Daily Market Outlook by Kate Curtis from Trader's Way

[katetrades]

Forex Major Currencies Outlook (Nov 19 – Nov 23)

USD

CPI data for the month of October came in at 2.5% y/y as expected with the prior reading showing 2.3% y/y. CPI ex-food and energy came in a bit weaker at 2.1% y/y vs 2.2% y/y as expected. On the monthly level, CPI came in at 0.3% m/m as expected with the prior reading showing 0.1% CPI ex- food and energy came in at 0.2% m/m as expected. Figures came in as expected with a steady rise from the previous reading. Supportive data for the greenback.

FED Chairman Powell continued to boost the greenback with his comments. He reiterated that the US economy remains strong and that the FED will continue to hike rates. The central bank’s goal is to extend the recovery, expand the economy and to keep inflation and unemployment low. He identified three general risks: slowing growth from abroad, fading fiscal simulus and lagged effect of past rate hikes on the economy.
This week we will get housing data from the US as well as data on Durable Goods Orders, which will be the first input for Q4 GDP and Markit PMIs. Thanksgiving is on Thursday so liquidity in the markets will be lower.

Important events for USD:

Tuesday:

• ---- Housing Starts
• ---- Building Permits

Wednesday:

• ---- Durable Goods Orders m/m
• ---- Core Durable Goods Orders m/m
• ---- Durable Goods Orders excl. Defense m/m
• ---- Existing Home Sales Existing Home Sales m/m
• ---- Michigan Consumer Sentiment
• ---- Michigan Consumer Expectations

Friday:

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

EUR

Early on Monday morning during the London Session EURUSD has fallen bellow 1.13 mark for the first time since June 2017. 1.13 is an important technical level and the break of it was caused by uncertainty regarding the Italy’s budget. However, the break came during very thin liquidity in the markets as banks in the US were closed due to Veteran’s Day. The EU will publish an opinion on Italy’s revised budget on November 21 thus prolonging the uncertainty. ECB's Draghi said that high debt countries shouldn't increase debt further and that all countries should respect the rules of the European Union thus sending strong message to Italy.

Germany ZEW survey of current situation came in at 58.2 vs 65.0 as expected a big drop in the current condition sentiment. ZEW data says that industrial production, retail sales and foreign trade all point toward a weak development of the German economy in Q3. They also mention that survey participants do not see any improvement of that in the coming six months. A bleak picture for the EUR and Eurozone.

Preliminary GDP data for Germany in Q3, leading economy in the EU, came in at -0.2% q/q vs -0.1% q/q as expected. The German economy is going into contraction for one quarter is a case for concern for EUR. German economic minister Halt said that problems in the German economy are only temporary and attributed GDP results to the car industry’s emission problem. Bundesbank came in with their views on future risks and assessed them as skewed to the downside. Second reading of the EU Q3 GDP came in at 0.2% m/m as expected. Final CPI for the month of October came in at 0.2% m/m as expected, 2.2% y/y as expected with Core CPI coming in at 1.1% as expected. All figures came in as expected and in line with preliminary readings.

This week we will see a decisions of European Commission regarding Italian Budget. We will also have an overview of financial markets and economic developments in the form of ECB Monetary Policy Meeting Accounts, and on Friday we get second reading from Germany regarding Q3 GDP as well as Markit PMIs.

Important events for EUR:

Monday:

• ---- Eurogroup meeting
• ---- Current Account

Wednesday:

• ---- European Commission decision on Italy

Thursday:

• ---- ECB Monetary Policy Meeting Accounts

Thursday:

• ---- ECB Monetary Policy Meeting Accounts

Friday:

• ---- GDP q/q (Germany)
• ---- GDP y/y (Germany)
• ---- Markit Manufacturing PMI
• ---- Markit Services PMI
• ---- Markit Composite PMI

GBP

Talks about Brexit within the UK Government are getting out of hand. Supporters of a hard Brexit reject any compromise that PM May could offer. Pro-Remain politicians start to voice their opinions especially after UK Transport Minister and pro-Remain politician Jo Johnson resigned last Friday. BOE Board member Broadbent stated that Brexit deal is still the most likely outcome and that fair amount of uncertainty would disappear with a Brexit deal. A new Brexit Summit will be held in Brussels on November 25 and 26. On Thursday UK Brexit Secretary Dominic Raab resigned stating that he cannot support indefinite backstop arrangement as the main reason. This has sent pound sinking almost 300 pips in the first couple of hours after the announcement. Due to the resignation markets have now priced out a rate hike by BOE.

Average Earnings came in at 3.0% as expected vs 2.7% prior. This is a strongest reading since Q3 2015. Average Earnings excluding Bonus came in at 3.2% vs 3.1% as expected. This is the strongest rise since Q4 2008. Unemployment ticked up to 4.1% vs 4.0% as expected and employment change was a bit softer than expected, but overall this is a very good report from the UK showing strength of UK economy.

CPI for month of October came in at 0.1% m/m vs 0.2% m/m as expected. Core CPI came in at 1.9% y/y as expected a slight tick down on the monthly level but the core CPI remains steady at 1.9% which is a good sign.

AUD

Wage price index data for Q3 came in at 0.6% q/q as expected and 2.3% y/y as expected with the prior reading showing 2.1%. This is the best y/y reading in the last 3 years. Wage growth is slowly picking up, RBA would like it to be faster to increase spending and thus economic growth.

Labour market continued strong with data concerning Employment Change coming in at 32.8k vs 20k as expected. Unemployment rate came in at 5.0% while it was expected for it to tick up to 5.1%. Full Time Employment Change came in at 42.3k which is a very healthy number. Participation rate also rose to 65.6%. Another stark labour report coming in from Australia showing that RBA is fulfilling one half of its mandate.

This week we will have RBA Meeting Minutes from previous meeting and markets will be on the look for any change in the language by RBA. Later on, there will be a speech by Governor Lowe so we can gain more insight on how RBA evaluates new employment and wage data and how it will influence their policies for the future.

Important events for AUD:

Tuesday:

• ---- RBA Meeting Minutes
• ---- RBA Governor Lowe Speach

NZD

Business NZ Manufacturing PMI for the month of October came in at 53.5 vs 51.7 prior month. Reading shows improvement in sentiment among manufacturers with rise in 4 out of 5 sub-indexes. NZD is still nicely positioned and underpinned with strong employment data from the previous week. GDP figures are the main concern now since Governor Orr said that he would consider a rate cut in the event GDP falls below expectations, therefore other data may have subdued effect on NZD.

This week we will have GDT auction and data regarding consumption.

Important events for NZD:

Tuesday:

• ---- GDT Price Index

Sunday:

• ---- Retail Sales q/q
• ---- Core Retail Sales q/q
• ---- Retail Sales y/y

CAD

Saudi Arabia decided to cut the production of oil by 500k bpd from December which stopped oil’s month-long free fall. During the OPEC’s meeting that was held over the weekend it was reckoned that oil supply in 2019 could be cut by 1.4m bpd. December 6th meeting in Vienna will be crucial for oil and CAD as well.

This week we will have speeches by Deputy Governors Wlilkins and Lane, CAD has been hit hard last week with falling oil prices and issues with USMCA agreement. Inflation and consumption data will be published on Friday.

Important events for CAD:

Tuesday:

• ---- BoC Senior Deputy Governor Wilkins Speech
• ---- BoC Deputy Governor Lane Speech

Wednesday:

• ---- Wholesale Trade m/m

Friday:

• ---- CPI m/m
• ---- CPI y/y
• ---- Core CPI m/m
• ---- Core CPI y/y
• ---- Retail Sales m/m
• ---- Core Retail Sales m/m

JPY

Preliminary GDP data for Q3 in Japan came in at -0.3% q/q as expected. GDP business spending y/y for Q3 came in at -0.2% q./q vs 0.2% q/q as expected. Data doesn’t paint a bright picture for the economy of Japan. Economy minister Motegi attributed bad data to natural disasters (devastating floods and earthquakes) and falling exports and stated that Japan’s is recovering moderately.

This week we will have data on Trade Balance from Japan as well as inflation on national level. Monetary Policy Statement will be published on Tuesday with more guidance on BOJ’s thinking.

Important events for JPY:

Monday:

• ---- Trade Balance
• ---- Imports y/y
• ---- Exports y/y

Tuesday:

• ---- BOJ Monetary Policy Statement

Thursday:

• ---- CPI y/y
• ---- Core CPI y/y
• ---- CPI excl. Food and Energy

CHF

PPI data came in at 0.2% m/m vs 0.1 m/m as expected with prior reading showing -0.2% and 2.3% y/y vs 2.2% as expected and prior reading of 2.6%. Slightly better data on monthly data and yearly data is lagging behind prior indicating that inflationary pressures are beginning to run into obstacles. SNB remains confident with current monetary policy and will continue normalisation only after ECB. So far, they seem satisfied with EURCHF ranging from 1.12 to 1.14.

This week we will have data on Trade Balance from Switzerland as well as industrial production.

Important events for CHF:

Tuesday:

• ---- Trade Balance Imports y/y Exports y/y

Thursday:

• ---- Industrial Production y/y

 

[katetrades]

Forex Major Currencies Outlook (Nov 26 – Nov 30)

USD

Previous Friday FED members Clarida, Harker and Kaplan emphasized the slowdown in global growth and stated that there is no rush for FED to raise rates. December’s hike is not affected by their statements but odds for three rate hikes in 2019 are now lower. Atlanta FED lowered its forecast for Q4 GDP to 2.5% from 2.8% citing falling inventory investment and real residential investment. The report issued stated that FED has hinted that they could pause the rate hike cycle in the Spring of 2019.

US Durable Goods Orders came in at -4.4% vs -2.6% as expected. That is the largest drop in 15 months. Durable Goods ex Transportation came in at 0.1% vs 0.4% as expected and Capital goods orders non-defense ex-air came in at 0.0% vs 0.2% as expected. Every category came in lower than expected for a poor reading which will certainly catch FED’s attention.

This week we will have housing data, second reading of the Q3 GDP, inflation (PCE, FED’s preferred), FOMC minutes and G20 Summit on November 30 – December 1.

Important events for USD:

Tuesday:

• ---- HPI m/m
• ---- HPI y/y
• ---- Consumer Confidence Index

Wednesday:

• ---- GDP q/q
• ---- Goods Trade Balance
• ---- New Home Sales
• ---- New Home Sales m/m
• ---- FED Chair Powell Speech

Thursday:

• ---- Core PCE Price Index m/m
• ---- Core PCE Price Index y/y
• ---- PCE Price Index m/m
• ---- PCE Price Index y/y
• ---- Personal Spending m/m
• ---- Personal Income m/m
• ---- Initial Jobless Claims
• ---- Pending Home Sales m/m
• ---- Pending Home Sales y/y
• ---- FOMC Minutes

EUR

The EU commission has rejected Italian budget as was expected. The EU sees Italy's budget as a serious non-compliance risk. EDP (Excessive Deficit Procedure) against Italy is warranted. Policymakers acknowledged that data was weaker than expected but data remains in line with expansion and gradually rising inflationary pressures. A remark was made that the number of arguments pointed towards risks to growth tilting to the downside. ECB still views the rate hike as “through the summer of 2019” but markets have slowly priced it out from the Q4 next year. Preliminary Manufacturing PMI on Friday came in at 51.5 vs 52.0 signalling additional slowdown in the EU zone. This is a 32-month low and these PMI readings account to GDP growth of 0.3% in Q4 according to Chris Williamson, the IHS/Markit chief business economist.

This week we will have data on business conditions, inflation and unemployment in EU and Germany, as well as data regarding consumption in Germany.

Important events for EUR:

Monday:

• ---- IFO Business Climate (Germany)

Thursday:

• ---- Unemployment Rate (Germany)
• ---- CPI m/m (Germany)
• ---- CPI y/y (Germany)
• ---- Services Sentiment Indicator
• ---- Economic Sentiment Indicator
• ---- Consumer Confidence Index

Friday:

• ---- Retail Sales m/m (Germany)
• ---- Retail Sales y/y (Germany)
• ---- Unemployment Rate
• ---- CPI y/y
• ---- Core CPI y/y

GBP

The Brexit saga continues and PM May will not get a chance to renegotiate the terms of the deal with EU over the coming weekend. She will meet with Juncker only after the EU meeting. The focus has now moved to Gibraltar, the lonely outpost of Britain on the Iberian Peninsula. On Thursday, Bloomberg obtained a document showing that further Brexit agreements have been made. The EU has admitted the UK’s independent trade policy and both sides are committed to getting rid of backstop on the Irish border. This news sent GBPUSD about 150 pips up and over 1.29. Move up was pushed also by the thin liquidity in the markets due to the Thanksgiving holiday. Issues of fisheries, environmental standards and Gibraltar are still to be resolved before the Summit on Sunday. Spain threatened to place a veto on the Brexit agreement if the two sides cannot reach an agreement. They have asked the UK to provide a solution for the large number of Spanish workers who cross the border daily.

BOE's Saunders stated that Q4 economic growth will likely slow after a strong Q3 gain. There is a chance that Q1 2019 growth will also slow. Brexit is having a great impact on business considering that business investments are not picking up in the UK due to the uncertainties surrounding the British economy.

This week there is a light economic calendar for the GBP, however all eyes are set on EU Leaders Summit that will be held on Sunday 25th. The main topic will be Brexit deal and outcome of the Summit will have large impact on future GBP movements.

Important events for GBP:

Wednesday:

• ---- BOE Financial Stability Report
• ---- BOE Governor Carney Speech

AUD

The RBA November Meeting Minutes revealed that the next move in the interest rates will be more likely up but that there is no strong case for a near term move. Employment figures are stronger than expected and they expect that unemployment will fall to 4.75% during mid-2020. Lower AUD has helped domestic economic growth. Further growth will be supported by accommodative monetary policy. It was assessed that trade protectionism represents a significant risk for the global economy.

This week we will have data regarding business confidence, credit in private sector as well as in housing and manufacturing and non-manufactoring PMIs from China.

Important events for AUD:

Thursday:

• ---- ANZ Business Confidence

Friday:

• ---- RBA Housing Credit m/m
• ---- RBA Private Sector Credit m/m
• ---- Manufacturing PMI (China)
• ---- Non-Manufacturing PMI (China)

NZD

The New Zealand GDT Price Index came in at -3.5%. Dairy prices, the main export of New Zealand, have fallen for the 13th consecutive auctions. They are now down 25.8% since May. NZD has been cruising up lately on the risk on sentiment and strong employment and CPI data, however data like this can severely undermine Kiwi.

This week we will have data regarding trade balance and housing as well as financial stability report.

Important events for NZD:

Monday:

• ---- Trade Balance
• ---- Exports
• ---- Imports

Tuesday:

• ---- RBNZ Financial Stability Report

Thursday:

• ---- Building Consents m/m

CAD

The Canadian dollar has been battered following the decline in oil prices. Talks about OPEC cutting production has not brought results and underpinned CAD. US president Trump is all for lower oil prices and in his recent tweets he thanked Saudi Arabia and called for even lower oil prices. He sees the drop in oil prices as a big tax cut for US and the rest of the World. Saudi energy minister Khalid Al-Falih says there is no slowdown in production and that they're pumping more in November than October. Oil is continuing to drop, this is a seventh week in a row of falling oil prices and now we are heading toward the $50 level.

CPI came in at 0.3 m/m vs 0.1 m/m as expected and 2.4% y/y vs 2.2% y/y as expected. All three Core CPIs, BOC pays close attention to them, came in as expected, Core common at 1.9%, Core median at 2.0% and Core trim at 2.1%. September Retail Sales came in at 0.2% m/m vs 0% m/m as expected. Retail Sales ex-Autos came in at 0.1% vs 0.3% as exp. Better headline numbers and stable core inflation numbers will signal BOC that is on the good path but due to the not so strong retail sales ex autos and falling oil prices, they will be in no hurry to raise interest rates.

This week we will have data regarding Current Account as well as monthly and quarterly GDP, Raw Material and Industrial Product price indexes.

Important events for CAD:

Thursday:

• ---- Current Account

Friday:

• ---- GDP m/m
• ---- GDP q/q
• ---- IPPI m/m
• ---- IPPI y/y
• ---- RMPI m/m
• ---- RMPI y/y

JPY

Trade balance for JPY came in at -Y449.3bn vs -Y70bn as expected. Exports came in at 8.2% vs 8.9% as expected and imports came in at 19.9% vs 14.1% as expected. Huge miss on trade balance, exports rose slower than expected and imports rose more than expected. Dangers of an escalating trade war do not help to paint a bright picture for Japanese trade balance in the future.

BOJ Kuroda stated that they are determined to keep the current easing policy. Easing policy has, according to him, helped Japan’s economy to recover and will eventually bring inflation to the goal. According to him there is no need to ease the policy even further but current stimulus programme must be patiently maintained.

National CPI for the month of October came in at 1.4% y/y as expected vs 1.2% the prior month. CPI excluding fresh food and energy, this is the reading that BOJ watches and wants to push toward 2% target, came in at 0.4% y/y as expected. Although the headline number showed the improvement compared to the previous month the main BOJ inflation measure is far away from the 2% mark and it will take a long time for it to get up there.

This week we will have data on consumption, inflation in Tokyo area, employment and industrial production.

Important events for JPY:

Thursday:

• ---- Retail Sales m/m
• ---- Retail Sales y/y

Friday:

• ---- Tokyo CPI y/y
• ---- Tokyo CPI excl. Food and Energy y/y
• ---- Tokyo Core CPI y/y
• ---- Unemployment Rate
• ---- Jobs to Applicants Ratio
• ---- Industrial Production m/m
• ---- Industrial Production y/y

CHF

SNB Maechler came out over the weekend with comments on Switzerland’s economic situation. According to him negative interest rates are indispensable for Swiss economy in the current context as they reduce CHF attractiveness.

Trade balance data came in at CHF 6.57b vs CHF 2.43b the prior month. Exports rose sharply 6.3 m/m vs -0.8% m/m the prior month. Imports fell to -3.6% m/m vs -0.4% m/m the prior month. Overall a nice trade surplus for the Switzerland.

This week we will have data on employment, quarterly and yearly GDP as well as on economic expectations.

Important events fro CHF:

Monday:

• ---- Employment Level

Thursday:

• ---- GDP q/q
• ---- GDP y/y

Friday:

• ---- KOF Economic Barometer

 

[katetrades]

Forex Major Currencies Outlook (Dec 3 – Dec 7)

USD

FED’s Clarida came out on Tuesday with a hawkish statement reiterating that gradual rate hikes are appropriate as data shows the way to neutral stance. He added that it is important to see capital expenditures rebound after soft numbers in Q3. He also characterized US economic fundamentals as “robust”, GDP growth as “strong” and the labour market as “healthy”. Inflationary expectations are the main focus now and he expects inflation to remain anchored.

Second reading of Q3 GDP came in at 3.5% as expected. Personal Consumption came in at 3.6% vs 3.9% as expected. Core PCE came in at 1.5% vs 1.6% as expected. Wholesale inventories for the month of October rose 0.7% vs 0.4% as expected. Rise in inventories is troubling as it could be a result of massive imports and stockpiling done before the implementation of US tariffs.

Advanced Goods Trade Balance data came in at -$77.25bn vs -$77bn as expected with -$76.3bn the prior month. This is the highest trade deficit. Especially worrying is the fact that exports fell -0.6% in the month of October signalling decreased demand for US products abroad. Additionally, the strong dollar has made US goods somewhat less appealing for foreign countries.

FED Chairman Powell stated that rates are “just below” neutral range. Back in October he said that we are “a long way from neutral at this point”. His message was interpreted as overly dovish by the market and USD lost more than 100 pips against major currencies in first 2 hours after the statement. This seemed like an overreaction. The FED’s own estimates set the neutral rate in a range of 2.5-3.5 percent, with most policymakers’ bets clustered at the midline of this band at 3 percent. That is about 75-100bps away from the current 2-2.25 percent target FED Funds rate range which leaves room for additional rate hikes in 2019.

Core PCE inflation for the month of October came in at 1.8% y/y vs 1.9% y/y as expected, on the monthly level it came in at 0.1% m/m vs 0.2% as expected. Both personal spending and personal income beat expectations with the former coming in at 0.6% vs 0.4 as expected and the latter coming in at 0.5% vs 0.4% as expected. FED has turned its stance to data dependent so the core PCE is worrisome but rise in personal spending and income are encouraging.

This week we will have PMI data, FED Beige Book, Trade Balance and employment data on Friday. Data coming from the US will be closely monitored from now on since the FED has emphasized data dependence in its rhetoric. NFP will as always be a huge event with the headline number moving the markets, however much more important for FED will be data on Average Hourly Earnings.

Important events for USD:

Monday:

• -- Markit Manufacturing PMI
• -- ISM Manufacturing PMI

Wednesday:

• -- Markit Services PMI
• -- Markit Composite PMI
• -- ADP Nonfarm Employment Change
• -- Unit Labor Cost q/q
• -- ISM Non-Manufacturing PMI
• -- FED Beige Book

Thursday:

• -- Trade Balance

Friday:

• -- Nonfarm Payrolls
• -- Unemployment Rate
• -- Participation Rate
• -- Average Hourly Earnings m/m
• -- Average Hourly Earnings y/y

EUR

The ECB President Draghi stated that incoming data has been somewhat weaker than expected but that the slowdown may be temporary. According to Draghi, significant monetary policy stimulus is still needed and the ECB continues to anticipate the net asset purchase program to end. He remains confident that underlying inflation will gradually rise in the period ahead. Draghi added that World Trade Growth momentum has slowed “considerably” and that it is expected for headline inflation to fall in line with the decline of oil prices.

Recent news and developments suggest that President Trump could impose 25% tariffs on import duty on car imports from all countries except Canada and Mexico after the G20 Summit which could have a huge negative impact on German auto industry.

Preliminary CPI core reading for the month of November softened to 1% vs 1.1% as expected with headline CPI coming in at 2% as expected. Unemployment ticked up to 8.1% vs 8% the previous month. It is still at the very low levels signalling a strong and tight labour market.

This week we will have data on PMI from Germany as well as from EU, consumption, employments and 3rd estimate of Q3 GDP.

Important events for EUR:

Monday:

• -- Markit Manufacturing PMI (Germany)
• -- Markit Manufacturing PMI

Tuesday:

• -- PPI m/m
• -- PPI y/y

Wednesday:

• -- Markit Services PMI (Germany)
• -- Markit Composite PMI (Germany)
• -- Markit Services PMI
• -- Markit Composite PMI
• -- Retail Sales m/m
• -- Retail Sales y/y

Friday:

• -- Industrial Production m/m
• -- Industrial Production y/y
• -- Employment Change q/q
• -- Employment Change y/y
• -- GDP q/q
• -- DP y/y

GBP

The EU-Brexit deal was adopted very quickly by the EU. BOE and the UK Treasury came out with pessimistic forecasts for the British economy post-Brexit. According to them worries have not been fully priced in by the GBPUSD and GBP crosses. Brexiteers immediately attacked the forecasts stating that they are merely a part of “Project Fear” designed by the anti-Brexit camp to weaken Brexit sentiment. The Brexit vote will take place on December 11 and markets will get more nervous as we close in on that date.

This week we will get PMI data as well as more headlines regarding the Brexit process as we get closer to voting in the Parliament.

Important events for GBP:

Monday:

• -- Markit Manufacturing PMI

Wednesday:

• -- Markit Services PMI

AUD

Data regarding construction work completed in Q3 came in at -2.8% q/q vs 0.9% as expected. Numbers are much weaker than expected and this sharp fall will negatively impact GDP growth. Capex data for Q3 came in weaker than expected at -0.5% q/q vs 1% as expected. The weaknesses are seen in building and structures but equipment spending surprised to the upside.

This week we will have RBA Interest Rate Decision, expected to stay unchanged, followed by Rate Statement for further direction on monetary policy. Additionally we will have data regarding housing, current account, consumption, trade balance and GDP data for Q3.

Important events for AUD:

Monday:

• -- Building approvals m/m
• -- Business inventories q/q
• -- Caixin Manufacturing PMI (China)

Tuesday:

• -- Current Account
• -- RBA Interest Rate Decision
• -- RBA Rate Statement

Wednesday:

• -- GDP q/q
• -- GDP y/y
• -- Caixin Services PMI (China)

Thursday:

• -- Retail Sales m/m
• -- Trade Balance

NZD

Retail sales for Q3 came in unchanged at 0% q/q vs 1.0% q/q as expected. This is a big miss and can have an impact on the GDP which RBNZ is closely monitoring to decide the next move in regards to interest rates. Sharp falling oil prices can be attributed to Q3 retail sales number but we will have to wait and see how RBNZ will interpret this number. Trade balance for month of October came in at -1295m NZD vs -850m NZD as expected. Exports were higher coming in at 4.88bn NZD and imports were higher as well coming in at 6.15bn NZD, highest ever imports in a month. Large import number is attributed to crude imports at high prices. Trade balance deficit grew to -5.79bn NZD which is the largest deficit in a decade.

Financial Stability Report announced that mortgage lending restrictions will be loosened from January 1st. Risks to financial stability have eased on the domestic side, however global risks have risen.

This week we will have dairy auction and it will be interesting to see if it will bring the stop to the falling dairy prices.

Important events for NZD:

Tuesday:

• -- GDT Price Index

CAD

S&P affirmed Canada’s AAA rating with a stable outlook. Rating is unchanged since 2002. The priced-in probability of a rate hike in January fell to the lowest in a month, although trades still see the odds of an increase at 68.5 percent.

Current account balance for Q3 came in at -10.34bn CAD vs. -12.00bn CAD as expected with -16.67bn CAD for the Q2. Biggest drop was made in goods and services account which dropped to -8bn CAD from -12.7bn CAD in the previous quarter. Net goods trade deficit fell to -1.72 bn CAD vs – 5.67bn CAD the previous quarter. Oil fell below $50 for the first time since October 2017.

First reading of GDP for Q3 shows that it came in at 2% as expected.

This week we will have PMI data and trade balance data. BOC is expected to leave the interest rate as it is and keep the hawkish tone, maybe even add some optimism due to the signing of USMCA deal at the G20 Summit. OPEC meeting in Vienna on Thursday will be of huge importance for Oil, Canada’s leading export and therefore for the CAD. Employment data on Friday will also be of high importance for CAD.

Important events for CAD:

Monday:

• -- Markit Manufacturing PMI

Wednesday:

• -- BOC Interest Rate Decision
• -- BOC Rate Statement
• -- EIA Crude Oil Stocks Change

Thursday:

• -- OPEC Meeting
• -- Trade Balance
• -- Ivey PMI
• -- BOC Governor Poloz Speach

Friday:

• -- Employment Change
• -- Unemployment Rate
• -- Participation Rate

JPY

The preliminary Nikkei Manufacturing PMI for the month of November came in at 51.8 vs 52.9 the prior month. This is lowest result in two years with new orders falling into contraction which is a worrying development and dampens hopes of a rebound.

Retail sales for the month of October came in at 1.2% m/m vs 0.4% m/m as expected and 3.5% y/y vs 2.7% y/y as expected. Figures beat the expectations and it may finally give some much-needed boost to the Japanese inflation.

Unemployment ticked up a bit to 2.4% vs 2.3% as expected. Job to application ratio ticked down to 1.62 vs 1.64 the previous month. Unemployment is still at extremely low levels so all attention was on the inflation figures. Tokyo CPI came in at 0.8% vs 1.1% with prior reading showing 1.5%. Fallout in the headline figure can be attributed to falling oil prices. CPI excluding fresh food and energy (this is the data BOJ uses when evaluating inflation) came in at 0.6% as expected. Still a long way from the targeted 2%.

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

Important events for JPY:

Monday:

• -- Nikkei Manufacturing PMI

Wednesday:

• -- Nikkei Services PMI

Friday:

• -- Household Spending m/m
• -- Household Spending y/y

CHF

Swiss GDP for Q3 came in at -0.2% q/q vs 0.4% as expected and 2.4% y/y vs 2.9% as expected. Contraction for the Swiss economy is an unpleasant surprise. Exports and imports both fell heavily in the Q3 with exports falling 4.2% q/q.

This week we will have data on consumption and inflation.

Important events for CHF:

Monday:

• -- Retail Sales m/m
• -- Retail Sales y/y

Tuesday:

• -- CPI m/m
• -- CPI y/y

 

[katetrades]

Forex Major Currencies Outlook (Dec 10 – Dec 14)

USD

The November Manufacturing PMI came in at 55.3 vs 55.4 as expected but ISM Manufacturing PMI came in at 59.3 vs 57.5 as expected for a huge beat. Within ISM PMI employment came in at 58.4 vs 56.8 as expected, new orders came in at 62.1 vs 57.4 the previous month and new export orders came in at 52.2 as expected.

Inversion of the yield curve has occurred and traditionally it is the sign of a recession to come, however time needed for recession to hit after inversion can range between 6 months to over 2 years. The yield on 5-year bonds was below 2-year bonds for the first time in more than a decade. This is most likely due to the increase in the US government debt, which forces yields up as the supply of bonds increases, more than offsetting the decrease due to the move in safer assets.

FED’s Williams has continued in his hawkish manner and avoided cautious approach taken by his FED colleagues. He stated that US economy is strong, with a healthy labour market. He expects the US economy to continue to grow at the strong rate of 2.5% and expects price inflation to move a bit above 2%. In his statement he implied that the time to raise rates is now and that further gradual rate hikes will be appropriate. Dollar bulls loved his words.

US trade balance continues to plunge coming in at -$55.5bn vs -$55.0bn as expected. Exports fell -0.1% while imports rose 0.2%. Goods deficit came in at $78.11B and US-China October deficit came in at $43.1B vs $40.24B the prior month. Strong US dollar weigh in negatively on trade balance. Services surplus of $22.62B is the only positive in this report.

Headline NFP number came in at 155k vs 198k as expected. Unemployment and the participation rate have stayed the same as expected with former coming in at 3.7% and latter coming in at 62.9%. Average hourly earnings came in a bit softer with 0.2% m/m vs 0.3% m/m as expected and stayed the same at 3.1% y/y.

This week we will have data on inflation (CPI), consumption, business inventories and Markit PMIs. Speech of FED chair Powell will be closely monitored for additional information on monetary policy.

Important news for USD:

Tuesday:

• -- PPI

Wednesday:

• -- CPI
• -- Real Earnings
• -- Federal Budget Balance
• -- FED Chair Powell Testifies

Thursday:

• -- Initial Jobless Claims

Friday:

• -- Retail Sales
• -- Markit Manufacturing PMI
• -- Markit Services PMI
• -- Markit Composite PMI
• -- Business Inventories

EUR

Italy’s Prime Minister Conte plans to negotiate with the EU on lowering Italy’s budget deficit to 1.9%. It is expected that a new revised budget proposal will be sent to the EU next Wednesday, day before the EU Leaders Summit.

The November Manufacturing PMI for the EU came in at 51.8 vs 51.5 preliminary. Germany, France and Spain data came better than expected while Italy showed contraction for the second straight month. Services PMI for the EU came in at 53.4 vs 53.1 preliminary. With prior reading being 53.7 there is a continued slide to the downside dragged by German numbers although there were positives from France, Spain and Italy.

This week ECB Monetary Policy Press Conference will be the main event as it is expected that ECB will end QE programme. Recent softer data coming from EU may change their mind so this event will be closely monitored. There are potential high market implications. The interest rate is expected to stay the same. We will have data on trade balance, industrial production and Markit PMIs.

Important news for EUR:

Monday:

• -- Trade Balance
• -- Exports
• -- Imports

Tuesday:

• -- ZEW Economic Statement Indicator (Germany)
• -- ZEW Economic Statement Indicator

Wednesday:

• -- Industrial Production

Thursday:

• -- EU Leaders Summit
• -- CPI (Germany)
• -- ECB Interest Rate Decision
• -- ECB Monetary Policy Press Conference

Friday:

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

GBP

The November Manufacturing PMI came in at 53.1 vs 51.7 as expected with the prior reading showing 51.1. This is a good recovery after the October numbers as new orders grow once again. Services PMI came in at 50.4 vs 52.5 expected with prior reading being 52.2. Big miss on the data, business expectations fell to the second-lowest reading since the financial crisis. Uncertainty around the Brexit is weighing heavily on the UK economy.

The European Court of Justice declared that the UK may revoke Article 50 of the Treaty of European Union unilaterally and possibly decide to remain in European Union if parliament fails to pass the Brexit agreement on December 11 if it so desires.

This week, the Brexit Parliament Vote will take the main stage and will be a big GBP mover. It is not expected that the current Brexit deal will pass. From an economic perspective we will get information about trade balance, industrial and manufacturing production as well as data on wages and employment.

Important news for GBP:

Monday:

• -- Industrial Production
• -- Manufacturing Production
• -- Trade Balance

Tuesday:

• -- Brexit Parliament Vote
• -- Average Hourly Earnings
• -- Unemployment Rate

AUD

At the G20 meeting presidents Trump and Xi agreed to place a hold on new tariffs for 90 days which raised risk appetite in the markets and propelled AUD higher against other major currencies.

RBA decided to leave cash rate at current level of 1.5% as widely expected. They reiterated that low rates are supporting the economy. They expect GDP growth to average around 3.5% for the next two years. The central scenario is for inflation to be 2.25% in the 2019 but higher in 2020 and they expect further decrease in the unemployment. Growth in household income remains low and debt levels are still high.

GDP data for Q3 came in at 0.3% q/q vs 0.6% q/q as expected and 2.8% y/y vs 3.3% y/y as expected. Huge miss on the numbers that sent AUD down. Consumption was the main drag as it fell from 0.9% q/q the previous quarter to just 0.3% q/q in Q3. Business investment was disappointing, gains in spending was created by decline in the savings for a lowest savings ratio (2.4%) since Q4 of 2007. Public demand and net exports were key growth engines. RBA’s Debelle said that they will keep a close watch on incoming data and if consumption continues to dampen in combination with rising household debt/low savings ratio they will be forced to consider cutting rates instead of
hiking them as planned.

Trade balance for the month of October came in at 2.361 bn AUD vs 3 bn as expected. Miss on the estimates with exports rising 1% m/m and imports rising 3% m/m. Retail Sales rose 0.3% m/m vs 0.2% m/m as expected.

This week there will be no big data coming from Australia, but data on Chinese consumption will be monitored.

Important news for AUD:

Friday:

• -- Retail Sales (China)

NZD

GDT auction data has come at 2.2%. This is the first positive reading after 13 consecutive auctions with falling or unchanged prices. Fonterra has cut their milk price payment forecast to NZD 6.00-6.30/kg with prior forecast being NZD 6.25-6.50/kg. Since dairy is NZ’s largest export this will have impact on trade balance and value of NZD in general. NZD has benefited greatly this week from the risk on sentiment after G20 meeting between presidents Trump and Xi so this positive data can add more fuel to the kiwi rally.

There will be a light calendar this week for NZD with data on consumption.

Important news for NZD:

Monday:

• -- Electronic Card Retail Sales

Wednesday:

• -- Food Price Index

CAD

Canada’s province of Alberta has decided to cut its oil production by 8.7% in order to ease the supply glut. Production will be cut on January 1st 2019 and it is expected that cuts will last until Spring of 2019, that is the estimated time needed to ship current oil storages to the market. Price of oil quickly rose which in turn gave a nice boost to CAD.

The November Manufacturing PMI came in at 54.9 vs 53.9 the prior month. New orders index rose to 53.7 vs 52.2 the prior month and employment climber to 57.1 vs 55.3 the prior month. All strong numbers blowing the wind in the sails of Canadian economy.

BOC has kept overnight rate at 1.75%. In the following statement it was said that there is more room for non-inflationary growth and the incoming data shows the slowing of economy going into Q4. There were concerns stated regarding sharply falling oil prices and falling business investment. The bright point in the statement was repeating of the fact that rates will need to rise. Governor Poloz stated in his speech that rate levels are appropriate for the “time being”. Pace of rate hikes will be data dependent and he reiterated that neutral range is “in the neighbourhood” of 2.50 – 3.50%. There was a 65% chance of a hike priced in for January however after the meeting markets see the probability of only 23%.

Canadian employment report was very strong. Employment change came in at 94.1k vs 10k as expected. Full time employment came in at 89.9k. Unemployment fell to 5.6% vs 5.8% as expected. Drop in wage growth is a bit concerning but overall this report should change BOC’s rhetoric of slowing growth.

The OPEC agreement brings 1.2mbpd of which OPEC countries will bring 800kbpd while Russia will participate with 400kbpd. Iran was exempted from the cuts. This agreement sent oil price up and in combination with strong employment report CAD finished the week stronger.

This week will be a slow one with data on housing and oil supply.

Important news for CAD:

Monday:

• -- Building Permits

Wednesday:

• -- EIA Crude Oil Stocks Change

JPY

Nikkei Manufacturing PMI for the month of November came in at 52.2 vs 51.8 the prior month with preliminary reading showing 52.9. As stated by Markit: New orders rose at joint-weakest rate in just over 2 years, production growth moderates and business confidence drops for sixth month. Household spending date came in at -0.3% y/y vs 1% as expected. A big miss on data that will be a drag on the inflation.

This week we will get final GDP data for Q3, data on trade and industrial production as well as number of Indexes showing the health of Japan’s economy.

Important news for JPY:

Monday:

• -- GDP
• -- Current Account
• -- Goods Trade Balance

Thursday:

• -- BoJ Corporate Goods Price Index

Friday:

• -- BoJ Tankan Large Manufacturing Index
• -- BoJ Tankan Large Non-Manufacturing Index
• -- Industrial Production

CHF

The retail sales for the month of October came in at 0.8% vs -0.6% as expected with prior reading showing -2.5%. November Manufacturing PMI came in at 57.7 vs 56.4 as expected. Finally, some positive data from Swiss economy after a slew of negative data.

CPI for the month of November came in at -0.3% m/m vs -0.1 m/m as expected with core CPI coming in at 0.2% m/m vs 0.4% m/m as expected. Drop in the headline number can be attributed to falling oil prices, however drop in the core number is concerning. Perhaps SNB will be forced to intervene sooner than ECB if this downtrend persists.

This week we will have SNB interest rate decision, it is expected to stay unchanged, but the tone in the follow up monetary policy assessment might change due to change in inflationary data.

Important news for CHF:

Monday:

• -- Unemployment rate

Thursday:

• -- SNB Interest Rate Decision
• -- SNB Monetary Policy Assessment

 

[katetrades]

Forex Major Currencies Outlook (Dec 17 – Dec 21)

USD

CPI data for the month of November came in at 2.2% y/y as expected. Monthly figure came in unchanged as expected. The budget deficit for the month of November came in at $204.9bn vs $100.5bn the previous month.

Retail Sales came in at 0.2% m/m vs 0.1% m/m as expected but the really strong reading is in control group where monthly figure came in at 0.9% m/m vs 0.4% m/m as expected. Ex-autos component came in at 0.2% m/m as expected. Possible reasons for the beat are the Black Friday and Cyber Monday deals. Nevertheless FED will be happy with these numbers. Industrial production came in at 0.6% m/m vs 0.3% m/m as expected with prior reading being 0.1% m/m but revised to -0.2% m/m so that most of the gains were covered by revision. All three PMI numbers came in weaker than expected signalling diminished confidence in the US economy.

This week central stage will be taken by the FED Interest Rate Decision. The chance for 25bp rate hike is currently at 69.1% and it is widely believed that we will see a hike. The following press conference as well as dot-plot will provide valuable information regarding future rate hike plans. We will also have information on housing, current account, final reading of Q3 GDP, PCE as well as durable goods.

Important news for USD:

Tuesday:

• -- Housing Starts
• -- Building Permits

Wednesday:

• -- Current Account
• -- Existing Home Sales
• -- FED Interest Rate Decision
• -- FOMC Statement
• -- FOMC Economic Projections
• -- FOMC Press Conference

Friday:

• -- GDP
• -- Durable Goods Orders
• -- PCE
• -- Core PCE

EUR

ZEW Survey of current situation in Germany came in at 45.3 vs 55.8 as expected with prior reading showing 58.2. Evaluation of current situation is abysmal. Trade war, Brexit and Auto-Tariffs on German cars weigh in heavily on current economic situation. Expectations came in a bit better at -17.5 vs -25.0 as expected for Germany and -21 vs -22 as expected for Eurozone.

The saga of Italy’s budget continues as EU stays firm in its stance that Italy should reduce budget deficit of 2.4% to avoid economic sanctions. Italian press stated that Italy has managed to cut its budget deficit by 4b EUR which is around half of the amount that EU is asking for. Due to the power of “Yellow vest” (“Gilets Jaunes”) protests in France, President Macron has agreed to raise the minimal wage, to revoke a gasoline tax hike and urged companies to pay a year-end bonus without tax with removal of taxes on overtime work. These moves will put pressures on France’s budget which could lead to ballooning of budget deficit to 3.5%. Italy will ask that the deficit/GDP rules be the same for France as well as for Italy. Meanwhile the Italian government debt has grown to 2.334 trillion EUR in October

The ECB left key rates unchanged and ended QE programme as widely expected. ECB’s Draghi acknowledged that inflation is coming weaker than expected as a result of softer external demand. Inflation is projected at 1.6% for 2019, 1.7% for 2020 and 1.8% for 2021. It was also stated that monetary policy is very accommodative, business investment continues to grow and consumption continues to grow driven by increases in disposable income. Statement that balance of risks to the growth outlook is “moving to the downside” is the key change and has shifted EUR downwards.

Preliminary PMI numbers for France all came worse than expected and they were all below 50 signalling contraction. Some of those numbers were influences by Gilets Jaunes protests but since the numbers are very worrisome it weighs heavily on EUR. German PMI numbers also came worse than expected but they were all above 50. Outlook remains gloomy and risk of recession for Germany has increased. Composite PMI for Eurozone fell to 51.3 vs 52.7 the previous month for the lowest level in 49 months.

Industrial production for the month of October came in at 0.2% m/m vs 0.1 m/m as expected with the prior reading being revised to -0.6% m/m. Revision lower dampen the mood of the data but better than expected reading that will prop up Q4 GDP.

This week we will have data on inflation, trade balance and current account as well as more evaluations on business climate and expectations and final reading of France’s Q3 GDP.

Important news for EUR:

Monday:

• -- CPI
• -- Core CPI
• -- Trade Balance

Tuesday:

• -- Ifo Business Climate (Germany)
• -- Ifo Business Expectations (Germany)

Thursday:

• -- Current Account

Friday:

• -- GDP (France)

GBP

PM May has pulled out the Brexit vote from the Parliament because the proposal was very unlikely to pass and now plans to meet with EU officials to renegotiate parts of the deal, however EU’s Tusk emphasized that he would “not be renegotiating the deal”. The new date for a vote deal is still not announced but UK PM spokesman said that it will be before January 21 2019. UK Parliament is in recess from December 20 to January 7 and date that UK is scheduled to leave EU is March 29 so they are working with a tight schedule. The no confidence vote was held and PM May won with 200-117. The fact that 117 PMs voted against her means that current Brexit deal will not pass the Parliament vote and that changes are needed.

Average earnings data beat expectations coming in at 3.3% 3m/y vs 3% 3m/y as expected. The Unemployment rate stayed at 4.1% which is almost a four-decade low. Healthy beating on the earnings showing that British households will have funds to make a positive impact on consumption and therefore on inflation. Due to the overwhelming Brexit worries, this data will not have impact on GBP as it should but it is important to keep it in mind.

This week will be the final week that Parliament will be operating in current year so the last chance to put Brexit deal up for a vote. We will get data on inflation, consumption, current account as well as final reading of Q3 GDP. Additionally, we will have BOE interest rate decision, but no change is expected as all eyes are on Brexit.

Important news for GBP:

Wednesday:

• -- CPI
• -- Core CPI

Thursday:

• -- BOE Interest Rate Decision
• -- BOE MPC Meeting Minutes
• -- Retail Sales

Friday:

• -- Business Investment
• -- Current Account
• -- GDP

AUD

RBA’s Kent stated in his speech that progress is made on lowering unemployment and rising inflation, but it is gradual. Wage growth in Australia begins to pick up and he reiterated that the next rate move will be most likely up but he didn’t rule out a cut if its needed. Preliminary Markit PMIs came in lower than expected across the board (manufacturing, services and composite) showing signs of softer demand. China’s retail sales numbers came in weaker than expected to put additional pressure on Australian economy.

This week we will see meeting minutes for more information about last RBA meeting as well as employment data.

Important news for AUD:

Tuesday:

• -- RBA Meeting Minutes

Thursday:

• -- Employment Change
• -- Unemployment Rate

NZD

Card spending data for the month of November, which accounts for about 70% of retail sales in New Zealand, came in at -0.4% m/m vs 0.3% m/m as expected. Weak data but it can be attributed to seasonality as December is where the real spending is due to the holidays. Fiscal update sees surplus in the coming years lower and also GDP projections have been lowered.

This week we will have data on GDT auction, current account and trade balance. The Q3 GDP reading will take the centre stage as Governor Orr previously said that he would consider a rate cut in the event GDP falls below expectations. The government has revised their GDP forecast a bit lower to a still healthy 2.9%.

Important news for NZD:

Tuesday:

• -- GDT Price Index
• -- Current Account

Wednesday:

• -- Trade Balance
• -- Exports
• -- Imports
• -- GDP

CAD

Housing starts in Canada for the month of November came in at 215.9k vs 198k as expected. Canadian housing starts to pick up. Building permits data for October came in at -0.2% vs -0.3% as expected. Better than expected, but still a troublesome reading.

This week we will have data on inflation, manufacturing and retail sales as well as GDP numbers and the BOC Business Outlook Survey.

Important news for CAD:

Tuesday:

• -- Manufacturing Sales

Wednesday:

• -- CPI
• -- Core CPI

Thursday:

• -- Wholesale Trade

Friday:

• -- Retail Sales
• -- GDP
• -- BOC Business Outlook Survey

JPY

Final Q3 GDP data came in at -0.6% q/q vs preliminary reading of -0.3% q/q. The GDP Deflator (this is an inflation indicator) for Q3 came in at -0.3% y/y vs -0.1% y/y as expected. GDP Business Spending fell to -2.8% y/y for the biggest fall since Q3 of 2009. These are some abysmal numbers for the Japanese economy, regardless of the natural disasters that have struck Japan and slowing exports due to US – China trade war. Current account balance has declined in October, coming in at 1.3 trillion yen ($ 11.6 billion). The trade deficit has widened to 321.7 billion yen ($ -2.8 billion), the most in 5 months. According to the latest quarterly Tankan survey Capex plans were stronger, as large businesses anticipate a 14.3% increase up from 13.4%.

This week we will have the Interest Rate Decision with no expectations of changing the rate but the monetary policy statement and press conference which will be held later on will provide us with more information about BOJ planned actions especially after abysmal Q3 GDP numbers. We will also have data on trade balance as well as national inflation data.

Important news for JPY:

Wednesday:

• -- Trade Balance
• -- Export
• -- Import

Thursday:

• -- BOJ Interest Rate Decision
• -- BOJ Monetary Policy Statement
• -- BOJ Press Conference

Friday:

• -- CPI
• -- CPI excluding Food and Energy

CHF

The Unemployment rate for the month of November came in at 2.5% as expected. The seasonally adjusted number came in at 2.4% for the lowest reading since May 2002. Labour market conditions are tightening, however SNB would like to see more wage growth so it can push inflation up.

SNB has left sight deposit interest rate unchanged at -0.75% as expected. SNB reiterated that they will remain active in FX market if necessary and characterized conditions in it as fragile. They still see CHF as highly valued and they lowered their projections for inflation to 0.5% in 2019 and 1% in 2020.

This week we will have data on trade balance as well as quarterly bulletin containing data on Swiss economy as a whole.

Important news for CHF:

Wednesday:

• -- SNB Quarterly Bulletin

Thursday:

• -- Trade Balance
• -- Export
• -- Import

 

[katetrades]

Forex Major Currencies Outlook (Dec 24 – Dec 28)

Please note that due to Christmas holidays liquidity in the markets will be thin which can potentially lead to increased volatility in the markets.

USD

Housing starts came in at 1256k vs 1228k as expected and building permits data came in at 1328k vs 1260k as expected. Housing starts have moved up and down during the year, the gains are concentrated mostly in multifamily homes and fact that permits rose 5% is a very encouraging sign. Existing home sales for the month of November came in at 5.32m vs 5.2m as expected.

Current account data for Q3 show deficit of -$124.8bn. Deficit has now grown to 2.4% of GDP, up from 2% in Q2. Increase in deficit was mainly caused by deficit in goods. Stronger USD, tariffs and slowing global demand are culprits for the data.

FED has raised interest rates by 25bp to the range of 2.25% - 2.50% as expected. New dot plot signals 2 rate hikes in 2019 instead of 3. Powell assessed risks as roughly balanced and said that FED is data dependent. He also stated that rates have now reached the bottom end of the neutral range and that there is no need for policy to be accommodative. GDP and inflation forecasts have been revised down. The fact that inflation is a bit below the target gives FED the room to be patient. FED will continue with unwinding of its balance sheet as planned which is not helpful for the stocks.

Durable goods for the month of November came in at 0.8% m/m vs 1.6% m/m as expected with prior reading being -4.3% m/m. Capital goods orders nondefense ex air came in at -0.6% m/m vs 0.2% m/m as expected, capital goods shipments nondefense ex air came in at -0.1% m/m vs 0.2% m/m as expected ex transportation category came in at -0.3% m/m vs 0.3% m/m as expected for a wide range of misses across the report.

This week we will have housing data, trade balance data and data on consumer confidence.

Important news for USD:

Thursday:

• -- New Home Sales
• -- Consumer Confidence Index

Friday:

• -- Goods Trade Balance
• -- Pending Home Sales

EUR

According to the president of the National Assembly. the lower house of the Parliament of France, France’s budget will be bigger than EU’s limit of 3% of GDP next year. It is expected that it will reach 3.4%. During the weekend agreement was reached between Italy’s coalition government leaders and PM regarding the budget and growth was slashed from 1.5% to 0.9% or 1% to make it more credible. Finally the revised budget was accepted by the EU with budget deficit of 2.04%. One less worry for the EUR going on.

Final Core CPI for EU for the month of November came in at 1% y/y as expected. Headline CPI figure dipped a bit and came in at 1.9% y/y vs 2% y/y as expected. October trade balance data came in at 12.5bn EUR vs 14bn EUR as expected.

This week we will have inflation data from Germany.

Important news for EUR:

Friday:

• -- CPI (Germany)

GBP

UK PM Spokesman has stated that talks between UK and EU are still ongoing regarding the Brexit process. Reminder that UK Parliament is on recess from December 20 to January 7. Currently it is expected that debate on Brexit deal will begin on January 9.

UK November CPI data came in as expected on all fronts, 0.2 m/m, 2.3% y/y and core CPI 1.8%. Retail Sales for November came in at 1.4% m/m vs 0.3% m/m as expected. Retail Sales are now up on 3.6% y/y. Many factors can contribute to this nice beating of the estimates, Black Friday offers, raising wages in the UK and even stockpiling of goods due to Brexit uncertainty. This data will have a positive impact on Q4 GDP.

BOE has left bank rate unchanged at 0.75% as expected with vote of 0-0-9, meaning that all 9 voting members voted unanimously for no change. They now see inflation falling below 2% in January due to falling oil prices and project Q4 and Q1 2019 GDP at 0.2%. Brexit uncertainties have intensified since November and main challenge is to asses their implications. They also see downside risks to the global economy increasing. Dovish statement in the midst of all surrounding uncertainties.

AUD

Australian government has revised their economic outlook and now it predicts higher surplus for the fiscal 2020, lower GDP and wage growth forecast for the 2018-19.

The RBA meeting minutes showed that board members agree that next move in rates will be likely up than down but that there is no strong case for near-term change in policy. Currently markets price in rate hike for Q1 of 2020. Sluggish household incomes, high debt and falling home prices have been stated as primary downside risk factors. Falling unemployment and job growth present a positive for Australian economy.

Australian employment change data came in at 37k vs 20k as expected for a big beat. Participation rate came in at 65.7% vs 65.6% as expected for the highest value ever. Unemployment ticked up to 5.1%. Another strong report showing that labour market is tightening, All gains in the employment change came from rise in part time employment change which is a bit of a downer.

NZD

New Zealand services PMI for the month of November came in at 53.5 vs 55.4 the previous month. PMI numbers are down across the globe so this data follows the trend. Business confidence in New Zealand came in at -24.1 vs -37 the previous month. This is the highest reading in 8 months and shows improvements in employment and investment intentions. Troubling is that figure is still negative showing that majority of respondents reporting expect worsening of business conditions in the coming year.

GDT Price Index sees prices up 1.7%. After a run of 13 consecutive months this makes a second consecutive auction of rising prices after the previous being 2.2%. BoP current account for Q3 came in at -6.149bn NZD vs -5.935bn NZD as expected. Lower dairy prices and higher oil prices in the Q3 contributed to a widening deficit. November trade balance came in at -861m NZD, exports were down a bit at 4.94bn NZD vs 4.98bn NZD as expected and imports came in line with expectations.

Q3 GDP numbers came in at 0.3% q/q vs 0.6% q/q as expected and 2.6% y/y vs 2.8% as expected. Since RBNZ had projected Q3 at 0.7% q/q so the result is less than half of the projected target. Rate hike is out of the question due to the miss in GDP numbers, however it will be interesting to hear if this has changed RBNZ neutral policy or they think rate hike is appropriate.

CAD

BOC Poloz stated in an interview that he expects no recession in Canada in 2019 and that Canada’s economic fundamentals are quite solid. He also stated that rates need to be more neutral with economy near full capacity.

CPI data for the month of November came in at 1.7% y/y vs 1.8% y/y as expected with prior reading showing 2.4% y/y. Monthly figure came in at -0.4% m/m as expected. There was a drop in all three major categories, goods came in at -0.7% m/m, services came in at -0.1% m/m and energy came in at -4.8% m/m. Core measures were also down but all three of them (core, median and trimmed) came in at 1.9% y/y. Since the decline in inflation is caused by more than falling oil prices it will be hard for BOC to continue their hawkish rhetoric and it can rule out the idea of rate hike in January.

Canadian manufacturing sales came in at -0.1% m/m vs 0.4% m/m as expected with prior reading showing 0.2% m/m. Wholesale trade came in at 1% m/m vs 0.4% m/m as expected. Machinery and personal/household categories were particularly strong. ADP employment in the month of November came in at 39k vs 2k the previous month. Strong rebound after previous month with trade, transportation and utilities leading the way.

Retail sales for the month of October came in at 0.3% m/m vs 0.5% m/m as expected. The ex-autos component came in at 0% m/m vs 0.2% m/m as expected and contributed to the weaker than expected reading. GDP figure for the same month came in at 0.3% m/m vs 0.2 % m/m as expected showing growth in 15 our of 20 industrial sectors with construction activity down for the 5th consecutive month.

JPY

Trade balance data for the month of November came in at -737bn Y vs – 630bn Y as expected. Exports came in at 0.1% y/y vs 1.2% as expected and imports came in at 12.5% y/y vs 11.8% as expected. Lower exports and higher imports, trade tensions and slowing global demand contributed to bigger than expected trade deficit.

BOJ has left interest rate unchanged at -0.10% as expected. They will keep current rates low for extended period of time and will continue to buy JGBs (Japanese Government Bonds). Governor Kuroda stated that downside risks are centred overseas and reiterated that impact of US – China tariff war is rather limited on Japan.

National CPI number came in at 0.8% y/y as expected with prior reading being 1.4% y/y. Decline in headline number is mostly due to falling energy prices. CPI excluding fresh food and energy came in lower at 0.3% y/y vs 0.4% y/y as expected. Inflation is heading in the wrong direction, away from the target level of 2%.

This week we will have monetary policy minutes, CPI for Tokyo region, employment and consumption data as well as data on industrial output.

Important news for JPY:

Thursday:

• -- BOJ Monetary Policy Minutes

Friday:

• -- Tokyo CPI
• -- Unemployment Rate
• -- Jobs to Applications Ratio
• -- Retail Sales
• -- Industrial Production

CHF

Swiss government cut growth and inflation forecasts so the new numbers are GDP at 2.6% for 2018, 1.5% for 2019 and 1.7% for 2020. Inflation is now seen at 1% for 2018, 0.5% for 2019 and 0.7% for 2020. November trade balance numbers came in at 4.74bn CHF vs 3.75bn CHF as expected. Exports rose 1% m/m while imports fell -1.5% m/m. Steady growing exports are positive for Swiss economy.

TradersWay team wishes you Merry Christmas and Happy Holidays!

 

[katetrades]

Forex Major Currencies Outlook (Dec 31 – Jan 4)

Please note that due to the New Year holidays, liquidity in the markets will be thin which can potentially lead to increased volatility and higher spreads, be sure to plan your trading accordingly.

USD

This week we will have the final PMI numbers for the month of December and on Friday the NFP data will be announced. After last month’s rise of 155k, this month is expected to come in at 178k. Unemployment is expected to remain the same. Once again, Average Hourly Earnings will be the data to watch and it is expected it will come out at 3.0% y/y vs 3.1% y/y the previous month.

Important news for USD:
Wednesday:

• -- Markit Manufacturing PMI

Thursday:

• -- ADP Nonfarm Employment Change
• -- Initial Jobless Claims
• -- ISM Manufacturing PMI
• -- ISM Manufacturing Employment

Friday:

• -- Nonfarm Payrolls
• -- Unemployment Rate
• -- Average Hourly Earnings
• -- Market Services PMI
• -- Market Composite PMI

EUR

ECB has published its Economic Bulletin in which they stated that they see ongoing expansion in the economy but with downward risks increasing. They acknowledged that global economic activity is expected to decelerate next year. Worries regarding growth in Euro Area appear to be mostly external which can give EUR a small boost. Italy vote on the budget in the Parliament is expected to be by December 29.

This week we will have final PMI numbers for the month of December as well as employment data from Germany and inflation numbers for the Euro Zone. It is expected that headline inflation figure will tick down to 1.8% y/y from 1.9% y/y the previous month while core number will rise to 1.2% y/y from 1.1% y/y the previous month.

Important news for EUR:
Wednesday:

• -- Markit Manufacturing PMI (Germany, France, Italy)
• -- Markit Manufacturing PMI
• -- Market Services (Germany, France, Italy)
• -- Market Composite (Germany, France, Italy)
• -- Market Services PMI
• -- Market Composite PMI
• -- Unemployment Change (Germany)
• -- Unemployment Rate (Germany)
• -- CPI

JPY

BOJ Governer Kuroda stated that BOJ will continue with their easing policy while monitoring both its positive and side effects. The unemployment rate for the month of November came in at 2.5% vs 2.4% as expected with Job-To-Applicant ratio coming in at 1.63 as expected. Headline CPI for the month of December in the Tokyo are came in at 0.3% y/y vs 0.5% as expected. Drop in the headline number is attributed to the falling oil prices. CPI excluding Food and Energy, which is the measure closest to US CPI, came in at 0.6% y/y as expected. Good news is that it didn’t drop as the headline number, Bad news is that the number is nowhere near the 2% target. Retail sales for the month of November fell -1.0% m/m vs -0.4% m/m as expected. Yields on the 10-year JGB (Japanese Government Bonds) went into negative territory for the first time since September 2017.

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

Important news for JPY:
Friday:

• -- Nikkei Manufacturing PMI

Important news for GBP:
Wednesday:

• -- Markit Manufacturing PMI

Thursday:

• -- Markit Construction PMI

Friday:

• -- Markit Services PMI

Important news for AUD:
Monday:

• -- Manufacturing PMI (China)
• -- Non-Manufacturing PMI (China)

Friday:

• -- Caixin Services PMI (China)

Important news for NZD:
Wednesday:

• -- GDT Price Index

Important news for CAD:
Wednesday:

• -- Markit Manufacturing PMI

Friday:

• -- Employment Change
• -- Unemployment Rate

TradersWay team wishes you a Happy New Year and good luck with your trading in the coming year!

 

[katetrades]

Forex Major Currencies Outlook (Jan 7 – Jan 11)

USD

The final Manufacturing PMI for the month of December came in at 53.8 vs 53.9 as expected. This is the lowest reading since September of 2017. Employment category fell to 52.7 vs 55.3 the previous month which is the lowest reading since June of 2017. New orders also showed decline to 54.3 vs 56.7 the previous month. This level is lowest since September 2017. ISM Manufacturing Index came in at 54.1 vs 57.5 as expected with prior reading showing 59.3. This is the biggest drop since 2008. All major categories showed declines with New Orders leading the way with 51.1 vs 62.1 the prior month. Employment figure came in at 56.2 vs 58.4 the previous month. Since PMI is a leading indicator this brings a bit of worry and raises questions regarding the strength of the labour market.

ADP employment report showed that 271k new jobs were added in the US economy for the month of December vs 179k as expected. ADP report once again showed a high correlation with NFP as headline NFP came in at 312k completely smashing expectations of 170k. Unemployment ticked up to 3.9% due to the rise in participation rate to 63.1% which is highest since 2014. Average hourly earnings came in at 0.4% m/m vs 0.3% m/m as expected and at 3.2% y/y vs 3% y/y as expected.

This week we will have inflation data (CPI), FOMC minutes from December’s meeting, trade balance data and non-manufacturing PMI data.

Important news for USD:

Monday:

• -- Factory Orders
• -- ISM Non-Manufacturing PMI

Tuesday:

• -- Trade Balance
• -- Export
• -- Import

Wednesday:

• -- FOMC Minutes

Friday:

• -- CPI
• -- Federal Budget Balance

EUR

The final Manufacturing PMI for the month of December for the Eurozone came in at 51.4 as expected. Contractions were seen in France, probably due to “gilet jaunes” Yellow vest movement and in Italy where the number shows contraction for the third consecutive month. Overall the manufacturing PMI of the Eurozone shows steady decline since the beginning of 2018. Services PMI came in at 51.2 and Composite PMI came in at 51.1. Both numbers came below preliminary readings with Italy and Spain beating the preliminary reading while Germany and France missed.

Preliminary CPI data for the month of December came in at 1.6% y/y vs 1.7% y/y as expected. Drop in the headline figure is a worrisome but it can be attributed to the falling oil prices. Core CPI came in at 1% y/y as expected. The fact that core CPI is not dropping is encouraging but it has stayed at 1% for several months and it is a long way from targeted level of 2%.

This week we will have data on consumption and employment as well as sentiment and climate indicators for the Euro area. Additionally, we will have data on industrial production, consumption and trade balance from Germany.

Important news for EUR:

Monday:

• -- Factory Orders (Germany)
• -- Retail Sales (Germany)
• -- Retail Sales

Tuesday:

• -- Industrial Production (Germany)
• -- Economic Sentiment Indicator
• -- Business Climate Indicator

Wednesday:

• -- Trade Balance (Germany)
• -- Export (Germany)
• -- Import (Germany)
• -- Unemployment Rate

GBP

UK December Manufacturing PMI came in at 54.2 vs 52.5 as expected for a healthy beat. New orders sub-index rose to its highest level since February. This number is helped by stockpiling ahead of the potential no deal Brexit. Services PMI came in at 51.2 vs 50.7 as expected and 50.4 the previous month and Composite PMI came in at 51.4 vs 50.8 the previous month. Decent beat on the data but business expectations category fell to 60.2 from 60.6 the previous month again showing impact that Brexit is having on business conditions in the UK.

This week British Parliament will start working and Brexit deal will be on the agenda. Additionally, we will get data on industrial and manufacturing production as well as trade balance data.

Important news for GBP:

Friday:

• -- Industrial Production
• -- Manufacturing Production
• -- Trade Balance

AUD

China Manufacturing PMI for the month of December came in at 49.4 vs 50 as expected. This puts it into contraction for the first time since July 2016. Non-manufacturing PMI came in at 53.8 vs 53.2 as expected for the composite number of 52.6. New export orders contracted for a seventh straight month. They came in at 46.6 vs 47.0 the previous month. Manufacturing PMI shows signs of deleveraging and less robust growth of the World Economy. Also, it shows that the trade war has had impact on Chinese economy. Caixin PMI, which shows the data for smaller more export-oriented firms, also showed contraction as it came in at 49.7. Slowing of manufacturing process in China could mean less need for import of raw materials which will offset Australia’s exports and weigh negatively on AUD. Final Manufacturing PMI for the month of December for Australia comes in at 54 showing continued expansion in new orders, elevated business conditions and signs of easing inflationary pressures due to lower oil prices. Services PMI data came in at 52.7 vs 53.7 the previous month for a composite number of 52.9. Caixin Services PMI from China came in at 53.9 vs 53 as expected. Positive data from China boosted AUD in the early trading on Friday and AUD was additionally boosted by the announcement of PBOC to cut bank’s RRR rate by 100 bps. The first 50 bps cut will take effect on January 15 and second 50bps cut will be applied from January 25.

This week we will have housing data, data on consumption and trade balance data. Chinese inflation data will also be closely monitored.

Important news for AUD:

Tuesday:

• -- Trade Balance
• -- Export
• -- Import

Wednesday:

• -- Building Approvals

Thursday:

• -- CPI (China)

Friday:

• -- Retail Sales

NZD

GDT Price Index came in at 2.8%. This is the third straight month of rising dairy prices which will surely boost New Zealand’s exports. NZD reacted positively on this news and strengthened against USD but prevailing risk off sentiment will weigh heavily against NZD.

This week we will get housing data from New Zealand.

Important news for NZD:
Thursday:

• -- Building Consents

CAD

Manufacturing PMI for the month of December came in at 53.6 vs 54.9 as expected. Lowest level since January 2017. Employment category fell to its lowest since May 2018.

Canada employment change came in at 9.3k vs 6.9k estimate. Unemployment and participation rates stayed the same with former coming in at 5.6% and latter coming in at 64.4%. Hourly wage rates remained for permanent employees stayed at the same level of 1.5%. Increases were recorded in manufacturing, transportation and warehousing, as well as in health care and social assistance while declines were in wholesale and retail trade as well as in public administration. Also, part time employment change was 28.3k while full time employment change was -18.9k which will put a dent in this report.

This week centre stage will belong to BOC and their rate decision followed by press conference. It is expected that the rate will stay at 1.75% so the interpretation by BOC members of mixed data, falling oil prices, USMCA deal and effects of US-China trade war will be closely monitored. During the week we will also get Ivey PMI data as well as housing and trade balance data.

Important news for CAD:

Monday:

• -- Ivey PMI

Tuesday:

• -- Trade Balance
• -- Export
• -- Import

Wednesday:

• -- BOC Interest Rate Decision
• -- BOC Rate Statement
• -- BOC Monetary Policy Report Press Conference
• -- EIA Crude Oil Stocks Change

Thursday:

• -- Building Permits

Important news for JPY:
Monday:

• -- Nikkei Services PMI

Wednesday:

• -- Labour Cash Earnings

Thursday:

• -- BOJ Kuroda Speech

Friday:

• -- Household Spending
• -- Current Account
• -- Goods Trade Balance

Important news for CHF:
Tuesday:

• -- Unemployment Rate
• -- Retail Sales

Wednesday:

• -- CPI

 

[katetrades]

Forex Major Currencies Outlook (Jan 14 – Jan 18)

USD

December non-manufacturing PMI came in at 57.6 vs 59.0 as expected with prior reading being 60.7. Reading is a five-month low and the only bright point is that new orders ticked up higher.

FED members Bostic and Evans (Evans is a voting member in 2019) have been bit more dovish than expected. Evans stated that “FED has the capacity to wait and take stock of incoming data” and added that H1 of 2019 would be the key for deciding on future rake hikes. Dollar bulls didn’t like the sound of that and dollar was trading lower across the markets. FOMC minutes showed that officials felt that timing and extent of rate hikes is less clear. FED should assess the impact of risks that have become more pronounced in recent months. Chairman Powell said that there is no specified amount of rate hikes. Vice Chair Clarida stated that the economy can tolerate inflation above 2%, effectively saying that there is no need to rush with rate hikes.

Trade balance data from US have been delayed due to the government shutdown. In 2013 when the government shutdown lasted 16 days GDP was slashed 0.6%. We are currently at the day 20. CPI for the month of December came in at 1.9% y/y as expected with core CPI at 2.2% y/y as expected and 0.2% m/m. Average weekly earnings came in at 1.2% y/y as expected. All numbers came in line with expectations.

This week we will have data on consumption, housing and industrial production as well as FED Beige Book. Please note that the US government is still partially closed so in the case that it opens fully during this week we will have plethora of data that were delayed, for example trade balance data, durable goods orders, new home sales, etc.

Important news for USD:

Wednesday:

• -- Retail Sales
• -- FED Beige Book

Thursday:

• -- Building Permits
• -- Housing Starts

Friday:

• -- FED Industrial Production

EUR

Eurozone Retail Sales for the month of November came in at 0.6% m/m vs 0.2% m/m as expected and same as the previous month. This puts yearly figure at 1.1% y/y vs 0.4% y/y as expected. This is one positive reading coming from Eurozone showing that spending and consumption can remain elevated in Q4.

The unemployment rate in the Eurozone dropped to 7.9% from 8.1%. This is a 10-year low for unemployment showing that the labour market continues to tighten. Now, if these numbers can translate to wage growth, inflation picture for Eurozone will be much brighter.

This week we will have data on trade balance and current account, industrial production as well as inflation from both Germany and Eurozone. Full year GDP data for 2018 for Germany will be published on Tuesday.

Important news for EUR:

Monday:

• -- Industrial Production

Tuesday:

• -- Trade Balance
• -- GDP (Germany)

Wednesday:

• -- CPI (Germany)

Thursday

• -- CPI

Friday:

• -- Current Account

GBP

Vote on the Brexit deal in Parliament is set for Tuesday January 15. Prime Minister May has indicated yesterday that if Parliament rejects the deal, she is prepared to lead the UK out of the EU on March 29 in any event. MPs voted in favour of demanding that the government comes up with an alternative plan to Brexit within three working days if it loses the meaningful vote next week.

November GDP came in at 0.2% m/m vs 0.1% m/m as expected. Index of services came in at 0.3% m/m vs 0.1% m/m as expected and that pushed the GDP figure higher since factory data was disappointing with industrial production coming in at -1.5% y/y vs -0.7% y/y as expected and manufacturing production coming in at -1.1%. y/y vs -0.7% y/y as expected. Goods trade balance came in at -£12.0bn vs -£11.4 as expected with the prior reading showing -£11.9bn while the total trade balance deficit declined to -£2.904bn. Total exports rose by 0.4% while the imports increased by 0.1%.

This week the Brexit Parliament Vote will take the centre stage. Pound will be heavily influenced by the outcome. It is expected that the deal will not pass so the government will have to provide plan B within three working days which puts the deadline at January 21. We will have data on consumption and inflation later in the week.

Important news for GBP:

Tuesday:

• -- Brexit Parliament Vote

Wednesday:

• -- CPI

Friday:

• -- Retail Sales

AUD

Manufacturing PMI for the month of December fell to 49.5 vs 51.3 the previous month. This is the first time in 26 months that the reading shows contraction. October’s PMI was above 58, thus this reading shows sharp decline and generally weaker conditions in the Australian economy. Six out of seven activity indexes fell, most notably production, employment and exports. New orders index rose but it is still in contraction territory, below 50.

The November Trade Balance number came in at 1.925bn AUD vs 2.175bn AUD as expected. Slightly weaker than expected reading but encouraging fact is that exports rose 1% m/m. Building permits dropped 9.1% in November for the largest monthly decline since 1980 thus enhancing Australia’s housing problem. Retail Sales came in at 0.4% m/m vs 0.3% m/m as expected.

This week we will have Chinese trade balance data.

Important news for AUD:

Monday:

• -- Trade Balance (China)

NZD

Building permits for the month of November came in at -2% m/m vs 1.5% m/m the previous month. Overall trend is still to the upside. NZD has been very strong this week profiting from the rise in risk appetite and USD weakness.

Important news for NZD:

Monday:

• -- Food Price Index

Tuesday:

• -- GDT Price Index
• -- Electronic Card Retail Sales

Thursday:

• -- Business NZ Manufacturing Index

CAD

Canadian Ivey PMI data for the month of December came in at 59.7 vs 57.2 the previous month and 58.1 as expected. Although the overall number is higher, the employment index decreased for the second consecutive month.

Trade balance data for the month of November came in at -2.06bn CAD vs -2.15bn CAD as expected with the prior reading showing -1.17bn CAD. Better than expected numbers but the deficit widens. Exports have fallen more than expected at -1.8% while imports fell only -0.3%. This is the fourth consecutive month of falling exports with 8 of 11 sectors reporting decline. The energy sector led the way with decrease of 9.2%, mostly due to the lower prices.

BOC has left the overnight rate unchanged at 1.75% as widely expected. They stated that pace of rate hikes will depend on oil and housing and added that housing activity and consumption are weaker than expected. They acknowledged slowdown in global economic growth and see the signs that US – China trade war is weighing in on global demand and commodity prices. The drop in global oil prices has a material impact on the Canadian outlook, resulting in lower terms of trade and national income. Forecast for 2018 GDP has been lowered to 2% vs 2.1% prior and it is expected that inflation will be below for the most of 2019 due to lower gas prices. The inflation will return to 2% by late 2019 as transitory effects unwind. As stated in statement “there is no pre-set course” for future rate decisions and “it’s all about the data”.

This week we will get inflation data from Canada and OPEC report on oil.

Important news for CAD:

Wednesday:

• -- EIA Cushing Crude Oil Stocks Change

Thursday:

• -- OPEC Monthly Oil Market Report

Friday:

• -- CPI

JPY

Labour cash earnings came in at 2% y/y vs 1.2% y/y as expected with real cash earnings coming in at 1.1% y/y vs 0.4% y/y as expected. Nice beat on the data and perhaps higher wages will feed into inflation to bring it back closer to the BOJ target of 2%.

BOJ governor Kuroda stated in his speech that Japan’s economy is expanding moderately and that overseas risks are heightening. He assessed Japan’s financial system as stable and added that BOJ will maintain QQE with yield curve control for as long as needed to achieve targeted 2% inflation in stable manner.

Household spending for the month of November came in at -0.6% y/y vs -0.1% y/y as expected. This number is down for the third consecutive month while wages are rising and consumer confidence is positive. Trade balance data came in at 1348.7bn JPY vs – 612.6bn JPY as expected.

This week we will have national inflation data and data on industrial production.

Important news for JPY:

Friday:

• -- CPI
• -- Industrial Production

CHF

November retail sales data came in at -0.5% y/y vs -0.6% y/y as expected and the unemployment rate came in at 2.4% as expected. CPI data came in at -0.3% m/m vs -0.2% m/m as expected and 0.7% y/y vs 0.8% y/y as expected. Core CPI came in at 0.3% y/y vs 0.2% y/y as expected. Although the core inflation measure ticked higher, it is still too close to 0% level. If headline inflation continues its downtrend, things can get messy for the economy.

 

[katetrades]

Forex Major Currencies Outlook (Jan 21 – Jan 25)

On Monday most banks and financial institutions will be closed in the US due to Martin Luther King’s day so liquidity in the markets will be thinner than usual, causing higher spreads and more volatile movements.

USD

FED’s George, who is the most hawkish member of the FED, also acknowledged that FED can be patient and wait with rate hikes. He added that a pause in the normalisation process would provide time to exercise the economy. This supports the general view they may pause until June. FED’s Williams stated the need for “prudence, patience and good judgement”. He added that FED doesn’t see worrying signs of inflation pressures and that FED will reassess the balance sheet policy if conditions change. US GDP growth will be about 2.0-2.5% in 2019 vs 3% in 2018.

This week we expect to get data on housing, preliminary PMIs and Durable Goods, however due to the ongoing government shutdown some data may be delayed. The shutdown has already cost $3.5 bn according to S&P Global ratings. This is the longest government shutdown in US history, lasting almost a month now.

Important news for USD:

Tuesday:

• -- Existing Home Sales

Thursday:

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

Friday:

• -- Durable Goods
• -- New Home Sales

EUR

Industrial production for the month of November for entire Eurozone came in at -1.7% m/m vs -1.5% m/m as expected. Worse than expected reading reflecting previously published German and French industrial production data signalling further slowdown of economic activity in the Q4. The first release of German GDP data came in at 1.5% y/y as expected for the 2018. Both exports and imports came in lower in 2018 than in 2017 reflecting a slowdown for German products, resulting from slowing economic growth and lower domestic demand.

Eurozone trade balance for the month of November showed a surplus of €15.1 bn vs €12.6bn as expected. However slight inspection under the hood of these numbers shows that higher surplus was achieved by both falling exports and falling imports. Exports fell 1% m/m and imports fell 1.9% m/m. As for trade with the US, the year-to-date November 2018 trade surplus stands at €129.0 bn and that is far greater than the year-to-date November 2017 trade surplus of €107.4 bn. Final CPI reading was in line with the expectations with headline CPI showing 1.6% y/y and core CPI showing 1% y/y.

ECB president Draghi came in as dovish with his remarks that further substantial stimulus is needed. This warning comes as a response to the slew of weak data from EU that were acknowledged by Draghi as weaker than expected. He added that there is no room for complacency which could lead to a dovish statement at next week’s ECB meeting.

This week centre stage will be taken by ECB interest rate decision and monetary policy conference headed by the president Draghi. Changes in the rate are not expected, however due to weaker economic data coming from the EU it is possible that Draghi will be more dovish in his statement shifting the assessment of risks from “broadly balanced” to “tilted to the downside”. Additionally, we will have data on business conditions in EU and Germany as well as preliminary PMIs.

Important news for EUR:

Tuesday:

• -- ZEW Economic Sentiment Indicator (EU and Germany)

Thursday:

• -- Markit Manufacturing PMI (France, Germany and EU)
• -- Markit Services PMI (France, Germany and EU)
• -- Markit Composite PMI (France, Germany and EU)
• -- ECB Interest Rate Decision
• -- ECB Monetary Policy Press Conference

Friday:

• -- Ifo Business Expectations (Germany)
• -- Ifo Business Climate (Germany)

GBP

The Brexit deal was voted down with 230 votes difference (202-432). This is the biggest loss for UK Government in history. Leader of the Labour Party Jeremy Corbyn immediately seized the opportunity and called for a no-confidence vote. PM May survived the no-confidence vote with a narrow margin of 19 votes (325-306). The vote can be repeated in the near future, and if PM May does anything that DUP party doesn’t like they will likely abandon support for her. PM May stated that she will get together with all parties to prepare a way forward. A motion on government’s next steps regarding Brexit will be brought before Parliament on January 21 and debate on the motion will be held on January 29.

December CPI came in at 0.2% m/m as expected and 2.1% y/y as expected with the prior reading showing 2.3%. Fall in the headline inflation is contributed to falling fuel, lubricant and petrol prices. Core CPI came in at 1.9% y/y vs 1.8% y/y as expected. Rise in core inflation shows that real inflationary pressures are holding steady. Retail sales came in at -0.9% m/m vs -0.8% m/m as expected. Retail Sales are 3% y/y. Consumers shaken by the Brexit uncertainties and the fact that most of the Christmas shopping was done on Black Friday in November caused a very weak reading showing the worst December performance in a decade.

This week we will have a Plan B regarding the Brexit from PM May. There are several possibilities: a second referendum, a Norway-style partnership, or a permanent customs union. From a strictly economic prospective we will have data on wages and employment.

Important news for GBP:

Monday:

• -- Plan B regarding the Brexit

Tuesday:

• -- Average Weekly Earnings
• -- Unemployment Rate

AUD

Chinese trade balance for the month of December came in at CNY 395bn vs CNY 345bn as expected. Exports came in at 0.2% y/y vs 6.6% y/y as expected with the prior reading showing 10.2% y/y. Imports came in at -3.1% y/y vs 12.0% y/y as expected with the prior reading showing 7.8% y/y. In USD terms exports fell 4.4% y/y while imports plunged 7.6% y/y. Both export figures and import figures were huge misses showing that the trade war is taking its toll, along with global slowdown (exports) and demand in China is slowing (imports). The Chinese government announced a new stimulus, tax cuts and lowering of the RRR rate, so the country can continue with high paced economic growth.

This week we will have GDP, consumption and industrial production data from China and employment data from Australia.

Important news from AUD:

Monday:

• -- GDP (China)
• -- Retail Sales (China)
• -- Industrial Production (China)

Thursday:

• -- Employment Change
• -- Unemployment Rate
• -- Participation Rate

NZD

Food prices for the month of December came in at -0.2% m/m vs -0.6% m/m the previous month. Lesser fall of prices than in the previous month can be positive for inflation and NZD in general. GDT Price Index came in at 4.2% for a fourth consecutive positive auction. NZD was unchanged on this news possibly because of the overwhelming market themes (Brexit). Electronic card spending for the month of December came in at -2.3% m/m vs -0.4% m/m as expected for a huge miss. This data accounts for about 70% of NZD retail sales data so we can expect a weak number coming in next week. House sales dropped 12.9% y/y. Business NZ manufacturing PMI for the month of December came in at 55.1 vs 53.5 the previous month.

This week we will have inflation data from New Zealand.

Important news for NZD:

Tuesday:

• -- CPI

CAD

CPI for the month of December came in at 2% y/y vs 1.7% y/y as expected. Positive beating immediately reflected in CAD strength across the markets." A month-over-month increase in the air transportation index (+21.7%) reflected higher prices for travel during the holiday season," Statistics Canada reported. Core common and Core trimmed numbers came in at 1.9% y/y, the same as the prior reading while Core median ticked down to 1.8% y/y from 1.9% y/y the previous month. BOC just got new ammunition to continue with its hawkish rhetoric.

This week we will have data on wholesale trade as well as manufacturing and retail sales.

Important news for CAD:

Tuesday:

• -- Manufacturing Sales
• -- Wholesale Trade

Wednesday:

• -- Retail Sales

JPY

Deputy governor Amamiya said in his speech at G20 symposium that ageing population of Japan can negatively affect future economic activity and that it is an important risk factor for the economy. He stated that “given the appropriate policy response, it can also have a positive impact on the economy” and added that ageing is a common policy challenge for all G20 members. National CPI for the month of December came in at 0.3% y/y as expected. CPI excluding fresh food and energy also came in at 0.3% y/y as expected. Far cry from the targeted 2%. Governor Kuroda stated that he expects US-China trade war to be resolved this year.

This week we will have the BOJ interest rate decision, followed by the outlook report, monetary policy statement and press conference will take the centre stage. Changes in the rate are not expected, however revision down of inflation forecasts in outlook report is possible, especially after national CPI data, which means that loose policy will remain for a longer period of time and that is negative for JPY. Additionally, we will see data on trade balance as well as preliminary manufacturing PMI and inflation data for the Tokyo area.

Important news for JPY:

Wednesday:

• -- Trade Balance
• -- Exports
• -- Imports
• -- BOJ Interest Rate Decision
• -- BOJ Outlook Report
• -- BOJ Monetary Policy Statement
• -- BOJ Press Conference

Thursday:

• -- Nikkei Manufacturing PMI

Friday:

• -- Tokyo CPI

CHF

SNB governor Jordan acknowledged that economic uncertainties have increased in recent months. He stated that negative interest rates make life difficult for pension funds and affect the property markets but increasing rates would negatively affect the economy and that would also have a negative impact on pensions. According to him there is no risk of Swiss inflation rising in the near future.

 

[katetrades]

Forex Major Currencies Outlook (Jan 28 – Feb 1)

USD

IMF cut the global growth forecast to 3.5% for 2019 which is the lowest in 3 years; they see growth in 2020 to be at 3.6%. They maintain USD growth forecast at 2.5% for 2019 and 1.8% for 2020. Risk to global growth are tilted to the downside according to them and further escalation of trade tensions remains the key risk factor.

The Government shutdown has been suspended for three weeks until February 15th, by which time President Trump expects Congress to come to an agreement on the budget, otherwise he has stated that he will let the shutdown begin once again.

The overall consensus is that there will be no damage to the US economy in the long run since the state will reimburse workers for their lost salaries. All back-pay during the one-month shutdown is scheduled to be paid during this week. If the government shuts down again, the longer it lasts, the more of a chance the growth of Q1 2019 will be affected. For every week that the government is closed, a little more than 0.1% of GDP is slashed. So far conservative estimates are that the shutdown has cost at least 0.7% of GDP.

This week we will have data on consumer confidence, housing and final PMI numbers. An interest rate decision is expected to stay unchanged. Big event will be Nonfarm payrolls. It is expected that the number will be around 170k, which is a big drop from the December figure. Again, more eyes will be drawn to the average hourly earnings numbers, although the kneejerk reaction will be on the headline NFP number.

Important news for USD:

Tuesday:

• -- Consumer Confidence Index

Wednesday:

• -- ADP Nonfarm Employment Change
• -- Pending Home Sales
• -- FED Interest Rate Decision
• -- FOMC Statement

Friday:

• -- Nonfarm Payrolls
• -- Unemployment Rate
• -- Average Hourly Earnings
• -- Markit Manufacturing PMI
• -- ISM Manufacturing PMI

EUR

IMF cut the Eurozone growth forecast for 2019 to 1.6% from 1.9% projected in October. Bank of Italy cut its GDP growth forecast to 0.6% for 2019 from 1% in December and to 0.9% for 2020 from 1.1% previously. ZEW survey of current situation in Germany plunged to 27.6 vs 45.3 as expected. With Germany being the leading economy in the EU survey shows bleak situation.

Preliminary European PMIs came weaker than expected across the boards. They are still in expansionary territory however manufacturing PMI that came in at 50.5 is weakest since November 2014, services PMI that came in at 50.8 is weakest since August 2013 and composite PMI that came in at 50.7 is weakest since July 2013. Everything points to a stall in EU growth. French composite and services PMI slumped deeper into contraction while a dropdown in German manufacturing PMI, showing contraction due to issues with auto industry and slowing China demand, was offset with a rise in services PMI which lead to expansionary composite PMI reading. According to the PMI data, EU Q1 GDP is 0.1%.

ECB Draghi delivered a message that represents fine balance between risks and confidence during the press conference. Incoming data have continued to be weaker than expected and slowdown is due to fall in external demand as well as some country specific reasons. According to him: "The risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility." Confidence in the outlook is based on continued growth and strong employment and financial conditions are favorable with very low likelihood of recession. The only assessment of the current situation was done in this meeting while new forecasts will be done in March.

This week we will have data on sentiment in the EU as well as preliminary inflation and unemployment from both Germany and EU, preliminary Q4 GDP and final PMI numbers.

Important news for EUR:

Wednesday:

• -- Business Climate Indicator
• -- Economic Sentiment Indicator
• -- CPI (Germany)

Thursday:

• -- Unemployment Rate (Germany)
• -- GDP
• -- Unemployment Rate

Friday:

• -- Markit Manufacturing PMI (Eurozone, Germany, France)
• -- CPI

GBP

Average hourly earnings came in at 3.4% 3m/y vs 3.3% 3m/y as expected. This is the highest reading since July 2008 and if it can turn into consumption it will be great boost for the UK economy. Unemployment ticked down to 4% vs 4.1% as expected.

PM May's Plan B seems to rest on convincing the European Commission to make some concession on the Irish backstop, which keeps the UK in the customs union until a new agreement is struck. Cross-party alliance is emerging for the House of Commons to take control over Brexit if there is no deal by the end of February 26. Additionally, around 40 members of the government threaten to resign next week if the Tory MPs are banned from voting on a plan to prevent a no-deal exit. Hints that Brexit will be delayed from the end of March are pushing GBP higher across the markets.

This week we will have Parliament voting on PM May’s plan B for Brexit, speech from governor Carney and final PMI number.

Important news for GBP:

Tuesday:

• -- Voting on plan B in the Parliament

Wednesday:

• -- BOE Governor Carney Speech

Friday:

• -- Manufacturing PMI

AUD

Chinese Q4 GDP data came in at 6.4% y/y as expected ticking down a notch from 6.5% y/y the previous month. GDP for the full year is 6.6% as expected, readings were in line with expectations, however GDP is the lowest in 28 years and Q4 GDP was the lowest in a decade. Industrial production came in at 5.7% y/y vs 5.3% y/y as expected for a very nice beat and retail sales followed the suit coming in at 8.2% y/y vs 8.2% y/y as expected. IMF cut China’s growth forecast for 2019 and 2020 to 6.2% and warned that economic activity may fall short of the expectations if trade tensions persist.

The employment report for the month of December showed that employment change came in at 21.6k vs 18k as expected. The Unemployment rate fell to 5.0% and participation rate ticked down to 65.6%. All employment change came through part time employment which is concerning, however it shows that labour market conditions are tight. Preliminary PMIs for the month of January came in mixed. Manufacturing ticked higher to 54.3 while services went lower a lot to 51.0 thus dragging the composite lower to 51.5. Weak start for the Australian economy in 2019. Turns in Manufacturing can lead to turns in the Services by two months.

This week we will have inflation data from Australia as well as PMI data from China.

Important news for AUD:

Wednesday:

• -- CPI

Thursday:

• -- Manufacturing PMI (China)
• -- Non-Manufacturing PMI (China)
• -- Caixin Manufacturing PMI (China)

Sunday:

• -- Caixin Services PMI (China)

NZD

Services PMI for the month of December came in at 53.0 vs 53.5 the previous month. New orders sub index improved from November to 59.2 but activity/sales continued to drop and posted 52.2. Growth in the service sector has been slower over the past six months but this reading shows that growth is slowly stabilising and not deteriorating further.

Inflation in Q4 surprised to the upside coming in at 1.9% y/y vs 1.8% y/y as expected. Uptick is more surprising given the weak credit card spending data from New Zealand from the last week. NZD reacted very favourably to the number and strengthened across the markets against various currencies.

This week we will have trade balance data.

Important news for NZD:

Monday:

• -- Trade Balance
• -- Exports
• -- Imports

CAD

Manufacturing sales for the month of November came in at -1.4% vs -1% as expected. Wholesale trade data came in at -1% vs -0.3% as expected. Misses on both fronts signalling a slowdown in the Canadian economy due to the slump in country’s oil sector and generally weaker economic growth. Retail Sales for the month of November disappointed coming in at -0.9% m/m vs -0.6% m/m as expected. Ex autos category came in at -0.6% m/m vs -0.4% m/m as expected. Consumer spending has slowed down in Canada noticeably.

BOC Governor Poloz said in Davos that oil prices will contribute to a drop in GDP of 0.4bp. He emphasized the dangers of the trade war and concluded that it would be a disaster if it escalated. The Canadian economy is in good shape and the pace of future rate hikes will be data dependant. After this week’s retail sales data a rate hike will be pushed further in the future for sure.

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

Important news for CAD:

Thursday:

• -- GDP

Friday:

• -- Markit Manufacturing PMI

JPY

Trade balance data for December came in at -JPY55.3 bn vs – JPY42.3bn as expected. Exports fell -3.8% y/y vs -1.8% y/y as expected for the sharpest fall in 2 years while imports rose 1.9% y/y vs 4% y/y as expected. Misses on all fronts showing that the trade war and global slowdown have impacted Japan’s exporters and that domestic demand is not as strong as expected. Exports to China came in at -7% y/y and they were the biggest contributor to export declines.

BOJ left the interest rate unchanged and monetary policy unchanged as expected. The Median Core CPI forecast for the FY 2019/20 has been slashed down to 0.9% vs 1.4% projected in October. Median Real GDP forecast for fiscal 2019/20 is at 0.9% vs 0.8% as projected in October. Governor Kuroda stated that the drop in oil prices is the key reason for downgrades in the price outlook. He added that it is appropriate to continue with current easing policies and that he doesn’t see a big change in economic fundamentals.

Tokyo area CPI came in at 0.4% y/y vs 0.2% as expected and CPI excluding food, energy came in at 0.7% y/y vs 0.6% y/y as expected. Positive beats for a much-needed rise in inflation to make BOJ encouraged.

This week we will get minutes from the latest meeting of the monetary policy comity, consumption data, industrial production data and employment numbers.

Important events for JPY:

Monday:

• -- BOJ Monetary Policy Meeting Minutes

Wednesday:

• -- Retail Sales

Thursday:

• -- Industrial Production

Friday:

• -- Unemployment Rate
• -- Jobs to Applicants Ratio

CHF

SNB Zurbruegg assessed the outlook for the Swiss economy as favourable. He added that the situation on Forex market remains fragile and that heightened uncertainty, highly valued Frank, low inflation pressure and global low rates warrant expansive policy. SNB Machlear added that negative rates and market interventions are needed to prevent a rise in CHF. SNB Governor Jordan stated that they still have room to maneuver on interest rates and added that there is no need for any change to SNB monetary policy.

This week we will have data on trade and consumption.

Important news for CHF:

Tuesday:

• -- Trade Balance
• -- Exports
• -- Imports

Friday:

• -- Retail Sales

 

[katetrades]

Forex Major Currencies Outlook (Feb 4 – Feb 8)

USD

The US Congressional Budget Office lowered its estimates of the US fiscal deficit for the 2019 fiscal year. They now see the deficit at $897 billion compared to the $981 billion deficit in the April estimate. That's 4.2% of GDP instead of 4.6%. The cost of government shutdown has been projected at $11bn.

FED has left rates unchanged at 2.25-2.50% as expected. Vote on keeping the rates on hold was unanimous. They stated they will be “patient” on future moves and that they are prepared to adjust any details for completing balance sheet normalization in light of economic and financial developments. Economic activity rising at “solid” rate (previously it was “strong” rate, downgrade from previous statement). Dovish statement sent USD quickly 50 pips down against the majors. FED moved from hawkish to neutral stance effectively halting any talks of raising rates.

FED Chairman Powell stated in press conference that growth has slowed in foreign economies and noted the effects of the shutdown. He explained that FED has seen crosscurrents and conflicting signals so they decided for the “patient, wait and see approach”. He is satisfied with progress in balance sheet discussions but no exact number was stated since according to him FED is not at that point yet. FED thinks that the outlook is favourable in general. Continuation of the dovish statement sent stocks to the new highs.

ADP employment change came in at 213k vs 175k as expected with 145k in services and 68k in the goods-producing sector. Job growth was seen in almost every industry with manufacturing adding the most jobs in more than four years. NFP headline number came in at 304k vs 165k as expected for a 100th consecutive month of job gains. Average hourly earnings came in at 3.2% y/y as expected and this is where the good news end since they came 0.1% m/m vs 0.3% m/m as expected. Previous NFP number was revised to the downside from 312k to 220k for a full 90k jobs.The unemployment rate rose to 4% due to the increase in participation rate to 63.2% vs 63% as expected. Underemployment rate rose to 8.1% vs 7.6% the previous month. Overall it is a mixed report that will send USD lower in the first few hours after its announcement.

This week we will have PMI numbers and due to shutdown delayed factory orders data as well as trade balance data.

Important news for USD:

Monday:

• -- Factory Orders

Tuesday:

• -- Trade Balance
• -- Exports
• -- Imports
• -- Markit Services PMI
• -- Markit Composite PMI
• -- ISM Non-Manufacturing PMI

EUR

Consumer confidence for the month of January came in at -7.9 as expected while Economic, Industrial and Service confidence data have all decreased showing the declining confidence in Eurozone economy as a whole. German economy ministry has cut German 2019 growth forecast to 1% from 1.8% citing external risks, Brexit, trade conflicts and external tax environment, as main reasons for lower number. German retail sales for the month of December were abysmal coming in at -4.3% m/m vs 0.6% m/m as expected.

Eurozone preliminary Q4 GDP came in at 0.2% q/q and 1.2% y/y as expected with the unemployment rate coming at 7.9% also as expected. Troubling sign is that preliminary Q4 GDP from Italy came in at -0.2% q/q vs -0.1% q/q thus showing negative GDP for the second consecutive quarter indicating that Italy slips into recession. Italy’s DiMaio has said that this contraction shows failure of previous governments. PM Conte said that recession is only temporary due to US-China trade war and that economy will recover in 2019.

Final manufacturing PMI for the Eurozone came in at 50.5 as expected. Italy’s PMI came in at 47.8 vs 48.8 preliminary showing deeper plunge of Italian economy. Preliminary CPI for the month of January came in at 1.4% as expected with prior reading of 1.6% y/y. Core CPI came in at 1.1% vs 1% as expected. Rise in the core reading is encouraging, showing that inflationary pressures are still present.

This week we will have final PMI data as well as consumption data from the EU along with industrial and trade balance data from Germany.

Important news for EUR:

Tuesday:

• -- Markit Services PMI (Germany, France, EU)
• -- Markit Composite PMI (German, France, EU)
• -- Retail Sales

Wednesday:

• -- Factory Orders (Germany)

Thursday:

• -- Industrial Production (Germany)

Friday:

• -- Trade Balance (Germany)
• -- Exports (Germany)
• -- Imports (Germany)

GBP

Voting in Parliament ended with a mandate for PM May to return to Brussels to renegotiate the so-called “backstop” that aims to prevent a hard border between Northern Ireland and the independent Irish Republic. The EU was strict that it will not change the deal currently on the table. Manufacturing PMI came in at 52.8 vs 53.5 as expected. Purchase of stock volumes has reached record high of 56.3 signalling stockpiling ahead of Brexit number and without it the PMI number would be even weaker.

This week we will have BOE interest rate decision followed by minutes from the MPC meeting and speech by governor Carney. It is expected that rate will stay unchanged so greater importance will be given to minutes and speech, that is where markets will look for more guidance. Additionally, every news regarding Brexit will be closely monitored.

Important news for GBP:

Monday:

• -- Markit/CIPS Construction PMI

Tuesday:

• -- Markit/CIPS Services PMI

Thursday:

• -- BOE Interest Rate Decision
• -- BOE MPC Meeting Minutes
• -- BOE Governor Carney Speech

AUD

China’s industrial profits for the month of December came in at -1.9% y/y vs -1.8% y/y the previous month. Another data pointing to the slowdown in Chinese economy that will impact broader markets. Non-manufacturing PMI for the month of January came in at 54.7 vs 53.8 as expected. Composite PMI came in at 53.2 vs 52.6 as expected. Manufacturing PMI came in at 49.5 vs 49.3 as expected for the second consecutive month in contraction. Caixin Manufacturing PMI came in at 48.3 vs 49.6 as expected. Falling deeper into contraction territory with dropping output subindex signalling softer demand. New orders fell for the second consecutive month at a faster pace.

Headline inflation numbers came in at 0.5% q/q vs 0.4% q/q as expected and 1.8% y/y vs 1.7% y/y as expected with prior reading showing 1.9% y/y. Trimmed mean, which is a core measure came in at 0.4% q/q and 1.8% y/y in line with the expectations. AUD was sent higher immediately on better than expected headline number and rise in iron ore prices.

This week centre stage will be taken by RBA and their interest rate decision followed by rate statement. Rate is expected to stay the same so all eyes will be on the accompanying statement. Additionally, we will have data on housing, trade balance and consumption. We will also get monetary policy statement.

Important news for AUD:

Monday:

• -- Building Approvals

Tuesday:

• -- RBA Interest Rate Decision
• -- RBA Rate Statement
• -- Trade Balance
• -- Exports
• -- Imports
• -- Retail Sales

Wednesday:

• -- RBA Governor Lowe Speech

Friday:

• -- RBA Monetary Policy Statement

NZD

Trade balance data for the month of December came in at NZD264m vs NZD150m as expected with previous month showing deficit of NZD861m. Exports rose NZD5.4bn for a beat vs NZD5bn as expected. Imports came in lower than expected at NZD5.22bn. Exports have been growing for 5 consecutive months and this is the strongest reading since December 2017. However, although markets have embraced these numbers and pushed NZD higher annual trade deficit for 2018 is deficit of NZD5.9bn. S&P leaves NZ rating unchanged at AA but raises outlook to positive.

This week we will have GDT auction as well as employment data.

Important news for NZD:

Wednesday:

• -- GDT Price Index
• -- Employment Change
• -- Unemployment Rate
• -- Participation Rate

CAD

November GDP figures came in at -0.1% m/m as expected and 1.7% y/y vs 1.6% y/y as expected. Raw materials price index came in at 3.8% m/m. Construction activity was down for the sixth consecutive month and came in at -0.3%. Along with the weaker retail sales it represents the biggest concern for Canadian economy. Manufacturing PMI came in at 53.0 vs 53.6 as expected. Wrong direction for the manufacturing but at least it is in the positives unlike with some European countries.

This week we will have data on trade balance and employment as well as Ivey PMI.

Important news for CAD:

Tuesday:

• -- Trade Balance
• -- Exports
• -- Imports

Wednesday:

• -- Ivey PMI

Friday:

• -- Employment Change
• -- Unemployment Rate
• -- Participation Rate

JPY

Meeting minutes for the December BOJ meeting saw members stating that it is appropriate to continue easing persistently and that CPI will likely gradually increase toward the target of 2%. Overall assessment was that "The Japanese economy is recovering at a moderate pace." Japan’s Cabinet Office has cut its evaluation of exports for the month of January citing the trade war between US and China as a main culprit.

Retail sales for the month of December came in at 0.9% m/m vs 0.4% m/m as expected and 1.3% y/y vs 1% y/y as expected. Much needed beats on retail sales data. If the effects spill over to the inflation it can push it up in the right direction, towards the magical 2% level. Preliminary Industrial production reading for the month of January came in at -0.1% m/m vs -0.5% m/m as expected. Outlook is for it to rise to 2.6% m/m in February. Unemployment rate came in at 2.4% vs 2.5% as expected with Job-to-applicant ratio coming in at 1.63 as expected.

This week we will have data on household spending, earnings as well as goods trade balance.

Important news for JPY:

Tuesday:

• -- Nikkei Services PMI

Friday:

• -- Household Spending
• -- Goods Trade Balance
• -- Labour Cash Earnings

CHF

Trade balance data for the month of December came in at CHF1.9bn vs CHF4.74bn the prior month. Large drop in the main figure was caused by exports which fell 5% m/m. Imports rose 3.7% m/m. Drop in exports is worrying and indicates far fetching reach of global slowdown. Rise of imports is a positive thing indicating that domestic demand holds steadily.

This week we will have employment data.

Important news for CHF:

Friday:

• -- Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (Feb 11 – Feb 15)

USD

ISM Non-Manufacturing PMI came in at 56.7 vs 57.1 as expected. New export orders had a tumble from 59.5 to 50.5 showing that a slowdown abroad is taking place. This is the worst new export orders reading in two years. Although data came in worse than expected, the domestic situation is stable and the reading is much higher than across the globe (Europe, Australia, Japan, China, etc.). Trade balance data for the month of November came in at -$49.3bn vs -$54bn as expected.

US Treasury secretary, Steven Mnuchin will visit China next week with US Trade Representative Lightihizer to continue trade talks. March 1 deadline is slowly creeping in on us and fear of US-China trade war escalations are mounting. Reports are coming that the Trump-Xi meeting will unlikely be held before the March 1 deadline. The Government could shut down again on February 15 if an agreement is not reached.

This week we will have continuation of trade talks and possible renewal of government shutdown on Friday. We will get data regarding inflation, consumption, federal budget and inventories.

Important news for USD:

Wednesday:

• -- CPI
• -- Federal Budget Balance

Thursday:

• -- Retail Sales
• -- Business Inventories

Friday:

• -- Possible Government Shutdown

EUR

Final Services PMI for the Eurozone for the month of January came in at 51.2 vs 50.8 preliminary. The number was pushed higher primarily by Spain’s number of 54.7. Spain remains the only bright spot. Italy dropped into contraction with reading of 49.7. Composite reading came in at 51 while new business index slid into contraction territory at 49.5 vs 50.7 the previous month. Retail sales for the month of December came in at -1.6% m/m as expected and 0.6% y/y vs 0.5% y/y as expected. Abysmal German number of -4.3% m/m has dragged down the retail sales.

The European Commission cut economic projections for Eurozone. GDP growth in 2019 is seen at 1.3% vs 1.9% previously and 2020 GDP is seen at 1.6% vs 1.7% previously. Inflation for 2019 has also been slashed to 1.4% vs 1.8% previously. Germany, France and Italy are the main drags on the GDP growth domestically while global slowdown and trade tensions weigh in from the outside.

This week we will have data on industrial production, employment change, trade balance and second estimate of Q4 GDP.

Important news for EUR:

Wednesday:

• -- Industrial Production

Thursday:

• -- Employment Change
• -- GDP

Friday:

• -- Trade Balance

GBP

Construction PMI for the month of January came in at 50.6 vs 52.5 as expected with prior reading being 52.8. This is a ten-month low reading as worries around Brexit mount on the construction activity. Services PMI came in at 50.1 vs 51 as expected and Composite PMI came in at 50.3 vs 51.4 as expected. Services reading is weakest since July 2016 and shows that uncertainty around Brexit causes a lot of disturbances in economic activity.

BOE has left the bank rate unchanged at 0.75% as expected with a unanimous vote. They have cut GDP growth forecasts to 1.2% for 2019 and 1.5% for 2020; they were both previously projected at 1.7%. CPI is expected to fall below 2% in the following months but they expect it to be at 2.35% in one year’s time. They acknowledge that Brexit damage has increased causing volatility in the data hitting both the housing markets and consumers. A No-deal Brexit could mean substantial economic contraction.

The UK PM May set herself a deadline of February 13 to re-negotiate the Brexit deal before the UK parliament will take over. They will most likely ask for a postponing of Brexit. UK government spokeswoman stated that the government intends to hold a parliament vote on February 14. Labour leader Corbyn sent a letter to PM May with five legally binding commitments that it would require to get support from his party. Tusk endorsed the letter which puts May in peculiar position. If she accepts, it may alienate her own party and if she brushes it off, it will show that the way was presented to her but she passed on it.

This week we will have data on industrial production, investments, trade balance, first reading of Q4 GDP, inflation and consumption.

Important news for GBP:

Monday:

• -- Industrial Production
• -- Manufacturing Production
• -- Business Investment
• -- Trade Balance
• -- GDP

Wednesday:

• -- CPI

Friday:

• -- Retail Sales

AUD

China Caixing Services PMI for the month of January came in at 53.6 vs 53.4 as expected. Composite number came in at 50.9 vs 52.2 the previous month showing that services activity continues to grow steadily while manufacturing sector struggles.

Building approvals for the month of December came in at -8.4% m/m vs 2% as expected. This data is very volatile from month to month taking into consideration that number is -22.5% y/y -- this paints a very nasty picture for housing in Australia. Trade balance for the month of December shows a healthy surplus of AUD3681m vs AUD2225m. Unfortunately for the economy this larger than expected surplus was achieved with a fall in exports of 2% m/m and fall in imports of 6% m/m. Retail sales for the month of December came in at -0.4% m/m vs 0% m/m as expected. Another in the line of weak data coming from Australia.

RBA has left cash rate unchanged stating that low rates support economy. Inflation remains low and stable and it is expected to pick up gradually, however no reasons were given as to why RBA expects an increase in the inflation. Household consumption remains a source of uncertainty. The labour market remains strong. Further falls in the unemployment rate to 4.75% are expected and wage growth is expected to pick up gradually over time. The global economy has slowed down and downside risks have increased. GDP and inflation projections have been cut. The lower inflation forecast was attributed to oil and core inflation will stay near 2%.

RBA Governor Lowe stated that probabilities of next rate move “appear to be more evenly balanced”, meaning that there are scenarios where the next move is up and scenarios where the next move is down. If jobs and wages are rising it will be appropriate to raise rates, however if unemployment rises and inflation stalls, lower rates might be appropriate. Lower rates = lower AUD. A change in the tone from RBA in characterizing the next rate move as evenly balanced has sent AUD lower. Monetary policy has changed from a tightening bias to a more neutral stance. Markets are now pricing in a rate cut by the end of the year.

This week China returns after Lunar New Year celebration so we will have data on trade balance and inflation. We will also have speech from assistant governor Kent.

Important news for AUD:

Thursday:

• -- Trade Balance (China)
• -- Export (China)
• -- Import (China)
• -- RBA Assistant Governor Kent Speech

Friday:

• -- CPI (China)

NZD

Building permits for the month of December came in at 5.1% m/m vs -2% m/m in the previous month. Number for the year is 9.8%.

The employment report for Q4 showed rise in the unemployment rate to 4.3% vs 4.1% as expected. Employment change came in at 0.1% q/q vs 0.3% q/q as expected and 2.3% y/y vs 2.6% y/y as expected. The participation rate fell to 70.9% which is still high compared to other countries, however rise in unemployment and a drop in the participation rate are worrisome. A bright spot are wages with average hourly earnings coming in at 1% vs 0.8% as expected. An overall negative report since most data came in worse than expected and sent NZD tumbling down.

This week we will have the RBNZ interest rate decision as a central event. Employment data will add to a more cautious tone from the RBNZ … softer outlook for activity, global growth risks. Hints of rate cuts may be on the table. We will also have data on electronic card retail sales, food inflation and manufacturing index.

Important news for NZD:

Monday:

• -- Electronic Card Retail Sales

Tuesday:

• -- RBNZ Interest Rate Decision
• -- RBNZ Rate Statement
• -- RBNZ Monetary Policy Statement
• -- RBNZ Press Conference

Wednesday:

• -- Food Price Index

Thursday:

• -- BusinessNZ Manufacturing Index

CAD

Employment change heavily beat expectations coming in at 66.8k vs 5k as expected. The jump in employment was mostly among the youth aged 15-24 and in the services-producing industry. Wholesale and retail trade were the main contributors. Unemployment rose to 5.8% vs 5.7% the previous month due to a rise in the participation rate to 65.6%. Both full-time and part-time jobs saw an increase with the former rising 30.9k and latter 36k. Monthly change came in at 0.4% for a very strong report showing tight labour conditions in Canadian economy. Building permits for the month of December came in at 6% m/m vs -1% as expected. Ivey PMI came in at 54.7 vs 59.7 the previous month.

This week we will have trade balance data, monthly report from OPEC regarding oil and manufacturing sales.

Important news for CAD:

Monday:

• -- Trade Balance
• -- Exports
• -- Imports

Tuesday:

• -- OPEC Monthly Oil Market Report

Thursday:

• -- Manufacturing Sales

JPY

Nikkei Services PMI for the month of January came in at 51.6 vs 51 the previous month due to a rise in domestic demand. Composite PMI fell to 50.9 vs 52 the previous month due to the fall in manufacturing activity. Household spending missed expectations coming in at 0.1% y/y vs 0.8% y/y as expected with prior reading showing -0.6% y/y. Labour cash earnings came in at 1.8% y/y vs 1.7% y/y as expected. Beat on the headline reading, however real cash earnings came in at 1.4% y/y vs 1.7% y/y as expected.

This week we will have preliminary Q4 GDP data as well as data on industrial production.

Important news for JPY:

Thursday:

• -- GDP

Friday:

• -- Industrial Production

CHF

The unemployment rate ticked up to 2.8% vs 2.7% the previous month, however the seasonally adjusted unemployment rate holds steady at 2.4% which is the lowest since 2002.

This week we will have data on inflation.

Important news for CHF:

Monday:

• -- CPI

 

[katetrades]

Forex Major Currencies Outlook (Feb 18 – Feb 23)

Please note that President’s day is on Monday Feb 18, financial institutions will not be working therefore liquidity in the markets will be lower which can lead to volatile movements.

USD

CPI for the month of January came in at 1.6% y/y vs 1.5% y/y as expected with prior reading being 1.9% y/y and 0% m/m vs 0.1% m/m as expected. CPI excluding food and energy came in at 2.2% y/y vs 2.1% y/y as expected and 0.2% m/m as expected. Average weekly and hourly earnings have beaten the expectations coming at 1.9% y/y vs 1.4% y/y as expected and 1.7% y/y vs 1.3% y/y as expected respectively. Rise in wages is very encouraging for the US economy, however it is not sufficient enough to cause FED to consider immediate rate hikes. CPI has ticked a bit higher but monthly figure stayed unchanged due to the energy prices.

US budget or the month of December shows higher than expected deficit of -$13.5bn vs -$11bn as expected. US fiscal 2019 year-to-date deficit is -$319bn versus comparable fiscal 2018 deficit of -$225bn. For the fiscal year to date, corporate income tax receipts are down -17.3%, individual tax receipts are down -3.5%. On the other hand Social Security receipts are up 6.1% while customs duties are up staggering 88.7%. Overall tax cuts introduced last year are dragging receipts lower and are not offset fully by receipts from the higher growth or cuts in spending. US national debt has risen to the record of $22 trillion.

Retail sales for the month of December came in at -1.2% m/m vs 0.1% m/m as expected for the worst monthly reading since 2009. Control group reading came in at -1.7% vs 0.4% as expected which is the worst reading sine 2000. The reading was delayed due to the shutdown and it shows that holiday shopping has been done during Black Friday. The numbers are very bad and USD felt the pressure immediately losing its ground against all the majors. GDP projections for Q4 have been lowered due to the abysmal retail sales numbers. Atlanta FED sees it now at 1.5% vs 2.7% estimate on February 6. Industrial production came in at -0.6% m/m vs 0.1% m/m as expected. Bad releases keep on piling up. After few more bad releases questions about health of US economy will be raised.

Compromise seems to have been reached to avoid another government shutdown. President Trump stated that he will sign the funding bill to keep the government open and then he would use executive action to declare a national emergency which will get him $8bn for a border wall. Chinese president Xi confirmed that trade negotiations will continue in Washington this coming week.

This week we will have FOMC minutes from the latest FOMC meeting where FED opted for patience, durable goods orders for the month of December, due to shutdown that data was delayed, preliminary PMIs for the month of February and housing data.

Important news for USD:

Wednesday:

• -- FOMC Minutes

Thursday:

• -- Durable Goods Orders
• -- Markit Manufacturing PMI
• -- Markit Services PMI
• -- Markit Composite PMI
• -- Existing Home Sales

EUR

Industrial production in EU continues to weaken coming in at -0.9% m/m vs -0.4% m/m as expected and -4.2% y/y vs -3% as expected. Year on year reading us the worst since 2009 bringing Eurozone back to the dark times.

Germany’s preliminary Q4 GDP came in at 0% q/q vs 0.1% q/q as expected. Technical recession of two consecutive quarters with negative GDP has been barely avoided with Q4 GDP staying flat but the growth remain very weak and it is not encouraging for the EUR. Eurozone second reading of Q4 GDP came in at 0.2% q/q and 1.2% y/y as expected.

This week we will have surveys on economic sentiment, consumer confidence and business climate as well as preliminary PMIs for the month of February along with final Q4 GDP data for Germany.

Important news for EUR:

Tuesday:

• -- ZEW Economic Sentiment Indicator (Germany and EU)

Wednesday:

• -- Consumer Confidence Index

Thursday:

• -- Markit Manufacturing PMI (France, Germany and EU)
• -- Markit Services PMI (France, Germany and EU)
• -- Markit Composite PMI (France, Germany and EU)
• -- Monetary Policy Meeting Accounts

Friday:

• -- GDP (Germany)
• -- Ifo Business Climate (Germany)
• -- CPI

GBP

Preliminary Q4 GDP figures came in at 0.2% q/q vs 0.3% q/q as expected. Main drag on the number was total business investment category which came in at -1.4% q/q vs -1% q/q as expected showing the reluctance of UK business to invest while uncertainties around Brexit hover in the air. This is the fourth straight quarter of falling business investments. Car production was another drag on GDP as it fell 4.9% q/q which is the worse result since Q1 2009. Industrial and manufacturing production as well as construction output all came in worse than expected and in the negatives adding more to the mounting Brexit pressures. Exports in the last quarter have risen 0.9% q/q vs 1/% q/q as expected and imports rose to 1.3% q/q vs 1% q/q as expected showing that domestic demand is still robust. Household spending kept the economy on the right path.

CPI for the month of January came in at -0.8% m/m vs -0.7% m/m as expected and 1.8% y/y vs 1.9% y/y as expected. This figure is the lowest for two years and the Office for National Statistics attributed the drop to cheaper gas, electricity and petrol prices, partly offset by cheaper ferry tickets and air fares. Core CPI held steadily at 1.9% y/y. Retail sales came in at 1% m/m vs 0.2% m/m as expected and 4.2% y/y vs 3.4% y/y as expected. Positive beating was spurred by strong clothing store sales.

Britain and Switzerland have signed trade continuity agreement which allows them to trade freely without any new tariffs. Meaningful vote on Brexit in the Parliament has been postponed by PM May and it is expected that it will be held on February 27.

This week we will have data on employment and wages as well as continuation of Brexit negotiations.

Important news for GBP:

Tuesday:

• -- Average Hourly Earnings
• -- Unemployment Rate

AUD

Australian housing sector continues to worsen. Data on home loan approvals came in at -6.1% m/m vs -2% m/m as expected. This represents fourth straight month of falling home loan approvals and adds fuel to the speculations of rate cut toward the end of the year.

Chinese trade balance data for the month of January came in at $39.16bn vs $34.3bn as expected. Exports rose 9.1% y/y vs -3.3% y/y as expected for a huge beat while imports came in at -1.5% y/y vs -10.2% y/y as expected. Due to lunar new year holidays there is some distortion in the figures so when the data for the February come out we will have a better picture. That being sad, exports coming in from China are very encouraging while imports although better than expected pose a bit of concern. Trade surplus with USA has dropped to $27.3bn vs $29.87bn the previous month with exports falling -2.4% y/y and imports collapsing staggering -41.2% y/y. Chinese CPI came in at 1.7% y/y vs 1.9% y/y as expected. Slowdown in food inflation was the main drag on inflation.

This week we will have RBA meeting minutes from the last RBA meeting along with wage and employment data.

Important news for AUD:

Tuesday:

• -- RBA Meeting Minutes

Wednesday:

• -- Wage Price Index

Thursday:

• -- Employment Change
• -- Participation Rate
• -- Unemployment Rate

NZD

RBNZ has left OCR unchanged at 1.75% as widely expected. With their new projections they see rate rising to 1.84% in December of 2020 and 2.36% in March of 2022. Annual CPI will be at 1.7% by March of 2020. Core CPI is expected to gradually rise to 2%. Continued supportive monetary policy is needed to raise CPI to 2% level. Next cash rate move could be up or down. Markets were prepared for dovish RBNZ and when they acknowledged that next rate move could be also up NZD was sent upwards. Manufacturing PMI for the month of January came in at 53.1 vs 55.1 the previous month. New orders sub index came in at 52.2 for a third consecutive falling month and lowest reading in past 13 months.

This week we will have GDT auction and data on consumption at the end of the week.

Important news for NZD:

Tuesday:

• -- GDT Price Index

Sunday:

• -- Retail Sales

CAD

Manufacturing sales for the month of December came in at -1.3% m/m vs 0.4% m/m. Unexpected drop in factory sales for the last month of 2018. This is second month in a row of negative reading and it sent CAD falling against majors including USD who had bad retail sales data published at the same time. Housing price index came in at 0% m/m as expected for another lacklustre data from Canada. Five consecutive months of flat readings for the index. Existing home sales came in at 3.6% m/m vs -0.6% m/m as expected.

This week we will have data on wholesale, speech by governor Poloz and data on consumption.

Important news for CAD:

Thursday:

• -- Wholesale Trade
• -- BOC Governor Poloz Speech

Friday:

• -- Retail Sales

JPY

GDP data for the Q4 came in at 0.3% q/q vs 0.4% q/q as expected and 1.4% y/y as expected. GDP deflator which is an inflation measure came in at -0.3% y/y vs -0.4% y/y. Consumer spending was 0.6% q/q vs 0.7% q/q as expected and business spending was 2.4% q/q vs 1.8% q/q. Headline number is weaker than expected but it shows that Japan’s economy managed to recover after GDP being negative in Q3 due to natural disasters. Business spending was the main input in the GDP figure with a healthy beat of the expectations. Exports didn’t show expected recovery, mainly due to lower imports from China.

This week we will have trade balance data, preliminary PMI for the month of February and national inflation data.

Important news for JPY:

Wednesday:

• -- Trade Balance
• -- Exports
• -- Imports

Thursday:

• -- Nikkei Manufacturing PMI

Friday:

• -- CPI

CHF

January CPI came in at -0.3% m/m vs – 0.2% m/m as expected, however the core CPI jumped to 0.5% y/y vs 0.3% as expected which is a five-month high and it shows that core inflationary pressures are rising. However with global slowdown it is interesting to see how long will those pressures maintain.

This week we will have data on trade balance as well as on industrial production.

Important news for CHF:

Tuesday:

• -- Trade Balance
• -- Exports
• -- Imports

Friday:

• -- Industrial Production

 

[katetrades]

Forex Major Currencies Outlook (Feb 25 – Mar 1)

USD

FED’s Williams stated that rates are already at neutral level. It is a sign that the FED will be in no rush to hike. Policymakers are increasingly pointing to risks abroad as a justification to wait. That means that even months of positive US economic data may not be enough to put the Fed back on a hiking path. FOMC minutes showed that almost all FED officials were in favour of ending the balance sheet reduction before the year ends. Positive domestic outlook was emphasized along with concerns regarding soft European and Chinese growth.

Durable goods for the month of December came in at 1.2% vs 1.7% as expected. Main drag was the non-defence ex-air component which came in at -0.7% vs 0.2% as expected. Philadelphia FED business index came in at -4.1 vs 14 as expected with new orders index and shipments plummeting to -2.4 vs 21.3 the previous month and -5.3 vs 12.3 the previous month respectively.

This week’s main data will be the first reading of Q4 GDP. Atlanta FED lowered forecast from 1.5% to 1.4% due to weak durable goods and retail sales data. If the number surprises to the downside it could lead to USD weakness. Additionally, we will get data on housing, trade balance, PCE and final manufacturing PMI.

Important news for USD:

Tuesday:

• -- Housing Starts
• -- Building Permits
• -- Consumer Confidence Index

Wednesday:

• -- Goods Trade Balance
• -- Factory Orders
• -- Pending Home Sales

Thursday:

• -- GDP

Friday:

• -- Final day of US – China trade war treat
• -- PCE
• -- Personal Spending
• -- Personal Income
• -- Markit Manufacturing PMI
• -- ISM Manufacturing PMI

EUR

ZEW current situation survey for Germany came in at 15 vs 20 as expected with prior reading showing 27.6. This is the lowest reading since December of 2014 and it shows continued deterioration of the German economy. ZEW does not see chances for “rapid recovery” of slumping German economy. Economic sentiment showing expectations about the future of the economy improved slightly to -13.4 vs -15 the previous month for Germany and -16.6 vs -20.9 for the entire Eurozone, however those numbers are still in the negatives.

Preliminary PMI reading for the Eurozone showed manufacturing PMI at 49.2 vs 50.3 as expected. Manufacturing dropped into contraction pushed by huge drop in German manufacturing PMI that came in at 47.6 with export orders component falling to lowest levels in over six years. Brexit, China slowdown and potential tariffs from US on German car makers all pushed the number down. Services PMI and composite PMI beat expectations coming in at 52.3 and 51.4 respectively. ECB minutes showed that EU growth could be below potential for several quarters and that although possibility of recession is low, levels of uncertainties are high. Market pricing for rate hike is accurate meaning that ECB is still on the path to raise rates this year.

This week we will have data on sentiment and climate in EU, inflation, unemployment and final reading of manufacturing PMI.

Important news for EUR:

Wednesday:

• -- Business Climate Indicator
• -- Economic Sentiment Indicator
• -- Consumer Confidence Index

Thursday:

• -- CPI (Germany and France)

Friday:

• -- Markit Manufacturing PMI (Germany, France, Spain, Italy and EU)
• -- CPI
• -- Unemployment Rate

GBP

Average weekly earnings for the month of December came in at 3.4% 3m/y vs 3.5% 3m/y as expected. The unemployment rate stayed at 4% as expected and employment change came in at 167k vs 151k as expected. An additional strong labour report coming from UK shows tight labour market conditions. Wage growth ticked a bit to the downside but it is not of a great concern. Due to the current circumstances this report falls second to the ongoing Brexit situation.

Deadline for PM May to convince parliament members of her plan is February 26. Brexit debate continues on February 27. Reuters reported, citing EU diplomats, that Brexit formal text may be agreed in mid-March.

This week we will have continuation of Brexit debate in the Parliament as well as manufacturing PMI data.

Important news for GBP:

Tuesday:

• -- PM May presents her plan in the Parliament

Wednesday:

• -- Brexit debate continues

Friday:

• -- Markit Manufacturing PMI

AUD

RBA meeting minutes showed that significant uncertainties were seen by the board members and that the next rate move can be either up or down. There is no need for a near-term move in rates as current policy should allow for progress on unemployment and inflation. Outlook for consumption was characterized as “key uncertainty” for policy. Labour market data are stronger than other economic data and they noted that downside risks to global economy had increased with China growth slowing more than GDP figures show. With this statement RBA is taking more of “data dependent” approach, waiting for further clear signs before taking a firmer stance.

Employment change for the month of January came in at 39.1k vs 15k as expected for a huge beat. Full time employment change came in at 65.4k which is a massive result. The unemployment rate stayed the same at 5% and participation rate ticked higher to 65.7%. Wage price index for Q4 2018 came in at 0.5% q/q vs 0.6% q/q as expected. RBA stated consumption as “key uncertainty” and this reading will not help. They want to see faster wage growth than this and see it spilling into consumption so it can spur economic growth. AUD was sent higher on the great jobs report and then Westpac came out with changes to its forecasts regarding the Australian economy and stated that they see two rate cuts in 2019. This immediately put a lot of pressure on AUD which was then pressured even more when Chinese port Dailan limited import of Australian coal as a response to Australia’s ban on Huawei.

This week we will have PMIs from both China and Australia.

Important news for AUD:

Thursday:

• -- Manufacturing PMI (China)
• -- Non-Manufacturing PMI (China)
• -- AIG Manufacturing Index

Friday:

• -- Caixin Manufacturing PMI (China)

NZD

Services PMI for the month of January comes in at 56.3 vs 53.2 the previous month. A healthy jump in the reading was provided by new orders and activity as well as drop in inventory. GDT price index rose 0.9% at the latest auction. This is the sixth consecutive auction with rising prices but rise was weaker than on any previous rising auctions.

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

Important news for NZD:

Tuesday:

• -- Trade Balance
• -- Export
• -- Import

Thursday:

• -- Business Confidence
• -- Building Permits

CAD

Canadian retail sales for the month of December came in at -0.1% m/m vs -0.3% m/m as expected. Ex autos category came in at -0.5% m/m vs -0.3% m/m as expected. Better than expected reading but still in the negative. Lower oil prices are responsible for a large part of the decrease. Weaker sales at gasoline stations were largely to blame. Holiday season in Canada was weak and didn’t manage to propel retail sales into positive territory, thus confirming weakening contribution to GDP from households. Wholesale sales came in at 0.3% m/m vs -0.2% m/m as expected.

This week we will have data on inflation and GDP along with manufacturing PMI.

Important news for CAD:

Wednesday:

• -- CPI

Friday:

• -- GDP
• -- Markit Manufacturing PMI

JPY

Governor Kuroda stated in his speech that they will react if JPY appreciation hurts the economy. They can react by buying more assets or lowering the rates. This more dovish approach pushed JPY lower across the markets.

Trade balance for the month of January came in at -JPY1415.2bn vs -JPY1029.1 bn as expected. Exports plummeted -8.4% y/y vs -5.7% y/y as expected. Exports to China and Asia contributed most to the decline. Exports to China fell -17.4% y/y and will continue to decline in February due to the holiday period. Imports came in at -0.6% y/y vs -3.5% y/y as expected. Preliminary manufacturing PMI for the month of February came in at 48.5 vs 50.3 the prior month. This is the first time that data fell into contraction since August 2016. Output expectations turned negative for the first time in over six years. Slowdown in China presents itself as a main drag on the Japanese economy with both new orders and new export orders continuing to decrease.

National CPI data for the month of January came in line with the expectation. Headline figure came in at 0.2% y/y and ex food, energy came in at 0.4% y/y. Inflation ex food, which is how Japan measures its core rate came in at 0.8% y/y vs 0.7% the previous month. Still a long way from targeted 2% and with recent global slowdown it doesn’t look like it will pick up any time soon.

This week we will have data on consumption, industrial production, inflation from Tokyo area and unemployment.

Important news for JPY:

Thursday:

• -- Retail Sales
• -- Industrial Production

Friday:

• -- Tokyo CPI
• -- Unemployment Rate
• -- Jobs to Applicants Ratio
• -- Nikkei Manufacturing PMI
• -- Consumer Confidence

CHF

January trade balance figures came in at CHF3.04bn vs CHF1.9bn the prior month. Exports rose 0.6% m/m showing demand for Swiss goods outside Switzerland. Imports rose 4.8% m/m showing that domestic demand is still robust.

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

Important news for CHF:

Monday:

• -- Employment level

Thursday:

• -- GDP

Friday:

• -- Retail Sales

 

[katetrades]

Forex Major Currencies Outlook (Mar 4 – Mar 8)

USD

Over the weekend President Trump has opted to postpone a tariff hike on Chinese imports stating that positive progress has been made in on-going negotiations.

Housing starts for December came in at 1078k vs 1256k as expected with a drop of -11.2 m/m. This is the lowest number since September 2016. Dreadful housing data shows pains of the housing market in the US and gives more sign to the FED that they cannot continue with rate hikes. Consumer confidence came in at 131.4 vs 124.9 showing a strong belief in US economy by consumers and easing the worries from the end of 2018. Advanced goods trade balance came in at -$79.5bn vs -$73.9bn as expected for the record high deficit. Factory orders in December came in at 0.1% m/m vs 0.6% m/m as expected and revision lower to core durable orders from -0.7% to -1% adds further worry to a poor durable goods report.

GDP for Q4 came in at 2.6% q/q vs 2.2% as expected and 3.1% y/y. GDP for 2018 was 2.9% which is highest since 2015. Personal consumption was 2.8% and business investment (capex) added 6.2% to GDP for a nice beat of the expectations. Inventories contributed as well to the GDP while Net exports subtracted from GDP less than expected. Regarding inflation data, the GDP price index came in at 1.8% q/q vs 1.7% q/q as expected with prior reading being 1.8% q/q and core PCE came in at 1.7% q/q vs 1.6% q/q as expected with prior showing 1.6% q/q.

FED Chairman Powell reaffirmed a patient approach toward monetary policy in his testimony before Senate. He also added that FED sees favourable economic outlook with some cross-currents. Recent economic data has 'softened' but 2019 expected to be 'solid' although slower than 2018. There are some signs of stronger wage growth. The balance sheet reduction program could end by the year which is exactly what the markets’ want to hear.

This week we will have more PMI data, housing and trade balance data with NFP on Friday as the prime event. The labour market is very strong in the US so it is expected for that trend to continue. Earnings will be of bigger importance as an increase in earnings leads to a higher standard of living and potentially can add to upward pressures on inflation.

Important news for USD:

Tuesday:

• -- Markit Services PMI
• -- Markit Composite PMI
• -- New Home Sales
• -- ISM Non-Manufacturing PMI
• -- Federal Budget Balance

Wednesday:

• -- ADP Nonfarm Employment Change
• -- Trade Balance
• -- Exports
• -- Imports
• -- FED Beige Book

Friday:

• -- Nonfarm Payrolls
• -- Unemployment Rate
• -- Participation Rate
• -- Average Hourly Earnings

EUR

Eurozone consumer confidence for the month of February came in at -7.4 as expected. Industrial confidence shows a decline while services, overall economic confidence and business climate indicator show a slight improvement. They are however all on the weak side showing a growth slowdown in the region. The unemployment rate has ticked down to 7.8% continuing its trend downwards. Preliminary CPI for the month of February came in at 1.5% y/y as expected, prior reading was 1.4% y/y. Core CPI however slipped to 1% y/y vs 1.1% y/y as expected. The rise in headline inflation can be attributed to rising oil prices, but fall in core CPI will give headache to ECB.

This week we will have final PMI readings along with consumption data and third reading of Q4 GDP. Main event will be ECB interest rate decision followed by press conference. It is expected that interest rate will stay unchanged but language of the statement will be closely monitored since data coming in from EU lately has not been encouraging.

Important news for EUR:

Tuesday:

• -- Markit Services PMI (EU, Germany, France)
• -- Markit Composite PMI (EU, Germany, France)
• -- Retail Sales

Thursday:

• -- ECB Interest Rate Decision
• -- ECB Monetary Policy Press Conference
• -- Employment Change
• -- GDP

GBP

Meaningful vote in Parliament will be postponed until March 12 at the latest while PM May continues to seek concessions from the EU. If PM May’s deal doesn’t go through Parliament will seek to take control of the process. They will most likely ask for a delay in the process and remove No Deal Brexit from the table which will strengthen the GBP. PM May confirmed in parliament that a second meaningful vote will be held by March 12. If government loses the meaningful vote, a new vote on leaving the EU without a deal will be held. The UK will only leave without a deal on explicit consent of parliament. If parliament rejects deal and no-deal, a new vote will be held on March 14 to vote on limited Article 50 extension.

This week we will have final services PMI data along with speech from governor Carney. Brexit talks will continue and they can have a high impact on GBP, however meaningful vote will be next week.

Important news for GBP:

Tuesday:

• -- Markit Services PMI
• -- BOE Governor Carney Speech

AUD

Construction work done in the Q4 of 2018 came in at -3.1% q/q vs 0.5% q/q as expected. A huge miss and continuation of the downward spiralling trend since Q3 was at -2.8% q/q. Expected bounce back in Q4 has not occurred. Total construction work has fallen for three quarters and other components of construction sector show multi-quarter falling trend. This data will have negative impact on Q4 GDP. Capex for Q4 came in at 2% q/q vs 1% q/q as expected suggesting positive investment outlook and it will partially offset abysmal construction data.

Chinese Manufacturing PMI for the month of February came in at 49.2 vs 49.5 as expected for a third consecutive month of contraction (below 50). This is a three-year low. Since China is the main importer of Australian metals this reading is worrisome for AUD. Non-Manufacturing PMI came in at 54.3 vs 54.5 as expected and composite PMI came in at 52.4 vs 53.2 the previous month. Caixin Manufacturing PMI came in at 49.9 vs 48.5 for a hefty beat although barely in the contraction territory. New orders rose to 50.2, back into expansion.

This week we will have very busy calendar for AUD. RBA interest rate decision will take centre stage. Rate is expected to stay unchanged so the text of the statement and speech by governor Lowe will be closely monitored for further guidance on monetary policy. We will also have housing, trade balance and consumption data as well as Q4 GDP. Additionally, we will have PMI, inflation and trade balance data from China.

Important news for AUD:

Monday:

• -- Building Approvals

Tuesday:

• -- RBA Interest Rate Decision
• -- RBA Rate Statement
• -- Caixin Services PMI (China)
• -- RBA Governor Lowe Speech

Wednesday:

• -- GDP

Thursday:

• -- Trade Balance
• -- Exports
• -- Imports
• -- Retail Sales

Friday:

• -- Trade Balance (China)
• -- Exports (China)
• -- Imports (China)

Saturday:

• -- CPI (China)

NZD

Retail sales data for Q4 came in at 1.7% q/q vs 0.5% q/q as expected. This is the highest reading since Q1 of 2017 and it is an impressive beat, especially taking into consideration how poorly retail sales data were for other countries. Trade balance for the month of January came in at -NZD914m vs -NZD300m as expected. Exports came in lower than expected while imports were higher than expected resulting in higher than expected trade balance deficit.

This week we will have bi-weekly GDT auction, manufacturing sales and consumption data.

Important news for NZD:

Tuesday:

• -- GDT Price Index

Thursday:

• -- Manufacturing Sales

Sunday:

• -- Electronic Card Retail Sales

CAD

CPI for the month of month of January came in at 1.4% y/y vs 1.5% y/y as expected with prior reading being 2% y/y. CPI common, trim and core came in in-line with the expectations with first two coming at 1.9% y/y and core at 1.8% y/y. Q4 GDP came in at 0.4% q/q vs 1% q/q as expected and -0.1% m/m vs 0% m/m as expected. Horrible GDP data and it was released earlier so there was no immediate huge spike on CAD pairs but it continues to weaken across the boards. Business investment data show huge drop led by residential investment of -14.7%.

This week we will have trade balance data and employment data on Friday which will be published at the same time as NFP data. BOC Rate decision is not expected to bring a rate change and we will see if the statement continues with hawkish tone after abysmal GDP data.

Important news for CAD:

Wednesday:

• -- BOC Interest Rate Decision
• -- BOC Rate Statement
• -- Trade Balance
• -- Exports
• -- Imports

Friday:

• -- Employment Change
• -- Unemployment Rate
• -- Participation Rate

JPY

Retail sales for the month of January came in at -2.3% m/m vs -0.8% m/m. This is a huge miss and troubling data. If consumption continues to fall deeper into negative territory inflation will never reach target of 2%. Industrial production was also a big miss coming in at -3.7% m/m vs -2.5% m/m as expected for a third consecutive month of falling output. Data can be distorted in January and February due to Chinese Lunar New Year, however this is such a huge miss that it cannot be attributed solely to the usual distortions and it will certainly not deter BOJ from further easing.

Headline inflation for Tokyo area came in at 0.6% y/y vs 0.4% y/y as expected. Core CPI came in at 1.1% y/y vs 1% as expected so at least inflation in Tokyo area is picking up. The unemployment rate ticked higher to 2.5% and the job to applicant ratio stayed at 1.63 as expected. Manufacturing PMI fell into contraction territory for the first time since August of 2016, coming in at 48.9. Output component fell most heavily to 47.7 from 54.4 in January.

This week we will have final Q4 GDP reading as well as data on household spending and trade balance.

Important news for JPY:

Friday:

• -- GDP
• -- Household Spending
• -- Current Account
• -- Goods Trade Balance

CHF

GDP figures for Q4 came in at 0.2% q/q vs 0.4% q/q as expected with prior reading showing -0.3% q/q. Bounce back was softer than expected, but a technical recession was avoided since Q4 GDP came in positive. Retail sales number came in at -0.4% y/y vs 0.4% y/y as expected. Consumption continues to hinder economic confidence.

This week we will have data on inflation and employment.

Important news for CHF:

Tuesday:

• -- CPI

Thursday:

• -- Unemployment Rate

 

[TradersWay]

Forex Major Currencies Outlook (Mar 11 – Mar 15)

USD

ISM Non-Manufacturing index came in at 59.7 vs 57.4 as expected with prior reading showing 56.7. This is a strong result for the service sector lead by highest jump in new orders since 2005. Trade balance for the month of December came in at -$59.8bn vs -$57.9bn as expected. Trade deficit continues to widen and is the highest since October 2018. Exports have fallen -1.9% while imports have risen 2.1%. Goods deficit is -$81.54bn while services had a surplus of $21.77bn. US-China trade deficit came in at -$36.83bn vs -$37.86bn the previous month. December was the first month of tariff suspension.

NFP number unpleasantly surprised everyone by coming at 20k vs 180k as expected. Government shutdown and extremely cold weather had an impact on the jobs market but it is yet to be discerned how much of this abysmal number is due to those two factors. The unemployment rate ticked down to 3.8% vs 3.9% as expected. Participation rate stayed the same at 63.2%. Average hourly earnings grew 0.4% m/m vs 0.3% m/m as expected and 3.4% y/y vs 3.3% y/y as expected. The broader U-6 unemployment rate takes discouraged people and those who want full-time jobs but work only part-time into account and it plunged to 7.3% vs 8.1% the previous month. Apart from the terrible headline number this is overall a very favourable report for US economy.

This week we will have data on consumption, inflation, durable goods, housing and consumer sentiment.

Important news for USD:

Monday:

• Retail Sales
• Business Inventories

Tuesday:

• CPI

Wednesday:

• Durable Goods

Thursday:

• New Home Sales

Friday:

• Industrial Production
• Michigan Consumer Sentiment
• Michigan Consumer Expectations

EUR

Final services PMI for the month of February came in at 52.8 vs 52.3 as expected with all of the main countries showing expansion in services sector thus temporarily removing those dark clouds that hover above the EU economy. Retail sales came in at 1.3% m/m as expected for a nice bounce from -1.4% m/m the previous month.

ECB has left key rates unchanged as expected but they have made changes to forward guidance regarding interest rates and announced new TLTROs (TLTRO III) that will start in September of 2019 and end in March of 2021. Full details of the new TLTRO will be announced in June. Governor Draghi stated that hikes will not be raised until December of 2019 although some members of the Governing Council believe that rate hike should be delayed until 2020. The slowdown is largely due to slower external demand but also country-specific factors. Risks to economic outlook is still tilted to the downside. ECB forecasts for 2019 GDP is now at 1.1% vs 1.7% in January and inflation in 2019 is now at 1.2% vs 1.6% the previous month. Big slashes in projections and since ECB already lowered projections in December, this is the second downgrade in less than 3 months. EURUSD has fallen below 2018 lows after Draghi’s presser.

This week we will have data on industrial production and inflation.

Important news for EUR:

Wednesday:

• Industrial Production

Friday:

• CPI

GBP

Markit construction PMI for the month of February came in at 49.5 vs 50.5 as expected. The reading dropped into contraction territory, housing and commercial projects are being delayed due to the ongoing Brexit situation. Services PMI came in at 51.3 vs 49.9 thus strongly pushing it away from contraction.

Reports state that Attorney General Cox presented two ideas to EU’s Barnier regarding the Brexit deal and they were both rejected. Seems that PM May will face imminent defeat in Parliament.

This week we will have data on industrial and manufacturing production, January GDP as well as trade balance. Additionally, we will have the meaningful vote that will put some clarity on further direction in the Brexit process, although it can cause a great volatility for GBP.

Important news for GBP:

Tuesday:

• Meaningful vote in the Parliament
• GDP
• Industrial Production
• Manufacturing Production
• Trade Balance

AUD

Caixin Services PMI came in at 51.1 vs 53.5 as expected for a huge miss. Main culprit is the new businesses index which dropped indicating slowing growth in demand across the services sector. Employment measure also edged down but stayed in expansion. Trade balance for the month of February came in at CNY34.46bn vs CNY252.3bn as expected. Exports were down -16.6% y/y while imports came in at -0.3% y/y. These are awful numbers caused by the trade war, however due to the Lunar new year holidays in January and February data tends to be distorted.

RBA has left rates on hold as expected with comment that low rates are supporting of the economy. They characterized the outlook for household spending and effect of falling housing prices as main uncertainties. Central scenario for underlying inflation is 2% in 2019, and 2.25% in 2020. Labour market remains strong and further fall in the unemployment rate to 4.75% is expected. Wage growth is expected to gradually pick up and central scenario for growth is around 3% this year. RBA continues with their story although data from Australia has constantly fell short of the expectations.

Q4 GDP data came in at 0.2% q/q vs 0.3% q/q as expected and 2.3% y/y vs 2.6% y/y as expected for a big miss. Government spending and inventories were positives while negatives where household consumption, residential construction, business investments and exports. Markets are gradually pricing in a greater chance of a rate cut in the second half of the year with some banks preaching for 2 rate cuts in total of 50 bps with the first being in August.

Trade balance data for the month of January came in at AUD4549m vs AUD2750m as expected. Exports rose 5% m/m while imports rose 3% m/m for the 13th straight month of surplus. However, AUD was hit by the weak retail sales data which came in at 0.1% m/m vs 0.3% m/m as expected. Although it is a decent bounce back from the prior month of -0.4% m/m.

This week we will have housing data from Australia and consumption and industrial production data from China.

Important news for AUD:

Tuesday:

• Home Loans
• Westpac Consumer Confidence

Thursday:

• Retail Sales (China)
• Industrial Production (China)

NZD

The commodity price index for the month of February came in at 2.8% m/m vs 2.1% m/m the previous month. Main contributors were dairy prices and GDT auction showed 3.2% rise in prices. This is the seventh consecutive auction of rising dairy prices which will bode well for exports and GDP figures.

This week we will have data on Food Price Index which is expected to beat the expectations due to positive GDT auction and rise in dairy prices.

Important news for NZD:

Tuesday:

• Food Price Index

CAD

Trade balance data for the month of December came in at -CAD4.59bn vs -CAD2.8bn as expected. This is the biggest trade deficit in at least 20 years. Exports have fallen for the fifth consecutive month and came in at -3.8% while imports rose 1.6%. Falling oil prices had a colossal impact on these abysmal numbers with export of energy products falling 21.7%. They can mean that Q4 GDP is very close to negative.

BOC has left interest rate unchanged at 1.75% as was widely expected. BOC stated that recent data suggest that the slowdown in the global economy has been more pronounced and widespread than forecasted in January, trade tensions and uncertainty are weighing heavily on confidence and economic activity. BOC is projecting a temporary slowdown in late 2018 and early 2019, mainly because of last year's drop in oil prices, the slowdown in the fourth quarter was sharper and more broadly based. It now appears that the economy will be weaker in the first half of 2019 than projected in January.

Canadian net change in employment came in at 55.9k vs 1.2k as expected for a healthy beat. The unemployment rate remained at 5.8% as expected. Hourly wage rate rose to 2.2% vs 1.7% as expected. Participation rate also rose to 65.8 vs 65.6 the previous month. Full-time employment change came in at 67.4k vs 0.8k as expected. More people were employed in professional, scientific and technical services; public administration; natural resources; and agriculture. Very strong report that will give BOC some comfort seeing that tight labour market conditions persist.

This week we will have data on manufacturing sales.

Important news for CAD:

Friday:

• Manufacturing Sales

JPY

Nikkei Services PMI came in at 52.3 vs 51.6 the previous month and composite PMI came in at 50.7 vs 50.9 the previous month. Services are in expansionary territory for 29 straight months. New businesses index rose 54.5 vs 52.1 the previous month. This is the highest since May 2013 and it pushed services higher. Drop in composite PMI is caused by drop in manufacturing PMI.

Final GDP numbers for Q4 came in at 0.5% q/q vs 0.3% q/q preliminary and 1.9% y/y vs 1.4% y/y preliminary. GDP was pushed higher by rise in capex and household spending. Household spending came in at 2% y/y vs -0.5% y/y as expected for a huge beat. Current account showed a rise in surplus to JPY600.4bn boosted by lower than expected trade balance deficit which came in at -JPY964.8bn. Although trade balance deficit came in lower than expected it is still the largest in 5 years.

This week we will have BOJ rate decision as the highlight of the week. There will be no changes in the bank rate so more emphasis will be placed on statement and press conference. We have had mixed data coming in from Japan so more clarification on monetary policy measures will be very welcomed. Additionally, we will have trade balance data.

Important news for JPY:

Friday:

• BOJ Interest Rate Decision
• BOJ Monetary Policy Statement
• BOJ Press Conference
• BOJ Governor Kuroda Speech
• Trade Balance
• Exports
• Imports

CHF

CPI for the month of February came in at 0.4% m/m as expected for a nice rebound from -0.3% m/m the previous month, however core CPI has ticked down and came in at 0.4% y/y vs 0.5% y/y as expected. SNB's Zurbruegg says central bank is ready for Brexit and that they are prepared to take measures if needed. The unemployment rate came in at 2.7% as expected ticking down from 2.8% the previous month.

 

[katetrades]

Forex Major Currencies Outlook (Mar 18 – Mar 22)

USD

Advanced retail sales form the month of January came in 0.2% m/m vs 0% as expected. Ex auto category came in at 0.9% m/m vs 0.3% m/m as expected and control group, which has influence on inflation, came in at 1.1% m/m vs 0.6% m/m as expected. Encouraging numbers but reaction in USD was lackluster. USD debt soared to new record highs of over $22 trillion.

CPI for the month of February came in at 1.5% y/y vs 1.6% y/y as expected and 0.2% m/m as expected. Core CPI came in at 2.1% y/y vs 2.2% y/y as expected. Small misses on the numbers which weakened USD across the boards. Durable goods for the month of January came in at 0.4% m/m vs -0.4% m/m as expected. Capital goods orders nondefense ex air 0.8% m/m vs 0.2% m/m as expected. Better than expected reading especially considering weak numbers in previous months, but there is still a lot of ground to be covered for it to be characterized as healthy. Core durable goods came in at -0.1% m/m vs 0.1% m/m as expected.

This week FED will publish updated economic projections known as the "dot plot". Fed has pledged patience on interest rates since January so the focus is now on how it translates into the updated projections. Additionally, we will have housing and factory data as well as preliminary PMI numbers.

Important news for USD:

Tuesday:

• -- Factory Orders

Wednesday:

• -- FOMC Interest Rate Decision
• -- FOMC Statement
• -- FOMC Economic Projections
• -- FOMC Press Conference

Friday:

• -- Markit Manufacturing PMI
• -- Markit Services PMI
• -- Markit Composite PMI
• -- Existing Home Sales

EUR

Industrial production for the month of January came in at 1.4% m/m vs 1% m/m as expected. Decent and much needed beat for EU data. Ifo institute has slashed German GDP forecast from 1.1% to 0.6%. CPI data came in line with preliminary reading, headline CPI at 1.5% y/y and core CPI at 1% y/y.

This week we will have trade balance data, economic sentiment data from ZEW as well as preliminary PMI numbers. Additionally, EU Summit will be held on March 21-22.

Important news for EUR:

Monday:

• -- Trade Balance

Tuesday:

• -- ZEW Economic Sentiment Indicator (Germany and EU)
• -- Wage costs

Thursday:

• -- EU Leaders Summit
• -- Consumer Confidence

Friday:

• -- EU Leaders Summit
• -- Markit Manufacturing PMI (Germany, France, EU)
• -- Markit Services PMI (Germany, France, EU)
• -- Markit Composite PMI (Germany, France, EU)

GBP

GDP for the month of January came in at 0.5% m/m vs 0.2% m/m as expected. Excellent start of the year for UK’s economy propped up by factory activity data. Manufacturing, industrial and construction have all beaten the expectations with construction output coming in at 2.8% m/m vs 0.8% m/m as expected. The economy is standing on the firm grounds, however Brexit is the main culprit influencing movements of GBP and for now pushes the data into the bacground.

Attorney General Cox has stated that legal risk remains unchanged and that UK will not have lawful means of exiting agreement. On March 12 PM’s Brexit deal was defeated in Parliament by whooping result of 391–242. On March 13 Parliament voted 312-308 in favour of never leaving the EU without a Brexit deal, this vote is non-binding, so there is a chance of UK could still face a no-deal Brexit. Parliament voted 321-278 in favour of not leaving the EU without a deal on 29 March. On March 14 Parliament voted 413-202 for extension on Article 50 effectively delaying the exit post March 29. Early indications show that EU may offer 1-2 year extension.

This week we will have data on employment, earnings and inflation. BOE is expected to keep interest rate unchanged so minutes will provide us with more insight on how BOE accesses Brexit uncertainties. Third meaningful vote will be held on March 20 and due to happenings surrounding the Brexit process higher than usual volatility can be expected on all GBP pairs. That volatility can be easily triggered by any Brexit related news so we would caution you to lower your lot sizes when trading GBP pairs.

Important news for GBP:

Tuesday:

• -- Average Hourly Earnings
• -- Unemployment Rate
• -- Claimant Count Change

Wednesday:

• -- CPI

Thursday:

• -- BOE Interest Rate Decision
• -- BOE MPC Meeting Minutes
• -- Third meaningful vote in the Parliament

AUD

China CPI came in at 1.5% y/y as expected although PPI came in slightly weaker than expected. Retail sales came in at 8.2% y/y vs 8.1% y/y as expected. Fixed asset investment came in at 6.1% y/y vs 6% y/y as expected and property investment rose 11.6% y/y vs 9.5% y/y the previous month while industrial production came in at 5.3% y/y vs 5.6% y/y as expected. Chinese economy was generally steady in period January-February, however downward pressures still exist. Industrial production has fallen to its lowest in 17 years.

Westpac consumer confidence for the month of March plunged to -4.8% m/m vs 4.3% m/m the previous month. A number of weak data coming from Australia lowered the confidence of consumers which in turn pressures the AUD down.

This week we will have minutes from the latest RBA meeting. Markets expect them to be dovish. Any excessive dovishness may push AUD downwards. We will also get employment data.

Important news for AUD:

Tuesday:

• -- RBA Meeting Minutes

Thursday:

• -- Employment Change
• -- Unemployment Rate

NZD

Food price index for the month of February came in at 0.4% m/m vs 1% m/m the previous month. This is a bit surprising reading considering the strong GDT auctions. Food price index comprises around 19% of the CPI. Manufacturing PMI for the month of February came in at 53.7 vs 53.1 the previous month. Production and new orders sub indexes contributed most to the number.

This week we will have regular bi-weekly GDT auction data on current account and Q4 GDP data which may influence RBNZ decision to cut interest rates later in the year.

Important news for NZD:

Tuesday:

• -- GDT Price Index
• -- Current Account

Wednesday:

• -- GDP

CAD

New housing price index for the month of January came in at -0.1% m/m vs 0% m/m as expected. Existing home sales for the month of February came in at -9.1% m/m vs -4% m/m as expected. Abysmal numbers showing price uncertainty present in Canadian housing market. Manufacturing sales in January have jumped to 1% m/m vs 0.4% m/m as expected with prior reading showing -1.3% m/m. Good number that will offset mainly poor data coming from Canada, apart from employment reports.

This week we will have data on wholesale trade, inflation and consumption.

Important news for CAD:

Thursday:

• -- Wholesale Trade

Friday:

• -- CPI
• -- Retail Sales

JPY

BOJ has left interest rate unchanged as expected. They concluded that Japan’s economy is expanding moderately but exports and output are affected by slowdown overseas. No changes in monetary policy and downgrades to the economic outlook were expected by the market and BOJ delivered. Governor Kuroda stated that momentum towards achieving 2% inflation target is maintained and emphasized that it is necessary to reach the target in order to achieve stable prices.

This week we will have trade balance data, minutes from the latest BOJ meeting, national inflation data and preliminary manufacturing PMI number for the month of March.

Important news for JPY:

Monday:

• -- Trade Balance
• -- Exports
• -- Imports
• -- Industrial Production

Wednesday:

• -- BOJ Monetary Policy Meeting Minutes

Friday:

• -- CPI
• -- Nikkei Manufacturing PMI

CHF

Important news for CHF:

Tuesday:

• -- Trade Balance
• -- Exports
• -- Imports

Thursday:

• -- SNB Interest Rate Decision

This week we will have trade balance data and interest rate decision. SNB will not make any changes as they patiently follow moves from ECB.

 

[katetrades]

Forex Major Currencies Outlook (Mar 25 – Mar 29)

USD

FED has left the interest rate unchanged as expected. Labour market has remained strong and on average job gains have been solid. They will begin to slow balance sheet runoff in May and will end it in September if the economy evolves as expected. Economic growth has slowed from a solid rate in Q4 and indicators are pointing to slowing growth in household consumption and business investment. New dot plot forecast revealed that 11 out of 15 US policy makers no longer believe that a rate hike is necessary this year which is a serious downgrade from the 2 rate hikes that were previously expected. GDP growth for 2019 has been cut from 2.3% to 2.1% and to 1.9% in 2020 from 2%.

This week we will have a great number of housing data, consumer confidence, trade balance data, final Q4 GDP reading and PCE inflation data.

Important news for USD:

Tuesday:

• -- Housing Starts
• -- Building Permits
• -- Consumer Confidence Index

Wednesday:

• -- Trade Balance
• -- Exports
• -- Imports

Thursday:

• -- GDP
• -- Pending Home Sales

Friday:

• -- PCE
• -- New Home Sales

EUR

Trade balance data for January came in at EUR17bn vs EUR15bn as expected. Both exports and imports rose with first coming in at 0.8% m/m and latter 0.3% m/m. ZEW survey of economic sentiment came in at -2.5 vs -18.7 as expected signalling that although the reading is in negative territory there are hopes that the worst is behind us as major economic risks are viewed as less dramatic now.

Preliminary manufacturing PMI for the Eurozone in March came in at 47.6 vs 49.5 as expected. The huge plunge in the number was driven by devastating manufacturing PMI from Germany that came in at 44.7 vs 48 as expected for the lowest reading since August 2012. French manufacturing PMI dipped into contraction coming in at 49.8. Services PMI came in as expected while composite was dragged lower by manufacturing data. EUR is lower across the markets against all of the majors as worries about the health of EU economy mount. Yields on German 10-year bond turn negative for the first time since October 2016.

This week we will have data on consumer confidence and sentiment for the EU as well as inflation, consumption and employment data from Germany.

Important news for EUR:

Monday:

• -- Ifo Business Climate (Germany)

Thursday:

• -- Economic Sentiment Indicator
• -- Consumer Confidence Index
• -- CPI (Germany)

Friday:

• -- Retail Sales (Germany)
• -- Unemployment Change (Germany)
• -- Unemployment Rate (Germany)

GBP

Average weekly earnings came in at 3.4% 3m/y as the prior quarter but 3.2% 3m/y was expected so a nice beat there. The unemployment rate fell to 3.9% vs 4% as expected for an additional beat. Employment change came in at 222k vs 120k for a fantastic beat. Jobless claims change came in at 27k vs 14.2k the previous month for the only dent in strong employment report. In the normal circumstances this report would bump BOE toward raising the rates and push GBP higher, however due to uncertainties surrounding Brexit this report will not have that effect.

Inflation number for the month of February came in at 0.5% m/m as expected and 1.9% y/y vs 1.8% y/y. Core CPI came in at 1.8% y/y vs 1.9% y/y as expected. Data came in-line with expectations with small uptick in headline inflation being offset by small dip in core reading. Retail sales for the month of February came in at 0.4% m/m vs -0.4% m/m as expected. On the yearly level they are now at 4% y/y vs 3.3% y/y as expected. Another batch of stronger than expected data that will not have the desired effect due to the Brexit concerns. BOE has left the official bank rate unchanged as expected noting concerns regarding the Brexit process.

Parliament speaker John Bercow has ruled out the third meaningful vote stating that the UK government could not bring the same exact Brexit deal for another vote. PM May has written to EU seeking extension of Brexit until June 30 and officially announced it on Wednesday. That proposal was not accepted and Brexit is pushed back to at least April 12. This gives PM May a chance to organize a third meaningful vote and if it succeeds the UK will leave EU on May 22. If the vote fails new plan for leaving the EU has to be proposed by April 12. Alternatively, hard Brexit or long delay followed by new leadership can occur.

This week we will have final Q4 GDP reading and business investment as well as possible third meaningful vote on Brexit deal.

Important news for GBP:

• -- Third Meaningful Vote (tentative)

Friday:

• -- GDP
• -- Business Investment

AUD

RBA meeting minutes noted “significant uncertainties” on the economic outlook. Scenarios for the rate moves are more evenly balanced than they had been last year and there is no strong case for near-term move in rates. Labour market continues to improve and unemployment is seen falling to 4.75%. Consumption outlook is uncertain due to the risk of further fall in housing prices.

Employment change showed 4.9k vs 15k as expected for a miss but the number was quickly offset by fall in the unemployment rate to 4.9% which is a huge positive since it moves toward RBAs projection. On the negative side we have a miss in the headline number, the fact that the number of full-time workers dropped and that rise in employment change was all due to part time employment change. Participation rate also ticked down to 65.6%.

This week on Sunday manufacturing and non-manufacturing data from China will be published.

Important news for AUD:

Sunday:

• -- Manufacturing PMI (China)
• -- Non-manufacturing PMI (China)

NZD

GDT price index came in at 1.9% for the eighth straight auction with higher prices. Q4 GDP came in at 0.6% q/q as expected with 2.3% y/y vs 2.5% y/y as expected. Main contributor to the GDP growth were service industries at 0.9%. Slowdown in the economy in H2 2018 is visible but it is not as big, therefore a rebound can be expected in Q1 2019 which pushes potential rate cut further in time.

This week we will have trade balance data, housing data and main event of the week will be RBNZ rate decision. It is expected that rate will stay the same. Recent data have indicated to the market that a possible rate cut will not come soon and now we will have a chance to hear RBNZ assessment of the incoming data.

Important news for NZD:

Monday:

• -- Trade Balance
• -- Exports
• -- Imports

Wednesday:

• -- RBNZ Interest Rate Decision
• -- RBNZ Rate Statement

Thursday:

• -- Building Permits

CAD

Canadian budget projections see this year’s deficit at CAD$14.9bn vs CAD$18.1bn the previous projection. GDP growth for 2019 is assumed at 1.8% for 2019 and 1.6% for 2020. There will be incentives on mortgage costs in an attempt to boost the falling housing market. Revenues will be used for social programs and transfers, including skill training, support for seniors and greater prescription coverage.

Wholesale trade in January came in at 0.6% m/m as expected with prior reading showing 0.3% m/m. January retail sales came in at -0.3% m/m vs 0.4% m/m as expected. Much weaker than expected reading with sales falling in 4 of 11 subsectors representing 52% of total retail trade. The main culprit for the drop in retail sales were motor vehicles and parts which dropped 1.5%. CPI for the month of February came in at 0.7% m/m vs 0.6% m/m as expected and 1.5% y/y vs 1.4% y/y as expected. All three core measures came in as expected: common and core at 1.8% y/y and trimmed at 1.9% y/y. Inflation figures can deter BOC for considering rate cuts, but now limelight is on growth which makes next week’s GDP reading all the more important.

This week we will have trade balance data and GDP for the month of January.

Important news for CAD:

Wednesday:

• -- Trade Balance
• -- Exports
• -- Imports

Friday:

• -- GDP

JPY

Trade balance data for the month of February came in at JPY339bn vs JPY305.1bn as expected. Nice beat on the reading but it was caused by imports falling faster than exports. Imports fell -6.7% y/y which is a biggest drop in last 2 years while exports fell -1.2% y/y which although still negative is a big improvement from the prior month when they were -8.4% y/y. Cars and semiconductors were the main culprit for falling exports. Exports to US, China and Europe all rose, exports to Asia fell. Industrial production for the month of January came in at -3.4% m/m vs -3.7% m/m as expected and 0.3% y/y vs 0% y/y as expected. Slightly better figures but still very weak reading.

National inflation for the month of February came in at 0.2% y/y vs 0.3% y/y as expected. Ex-food came in at 0.7% y/y vs 0.8% y/y as expected and ex-food and energy came in at 0.4% y/y as expected. All are miles away from targeted 2%. Preliminary manufacturing PMI came in unchanged at 48.9. Slowing demand from domestic and international markets caused the sharpest cutback in output volumes in almost three years. New orders component plunged as well.

This week we will have data on inflation from Tokyo area, employment and consumption data as well as industrial production data.

Important news for JPY:

Friday:

• -- Tokyo area CPI
• -- Unemployment Rate
• -- Jobs to Applicants Ratio
• -- Retail Sales
• -- Industrial Production

CHF

February trade balance came in at CHF3.13bn vs CHF3.04bn the previous month. Exports rose 1.3% m/m while imports fell -3% m/m. Steady rise in exports is satisfying.

SNB has left interest rate unchanged as expected. They stated that CHF remains highly valued and that situation in FX markets remains fragile. Downgrades have been made to inflation and it is now seen at 0.3% for 2019 and 0.6% for 2020. Governor Jordan stated that negative rates remain an important instrument for the foreseeable future.

 

[katetrades]

Forex Major Currencies Outlook (Apr 1 – Apr 5)

USD

The US yield curve is inverted and according to the past evidence it points to a recession. The 10-year yield was lower than the 3m yield. After yield curve inverts it can take substantial time, usually more than 11 months, for the recession to occur. Boston FED President Eric Rosengren suggested a change in the Fed's reinvestment policy in order to fight the yield curve. In his opinion FED should be buying the short end of the curve in order to push short-term borrowing lower and long-term financing higher.

Consumer confidence dropped in March to 124.1 vs 132.5 as expected, rather big drop and widely unexpected. Present situation came in at 160.6 vs 173.5 and expectations slid down to 99.8 vs 103.4 as expected. This is the largest one month drop since 2008. One of the leading indicators painting not so bright picture which can trigger risk off mode in the markets.

Trade balance for the month of January came in at -$51.5bn vs -$57bn as expected. Exports were up 0.9% m/m while imports were down -2.6% m/m. Goods deficit was $73.29bn while services surplus came in at $22.14 bn. Trade balance deficit with China came in at $34.47bn vs $36.83bn the previous month. Slowing imports are not that satisfying but lowering of deficit overall and with China in particular is positive for USD. Services surplus has smashed expectations.

Final reading of Q4 GDP for 2018 came in at 2.2% q/q vs 2.3% q/q as expected and 3% y/y vs 3.1% y/y as expected. Growth was mainly fuelled by president Trump’s tax cuts which resulted in corporate profits after tax of 16.2%. Core PCE number came in at 1.8% y/y vs 1.9% y/y as expected. The FED pays special attention to core PCE so miss is worrying. Personal income and personal spending also came in lower as expected.

This week we will have data on consumption, durable goods, business inventories, final PMI data and on Friday the big event, NFP. This time headline number will be monitored closely due to very low number from the previous month. Expected number is 170k.

Important news for USD:

Monday:

• -- Retail Sales
• -- ISM Manufacturing PMI
• -- Business Inventories

Tuesday:

• -- Durable Goods

Wednesday:

• -- ADP Nonfarm Employment Change
• -- ISM Non-Manufacturing PMI

Friday:

• -- Nonfarm Payrolls
• -- Unemployment Rate
• -- Average Hourly Earnings

EUR

Germany IFO business climate index for the month of March came in at 99.6 vs 98.5 as expected. Both expectations and current assessment beat the expectations coming in at 95.6 and 103.8 respectively. This is a breath of fresh air for the data coming in from Europe after abysmal PMI data last week. These figures support German GDP growth forecast of 0.6% for 2019. Although numbers indicate that the worst is behind Germany and forward-looking picture looks brighter than expected weak GDP forecast still looms. Germany inflation data for the month of March came in at 1.5% y/y vs 1.6% y/y as expected. Lower than expected inflation can drag down the inflation of the EU as a whole. Retail Sales in the month of February for Germany came in at 0.9% m/m vs -1% m/m as expected adding further support to Q1 GDP from consumption. German unemployment rate dropped to 4.9% from 5% the previous month indicating tighter labour market conditions.

This week we will have final PMI data, preliminary inflation data for the month of March, employment and consumption data as well as factory and industrial production data from Germany and accounts from the latest monetary policy meeting.

Important news for EUR:

Monday:

• -- Markit Manufacturing PMI (EU, Germany, France)
• -- CPI
• -- Unemployment Rate

Wednesday:

• -- Markit Services PMI (EU, Germany, France)
• -- Markit Composite PMI (EU, Germany, France)
• -- Retail Sales

Thursday:

• -- Factory Orders (Germany)
• -- ECB Monetary Policy Meeting Accounts

Friday:

• -- Industrial Production (Germany)

GBP

Brexit happenings dominated the week. Parliament and the government battle for control of Brexit and several indicative votes have been organized although none of them are binding. None of the amendments got a clear majority in the Parliament so PM May continued to push for the third meaningful vote on her proposal, but Speaker John Bercow insists it must be meaningfully different from previously defeated versions. PM May offered her resignation after her deal passes. In order to get her deal to pass for voting PM May has split it in half. First half is a withdrawal agreement and second half is the political declaration. If Parliament approves of her withdrawal agreement Brexit date will be moved to May 22 giving her more time to find satisfying solution. The deal has been defeated with 286-344 and GBPUSD fell below 1.30. This is the third time that PM’s deal did not pass in the Parliament.

This week we will have final PMI data as well as continuation of Brexit saga.

Important news for GBP:

Monday:

• -- Second Round of Indicative Votes
• -- Markit Manufacturing PMI

Tuesday:

• -- Markit Construction PMI

Wednesday:

• -- Markit Services PMI

AUD

Industrial profits in China for the months of January-February (they are combined in order to smooth the out distortions caused by China’s Lunar New Year) came in -14% y/y. This is the biggest fall since 2011 and cause of great concern not only for Australia due to its proximity to China but to whole World as it adds more to the ongoing global slowdown. The situation can improve in Q2 thanks to monetary easing and stimulus, but it is yet to be seen if it will.

This week we will have Caixin PMIs from China, housing data, consumption and trade balance data. Main event will be RBA’s rate decision and given the RBNZ’s dovish decision markets will expect for RBA to follow the suit. Global slowdown, declining consumption and falling housing market may spur RBA to react by announcing that next move will likely be lower.

Important news for AUD:

Monday:

• -- Caixin Manufacturing PMI (China)

Tuesday:

• -- RBA Interest Rate Decision
• -- RBA Rate Statement
• -- Building Approvals

Wednesday:

• -- Trade Balance
• -- Exports
• -- Imports
• -- Retail Sales
• -- Caixin Services PMI (China)
• -- Caixin Composite PMI (China)

NZD

Trade balance data for the month of February came in at NZD12m vs -NZD200m as expected. Modest surplus but better than expected deficit. Exports rose to NZD4.82bn vs NZD4.7bn for always good news keeping NZD supported ahead of RBNZ rate decision.

RBNZ has kept the cash rate at 1.75% as widely expected however they said that next rate move is likely down. This change from previously neutral stance has caused NZD to plunge across the markets. Inflation and outlook risks have shifted to the downside according to RBNZ and it is necessary to keep low interest rates in order to support economic growth in 2019. Increased government spending and investment will work along with low interest rates in attaining that goal. The next RBNZ meeting is in May and markets start to price in rate hike for November’s meeting and some banks predict first cut in August. Business confidence and activity outlook data put additional pressure on kiwi coming in respectively at -38 vs -30.9 the previous month and 6.3 vs 10.5 the previous month.

This week we will have bi-weekly GDT auction.

Important news for NZD:

Tuesday:

• -- GDT Price Index

CAD

Trade balance for the month of January came in at -CAD4.25bn vs -CAD3.55bn as expected. Trade deficit shrank from the previous month but still came worse than expected. Exports rose 2.9% m/m and imports rose 1.5% m/m. The largest positive contributor to exports was the energy sector that came in at 14% m/m. Exports are up 3.1% y/y while imports are up 8.3% y/y.

January GDP came in at 0.3% m/m vs 0% m/m as expected and 1.6% y/y vs 1.3% y/y as expected. Goods producing sectors contributed with 0.6% and services producing sectors contributed with 0.2%. Manufacturing came in at 1.5% offsetting losses in previous months and construction rose 1.9% for largest expansion since July 2013. The reading beat the markets expectations and CAD has strengthened against all majors.

This week we will have final PMI readings as well as employment data on Friday. Please note that Canadian employment data will be released at same time as US employment data which can cause increased volatility on USDCAD pair.

Important news for CAD:

Monday:

• -- Markit Manufacturing PMI
• -- BOC Governor Poloz Speech

Thursday:

• -- Ivey PMI

Friday

• -- Employment Change
• -- Unemployment Rate

JPY

Tokyo area inflation for the month of March came in line with expectations at 0.9% y/y. CPI excluding fresh food came in at 1.1% y/y as expected. The unemployment rate dropped down to 2.3% from 2.5%. Retail sales missed coming in at 0.2% m/m vs 1% m/m as expected and 0.4% y/y vs 1% y/y as expected. With this kind of low consumption chances of inflation rising are very slim. Industrial production for the month of February came in at 1.4% m/m as expected.

This week we will have Tankan indices, manufacturing and services PMI and household spending data.

Important news for JPY:

Monday:

• -- BOJ Tankan Large Manufacturing Index
• -- BOJ Tankan Large Non-Manufacturing Index
• -- Nikkei Manufacturing PMI

Wednesday:

• -- Nikkei Services PMI

Friday

• -- Household Spending
• -- Labour Cash Earnings

CHF

Investor sentiment for the month of March, which measures expectations on the Swiss economy and other economic expectations over the next 6 months, fell to -26.9 vs -16.6 the previous month.

This week we will have consumption and inflation data.

Important news for CHF:

Monday:

• -- Retail Sales

Tuesday:

• -- CPI