Consumption data from US, preliminary Q4 GDP from UK and RBNZ meeting will be the highlights of the week.
USD
ISM manufacturing index in January came in at 50.9 vs 48.5 as expected and up from 47.2 the previous month. Manufacturing is back to expansion thanks to surge in new orders and improvement in the employment sub-index. ISM non-manufacturing index came in at 55.5 vs 55.1 as expected. Business activity has jumped to 60.7 with new orders also being on the rise. The reading is moving back toward the levels from the first half of 2019.
Trade balance for December showed an increase in the deficit to -$48.9bn vs -$48.2bn as expected. Both exports and imports rose, with former rising 0.8% m/m and latter 2.7% m/m. Trade deficit with China lessened to -$24.79bn on the back of both falling exports (-11.3%) and falling imports (-16.2%). Trade surplus with OPEC countries improved to $1.33bn. On an annual basis the trade deficit shrunk for the first time in 6 years to -$616.8bn of which deficit with China alone is -$345.6bn.
NFP headline for January came in at 225k vs 165k as expected and up from 147k the previous month. The unemployment rate has ticked up to 3.6% on the back of increase in participation rate to 63.4% from 63.2% the previous month. Average hourly earnings were mixed, coming in at 0.2% m/m vs 0.3% m/m as expected and 3.1% y/y vs 3% y/y as expected. Both showed the increase compared to the previous month. Sluggish wage growth indicates that great majority of newly created jobs are low paid jobs in services sectors such as health care (50k) and bars and restaurants (24k).
This week we will have inflation, consumption and industrial production data.
Important news for USD:
Thursday:
CPI
Friday:
Retail Sales
Industrial Production
EUR
Final manufacturing PMI for the month of January came in at 47.9 vs 47.8 preliminary on the back of small improvements in German and French readings. Services came in at 52.5 vs 52.2 preliminarily which pushed the composite reading at 51.3 vs 50.9 preliminary. Beatings on all fronts show that recovery in Eurozone is real but slow and susceptible to external shocks. Retail sales for December painted a different picture. After rise in previous month due to Black Friday this month they came at -1.6% m/m and 1.3% y/y with previous reading showing 0.8% m/m and 2.3% y/y.
This week we will have industrial production and trade balance data as well as the second reading of Q4 GDP.
Important news for EUR:
Wednesday:
Industrial Production
Friday:
GDP
Trade Balance
GBP
Final manufacturing PMI for the month of January came in at 50 vs 49.8 preliminary. A small improvement bringing the reading back into neutral 50 level. New orders have returned into expansion territory showing post-election optimism. Services continued to show the same optimism coming in at impressive 53.9 vs 52.9 as expected and 50 the previous month thus returning composite back to expansion with 53.3 reading.
The UK has finally left the EU on January 31. It took 1317 days after the referendum. Boris Johnson took over the weekend much firmer stance regarding trade deal with EU than markets expected. He stated that there is no need for a free trade agreement to involve UK accepting EU rules, any more than the EU should be obliged to accept UK rules. The pound dropped more than 100 pips at the beginning of the week.
This week we will have preliminary Q4 GDP, trade balance and production data.
Important news for GBP:
Tuesday:
GDP
Industrial Production
Manufacturing Production
Construction Output
Trade Balance
Business Investment
AUD
RBA left the official cash rate unchanged at 0.75% as was widely expected. They reiterated their willingness to cut rates if it is necessary to support economic growth. Lower rates will stay for a prolonged period of time and RBA will closely monitor developments in labour market. They expect the economy to grow by 2.75% in 2020 and 3% in 2021 with inflation being close to 2% in those years. Coronavirus has been deemed as uncertainty for global growth but it is too early to assess the long-term impact of the virus.
Retail sales in December missed coming in at -0.5% m/m vs -0.2% m/m. The November figure was great due to Black Friday and it was even revised up so the decline in December’s reading was expected, but the drop was bigger than hoped for. Trade balance for the same month came in at AUD5223mn vs AUD5950mn as expected. The imports rose 2% m/m while exports rising only 1% m/m. Due to coronavirus fears the AUD has dropped at the end of the week to the lowest levels since 2009.
Caixin manufacturing PMI in January came in at 51.1, down from 51.5 the previous month. The survey was done before the outbreak of the virus so it does not take into the account its effects making the drop in the reading even more concerning. Employment and new export orders sub-inidicies were below 50 while total new orders dropped to lowest in 5 months. Services PMI came in at 51.8 and composite was at 51.9, both of them weaker than the previous month. Industrial profits for December, coronavirus had no influence on them, plunged to -6.3% vs 5.4% the previous month. China has again cut rates and injected additional liquidity into economy in order to fight the economic slowdown. Ban on short selling has been implemented as well to prevent market crash. Number of coronoavirus deaths grew to 600 while number of infected is estimated at over 30 000.
This week we will have speech by RBA governor Lowe and inflation data from China.
Important news for AUD:
Monday:
CPI (China)
Thursday:
RBA Governor Lowe Speech
NZD
Employment report for Q4 was very mixed. The unemployment rate dropped to 4% from 4.1% the previous quarter, however employment change was flat on the quarter vs 0.3% q/q as expected and as it was in the previous quarter. Additionally, the participation rate dropped to 70.1% from 70.4% the previous quarter. Average hourly wages were down to 0.1% q/q vs 0.6% q/q the previous quarter but private wages held steady at 0.6% q/q. GDT price auction came in at -4.7% for a first negative auction in 2020. The main culprit were whole milk powder prices which fell -6.2%.
This week we will have card spending for January and RBNZ interest rate decision. RBNZ’s 2-year inflation expectations have risen to 1.93% from 1.8% previously with 1-year expectations rising to 1.88% from 1.66% the previous month which should keep the OCR steady.
Important news for NZD:
Tuesday:
Electronic Card Retail Sales
Wednesday:
RBNZ Interest Rate Decision
RBNZ Rate Statement
CAD
Trade balance data for December showed a serious decline in the trade deficit. The reading came in at -$0.37bn vs -$1.09bn the previous month which was revised down to -CAD1.2bn. Exports were up 1.9% m/m with imports being up 0.2% m/m. Energy products contributed the most to the rise in exports (9.5%) while consumer goods contributed the most to the rise of imports (4%). Trade surplus with US widened to $5.2bn for the month. Total trade deficit in 2019 was -$18.3bn which is the smallest since 2014. Trade surplus with US was $51.6bn for the year while exports to China were down -16% for the year. The drop in exports to China shows the devastating effects of Canada’s decision to arrest the daughter of Huawei’s founder.
Employment change in January came in at 34.5k vs 17.5k as expected. The unemployment rate has dropped to 5.5% from 5.7% the previous month on the tick down in participation rate to 65.4% from 65.5%. Hourly wages for permanent employers rose 4.4% y/y vs 3.6% y/y as expected and up from 3.8% y/y the previous month. Markets have embraced the rise in wages and CAD strengthened. Full-time employment came in at 35.7k while part-time employment came in at -1.2k for another strong data input from the report. All of the jobs created were full-time and with a healthy wage rise this will be a great sign for the Canadian economy.
This week we will have housing data and speech by governor Poloz.
Important news for CAD:
Monday:
Housing Starts
Building Permits
Thursday:
BOC Governor Poloz Speech
JPY
Final manufacturing PMI for the month of January came in at 48.8 vs 48.6 preliminary and up from 48.4 the previous month. Services PMI came in at 51 vs 49.4 the previous month which helped push the composite back to expansion territory at 50.1. A fragile recovery will be under fire when the February data comes out showing the effects of the coronavirus.
Labour cash earnings came in flat after the previous month’s reading has been revised up to 0.1% y/y. Household spending came in at -4.8% y/y vs -1.7% y/y as expected. With wages staying stagnant there was no chance for the spending to rise, however the drop is much more severe than expected. Inflation pressures will still be missing.
CHF
Manufacturing PMI in January heavily missed the expectations coming in at 47.8 vs 50.3 as expected. Previous month’s reading has been revised to 48.8 from 50.2 indicating deep plunge into contraction. The only saving grace is that manufacturing contributes to around ¼ of GDP so the result can be digested more easily.
This week we will have employment and inflation data.
Important news for CHF:
Monday:
Unemployment Rate
CPI
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