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
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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.
