June came in at 49.3 vs 49.5 preliminary and down from 49.8 the previous month. There was a sharp decline in the new export orders category. Household spending in May surprised and came in at 4% y/y vs 1.5% y/y as expected.
This week we will have final data on industrial production.
Important news for JPY:
Friday:
Industrial Production
CHF
Retail sales for the month of May came in at -1.7% y/y vs -0.7% y/y as expected. Consumption in Switzerland continues to deteriorate without noticeable effect on CHF. Manufacturing PMI for the month of June came in at 47.7 vs 49 as expected and down from 48.6 the previous month. Although manufacturing is not the main driver of the economy, drops like these are worrying. SNB’s vice president Zurbruegg stated that they have seen some pressure on the CHF and reiterated that SNB is ready to intervene to reduce attractiveness of the CHF. Headline CPI for June came in at 0.6% y/y vs 0.5% y/y as expected. There was also a very welcoming tick up in core CPI component which came in at 0.7% y/y vs 0.6% y/y as expected.
This week we will have employment data.
Important news for CHF:
Tuesday:
Unemployment Rate
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Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets.Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.
