Daily Market Outlook by Kate Curtis from Trader's Way

[katetrades]

Forex Major Currencies Outlook (June 22 – June 26)

This week we will have RBNZ meeting, PCE and personal spending data from US as well as preliminary June PMI data from EU, GBP and Japan.

USD

Retail sales in May rebounded more than double than expected coming in at 17.7% m/m vs 8.6% m/m as expected. In addition to the strong headline reading previous month’s number was revised higher giving more strength to the report. Clothing stores along with furniture stores were the biggest contributors. This should ease the negative impact of lockdown on Q2 GDP, however the reading is down -6.1% compared to May 2019. Initial jobless claims for the week ending June 13 came in at 1508k vs 1290k as expected. This is the 13th week of claims above 1 million. Continuing claims are hovering around 20.5 million.

The Secondary Market Corporate Credit Facility (SMCCF), worth $750bn, was announced in March. With this program Fed will buy debt in markets, even directly from companies, rather than via ETFs as was done previously. The new program will involve purchases of corporate bonds issued by investment-grade US. Companies as well as corporate bonds issued by companies that were investment-grade rated as of March 22, 2020.

This week we will have housing data, final Q1 GDP reading, durable goods data as well as PCE inflation and personal spending data.

Important news for USD:

Monday:

• Existing Home Sales

Tuesday:

• New Home Sales

Thursday:

• GDP
• Durable Goods Orders

Friday:

• PCE
• Personal Spending

EUR

German ZEW survey of the current situation came in at -83.1 vs -93.5 the previous month for a small move in the right direction. Expectations category for both Germany and EU came in stronger than previous month (64.4 and 58.6 respectively) indicating optimism regarding possible economic recovery in second part of the year. Final May inflation data showed headline number at 0.1% y/y and core number at 0.9% y/y, both same as preliminary reported.

This week we will have preliminary June PMI readings.

Important news for EUR:

Tuesday:

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

GBP

Jobless claims for May came in at 528.9k with claimant count rate jumping to 7.8% from 5.8% the previous month. In period from March to May they surged astonishing 125.9%. The ILO unemployment rate, which is measured as the number of unemployed workers divided by the total civilian labour force, stayed the same in April at 3.9%. Around 9,1 million people were furloughed. A huge drop was seen in wages with average weekly earnings dropping to 1% 3m/y from 2.3% 3m/y the previous month. Slower wage growth indicates lower consumption which in turn will put downward pressure on inflation. Inflation in May came in at 0.5% y/y as expected with core sliding to 1.2% y/y vs 1.3% y/y as expected. Retail sales came in at 12% m/m vs 6.3% m/m as expected and up from -18% m/m the previous month. Core retail sales (ex autos, fuel) also bounced back more than exepected coming in at 10.2% m/m from -15% m/m the previous month. Although the monthly figures show a great rebound, yearly figures show that consumption is still very much subdued compared to the previous year.

BOE has left the rate unchanged at 0.10% and they have expanded their asset purchase program by £100bn. MPC have voted 8-1 in favour to increase QE program target with BOE chief economist Andy Haldane the only one to dissent. MPC members expect total stock of asset purchases to be hit around the turn of the year. They have stated their readiness to increase the amount of purchases if necessary. There was no mention of negative rates or yield curve control.

Prime Minister Johnson had an hour-long videoconference call with European Commission President Ursula von der Leyen and other EU officials with both sides agreeing to work toward a deal. According to the document from German government they expect negotiations to intensify only after September.

This week we will have preliminary June PMI readings.

Important news for GBP:

Tuesday:

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

AUD

Employment change in May came in at -227.7k vs -78.8k as expected, almost a threefold miss. The unemployment rate jumped to 7.1% from 6.4% the previous month while participation rate fell to 62.9% from 63.5% the previous month. Full-time employment change was -89.1 k while part-time employment change came in at -138.6k. This is a very weak report compounded with negative revisions to the previous numbers as well as the fact that drop in the participation rate smoothed the jump in the unemployment rate and still it jumped almost full percentage point. Preliminary retail sales report showed a bounce to 16.3% m/m from – 17.7% m/m the previous month. Prime Minister Morrison announced a new spending program of AUD1.5bn, 2/3 of which will be spent on infrastructure. Additionally, Australia will raise minimum wage by 1.75% to stimulate aggregate demand and ease negative effects of the virus on the labour market.

Industrial production in May in China came in at 4.4% y/y vs 5% y/y as expected but up from 3.9% y/y the previous month. Retail sales came in at -2.8% y/y vs -2.3% y/y as expected for a fourth consecutive month of decline in consumption. Previous month’s reading was at -7.5% y/y so both consumption and industrial production are improving albeit at slower than expected rate.

NZD

RBNZ Governor Orr stated in an interview his satisfaction with impact of QE, pointing to flatter yield curve. Next steps could include increase in QE, increase in number of instruments included in QE as well as negative interest rates indicating that RBNZ still has many tools to support the economy. Q1 GDP came in at -1.6% q/q vs -1% q/q as expected. Since Q2 GDP will be negative. due to the effects of the lockdown, this signals a recession in New Zealand (two consecutive quarters of negative GDP growth). GDT price index came in at 1.9% for the third consecutive auction of rising dairy prices.

This week we will have RBNZ rate decision, no change is expected, they should stand the pat and let the already taken measures produce results as well as trade balance data.

Important news for NZD:

Wednesday:

• RBNZ Interest Rate Decision
• RBNZ Rate Statement

Thursday:

• Trade Balance

CAD

Headline inflation for May came in at -0.4% y/y vs 0% y/y as expected. Food and shelter category contributed positively to the reading but reading was overturned by drops in clothing, transportation and recreation, education and reading categories. Core measures came as expected: median at 1.9% y/y, common at 1.4% y/y and trimmed at 1.7% y/y, all of them weaker than the previous month. Retail sales in April were horrific, coming in at -26.4% m/m vs 15.1% m/m as expected with the ex-auto category coming in at -22% vs -12% as expected. April was the worst month with full lockdown throughout. Early retail sales estimates for May from Statistics Canada see them rebounding by 19.1% m/m.

JPY

BOJ kept the short-term interest rate at -0.10% as widely expected. The state of Japan’s economy has been characterized as severe with exports, outputs and consumption falling sharply while the pace of increase in capex is clearly slowing. They will increase their pandemic combat program to around JPY110 trillion from JPY75 trillion previously. Governor Kuroda reiterated that BOJ sees the situation in the economy as extremely severe, added that they will take additional steps if needed and sees a recovery in second part of the year. Additionally, he added that the BOJ will not be able to raise interest rates before Fed hikes its rate. Since Powell stated last week that they are “not even thinking about thinking about raising rates” we will see a prolonged period of negative interest rates from Japan.

Trade balance for May came in at -JPY833.4bn vs -JPY1030bn as expected. Exports have plunged -28.3% y/y for the 18th consecutive month drop while imports fell -26.8% y/y for the 13th consecutive month drop. Exports to US have fallen amazing -50.6% y/y while exports to EU dropped -33.8% y/y. Exports to China, Japan’s biggest trade partner, were down -1.9% y/y. National inflation in May came in at 0.1% y/y, same as the previous month, vs 0.2% y/y as expected. Ex-fresh food category remained in the negative at -0.2% y/y while ex-fresh food, energy measure came in at 0.4% y/y vs 0.2% y/y the previous month. The battle with deflation intensifies and so far it looks that BOJ is on the loosing side.

This week we will have preliminary June PMI readings as well as inflation data from Tokyo area.

Important news for JPY:

Tuesday:

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

Friday:

• Tokyo CPI

CHF

Total sight deposits for the week ending June 12 came in at CHF679.5bn vs CHF680.1bn the previous week. Second week in a row of declining deposits as SNB eases their action in the markets ahead of the meeting. SNB left the policy rate unchanged at -0.75% as widely expected. They have lowered inflation expectations to -0.7% for 2020 and see inflation going back to positive only in 2022 (0.2%). Estimations are for -6% GDP contraction in 2020. SNB chief Jordan stated that Swissy is still highly valued and confirmed that they made substantial currency interventions since March. We have written about it and followed it through the rise in total sight deposits.

 

[katetrades]

Forex Major Currencies Outlook (June 29 – July 3)

NFP, PMI data from China as well as preliminary June inflation from EU will headline the week. Please note that due to the Independence Day holiday US markets will be closed on Friday, causing lower liquidity and increased volatility, thus NFP data will be published on Thursday.

USD

Final Q1 GDP reading came in at -5%, same as the second reading. In comparison to the second reading personal consumption and investments declined but they were supplemented by the rise in government spending. Bounce back was seen in durable goods orders which came in at 15.9% m/m vs -18.1% m/m the previous month. Initial jobless claims continued to fall down but slower than expected and for the week ending June 20 they came in at 1480k vs 1320k as expected bringing the total number of claims since March 21 to over 47 million. Continuing claims for the week ending June 13, the week in which NFP is calculated, came in at 19 522k vs 20 000k as expected. Personal spending data came in at 8.2%, up from -12.6% the previous month while personal income fell to -4.2% from upwardly revised 10.8% the previous month. Once economy reopened spending rebounded propped by government stimulus cheques.

White House trade adviser Peter Navarro stated that President Trump decided to terminate the China trade deal saying it was over. The statement led to huge risk off sentiment in the market and Navarro retracted it later on saying that his comment “was taken out of context” which lead to the return of risk sentiment in the markets. President Trump tweeted that the deal is fully intact in order to clear things up and appease the markets. After stress test for banks was conducted the Fed has capped dividend payouts at Q2 levels and banned share buybacks in Q3.

This week we will have ISM manufacturing PMI, FOMC minutes, trade balance data and this week on Thursday NFP numbers. Expectations are very wide with headline number ranging from -1.2 million to 3 million with the unemployment rate expectations ranging from 15.1%. to over 20%.

Important news for USD:

Wednesday:

• ISM Manufacturing PMI
• FOMC Minutes

Thursday:

• Nonfarm Payrolls
• Unemployment Rate
• Trade Balance

EUR

Preliminary PMI numbers for June all showed improvements compared to May. Manufacturing came in at 46.9 up from 39.4 the previous month, services came in at 47.3 up from 30.5 the previous month and composite came in at 47.5. French and German readings attributed to positive numbers. French readings even went above 50 level indicating expansion; however, it is only due to the reading being compared to previous month. Markit noted that output and demand are still falling in EU but at the slower pace. "The job market remains a particular area of concern, especially if demand fails to pick up sharply in coming months. We therefore continue to expect GDP to slump by over 8% in 2020 and, while the recovery may start in the third quarter, momentum could soon fade meaning it will likely take up to three years before the Eurozone regains its pre-pandemic level of GDP."

Ifo business climate rose to 86.2 from 79.5 the previous month while expectations category jumped to 91.4 from 80.1 the previous month. Ifo economist Wohlrabe stated that the economy is on the upward path now with expectations for German Q3 GDP growth of around 7%. ECB introduced new repo facility, EUREP for central banks outside of the euro area in order to provide more euro liquidity. Central banks will be able to borrow funds and use euro-denominated debt as a collateral. This program will run through June of 2021.

This week we will have sentiment data, preliminary inflation data for June as well as final June PMI data.

Important news for EUR:

Monday:

• Economic Sentiment Indicator
• Consumer Confidence

Tuesday:

• CPI

Wednesday:

• Markit Manufacturing PMI (EU, Germany, France)

Friday:

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

GBP

Preliminary manufacturing PMI for June returned to expansion territory with 50.1 while services improved to 47 and lifted the composite to 47.6. The return of manufacturing above 50 level coincides with the reopening of plants. Markit states that economy is likely to return to growth in Q3 and add "Uncertainty over recovery prospects and job prospects also mean demand for many goods, especially non-essential big-ticket items, is likely to remain weak for many months, with Brexit uncertainty also continuing to cast a shadow over the economy."

Prime Minister Johnson announced relaxation of lockdown measures. Tourism and hospitality can resume on July 4 and social distancing rules will be relaxed as well. New social distancing requirement will be for 1 meter instead of 2 meters previously. The decision is positive for pound and it sent GBP pairs up at the beginning of the week.

This week we will have final Q1 GDP data as well as final June PMI data.

Important news for GBP:

Tuesday:

• GDP

Wednesday:

• Markit Manufacturing PMI

Friday:

• Markit Services PMI
• Markit Composite PMI

AUD

RBA Governor Lowe stated that they are not concerned with current level of AUD but they would like to see it lower at some point. He stated that it is hard to argue that AUD is overvalued and reiterated that rates will stay at current level for years in order to support economic recovery.

This week we will have trade balance and 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)

Wednesday:

• Caixin Manufacturing PMI (China)

Friday:

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

NZD

RBNZ has left the official cash rate unchanged at 0.25% as widely expected. They have also left their QE program unchanged at NZD60bn adding that they will review the program regularly. The appreciation of the Kiwi puts additional pressure on export earnings and tilt the balance of economic risks to the downside. The meeting was a non-event although it had a dovish tone with RBNZ leaving the option of increasing QE open. Trade balance in May came in at NZD1253m vs NZD1290m as expected.

CAD

In his first public speech as the Governor of BOC Tiff Macklem stated that they will continue purchasing at least CAD5bn a week in federal bonds until the economy is on the right path to recovery. He also added that the bank prefers asset purchase programs over negative interest rates. Fitch rating agency has downgraded Canada’s credit rating from AAA to AA+ with a stable outlook due to the emergency spending which raised debt to GDP ratio to go over 100% level (115%).

This week we will have GDP for April and trade balance data.

Important news for CAD:

Tuesday:

• GDP

Thursday:

• Trade Balance

JPY

Preliminary manufacturing PMI number for June continued to decline and came in at 37.8 vs 38.4 the previous month while services staged a comeback to 42.3 from 26.5 the previous month, pushing the composite reading to 37.9. Manufacturing falling with services and composite below 50 indicates a rough path ahead for the economy. Headline Tokyo area inflation data for June came in at 0.3% y/y, ex-fresh food category came in at 0.2% y/y while ex-fresh food, energy came in at 0.4% y/y. All of the readings came as expected.

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

Important news for JPY:

Monday:

• Retail Sales

Tuesday:

• Unemployment Rate
• Industrial Production

Wednesday:

• Markit Manufacturing PMI

Friday:

• Markit Services PMI
• Markit Composite PMI

CHF

SNB total sight deposits for the week ending June 19 came in at CHF680.1bn vs CHF679.5bn the previous week. Swissy was on the decline during first half of the week, therefore there was no need for SNB to react at first, however Swissy started gaining strength in the second part of the week which lead to rise in total sight deposits.

This week we will have consumption and inflation data.

Important news for CHF:

Tuesday:

• Retail Sales

Thursday:

• CPI

 

[katetrades]

Forex Major Currencies Outlook (July 6 – July 10)

In rather quiet week ahead of us ISM Non-Manufacturing PMI, RBA rate decision and employment data from Canada will be on the docket.

USD

ISM manufacturing PMI came in at 52.6 vs 49.8 as expected and up from 43.1 the previous month for a highest reading of the year. Production and new orders indexes posted highest readings in a year while employment index substantially rose. Although the readings are very positive, they still show only that the economy reopened and not any substantial economic rebound. FOMC minutes showed that officials agreed for more analysis of yield curve control and urged more explicit forward guidance.

NFP report beat expectations by coming at 4800k. The unemployment rate was also better than expected and it dropped to 11.1%. Participation rate climbed to 61.5% so we have a double positive, the unemployment rate dropping and participation rate rising. Leisure and hospitality was the biggest contributor with 2.088mn, retail was up 740k, while 903k was in trade and transport and 568k in education and healthcare. On the other front, the initial jobless claims came in at 1427k vs 1350k as expected. Continuing jobless claims are still near 20 million.

This week we will have ISM Non-Manufacturing PMI which may garner more movements in the market than usual as investors will be accessing the health of services sector.

Important news for USD:

Monday:

• ISM Non-Manufacturing PMI

EUR

Economic sentiment in June came in at 75.7 vs 80 as expected but up from 67.5 the previous month. Weaker than expected improvements are seen on industrial and services confidence readings indicating that optimism regarding recovery is subdued. Consumer confidence improved only to the -14.7 level. Preliminary CPI in June rose to 0.3% y/y from 0.1% y/y the previous month while core CPI dropped to 0.8% y/y as expected. Final manufacturing PMI improved to 47.4 from 39.4 the previous month on the back of strong readings from German and France. Final services reading was also better than preliminary reported coming in at 48.3 pushing composite to 48.5 from 47.5 as preliminary reported. Markit has noted that: "An improvement in business sentiment meanwhile adds to hopes that GDP growth will resume in the third quarter.”

This week we will have consumption data for May which are expected to show a rebound from the previous month.

Important news for EUR:

Monday:

• Retail Sales

GBP

Final Q1 reading came in at -2.2% q/q vs -2% q/q as preliminary reported with all of the categories being revised down. Private consumption was at -2.9% vs -1.7% q/q preliminary while government spending showed the biggest decline coming in at -4.1% q/q vs -2.6% q/q as preliminary reported. With economy fully impacted by lockdown in Q2 there will be a horrific Q2 GDP reading pushing UK into a recession. Final manufacturing PMI came in at 50.1 same as preliminary reported while services came in at 47.1 vs 47 as preliminary reported pushing composite reading toward 47.7 from 47.6 as preliminary reported.

June 30 was the last day that UK could have asked for an extension of Brexit period. They have decided not the extend it and now if there is no deal by the end of the year UK’s relationship with EU will be on WTO rules. Negotiations pace will pick up as we get closer to the year-end but for now all of the attention is on UK’s fiscal measures to support the economy.

AUD

Trade balance data for May came in at AUD8.025bn vs AUD9bn as expected but with previous reading being revised down to AUD7.83bn. Exports came in at -4% m/m while imports fell even more at -6% m/m. Retail sales staged a rebound coming in at 16.9% m/m from -17.7% m/m the previous month.

Official PMI data from China for June came in better than expected. Manufacturing was at 50.9, non-manufacturing at 54.4, which is the best reading in seven months and composite was at 54.2. Factories and companies have returned to work and output is growing. On the downside there are signs that both external and internal demand are shrinking. Caixin manufacturing PMI came in at 51.2 for the highest reading of the year. Output component is in expansion for the fourth consecutive month with new orders being higher on the month. Caixin services skyrocketed to 58.4, the highest in over a decade, pushing the composite to 55.7. From the services report it can be seen that both domestic and international demand recovered and businesses were highly confident regarding the economic outlook.

This week we will have rate decision from Australia and inflation data from China. RBA is expected to leave the rate unchanged and give forward guidance on additional asset purchases and yield curve control.

Important news for AUD:

Tuesday:

• RBA Interest Rate Decision
• RBA Rate Statement
  

Thursday:

• CPI (China)

NZD

Final business confidence reading for June came in at -34.4 vs -33 as preliminary reported, but a jump from -41.8 the previous month. RBNZ is closely watching business confidence reading and with readings moving in the right direction they can be more confident that they are taking proper policy moves.

CAD

GDP in April set a new record by coming in at -11.6% m/m. Manufacturing and construction sector as well as retail trade and transport and warehousing have seen drops bigger than -20% m/m. Accommodation and food services sector saw a drop of -42.4% m/m. When looked at chained GDP a decade of growth in Canadian GDP was wiped out by the preceding two months. Trade balance in May came in at CAD0.6bn vs -CAD4.27bn the previous month. Exports rose 6.7% m/m on the back of motor vehicles and parts as well as increase in oil prices. Imports fell -3.9% m/m with basic and industrial chemical, plastic and rubber products (-14.4%) being the biggest contributor. Exports to the United States were up 8.9% m/m increasing trade balance surplus with US to CAD2.8bn.

This week we will have employment data expected to show another positive reading.

Important news for CAD:

Friday:

• Employment Change
• Unemployment Rate

JPY

Retail sales in May staged a rebound of 2.1% m/m but 3% m/m was expected. The unemployment rate rose to 2.9% from 2.6% the previous month, which is the highest rate in over 3 years, while preliminary industrial production data fell to -8.4% m/m and -25.9% y/y, both worse than expected. Final manufacturing PMI for June came in at 40.1 up from 37.8 as preliminary reported while services came in at 45 propping up composite to 40.8. Improvements from the previous month’s horrors but still way below the expansionary 50 level.

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

Important news for JPY:

Tuesday:

• Household Spending
• Labor Cash Earnings

Thursday:

• Core Machinery Orders

CHF

Total sight deposits for the week ending June 26 came in at CHF683bn vs CHF680.1bn the previous week. SNB is intervening to fight Swissy’s strength and push EURCHF toward 1.07 level. SNB has reduced the lower limit of its special liquidity-shortage financing facility rate in order to assist banks to obtain short-term liquid funds. The rate will be reduced to at least 0% and the change will come into effect from July 1. Retail sales in May staged a V-shape recovery coming in at 6.6% y/y vs -18.8% y/y previously. Inflation data continued to plunge into deflationary territory with headline CPI coming at -1.3% y/y while core CPI came in at -0.8% y/y.

This week we will have employment data.

Important news for CHF:

Wednesday:

• Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (July 13 – July 17)

ECB, BOJ and BOC meetings combined with consumption data from US and China, as well as Chinese Q2 GDP and EU summit on Friday will highlight this eventful week.

USD

ISM non-manufacturing index in June rebounded to an exquisite 57.1 from 45.4 the previous month. Business activity index came in at 66 which is the highest reading in almost a decade. New orders rose to 61.6 level. High 50s and low 60s indicate a recovery that may be more than just a simple reopening. On the down side, the employment index rose only to 43.1 level from 31.8 the previous month. Weekly jobless claims for the week ending July 3 came in at 1314k vs 1375k as expected. This is the first lower-than-expected reading in several weeks and continuing claims dropped to 18 million. The price of gold has breached the $1800 level for the first time since 2011 reaching a high of $1818.

This week we will have inflation, consumption and housing data.

Important news for USD:

Tuesday:

• CPI

Thursday:

• Retail Sales

Friday:

• Housing Starts
• Building Permits

EUR

Retail sales in May rebounded 17.8% m/m from -12.1% m/m the previous month. The reading adds more to the view that April was the bottom and that economies are in the process of recovery after reopening. Compared to previous year retail sales are down -5.1% y/y. European Commission forecasts a deeper plunge in GDP than reported in spring. GDP for 2020 is now seen dropping -8.7% from -7.7% previously. Q2 GDP most likely fell by -13.5%.

This week we will have industrial production and final June inflation data. EU’s ‘special summit’ in Brussels will be held on July 17 and member states are set to discuss coronavirus recovery plans. ECB will leave both the interest rate and the PEPP program unchanged.

Important news for EUR:

Tuesday:

• Industrial Production
• ZEW Economic Sentiment Index (EU and Germany)

Thursday:

• ECB Interest Rate Decision
• ECB Monetary Policy Press Conference

Friday:

• CPI
• EU Summit

GBP

Reports are circulating that BOE Governor Andrew Bailey has sent a letter to commercial banks preparing them for negative interest rates. The government has announced a £30bn stimulus package which amounts to almost 1.5% of GDP. Chancellor of Exchequer Rishi Sunak stated that their job is to protect and create jobs. They will pay £1000 bonus per employee that returns from furlough through to January. With almost 9 million people on furlough the program will amount to almost £9bn. The scheme will be designed so it pays firms to hire young people. VAT on hospitality and tourism will be cut from 20% to 5% for the next 6 months and in August there will be discount on for eating out from Monday to Wednesday.

This week we will have May GDP data, as well as inflation and employment data.

Important news for GBP:

Tuesday:

• GDP
• Manufacturing Production
• Industrial Production

Wednesday:

• CPI

Thursday:

• Claimant Count Change
• Unemployment Rate

AUD

RBA has kept the official cash rate at 0.25% as widely expected. Statement showed that they will continue maintaining an accommodative approach for as long as necessary and there will be no increases in the cash rate until progress in employment and inflation is made. Economic conditions have recently stabilized but the economy is still going through a “very difficult period”. The bank is prepared to scale up bond purchases if needed. The meeting was non-eventful with a reiteration of the statement from previous month and no mention of AUD strength as AUDUSD is getting closer to 0.70 level.

CPI from China in June came in at 2.5% y/y on the back of rising food prices. PPI came in at -3% y/y still indicating deflationary pressures producers face which in turn will hurt industrial profits, however at least the reading is moving in the right direction after four months of increasing declines. Previous month’s reading was at -3.7% y/y.

This week we will have employment data from Australia as well as Q2 GDP, trade balance, consumption and industrial production data from China.

Important news for AUD:

Tuesday:

• Trade Balance (China)

Thursday:

• Employment Change
• Unemployment Rate
• GDP (China)
• Retail Sales (China)
• Industrial Production (China)

NZD

GDT price auction came in at huge 8.3% with whole milk powder rising 14%. This is a fourth consecutive auction of rising prices and the high reading pushed kiwi up in the markets which led NZDUSD to test the 0.66 level. Electronic card spending in June, an indicator for retail sales, came in at 16.3% m/m vs 15% m/m as expected.

This week we will have Q2 inflation data.

Important news for NZD:

Wednesday:

• CPI

CAD

Employment change in June came in at 952.9k vs 700k as expected and up from 289.6k in May. The unemployment rate dropped to 12.3%, although 12.1% was expected while the participation rate jumped to 63.8% from 61.4% the previous month. Participation rate is improving toward pre-pandemic levels, indicating that people are returning to work after the lockdown has been lifted. Full-time employment came in at 488.1k while part-time employment came in at 464.8k. Statistics Canada estimates that 3.1 million workers are now affected by lockdown from the peak of 5.5 million.

This week we will have BOC meeting where no change in the rate is expected.

Important news for CAD:

Wednesday:

• BOC Interest Rate Decision
• BOC Rate Statement

JPY

Wage data in May continued to deteriorate showing earnings at -2.1% y/y which in turn lead to household consumption plunging to -16.2% y/y. Household consumption has not risen since the sales tax hike in October of 2019. Declining wages and declining consumption add more downward pressure to Japan’s already deflationary climate. Core machinery orders, seen as a good proxy for capex in the coming months, came in at 1.7% m/m vs -5% m/m as expected and -16.3% y/y vs -16.8% y/y as expected. The rise in new orders was driven by the service sector. The reading is a rather volatile one but with current situation in the economy every positive reading is welcomed.

This week we will have BOJ meeting where no change in the rate is expected.

Important news for JPY:

Wednesday:

• BOJ Interest Rate Decision
• BOJ Monetary Policy Statement

CHF

Total sight deposits for the week ending July 3 came in at CHF687bn vs CHF683bn the previous week. SNB deemed that EURCHF is getting to close to the 1.06 level and decided to intervene in order to prevent Swissy’s appreciation. The unemployment rate in June declined to 3.3% after rising every month since February. This may indicate that Switzerland, from the labour market standpoint, is weathering the virus induced crisis quite well.

 

[katetrades]

Forex Major Currencies Outlook (July 20 – July 24)

Preliminary July PMI data from Europe, UK and Japan as well as consumption data from UK and Canada will be eyed in an otherwise uneventful week.

USD

June CPI improved to 0.6% y/y as expected from 0.1% y/y in May on the back of rising gasoline and food prices. Energy prices rose 5.1% for the largest single-month increase in more than a decade. Core CPI remained at the 1.2% y/y level. Real average weekly earnings dropped to 4.6% y/y while real average hourly earnings dropped to 4.3% y/y. The numbers are still high due to government support packages that will run out on July 31.

Retail sales came in at 7.5% m/m vs 5% m/m as expected. Core retail sales came in at 5.6% m/m vs 3.6% m/m as expected while ex autos category came in at 7.3% m/m. There were beatings all around sending positive signals but there are still caveats. The structure of yearly changes shows double digit drops for food services and drinking places, clothing stores as well as electronics & appliances stores. Those are traditional brick and mortar businesses that were hit particularly hard by the virus and subsequent lockdown measures. An additional caveat is that weekly employment checks of $600 are still handed giving people more purchasing power. The big question is how consumption will react after the CARES act is terminated on July 31.

This week we will have housing and jobless claims data.

Important news for USD:

Wednesday:

• Existing Home Sales

Thursday:

• Initial Jobless Claims

Friday:

• New Home Sales

EUR

Industrial production in May came in at 12.4% m/m vs 15% m/m as expected while previous month’s reading was revised down to -18.2% m/m. Lower than expected rebound will be predominant in June as well and a potential recovery will be shown only in Q3 numbers. ZEW survey of the current situation in Germany came in at -80.9 an improvement from -83.1 the previous month but far cry from the expected reading of -65. German expectations reading dropped to 59.3 after 3 months of rising. Slower than expected recovery combined with declining expectations, not a good recipe for the economy.

ECB has left rates unchanged as widely expected and reiterated their willingness to adjust all of their instruments. Interest rates will remain at present or lower levels until the inflation outlook robustly converges to a level sufficiently close to below 2%. PEPP program is kept at €1.350bn and will run at least through end of June 2021. ECB president Lagarde stated that incoming data are signalling resumption of economic activity. Signs are pointing of bottoming in April but outlook remains highly uncertain. Inflation is dampened by energy prices and they expect for it to pick up in early 2021. Lagarde added that the ECB “slowed down a little bit” the pace of PEPP purchases due because markets have stabilized. If the tapering continues there will be enough funds to last through the end of June 2021 without the need for increase in the program.

This week we will have preliminary July PMI data.

Important news for EUR:

Friday:

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

GBP

Monthly GDP for May came in at 1.8% m/m vs 5.5% m/m indicating a very slow recovery from the abysmal -20.3% m/m reading in April. GDP has fallen -19.1% in the previous 3-month period. During May there were still lockdown measures in place, so it stifled the rebound. Industrial and construction output came below expectations while manufacturing production showed better than expected improvement. Yields on 2-year UK gilts slipped below Japanese 2-year yields indicating growing pessimism among bond traders with respect to UK growth prospects.

Jobless claims in June rebounded and came in at -28.1k vs upwardly revised 566.4k the previous month. Claimant count rate slipped to 7.3% from downwardly revised 7.4% the previous month. The unemployment rate for May remained at 3.9% with employment change for the same month coming in at -126k, more than double the expected of -275k. Earnings numbers present a problem with average weekly earnings dropping into negative at -0.3% 3m/y. The Overall employment picture is tainted by the government’s furlough program and cannot be easily interpreted. Inflation in June picked up to 0.6% y/y from 0.5% y/y in May while core CPI came in at 1.4% y/y vs 1.2% y/y in May. BOE Governor Bailey informed MPs that interest rates will remain depressed for at least two more years.

This week we will have consumption and preliminary July PMI data.

Important news for GBP:

Friday:

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

AUD

Employment change in June came in at 210.8k vs 100k as expected, more than doubling expectations for a hefty beat. The unemployment rate rose to 7.4% from 7.1% the previous month on the back of participation rate rising to 64% from 62.9% in May. Full-time employment change came in at -38.1k while part time employment change came in at 249k. The headline number looks impressive but great concern is that all of those jobs and more were part-time.

Trade balance data from China showed a decrease in the surplus to CNY328.94bn due to imports (6.2%) rising faster than the exports (4.3%). In dollar terms trade balance came in at $46.42bn with imports coming in at 2.7% while exports rose by only 0.5%. The rise in imports indicates that Chinese domestic demand is picking up with energy imports rising the most.

Q2 GDP came in at 11.5% q/q vs 9.6% q/q as expected and 3.2% y/y. This is a complete turnaround from -9.8% q/q in virus stricken Q1. Industrial production in June improved to 4.8% y/y as expected while retail sales again missed the expectations coming in at -1.8% y/y. Chinese monetary policy will continue supporting both production and consumption but with consumption still not having a positive month it is very concerning for the goods exporting countries and the world as a whole. On the positive side 10 out of 16 sectors that go into retail sales calculation expanded.

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

Inflation data for Q2 came in at -0.5% q/q vs -0.6% q/q as expected and down from 0.8% q/q in Q1. When calculated y/y it came 1.5% vs 1.3% as expected and down from 2.5% in the previous quarter. Kiwi was not impacted by the data in the market and NZDUSD continued to hover around 0.66 level on positive risk sentiment.

CAD

BOC has left the rate unchanged at 0.25% with a commitment to keep rates at that level until inflation target is hit. BOC will continue CAD5bn per week in QE “until the recovery is well underway”. Economic decline has been characterised as "considerably less severe than the worst scenarios presented in the April MPR". Governor Macklem stated that rates will be on hold for at least 2 years.

This week we will have consumption and inflation data.

Important news for CAD:

Tuesday:

• Retail Sales

Wednesday:

• CPI

JPY

BOJ refrained from changing their monetary policy at their July meeting. Interest rate was kept at -0.10%. Board members reiterated their willingness to take additional easing measures, with eye on impact of pandemic on economy. They expect the economy to improve gradually in H2 but the pace of recovery will be moderate. Governor Kuroda stated at the press conference that economic activity has gradually resumed but that economy remains in an extremely severe situation.

This week we will have trade balance, inflation and preliminary July PMI data.

Important news for JPY:

Monday:

• Trade Balance

Tuesday:

• CPI

Wednesday:

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

CHF

Total sight deposits for the week ending July 10 came in at CHF688.6bn vs CHF687bn the previous week. There was a slight increase in the deposits just enough for SNB to nudge Swissy in desired direction, away from the 1.05 level on EURCHF.

 

[katetrades]

Forex Major Currencies Outlook (July 27 – July 31)

FOMC meeting followed by preliminary Q2 GDP readings, historic lows expected, from US and EU as well as official China PMI data will be highlights of the week.

USD

Existing home sales came in at 4.72m in June for a record breaking 20.7% m/m rise from 3.91m in May. Record-low mortgage rates led to return of buyers into the market. Single-family sales rose by 20% while condominium sales surged by 29%. Prices were little affected by the pandemic. Initial jobless claims for the week ending July 18 came in at 1416k vs 1300k as expected. Previous week showed claims of 1307k so this is the first rise after 15 consecutive weeks of falling claims. The reading brings total amount of reported claims since late March to 52.7 million. Continuing claims have continued their decline to 16197k. The $600 a week help for the unemployed will expire on July 31. Gold went over $1890 level, the highest it got since September of 2011 and is getting closer to the all-time high level of $1920.

This week we will have preliminary Q2 GDP reading as well as PCE inflation and personal spending data. FOMC meeting is not expected to produce rate changes or changes in their QE program, but as always, the tone will be heavily scrutinized.

Important news for USD:

Wednesday:

• Fed Interest Rate Decision
• FOMC Press Conference

Thursday:

• GDP

Friday:

• PCE
• Personal Spending

EUR

After four long days of talks European leaders agreed to a package of €750 billion in grants and loans. Agreed division of funds shows €390bn in grants and €360bn in loans. With this move, the debt burden is shared among the members which could strengthen to Union and propel EUR higher. Additionally, the European leaders agreed upon the seven-year budget spanning from 2021 to 2027.

Preliminary PMI data for July showed improvements across all readings putting them back into expansion territory. Manufacturing PMI came in at 51.1 on the back of strong German reading that returned to 50 level. Services PMI came in at 55.1 with German coming in at 56.7 and French at 57.8 indicating reactivation of services industry after the lockdown. Composite PMI came in at 54.8 with German at 55.5 and French at 57.6. Markit noted that the output grew at the fastest rate in more than over two years in July. However, the concern is that the recovery could falter after this initial revival.

This week we will have sentiment data as well as preliminary Q2 GDP reading and preliminary July inflation data.

Important news for EUR:

Thursday:

• Economic Sentiment Indicator
• Services Sentiment Indicator

Friday:

• GDP
• CPI

GBP

Retail sales in June rebounded 13.9% m/m vs 8.3% m/m as expected. Much better than expected and a positive reading given that consumption almost returned to the levels from previous year with yearly retail sales coming in at -1.6% y/y. Ex autos, fuel category shoot almost double over expectations coming in at 13.5% m/m vs 7.9% m/m as expected. Preliminary July PMI numbers smashed expectations with manufacturing coming in at 53.6 vs 52 as expected, services at 56.6 vs 51.5 as expected and composite at 57.1 vs 51.7 as expected. Markit noted that numbers present step in the right direction, but there is still a lot of work to be done before the sustainable recovery is in sight.

Relationship with China has deteriorated after the UK cancelled its extradition treaty with Hong Kong. China vowed to retaliate on this topic and also in response to Britain's decision to phase out Hauwei technology. One of the moves China took was to block broadcast of Premier League matches on its territory. EU chief negotiator Barnier stated that EU and UK are still far away in the negotiations regard post-Brexit trade relationship adding that there is an objective risk of no deal.

AUD

RBA minutes from July meeting showed resolution from board members to keep easy monetary policy for as long as needed. They also agreed that there is no need to adjust the package of already implemented measures. Board members stated that there is no case for intervention in the foreign exchange market, given its limited effectiveness when the exchange rate is broadly aligned with its fundamental determinants. This means that they are satisfied with current AUD level and will not fight to keep it from strengthening further. Governor Lowe stated that he would like to see lower AUD but will not going to intervene to lower it. He also stated that the board has reviewed alternative monetary policy options but ultimately decided on no change, however they are not ruled out in the future.

This week we will have Q2 inflation data from Australia as well as official July PMI data from China.

Important news for AUD:

Wednesday:

• CPI

Friday:

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

NZD

RBNZ stated that domestic financial markets have stabilized, therefore they have reduced liquidity interventions from daily to weekly. GDT price auction came in at -0.7%. The fall in prices is the first after four-consecutive positive auctions. NZDUSD has been shooting higher all week on the back of positive risk sentiment in the markets, reaching the 0.67 level. Trade balance showed a decline in surplus to NZD426m from NZD1286m previous month on the back of falling exports and rising imports. The data will give a small blow to Q2 GDP reading.

This week we will have ANZ business confidence, a closely followed metric by RBNZ.

Important news for NZD:

Thursday:

• ANZ Business Confidence

CAD

Retail sales for May rebounded 18.7% m/m from -25% m/m in April, however expectations were for a rebound of 20% m/m. Ex autos category came in at 10.6% m/m vs 11.9% m/m as expected. Sales were up in 10 out of 11 sub sectors. Motor vehicle and parts dealers, general merchandise stores, as well as clothing and clothing accessories stores were the main contributors with food and beverage stores being the only negative sub sector.


Headline inflation for June came in at 0.7% y/y up from -0.4% y/y in May. Prices rose in 5 of the 8 major components with food and shelter prices contributing the most to the increase in the CPI. Prices for goods declined by less than the previous month. Common and trimmed core measures of CPI improved to 1.5% y/y and 1.8% y/y respectively while median CPI stayed the same at 1.9% y/y.

This week we will have May GDP data.

Important news for CAD:

Friday:

• GDP

JPY

Trade balance in June came in at -JPY268.8bn vs -JPY11.9bn as expected. Exports have missed expectations and came in at -26.2% y/y, a 19th straight monthly drop, indicating a prolonged slowdown in global demand while imports came in at -14.4% y/y. Japanese exports account for around 15-18% of GDP. Exports to China, Japan’s biggest trading partner, came in at -0.2% y/y while exports of cars to China rose 18.8% y/y. Exports to the US came in at -46.6% y/y, an 11th straight monthly drop.

National inflation data for the month of June continued to show the same decade-long absence with the headline number coming in at 0.1% y/y. Excluding fresh food category came in flat, at least coming back from -0.2% y/y the previous month, while excluding fresh food, energy category came in at 0.4% y/y. Preliminary PMI data in July improved a bit compared to the previous month but still in the contraction territory. Manufacturing came in at 42.6, services at 45.2 while composite rose to 43.9 from 40.8 the previous month. Q3 data begins with a sluggish improvement.

This week we will have consumption, employment and preliminary June industrial production data.

Important news for JPY:

Thursday:

• Retail Sales

Friday:

• Unemployment Rate
• Industrial Production

CHF

Total sight deposits for the week ending July 17 came in at CHF691.5bn vs CHF688.6bn the previous week indicating SNB activity in the forex market to fight off Swissy’s strength.

This week we will have consumption data.

Important news for CHF:

Friday:

• Retail Sales

 

[katetrades]

Forex Major Currencies Outlook (Aug 3 – Aug 7)

BOE and RBA meetings along with NFP will highlight the upcoming week.

USD

Fed has left the interest rate unchanged at the 0-0.25% range as expected with a unanimous vote. The Path of the economic recovery will largely depend on the virus. They have added that economic activity and employment have picked up a bit in the recent months but are still below their levels from the beginning of the year. Chairman Powell added that Fed will do whatever they can for as long as it is needed. High-frequency data showed that the pace of the recovery has slowed. He reiterated that they are not even thinking about thinking about raising rates. There were no talks about yield curve control or additional stimulus measures. We can expect that members chose to wait for more data before possibly acting on it in September.

Advanced Q2 GDP reading showed a drop of an abysmal -32.9% q/q, better than the expected -34.5% q/q, but still easily the worst in history. Personal consumption plunged -34.6% q/q while business investment fell -27% q/q. Exports were down a historic -64.1% while imports were down a horrific -53.4%. Headline PCE rebounded to 0.8% y/y from 0.5% y/y the previous month, however a worrying sign is the drop in core PCE to 0.9% y/y from 1% y/y the previous month indicating softening price pressures. Personal spending came in at 5.6% m/m vs 5.2% m/m as expected. Spending is still positive but is dying down as the $600 weekly government cheques are about to expire.

Initial jobless claims for the week ending July 25 came in lower than expected at 1434k, but it is the second week of claims rising compared to the previous week. Continuing jobless claims for the week ending July 18, when NFP is calculated, jumped to 17108k from 16151k the previous week. Trends are reversing as parts of the country are again under lockdown due to Covid-19 outbreaks. Consumer confidence in July fell to 92.6, below expectations and the previous month’s reading of 98.3, due to an increase in Covid-19 cases. Gold has breached an all-time high level of $1920 in the early hours Asia-Pacific session on market opening and went above $1940 level. It rose all the way up to $1980 before dropping sharply to the $1905 level on Tuesday and then again testing the $1980 level a couple more times during the week.

This week we will have ISM PMI and trade balance data as well as NFP data on Friday. Expectations are for an increase of jobs in the range of around 2.3m while the unemployment rate is seen at around 10.5%.

Important news for USD:

Monday:

• ISM Manufacturing PMI

Wednesday:

• ISM Non-Manufacturing PMI
• Trade Balance

Friday:

• Nonfarm Payrolls
• Unemployment Rate

EUR

Ifo business climate index for the month of July came in at 90.5 vs 89.3 as expected and up from 86.2 the previous month. Expectations index came at 97, indicating belief about the Q3 rebound in the German economy. Ifo sticks with their forecast of 6.9% Q3 GDP. Sentiment data for the EU showed an improvement compared to June, but the pace of improvement is not impressive, indicating doubts about the strength of the Q3 rebound.

Preliminary Q2 GDP came in at -12.1% q/q as expected. German reading was worse than expected while French reading came in better than expected which put the EU reading on par with expectations. Inflation in July surprised to the upside, improving the mood of policymakers, with the headline number coming in at 0.4% y/y vs 0.3% y/y the previous month. Core inflation came in at 1.2% y/y vs 0.8% y/y the previous month. Headline German inflation fell into deflation territory for the first time since April 2016 coming in at -0.1% y/y as price pressures strongly declined.

This week we will have final July PMI numbers 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

Prime Minister Johnson stated that they will have to slow down the easing of lockdown measures. Reopening of leisure facilities will now be postponed for at least two weeks. He confirmed that this means a return to social distancing. The pound enjoyed a very strong week. It has gained across the markets with GBPUSD crossing over 1.31 level and breaking above W1 200SMA. It now constitutes eleven trading days of rising prices.

This week we will have final July PMI numbers as well as BOE interest rate decision. There will be no changes in the rate but talks about possible introduction of negative rates may occur.

Important news for GBP:

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

Thursday:

• BOE Interest Rate Decision
• BOE Governor Bailey Speech

AUD

Q2 CPI data came in at -1.9% q/q vs -2% q/q as expected. The headline number represents the biggest fall in more than 70 years and signals deflationary conditions in the economy. Core inflation came in at 1.2% y/y vs 1.4% y/y as expected.

Company profits in China for the month of June rose 11.5% y/y while dropping -12.8 y/y for the period from January to June of 2020. Both numbers show improvement compared to figures from May led by rising profits in state-owned enterprises. Official manufacturing PMI for July improved yet again to 51.1 for a fifth consecutive month of expansion. Non-manufacturing and composite PMIs saw slight drops coming in at 54.2 and 54.1 respectively, but they are still safely in the expansion territory.

This week we will have trade balance data as well as RBA interest rate decision and monetary policy statement. We expect RBA to keep the rates unchanged and let their monetary policy measures take effects, although talks regarding further monetary stimulus may emerge. Out of China we will have Caixin PMI and trade balance data.

Important news for AUD:

Monday:

• Caixin Manufacturing PMI (China)

Tuesday:

• RBA Interest Rate Decision
• Retail Sales
• Trade Balance

Wednesday:

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

Friday:

• RBA Monetary Policy Statement
• Trade Balance (China)

NZD

Final ANZ business confidence in July came in at -31.8 vs -34.4 the previous month. Activity outlook came in at -8.9 vs -25.9 the previous month. ANZ' stated that the vigorous bounce out of lockdown appears to be topping out and that the retail sector has driven much of the rebound since June.

This week we will have Q2 employment data.

Important news for NZD:

Wednesday:

• Employment Change
• Unemployment Rate

CAD

GDP data in May came in at -13.8% y/y vs -17.1 y/y the previous month. On the monthly basis GDP rebounded 4.6% m/m vs -11.7% m/m which was a record low. Goods were up 8% m/m while services were up 3.4% m/m. Canadian dollar did not take advantage of the seriously weak USD this week and USDCAD pair finished the week basically unchanged from where it started.

This week we will have trade balance and employment data.

Important news for CAD:

Wednesday:

• Trade Balance

Friday:

• Employment Change
• Unemployment Rate

JPY

Final Q1 Capex data came in at 0.1% q/q vs 4.3% q/q as preliminary reported. Company profits have plunged -28.4% y/y. Considering the great uncertainty in the world combined with falling company profits a drop in business investment was expected. Retail sales in June came in at 13.1% m/m vs 8% m/m as expected and -1.2% y/y vs -5.7% y/y as expected. Consumption picked up strongly with healthy beats. The unemployment rate positively surprised, ticking down to 2.8% vs 3.1% as expected. Preliminary industrial production came in at 2.7% m/m vs -8.9% m/m the previous month for the first positive reading in five months.

Fitch has confirmed Japan’s A rating but has lowered the outlook to negative from stable. They expect Japan's economy to contract by 5% for 2020, before rebounding to 3.2% in 2021. Japan has downgraded its GDP forecast for 2020, they now expect it to shrink by 4.5% before rebounding to 3.4% in 2021.

This week we will have final July PMI numbers and final Q1 GDP data as well as Tokyo area inflation, earnings and spending data.

Important news for JPY:

Monday:

• GDP
• Markit Manufacturing PMI

Tuesday:

• CPI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

Friday:

• Household Spending
• Labor Cash Earnings

CHF

SNB total sight deposits for the week ending July 24 came in at CHF692.6bn vs CHF691.5bn the previous week. Steady increase in the deposits as SNB keeps intervening in the forex market. Retail sales in June came in at 1.1% y/y vs 6.2% y/y the previous month. The food, beverages and tobacco category was the biggest contributor.

This week we will have inflation data.

Important news for CHF:

Monday:

• CPI

 

[katetrades]

Forex Major Currencies Outlook (Aug 10 – Aug 14)

RBNZ meeting, consumption data from US, preliminary Q2 GDP from UK and second Q2 GDP estimate from EU will highlight the week.

USD

ISM manufacturing PMI in July surprised to the upside and came in at 54.2 vs 52.6 the previous month. New orders and production categories crossed into 60s while new export orders returned to expansion with 50.4. The only concern is slow rise in the employment category which came in at 44.3 but overall this is a strong report for the manufacturing activity in the US. ISM Non-manufacturing PMI smashed expectations coming in at 58.1 vs 55 as expected. It continued to rise after posting 57.1 the previous month. Business activity and new orders rose to 67.2 and 67.7 levels respectively. Troubling signs appeared in new export orders which slipped below 50 level and employment which fell from the last month’s reading indicating rise in lay-offs.

Trade balance in June came in at -$50.7bn, an improvement from -$54.8bn the previous month. Exports were up 9.4% m/m while imports rose by 4.7% m/m. Initial jobless claims continued their decline after the rise in previous two weeks and came in at 1186k vs 1435k the previous week. Continuing claims also dropped to 16107k from 16900k previously. Fitch revised US outlook to negative from stable but kept the AAA rating. They have noted growing US deficit as the main concern and reason for the cut. They have, however, noted that US enjoys “exceptional financing flexibility” and that "It is a truism that the US government cannot run out of money to service its debt."

NFP reading came in at 1763k vs 1480k as expected. Not a big number as president Trump was announcing on twitter but it beat expectations. The unemployment rate declined almost a full percentage point to 10.2% from 11.1% the previous month while participation rate slightly declined to 61.4%. Gold has breached $2000 level for the first time in history going over $2070 during the week.

This week we will have inflation and consumption data.

Important news for USD:

Wednesday:

• CPI

Friday:

• Retail Sales

EUR

Final July manufacturing PMI came in at 51.8 vs 51.1 as preliminary reported on the back of improvements in both German and French readings. Markit notes: “Growth of new orders in fact outpaced production, hinting strongly that August should see further output gains.” Services PMI came in weaker than preliminary reported at 54.7 with composite rising to 54.9 on the back of improvement in manufacturing reading. Overall Markit noted that “the renewed expansion of the service sector bodes well for the economy to rebound in the third quarter after the unprecedented slump seen in the second quarter. Whether the recovery can be sustained will be determined first and foremost by virus case numbers.” Retail sales in June came in at 5.7% m/m and 1.3% y/y with previous month’s data being revised higher. Textiles, clothing and footwear were the biggest contributor to rise in consumption.

This week we will have ZEW survey as well as second estimate of Q2 GDP, recent improvements in German factory data should help revise the reading higher.

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment (EU and Germany)

Friday:

• GDP

GBP

Final July manufacturing PMI slipped to 53.3 vs 53.6 as preliminary reported. Markit notes that job losses despite the reopening can hinder further readings. Services came in at 56.5 vs 56.6 as preliminary reported which pulled composited to 57 vs 57.1 as preliminary reported. Markit stated that “Higher levels of service sector output were almost exclusively linked to the reopening of the UK economy after lockdown measures and the subsequent return to work of employees and clients. However, these are still the very early stages of recovery.” Employment picture still remains worrisome.

BOE has left both interest rate and QE program unchanged at 0.10% and £745bn respectively, as widely expected. The vote was unanimous. Policymakers noted that higher frequency indicators imply that spending has recovered significantly and that their projections assume that direct impact of the virus will dissipate gradually. They now project 2020 GDP to fall by -9.5% vs -14% as previously projected. Regarding negative interest rates policy makers feel that other instruments, like asset purchases and forward guidance, should be tweaked first. Overall the statement had more of a positive tone which pushed GBP even higher.

This week we will have employment data and preliminary Q2 GDP reading.

Important news for GBP:

Tuesday:

• Claimant Count Change
• Unemployment Rate

Wednesday:

• GDP

AUD

RBA left the cash rate unchanged at 0.25% as widely expected. They have reiterated their commitment to do what they can to support jobs and businesses. They will step in to resume bond purchases which will be done as necessary. They see their mid-March package working as expected. The outburst of virus in the state of Victoria had them lower the economic outlook. There was also no mention of AUD strength indicating that they are satisfied with its current levels. RBA statement showed that board members now see the economy recovering at a slower pace. Trade balance data in June came in at AUD8202bn vs AUD7341bn the previous month on the back of exports rising 3% while imports rose 1%. Retail sales for the same period improved 2.7% m/m.

Caixin manufacturing for July rose to 52.8 putting it deeper into expansion territory on the back of rising new orders. It is a highest reading since January of 2011, although overseas demand was subdued and employment remained week. Caixin services dropped to 54.3 from 58.4 the previous month for the big miss since 58 was the expected reading. It dragged composite down to 54.5 vs 55.7 the previous month. Although the reading is well above 50 level it indicating struggles that smaller companies, that are not state owned, face.

Chinese trade balance data for July say a rise in surplus to CNY442.23bn from 328.94bn the previous month. Exports were up 10.4% while imports were up 1.6%. In the USD terms trade balance came in at $62.33bn vs $46.42bn previous month on the back of exports rising 7.2% and imports falling -1.4%. Exports in both yuan and dollar terms beat expectations sending positive signals regarding overseas demand. Overall imports were low due to lower crude oil and agricultural products imports. Exports to US rose 12.5% while imports rose 3.6%.

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

Important news for AUD:

Monday:

• CPI (China)

Thursday:

• Employment Change
• Unemployment Rate

Friday:

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

NZD

The unemployment rate for Q2 came in at 4% q/q vs 5.6% q/q as expected for a tremendous beat. The employment change came in at -0.4% q/q vs -2% q/q as expected for another big beat. Participation rate came in at 69.7% as expected but down from 70.4% the previous quarter to put a dent in the reading. The reading shows that New Zealand economy weathered crisis caused by virus outbreak much better than any other developed economy. GDT price index at first auction in August came in at -5.1%. This is the second consecutive auction of falling prices and it shows a much bigger decline than 0.7% previously. Whole milk powder prices were the main culprit falling -7.5%.

This week we will have RBNZ rate decision which is expected to stay unchanged so talks about further stimulus will be closely monitored.

Important news for NZD:

Wednesday:

• RBNZ Interest Rate Decision

CAD

Trade balance data for June showed a widening of deficit to -CAD3.19bn vs -CAD0.9bn as expected. Exports rose by 17.1% m/m but were outpaced by imports which rose 21.8% m/m. Almost half of the imports and biggest contributor to exports were imports of motor vehicles and parts. Surplus in trade with US narrowed down to CAD1.1bn while deficit with other countries rose to -CAD4.3bn.

Employment report in July showed a change of 418.5k vs 380k as expected. The unemployment rate dropped to 10.9% from 12.3% the previous month and it was achieved along with participation rate rising to 64.3%. Full-time employment came in at 73.2 k while part-time employment came in at 345.3k. It is a bit concerning that great majority of new positions are part-time but other numbers show that labour market is heading in the right direction.

JPY

Final Q1 GDP reading came in unchanged at -0.6% q/q and -2.2% y/y while final manufacturing PMI for July improved to 45.2 from 42.6 as preliminary reported but still in the contraction territory with a dim outlook. Final services PMI improved to 45.4 which pushed composite PMI to 44.9. Slow recovery with all of the readings below 50 level which adds concern in regards to the rebound projected for Q3 GDP. Labour cash earnings in June continued their decline and came in at -1.7% y/y vs -3% as expected. Household consumption on a yearly basis is yet to post a positive reading and came in at -1.2% y/y vs -7.8% y/y. At least beatings of expectations are a positive.

July inflation from Tokyo area surprised everyone coming in at 0.6% y/y vs 0.3% as expected and as previous month. CPI excluding Fresh Food came in at 0.4% y/y vs 0.1% y/y as expected while excluding Fresh Food, Energy came in at 0.6% y/y vs 0.3% y/y as expected. All of the readings beat the expectations and moved the inflation in the desired direction. While it is still far away from 2% level every move up is warmly welcomed by BOJ officials.

CHF

July CPI rebounded to -0.9% y/y from -1.3% y/y the previous month with core coming at -0.4% y/y vs -0.8% y/y the previous month. This is a very welcomed rebound but it indicates just an easing of deflationary pressures in the month of July. Total sight deposits for the week ending of 31 July came in at CHF693.7bn vs CHF692.6bn the previous week showing that SNB still acts to prevent Swissy from getting too strong for their taste.

This week we will have employment data.

Important news for CHF:

Monday:

• Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (Aug 17 – Aug 21)

Preliminary Q2 GDP reading from Japan followed by preliminary August PMI numbers from EU, UK and Japan will highlight the relatively quiet week ahead of us.

USD

Headline inflation in July rose to 1% y/y from 0.6% y/y the previous month. Core inflation for the same period rose to 1.6% y/y vs 1.2% y/y the previous month. Headline inflation is continuing its path toward 2% level while core staged a first rebound after four months of falls which was unprecedented in its history. Initial jobless claims for the week ending August 8 came in at 963k vs 1100k as expected. This is the first time that claims came below 1 million number in 21 weeks. Continuing claims came in at 15486k and continued with their downward trajectory.

Retail sales in July came in at 1.2% m/m vs 2.1% m/m as expected but previous month’s reading was revised up from 7.5% m/m to 8.4% m/m. Core retail sales came in better than expected at 1.4% m/m and previous month’s reading was revised up. Electronics and appliance stores were the biggest contributors with 22.9% m/m followed by gasoline stations at 6.2% m/m. Sporting goods, musical instruments and book stores were the biggest drag on the reading with -5% m/m. The $600/week benefit package stopped on July 31 so we can expect that numbers in August reading will be much weaker.

During the weekend President Trump granted an executive order that will offer federal unemployment insurance for the unemployed of $300 per week if individual states pay $100 per week. This move, although not clear that the president has the power to make it, will slowdown negotiations between Republicans and Democrats and will lower the total amount to below $2 trillion (Democrats wanted a package that is north of $3 trillion).

The funds come from re-directing disaster-relief funds which amount to around $44bn. Considering the demand, those funds are not expected to last much longer than a month.

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

Important news for USD:

Tuesday:

• Housing Starts
• Building Permits

Wednesday:

• FOMC Minutes

Friday:

• Existing Home Sales

EUR

ZEW current situation survey came in at -81.3, much worse than expected and down from the -80.9 level the previous month. Expectations category on the other hand smashed expectations and came in at 71.5 vs 59.3 the previous month. This is the highest level in over 16 years. Survey respondents are not satisfied with what they see in the economy but their hopes for a significant rebound are undiminished.

Second reading of GDP came in line with preliminary readings of -12.1% q/q and -15% y/y. Markets are turning their attention toward Q3 data and German economy ministry expects strong growth in that period. They stated that German economy has been recovering since May.

This week we will have final July inflation data and preliminary August PMIs.

Important news for EUR:

Wednesday:

• CPI

Friday:

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

GBP

Claimant count in July came in at 94.4k vs -68.5k the previous month. A spike in claims pushed the claimant count rate to 7.5% from 7.2% the previous month. ILO unemployment rate for June stayed the same at 3.9% but employment change dropped by -220k almost doubling the previous month’s -125k. Numbers are skewed by the government’s furlough scheme which makes them hard to interpret and do not paint a proper picture regarding the state of the labour market. ONS acknowledges that employment is weakening. Average weekly earnings came in at -1.2% 3m/y continuing with the decline. If this trend continues, they do not contribute positively to inflation. This may prompt BOE to react in Q3 or Q4. Finance minister Sunak reiterated that extending furlough scheme is not sustainable and that many will lose their jobs.

Abysmal data that is Q2 GDP showed a decline of -20.4% q/q and -21.7% y/y. Private consumption plunged -23.1% q/q while business investment showed an even bigger drop of -31.4% q/q. GDP for the month of June came in at 8.7% m/m. The rise in June reading helped offset the decline in Q2 GDP but not by much. The rebound in the activity was slow but since we are in mid-August markets are turning their attention to Q3 data.

This week we will have inflation, consumption and preliminary August PMI data. Brexit talks will resume in Brussels from August 18 to August 21.

Important news for GBP:

Wednesday:

• CPI

Friday:

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

AUD

July employment report showed employment change of 114.7k vs 30k as expected. The unemployment rate ticked higher from the previous month to 7.5% but came in much better than 7.8% as was expected. Participation rose to 64.7% making the better than expected unemployment rate more impressive. Additional positive from the strong jobs report is that full-time employment rose 43.5k vs falling -23.6 the previous month. One caveat to the report is that it was conducted before lockdown was reintroduced in the state of Victoria. August numbers will not be this good. RBA Governor Lowe stated that it is possible for rate to stay at 0.25% level for as long as 5 years. He added that it would be nice to see AUD lower, but the currency is not overvalued.

Inflation data from China continued to climb and came in at 2.7% y/y in July on the back of the rise in food prices. PPI posted a smaller decline of -2.4% y/y vs -3% y/y the previous month on the back of rising commodity and industrial product prices. Industrial production remained at 4.8% y/y but missed expectations of 5.1% y/y. Retail sales continued to miss expectations and remain negative for the entire calendar year of 2020 coming in at -1.1% m/m. Domestic demand proves to be the biggest headache for China.

NZD

RBNZ has left the cash rate at 0.25% as widely expected. They have, however, increased their asset purchase program by NZD100bn and extended it from 12 to 22 months. Expectations were for an increase between NZD75 and 90bn. The committee has instructed RBNZ to prepare a package of additional monetary policy measures to be applied if needed. These measures encompass the negative official cash rate as well as purchases of foreign assets. Governor Orr added that rising NZD prices have had impact on exports. Fiscal policy remains primary response to the crises and the path RBNZ of stable inflation and full employment is through low rates and low NZD. Overall, the decision was full on dovish and NZD was pushed down.

Preliminary July ANZ business confidence came in at -42.4 vs -31.8 the previous month. Activity outlook also turned south coming in at -17 vs -8.9 the previous month. These may be warning signs that post-lockdown rebound has run its course.

CAD

Housing starts in July surged 15.8% m/m to 245.6k units in July. This was the highest reading since November 2017. Urban starts led the jump with 17.4% rise m/m. Manufacturing sales in June jumped 20.7% m/m vs 16.4% m/m as expected. The rise in sales was present in all 21 industries. New orders component jumped 23.6% m/m indicating ongoing reactivation of the economy after lockdown.

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:

• CPI

Friday:

• Retail Sales

JPY

Tertiary industry index, which measures the change in total value of services purchased by businesses, came in at 7.9% m/m in July. This comes as the first positive reading of the index since the start of the year indicating that the services sector is picking up after the virus outbreak. JPY had a rough week, weakening against all major currencies with GBPJPY going as high as the 140 level.

This week we will have preliminary Q2 GDP reading, industrial production, machinery orders, trade balance as well as national inflation and preliminary August PMI data.

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

The unemployment rate in July stayed the same at 3.3%. Total sight deposits for the week ending August 7 came in at CHF695.8bn vs CHF693.7bn the previous week. SNB is continuing to intervene in the FX markets to keep EURCHF well above the 1.07 level.

This week we will have trade balance data.

Important news for CHF:

Thursday:

• Trade Balance

 

[katetrades]

Forex Major Currencies Outlook (Aug 24 – Aug 28)

Second estimate of US Q2 GDP along with Canadian and Swiss Q2 GDP readings on top of PCE inflation may bring some movements in the Summer lull.

USD

Housing starts in July came in at 1496k for a 22.6% m/m rise while building permits came in at 1495k for a rise of 18.8% m/m. Low rates environment suits well for the housing market which is brimming with activity. Initial jobless claims for the week ending August 15 came at 1106k, thus again posting over 1 million claims after the drop from previous week. Continuing claims have dropped below 15 million coming in at 14844k.

Minutes from July’s FOMC policy meeting showed that the central bank is in no hurry to expand its stimulus program. They are opting for the forward guidance and expansion of QE if needed to keep the borrowing costs low. Talks about yield curve control have been ruled out. The yield curve control would only provide modest benefits to the current environment, as assessed by the board members. Gold reclaimed the $2000 level when the week started but after the FOMC minutes, take profit on gold occurred and it dropped almost $100.

This week we will have housing data, durable goods data, second estimate of Q2 GDP as well as PCE inflation and personal spending data.

Important news for USD:

Tuesday:

• New Home Sales

Wednesday:

• Durable Goods Orders

Thursday:

• GDP

Friday:

• PCE
• Personal Spending

EUR

Preliminary August manufacturing PMI slipped to 51.7 vs 51.8 the previous month while the big drop was seen in services PMI which came in at 50.1 vs 54.7 the previous month. A drop was caused by a fall in demand due to travel restrictions. Composite was dragged down to 51.6 from 54.9 the previous month. French readings have all disappointed with manufacturing dropping below 50 level. Manufacturing in Germany improved but services were battered. The readings weighed heavily on EUR, pushing it down across the markets as concerns surrounding exhaustion of economic recovery mount. Final inflation in July came in at 0.4% y/y with core at 1.2% y/y. Both readings came in same as preliminary reported.

This week we will have business climate data from Germany and sentiment data from EU.

Important news for EUR:

Tuesday:

• Ifo Business Climate (Germany)

Friday:

• Economic Sentiment Indicator

GBP

Inflation in July surprised to the upside coming in at 1% y/y vs 0.6% y/y as expected. Even more impressive was the jump in the core CPI which came in at 1.8% y/y vs 1.2% y/y as expected. ONS stated that the largest rise came from recreation and culture. As lockdown ended people were hurling outside. The rising prices in clothing, petrol, household goods also contributed to the rise in inflation.

Retail sales for the month of July came in at 3.6% m/m vs 2% m/m as expected and are now 3% above the pre-pandemic levels in February of 2020 while online retail sales are up 50.4% from pre-pandemic period. Preliminary August PMI data heavily beat the expectations. Manufacturing came in at 55.3 vs 53.3 the previous month while services rose to staggering 60.1 level from 56.5 the previous month. Composite capped the good data coming in at 60.3 vs 57 the previous month. The “Eat out to help out” scheme was introduced in August and it helped tremendously with rise in services reading. The scheme allows 50% reduction in food bill in restaurants from Monday through Wednesday.

AUD

RBA meeting minutes showed that board members currently do not see the need to change the course of monetary policy, but that they are ready to intervene if the need arises. Monetary policy will be held accommodative for as long as necessary. The economic downturn was not as severe as expected and board members are grateful that the government decided to extend various income support measures.

NZD

Talks about negative rates coming in from RBNZ in Q2 of 2021 are intensifying. RBNZ members have stated at their last meeting that they would like to see a weaker NZD. The markets are pricing negative rates for April 2021 but if the virus continues hurting the economy more the markets will move expectations for a rate cut closer to the start of 2021. GDT price auction came in at -1.7% and price index is now down more than 7% since the beginning of July. This drop in dairy prices, largest export for New Zealand, will hurt trade balance and in turn GDP.

This week we will have Q2 consumption data and July trade balance data.

Important news for NZD:

Monday:

• Retail Sales

Wednesday:

• Trade Balance

CAD

Inflation in July fell to 0.1% y/y vs 0.6% y/y as expected on the back of rising CAD and issues in travel sector. Core measures show median reading staying at 1.9% y/y for the third straight month while common and trimmed both slipped to 1.3% y/y and 1.7% y/y respectively. Retails sales for the month of June came in at 23.7% m/m vs 24.5% m/m as expected. The reading brought retail sales up 1.3% from pre-pandemic levels in February as more regions reopened. Sales were up in all sub sectors, with growth primarily led by motor vehicle and parts dealers, as well as clothing and clothing accessories stores. Statistics Canada is providing an advanced estimate of July sales of 0.7%.

This week we will have Q2 GDP data.

Important news for CAD:

Friday:

• GDP

JPY

Preliminary Q2 GDP reading showed the pain circulating through Japanese economy. It came at -7.8% q/q vs -7.5% q/q, even worse than very low expectations! Annualized decline was -27.8%. Private consumption fell -8.2% q/q while business spending fell -1.5% q/q. Business spending is the only bright spot in the reading, although it is negative, it came better than -4% as was expected. The reading now shows three consecutive quarters of negative GDP, indicating prolonged recession. Since Japan is net exporter the drop in the global demand due to virus outbreak wreaked havoc on the economy.

Trade balance in July came in at JPY11.6bn, beating expectations and turning back into surplus after three months of deficits. However, surplus was achieved with exports dropping -19.2% y/y while imports plunged -22.3% y/y. Report showed the first increase in exports to China this year. Core machinery orders for June came in at -7.6% m/m and -22.5% y/y. After brief positive reading the previous month machinery orders, proxy for CAPEX, return into negative which will raise concerns about business investment in Q3 as well as Q4.

National inflation for July improved slightly to 0.3% y/y but ex-fresh food and ex-fresh food, energy categories stayed at their previous levels of 0% y/y and 0.4% y/y respectively. Measures are miles away from BOJ’s 2% target level. Preliminary manufacturing PMI for the month of August improved to 46.6 but services dropped to 45 from 45.4 the previous month leaving composite at 44.9 level.

This week we will have Tokyo area inflation data for the month of August.

Important news for JPY:

Friday:

• CPI

CHF

Total sight deposits for the week ending August 14 came in at CHF698.6bn vs CHF695.8bn the previous week. We can expect the CHF700bn level to be reached within a week or two. Trade balance data in July improved to CHF3.38bn on the back of exports rising 2.3% m/m and imports rising 1.1% m/m. This is an encouraging sign for the start of Q3.

This week we will have Q2 GDP data.

Important news for CHF:

Thursday:

• GDP

 

[katetrades]

Forex Major Currencies Outlook (Aug 31 – Sep 4)

Employment data from US and Canada followed by PMI data from China and RBA rate decision will highlight the upcoming week as we start to wake up from the summer lull.

USD

Consumer confidence in August declined for the second straight month. It came in at 84.8, down from 91.7 the previous month. The $600/week scheme ended on July 31 and it led to the decline in consumer confidence. The numbers have fallen below values during the pandemic and represent almost a six-year low. Preliminary durable goods for the month of June smashed expectations coming in at 11.2% m/m vs 4.7% m/m as expected. Digging in deeper into the number we find out that the reading was skewed due to the rise in defensive aircraft parts of 77.1% which does not reflect economic expansion and muddies the headline reading. On the positive side, core capital goods came in at 2.4% m/m vs 1.8% m/m as expected with a revision higher to the previous month’s reading.

Second reading of Q2 GDP saw it revised up to -31.7% q/q from -32.5% q/q as preliminary reported. Initial jobless claims topped the 1 million mark for the second week in a row (it came at 1006k). Another blow to the economy is that the number of continuing claims came in higher than expected at 14535k but still lower than 14758k from the previous week.

Fed Chairman Powel stated that "following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time." Employment issues will be prioritized over inflation. PCE inflation in July rose to 1% y/y with core rising as well to 1.3% y/y. Both personal spending and personal income beat expectations coming in at 1.9% and 0.4% respectively which is a good sign for Q3. However, caveat is that these numbers are July numbers, $600 per week checks were still available back then, so we may see a serious drop in August numbers.

This week we will have ISM PMI data and NFP numbers on Friday. Given that the Fed is prioritizing employment NFP reading will gain in importance. Estimates are for around 1.5 million on the headline number with the unemployment rate of around 10%.

Important news for USD:

Tuesday:

• ISM Manufacturing PMI

Thursday:

• ISM Non-Manufacturing PMI

Friday:

• Nonfarm Payrolls
• Unemployment Rate

EUR

German Ifo business climate index jumped to 92.6 in August from 90.4 the previous month. Expectations and current situation assessment categories also showed an improvement coming in at 97.5 and 87.9 respectively. Optimism regarding the economy, not just expectations, but current situation as well, pushed EUR higher. Ifo economists now expect German GDP to grow by 7% in Q3 after Q2 GDP was revised higher to -9.7% q/q from -10.1% q/q as preliminary reported. Economic sentiment for the Euro area continued to rise, beating expectations which suggests double-digit Q3 GDP. Improvements were seen in both industrial and services sentiment.

This week we will have preliminary August inflation data and consumption data for July.

Important news for EUR:

Tuesday:

• CPI

Thursday:

• Retail Sales

GBP

The pound has enjoyed a very strong week despite the uncertainties around Brexit deal and Covid-19 back home. It has benefited from the weak dollar pushing GBPUSD to the 1.33 level and strengthening against the yen, crossing the 141 level.

AUD

Q2 Capex data came in at -5.9% q/q vs -8.2% q/q as expected. It is a beating but not something to be proud of especially when Q1 reading was -2.1% q/q. Westpac is predicting that AUDUSD will go as high as 0.75 by the end of 2020 citing increase in iron ore prices due to growing demand from China, current account surplus and stimulus coming from Australia.

This week we will have RBA interest rate decision, Q2 GDP and July consumption data from Australia as well as official and Caixin PMI numbers from China.

Important news for AUD:

Monday:

• Manufacturing PMI (China)
• Services PMI (China)
• Composite PMI (China)

Tuesday:

• RBA Interest Rate Decision
• Caixin Manufacturing PMI (China)

Wednesday:

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

Friday:

• Retail Sales

NZD

Retail sales in Q2 plunged -14.6 q/q and -14.2% y/y as a result of countrywide lockdown. Prime Minister Ardern announced that lockdown in Auckland will be extended to August 30 and finance minister added that lockdown takes away NZD500m from GDP per week. Trade balance data for July saw surplus dwindling to NZD282m from NZD475m the previous month on the back of fall in exports and rise in imports.

CAD

Q2 GDP data showed the record drop of -38.7% q/q vs -39.4% q/q as expected. GDP in June was up 6.5% m/m but the huge drop in April’s reading lead to the sharp quarterly decline.

This week we will have employment data.

Important news for CAD:

Friday:

• Employment Change
• Unemployment Rate

JPY

After a surprising jump in inflation the previous month CPI data for August continued their downward path. Headline number came in at 0.3% y/y vs 0.6% y/y as expected and as reported the previous month. Ex-fresh food category, which is a core reading, came in at -0.3% y/y vs 0.4% y/y the previous month and ex-fresh food, energy category, the so-called core-core, came in at -0.1% y/y vs 0.6% y/y the previous month.

Prime minister Abe will resign from his post due to health reasons. Economic policy called “Abenomics”, which consists of monetary and fiscal stimulus as well as economic reforms, will continue to be implemented regardless of the successor. Currently, finance minister Aso is the leading candidate.

This week we will have consumption, employment and capital spending data.

Important news for JPY:

Monday:

• Retail Sales

Tuesday:

• Unemployment Rate
• Capital Spending

CHF

Total sight deposits for the week ending August 21 reached the magic round number of CHF700bn, up from CHF689.9bn the previous week. With EURCHF being at the 1.075 level seems that SNB targeted USDCHF pair, buying dollars, in order to prop it up from the 0.90 level. Q2 GDP fell -8.2% q/q thus providing another reading showing the devastating impact of the virus on the economy.

This week we will have consumption and inflation data.

Important news for CHF:

Monday:

• Retail Sales

Wednesday:

• CPI

 

[katetrades]

Forex Major Currencies Outlook (Sep 7 – Sep 11)

ECB and BOC meeting along with continuation of Brexit talks will highlight the upcoming week.

USD

ISM manufacturing PMI for the month of August set new highs coming in at 56 vs 54.8 as expected. The reading is the highest in almost two years and it was led by huge jump in new orders (67.6, which is the highest since 2004) and production 63.3. New export orders returned to expansion territory, however employment sub index puts a dent into the report as it rose only to 46.4 from 44.3 the previous month. ISM non-manufacturing PMI came in at 56.9 vs 57 as expected, a decline from 58.1 in July but still at the very healthy level. Business activity and new orders declined from previous month, although they are still very high, 62.4 and 56.8 respectively. The biggest concern with the report is the employment sub index which is below 50 level for the sixth consecutive month.

NFP headline number for August came in at 1371k vs 1350k as expected. The main reading from the report is the unemployment rate which fell to 8.4% from 10.2% the previous month. This is a staggering drop in the unemployment rate considering that participation rate rose to 61.7% from 61.4% the previous month. The underemployment rate, referring to a situation in which individuals are forced to work in low paying or low skill jobs, also continued to decline coming in at 14.2%. The drop in the unemployment rate may persuade Republicans that new stimulus is not needed which can further undermine already fragile consumer. Number of private jobs was 1027k meaning that temporary government jobs made a significant contribution to the headline number. Out of those government jobs 238k are scheduled to be laid off at the end of the September.

Initial jobless claims for the week ending August 29 dropped below 1 million mark coming in at 881k. Continuing claims for the week ending August 22 fell to 13 254k from 14 492k previously. There were 2 million more workers collecting unemployment benefits in August than in July. This suggests that fewer businesses are reopening than expected and more importantly those that are reopening are doing so at reduced capacity using smaller labour forces than before the pandemic.

This week we will have inflation data.

Important news for USD:

Friday:

• CPI

EUR

Final manufacturing PMI for August came in at 51.7 as preliminary reported but there were revisions between countries. German dropped to 52.2 while French improved to 49.8, so close to the 50 level. Markit notes that readings so far point to sharp rebound in production in Q3. Final services reading improved to 50.5 from 50.1 as preliminary reported on upward revision to German services which pushed composite to 51.9 from 51.6 preliminary. Markit notes that recovery started to wane mid-Q3 and it is attributed to resurgence in Covid-19 cases.

Preliminary inflation data for August see the headline number show deflation coming in at -0.2% y/y vs 0.2% y/y as expected. Core CPI came in at 0.4% y/y vs 0.8% y/y as expected. Both readings heavily missed expectations and although the drop can be attributed to pandemic conditions if the drop persists for some time it will cause concern at the ECB. The fall in inflation can also be attributed to the late start of the sales season.

EURUSD briefly crossed the 1.20 level after it was pulled down on comments from ECB chief economist Philip Lane. He stated that while ECB does not target the exchange rate, the euro-dollar exchange rate matters which was interpreted as ECB expressing concern regarding EUR strength. EUR strength led to deflation as reported in preliminary August inflation report.

This week we will have final Q2 GDP reading as well as ECB meeting. No change in the rate is expected but further comments on EUR strength will be monitored. Additionally, investors will look for any change in inflation targets, that is, will ECB allow inflation to go over 2% level as Fed announced.

Important news for EUR:

Tuesday:

• GDP

Thursday:

• ECB Interest Rate Decision
• ECB Monetary Policy Press Conference

GBP

Final manufacturing PMI for August was slightly revised to 55.2 from 55.3 as preliminary reported but still a very healthy reading, best level since February 2018, with output rising at fastest pace in six years led by an upturn in domestic demand. Services had a bigger downgrade. They came in at 58.8 vs 60.1 as preliminary reported which pushed composite to 59.3 vs 60.3 as preliminary reported. Markit notes that economy is enjoying “mini boom” due to the reopening and that numbers are skewed due to furlough scheme that will be in place until October and “Eat out to help out” scheme.

This week we will have July GDP figures.

Important news for GBP:

Friday:

• GDP

AUD

RBA has left the cash rate unchanged at 0.25% as was widely expected. They will maintain their 0.25% target for 3-year bond yields until progress is made in employment and inflation. They will increase the size of term funding facility and make the facility available for longer. Board members have acknowledged Aussie strength in the recent months but it was attributed to the falling USD and it does not warrant any intervention.

Q2 GDP data posted historically bad numbers coming in at -7% q/q and -6.3% y/y. Both readings came worse than expected and after negative readings from Q1 it affirms that Australia is in technical recession, measured as two consecutive quarters of negative GDP, for the first time in almost 30 years. Household consumption dropped -12.1% q/q. Government consumption was the only positive with 2.9% q/q. Retail sales in July came in at 3.2% m/m. Another positive reading, but trouble will be seen in August reading due to the increased harshness of lockdown measures in Melbourne.

Official PMI data from China for the month of August show small decline in manufacturing (51 vs 51.1 the previous month) and nice increase in the non-manufacturing (55.2 vs 54.2 the previous month) which led to composite rising to 54.5 from 54.1 the previous month. Caixin manufacturing PMI came in at 53.1 thus marking fourth consecutive month in expansion territory. The reading is highest since 2011, new export orders recorded their first growth this year as overseas demand increased while employment moved closest to 50 level this year. Caixin services slipped to 54 but composite improved on the back of manufacturing reading to 55.1.

This week we will have trade balance and inflation data from China.

Important news for AUD:

Monday:

• Trade Balance (China)

Wednesday:

• CPI (China)

NZD

ANZ business confidence, closely followed metric by RBNZ, came in at -41.8 thus returning to the value from May. ANZ stated that survey is recessionary and that the retail sector, which drove the rebound in recent months, is losing rapidly losing steam. GDT price index posted a fourth consecutive decline coming in at -1% indicating that we can expect weaker contribution from net exports to Q3 GDP.

CAD

The employment change in August came in at 245.8k. The report is full of great signs starting with the unemployment rate dropping to 10.2% from 10.9% the previous month while participation rate rose to 64.6% from 64.3% the previous month. Full-time employment came in at 205.8k while part-time employment came in at 40k. The fact that great majority of employment gains are in full-time employment is a great sign for the economy. Employment is now within 1.1 million from the pre-pandemic levels.

This week we will have BOC interest rate decision which may show some changes in the existing stimulus program since data continues to show positive signs.

Important news for CAD:

Wednesday:

• BOC Interest Rate Decision

JPY

Preliminary industrial production data for July came in at 8% m/m and -16.1% y/y. Both readings came better than expected and better than previous month prompting government to lift their assessment. Retail sales went into the other direction coming in at -3.3% m/m vs -2.5% m/m as expected and -2.8% y/y vs -1.7% y/y as expected. Q2 Capex data completely disappointed coming in at -11.3% y/y vs –4% y/y as expected. Company profits plunged astonishing -46.6% y/y. The big drop in global demand caused by virus outbreak hurt Japanese exporters much worse than it was expected.

Yoshihide Suga will stand for LDP leadership election and deputy prime minister Aso, which was at first seen as the main contender, stated he will support him. The winner of LDP leadership race will be the next prime minister since the party has the majority in the House of Representatives. The leadership vote will be held on September 14.

This week we will have final Q2 GDP reading, spending and earnings data as well as core machinery orders data.

Important news for JPY:

Tuesday:

• GDP
• Household Spending
• Labor Cash Earnings

Thursday:

• Core Machinery Orders

CHF

Retail sales for July showed a strong rebound coming in at 4.1% y/y. Positive revision to previous month’s reading from 1.1% y/y to 3.3% y/y made the reading shine even brighter. SNB total sight deposits for the week ending August 28 came in at CHF701.6bn vs CHF700bn the previous week. SNB’s intervention aim was most likely to lift USDCHF from the 0.90 level. CPI for August came in line with expectations, headline at -0.9% y/y and core at -0.4% y/y. Headline number is in deflation since February and core since March.

This week we will have employment data.

Important news for CHF:

Wednesday:

• Unemployment Rate

 

[TradersWay]

Forex Major Currencies Outlook (Sep 14 – Sep 18)

Fed, BOE and BOJ rate decisions accompanied by consumption data from the US and China will be the key economic events while election of Japan’s new prime minister and continuation of Brexit negotiations will dominate the political landscape.

USD
Headline CPI in August came in at 1.3% y/y vs 1.2% y/y as expected and up from 1% y/y in July. Core reading came in at 1.7% y/y vs 1.6% y/y the previous month. Rise in energy prices is most responsible for the increase in inflation. Initial jobless claims for the week ending September 5 came in at 884k for a second week of claims below 1 million while continuing claims rose to 13385k.

This week we will have consumption and housing data. Highlight of the week will be the Fed interest rate decision accompanied with economic projections and press conference. After introduction of AIT (Average Inflation Targeting) in Jackson Hole and putting emphasis on employment data investors will look for additional clarification.

Important news for USD:
Wednesday:

• Retail Sales
• Fed Interest Rate Decision
• FOMC Press Conference

Thursday:

• Building Permits
• Housing Starts

EUR
ECB left key policy rates unchanged as was widely expected. PEPP program will continue in the amount of €1.35 trillion with purchases being flexible until the end of the program at the end of June 2021. ECB president Lagarde stated that they will be monitoring the FX rate but that they will not overreact to Euro gains as it is not in their mandate. Rebound in the economy is in line with expectations. Inflation has been dampened by energy prices as well as drop in German VAT. They expect inflation to remain negative until the end of the year before picking up at the start of 2021. Final Q2 GDP reading came in at -11.8% q/q vs -12.1% q/q as reported in the second reading.

This week we will have industrial production data, ZEW survey data and final August inflation data.
Important news for EUR:

Monday:

• Industrial Production

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Thursday:

• CPI

GBP
Prime minister Johnson announced October 15 as the deadline date for the EU deal. If the deal is not reached by that date UK will leave on “no deal” and “move on”. Johnson added that the date is chosen so it can be ratified by the year-end. UK will be ready to trade with the EU on WTO trade terms if no deal is reached. October 15 is two weeks earlier than the EU’s self-imposed date of the end of October. Internal market bill, the newly proposed bill which overrides the Withdrawal Agreement and the Northern Ireland protocol, will be debated in the Parliament on September 14. GDP for July came in at 6.6% m/m indicating a rebound at the start of Q3 due to the reopening. Industrial output and construction were stronger than expected, but services were a bit weaker than expected.

This week we will have employment, inflation and consumption data along with BOE rate decision. No change in rate is expected with talks about increase of QE in November being eyed. Continuation of Brexit talks will have a bigger impact on pound as we are entering within a month from the deadline imposed by British government.

Important news for GBP:
Tuesday:

• Claimant Count Change
• Unemployment Rate

Wednesday:

• CPI

Thursday:

• BOE Interest Rate Decision

Friday:

• Retail Sales

AUD
Trade balance data for China in August showed surplus of CNY416.6bn vs CNY386bn as expected. Exports were up 11.6% y/y while imports were down -0.5% y/y. Trade surplus with US on YTD basis, from January to August, is at CNY1.32 trillion. In the dollar terms trade balance came in at $58.93bn with exports rising 9.5% y/y and imports falling -2.1% y/y. Export growth was mainly concentrated in integrated circuits, auto-data processors and textiles, smartphones and household appliances. Exports smashed expectations while imports missing widely raise a concern regarding domestic demand within China. One caveat may be that the biggest drop in imports was in energies and the other that the decline in imports appears to be a function of falling prices. Inflation in August came in at 2.4% y/y as expected easing from 2.7% y/y due to the drop in the food prices.

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

Important news for AUD:
Tuesday:

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

Thursday:

• Employment Change
• Unemployment Rate

NZD
September preliminary readings of ANZ business confidence and activity outlook showed significant improvements. The former came in at -26 vs -41.8 in August while the latter came in at -9.9 vs -17.5 the previous month. ANZ stated that many activity indicators are at their highest levels since February, but are still well down compared to pre-pandemic.

This week we will have Q2 GDP reading.

Important news for NZD:

Thursday:

• GDP

CAD
BOC has left the overnight rate unchanged at 0.25% as we expected. They have also left their QE program unchanged at CAD5bn per week and reiterated that they “will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved". In their assessment the rebound in the US has been stronger than expected, while economic performance among emerging markets has been more mixed.

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:

• CPI

Friday:

• Retail Sales

JPY
Final Q2 GDP reading came in at -7.9% q/q vs -7.8% q/q as preliminary reported. Private consumption was at -7.9% q/q vs -8.2% q/q as preliminary reported but business consumption dropped to -4.7% q/q from -1.5% q/q as preliminary reported. Labour cash earnings in July came in at -1.3% y/y for the fifth consecutive month of declines while household spending plunged -7.6% y/y. Spending has been falling every month since the sales tax hike in October of last year. Core machinery orders for July, a good proxy for capex 6 to 9 months in the future, rebounded to 6.3% m/m from -7.6% m/m in June.

This week we will have industrial production, trade and inflation data along with BOJ rate decision. According to reports BOJ is expected to offer more positive tone on the economy indicating that Japan is recovering from the fallout caused by the pandemic.

Important news for JPY:

Monday:

• Industrial Production

Wednesday:

• Trade Balance

Thursday:

• BOJ Interest Rate Decision

Friday:

• CPI

CHF
SNB total sight deposits for the week ending September 4 came in at CHF702.9bn vs CHF701.6bn the previous week. SNB keeps the steady fight against the unwanted Swissy strength. Seasonally adjusted unemployment rate in August came in at 3.4%.

 

[katetrades]

Forex Major Currencies Outlook (Oct 5 – Oct 10)


RBA rate decision followed by FOMC minutes and Canadian employment data will highlight the week from an economic standpoint with markets facing an impact from Brexit and virus-related news.

USD

Final Q2 GDP came in at -31.4% vs -31.7% as reported in the second reading. This is by far the worst quarter on record with private consumption plunging around 35% and business investment free-falling around 45%. Initial jobless claims continued to decline in the week ending September 26 coming in at 837k vs 850k as expected, down from 873k the previous week. Continuing claims slipped to 11767k from 12000k previously. Inflation, as measured by PCE, came in at 1.4% y/y vs 1.1% y/y the previous month with core PCE rising to 1.6% y/y from 1.4% y/y the previous month. Personal income dropped -2.7% due to the end of the weekly unemployment benefits which in turn dragged personal spending to 1% from 1.5% the previous month.

NFP for September came in at 661k vs 875k as expected with previous month’s reading being revised up to 1489k. The unemployment and underemployment rates dropped to 7.9% and 12.8% respectively, however the participation rate also dropped to 61.4% from 61.7% the previous month thus taking away the shine from the reading. A drop in the unemployment rate could cause further divergence in the fiscal stimulus package as Republicans can argue that the amount should be lower due to the economy doing well.

First presidential debate underwhelmed and started as an insult match. As it went on it turned from ugly into chaotic. President Trump refused to say that he will accept the election results increasing the fears of a contested election, an election of which the legality or validity of the result is challenged by the losing candidate and a constitutional crisis. President Trump announced on Twitter that he tested positive on COVID-19 which sent US equities down. He is 74 years old and overweight which puts him in a high-risk group. He is in quarantine which will side-line him for two weeks from the election campaign in the final month before the elections.

This week we will have ISM Non-Manufacturing PMI, trade balance data as well as minutes from the latest FOMC meeting.

Important news for USD:

Monday:

• ISM Non-Manufacturing PMI

Tuesday:

• Trade Balance

Wednesday:

• FOMC Minutes

EUR

Economic confidence in September came in at 91.1, up from 87.5 reported the previous month. Services and industrial sentiment also showed an improvement indicating the growing optimism surrounding the recovery in the euro area. Consumer confidence improved to -13.9 from -14.7 the previous month, but the reading is still rather weak.

Preliminary September inflation data showed CPI falling further into deflation coming in at -0.3% y/y vs -0.2% y/y the previous month. Core CPI added salt to the wound by dropping to 0.2% y/y vs 0.4% y/y the previous month. Headline inflation fell to the its lowest level since 2015 while core inflation is at the record lows. Although the factors that lead to the drop are mostly transitory, -- German VAT reduction, a drop in energy prices and late mandatory sales period, -- there is a concern about the drop in services inflation caused by social distancing measures. If the deflation persists beyond transitory effects the ECB will be spurred into action to fight the deflationary pressures.

This week we will have consumption data for the last month of Q3.

Important news for EUR:

Monday:

• Retail Sales

GBP

Final Q2 GDP reading improved to -19.8% q/q vs -20.4% q/q as preliminary reported on upwardly revised business investment. However, this still remains the worst quarter reading on record with both private and government consumption being downwardly revised. Additionally, Q2 is long behind us and markets will react only to Q3 related news.

This week we will have GDP data for the last month of Q3 as well as continuation of Brexit negotiations.

Important news for GBP:

Friday:

• GDP

AUD

Industrial profits in China for August came in at 19.1% y/y for a fourth consecutive month of rising profits thanks to the massive government stimulus, pent-up demand and exports. Equipment manufacturing sector as well as mining sector showed the biggest rise in profits. Official manufacturing PMI in September came in at 51.5 beating the expectations of 51.3 and rising from 51 as reported the previous month. Non-Manufacturing PMI jumped to 55.9 vs 54.7 as expected which pushed composite PMI to 55.1. Caixin manufacturing PMI ticked down to 53.0 from 53.1 the previous month with Caixin noting "The sharp rise in overseas demand has complemented the domestic market" and adding their worries about the job market.

This week we will have trade balance data and RBA interest rate decision. No changes to policy in October are expected but Reuters poll shows that 25 out of 36 economists see a cash rate cut to 0.1% at some time in Q4, most likely on November 3. We will have Caixin services and composite PMIs from China.

Important news for AUD:

Tuesday:

• RBA Interest Rate Decision
• Trade Balance

Friday:

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

NZD

ANZ business survey for September showed business confidence improving to -28.5 from -41 the previous month. Activity outlook improved as well coming in at -5.5 vs -17.5 the previous month. ANZ noted that agriculture and construction are the most optimistic sectors while services and retail are the least optimistic.

CAD

GDP for the month of July came in at 3% m/m vs 2.9% m/m as expected for the third consecutive month of rising GDP. Astonishingly all 20 of the industrial sectors posted increases with manufacturing being at 5.9% and accommodation and food services at 20.1%. Projections for August GDP are at 1% m/m indicating rebound in Q3 GDP, however GDP is still 6% lower than in February.

This week we will have employment data.

Important news for CAD:

Friday:

• Employment Change
• Unemployment Rate

JPY

Headline inflation for Tokyo area in September came in at 0.2% y/y vs 0.1% y/y as expected. CPI excluding fresh food came in at -0.2% y/y vs -0.3% y/y the previous month while CPI excluding food, energy came in flat vs -0.1% y/y the previous month. BOJ target is for 2% inflation so the small beatings are not nearly enough. Preliminary industrial production for August came in at 1.7% m/m vs 1.4% m/m as expected and -13.3% y/y vs -13.4% y/y as expected. Retail sales followed industrial production and came in with a beat of 4.6% m/m vs 2% m/m as expected thus returning to the growth path after a stumble in July. The unemployment rate ticked up to 3% as expected thus crossing the 3% mark for the first time since May 2017.

This week we will have spending and earnings data.

Important news for JPY:

Friday:

• Household Spending
• Labor Cash Earnings

CHF

Total sight deposits for the week ending September 28 came in at CHF704.5bn vs CHF703.9bn the previous week. After a surprising drop in total sight deposits two weeks ago they continue with their upward trajectory. Both headline inflation and core inflation in September ticked up to -0.8% y/y and -0.3% y/y respectively. Retail sales in August came in at 2.5% y/y vs 3.6% y/y the previous month due to the drop in non-food (ex-fuel) category indicating slight slowdown in domestic demand.

SNB quarterly intervention data report showed that they spent CHF90bn on currency interventions in H1 thus spending more in H1 of 2020 than in previous three years combined and amounting to slightly over 50% of Swiss GDP. US Treasury labels countries as currency manipulators if they meet three criteria and now Switzerland has met them all. Those are: Bilateral Trade, goods trade surplus higher than $20bn and Switzerland is at $47bn, Current Account Surplus, greater than 2% of GDP and Switzerland is at 8.6% of GDP and Persistent One-Sided Intervention in Foreign Markets, greater than 2% of GDP and for at least 6 out of 12 months and Switzerland is at over 50% of GDP with at least 8 months. With inflation deeply negative SNB is forced to continue intervening in the markets to fight off Swissy’s strength.

This week we will have employment data.

Important news for CHF:

Thursday:

• Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (Oct 12 – Oct 16)

Consumption data from the US along with Brexit deadline imposed by the UK government on October 15 and EU Leaders Summit will highlight the coming week. Monday is a holiday in the US which will cause lower liquidity in the markets.

USD

ISM Services PMI in September came in at 57.8 vs 56.2 as was expected and up from 56.9 the previous month. Diving deeper into the numbers we see that new orders jumped to 61.5 from 56.8 the previous month while employment index returned to expansion with 51.8 from 47.9 the previous month. Business activity also improved coming in at very strong 63 level. Trade balance in August set a new record deficit. It came in at -$67.1bn vs -$66.2bn as expected. Exports rose 2.2% while imports rose 3.2% indicating good domestic demand. The deficit with China decreased to -$26.4bn while total goods deficit increased by $3bn and came in at -$83.86bn.

Fed Chairman Powell stated in his speech that economy has performed well but it is weakening. He stated that Fed has lowered borrowing costs and ensured that credit is ample thus stabilising financial markets. Government was commended for its massive fiscal stimulus, however more of it is needed to ensure that recovery continues. Powell added that doing little on this front will be worse than doing too much. President Trump suddenly announced the end of stimulus talks with Democrats stating that he will unveil massive stimulus after the election victory. After seeing US markets close lower due to his announcement, he tweeted his support for small businesses and sending stimulus checks to all Americans ($1200).

This week we will have inflation and consumption data.

Important news for USD:

Tuesday:

• CPI

Friday:

• Retail Sales

EUR

Final services PMI reading for September came in at 48, down from 50.5 in August. Composite came in at 50.4, down from 51.9 in August. The rise in virus cases impeded the economic recovery raising questions about the Q4 data. If PMIs continue to falter in combination with already falling inflation will prompt additional stimulus. Retail sales in August came in at 4.4% m/m vs 2.5% m/m due to strong online purchases and clothing sales. Consumption has rebounded after a drop in July adding more support to the rebound in Q3.

This week we will have ZEW survey as well as EU Summit on Thursday and Friday.

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Thursday and Friday:

• EU Leaders Summit

GBP

Final services PMI reading for September came in at 56.1 vs 55.1 as preliminary reported. Composite came in at 56.5 vs 55.7 as preliminary reported. Markit noted the resilience of UK’s service sector stating however that risks in the coming months are skewed to the downside. Worries concerning Brexit are on the rise which could negatively impact the economic recovery in Q4.

GDP in August came in at 2.1% m/m vs 4.6% m/m as expected. GDP in August is down 9.3% from the same month a year ago. Although all 3 months in Q3 had positive readings they kept sliding from month to month indicating that Q3 rebound may not be as strong as hoped for. Given the risk surrounding Brexit as well as the expiring furlough programme the worries about Q4 are mounting.

This week we will have employment data.

Important news for GBP:

Tuesday:

• Claimant Count Change
• Unemployment Rate

AUD

At their October meeting RBA left both cash rate and the targeted yield on 3 year bonds at 0.25% as was widely expected. They have reiterated that they will not increase cash rate until progress has been made towards full employment and they are confident that inflation will be sustainably within 2-3% band. Decline in growth was not as bad as expected and the unemployment rate is likely to peak at a lower rate than it was expected earlier. They see tackling the unemployment rate as an important national priority and “will maintain highly accommodative policy settings as long as is required”. Government unveiled the budget for the fiscal year ending in 2021 and it shows a deficit of 11% of GDP as well as net debt rising to 36.1% of GDP.

This week we will have employment data from Australia as well as trade balance and inflation data from China.

Important news for AUD:

Tuesday:

• Trade Balance (China)

Thursday:

• Employment Change
• Unemployment Rate
• CPI (China)

NZD

RBNZ officials stated that they are actively working on negative interest rates and funding-for-lending programme. The news was brought by Reuters citing an unnamed RBNZ official and it pushed NZD down. There are still speculations about the validity of the news, however kiwi is suffering from negative rates talk.

This week we will have Q3 inflation data.

Important news for NZD:

Thursday:

• CPI

CAD

Employment report for September showed employment change coming in at 378.2k vs 150k as expected. The unemployment rate fell to 9% from 10.2% in August while participation rate climbed to 64.8% from 64.6% in August. Final point of this very strong employment report is that great majority of employment (334k) was full-time employment. BOC Governor Macklem stated that “we are not actively discussing negative interest rates at this point but it’s in our toolkit and never say never”. Later on during his statement he subtly downplayed the probability of negative rates which lead to CAD gaining strength.

JPY

Final services PMI reading for September came in at 46.9 vs 45 the previous month and pushed composite to 46.6 vs 45.2 the previous month. This is the eighth straight month of services reading below 50 with January showing measly 50.1. Markit stated that with restrictions on travel imposed in the country tourism is preventing any meaningful recovery in the services sector. Household consumption in August improved a bit to -6.9% y/y from -7.6% y/y in July. Labour cash earnings continued to decline coming in at -1.3% y/y, for a fifth straight month of declines. Japan’s economy is in a vicious downward cycle, no wages, no consumption, no inflation.

CHF

Total sight deposits for the week ending October 2 came in at CHF705.1bn vs CHF704.5bn the previous week indicating that SNB is still performing interventions in the market to curb Swissy’s strength. The seasonally adjusted unemployment rate in September moved in the right direction by slipping to 3.3% from 3.4% the previous month.

 

[iamsam]

Loving your analysis, especially your insight on USDJPY.
I'm curious given the precarious position both of these currencies find themselves in, which direction you anticipate this pair heading over the next couple of weeks?

 

[katetrades]

Forex Major Currencies Outlook (Oct 19 – Oct 23)
​

Preliminary PMI data from Europe, talks surrounding Brexit negotiations as well as Q3 GDP reading from China will impact the markets.

USD

Inflation in September came in as expected, headline at 1.4% y/y and core at 1.7% y/y. Retail sales on the other hand smashed expectations by coming in at 1.9% m/m vs 0.8% m/m as expected. Control group also had a very strong reading coming in at 1.4% m/m vs 0.2% m/m as expected. US consumer is keeping the economy going and this may put some risk-on mood in the markets. IMF now sees world GDP contracting -4.4% in 2020 vs -5.2% as was estimated in June. GDP for 2021 is seen at 5.2% vs 5.4% in June. China growth for 2020 is raised to 1.9% from 1% while outlook for 2021 is unchanged at 8.2%. Eurozone 2020 contraction is seen at -8.3% vs. -10.2% in June while 2021 growth is seen at 5.2% vs. 6.0% in June.

This week we will have housing data.

Important news for USD:

Tuesday:

• Housing Starts
• Building Permits

Thursday:

• Existing Home Sales

EUR

ZEW survey showed a small improvement in the current situation in Germany from -66.2 to -59.5, however there were big drops in expectations component. German dropped to 56.1 from 77.4 while EU expectations dropped to 52.3 from 73.9. ZEW notes rising virus cases as the main culprits for the drop in the expectations category. We can add Brexit uncertainties as well as incoming US elections and their negative impact to the investor optimism in the mix. Industrial production in August slipped to 0.7% m/m from 5% m/m in July indicating that economic recovery started to lose it’s steam in mid Q3. Production is now 6.7% lower than it was before the virus. The slowdown in production was lead by non-durable consumer goods production while durable consumer goods production picked up.

This week we will have preliminary October PMI data.

Important news for EUR:

Friday:

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

GBP

Claimant count, jobless claims, in September came in at 28k vs 39.k the previous month. Claimant count rate remained stable at 7.6%. ILO unemployment rate rose to 4.5% due to the change in the methodology. Still there are concerns that the number is low due to the furlough scheme and inability to properly measure unemployment. Wages have improved as workers are going back to work but are still very weak and not able to provide any inflationary pressures.

Reuters reported that EU leaders will authorise continuation of Brexit negotiations for the 'coming weeks'. Prime minister Johnson hinted to preparations for no-deal Brexit which plunged GBP almost 100 pips against major counterparts. Negotiations will continue over the weekend and we see them dragging through November as well.

This week we will have inflation, consumption and preliminary October PMI data.

Important news for GBP:

Wednesday:

• CPI

Friday:

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

AUD

Employment change in September came in at -29.5k vs -40k as expected. The unemployment rate ticked up to 6.9%, keeping it below expected level of 7%, while participation rate was unchanged at 64.8%. Both full-time and part-time employment showed declines coming in at -20.1k and -9.4k respectively. The report was not good, but not as bad as expected. Additionally, the report is not showing the full picture as government job support is assisting the numbers. RBA governor Lowe indicated a possibility of cutting rate from 0.25% to 0.10% which weighed heavily on the AUD pushing it lower. Analysts now see RBA cutting rate at their next meeting on November 3 and markets are pricing around 74% chance of that happening. Lowe also added the possibility of expanding QE program to encompass purchases of 10yr bonds and urged for further fiscal support.

Trade balance in China for the month of September came in at CNY254.7bn vs CNY419.5bn as expected. Exports rose 8..7% y/y while imports jumped to 11.6% y/y vs 1% y/y as expected. This huge jump in imports did lower the surplus, however it is indicative of strong domestic demand which is much more important. Alternatively, the rise in imports could be due to the stockpiling ahead of the US sanctions. September CPI came in at 1.7% y/y vs 1.9% y/y as expected dropping from 2.4% y/y in August. Main culprit were food prices, particularly pork prices, which showed a significant drop. PPI broke a chain of three consecutive improving months by coming in at -2.1% y/y vs -2% y/y in August. Low PPI will hurt industrial profits in the future thus prompting monetary authorities to increase support for the economy.

This week we will have Q3 GDP data as well as consumption and production data for September.

Important news for AUD:

Monday:

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

NZD

Assistant Governor of RBNZ Hawkesby commented that although there is still a lot of uncertainty about the economy some economic data have surprised to the upside. Global risks are to the downside and economy will require continued policy support. He added that lower NZD could provide further stimulus is interest rates go negative which sent NZD down as markets are increasingly sensitive to all news related to the possibility of negative rates implementation.

This week we will have Q3 inflation data.

Important news for NZD:

Thursday:

• CPI

CAD

Manufacturing sales in August came in at -2% m/m vs -1.4% m/m as expected. This breaks the chain of three consecutive rising months. The largest declines were in the transportation equipment (-13.7%) and plastics and rubber industries (-9.6%). Sales of wood products and miscellaneous industry were up for the fourth consecutive month, rising 12.3% and 12% respectively.

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:

• CPI
• Retail Sales

JPY

Core machinery orders in August came in at 0.2% m/m vs -1% m/m as expected and -15.2% y/y vs -15.6% y/y as expected. A small beating on expectations may indicate increased business spending in months to come. Final industrial production came in at 1% m/m and -13.8% y/y, a bit weaker than preliminary reported. Tertiary industry index improved to 0.8% m/m but an improvement of 1.5% m/m was expected. Both reports indicate just a gradual improvement in their respective sectors.

This week we will have national inflation data as well as preliminary October PMI data.

Important news for JPY:

Friday:

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

CHF

SNB total sight deposits came in at CHF704.6bn vs CHF705.1 the previous week. A small drop indicating that SNB slowed down their intervention. They are most likely satisfied with the current EURCHF level and decided to stand on the sidelines for a time being. Swiss government has upgraded GDP projection for 2020 to -3.8% from -6.2% previously but it came at the cost of downgrading GDP for 2021 to 3.8% from 4.9% previously.
Inflation has also seen improvements to -0.7% in 2020 and -0.1% in 2021 from -0.9% and -0.3% respectively, but the fact that they expect deflation to continue through the next year is very worrisome. SNB Chairman Jordan stated that although they are not big fans of negative rates they are necessary. With disinflationary pressures presiding over the economy negative rates are here to stay.

 

[katetrades]

Loving your analysis, especially your insight on USDJPY.
I'm curious given the precarious position both of these currencies find themselves in, which direction you anticipate this pair heading over the next couple of weeks?

Hello and thank you very much for your kind words!

As you have correctly pointed out the pair is in a rather precarious position. Our view is that until fiscal stimulus is signed the pair will not see any major movements and will be confined in a tight range of 105 to 106 with slightly more pressure to the downside.

After the stimulus is in play we can see stocks rising, which in turn can move US treasury yields higher and ultimately push USDJPY higher. However, due to the incoming elections and divide between parties we do not see a deal on stimulus before the election.

 

[katetrades]

Forex Major Currencies Outlook (Oct 26 – Oct 30)​

ECB, BOJ and BOC meetings, along with preliminary Q3 GDP data from the US and EU will highlight the final week before the US elections.

USD

Housing starts and building permits continued to rise in September taking advantage of favourable conditions caused by low interest rates and came in at 1415k and 1553k respectively. Existing home sales skyrocketed to 6.54m, the highest in 14 years. Housing is leading the recovery, however if the housing market gets overheated it can lead to a new bubble.

This week we will have more housing data, durable goods orders and as well as first reading of Q3 GDP which is expected to show annualised rebound of around 32%. PCE inflation and personal spending data will round up the week.

Important news for USD:

Monday:

• New Home Sales

Tuesday:

• Durable Goods Orders

Thursday:

• GDP

Friday:

• PCE
• Personal Spending

EUR

Preliminary PMI data for October paint a mixed picture. Manufacturing PMI rose to 54.4 from 53.7 in September on the back of a very strong German reading of 58. Services continued to decline coming in at 46.2 vs 47 as expected and down from 48 the previous month. Composite reading fell below 50 level to 49.4 from 50.4 in September. The reading shows a two-way recovery with manufacturing going strong while services dropping due to virus related restrictions. Markit notes that EU “is at increased risk of falling into a double-dip downturn” adding that “the prospect of a slide back into recession will exert greater pressure on the ECB to add more stimulus.”

This week we will have an ECB meeting. We see no changes to the policy at this meeting but possibility of more stimulus to come in December targeting PSPP (Public Sector Purchases Program). We will also get preliminary Q3 GDP, expected at 7.5%, as well as preliminary October inflation figures.

Important news for EUR:

Thursday:

• ECB Interest Rate Decision

Friday:

• GDP (EU, Germany, France)
• CPI

GBP

Inflation in September has improved after a dramatic drop in August and came in at 0.5% y/y. Core inflation came in at 1.3% y/y as expected. The biggest contributor was recreation and culture. After the “eat out to help out” scheme ended in August, prices in restaurant and bars also pushed inflation higher. Overall, the inflation push seems connected only to several goods and services thus not making the environment inflationary. Retail sales improved 1.5% m/m from thebAugust reading thus making retail sales volumes in Q3 increase by 17.4% which is a new record. They continue to rise and exceed the pre-virus levels.

Preliminary October PMI data showed expansion but it has significantly slowed down. Manufacturing came in at 53.3 vs 54.1 in September, services came in at 52.3 vs 56.1 in September while composite came in at 52.9 vs 56.5 the previous month. Markit noted that "The slowdown would have been even more pronounced had it not been for exports rising as overseas customers sought to secure orders before potential supply disruptions as Brexit draws closer” and "While the fourth quarter still looks likely to see the economy expand, the rate of growth looks to have slowed sharply and the risk of a renewed downturn has risen."

Moody has downgraded UK to Aa3 citing three reasons: Weakening economic strength, erosion of fiscal strength and weakening of UK institutions and governance. Due to the furlough scheme the debt grew over 100% of GDP in 2020. Finance minister Sunak revealed additional support for businesses. The maximum grant will increase to £3750 from £1875 previously with grants for self-employed doubling from 20% to 40%. While trade negotiations with EU are still going and will continue to do so until the end of the year UK and Japan have signed post Brexit free-trade agreement.

AUD

RBA Assistant Governor Kent stated that there is a need in the economy for more policy support and this need will be prevalent for some time given the economic outlook and high unemployment. RBA minutes from the October meeting showed that both unemployment and underemployment are expected to remain high for an extended period. Inflation is expected to remain subdued for some time. Members have discussed the options of reducing the targets for the cash rate and the 3-year yield towards zero, without going negative. AUD was weakened by Kent’s and minutes’ remarks and AUDUSD is pushing toward the 0.70 level.

Q3 GDP from China came in at 2.7% q/q vs 3.3% q/q as expected while coming in at 4.9% y/y vs 3.2% y/y the previous quarter. After a strong reading in Q2 the rebound has lost its steam and it was dampened by low imports. Imports are indicator of domestic demand which helps propel economic recovery. Industrial production in September continued to improve and came in at 6.9% y/y vs 5.8% y/y as expected. The improvement was achieved due to the rising exports. Retail sales came in at 3.3% y/y vs 1.6% y/y as expected. Domestic consumption is picking up making this a second consecutive month of rising positive reading. Chinese tourists have travelled only within the country thus all their money was spent within the economy which in turn helped create jobs for low-skilled workers and further stabilised consumption.

This week we will have Q3 inflation data from Australia as well as official PMI data from China.

Important news for AUD:

Wednesday:

• CPI

Saturday:

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

NZD

RBNZ Governor Orr stated that there is plenty more room in their QE program and that they would prefer to deal with inflation than battle deflation. He added that they will update on policy tools in November, RBNZ meeting is on November 11. GDT price index came in at 0.4%, faltering a bit, but still a third positive auction in a row. CPI in Q3 rose to 0.7% q/q from -0.5% q/q the previous quarter, although expectations were for a rise to 0.9% q/q. Incoming data from New Zealand are good but RBNZ keeps sending dovish messages thus keeping the currency in a limbo.

CAD

Retail sales for August came in at 0.4% m/m vs 1.1% m/m as expected. The biggest contributors were building materials and garden equipment which rose 4.5%. Clothing stores were flat on the month due to the rise in jewellery while they are down -12% since August of last year. Retail sales are waning as we are getting into Q4. Headline inflation in September improved to 0.5% y/y from 0.1% y/y in August thanks to rising prices in transportation, recreation, education and reading, and shelter.

This week we will have BOC meeting with no changes to rate or policy expected and monthly GDP figure for August.

Important news for CAD:

Wednesday:

• BOC Interest Rate Decision

Friday:

• GDP

JPY

Trade balance in September came in at JPY675bn vs JPY975.6bn as expected. Exports came in at -4.9% y/y, worse than -2.6% y/y expected while imports came in at -17.2% y/y. Although the imports data is terrible it still represents an improvement from -21.5% y/y as expected and -20.8% y/y the previous month. Exports to China showed the biggest improvement coming in at 14% y/y while exports to EU slumped -10.6% y/y.

National inflation numbers in September show complete absence of inflation with headline number coming in flat as expected, down from 0.2% m/m in August. Ex fresh food, energy component also came in flat on month, while ex fresh food component came in at -0.3% m/m vs -0.4% m/m as expected. The numbers are very worrying and they will prompt BOJ to consider additional stimulus in the near future. Considering their track record so far, doing more of the same will hardly provide desired results.

This week we will have the BOJ meeting. No changes to policy or rate are expected but lower assessment of the economy is possible. Additionally, we will have consumption, employment and Tokyo area inflation data.

Important news for JPY:

Thursday:

• BOJ Interest Rate Decision
• Retail Sales

Friday:

• CPI
• Unemployment Rate

CHF

SNB total sight deposits for the week ending October 16 came in at CHF705.1bn vs CHF704.6bn the previous week. After a short break total sight deposits continue to rise indicating more space for SNB intervention in FX markets.

 

[katetrades]

Forex Major Currencies Outlook (Nov 2 – Nov 6)

US presidential election on Tuesday. This event alone would make most other weeks completely uneventful. On top of that we will have RBA, BOE and Fed meetings as well as NFP to round out the week.
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USD

Preliminary reading of Q3 GDP shows it at 33.1% vs 32% as expected. Needless to say that this is the best quarterly reading, however it is following the worst quarterly reading. Personal consumption came in at 40.7% while business investment came in at 20.3%. Inventories added 6.62 pp to the reading while imports improved almost 100% from the previous quarter. The reading still puts the annual rate of contraction from the pre-virus peak of more than 7 percent. The drop is almost as big as in 2008 trough of the Great Recession.

Consumer confidence slipped to 100.9 from 101.3 the previous month. It was a mixed report with current situation rising and expectations falling indicating that people are falling from government support and are not optimistic regarding the relief package. Fed’s preferred inflation reading PCE came in at 1.4% y/y with core pointing to 1.5% y/y. Both readings show small improvements compared to the August reading but still miles away from Fed’s ATI target. Senate leader McConell has adjourned it until after the election. This move throws away any chance of stimulus package to be passed before the election.

This week we will have ISM PMI data as well as Fed meeting, with no changes expected and NFP. Headline NFP number is expected to come above 500k while the unemployment rate should slip to 7.8%. Economic data will be secondary to the biggest event of the year: US presidential election.

Important news for USD:

Monday:

• ISM Manufacturing PMI

Wednesday:

• ISM Non-Manufacturing PMI

Thursday:

• Fed Interest Rate Decision

Friday:

• Nonfarm Payrolls
• Unemployment Rate

EUR

Ifo survey in October showed a first decline in business climate and expectations for Germany in six months. Rising number of virus cases in Germany does not bode well with investors. This just adds more concern about a Q4 GDP reading making a “double-dip” growing possibility. Current situation has been positively assessed and it continues its five-month rising trend. Sentiment data pointed to a decline in consumer confidence to -15.5 from -13.9 in September.

ECB has left key rates unchanged and refrained from any changes in policy stating that they will correct their course of action according to December forecasts. ECB president Lagarde stated that recovery is losing momentum faster than anticipated which causes consumers to be more cautious regarding their spending habits. She cited “clear deterioration” in the near-term outlook as well as fall in business investment caused by the virus. All instruments will be under review. There will be additional stimulus in December, the question remains what will it look like and in what amount will it be.

Q3 GDP data surprised to the upside coming in at 12.7% q/q vs 9.6% q/q as expected. This is a great rebound after a dismal Q2, however with covid infection numbers rising across the EU it puts a very bleak outlook on Q4. The rebound from Q3 will not be translated into Q4 as we could have seen by September data. Preliminary inflation data in October shows no change from September reading. Headline inflation is at -0.3% y/y while core is at 0.2% y/y.

GBP

Headlines that EU and UK have managed to make progress on some important issues lead to increased optimism in the market that a deal can be reached in early November. Fewer questions remain unsolved, but the big one, fisheries, is still a point of contention.

This week we will have BOE meeting where no changes to rate are expected but we should see increase in asset purchase program by £100bn.

Important news for GBP:

Thursday:

• BOE Interest Rate Decision

AUD

Victoria state premier Andews stated that virus outbreak is under control and that it is time now to open up the economy. Melbourne, capital of Victoria state and the second most populous city in Australia, was under lockdown for 111 days. The reopening will help the economic growth thus easing pressure on RBA which meets this week. Q3 inflation came in at 1.6% q/q and 0.7% y/y, both improvements from Q2. Rising oil prices as well as re-introduction of childcare costs that were cut in Q2 as a way to help families cope during the virus induced crisis attributed the most to the rebound. Core inflation, RBA targets it for 2-3% y/y range, came in at measly 0.4% q/q and 1.2% y/y thus adding more credence to the rate cut talk next week.

This week we will have consumption data and RBA meeting from Australia. Markets are expecting a 15bp rate cut, bringing the rate down to 0.10%, 15bp cut to 3-year target yields, bringing them down also to 0.10% and a QE program to encompass bonds of 5-10 years. The size of QE is estimated to be between AUD150bn and AUD200bn. Caixin PMI data will be published from China.

Important news for AUD:

Monday:

• Caixin Manufacturing PMI (China)

Tuesday:

• RBA Interest Rate Decision

Wednesday:

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

NZD

Trade balance data in September showed a widening of trade deficit to -NZD1017m from -NZD353m in August. This is the fifth consecutive month of declines in trade balance due to the drop in exports and rise in imports.

This week we will have Q3 employment data as well as preliminary business confidence data for November.

Important news for NZD:

Tuesday:

• Employment Change
• Unemployment Rate

Thursday:

• ANZ Business Confidence

CAD

BOC has left the rates at 0.25% as widely expected. They will reduce the amount of QE from CAD5bn/week to CAD4bn/week but will encompass more longer-dated bonds. They also see inflation staying below 2% level until 2023. GDP forecast for 2020 has been reduced to -4.3% from -6.8% previously but GDP for 2021 was also reduced to 3.8% from 4.9% previously. GDP for the month of August came in at 1.2% m/m. Preliminary estimate for September GDP is 0.7% m/m which would put Q3 GDP at 10% q/q.

This week we will have employment data.

Important news for CAD:

Friday:

• Employment Change
• Unemployment Rate

JPY

BOJ has left the short-term interest rate at -0.10% as widely expected. Board members have noted extremely high uncertainty over economic, price outlook with risks for price outlook skewed to the downside. They reiterated their willingness to take additional easing steps without hesitation as needed to combat the damage to the economy caused by the virus. Both GDP and core CPI for fiscal year 2021/2020 have been downgraded to -5.5% and -0.6% respectively. Consumption in September disappointed with retail sales coming in at -0.1% m/m vs 1% m/m as expected and -8.7% y/y vs -7.6% as expected. The unemployment rate stayed at 3%

Both core and headline inflation numbers for Tokyo area in October dropped into negative territory. Headline CPI came in at -0.3% y/y, ex-fresh food at -0.5% y/y while ex-fresh food, energy came in at -0.2% y/y. Government introduced “Go to Travel” campaign which consists of government’s subsidies for domestic travel and is considered to be the main drag on consumer price growth. Additionally, sales tax hike that was introduced in October of last year has fallen out of the comparison which contributed to low reading. Industrial production in September improved to 4% m/m and -9% y/y with expectations for further growth in October and November.

This week we will have spending and earnings data.

Important news for JPY:

Friday:

• Household Spending
• Labor Cash Earnings

CHF

SNB total sight deposits for the week ending October 23 came in at CHF706.9bn vs CHF705.1bn the previous week. Steady and continued rise. Retail sales in September came in at 0.3% y/y, however August reading has been revised up to 4% y/y from 2.5% as preliminary reported, thus giving strength to the consumption report.

This week we will have inflation data.

Important news for CHF:

Tuesday:

• CPI