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
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