Daily Market Outlook by Kate Curtis from Trader's Way

[katetrades]

Forex Major Currencies Outlook (Feb 3 – Feb 7)

NFP in combination with Canadian employment published at the same time will provide volatility in the markets, with New Zealand employment report, ISM PMI numbers from US and RBA rate statement being the other high impact events of the week.

USD

Preliminary durable goods in December came in at 2.4% m/m vs 0.4% m/m as expected. It is a great beating on the estimates but the number is very volatile and susceptible to revisions. Prior month’s reading was revised to -3.1% m/m from -2.1% m/m. The more concerning sign is that core durable orders, characterized often as core CAPEX, came in at -0.9% m/m vs 0.2% m/m as expected indicating that businesses are reluctant to invest. Consumer confidence climbed to 131.6 vs 128 as expected showing that consumer will continue to drive growth and will not allow for slowdown at the beginning of 2020.

Fed has left the interest rate unchanged as was expected. The whole meeting was an uneventful one with chairman Powell stressing their insistence on reaching the 2% inflation target. They have also reaffirmed their commitment to support the repo market. Reserves of 1.5 trillion will be the bottom end of the range. Powell also stated the importance of the Coronavirus outbreak and the uncertainties it brings. The labour market is continuing to perform well with wages rising, particularly for the lowest paying jobs. The view on household consumption has softened.

First reading of Q4 GDP came in at 2.1% q/q, same as the previous quarter. Personal spending came in at 1.8% vs 2% as expected contributing 1.2 pp to the final number. Inflation numbers were also down. Business investment overall was -1.5% and it was a drag of -1.08 pp. Inventories reduced GDP by 1.09 pp while trade balance added 1.48 pp to GDP mostly due to falling imports. GDP of 2.3% y/y was the lower than 2.9% y/y for the previous year.

The World Health Organisation has declared coronavirus a public health emergency. They have applauded China’s attempts to contain the virus and fear that the biggest threat will be for the countries with weak health systems. They did not recommend curbing of trade and travel between the countries. Number of victims in China rose tot least 213. On the earnings front, many companies have beaten earnings forecasts but Amazon topped them all. The tech giant smashed the earnings by 60% over the expectations.

This week we will have ISM PMI data for January and trade balance for December. The central stage will be taken by the NFP report. The headline number is expected around 140k, an uptick in the unemployment rate to 3.6% is expected as well as rise in wages to 3%.

Important news for USD:

Monday:

• ISM Manufacturing PMI

Wednesday:

• Trade Balance
• ISM Non-Manufacturing PMI

Friday:

• Nonfarm Payrolls
• Unemployment Rate
• Average Hourly Earnings

EUR

Ifo business climate index and expectations readings fell while current situation reading improved. Ifo economist stated that there is a reason to be cautiously optimistic about the German economy and that the industrial sector is slowly emerging from crisis. Uncertainty has been decreased thanks to the Phase 1 deal between US and China and clarity on the Brexit front. Consumer confidence came in unchanged while economic sentiment continued to improve for the Eurozone. Industrial confidence and business climate recorded a nice rebound while services sentiment stumbled. The unemployment rate ticked down to 7.4% showing a continuation of tight labour market conditions.

Preliminary Q4 GDP came in at 0.1% q/q vs 0.2% q/q as expected on the back of unexpected negative Q4 GDP from France and Italy. Preliminary CPI for January came in at 1.4% y/y vs 1.3% y/y the previous month while core CPI dropped to 1.1% y/y from 1.3% y/y the previous month.

This week we will have final PMI data as well as consumption data.

Important news for EUR:

Monday:

• Markit Manufacturing PMI (EU, Germany, France)

Wednesday:

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

GBP

At his final meeting as the head of BOE governor Carney did not cause any disturbances in the market. The BOE has left the rate unchanged at 0.75%. The vote came in at 7-2, 7 votes for no change and 2 votes for a rate cut; the same as the previous month while the consensus was for 6-3 vote. Inflation has been given the top priority and if there is a drop in inflation over the coming months BOE will be ready to act. The statement showed “if the economy recovers broadly in line with the MPC's latest projections, some modest tightening of policy may be needed to maintain inflation sustainably at the target”. Carney stated that, according to the survey data, economic activity has improved after the election and the UK recovery appears to be on track. The overall tone of the statement and Carney’s press conference was hawkish sending GBP higher across the markets. Andrew Baily will be the Governor at the next meeting on March 26.

This week we will have final PMI data.

Important news for GBP:

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

AUD

CPI for Q4 came in at 0.7% q/q vs 0.6% q/q as expected and 1.8% y/y vs 1.7% y/y as expected. Core measure trimmed mean came in at 0.4% q/q and 1.6% y/y as was expected. The drought and devastating fires caused the price of food to go up. In combination with a falling unemployment rate published the previous week, this small rise in headline inflation will put RBA on hold regarding interest rates. Markets are pricing around 15% chance of a rate cut.

Official manufacturing PMI from China for January came in at 50 as expected while services came in at 54.1 vs 53 as expected. Composite was dragged down on manufacturing PMI to 53 vs 53.4 the previous month. Next month’s figures will not be this good as the coronavirus takes its toll on the economy. Beijing asked companies to resume work on February 10 instead of February 3 as previously planned.

This week we will have trade balance and consumption data along with RBA rate decision. In the light of improving data RBA will not cut, however the statement will be of great interest. The coronavirus outbreak in China will have consequences on the Australian economy so RBA’s thoughts on that will be scrutinized. We will have Caixin PMI and trade balance data from China.

Important news for AUD:

Monday:

• Caixin Manufacturing PMI (China)

Tuesday:

• RBA Interest Rate Decision

Wednesday:

• Caixin Services PMI (China)
• Caixin Composite PMI (China)

Thursday:

• Trade Balance
• Retail Sales

Friday:

• RBA Monetary Policy Statement
• Trade Balance (China)

NZD

Trade balance for December came in at NZD547m vs NZD100m as expected. Better than expected reading was achieved on the back of rising exports, rose less than expected and falling imports, fell more than expected. Dairy exports hit a new high thanks to raising dairy prices and China took 28% of New Zealand’s exports in this fiscal year. Although a positive data point it did not change the fortune of Kiwi as it was hammered the entire week due to risk off sentiment caused by the Coronavirus outbreak.

This week we will have bi-monthly GDT price index and Q4 employment data.

Important news for NZD:

Tuesday:

• GDT Price Index
• Employment Change
• Unemployment Rate

CAD

GDP for November came in 0.1% m/m vs flat as expected and up from -0.1% m/m the previous month. There was a rise in 15 out of 20 sectors and yearly figure came in at 1.5% y/y vs 1.4% y/y as expected. Utilities, construction and retail sales were the main contributors while mining, oil and gas and transportation were the laggards. Markets took notice of this data but CAD continued to decline as it has done the whole week on the back of rising worries for commodity currencies due to a potential global slowdown caused by outbreak of coronavirus.

This week we will have trade balance and employment data.

Important news for CAD:

Wednesday:

• Trade Balance

Friday:

• Employment Change
• Unemployment Rate

JPY

Tokyo CPI for January came in at 0.6% y/y vs 0.7% y/y as expected. Inflation is again heading in the wrong direction despite the sales hike tax. Ex food category came in at 0.7% y/y vs 0.8% y/y as expected while Ex food and energy came in line with expectations at 0.9% y/y. The unemployment rate in December came in at 2.2%, same as the previous month, while expectations were for a rise to 2.3%. Retail sales continued their decline and came in at 0.2% m/m vs 4.5% m/m the previous month and -2.6% y/y vs -2.1% y/y the previous month. Preliminary industrial production data were the bright spot coming in at 1.3% m/m vs 0.7% m/m as expected and -3% y/y vs -3.6% y/y as expected.

This week we will have final PMI data, as well as wages and spending data.

Important news for JPY:

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

Friday:

• Household Spending
• Labour Cash Earnings

CHF

Trade balance in December more than halved to CHF1.96bn from CHF3.95bn the previous month. Exports showed a drop of -3.4% m/m while imports rose 0.2% m/m. Retail sales came in at 0.1% m/m vs being flat the previous month but with previous month being revised to 0.5% m/m it gives more strength to the reading.

 

[katetrades]

Forex Major Currencies Outlook (Feb 10 – Feb 14)

Consumption data from US, preliminary Q4 GDP from UK and RBNZ meeting will be the highlights of the week.

USD

ISM manufacturing index in January came in at 50.9 vs 48.5 as expected and up from 47.2 the previous month. Manufacturing is back to expansion thanks to surge in new orders and improvement in the employment sub-index. ISM non-manufacturing index came in at 55.5 vs 55.1 as expected. Business activity has jumped to 60.7 with new orders also being on the rise. The reading is moving back toward the levels from the first half of 2019.

Trade balance for December showed an increase in the deficit to -$48.9bn vs -$48.2bn as expected. Both exports and imports rose, with former rising 0.8% m/m and latter 2.7% m/m. Trade deficit with China lessened to -$24.79bn on the back of both falling exports (-11.3%) and falling imports (-16.2%). Trade surplus with OPEC countries improved to $1.33bn. On an annual basis the trade deficit shrunk for the first time in 6 years to -$616.8bn of which deficit with China alone is -$345.6bn.

NFP headline for January came in at 225k vs 165k as expected and up from 147k the previous month. The unemployment rate has ticked up to 3.6% on the back of increase in participation rate to 63.4% from 63.2% the previous month. Average hourly earnings were mixed, coming in at 0.2% m/m vs 0.3% m/m as expected and 3.1% y/y vs 3% y/y as expected. Both showed the increase compared to the previous month. Sluggish wage growth indicates that great majority of newly created jobs are low paid jobs in services sectors such as health care (50k) and bars and restaurants (24k).

This week we will have inflation, consumption and industrial production data.

Important news for USD:

Thursday:

• CPI

Friday:

• Retail Sales
• Industrial Production

EUR

Final manufacturing PMI for the month of January came in at 47.9 vs 47.8 preliminary on the back of small improvements in German and French readings. Services came in at 52.5 vs 52.2 preliminarily which pushed the composite reading at 51.3 vs 50.9 preliminary. Beatings on all fronts show that recovery in Eurozone is real but slow and susceptible to external shocks. Retail sales for December painted a different picture. After rise in previous month due to Black Friday this month they came at -1.6% m/m and 1.3% y/y with previous reading showing 0.8% m/m and 2.3% y/y.

This week we will have industrial production and trade balance data as well as the second reading of Q4 GDP.

Important news for EUR:

Wednesday:

• Industrial Production

Friday:

• GDP
• Trade Balance

GBP

Final manufacturing PMI for the month of January came in at 50 vs 49.8 preliminary. A small improvement bringing the reading back into neutral 50 level. New orders have returned into expansion territory showing post-election optimism. Services continued to show the same optimism coming in at impressive 53.9 vs 52.9 as expected and 50 the previous month thus returning composite back to expansion with 53.3 reading.

The UK has finally left the EU on January 31. It took 1317 days after the referendum. Boris Johnson took over the weekend much firmer stance regarding trade deal with EU than markets expected. He stated that there is no need for a free trade agreement to involve UK accepting EU rules, any more than the EU should be obliged to accept UK rules. The pound dropped more than 100 pips at the beginning of the week.

This week we will have preliminary Q4 GDP, trade balance and production data.

Important news for GBP:

Tuesday:

• GDP
• Industrial Production
• Manufacturing Production
• Construction Output
• Trade Balance
• Business Investment

AUD

RBA left the official cash rate unchanged at 0.75% as was widely expected. They reiterated their willingness to cut rates if it is necessary to support economic growth. Lower rates will stay for a prolonged period of time and RBA will closely monitor developments in labour market. They expect the economy to grow by 2.75% in 2020 and 3% in 2021 with inflation being close to 2% in those years. Coronavirus has been deemed as uncertainty for global growth but it is too early to assess the long-term impact of the virus.

Retail sales in December missed coming in at -0.5% m/m vs -0.2% m/m. The November figure was great due to Black Friday and it was even revised up so the decline in December’s reading was expected, but the drop was bigger than hoped for. Trade balance for the same month came in at AUD5223mn vs AUD5950mn as expected. The imports rose 2% m/m while exports rising only 1% m/m. Due to coronavirus fears the AUD has dropped at the end of the week to the lowest levels since 2009.

Caixin manufacturing PMI in January came in at 51.1, down from 51.5 the previous month. The survey was done before the outbreak of the virus so it does not take into the account its effects making the drop in the reading even more concerning. Employment and new export orders sub-inidicies were below 50 while total new orders dropped to lowest in 5 months. Services PMI came in at 51.8 and composite was at 51.9, both of them weaker than the previous month. Industrial profits for December, coronavirus had no influence on them, plunged to -6.3% vs 5.4% the previous month. China has again cut rates and injected additional liquidity into economy in order to fight the economic slowdown. Ban on short selling has been implemented as well to prevent market crash. Number of coronoavirus deaths grew to 600 while number of infected is estimated at over 30 000.

This week we will have speech by RBA governor Lowe and inflation data from China.

Important news for AUD:

Monday:

• CPI (China)

Thursday:

• RBA Governor Lowe Speech

NZD

Employment report for Q4 was very mixed. The unemployment rate dropped to 4% from 4.1% the previous quarter, however employment change was flat on the quarter vs 0.3% q/q as expected and as it was in the previous quarter. Additionally, the participation rate dropped to 70.1% from 70.4% the previous quarter. Average hourly wages were down to 0.1% q/q vs 0.6% q/q the previous quarter but private wages held steady at 0.6% q/q. GDT price auction came in at -4.7% for a first negative auction in 2020. The main culprit were whole milk powder prices which fell -6.2%.

This week we will have card spending for January and RBNZ interest rate decision. RBNZ’s 2-year inflation expectations have risen to 1.93% from 1.8% previously with 1-year expectations rising to 1.88% from 1.66% the previous month which should keep the OCR steady.

Important news for NZD:

Tuesday:

• Electronic Card Retail Sales

Wednesday:

• RBNZ Interest Rate Decision
• RBNZ Rate Statement

CAD

Trade balance data for December showed a serious decline in the trade deficit. The reading came in at -$0.37bn vs -$1.09bn the previous month which was revised down to -CAD1.2bn. Exports were up 1.9% m/m with imports being up 0.2% m/m. Energy products contributed the most to the rise in exports (9.5%) while consumer goods contributed the most to the rise of imports (4%). Trade surplus with US widened to $5.2bn for the month. Total trade deficit in 2019 was -$18.3bn which is the smallest since 2014. Trade surplus with US was $51.6bn for the year while exports to China were down -16% for the year. The drop in exports to China shows the devastating effects of Canada’s decision to arrest the daughter of Huawei’s founder.

Employment change in January came in at 34.5k vs 17.5k as expected. The unemployment rate has dropped to 5.5% from 5.7% the previous month on the tick down in participation rate to 65.4% from 65.5%. Hourly wages for permanent employers rose 4.4% y/y vs 3.6% y/y as expected and up from 3.8% y/y the previous month. Markets have embraced the rise in wages and CAD strengthened. Full-time employment came in at 35.7k while part-time employment came in at -1.2k for another strong data input from the report. All of the jobs created were full-time and with a healthy wage rise this will be a great sign for the Canadian economy.

This week we will have housing data and speech by governor Poloz.

Important news for CAD:

Monday:

• Housing Starts
• Building Permits

Thursday:

• BOC Governor Poloz Speech

JPY

Final manufacturing PMI for the month of January came in at 48.8 vs 48.6 preliminary and up from 48.4 the previous month. Services PMI came in at 51 vs 49.4 the previous month which helped push the composite back to expansion territory at 50.1. A fragile recovery will be under fire when the February data comes out showing the effects of the coronavirus.

Labour cash earnings came in flat after the previous month’s reading has been revised up to 0.1% y/y. Household spending came in at -4.8% y/y vs -1.7% y/y as expected. With wages staying stagnant there was no chance for the spending to rise, however the drop is much more severe than expected. Inflation pressures will still be missing.

CHF

Manufacturing PMI in January heavily missed the expectations coming in at 47.8 vs 50.3 as expected. Previous month’s reading has been revised to 48.8 from 50.2 indicating deep plunge into contraction. The only saving grace is that manufacturing contributes to around ¼ of GDP so the result can be digested more easily.

This week we will have employment and inflation data.

Important news for CHF:

Monday:

• Unemployment Rate
• CPI

 

[katetrades]

Forex Major Currencies Outlook (Feb 17 – Feb 21)

Employment data from UK and Australia as well as preliminary February PMI numbers from EU, UK and Japan will take the centre stage, US markets will be closed on Monday due to President’s day so the liquidity will be thin.

USD

CPI in January came in at 2.5% y/y vs 2.4% y/y as expected and up from 2.3% y/y the previous month. The rise in headline number was caused by the rise in energy prices. Core CPI came in unchanged from previous month at 2.3% y/y. Chairman Powell stated that Fed needs to see inflation over 2% for prolonged period before deciding to act and raise rates. He was referring to PCE and divergence between CPI, above 2% and PCE, below 2%, rises. In addition, due to low demand for oil from China caused by coronavirus outbreak energy prices have fallen which will put downward pressures onto inflation.

Retail sales in January came in at 0.3% m/m as expected with previous month’s reading being revised down to 0.2% m/m. Core retail sales, control group that is used for GDP calculation, came in flat with prior reading being revised down to 0.2% m/m from 0.5% m/m. Negative revisions and miss in control group will prompt downward revisions to Q4 GDP.

This week we will have housing data and minutes from the latest FOMC meeting.

Important news for USD:

Wednesday:

• Housing Starts
• Building Permits
• FOMC Minutes

Friday:

• Existing Home Sales

EUR

Industrial production for Eurozone in December came in at -2.1% m/m vs -2% m/m as expected and -4.1% y/y vs -2.5% y/y. The reading reaffirms weak conditions shown in the German and French readings. The slump in manufacturing activity accelerated EURUSD downfall to the lowest levels since 2017. ECB’s chief economist Lane stated that impact of coronavirus may be pretty serious short-term and that they expect gradual pick up in inflation. ECB member de Cos confirmed that rates will stay low and accommodative policy will remain for prolonged period of time. The EU confirmed their forecast of GDP at 1.2% in both 2020 and 2021.

Germany reported flat Q4 GDP vs 0.1% q/q as expected and 0.4% y/y vs 1.1% y/y as expected. Eurozone Q4 GDP seemed undisturbed by Germany’s reading and came in at 0.1% q/q as expected and 0.9% y/y vs 1% y/y as expected. Trade balance in December for Eurozone came in at EUR22.2bn vs EUR19.3bn as expected. Exports grew 0.9% m/m while imports fell -0.7% m/m.

This week we will have sentiment data, final January inflation data and preliminary February PMI numbers.

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Thursday:

• Consumer Confidence Index

Friday:

• Markit Manufacturing PMI (EU, Germany and France)
• Markit Services PMI (EU, Germany and France)
• Markit Composite PMI (EU, Germany and France)
• CPI

GBP

Preliminary Q4 GDP number came in flat as expected but yearly figure came in stronger than expected at 1.1% y/y on the back of positive revision to Q3 reading. GDP in December came in at 0.3% m/m vs 0.2% m/m as expected and helped keep the economy from contracting in Q4. Net exports and government spending were the biggest contributor to Q4 GDP while business investment was a drag. Government spending showed the biggest increase since Q1 of 2012. Industrial and manufacturing production rebounded from the previous month’s lows but recovery was weaker than expected. Trade balance in December came in at £0.8bn on the back of astonishing rise in exports of 17.4% driven by exports of precious metals. Exports are a fickle category so danger for contraction in Q1 2020 is present considering the highest drop in business investment since 2016.

Prime minister Johnson made a cabinet reshuffle which lead to the resignation of Sajid Javid, Chancellor of Exchequer (minister of finance). He declined to sack his top advisors and will be replaced by Rishi Sunak and this move is seen as positive for pound as Sunak will boost infrastructure spending and investments, thus stimulating the British economy.

This week we will have employment, inflation and consumption data as well as preliminary February PMI numbers.

Important news for GBP:

Tuesday:

• Unemployment Rate
• Average Weekly Earnings

Wednesday:

• CPI

Thursday:

• Retail Sales

Friday:

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

AUD

January CPI from China came in at 5.4% y/y vs 4.9% y/y as expected. Food inflation has increased exponentially to 20.6% y/y, mainly due to rise in pork price which were up 8.5% m/m for a total of more than 100% y/y, while non-food items were up 1.6% y/y. Core CPI ticked up to 1.5% y/y. PPI came in at 0.1% y/y for a first rise in 7 months. China’s oil imports are down due to economic stoppage caused by Coronavirus. This in turn has pushed the price of WTICrude below $50 at the beginning of the week.

This week we will have minutes from the latest RBA meeting as well as employment data.

Important news for AUD:

Tuesday:

• RBA Meeting Minutes

Thursday:

• Employment Change
• Unemployment Rate

NZD

RBNZ has left the cash rate unchanged at 1% as widely expected. According to their forecasts no rate cuts are expected this year which boosted NZD. They assessed the impact of coronavirus on New Zealand as short lived with risk of potential bigger impact present. Governor Orr assumes that coronavirus impact will last for 6 weeks. He added that fiscal boost eases pressures on monetary policy. RBNZ sees low interest rates as necessary to keep inflation and employment levels close to target and expect economic growth to accelerate over the second half of 2020. Electronic card spending in January came in at -0.1% m/m vs 0.4% m/m as expected.

This week we will have bi-monthly GDT price auction as well as Q4 retail sales which are expected to come higher than previous quarter.

Important news for NZD:

Tuesday:

• GDT Price Index

Sunday:

• Retail Sales

CAD

Housing data showed an improvement compared to last month and expectations with building permits coming in at 7.4% m/m for the month of December and housing starts at 213.2k for the month of January.

This week we will have inflation and consumption data.

Important news for CAD:

Tuesday:

• Manufacturing Sales

Wednesday:

• CPI

Friday:

• Retail Sales

JPY

Preliminary machine tool orders in January continued their decline from already low levels coming in at -35.6% y/y vs -33.5% y/y the previous month. Lackluster start of the year. Although Olympic Games are in late July questions slowly arise whether it will be possible to held the games due to the virus threat. Cancellation of games would be a devastating blow to Japanese economy.

This week we will have preliminary Q4 GDP reading which is expected to come in negative due to sales tax hike and problems caused by weather (typhoon). We will also have final industrial production data for December, core machinery orders, trade balance, national inflation data and preliminary February PMI numbers.

Important news for JPY:

Monday:

• GDP
• Industrial Production

Wednesday:

• Core Machinery Orders
• Trade Balance

Friday:

• CPI
• Markit Manufacturing PMI
• Markit Services PMI
• Markit Composite PMI

CHF

January seasonally adjusted unemployment rate stayed at the low level of 2.3% showing very tight labour market conditions. Headline CPI for the same month came in at 0.2% y/y same as the previous month, however very concerning is the drop in the core number which also came in at 0.2% y/y but down from 0.4% y/y the previous month. Switzerland is struggling with missing inflation for years now and the situation is deteriorating. CHF has been gaining strength due to its safe haven status, especially against EUR which may prompt SNB to react in order to weaken it.

This week we will have trade balance data.

Important news for CHF:

Thursday:

• Trade Balance

 

[katetrades]

Forex Major Currencies Outlook (Feb 24 – Feb 28)

PMI data from China showing the impact of the coronavirus on the economy, inflation data from US and EU, and Canada’s Q4 GDP, will highlight the week.

USD

He housing market showed tremendous strength with both housing starts and building permits beating the expectations. Building permits came in highest since 2007 which in combination with overall strong data coming from US kept dollar bought throughout the week. FOMC minutes from the January meeting provided no new clues into Fed’s thinking. They find the current monetary policy appropriate and noted that surrounding risks are “somewhat more favourable” than at the previous meeting. They expect economic growth to continue at a “moderate pace” and will continue watching how the situation with the coronavirus unfolds. Regular open market operations are still needed to ensure ample reserves.

This week we will have consumer confidence and housing data as well as a second estimate of Q4 GDP, durable goods orders, PCE inflation data and data on personal spending and income.

Important news for USD:

Tuesday:

• Consumer Confidence Index

Wednesday:

• New Home Sales

Thursday:

• GDP
• Durable Goods
• Pending Home Sales

Friday:

• PCE
• Personal Spending
• Personal Income

EUR

ZEW survey in February for Germany showed a drop to -15.7 vs -10 as expected. Expectations dropped from the previous month for both Germany and the Eurozone, coming in at 8.7 and 10.4 respectively. Coronavirus threat reared its ugly head and caused concerns about a global slowdown which will particularly hurt export-oriented economies like Germany. Final January CPI came in at 1.4% y/y with core being at 1.1% y/y.

Preliminary consumer confidence in February came in at -6.6 vs -8.2 the previous month which gave a short-lived boost to EUR as markets braced for PMI data. PMI data beat the expectations with manufacturing coming in at 49.1 on the back of jump in German manufacturing reading. Services were up to 52.8 which pushed composite to 51.6. A caveat to German manufacturing data is that almost half of the gain can be attributed to decrease in Supplier Delivery Index which indicates increased supply availability - and possibly decreased economic activity.

This week we will have sentiment and preliminary inflation data for February from Germany and EU as well as final Q4 GDP from Germany.

Important news for EUR:

Monday:

• Ifo Business Climate (Germany)

Tuesday:

• GDP (Germany)

Thursday:

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

Friday:

• CPI

GBP

The unemployment rate in December came in unchanged at 3.8% as expected. Claimant counts dropped from November and employment change in last three months of the year came in better than expected, but average weekly earnings dropped to 2.9% 3m/y from 3.2% 3m/y the previous month. Expectations were for drop to 3% 3m/y. Data still shows tight labour market from UK. Additionally, this is the data from December before the elections while there was a lot of uncertainty in the economy.

January headline inflation came in at 1.8% y/y vs 1.6% y/y as expected and up from 1.3% y/y the previous month. The rise in petrol prices was the main contributor to the inflation growth. Core reading came in at 1.6% y/y vs 1.5% y/y as expected. Although BOE’s target is 2% this move in the right direction will give them cause for happiness and keep them away from further rate cuts. Retail sales staged a rebound in new year coming in at 0.9% m/m vs 0.7% m/m as expected and up from -0.5% m/m the previous month on the back of strong clothing and footwear sales. Ex-fuel sales growth came in at 1.6% m/m, the strongest gain since May 2018.

Preliminary February PMI data showed services at 53.3 vs 53.9 prior, manufacturing at 51.9 vs 50 prior and composite the same at 53.3. Markit notes emergence of supply chain disruptions due to the coronavirus outbreak but they still forecast Q1 GDP to be at 0.2% q/q.

AUD

February meeting minutes showed board’s decision to keep rates on hold with their willingness to ease further if need arises. It is reasonable to expect periods of lower rates and further rate cuts will be taken only in order to support growth in inflation and job creation. The coronavirus has been characterized as a new risk for the global economy, but it is too early to judge its impact. Slowdown in Q4 of 2019 and Q1 2020 will be shown due to wildfires but they expect full recovery by the end of the year. Outlook for the economy remains positive.

Employment change in January came in at 13.5k vs 10k as expected. Full-time employment change came in at 46.2k for a big beat and boost to the economy. Part-time employment came in at -32.7k. As for the ugly side of the report, the unemployment rate jumped to 5.3% from 5.1% the previous month. RBA targets the unemployment rate trying to push it down to around 4.5% so this jump is particularly unwelcoming. This rise will spur talks about RBA rate cuts that may come sooner than later. Participation rate ticked up to 66.1% from 66% and this may ease the rise in the unemployment rate a bit.

AUD continues to drop toward new lows mainly on the back of stagnating wages. RBA noted in their minutes that they would welcome the rise in wages, but they do not expect to see it in the next 2 years. China reported that their refineries processed 25% less oil in 2020 than the average in H2 2019 indicating serious slowdown in demand for oil and consequently the fall in economic activity which lead Apple to state that they will not be able to reach their Q1 targets. Moody’s lowered China’s growth to 5.2% from 5.8% previously. China is trying to battle the economic slowdown with rate cuts, a cut to 4.05% from 4.15% on the 1-year loan prime rate as well as a cut to the 5-year rate to 4.75% from 4.80% previously.

This week we will have February PMI data from China showing the effect of coronavirus outbreak.

Important news for AUD:

Saturday:

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

NZD

GDT price index came in at -2.9%. Second consecutive negative auction. Low demand from China seems to be the main culprit. Governor Orr characterized the economy and monetary policy as being in a “good position”. NZDUSD dropped below 0.64 on risk-off sentiment caused by perceived detrimental impact of coronavirus on global economy.

This week we will have trade balance and activity data.

Important news for NZD:

Wednesday:

• Trade Balance

Thursday:

• ANZ Business Confidence
• ANZ Activity Outlook

CAD

Manufacturing sales in December badly missed coming in at -0.7% m/m vs 0.7% m/m as expected with the prior month’s reading being revised down to -1% m/m from -0.6% m/m. This is the fourth consecutive month of negative readings. The decline was led by motor vehicles and aerospace products. Ex-auto category actually came in positive on month at 0.1% m/m. Sales were down in 11 out of 21 sectors.

Headline inflation in January came in at 2.4% y/y vs 2.3% y/y as expected and up from 2.2% y/y the previous month. Median and trim core inflation came in as expected at 2.2% y/y and 2.1% y/y respectively while common declined to 1.8% y/y from 2% y/y as expected. Retail sales in December came in flat vs 0.1% m/m as expected. The bright spot is that the previous month’s reading has been revised up to 1.1%. Ex-auto category came in at 0.5% m/m vs 0.3% m/m. The biggest contributors were building materials while biggest drag were gasoline stations and motor vehicles. Cannabis sales were up 8.1% m/m.

This week we will have Q4 GDP data.

Important news for CAD:

Friday:

• GDP

JPY

Preliminary Q4 GDP data came in at -1.6% q/q vs -1% q/q as expected for the first contraction in 5 quarters. The annualized reading came in at -6.3% which is a biggest drop since Q2 of 2014. Private consumption came in at -2.9% q/q vs -2% q/q as expected with business spending coming in at -3.7% q/q vs -1.6% q/q as expected. Expectations for the reading were low and data managed to miss even these low expectations. Both exports and imports dropped although net exports were positive and contributed with 0.5 pp. An atrocious quarter caused by sales tax hike and typhoons. With Japan being the export-oriented economy, the coronavirus outbreak will dampen the recovery in Q1, so the Olympic Games may act as a saving grace for the economy.

Trade balance data for the first month of 2020 came in at -JPY1312.6bn vs -JPY1984.8bn as expected but still a huge fall from -JPY154.6bn the previous month. Exports came in at -2.6% y/y vs -7% y/y as expected for a small positive from the reading, although it is the 14th consecutive month of negative exports. while imports fell -3.6% y/y vs -1.8% y/y as expected. Core machinery orders which serve as the capex indicator for 6 to 9 months in the future continued their decline coming in at -12.5% m/m vs -8.9% m/m as expected and -3.5% y/y vs -0.7% y/y as expected. Industrial production in December came in at 1.2% m/m and -3.1% y/y. Both readings came in better than previous month, however they were not enough to save the GDP.

National CPI data for January came in as expected. Headline number was at 0.7% y/y, ex-fresh food was at 0.8% y/y same as ex-fresh food, energy category. Those are some weak numbers that will pressure BOJ to continue with their massive monetary stimulus. If the sales hike effect is removed, the core CPI came in at just 0.4% y/y. Preliminary February PMI data showed the devastating effect of the coronavirus and China with a slowdown on exports - at 47.6 for manufacturing, 46.7 for services and 47 for composite. All three much weaker than the previous reading and all three in contraction.

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

Important news for JPY:

Friday:

• Tokyo CPI
• Unemployment Rate
• Retail Sales
• Industrial Production

CHF

Trade balance data for the year start came in at CHF4.78bn vs CHF1.96bn the previous month on the back of 1.7% m/m exports and falling imports -1.8% m/m.

This week we will have consumption data.

Important news for CHF:

Friday:

• Retail Sales

 

[katetrades]

Forex Major Currencies Outlook (Mar 2 – Mar 6)

BOC and RBA meetings, followed by preliminary inflation data from EU, Caixin PMI data from China and employment data from US (NFP) and Canada will highlight the week ahead.

USD

Consumer confidence index for February came in at 130.7 for a small increase from 130.4 in January. Consumers should continue to contribute to spending and growth in H1 of 2020. New home sales surged to 764k from upwardly revised 708k the previous month for the highest level in almost 13 years. The situation in the market causes demand for bonds which in turn pushes their yield lower. The dramatic change in the short end of the yield curve now implies that markets now fully price in a rate cut at the March meeting.

Second reading of Q4 GDP came in at 2.1% annualized as expected. Personal spending came in at 1.7%, down from 1.8% preliminary. Business investment came in at -2.3% vs -1.5% preliminary for a third consecutive quarter of falling investments. Net exports were revised up and propped GDP to stay at the same level as preliminary reported. Preliminary durable goods orders in January came in at -0.2% m/m vs -1.4% m/m as expected with prior month’s reading being revised up to 2.9% m/m. Core durable goods rebounded to 1.1% m/m from -0.8% m/m the previous month which was revised up to -0.5% m/m. A strong start of the year for business investment, but the effects of Boeing and coronavirus will certainly dampen the numbers in the coming months. Personal income came in at 0.6% m/m up from 0.2% m/m the previous month while personal spending came in at 0.2% m/m, down from 0.3% m/m the previous month.

This week we will have ISM PMI data and trade balance data. NFP on Friday is expected to come around 175k, the unemployment rate is expected to tick up to 3.7% while average hourly earnings are expected to stay at 0.2%.

Important news for USD:

Monday:

• ISM Manufacturing PMI

Wednesday:

• ADP Nonfarm Employment
• ISM Non-Manufacturing PMI

Friday:

• Nonfarm Payrolls
• Unemployment Rate
• Average Hourly Earnings
• Trade Balance

EUR

Ifo business climate index in February came in at 96.1 vs 95.3 as expected. Both expectations and current assessment categories beat the expectations. According to Ifo economists, the coronavirus outbreak did not affect the German economy. The problem with the survey and this statement is that it was conducted before the virus took the lives of four people in Italy. Later on, an Ifo economist stated that the development of the coronavirus epidemic is not yet fully reflected in the survey. German’s Q4 GDP has been confirmed flat for the quarter and only 0.3% y/y. Exports were down, businesses investment was cut and consumption stagnated. February sentiment data showed that EU’s economy does not appear to be threatened by coronavirus. Consumer confidence improved to -6.6 with other indicators also showing improvement, most notably the economic sentiment indicator pushing up to 103.5.

The Venice Carnival has been cancelled, football games in northern Italy have been postponed and schools have been closed. The number of reported deaths is 11 while number of people affected with virus is climbing toward 4-digit number. New cases showed up in Spain, Germany, Denmark, UK and Austria as well.

This week we will have final PMI February data, preliminary February inflation data, the unemployment rate and consumption data for January.

Important news for EUR:

Monday:

• Markit Manufacturing PMI (EU, Germany, France)

Tuesday:

• CPI
• Unemployment Rate

Wednesday:

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

GBP

Official talks regarding future trade relationship between UK and EU are set to start on Tuesday. UK has affirmed in their negotiating mandate that they are looking for Canada, Japan-style deals and that they are willing to trade on no-deal basis with EU if the talks fail to produce results. The government stated their willingness to quit talks by June and turn their attention on preparations for no-deal scenario if no progress is made on the deal. GBP has weakened on this news.

This week we will have final PMI data and start of EU/UK talks regarding future trade relationship, so headlines will dominate the movements in the GBP.

Important news for GBP:

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

AUD

Private capital expenditure in Q4 missed the expectations badly coming in at -2.8% q/q vs 0.5% q/q as expected. The decline was mainly due to a drop in construction activity and this will be a huge drag on Q4 GDP number. AUDUSD fell to new lows. Lowest levels in 11 years have been reached on the back of worrying reports about coronavirus impact.

This week we will have Q4 GDP, which may surprise to the downside due to weak capex data, trade balance and consumption data from Australia. RBA will hold their meeting. Expectations are for the rate cut in April and no changes in March. Caixin PMI and trade balance data will be published from China.

Important news for AUD:

Monday:

• Caixin Manufacturing PMI (China)

Tuesday:

• RBA Interest Rate Decision
• RBA Rate Statement

Wednesday:

• GDP
• Caixin Services PMI (China)
• Caixin Composite PMI (China)

Thursday:

• Trade Balance

Friday:

• Retail Sales

Saturday:

• Trade Balance (China)

NZD

Retail sales for Q4 came in at 0.7% q/q vs 0.8% q/q as expected, down from 1.6% q/q the previous quarter. Core retail sales also missed expectations coming in at 0.5% q/q vs 0.9% q/q as expected and much weaker than 1.8% q/q the previous quarter. Yearly figure dropped to 3.3% y/y vs 4.5% y/y the previous quarter. Department stores along with fuel sales were the main drag while pharmaceuticals showed an increase.

Trade balance for the first month of the year came in at -NZD349m vs -NZD549m as expected. Both exports and imports were positive and beat the expectations which lead to lower than expected trade deficit. After several months of improvement in business confidence the reading showed a step back and came in at -19.4 vs -13.2 the previous month. NZDUSD pair has dropped under 0.63 level.

This week we will have bi-monthly GDT auction.

Important news for NZD:

Tuesday:

• GDT Price Index

CAD

Wholesale trade in December came in at 0.9% m/m vs 0.4% m/m as expected and rebounded from -1.2% m/m the previous month. The automotive sector was the main drag. A drop in oil prices due to slowing of global demand pushed CAD down against major pairs. WTICrude was trading below psychologically important $50/barrel during the week, falling even bellow $45/barrel for a brief period. Q4 GDP came in as expected at 0.3% q/q and 1.3% annualized.

This week we will have employment and trade balance data and BOC rate decision. Chances of a rate cut have increased. Markets are now pricing almost 30% chance of a rate cut.

Important news for CAD:

Wednesday:

• BOC Interest Rate Decision
• BOC Rate Statement

Friday:

• Employment Change
• Unemployment Rate
• Trade Balance

JPY

Tokyo area CPI in February continued to move in the opposite direction from the BOJ target. Headline number came in at 0.4% y/y vs 0.5% y/y as expected and down from 0.6% y/y the previous month. Ex-fresh food category came in at 0.5% y/y vs 0.7% y/y the previous month while ex-fresh food, energy category came in at 0.7% y/y vs 0.9% y/y the previous month. The unemployment rate in January jumped to 2.4% from 2.2% the previous month. Retail sales finally bounced back and showed a strong reading, coming in at 0.6% m/m vs -0.1% m/m as expected and -0.4% y/y vs -1.3% y/y as expected. Preliminary industrial production numbers were also better than expected coming in at 0.8% m/m vs 0.2% m/m.

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

Important news for JPY:

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

Friday:

• Household Spending
• Labour Cash Earnings

CHF

SNB’s Maechler reiterated willingness to act in the market if the need arises. Swissy has been gaining strength due to its safe haven status, pushing EURCHF down to 1.06, so it is reasonable to believe that they will act to preserve that level and ease the CHF strength. The US treasury has SNB on the watch list for potential currency manipulation. January retail sales came in at -0.1% m/m but the previous month’s reading was revised up to 0.8% m/m.

This week we will have Q4 GDP and inflation data.

Important news for CHF:

Tuesday:

• GDP

Wednesday:

• CPI

 

[katetrades]

Forex Major Currencies Outlook (Mar 9 – Mar 13)

ECB meeting will dominate the otherwise slow week with economic data followed by GDP readings from EU, UK and Japan and unavoidable coronavirus news.

USD

ISM manufacturing PMI in February came in barely above boom level at 50.1 vs 50.9 the previous month. New orders and prices paid dropped into contraction, production dropped but stayed in expansion while employment showed a small improvement but still well below the 50 level. ISM Non-manufacturing PMI painted a different picture, smashing the expectations and coming in at 57.3 vs 54.9 as expected. Main drivers were employment, new orders and new export orders categories. This is the highest reading since February of 2019 and since the US economy is much more services oriented this is a great reading.

Fed surprised the markets with 50bp rate cut delivered in between the meetings, putting the rate at 1% to 1.25%. The cut was delivered in order to ease the economic disruption caused by the virus outbreak. Chairman Powell quickly added that US fundamentals are strong and that a rate cut was necessary due to the emergency situation. He added that move should provide a meaningful boost to the economy. Markets are now pricing an additional 50bp rate cut at the March meeting as yields on 10-year treasuries fell below 0.80%. The House of Representatives approved $8.3bn emergency spending to cope with the virus, thus adding fiscal support on top of the monetary one.

NFP numbers for February smashed the expectations coming in at 273k vs 175k as expected with previous reading being revised upwards to 273k as well. The unemployment rate ticked back down to 3.5% with participation rate staying the same at 63.4%. Average hourly earnings climbed to 0.3% m/m from 0.2% m/m the previous month. The underemployment rate was the only weak point in the report climbing to 7% from 6.9% the previous month. Trade balance in January came in at $-45.3bn vs -46.1bn as expected. Exports were down -0.4% m/m while imports showed even bigger drop coming in at -1.6% m/m. Trade deficit with China increased compared to the previous month but it decreased compared to the previous year.

This week we will have inflation data.

Important news for USD:

Wednesday:

• CPI

EUR

Final manufacturing PMI for EU improved slightly to 49.2 from 49.1 preliminary. Both German and French readings improved as well but on the back of rise in deliveries sub index, which indicates a serious disruption in supply chains. The new orders category continued to decline. Services PMI came in at 52.6 vs 52.8 preliminary due to the drop in German services reading. Composite came in at 51.6 as preliminary reported. Retail sales bounced back in January coming in at 0.6% m/m from -1.1% m/m in December with yearly reading staying the same at 1.7% y/y.

Preliminary inflation in February came in at 1.2% y/y as expected, a drop from 1.4% y/y in January due to a drop in energy prices, but the core CPI climbed to 1.2% y/y from 1.1% y/y the previous month. G7 meeting showed the willingness of central bankers and finance ministers to use all appropriate policy tools, including fiscal measures, to achieve strong growth. However, the fiscal measures will be used only where it is deemed as appropriate meaning there will be no coordinated action and that there is no push for Germany to loosen up their fiscal policy. Italy has pledged to provide a fiscal boost to its economy which will grow her debt to 2.4% of GDP. The EU commission expects to downgrade GDP forecasts and that Italy and France face risk of technical recession.

This week we will have final Q4 GDP reading and industrial production data. ECB meeting will be closely watched. The markets are pricing 7bp out of 10bp rate cut.

Important news for EUR:

Tuesday:

• GDP

Thursday:

• Industrial Production
• ECB Interest Rate Decision
• ECB Monetary Policy Press Conference

GBP

Final manufacturing PMI for February came in at 51.7 up from 50 the previous month. Services came in a bit weaker from the previous month coming in at 53.2 vs 53.9 which brought down composite to 53 vs 53.3 the previous month.

This week we will have GDP, trade balance and industrial data as well as information about budget that will be published on March 11.

Important news for GBP:

Wednesday:

• GDP
• Trade Balance
• Manufacturing Production
• Industrial Production
• Construction Output

AUD

RBA has cut the interest by 25bp and it now stands at 0.50%. Coronavirus outbreak and the need to support the economy have been cited as the main reasons for the cut. Coronavirus has been blamed for everything starting with the delay in progress on jobs and inflation to global slowdown. They also stated that it is too early to assess the effects of the virus and at what point will the global activity pick up. The housing market seems to have reached a turnaround as the latest abysmal housing data show. AUD has jumped on the news as markets were expecting a 50bp cut. RBA deputy governor, Guy Debelle stated that RBA has room for one more rate cut and after that they will have to consider introducing QE. Markets are pricing almost 97% chance for a rate cut at April’s meeting.

Q4 GDP came in at 0.5% q/q vs 0.4% q/q and 2.2% y/y vs 2% y/y as expected. Household consumption and change in inventories were the biggest contributors while private capital formation was the biggest drag. Government spending contributed to more than half of the yearly figure. Trade balance figures for January came in at AUD5.21bn vs AUD4.8bn as expected. Both exports and imports were -3% m/m. Exports to China have fallen again and in February and March they will continue to drop and hurt the trade balance. January retail sales came in at -0.3% m/m vs flat as expected. Bad start of the year for retailers caused by the raging wildfires at the time.

Official PMI data from China disappointed even with the bar being set very low. Manufacturing PMI plunged to 35.7 vs 45 as expected while non-manufacturing PMI collapsed to 29.6 vs 51 as expected. Composite reading was dragged down to 28.9, a record low, showing the full impact of work stoppage caused by coronavirus. Caixin PMI manufacturing showed a decline to 40.3 vs 45.7 as expected with record falls in new orders, employment and output components. Caixin services plunged to 26.5 which dragged down composite to 27.5, both readings are record lows. New orders, new export orders and employment category dropped.

This week we will have inflation data from China.

Important news for AUD:

Tuesday:

• CPI (China)
• PPI (China)

NZD

GDT price index again came in negative (-1.2%), however a positive trend is forming and prices should move to the positive within the couple of next auctions. Butter Milk Powder (-4.8%) and Cheddar (-4.7%) where the main drags. Kiwi has gained grounds during the week against USD due to the dollar weakness and NZDUSD stood above 0.63 level.

This week we will have data on card spending.

Important news for NZD:

Tuesday:

• Electronic Card Retail Sales

CAD

BOC has followed Fed’s lead and cut rates by 50bp, bringing it down to 1.25% citing that outlook is now clearly weaker than it was in January. Markets were expecting a 25bp cut so this move weighed heavily on CAD sending USDCAD to 1.34 and beyond. Business activity has fallen sharply in some regions and supply chains have been disrupted. They expect business activity and consumer confidence to further drop as the virus spreads. Rail line blockades, strikes by Ontario teachers, and winter storms in some regions are additional factors slowing economic activity in the first quarter.

Employment change in February came in at 30.3k vs 11k as expected. The unemployment rate stayed at 5.6% with participation rate climbing to 65.5%. Full-time employment was 37.6k while part-time was -7.3. Hourly wage rate jumped to 4.3% from 3.9% the previous month. Overall a very strong employment report with wages and full-time employment leading the way. Trade balance deficit widened in January coming in at -CAD1.47bn. Exports have fallen by 2% m/m while imports dropped by 0.5% m/m. Exports declined in 9 out of 11 sectors while imports declined in 6 out of 11 sectors. Motor vehicles showed the biggest drop in exports and consumer goods showed the biggest drop in imports.

JPY

Final February manufacturing PMI came in at 47.8, a bit better than preliminary reading of 47.8. New orders category showed a biggest drop since late 2012. Firms have cut production due to the slowdown in global demand. Services came at 46.8 and put composite PMI down into contraction at 47. Business activity suffered a biggest drop since 2014 due to fall in tourism caused by the virus. Capex for Q4 came in at -3.5% vs -2.5% as expected with ex-Software category showing even bigger drop of -5% vs -2% as expected. Newly published data will cause downward revision to next week’s Q4 GDP.

Earnings data for January showed a surprising rise in wages to 1.5% y/y vs 0.2% y/y as expected and up from being flat in December. Although base wages did increase, the real push came from bonuses that jumped 10.2%. The rise in wages did not fully transition into consumption as household consumption numbers came in at -3.9% y/y vs -4.8% y/y the previous month for the fourth consecutive month with negative reading.

This week we will have final Q4 GDP reading.

Important news for JPY:

Monday:

• GDP

CHF

Q4 GDP came in at 0.3% q/q vs 0.2% q/q as expected and 1.5% y/y vs 1.3% y/y as expected. On the inflation side, headline CPI in February came in at -0.1% y/y vs 0.1% y/y as expected but core CPI stood the ground at 0.2% y/y.

This week we will have employment data.

Important news for CHF:

Monday:

• Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (Mar 16 – Mar 20)

Fed’s meeting will be the main event of the week followed by BOJ and SNB meetings, employment data from UK and Australia as well as consumption data from US and Canada.

USD

Inflation in February came in at 2.3% y/y vs 2.2% y/y as expected and down from 2.5% y/y the previous month. Core measure climbed to 2.4% y/y vs 2.3% y/y the previous month. Fed will increase the amount offered in its repo operations from $100bn to at least $150bn in attempt to ramp up the liquidity and then again raised the amount to $175bn indicating critically illiquid conditions in the repo market. Finally, the NY Fed has pumped $500bn in the repo market and pledged to do so 3 days in a row making this an extraordinary $1.5 trillion liquidity injection. There are talks about $5 trillion injection over the next month. President Trump enacted a 30-day ban on all travel from the EU Schengen zone and later clarified that it refers only on travel of people, not goods.

This week we will have data on consumption, housing and industrial production. Fed interest rate decision will dominate the markets. The question is not will Fed cut, but how much? Estimates are varying from 0.50% to full 1% as stated by Goldman Sachs. New economic projections, the dot plot, will provide us with more insight in how Fed sees the impact of the virus on US economy.

Important news for USD:

Tuesday:

• Retail Sales
• Industrial Production

Wednesday:

• Housing Starts
• Building Permits
• Fed Interest Rate Decision
• FOMC Press Conference
• FOMC Economic Projections

Friday:

• Existing Home Sales

EUR

Final Q4 GDP came in at 0.1% q/q and 1% y/y. Industrial production in January came in at 2.3% m/m vs 1.5% m/m and -1.9% y/y vs -2.9% y/y as expected. Better than expected results for the Eurozone as a whole on the back of previously reported improvements from Germany and France. The caveat with data is that it is pre-virus.

ECB has left the interest rate unchanged, however it has announced a bonds purchase of EUR120bn until the year and on top of EUR20bn that are already conducted. Additional TLTROs will be conducted in order to provide immediate liquidity. More favourable terms will be applied to TLTROs during period from June 2020 to June 2021. Governor Lagarde stated that decision on package was unanimous and that reversal rate has “definitely” not being reached yet. She also asked for coordinated fiscal support to go along with monetary policy measures. The virus has been characterized as a major shock and ECB will use measures best targeted for crisis.

This week we will have ZEW survey, final February inflation and trade balance data.

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Wednesday:

• CPI
• Trade Balance

GBP

BOE followed the Fed and cut the interest rate between the meetings by 50bp, so new rate is 0.25%. In the accompanying statement it was said that move will help support business and consumer confidence during these difficult times by improving the availability of funding. Governor Carney, who will be leaving the post and will be replaced by Andrew Bailey next week, stated that move was necessary to prevent temporary disruptions from causing long-term damage. He added that they further cut rates from 0.25% but close to and above 0%. They will launch a lending scheme of around £100bn to small and medium-sized business. Today’s move was characterized as “big, big package”. Government will also prepare a set of measures intended to fight of the economic slowdown and assist households and businesses.

GDP in January came in flat vs 0.2% m/m as expected. Manufacturing production came in line with expectations while industrial production and construction output missed expectations. Seems that post-election exuberance did not hold for long in UK and with disruption caused by the virus the figures will only get worse, therefore the BOE’s decision. Visible trade balance in January came in at -£3.7bn due to big drop in exports (-2.8%) and rise in imports (0.7%). Again, these are pre-virus data.

The UK delivered a huge support package for workers and businesses in order to fight the coronavirus. Statuary sick pay will be made for all that are advised to self-isolate. Temporary loans will be provided to businesses with government guaranteeing 80% of bank loans for up to £1.2m for small businesses. Self-employed people will get sick benefits from day one and business rates will be abolished for small businesses 'entirely' for a year. Total stimulus package will be worth around £30bn with further loosening of up to £18bn on the year. Total coronavirus measures will cost £7bn.

This week we will have employment data.

Important news for GBP:

Tuesday:

• Employment Change
• Unemployment Rate
• Average Weekly Earnings

AUD

Economic package from Australia will provide AUD17.6bn stimulus to the economy. The two-year package will total AUD22.9bn, almost 1.2% of GDP, out of which AUD11bn will be distributed before June 30 of 2020.

January-February trade balance data from China showed a decline in trade surplus due to huge drop in exports of -17.2% while imports dropped -4%. Trade surplus with US almost halved to $25.37bn vs $42.16bn at the same time previous year. Inflation figures for February show drop in both CPI (5.2% y/y) and PPI components (-0.4% y/y).

This week we will have meeting minutes from RBA’s meeting and employment data from Australia as well as consumption and industrial data from China followed by decision on loan prime rate on Friday.

Important news for AUD:

Monday:

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

Tuesday:

• RBA Meeting Minutes

Thursday:

• Employment Change
• Unemployment Rate

Friday:

• Loan Prime Rate (China)

NZD

Business surveys plunged as preliminary business confidence for March dropped to -53.3 from -16.4 the previous month and activity outlook went back into negative territory with -12.8% vs 12% the previous month. RBNZ is closely monitoring these surveys and they influence their decisions so this can be additional sign, apart from global easing moves, that RBNZ will cut at their March meeting. Governor Orr stated that they are prepared to do everything that is needed as well as that they see lower bound for rates in the negative territory. Electronic card retail sales for the month of February beat expectations and came in at 0.6% m/m and 8.6% y/y.

This week we will have bi-monthly GDT auction as well as Q4 GDP which is expected to weaken from the previous quarter.

Important news for NZD:

Tuesday:

• GDT Price Index

Wednesday:

• GDP

CAD

Saudi Arabia plans to increase their oil production next month and they have cut their price for all crude. The move is equivalent to a “price war” and crude oil plunged on opening to $33/barrel and with it USDCAD gapped up 150+ pips. USDCAD climbed as high as 1.3750 level while oil dropped down to barely above $27/barrel level.

January was a strong month for housing with building permits coming in at 4% m/m vs -3% m/m as expected due to good weather. February housing starts came in a bit weaker from than the previous month but still better than expected at 210.1k. The government has announced CAD1.1bn stimulus package to fight off the coronavirus and stated their readiness to add more., h However in the light of other country’s measures this seems utterly insufficient. BOC has announced that they will expand their operations in the repo market, similar to Fed’s. They will be conducted weekly starting from March 17. Late on Friday BOC cut the interest rates additional 50 bp for a second cut in a month putting it at 0.75%.

This week we will have data on manufacturing sales, inflation and consumption.

Important news for CAD:

Tuesday:

• Manufacturing Sales

Wednesday:

• CPI

Friday:

• Retail Sales

JPY

Final Q4 GDP data came in even worse than preliminary reported at -1.8% q/q and -7.1% y/y. Capex fell -4.6% q/q for the biggest quarterly drop in over a decade. Private consumption came in a bit better at -2.8% q/q vs -2.9% q/q preliminary. Domestic demand contribution came in at -2.3% q/q vs -2.1% q/q. Chances of the economy contracting again in Q1 are rising due to drops in exports and production as well as private consumption. Government approved an additional $4.1bn package to fight off the coronavirus induced economic fallout. This will be a part of greater economic package of approximately $16bn.

This week we will have data on core machinery orders, industrial production and national inflation. BOJ will meet on Monday and additional easing measures to keep the liquidity are expected.

Important news for JPY:

Monday:

• Core Machinery Orders
• BOJ Interest Rate Decision

Wednesday:

• Trade Balance

Thursday:

• CPI

CHF

February seasonally adjusted unemployment rate keeps steady for months now at 2.3%. Swissy has strengthened on the back of risk aversion in the markets. On market open and in first hours of trading USDCHF fell below 0.92 level.

This week we will have trade balance data. SNB will be forced to take more easing measures to fight the strength of CHF.

Important news for CHF:

Thursday:

• Trade Balance
• SNB Interest Rate Decision

 

[katetrades]

Forex Major Currencies Outlook (Mar 23 – Mar 27)

We expect lockdowns to engulf more and more countries making economic data secondary to the fiscal and monetary measures, preliminary PMI data will be among the first to show direness of the situation.

USD

At the emergency meeting held over the weekend Fed has cut rates to 0%. The length of loans to banks has been increased to 90 days and reserve requirements for banks have been lowered. They have launched a new QE program which will total $700bn of which $500 is for treasuries and $200 for MBS (Mortgage Backed Securities). The cut was deemed necessary to alleviate the pain of economic slowdown caused by the virus and ease the credit conditions as liquidity is seriously drying up.

Retail sales for February disappointed coming in at -0.5% m/m vs 0.2% m/m as expected. Core retail sales came in flat vs 0.4% m/m as expected. Silver lining is that both headline and core readings for previous month have been revised up. These are the pre-virus data and although there will be some initial surge on grocery buying in March, April reading going to be very bad. Industrial production came in at 0.6% m/m vs 0.4% m/m as expected.

This week we will have housing and durable goods data along with final reading of Q4 GDP and data on PCE inflation, personal spending and income.

Important news for USD:

Tuesday:

• New Home Sales

Wednesday:

• Durable Goods Orders

Thursday:

• GDP

Friday:

• PCE
• Personal Spending
• Personal Income

EUR

ZEW survey numbers for March were abysmal. Current situation plunged to -43.1 vs -15.7 the previous month. Both German and EU expectations plunged back into negative coming in at -49.5. Prevailing pessimism is shown in the expectations reading indicating that, apart from a certain contraction in Q1, contraction in Q2 is highly likely. Both final headline and core CPI for February came in at 1.2% y/y while the trade surplus in January shrank to EUR17.3bn from EUR21.5bn the previous month on the back of falling exports -0.1% and rising imports 2.4%. Ifo data plunged showing the state and expectations in German economy with Ifo president saying that German economy could shrink by 6% due to the economic slowdown.

France has imposed a ban on short selling of stocks. The duration of the ban is not stated, but possibly it could last a month. Italy joined them with ban on short selling lasting 3 months. France will guarantee EUR300bn of bank loans to businesses and defer taxes and social security payments. Germany announced the willingness to provide up to EUR500bn of bank loans to businesses. ECB has announced EUR750bbn stimulus package to fight the off the economic impact of coronavirus named Pandemic Emergency Purchase Program (PEPP). It is a new and temporary asset purchase program targeting private and public sector securities that will be conducted by the end of 2020.

This week we will have preliminary March PMI and consumer confidence data.

Important news for EUR:

Monday:

• Consumer Confidence Index

Tuesday:

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

GBP

The January employment report already started to show cracks as the unemployment rate and claimant count change ticked up to 3.9% and 3.5% respectively. Employment change (three month) came in at 184k vs 140k as expected with average weekly earnings coming in at 3.1% 3m/y vs 3% 3m/y as expected but ex-bonus category showed a drop.

The UK announced a new support package which includes a loan guarantee program for £330bn, almost 15% of GDP as well as £20bn grant and tax cuts. Airlines, retailers, and hospitals are the main targets to receive support. GBPUSD has fallen below 1.18 for a lowest reading since 1985. In an extraordinary meeting BOE has made an additional 15bp rate cut putting the interest rate at 0.10%. They have also decided to increase holdings of government bonds, effectively introducing new QE. The majority of new purchases will comprise of government bonds but the BOE will also buy corporate bonds. The size of the program rises to £645bn from £200bn.

This week we will have preliminary March PMI data, inflation and consumption data and BOE meeting. Interest rate has already been lowered to 0.10% and we expect it to stay there.

Important news for GBP:

Tuesday:

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

Wednesday:

• CPI

Thursday:

• Retail Sales
• BOE Interest Rate Decision

AUD

Meeting minutes showed RBA’s preparedness to ease further should economic conditions deteriorate. An extended period of lower rates is necessary to support the economy. Q1 growth will be noticeably weaker than expected and it is hard to predict length of slowdown. AUDUSD has fallen below 0.60 for the first time since 2003. February employment report showed employment change of 26.7k vs 13.5k the previous month. Full-time employment was 6.7k while part-time employment was 20k. The unemployment rate fell to 5.1% from 5.3% and participation rate has ticked down to 66% from 66.1%. Although the reports are very good, with falling unemployment rate, the situation in the world is deteriorating and RBA is under pressure to react and they have delivered. Another 25bp rate cut was announced putting the rate at 0.25%. They started buying bonds in secondary market across the yield curve on Friday. RBA governor Lowe stated that purchase of bonds will be done selectively.

February data from China show devastating numbers. Retail sales fell -20.5% y/y vs -4% y/y as expected, industrial production fell -13.5% y/y vs -3% y/y as expected while fixed asset investments managed to plunge -24.5% y/y vs -2% y/y as expected. The impact of coronavirus on the economy has shattered even the worst expectations.

NZD

RBNZ has also cut interest rate in an emergency meeting over the weekend. New OCR is now set at 0.25% from 1% previously. RBNZ states that OCR will stay at this level for at least 12 months. If more stimulus is required, they prefer introducing QE than pushing rates into negative territory. When the markets opened upon hearing the news NZDUSD was pushed below 0.60 level and continued declining to new 11-year lows. GDT auction came in at -3.9% for a fourth consecutive auction of falling prices with skim milk powder leading the way of decline (-8.1%).

This week we will have trade balance data.

Important news for NZD:

Tuesday:

• Trade Balance

CAD

Manufacturing sales in January came in at -0.2% m/m vs -0.6% m/m as expected. This is the fifth consecutive month of declining sales. Sales decreased in 9 of 21 industries, led by lower sales in the transportation equipment and petroleum and coal products industries. The food industry posted the largest gain. Oil has dropped almost below $20/barrel and in combination with other issues caused by global slowdown it propelled USDCAD above the 1.465 level.

February CPI came in at 2.2% y/y down from 2.4% y/y the previous month while core measures came in-line with expectations, 2.1% y/y for median, 1.8% y/y for common and 2% for trimmed. These readings have very little value and impact on the market which is preoccupied with virus. March reading will be of much more interest.

JPY

BOJ kept the rate steady at -0.1% and doubled the annual pace of ETF purchases to JPY12 trillion with willingness to take additional easing measures if needed to support the economy. Governor Kuroda stated that these measures are a part of cooperation with other nations and added that -0.1% is not a limit and that rate could go lower. He added that there will be increases in purchases of corporate bonds as well. Government is considering ramping the support with an economic package worth more than JPY30 trillion.

Core machinery orders in January improved to 2.9% m/m and -0.3% y/y while final January industrial output saw an improvement from preliminary reading to 1% m/m and -2.3% y/y. February trade balance report showed larger than expected surplus of JPY1109.8bn that was achieved on imports (-14%) falling faster than exports (-1%). National CPI fell to 0.4% y/y from 0.7% y/y the previous month and both ex-food and ex-food, energy came in at 0.6% y/y down from 0.8% y/y the previous month.

This week we will have preliminary March PMI and inflation data.

Important news for JPY:

Tuesday:

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

Friday:

• Tokyo CPI

CHF

SNB total sight deposits for the week have risen indicating their action to limit CHF’s gains. They have left the rate unchanged at -0.75% and added that they will intervene more strongly in the FX market to stabilise the situation. The Franc is now, according to them, “even more highly valued”. Governor Jordan reiterated the need for fiscal policy to assist with monetary policy measures adding that cutting rates is unfavourable at the moment. Given that they are already at -0.75% there is really no point in cutting them even lower.

 

[katetrades]

Forex Major Currencies Outlook (Mar 30 – Apr 3)

Government actions and news events will dominate the week along with resurgence in importance of employment data from US.

USD

Fed has announced that it will keep purchases of MBS and Treasuries in the amounts needed. They will purchase $75bn of Treasuries and $50bn of agency MBS each day this week. This is essentially open-ended QE that will lead to Fed owning entire debt. US Senate has reached a deal on $2 trillion bill that includes cash payment for low and middle-income earners of $1200 for adults and $500 for children and $500bn of corporate and local government assistance. Almost $365bn is penned for small and medium-sized businesses with unemployment compensation being increased and broadened. Hospitals will get $150bn.

Initial jobless claims, data that threatens to overtake NFP as most tracked economic measure, for the week of March 21 skyrocketed to 3283k vs 1640k as expected and up almost 11 times from the previous week’s reading of 282k (more than 3 million). The report is with a week delay, so it refers to the week of March 14 and we can only assume that the number will continue growing as lockdown goes on. President Trump hopes that country can reopen by April 12, that is when Easter is. The time period is very short and it is frowned upon by most scientists as eight weeks are thought to be minimum for the virus cycle.

This week we will have ISM PMI, trade balance and employment data. Initial jobless claims rose to over 3 million in the past week and they could continue their rise to over 4 million while NFP is expected to show a drop of almost 300k. Projections for the unemployment rate go from 4% all the way up to 7%.

Important news for USD:

Tuesday:

• Consumer Confidence Index

Wednesday:

• ISM Manufacturing PMI

Thursday:

• Trade Balance
• Initial Jobless Claims

Friday:

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

EUR

German government has signed the €750bn economic package to fight off the fallout caused by the virus outbreak. The size of the package is whopping 22% of the GDP. The package will have €150bn in supplementary government budget, €100bn for an economic stability fund that can take direct equity stakes in companies, €100bn in credit for loans to struggling businesses, and €400bn in loan guarantees to secure corporate debt at risk of defaulting.

Preliminary March manufacturing PMI came in at 44.8 due to the supplier delivery times being inversely calculated. The longer delivery times are calculated as a positive. Services PMI show the full picture of the slowdown coming in at 28.4 vs 39.5 as expected and dragging composite PMI to 31.4 vs 38.8 as expected. Preliminary consumer confidence index came in at -11.6 vs -13 as expected. Ifo numbers for March showed decline both from February readings and from preliminary March readings indicating the deterioration in economic conditions. Business climate came in at 86.1 vs 87.7 preliminary announced last week, down to the July 2009 level. Ifo economist stated that drop in GDP for 2020 could be between 5 and 20% and it will depend on the length of the shutdown.

This week we will have sentiment data, preliminary March inflation, consumption and employment data as well as final PMI readings.

Important news for EUR:

Monday:

• Business Climate Indicator
• Industrial Confidence Indicator
• Services Sentiment Indicator
• Economic Sentiment Indicator
• Consumer Confidence Index

Tuesday:

• CPI

Wednesday:

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

Friday:

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

GBP

Preliminary March manufacturing PMI came in at 48 vs 45 as expected due to disruption in the supply chains. Services came in at 35.7 vs 45.0 as expected dragging down the composite to 37.1 vs 45 as expected. February CPI came in at 1.7% y/y as expected, a tick down from 1.8% y/y the previous month due to the drop in oil prices. Core CPI however pushed higher to 1.7% y/y from 1.6% y/y the previous month. The rise in core is encouraging, however it is a pre-virus data and as such it will not have an impact. Retail sales came in at -0.3% m/m vs 0.2% m/m as expected and they were flat on the year vs 0.7% y/y as expected.

BOE has left bank rate unchanged at 0.10% stating that MPC can expand asset purchases further. The economic package is estimated to be around 15% of GDP making it the largest fiscal stimulus in the Western world. British Parliament that is scheduled for recess from March 31 to April 21 due to Easter holidays was closed as week earlier amidst the virus fears.

This week we will have final Q4 GDP and PMI data.

Important news for GBP:

Tuesday:

• GDP

Wednesday:

• Markit Manufacturing PMI

Friday:

• Markit Services PMI
• Markit Composite PMI

AUD

Australian government announced a fiscal package that combined with central bank's measures to almost 10% of GDP. More than 50% of it is assistance for small and medium-sized businesses and it also includes expanding the eligibility of collecting benefits and doubling the income support for job seekers allowance.

Singapore reported Q1 GDP and the figure is abysmal. It came in at -10.6% q/q annualized, much worse than already very bad expectations for -8.2% q/q annualized. This is just the beginning of terrible Q1 reports from around the Globe. As a result of the GDP reading Singapore added additional S$48bn to their stimulus package. As a part of fiscal measures they tripled cash payouts to S$300-S$900 which will total to around S$4.6bn. China will implement $344bn stimuuls of which majority will be in fiscal measures. That constitutes around about 2.5% of GDP.

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

Important news for AUD:

Tuesday:

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

Friday:

• Retail Sales
• Caixin Services PMI (China)
• Caixin Composite PMI (China)

NZD

RBNZ has announced a bond purchase program. They will buy NZD30bn of bonds over the next year at a pace of around NZD750mn per week. Governor Orr stated that aim of the QE program is to keep rates very low and that they may consider buying additional assets. RBNZ has bought NZD250mn with their first QE move while there was NZD810mn offered. Trade balance for February returned to surplus with NZD594mn due to rise in exports and drop in imports.

This week we will have ANZ business confidence and activity outlook which are closely watched by RBNZ.

Important news for NZD:

Tuesday:

• ANZ Business Confidence
• ANZ Activity Outlook

CAD

Canadian parliament has passed an emergency spending plan that will total CAD107bn out of which CAD55bn will be in tax deferments. CAD was a beneficiary of weak USD during the week so USDCAD retraced almost 50% and then BOC cut rates by additional 50bp pushing USDCAD higher. Current rate is at 0.25%. They have launched QE program pledging to buy government bonds in the amount of CAD5bn per week and plan to continue doing so “until the economic recovery is well underway”. Separate program has been announced that will concern with buying of commercial paper. They stated that policy rate is now at the effective lower bound. Their intent is to support financial system and to lay foundation for return to normalcy.

This week we will have January GDP and February trade balance data.

Important news for CAD:

Tuesday:

• GDP

Thursday:

• Trade Balance

JPY

Preliminary March manufacturing PMI came in at 44.8 while services plunged to 32.7 for a composite of 35.8. Finance minister Aso stated that stimulus to consumers will most likely be in vouchers, not in cash as cash can be saved while vouchers will be spent and put back into the economy. Headline CPI for Tokyo area came in same as the previous month at 0.4% y/y.

Summer Olympic Games that were supposed to be held in Tokyo in 2020, have been postponed to 2021. Another heavy blow for Japanese economy that hoped to use the games as a springboard. Government has downgraded their economic view and assessed the situation as severe, extremely depressed by the Novel Coronavirus.

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

Important news for JPY:

Tuesday:

• Unemployment Rate
• Retail Sales
• Industrial Production

Wednesday:

• Markit Manufacturing PMI

Friday:

• Markit Services PMI
• Markit Composite PMI

CHF

SNB total sight deposits have been rising for the second week in a row indicating that SNB is intervening in the FX markets to keep CHF from strengthening too much. They have stated in last week that the Franc is now “even more highly valued” which explains their actions. Later on during the week SNB set up refinancing facility and deactivated counter-cyclical buffer with no upper limits.

This week we will have consumption and inflation data.

Important news for CHF:

Tuesday:

• Retail Sales

Thursday:

• CPI

 

[katetrades]

Forex Major Currencies Outlook (Apr 6 – Apr 10)

News relating to the virus and government actions will continue to dominate the markets with employment data from Canada being a potential market mover.

USD

ISM March manufacturing PMI came in at 49.1 vs 45 as expected. The main drop was seen in new orders category followed by new export orders and employment. The reading beat the expectations thanks to the jump in supplier deliveries category which indicates potential supply problems in the future. February trade balance came in at -$39.9bn from -$45.3bn. Exports were down -0.4% while imports showed a bigger decline of -2.5%. The deficit with China decreased by $4bn to $19.7bn due to both falling exports and imports. Initial jobless claims for the week of March 28 came in at 6648k vs 3700k as expected. The number doubled expectations and previous week’s record reading of 3370k. That is 10 million people applying for unemployment compensation in just two weeks. Coronavirus is wrecking chaos in the labour markets.

A record run of 113 months of jobs growth ended today with nonfarm payroll number coming in 7 times worse than expected at -701k. The unemployment rate jumped to 4.4% from 3.5% the previous month and participation rate slipped to 62.7% from 63.4% the previous month. U6 underemployment jumped to 8.7% from 7% the previous month. On the positive side, average hourly earnings came in at 0.4% m/m and 3.1% y/y both up from the previous month’s readings. The report encompasses data up to March 12 which was before the majority of jobs were lost, so April’s reading has a potential to be even worse.

President Trump suggested that the US should continue its social distancing policies until at least April 30 instead until Easter as previously planned. Fed announced that they will temporarily ease capital requirements for big bangs. The temporary change would exclude US Treasury securities and deposits at Federal Reserve Banks from the calculation of the leverage ratio, and will be in effect until March 31, 2021. The vote to ease the requirement was unanimous.

This week we will have rapidly climbing initial jobless claims and inflation data.

Important news for USD:

Thursday:

• Initial Jobless Claims

Friday:

• CPI

EUR

Sentiment in the EU in March showed a decline as was expected. Economic sentiment plunged below 100 to 94.5, matching the low levels from August 2013. Preliminary CPI for March came in at 0.7% y/y vs 0.8% y/y as expected dropping from 1.2% y/y the previous month due to fall in oil prices. Core CPI came in at 1% y/y vs 1.1% y/y as expected and also down from 1.2% y/y the previous month which poses greater reason for concern. Final manufacturing PMI came in at 44.5 vs 44.8 preliminary on the back of falling German reading. New orders, output and purchasing all fell while supplier deliveries index held the reading high. Final services came in at 26.4 vs 28.4 preliminary which dragged composite to 29.7 vs 31.4 preliminary. Record low readings for EU, Germany and France which will seriously damage GDP readings. February retail sales came in at 0.9% m/m vs 0.7% m/m as expected.

Talks about coronabonds are ongoing. The southern states including France have been pushing for a collective bonds while northern countries, Germany and Netherlands, are vehemently opposed to it. The decision has to be unanimously made. Introduction of coronabonds will ease the pressure on southern countries due to the countries with strong credit rating, namely Germany, lowering the rate.

GBP

Final Q4 GDP came in flat and 1.1% y/y as preliminary reported. There were some changes in the details of the report, with government spending dropping and business investment rising, but the reading is still very weak and it reflects the economy that was not impacted by the virus stoppage. Final manufacturing PMI for March came in at 47.8 vs 48 preliminary while services came in at 34.5 vs 35.7 preliminary dragging down composite to 36 from 37.1 preliminary.

This week we will have GDP, industrial, construction and trade balance data.

Important news for GBP:

Thursday:

• GDP
• Manufacturing Production
• Industrial Production
• Construction Output
• Trade Balance

AUD

Retail sales from February came in at 0.5% m/m vs 0.4% m/m as expected and rebound from -0.3% m/m the previous month. The rebound can be attributed to panic buying caused by the virus outbreak. March numbers should post the same picture.

Official PMI data from China for the month of March showed a big rebound, a V shaped one. Manufacturing came in back in expansion at 52, services followed the suit with 52.3 while composite came in at 53. Output, new orders and employment categories all bounced back to expansion territory. Many analysts are questioning the validity of report, however due to the abysmal numbers from the previous month and the fact that PMI is measured comparing to previous month many surveyees might have set the bar too low, therefore any signs of improvement have been warmly welcomed. Caixin manufacturing PMI also went into expansion territory coming in at 51 with services also jumping to 43 from 26.5 the previous month and combining for 46.7 in composite reading.

This week we will have trade balance data and RBA rate decision that is expected to be non-event due to the recent moves made by RBA. They need to give more time so that their measures start producing effects. Inflation data from China will be published.

Important news for AUD:

Tuesday:

• Trade Balance
• RBA Interest Rate Decision
• RBA Rate Statement

Friday:

• CPI (China)

NZD

Activity numbers in March paint a very dark picture. Business confidence plummeted to -63.5 while activity outlook plunged to -26.7. According to the report the second part of the month was particularly troublesome indicating that next month’s readings will be even weaker. Report also states that a net 23% of firms intend on laying off staff, including a net 35% of retailers.

This week we will have bi-monthly dairy price auction.

Important news for NZD:

Tuesday:

• GDT Price Index

CAD

February trade balance came in at -CAD0.98bn vs -CAD2.3bn as expected. Exports were up 0.5% because of higher exports of aircraft, while imports were down 0.8% mostly due to a decrease in crude oil imports. This data had little to no impact as it was pre-virus news and currently everything revolves around virus related news.

This week we will have housing and employment data.

Important news for CAD:

Wednesday:

• Housing Starts
• Building Permits

Thursday:

• Employment Change
• Unemployment Rate

JPY

The great number of data from Japan started with the unemployment rate for February which stayed at 2.4%. It continued with retail sales beating expectations coming in at 0.6% m/m and finally preliminary February industrial production came in at 0.4% m/m vs flat as expected and -4.7% y/y. Figures seem encouraging but a rude awakening and sharp drops are expected in March. Final manufacturing PMI plunged even deeper to 44.8 from 47.8 the previous month while services PMI came in at 33.8 a bit better from the preliminary reading pushing composite to 36.2.

This week we will have spending, earnings and core machinery data.

Important news for JPY:

Tuesday:

• Household Spending
• Labour Cash Earnings

Wednesday:

• Core Machinery Orders

CHF

SNB total sight deposits for the week ending 27 March jumped to CHF620.5bn from CHF608.8bn the previous week indicating bank’s increased activity in the financial markets. The activity is aimed towards fighting the strong CHF. February retail sales bounced back into positive with 0.3% m/m. CPI in March came in at -0.5% y/y as expected while core CPI dived into negative territory with -0.1% y/y indicating deflation.

This week we will have employment data.

Important news for CHF:

Wednesday:

• Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (Apr 13 – Apr 17)

The world continues to be dominated by the coronavirus related news and it will continue in this post-Easter week with special attention paid to data from China, the country where it all originated, and where life first started to go back to normal.

USD

Initial jobless claims for the week ending with April 3 came in at 6606k vs 5500k as expected. There was a small drop compared to prior week’s reading of 6867k, however the numbers are still much worse than expected and there is no sign of the data slowing down. Headline CPI in March fell to 1.5% y/y from 2.3% y/y the previous month on the back of slumping oil prices. Core CPI dropped to 2.1% y/y from 2.4% y/y which will be a cause for concern during normal times but now the reading is brushed off.

Fed has announced new plan of $2.3 trillion in lending programs to support the economy. $600bn is intended for small and mid-sized businesses through Main Street Lending Program. Municipal Liquidity Facility will offer up to $500bn in lending to states and municipalities. Primary and secondary corporate debt facilities and TALF will be expanded using the remaining amount.

This week we will have consumption, housing and industrial production data as well as initial jobless claims for week leading up to the Easter holiday.

Important news for USD:

Wednesday:

• Retail Sales
• Industrial Production

Thursday:

• Housing Starts
• Building Permits
• Initial Jobless Claims

EUR

The Emergency conference held by finance ministers of EU states failed to approve a €500bn aid package. The countries again divided between northern and southern countries over sharing the burden for the hardest hit countries. Italy and Spain pushed for the introduction of coronabonds that would help spread the burden among all of the countries while Germany and Netherlands are opposing it. This decision has to be unanimous in order to be implemented; a simple majority will not suffice. ECB has decided to accept Greek debt as collateral after it was excluded for almost 5 years. At their second meeting they managed to agree on around €540bn rescue package. Restriction on the deal is that funds have to be used for treating issues caused by coronavirus.

This week we will have industrial production data and final March inflation data.

Important news for EUR:

Thursday:

• Industrial Production

Friday:

• CPI

GBP

News that prime minister Boris Johnson has been put into intensive care due to coronavirus lead to the weakening of pound at the start of the week. Foreign secretary Dominic Raab was named as interim leader of the government and due to his hard Brexit stances as well as fiscal conservatism the pound was pushed even lower.

AUD

RBA has left the cash rate unchanged at 0.25% as was expected after the multiple cuts preceding this meeting. They stated that if market conditions continue to improve “smaller and less frequent purchases of government bonds will be required”. The government has voted to subsidize the wages of 6 million workers for at least the next 6 months. Trade balance data for February showed a larger than expected surplus at AUD4.36bn. However, it was achieved on both falling exports (-4.7%) and falling imports (-4.3%). CPI from China for the month of March came in at 4.3% y/y while the food prices were up 18.3% y/y. PPI has continued its deflationary trend sinking even lower to -1.5% y/y due to shutdowns.

This week we will have employment data from Australia and slew of March data from China including Q1 GDP, trade balance, consumption and industrial production.

Important news for AUD:

Tuesday:

• Trade Balance (China)

Thursday:

• Employment Change
• Unemployment Rate

Friday:

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

NZD

Business confidence for Q1 dropped to -70 from -21 the previous quarter. The report states that a net 67% of businesses expects a deterioration in general economic conditions while a net 11 percent reported weaker demand in their own business in the 1st quarter, but a net 13 percent expected weaker demand in the next quarter. RBNZ has increased their QE program to NZD33bn over the 12 months. GDT price index came in at 1.2% thus snapping a streak of four consecutive negative auctions thanks to the rise in whole milk prices.

CAD

March employment data from Canada missed already bleak expectations and came in at -1010k vs -500k as expected - the worst employment report ever, but that unwelcoming title can be overtaken already by April’s report since numbers are gathered up to March 21. The unemployment rate jumped to 7.8% from 5.6% the previous month while participation rate dropped to 63.5% from 65.5% the previous month. Due to the methodology connected with calculation of the unemployment rate it is feared that true rate could be higher, even going to 9%. Part-time employment fell by -536.7k while full-time employment plunged -474k. Those are some atrocious numbers.

OPEC+ countries agreed to reduces output by 10-12 mln bpd in May and June. Oil traders were not impressed by this decision because cuts appear to be small, there is already oversupply and Mexico refused to participate in output cuts, but later on agreed on 100k bpd reduction.

This week we will have BOC meeting that is expected to be a non-event since the rates have already been slashed to 0.25% and started QE program.

Important news for CAD:

Wednesday:

• BOC Interest Rate Decision
• BOC Rate Statement

Thursday:

• Manufacturing Sales

JPY

Household spending in February came in at -0.3% y/y vs -3.9% y/y the previous month, most likely due o stocking up of goods before the virus outbreak. Labour cash earnings beat expectations, coming in at 1% y/y but slowed down compared to 1.5% y/y the previous month. Core machinery orders came in better than expected at 2.3% m/m and -2.4% y/y. This is another data point indicating good pre-virus conditions which will be completely ignored.

Prime minister Abe announced a state of emergency in seven prefectures adding that the government will withdraw the order as soon as it is clear that people's lives are no longer in danger or if the measures are no longer needed. The overall cost of the government fiscal stimulus is said to reach almost 20% of GDP with cash payments to households being primary focus. BOJ has cut economic outlook for all regions.

This week we will have final February industrial production data.

Important news for JPY:

Friday:

• Industrial Production

CHF

Total sight deposits for the week ending with April 3 came in at CHF627.2bn vs CHF620.5bn the previous week. SNB is fighting hard to limit Swissy’s strength. The unemployment rate in March jumped to 2.8%.

 

[katetrades]

Forex Major Currencies Outlook (Apr 20 – Apr 24)

Preliminary April PMI data will give us an insight into the devastative effects of pandemic on economies while investors will be looking for a continuation of slowdown in initial jobless claims.

USD

Retail sales for the month of March came in at -8.7% m/m vs -8% m/m as expected. Control group came in at 1.7% m/m vs -2% m/m as expected. The biggest drop was in clothing stores and restaurants while food and beverage stores as well as pharmacies were up. The stockpiling of food and drugs at the beginning of the month was not enough to improve the reading above the expected number but it did manage to soften the drop. If we exclude the positive impact of grocery and pharmacy stockpiling the retail sales number would come around -20%. Initial jobless claims for the week ending with April 4 eased a bit coming in at 5245k vs 6606k the previous month, but are still at historic highs, almost 20 times higher than a month ago. Continuing claims have reached almost 12 million.

IMF put out new projections for 2020 and now they see global GDP declining by -3%. All of the major economies will have negative GDP with Italy leading the way with -9.1% followed by France with -7.2% and Germany with -7%. US GDP is expected to come at -5.9%. They say that if outbreak lasts into the Q3 it could shave additional 3 pp from the GDP. For 2021 they see a rebound in growth and forecast it at 5.8%. Gilead Science published preliminary results of its Remdesivir drug treatment on coronavirus cases. Positive results were enough to raise markets spirits; however, the drug was tested on the small sample size so they are still partial and not verified.

This week we will have housing data, new look at the initial jobless claims and durable goods data.

Important news for USD:

Tuesday:

• Existing Home Sales

Thursday:

• Initial Jobless Claims

Friday:

• Durable Goods Orders

EUR

France is extending its lockdown to May 11 while Austria and Denmark talk about easing of restrictions. Reports are showing that Germany plans to extend lockdown to May 3. France, Spain, Austria, Belgium and Greece extended the ban on short-selling to middle of the May while Italy keeps it imposed until June. Final inflation data for March show headline CPI at 0.7% y/y and core CPI at 1% y/y.

This week we will have trade balance and sentiment data as well as preliminary consumer confidence and PMI numbers for April.

Important news for EUR:

Monday:

• Trade Balance

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Thursday:

• Markit Manufacturing PMI (EU, Germany and France)
• Markit Services PMI (EU, Germany and France)
• Markit Composite PMI (EU, Germany and France)

Friday:

• Ifo Business Climate (Germany)

GBP

UK is extending its lockdown until May 11. In the absence of economic events in the UK the pound was mostly influenced by the news about Prime Minister Johnson’s health. Movements in GBPUSD were centred around moving averages with buyers taking control during risk-on sentiment and sellers regaining it during risk-off sentiment. Overall the range for the pair was around 250 pips for the week with near-term bias remaining neutral.

This week we will have employment, inflation, consumption and preliminary PMI data for April.

Important news for GBP:

Tuesday:

• Employment Change
• Unemployment Rate
• Average Weekly Earnings

Wednesday:

• CPI

Thursday:

• Retail Sales
• Markit Manufacturing PMI
• Markit Services PMI
• Markit Composite PMI

AUD

Employment report for March showed an employment change of 5.9k vs -30k as expected. Survey was done for the period up to the March 14 which is before restrictions on movement and lockdowns began. The unemployment rate ticked to 5.2% while participation rate stayed at 66%. Full-time employment change came in at -0.4k while part-time employment change came in at 6.4k. The report is of very little value since it catches only pre-virus data.

Chinese trade balance for period of January to March came in at $19.96bn with exports falling -6.6% y/y and imports falling -0.9% y/y. Exports to the EU -24.2%, the US -20.8% and Japan -1.4% fell while imports from the US and the EU fell -12.5% and -6.5% respectively. Imports from Japan rose 4.8%. Both exports and imports beat the expectations indicating that supply chains are not in such a dire state, however collapse of demand due to lockdowns worldwide is yet to be measured. Markets were starving for some good news in the sea of negativity so the beatings on data brought risk-on mood.

China is the first country to publish Q1 numbers and they show the full impact of the economic slowdown. Data came in at -9.8% q/q and -6.8% y/y, the worst since 1992. Retail sales for March came in bit better than previous month but still way worse than expected at -15.8% y/y. Manufacturing sector was not hit that hard so the industrial production number in March came in at -1.1% y/y vs -6.2% y/y as expected. Service industries have been hit very hard; therefore, the number is negative. Markets were encouraged by the beating on the industrial production.

This week we will have minutes from the latest RBA meeting as well as speech by governor Lowe.

Important news for AUD:

Tuesday:

• RBA Meeting Minutes
• RBA Governor Lowe Speech

NZD

RBNZ Governor Orr stated that asset-purchase program can be increased and that idea about implementing negative interest rates is not completely abandoned.

This week we will get Q1 inflation data and bi-monthly dairy auction.

Important news for NZD:

Monday:

• CPI

Tuesday:

• GDT Price Index

CAD

BOC has left the interest rate unchanged at 0.25% adding that it is an effective lower bound. They have announced an additional QE program intended for the purchase of provincial and corporate bonds. Provincial bonds will be acquired in the amount of up to CAD50bn while investment grade corporate bonds will be acquired in the secondary market in the amount of up to CAD10bn. So far BOC has accumulated over CAD200bn of new assets, amounting to about 10% of Canada's GDP. Governor Poloz stated that asset purchases are now the main driver of monetary policy as they do not see the effectiveness of negative interest rates on stability in the financial markets.

WTICrude prices fell below $18/barrel during the week due to the combination of several factors. Oversupply, not big enough production cut by the OPEC and historic drop in demand all weighed heavily on the oil prices. Russia and Saudi Arabia issued a joint statement about the necessity for further easing measures in order to boost the prices.

This week we will have consumption and inflation data.

Important news for CAD:

Tuesday:

• Retail Sales

Wednesday:

• CPI

JPY

Prime minister Abe announced expansion of the state of emergency to whole country until May 6. He told the citizens to avoid travelling to other prefectures. The week from April 29 and May 6 is called “Golden week” as many Japanese holidays are within that week, travelling was supposed to increase exponentially, therefore new measures have been taken. The government will handout JPY100k to households and it is expected that the cost of entire package will be around JPY14 trillion.

This week we will have trade balance and national inflation data as well as preliminary April PMIs.

Important news for JPY:

Monday:

• Trade Balance

Thursday:

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

Friday:

• CPI

CHF

Total sight deposits for the week ending with April 10 came in at CHF634.1bn vs CHF627.2bn the previous week indicating continuation of SNB’s fight to subdue the rising Swissy.

This week we will have trade balance data.

Important news for CHF:

Tuesday:

• Trade Balance

 

[katetrades]

Forex Major Currencies Outlook (Apr 27 – May 1)

Three major central banks (Fed, ECB and BOJ) will hold their meetings during the week and we will have preliminary Q1 GDP readings from US and EU.

USD

Sales of existing homes in March dropped almost 10% to 5.27m from 5.76 the previous month while new home sales plunged over 15% to 627k from 741k the previous month. Initial jobless claims for the week ending April 18 came in at 4427k down from 5245k the previous week. This is the third week of falling claims, however the number is still preposterous as almost 4.5 million people asked for monetary assistance. Continuing jobless claims rose to almost 16 million.

The US Senate approved a $485bn support package that includes around $320bn for the Payroll Protection Plan that turns loans into grants for small and medium businesses that maintain or rehire employees. The remainder of the funds is intended for coronavirus testing and hospitals. The House has also approved the package. Another support package that includes assistance for state and local government is currently being negotiated but it is still in the early stages.

This week we will have preliminary Q1 GDP reading, PCE inflation and personal spending data, initial and continuing jobless claims as well as ISM manufacturing PMI data. Fed should stay dormant at their meeting and let their previous measures start to produce results.

Important news for USD

Wednesday:

• GDP
• Fed Interest Rate Decision
• FOMC Press Conference

Thursday:

• PCE
• Personal Spending
• Initial Jobless Claims

Friday:

• ISM Manufacturing PMI

EUR

ZEW survey of the current situation came in at -91.5 vs -77.5 as expected. Expectations for both EU and Germany surprised and came in positive, 25.2 and 28.2 respectively, however those expectations are not for the short-term. Bounce back in the economy is not expected before Q3.

PMI numbers for April were downright abysmal. Expectations were very low but the readings managed to come way below expectations, particularly services PMI. Manufacturing PMI for Eurozone came in at 33.6 vs 38 as expected while services plunged to only 11.7 vs 22.8 as expected dragging the composite reading to 13.5 vs 25 as expected. French services PMI came in almost single digit at 10.5. The survey was done for the period of 7 – 21 April, right in the middle of lockdowns thus it shows the full devastation that the virus has brought on economic activity. Markit stated: "Our model which compares the PMI with GDP suggests that the April survey is indicative of the eurozone economy contracting at a quarterly rate of approximately 7.5%.” They added that the fall in the employment is among steepest ever.

This week we will have business sentiment indicators, preliminary Q1 and CPI for April readings as well as ECB meeting.

Important news for EUR:

Wednesday:

• Business Climate Indicator
• Consumer Confidence Index

Thursday:

• GDP
• CPI
• ECB Interest Rate Decision
• ECB Monetary Press Conference

GBP

Employment report for March showed a claimant count change of only 12.2k, indicating a not so bleak picture in the jobs market. The government has offered a program to keep people at work and almost 150 000 companies applied for it to receive a partial salary funding for almost 1 million workers in the first day of program’s introduction. This program helped to offset the spike in claimant counts. The unemployment rate ticked to 4% while average weekly earnings slipped to 2.8% 3m/y from 3.1% 3m/y the previous month.

CPI for March came in at 1.5% y/y as expected, down from 1.7% y/y the previous month due to the drop in oil prices. Core CPI came in at 1.6% y/y as expected. Retail sales plunged -5.1% m/m vs -0.3% m/m the previous month. Retail sales ex-autos and fuel dropped -3.8% m/m. Apart from food purchases, which due to virus-induced stockpiling pushed the reading up, all other categories showed significant drops. The greatest drop was seen in clothing stores where sales were down over a third.

Preliminary PMI numbers followed the suit of the European data and came in at 32.9 for manufacturing, 12.3 for services and 12.9 for composite. Easily record low numbers in survey’s 22-year history. According to the report, an estimated 81% of service providers and 75% of manufacturing companies reported a fall in business conditions during the month. PMI numbers indicate that we can expect a drop in Q2 GDP greater than 7%.

AUD

RBA April minutes showed board’s expectations that coordinated monetary and fiscal responses would soften expected economic contraction. They expect that less frequent and smaller purchases of government bonds will be required going on. Governor Lowe reiterated that current rates will likely remain for a few years.

Central bank of China cut its one-year Loan Prime Rate (LPR) by 20 bps to 3.85%. The central bank also cut the five-year LPR by 10 bps to 4.65%. These cuts are intended to ease lending conditions and stimulate the economy.

This week we will have inflation data from Australia and official PMI numbers from China.

Important news for AUD:

Wednesday:

• CPI

Thursday:

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

NZD

Inflation data for Q1 showed CPI at 0.8% q/q vs 0.4% q/q as expected and 2.5% y/y vs 2.1% y/y as expected. Inflation has shot over the magical level of 2%, but the data captures pre-virus conditions so it is brushed for now. GDT price auction return into negative territory coming in at -4.2%. Prime Minister Ardern announced that they will be easing lockdown measures on April 27.

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

Important news for NZD:

Wednesday:

• Trade Balance

Thursday:

• ANZ Business Confidence

CAD

Retail sales in March came in at 0.3% m/m vs 0.4% m/m the previous month while the ex-autos category came in flat vs -0.1% m/m the previous month. Sales rose in 6 of 11 sub-sectors, representing 62.5% of retail trade. CPI in March crumbled down to 0.9% y/y from 2.2% y/y the previous month due to the collapse in oil prices. Gasoline was down -21.2%. This is the lowest inflation reading since September of 2016. Core measures also came weaker than expected with median coming at 2% y/y, common at 1.7% y/y and trim at 1.8% y/y.

JPY

Trade balance for March came in at JPY4.9bn vs JPY459.9bn as expected. A very big miss was caused by exports slumping -11.7% y/y, which represents 16 consecutive negative y/y readings, while imports fell -5% vs -8.7% as expected. Exports to the US are down -16.5% y/y, to EU they are down -11.1% y/y and to China exports are down -8.7% y/y. Auto exports have fallen more than 13%. National CPI numbers came in as expected with both headline and ex-fresh food readings at 0.4% y/y and ex-food and energy at 0.6% y/y.

Preliminary April manufacturing PMI slipped to 43.7 from 44.8 the previous month while services PMI plunged to 22.8 from 33.8 the previous month. This is a new record low for the services reading. Composite PMI was dragged down to 27.8 from 36.2 the previous month. Markit concludes that we can expect a larger than 10% annual drop in GDP for Q2.

This week we will have employment, consumption, industrial production and Tokyo inflation data. BOJ meeting will leave the rate unchanged but further easing of monetary policy is possible.

Important news for JPY:

Tuesday:

• BOJ Interest Rate Decision
• BOJ Monetary Policy Statement
• Unemployment Rate

Thursday:

• Retail Sales
• Industrial Production

Friday:

• Tokyo CPI

CHF

Total sight deposits for the week ending April 17 came in at CHF637.2bn vs CHF634.1bn the week before. SNB continues to fight Swissy’s strength not paying much attention about being labelled as a currency manipulator. Trade balance in March came in at CHF4.02bn vs CHF3.54bn the previous month. Increase in surplus was achieved in the worst possible way with both falling exports -4% and falling imports -6.7%.

This week we will have consumption data.

Important news for CHF:

Thursday:

• Retail Sales

 

[katetrades]

Forex Major Currencies Outlook (May 4 – May 8)

Employment data from US, Canada and New Zealand coupled with RBA and BOE interest decisions will be the highlights of the economic week.

USD

Q1 GDP data release caused stir in the markets. First the publication was delayed, then it printed positive 4.8% annually and later on it was changed to -4.8% annually. Estimates were for a drop of -4% annually. Personal consumption, the chief motor of US economy, was the main drag falling -7.6%. Net exports were the biggest contributor with 1.3pp. Since Q2 GDP is expected to come even lower we may say that US has entered into a recession defined as two consecutive quarters of falling GDP. Fed Chairman Powell confirmed this fears stating that Q2 GDP may plunge as deep as -30%. The Fed has left the interest rate unchanged but it has pledged to do whatever is necessary to support the economy. They called the government to expand their fiscal stimulus. Rates will stay near zero until employment and inflation move towards their targets.

Initial jobless claims for the week ending April 18 came in at 3839k pushing the number very close to 30 million people. Continuing claims rose to almost 18 million people. Personal spending plunged to -7.5% m/m due to constrictions on movement preventing people from consuming in restaurant, bars, shopping malls, movie theatres, etc. Headline PCE came in at 1.3% y/y while core was at 1.7% y/y. Significant drop in headline number is contributed to plunging oil prices.

This week we will get trade balance, PMI and employment data. NFP for April is, according to some estimates, expected to drop by 20 million while the unemployment rate may rise to double digits at 15.5% while White House expects it to go to 19%.

Important news for USD:

Tuesday:

• Trade Balance
• ISM Non-Manufacturing PMI

Thursday:

• Initial Jobless Claims

Friday:

• Nonfarm Payrolls
• Unemployment Rate
• Average Hourly Earnings

EUR

Unsurprisingly, sentiment data from EU plunged into deep negative territory in April with services sentiment falling to -35 from -2.2 the previous month. Preliminary headline CPI slipped to 0.4% y/y which is the lowest reading since September of 2016 while core held better and came in at 0.9% y/y vs 1% y/y the previous month. Significant drop in headline inflation was due to the sharp drop in oil prices. Preliminary Q1 GDP came in at -3.8% q/q and -3.3% y/y. Spain and France were hit the hardest with both countries showing drops bigger than 5% while Italy came in at -4.7% q/q. French president Macron stated that movement restrictions will be lifted on May 11 but it is only the first step and it will not immediately lead back to normal life.

ECB has left the rate unchanged as expected. They have decided to also leave PEPP unchanged at €750bn. New lending program has been introduced confirming their commitment to do whatever is necessary. Bleak projections about the output for 2020 have been presented. Q2 GDP may fall -15% while total 2020 GDP may be -12%.

This week we will have final PMI and consumption data.

Important news for EUR:

Monday:

• Markit Manufacturing PMI (EU, Germany, France)

Wednesday:

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

GBP

UK Government is not planning to ease social distancing measures before May 7. They stated that five tests need to be met in order for measures to ease: 1) Making sure that NHS can cope with the number of cases, 2) A “sustained and consistent” fall in daily death rate, 3) The rate of infection slowing to “manageable level”, 4) Ensuring supply of tests and PPE (Personal Protective Equipment) can meet future demand and 5) Being confident that any adjustments will not risk a second peak.

This week we will have final PMI data as well as BOE rate decision. No change in the rate is expected, however there is room for additional easing to support the economy.

Important news for GBP:

Tuesday:

• Markit Services PMI
• Markit Composite PMI

Thursday:

• BOE Interest Rate Decision

AUD

Headline CPI number for Q1 from Australia came in at 0.3% q/q and 2.2% y/y. Core CPI came in at 1.8% y/y, still below the RBA’s range of 2-3% and projections for Q2 are abysmal. Due to the stoppage caused by the virus outbreak we could see numbers moving into opposite direction, perhaps even going into deflation.

Official Chinese PMI data for April show manufacturing at 50.8, non-manufacturing at 53.2 and composite up to 53.4. Services were hit especially hard during the lockdowns so it is very encouraging sign to see them rise firmly above the 50 level. Caixin manufacturing PMI came in weaker than official at 49.4. Caixin manufacturing PMI measures smaller enterprises while official number concentrates on larger enterprises. Export orders have significantly plunged due to the lack of demand. Some reports indicate that almost 91% of all firms in China are operational as of late April, however only 4% work with full capacity.

This week we will have consumption and trade data from Australia coupled with RBA rate decision along with trade and Caixin PMI data from China.

Important news for AUD:

Tuesday:

• RBA Interest Rate Decision
• RBA Rate Statement

Wednesday:

• Retail Sales

Thursday:

• Trade Balance
• Trade Balance (China)
• Caixin Services PMI (China)
• Caixin Composite PMI (China)

NZD

RBNZ Governor Orr stated that he is open minded about direct monetization of government debt. This is unprecedented for a central bank in high-income countries as they usually buy debt from the market and not directly from the government. Adding to that the RBNZ is not ruling out negative interest rates and NZD was sent down.

Trade balance in March came in at NZD672m, increase of surplus from the previous month, but not as much as expected. Exports rose and reached a new high on the back of kiwifruit, dairy and meat exports. Higher prices of dairy and meat contributed as well. Imports have also risen indicating strong domestic demand. Business confidence continued to deteriorate, although at a slower pace coming in at -66.6 vs -63.5 the previous month.

This week we will have bi-monthly GDT auction and employment data for Q1.

Important news for NZD:

Tuesday:

• GDT Price Index

Wednesday:

• Employment Change
• Unemployment Rate

CAD

GDP for the month of February was published and it showed increase of 0.1% m/m which pushed GDP to 2.2% y/y. Canada was struggling with growth even before the outbreak. Stoppages will have a devastating effect on economy and wipe out the sluggish growth.

This week we will have trade and employment data. Employment change is expected to show a drop of 1.5 million people while the unemployment rate should climb to 8.5%

Important news for CAD:

Tuesday:

• Trade Balance

Friday:

• Employment Change
• Unemployment Rate

JPY

BOJ has kept the policy rate at -0.1% and made further easing of monetary policy as expected. They have pledged to buy unlimited amounts of Japanese Government Bonds. Additionally, they will double the amount of purchases of corporate bonds and commercial papers. They will also expand their loan program aimed to fight the coronavirus and will expand the type of assets they accept as collateral for the loan program. BOJ has lowered its forecasts for growth and inflation for 2020 as the downturn caused by the coronavirus outbreak triggers a harsh reassessment of the economy. Governor Kuroda stated that primary goal of asset purchases is to stabilise markets and added that further easing is possible. Further steps will be taken if need arises.

The unemployment rate ticked up to 2.5% in March, a new 1-year high. Preliminary industrial production data came in better than expected at -3.7% m/m and -5.2% y/y while drop in retail sales matched the expectations of -4.5% m/m and -4.6% y/y. Inflation in the Tokyo area dropped to 0.2% y/y while ex-fresh food measure fell into deflation with -0.1% y/y. Final manufacturing PMI came in at 41.9 vs 43.7 as preliminary reported putting the reading at lowest level since 2009. Japan plans to extend the state of emergency for a month. Final decision will be made on May 6. Previously it was set to expire on May 6.

This week we will have earnings, spending and final PMI data.

Important news for JPY:

Friday:

• Household Spending
• Labour Cash Earnings
• Markit Services PMI
• Markit Composite PMI

CHF

SNB total sight deposits for the week ending 24 April rose to CHF 650.7 bn vs CHF 637.2 bn prior. This is a significant increase in deposits as SNB signals their determination to defend EURCHF 1.05 level and push the pair higher. Retail sales in March plunged -5.6% y/y vs 0.3% y/y the previous month. Impact of lockdown restrictions shows a sharp drop in consumption across the economy.

This week we will have inflation and employment data.

Important news for CHF:

Tuesday:

• CPI

Friday:

• Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (May 11 – May 15)

Consumption and inflation data from US, Q1 GDP from US and employment data from Australia will plunge global economies further down the black hole of bad data.

USD

March factory orders came in at -10.3% m/m for the lowest reading since the series has been tracked (1957). The final durable goods reading came in at -14.7% m/m and those numbers combined will push down the second GDP reading. Some analysts see it plunging down to -8%. Trade balance came in at -$44.4bn vs -$44.2bn as expected. Exports were down -9.6% while imports were down -6.2%. Trade deficit with China narrowed to -$11.83bn vs -$16bn the previous month. ISM Non-manufacturing came in at 41.8. This is the lowest reading since Great Financial Crisis and with business activity, new orders and employment measures plunging it indicates the pain that will be felt in jobs market and in Q2 GDP. Initial jobless claims came in at 3169k putting the total number of claims in last two months north of 33.5 million while continuing claims climber to 22.65 million.

NFP for April came in at -20.5 million vs -22 million as expected. Downward revisions were made to the previous month’s reading. The unemployment rate jumped to 14.7% with participation rate dropping down to 60.2%. U6 unemployment rate, measuring workers who are highly skilled but working in low paying or low skill jobs and part-time workers who would prefer to be full-time, rose to staggering 22.8%. The US Labour department stated that the unemployment rate would be 5% higher if that workers were classified correctly which would take the unemployment rate to almost 20%. Average hourly earnings came in at 4.7% m/m and 7.9% m/m beating the estimates due to the fact that low wage employees lost their jobs. The data is arrived at by simple division of total wages paid by the number of hours worked. US Treasury is planning to borrow almost $2 trillion in Q2. It has borrowed almost half of that in previous year. Fed futures contracts implied that from November of 2020 we may get negative interest rates.

This week we will have inflation, consumption and industrial production data along with hugely growing jobless claims.

Important news for USD:

Tuesday:

• CPI

Thursday:

• Initial Jobless Claims

Friday:

• Retail Sales
• Industrial Production

EUR

Final manufacturing PMI came in at 33.4 little changed from the preliminary reading of 33.6. Small uptick was seen in German reading (34.5 vs 34.4 preliminary) while French reading stayed at 31.5 as preliminary reported. Final services came in at 12 with composite at 13.6, a bit better than preliminary but still horrendously low. Spanish composite came in single digits (9.2)! Retail sales in March came in at -11.2% m/m. Expectations are for April to show even bigger decline as the entire continent was under lockdown.

This week we will have industrial production data and second estimate of Q1 GDP.

Important news for EUR:

Wednesday:

• Industrial Production

Friday:

• GDP

GBP

Final services PMI came in at 13.4, a little improvement from 12.3 as preliminary reported but still abysmally low. It dragged composite up to 13.8. Still lowest readings on the record with activity, new work and employment all showing significant declines.

BOE has left the both the bank rate (0.10%) and asset purchase program (£645bn) unchanged. Seven Members of Policy Committee voted in favour of leaving the asset purchase program unchanged with two members voted for increase it for £100bn. BOE expects GDP to drop by -14% in H2 of 2020 before rebounding the following year. Governor Bailey stated that they still have ample monetary policy tools and that they will continue to come up with appropriate responses. Information about removing lockdown measures will be taken into account for June discussions and BOE may expend their QE programme at the June meeting.

This week we will have preliminary Q1 GDP reading, industrial and manufacturing production as well as trade balance data. We will also have continuation of post-Brexit negotiations starting on Monday.

Important news for GBP:

Wednesday:

• GDP
• Manufacturing Production
• Industrial Production
• Construction Output
• Trade Balance

AUD

RBA has left the cash rate unchanged at 0.25% as it is already at their lower effective bound. The rate will not be increased until goals in employment, the unemployment rate below 5%, and inflation, range between 2-3% for the core reading, are met. Given their previous track record and the severity of the global economic downturn the rate may stay at 0.25% for years. They have scaled back size and frequency of bonds purchases but will widen their criteria for bond purchases to include investment-grade non-bank paper. Their assessment is for GDP to drop -10% in the first half of 2020 and -6% for the entire year before bouncing back in 2021.

Retail sales in March came in at 8.5% m/m. The number was inflated due to stockpiling done before the outbreak. Overall Q1 retail sales rose only 0.7% q/q. Trade balance showed a surplus of AUD10.602bn, almost doubling the expectations and more than doubling previous month’s reading. Exports skyrocketed 15% m/m while imports dropped -4% m/m. This data will make Q1 GDP less negative.

Caixin services PMI came in at 44.4 while composite came in at 47.6. Both numbers are below 50 level for the third consecutive month. New export orders plunged deeper indicating a drop in global demand. Reduction in payrolls for the third straight month and a week start for Q2. Trade balance data for April showed a surplus of CNY318.15bn on the back of strong exports (8.2%) and plunging imports (-10.2%).

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

Important news for AUD:

Tuesday:

• CPI (China)

Thursday:

• Employment Change
• Unemployment Rate

Friday:

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

NZD

Employment data for Q1 were encouraging with employment change coming in at 0.7% q/q vs 0.2% q/q as expected. Although the unemployment rate came in higher than previous month at 4.2% it was less than 4.4% as expected. Participation rate went up to 70.4%. Overall, the report shows that jobs market was going strong before the outbreak. GDT price index came in at -0.8% for a second consecutive drop.

This week we will have consumption data and RBNZ rate decision. No change is expected in the interest rate; the tone of the statement will be scrutinized for more information about direction of the monetary policy and a potential QE increase.

Important news for NZD:

Monday:

• Electronic Card Retail Sales

Wednesday:

• RBNZ Interest Rate Decision
• RBNZ Monetary Policy Statement

CAD

Employment change for April came in at -1993.8k for the worst number ever although beating the more pessimistic estimates of -4000k. The unemployment rate shot to 13% while participation rate fell to 59.8% from 63.5% the previous month. Full-time employment fell -1472k while part-time employment fell -521k. Wages rose to 10.5% m/m due to the lay-offs of low paid workers.

Trade balance in March came in at -CAD1.4bn due to exports falling -4.7% while imports fell -3.5%. BOC governor Poloz’s term at the head of the central bank finishes at the end of the next month and Prime Minister Trudeau announced former deputy governor Tiff Mackem will be his successor.

JPY

Labour cash earnings in May came in at 0.1% y/y, a negligible improvement. Household spending dropped -6% y/y. No wages leads to no spending which leads to no inflation. Final services came in at 21.5 dragging composite down to 25.8. Both readings came weaker than the preliminary ones with new orders and output categories plunging down. This reading indicates GDP contraction of almost -12% annually. The only bright spot is that employment category showed resilience which can be supportive of quicker economic recovery. Prime Minister Abe extended state of emergency until May 31.

CHF

Sight deposits for the week ending May 1 came in at CHF663.8bn vs CHF650.7bn the previous week indicating that SNB is ramping up its activities in currency markets targeting Swissy’s strength. Inflation in April continued to drop with headline inflation coming in at -1.1% y/y and core inflation dropping -0.5% y/y. Deflationary conditions may spur SNB into action even before their scheduled meeting in June.

 

[katetrades]

Forex Major Currencies Outlook (May 18 – May 22)

Preliminary PMI data from the EU and UK along with news regarding easing of restrictions will draw the most interest in the week ahead.

USD

CPI for the month of April came in at 0.3% y/y for the lowest reading since October 2015. Food inflation has risen in April, however that rise was dwarfed by the drop in energy prices of -10.1% m/m. Apparel prices also weighed down on inflation coming in at -4.7% m/m. Core CPI, excluding food and energy, came in at 1.4% y/y vs 1.7% y/y as expected. Initial jobless claims added almost 3 million new requests (2981k) bringing total amount to over 36.5 million requests in 2 months while continuing claims hover around 23 million. Retail sales came in at -16.4% m/m vs -12% m/m as expected with control group coming at -15.3% m/m vs -5% m/m. Given that the American consumer constitutes almost 70% of GDP this reading puts additional downward pressure on Q2 GDP.

Fed chairman Powell stated in a video interview that additional policy measures may be needed to avoid lasting damage. The unemployment may peak in the next month or so before dropping significantly but still staying above the number prior to the outbreak. He then reiterated that Fed’s policy on negative interest rates has not changed and that they are not looking in that direction. Powell also called for more fiscal policy measures.

This week we will have housing data and continuation of initial jobless claims and their run toward 40 million.

Important news for USD:

Tuesday:

• Housing Starts
• Building Permits

Thursday:

• Initial Jobless Claims
• Existing Home Sales

EUR

Industrial production in March showed the pain caused by the virus outbreak. It came at -11.3% m/m and -12.9% y/y. The numbers were included in past week’s Q1 GDP report so they did not cause a stir in the markets but the mere sight of the numbers is devastating. April numbers will be even more terrifying as the entire continent was under lockdown. The Italian government has signed off a new stimulus bill worth €55bn.

Preliminary German Q1 GDP came in at -2.2% q/q as expected and with 2019 Q4 GDP being revised to -0.1% q/q technical recession is official. German economy minister Altmeir stated that deepening of recession is expected in Q2 and that the low point should have been reached in April. Q2 GDP is forecast at -10%, however the real number will depend in part on the easing of restrictions. Second estimate of the Eurozone Q1 GDP came in as preliminary at -3.8% q/q.

This week we will have sentiment, final April inflation and preliminary May PMI data.

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment (EU and Germany)

Wednesday:

• CPI

Thursday:

• Markit Manufacturing PMI (EU, Germany and France)
• Markit Services PMI (EU, Germany and France)
• Markit Composite PMI (EU, Germany and France)

GBP

GDP figure for March came in at -5.8% m/m, a staggering drop but better then the dire expectations. Manufacturing and industrial production as well as construction output also beat expectations but all came in deep into negative. Q1 GDP fell -2% q/q while yearly figure dropped -1.6%. Government spending was the main drag. Net exports plunged thanks to a drop of -10.8% in exports while private consumption fell -1.7% q/q. Business investment improved compared to the Q4 2019 but it only came flat in Q1 2020. Numbers in April will be more horrendous and with Brexit negotiations looming UK economy is in grave condition. BOE governor Bailey ruled off negative interest rates but hinted that they may increase their asset purchase program in June.

This week we will have employment, inflation, consumption and preliminary May PMI data. Brexit trade negotiations will continue this week.

Important news for GBP:

Tuesday:

• Claimant Count Change
• Unemployment Rate
• Average Weekly Earnings

Wednesday:

• CPI

Thursday:

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

Friday:

• Retail Sales

AUD

Employment change in April came in at -594.3k. The unemployment rate rose to 6.2% while participation rate plunged to 63.5% from 66% the previous month. Participation is now the lowest in 15 years. Full-time employment change came in at -220.5k while part-time employment change was -373.8k. This painful picture of jobs market was due to the state wide shutdown for the month.

Inflation data from China for April show headline number at 3.3% y/y, dropping from 4.3% the previous month while PPI fell to -3.1% y/y from -1.5% y/y the previous month. The drop in PPI will have a negative impact on already declining company profits and may lead to further easing from PBOC. China has ramped up its trade war tactic by banning imports from four meat works from Australia stating that beef products from those firms have violated inspection requirements. Industrial production came in at 3.9% y/y doubling the expectations but retail sales came in at -7.5% y/y vs -6% y/y as expected indicating growing issues with domestic demand. These numbers show that while it may not be hard to restart the supply after the virus outbreak, it will be much harder to revive demand.

NZD

Electronic retail sales for April were horrendous, -46.8% m/m and -47.5% y/y. This is yet another chart that will never be the same again. Preliminary business survey in May showed some hope rebounding to -45.6 from -66.6 the previous month with all of the forward-looking activity indicators being up compared to the previous month.

RBNZ has left the cash rate unchanged at 0.25% as widely expected. They have decided to expand their QE program, almost doubling it, to the limit of NZD60bn. Apart from government and local government agency bonds, the program will now include purchases of government inflation-indexed bonds. Members stated that RBNZ is prepared to add other assets in their QE program. Annual inflation is forecast at -0.4% in Q1 2021 while they see Q2 2020 GDP dropping -21.8%. The board stated their preparedness to cut cash rate if need arises but as for now, they see it at 0.25% level through Q1 of 2021. The government approved a NZD50bn stimulus package projecting that debt to GDP ratio will rise over 53%.

This week we will have Q1 consumption data.

Important news for NZD:

Friday:

• Retail Sales

CAD

Manufacturing sales in March slumped -9.2% m/m, more than double than the expected -4.5% m/m. This is the largest monthly decline since December of 2008 and it was led by drop in New orders (-11.3%). Canadian economy was shutdown only in the second half of the March and these numbers show a deeply concerning picture about the state of the economy. Needless to say that April numbers, when the entire economy was shutdown, will be much worse.

Canada's Ministry of Finance launched a new loan facility called "The Large Employer Emergency Financing Facility" which will provide loans to non-financial companies and not-for-profit businesses.

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:

• CPI

Friday:

• Retail Sales

JPY

The virus outbreak has weighed heavily on Japan’s economy, lowering both consumer demand and capital expenditures. Expectations are for second consecutive drop in GDP of -1.3% q/q and -5% annualised. In the light of those grim projections BOJ governor Kuroda ramped up its rhetoric vowing to do whatever the bank can do to support lending to the real economy. They continue to examine new lending facility. PM Abe has announced decision to lift the state of emergency in 39 prefectures leaving Tokyo, Osaka and Hokkaido from the list.

This week we will have preliminary Q1 GDP data as well as core machinery data, preliminary May PMI data and national inflation data.

Important news for JPY:

Monday:

• GDP

Wednesday:

• Core Machinery Orders

Thursday:

• Trade Balance
• Markit Manufacturing PMI
• Markit Services PMI
• Markit Composite PMI

Friday:

• CPI

CHF

Total sight deposits for the week ending May 8 jumped to CHF669.1bn vs CHF663.8bn the previous week making it eleventh consecutive weekly increase. SNB governor Jordan came out over the weekend and spoke about their commitment to further FX intervention in order to stave off Swissy’s strength. SNB has also further expanded their virus refinancing facility. Now it includes cantonal loan guarantees as well as joint and several loan guarantees for startups. They are taking a page from the Fed’s book in order to prop the economy.

 

[katetrades]

Forex Major Currencies Outlook (May 25 – May 29)

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

USD

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

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

Important news for USD:

Thursday:

• GDP
• Durable Goods Orders

Friday:

• PCE
• Personal Spending

EUR

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

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

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

Important news for EUR:

Thursday:

• Economic Sentiment Indicator

Friday:

• CPI

GBP

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

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

AUD

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

This week we will have PMI data from China.

Important news for AUD:

Sunday:

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

NZD

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

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

Important news for NZD:

Tuesday:

• Trade Balance

Thursday:

• ANZ Business Confidence

CAD

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

This week we will get Q1 GDP reading.

Important news for CAD:

Friday:

• GDP

JPY

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

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

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

Important news for JPY:

Friday:

• Tokyo CPI
• Unemployment Rate
• Retail Sales
• Industrial Production

CHF

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

This week we will have industrial production and trade data.

Important news for CHF:

Monday:

• Industrial Production

Thursday:

• Trade Balance

 

[katetrades]

Forex Major Currencies Outlook (June 1 – June 5)

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

USD

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

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

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

Important news for USD:

Monday:

• ISM Manufacturing PMI

Wednesday:

• ISM Non-Manufacturing PMI

Thursday:

• Trade Balance

Friday:

• Nonfarm Payrolls
• Unemployment Rate

EUR

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

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

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

Important news for EUR:

Monday:

• Markit Manufacturing PMI (EU, Germany, France)

Wednesday:

• Markit Services PMI (EU, Germany, France)
• Markit Composite PMI (EU, Germany, France)

Thursday:

• Retail Sales
• ECB Interest Rate Decision
• ECB Monetary Policy Press Conference

GBP

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

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

Important news for GBP:

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

AUD

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

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

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

Important news for AUD:

Monday:

• Caixin Manufacturing PMI (China)

Tuesday:

• RBA Interest Rate Decision
• RBA Rate Statement

Wednesday:

• GDP
• Caixin Services PMI (China)
• Caixin Composite PMI (China)

Thursday:

• Trade Balance
• Retail Sales

Sunday:

• Trade Balance (China)

NZD

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

CAD

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

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

Important news for CAD:

Wednesday:

• BOC Interest Rate Decision
• BOC Rate Statement

Thursday:

• Trade Balance

Friday:

• Employment Change
• Unemployment Rate

JPY

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

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

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

Important news for JPY:

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

Friday:

• Household Spending

CHF

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

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

Important news for CHF:

Tuesday:

• Retail Sales

Wednesday:

• GDP

Thursday:

• CPI

 

[katetrades]

Forex Major Currencies Outlook (June 8 – June 12)

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

USD

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

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

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

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

Important news for USD:

Wednesday:

• CPI
• Fed Interest Rate Decision
• FOMC Economic Projections
• FOMC Press Conference

EUR

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

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

This week we will have final Q1 GDP reading.

Important news for EUR:

Tuesday:

• GDP

GBP

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

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

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

Important news for GBP:

Friday:

• GDP
• Manufacturing Production
• Industrial Production
• Trade Balance

AUD

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

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

This week we will get inflation data from China.

Important news for AUD:

Wednesday:

• CPI (China)

NZD

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

CAD

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

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

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

JPY

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

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

Important news for JPY:

Monday:

• GDP

Tuesday:

• Labour Cash Earnings

CHF

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

 

[katetrades]

Forex Major Currencies Outlook (June 15 – June 19)

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

USD

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

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

This week we will have consumption and housing data.

Important news for USD:

Tuesday:

• Retail Sales

Wednesday:

• Housing Starts
• Building Permits

EUR

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

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

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Wednesday:

• CPI

GBP

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

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

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

Important news for GBP:

Tuesday:

• Claimant Count Change
• Unemployment Rate
• Average Weekly Earnings

Wednesday:

• CPI

Thursday:

• BOE Interest Rate Decision

Friday:

• Retail Sales

AUD

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

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

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

Important news for AUD:

Monday:

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

Tuesday:

• RBA Meeting Minutes

Thursday:

• Employment Change
• Unemployment Rate

NZD

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

This week we will have Q1 GDP data.

Important news for NZD:

Thursday:

• GDP

CAD

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

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:

• CPI

Friday:

• Retail Sales

JPY

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

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

Important news for JPY:

Tuesday:

• BOJ Interest Rate Decision
• BOJ Monetary Policy Statement

Wednesday:

• Trade Balance

Friday:

• CPI

CHF

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

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

Important news for CHF:

Thursday:

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