USD
ISM manufacturing index came in at 52.1 vs 53 as expected.
This is the lowest reading in 31 months. On the back of the reading and falling 2-year and 10-year bond yields odds of a rate cut in the July meeting have jumped to 50%. St Louis FED president Bullard was the first FED official to state the possibility of rate cut scenario. Bullard is a well-known dove but he is a voting member. He stated that main reason would be to “prop up inflation”. FED chairman Powell stated that likelihood that rates will fall to effective lower bound in a downturn is much higher, indicating that if the trade war continues or escalates a rate cut can be appropriate. Market participants are now pricing in a 92% probability of a rate cut by the September meeting.
ISM non-manufacturing index for the month of May came in at 56.9 vs 55.4 as expected. Employment category jumped to 58.1 from 53.7 the previous month. All categories were well over the 50 mark with inventories making the highest jump after the employment. The New Order category climbed to 58.6 from 58.1 the previous month. Trade balance for the month of April came in at -$50.8bn vs -$50.7bn as expected. Both exports and imports came in at -2.2%. Main culprit in exports were aircraft, the issue with Boeing, while on the import side chemicals, cars and semi-conductors showed the biggest decline.
NFP number came in at 75k vs 175k as expected. The lowest estimates were for an 80k increase. The unemployment rate and participation rate stayed the same at 3.6% and 62.8% respectively. Average hourly earnings came in at 3.1% y/y vs 3.2% y/y. Misses on the headline number and earnings pushed USD lower. This is the second month of the year with below a 100k NFP number, although the 4-month average is 127k. Will the FED brush off this reading or will it give significance and hint toward rate cut is yet to be seen.
This week we will have inflation and consumption data.
Important news for USD:
Wednesday:
CPI
Friday:
Retail Sales
EUR
The final manufacturing PMI for the Eurozone in the month of May came in at 47.7 as preliminary reading showed. German and French PMIs remained the same while Spanish dropped and Italian jumped coming in at 49.7, almost back into the expansion territory. Services PMI came in a bit better at 52.9 vs 52.5 preliminary with composite reading showing 51.8 vs 51.6 preliminary. Revisions up were done in Spain, Italy and German while French PMIs were revised slightly to the downside.
Preliminary CPI for the month of May came in at 1.2% y/y vs 1.3% y/y as expected. Previous month it was 1.7% y/y and a drop was expected since higher inflation was achieved due to Easter holiday. Core CPI came in at 0.8% y/y vs 0.9% y/y as expected signalling that inflation pressures are still very weak in the EU and that they will continue to pose problems for ECB. The unemployment rate for the month of April ticked down to 7.6%. Retail sales for the month of April came in at -0.4% m/m vs -0.5% m/m as expected while coming at 1.5% y/y as expected.
ECB has left the key rates unchanged as expected. They see rates at the present levels at least through H1 2020. New TLTRO is priced at MRO + 10bps. The main refinancing operations (MRO) rate is the interest rate banks pay when they borrow money from the ECB for one week. Consensus for TLTRO was MRO – 20bps so new TLTRO rate is hawkish decision that will help financial institutions in EU area and it propped EUR higher. GDP forecast for 2019 has been revised up to 1.2% and downgraded to 1.4% from 2020 and 2021. Inflation for 2019 is seen at 1.3%, for 2020 at 1.4% and for 2021 at 1.6%.
This week we will have data on industrial production and since German industrial production data was terrible, we can expect a miss.
Important news for EUR:
Thursday:
Industrial Production
GBP
The manufacturing PMI for the month of May came in at 49.4 vs 52.2 as expected. This is a huge miss, a drop into contraction territory for the first time July of 2016. Previous stockpiling due to Brexit uncertainties has eased and we got a big drop in the reading. New orders component fell to 46.2 which is lowest reading since October 2014. Construction PMI came in at 48.6 vs 50.6 as expected. The drop was led by the fall in the employment component which fell to the lowest since November 2012. Return to contraction territory for the construction PMI putting another PMI into the contraction territory. Services PMI came in at 51 vs 50.5 as expected thus beating the expectations and moving further into the expansion territory.
This week we will have monthly GDP data, data on trade balance, industrial and manufacturing production as well as construction output, employment and wages data and speech by governor Carney.
Important news for GBP:
Monday:
GDP
Trade Balance
Construction Output
Manufacturing Production
Industrial Production
Tuesday:
Unemployment Rate
Claimant Count Change
Average Weekly Earnings
Friday:
BOE Governor Carney Speech
AUD
Caixin manufacturing PMI for the month of May came in at 50.2 vs 50 as expected. This is the third consecutive month above 50. New orders accelerated rapidly according to Caixin and new export orders rebounded significantly to high levels. Caixin services PMI came in at 52.7 vs 54.5 the previous month and composite PMI came in at 51.5 vs 52.7 the previous month.
Retail sales for the month of April came in at -0.1% m/m vs 0.2% m/m as expected. The weak stream of data from Australia continues, however reaction in the markets was missing because everyone was concentrating on the rate decision. RBA delivered rate cut of 25bp putting the cash rate to 1.25% which is a record low. The decision to cut rates was primarily motivated by desire to support job growth and make progress towards inflation target. They acknowledged household consumption as main domestic uncertainty and April’s numbers confirmed their thesis. Downside risks from trade tensions have increased. Markets had this move priced at 100% and text of the statement did not leave room for speculations about further rate cuts so there were no volatile movements. Later during the day governor Lowe stated that future rate cuts are “not unreasonable” and that RBA will be data dependent. UBS reckons that the unemployment rate should be higher than 5.4% in order for future rate cuts to be made in July.
Q1 GDP came in at 0.4% q/q vs 0.5% q/q as expected and 1.8% y/y as expected. Growth rate is slowest in 5 years. Government spending was the main contributor to the growth. Household spending slowed and contributed a 0.1% to growth. Investment continued to detract and housing market continued to slow down. Trade balance for the month of April came in at AUD4.871bn vs AUD 5bn as expected. Exports were up 2.5% m/m and staggering 17.2% y/y while imports were up 2.8% m/m and 5.4% y/y.
This week we will have employment data from Australia as well as trade balance, inflation, consumption and industrial production data from China.
Important news for AUD:
Monday:
Trade Balance (China)
Exports (China)
Imports (China)
Wednesday:
CPI (China)
Thursday:
Employment Change
Unemployment Rate
Friday:
Retail Sales (China)
Industrial Production (China)
Fixed Asset Investment (China)
NZD
GDT price index came in at -3.4% at latest auction making it second straight auction with falling dairy prices. After an impressive run of 11 straight rising auctions we see a pullback in prices.
This week we will have data on consumption via electronic cards.
Important news for NZD:
Wednesday:
Electronic Card Retail Sales
CAD
Manufacturing PMI for the month of May came in at 49.1 vs 49.7 the previous month. This is the seventh consecutive month of dropping numbers with final reading being lowest since December of 2015 and plunging deeper into the contraction territory. Output and new orders category continued their decline while employment category came better than previous month. Global slowdown and trade tensions takes its toll on Canadian manufacturers. Trade balance for the month of April came in at -$0.97bn vs -$2.80bn as expected. Exports rose 1.3% while imports dropped -1.4%. Decline in trade deficit will have positive effect on Q2 GDP.
Employment change came in at 27.7k vs 5k as expected. All of the employment came in from full-time employment. The unemployment rate dropped to 5.4% from 5.7% the previous month and it is the lowest since 1976. Annual hourly wages accelerated to 2.8% from 2.5% in April and were steady at 2.6% for permanent employees. Another strong report from Canada indicating tight labour market conditions.
This week we will have housing data.
Important news for CAD:
Monday:
Housing Starts
Building Permits
JPY
The final manufacturing Nikkei PMI for the month of May came in at 49.8 vs 49.6 preliminary and 50.2 the previous month. Output and new orders dropped for the fifth consecutive month. Domestic and external demand conditions are getting weaker while the firms slow down on hiring and production. Services PMI came in at 51.7 vs 51.8 the prior month and composite was 50.7 vs 50.8 the previous month. Japan’s economy proves resilient in the wake of trade wars and other headwinds.
Labour cash earnings for the month of April came in at -0.1% y/y vs -0.7% y/y as expected. Household spending came in at 1.3% y/y vs 2.6% y/y as expected. Low wages, missing wages even, cannot prop up spending. Real wages came in at -1.1% y/y, falling for the fourth consecutive month.
This week we will have final Q1 GDP and industrial production data.
Important news for JPY:
Monday:
GDP
Friday:
Industrial Production
CHF
Headline inflation for the month of May came in at 0.3% m/m as expected while core CPI surprised to the upside and came in at 0.6% y/y vs 0.5% y/y prior. Seasonally adjusted unemployment rate came in at 2.4% as expected.
This week we will have SNB interest rate decision followed by monetary policy assessment. It is expected that the rate will stay the same but we could see some dovish comments intended to weaken the currency since CHF is appreciating, according to its safe heaven role, due to global tensions.
Important news for CHF:
Thursday:
SNB Interest Rate Decision
SNB Monetary Policy Assessment
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