USD
ISM Non-Manufacturing PMI came in at 56.7 vs 57.1 as expected.
New export orders had a tumble from 59.5 to 50.5 showing that a slowdown abroad is taking place. This is the worst new export orders reading in two years. Although data came in worse than expected, the domestic situation is stable and the reading is much higher than across the globe (Europe, Australia, Japan, China, etc.). Trade balance data for the month of November came in at -$49.3bn vs -$54bn as expected.
US Treasury secretary, Steven Mnuchin will visit China next week with US Trade Representative Lightihizer to continue trade talks. March 1 deadline is slowly creeping in on us and fear of US-China trade war escalations are mounting. Reports are coming that the Trump-Xi meeting will unlikely be held before the March 1 deadline. The Government could shut down again on February 15 if an agreement is not reached.
This week we will have continuation of trade talks and possible renewal of government shutdown on Friday. We will get data regarding inflation, consumption, federal budget and inventories.
Important news for USD:
Wednesday:
CPI
Federal Budget Balance
Thursday:
Retail Sales
Business Inventories
Friday:
Possible Government Shutdown
EUR
Final Services PMI for the Eurozone for the month of January came in at 51.2 vs 50.8 preliminary. The number was pushed higher primarily by Spain’s number of 54.7. Spain remains the only bright spot. Italy dropped into contraction with reading of 49.7. Composite reading came in at 51 while new business index slid into contraction territory at 49.5 vs 50.7 the previous month. Retail sales for the month of December came in at -1.6% m/m as expected and 0.6% y/y vs 0.5% y/y as expected. Abysmal German number of -4.3% m/m has dragged down the retail sales.
The European Commission cut economic projections for Eurozone. GDP growth in 2019 is seen at 1.3% vs 1.9% previously and 2020 GDP is seen at 1.6% vs 1.7% previously. Inflation for 2019 has also been slashed to 1.4% vs 1.8% previously. Germany, France and Italy are the main drags on the GDP growth domestically while global slowdown and trade tensions weigh in from the outside.
This week we will have data on industrial production, employment change, trade balance and second estimate of Q4 GDP.
Important news for EUR:
Wednesday:
Industrial Production
Thursday:
Employment Change
GDP
Friday:
Trade Balance
GBP
Construction PMI for the month of January came in at 50.6 vs 52.5 as expected with prior reading being 52.8. This is a ten-month low reading as worries around Brexit mount on the construction activity. Services PMI came in at 50.1 vs 51 as expected and Composite PMI came in at 50.3 vs 51.4 as expected. Services reading is weakest since July 2016 and shows that uncertainty around Brexit causes a lot of disturbances in economic activity.
BOE has left the bank rate unchanged at 0.75% as expected with a unanimous vote. They have cut GDP growth forecasts to 1.2% for 2019 and 1.5% for 2020; they were both previously projected at 1.7%. CPI is expected to fall below 2% in the following months but they expect it to be at 2.35% in one year’s time. They acknowledge that Brexit damage has increased causing volatility in the data hitting both the housing markets and consumers. A No-deal Brexit could mean substantial economic contraction.
The UK PM May set herself a deadline of February 13 to re-negotiate the Brexit deal before the UK parliament will take over. They will most likely ask for a postponing of Brexit. UK government spokeswoman stated that the government intends to hold a parliament vote on February 14. Labour leader Corbyn sent a letter to PM May with five legally binding commitments that it would require to get support from his party. Tusk endorsed the letter which puts May in peculiar position. If she accepts, it may alienate her own party and if she brushes it off, it will show that the way was presented to her but she passed on it.
This week we will have data on industrial production, investments, trade balance, first reading of Q4 GDP, inflation and consumption.
Important news for GBP:
Monday:
Industrial Production
Manufacturing Production
Business Investment
Trade Balance
GDP
Wednesday:
CPI
Friday:
Retail Sales
AUD
China Caixing Services PMI for the month of January came in at 53.6 vs 53.4 as expected. Composite number came in at 50.9 vs 52.2 the previous month showing that services activity continues to grow steadily while manufacturing sector struggles.
Building approvals for the month of December came in at -8.4% m/m vs 2% as expected. This data is very volatile from month to month taking into consideration that number is -22.5% y/y — this paints a very nasty picture for housing in Australia. Trade balance for the month of December shows a healthy surplus of AUD3681m vs AUD2225m. Unfortunately for the economy this larger than expected surplus was achieved with a fall in exports of 2% m/m and fall in imports of 6% m/m. Retail sales for the month of December came in at -0.4% m/m vs 0% m/m as expected. Another in the line of weak data coming from Australia.
RBA has left cash rate unchanged stating that low rates support economy. Inflation remains low and stable and it is expected to pick up gradually, however no reasons were given as to why RBA expects an increase in the inflation. Household consumption remains a source of uncertainty. The labour market remains strong. Further falls in the unemployment rate to 4.75% are expected and wage growth is expected to pick up gradually over time. The global economy has slowed down and downside risks have increased. GDP and inflation projections have been cut. The lower inflation forecast was attributed to oil and core inflation will stay near 2%.
RBA Governor Lowe stated that probabilities of next rate move “appear to be more evenly balanced”, meaning that there are scenarios where the next move is up and scenarios where the next move is down. If jobs and wages are rising it will be appropriate to raise rates, however if unemployment rises and inflation stalls, lower rates might be appropriate. Lower rates = lower AUD. A change in the tone from RBA in characterizing the next rate move as evenly balanced has sent AUD lower. Monetary policy has changed from a tightening bias to a more neutral stance. Markets are now pricing in a rate cut by the end of the year.
This week China returns after Lunar New Year celebration so we will have data on trade balance and inflation. We will also have speech from assistant governor Kent.
Important news for AUD:
Thursday:
Trade Balance (China)
Export (China)
Import (China)
RBA Assistant Governor Kent Speech
Friday:
CPI (China)
NZD
Building permits for the month of December came in at 5.1% m/m vs -2% m/m in the previous month. Number for the year is 9.8%.
The employment report for Q4 showed rise in the unemployment rate to 4.3% vs 4.1% as expected. Employment change came in at 0.1% q/q vs 0.3% q/q as expected and 2.3% y/y vs 2.6% y/y as expected. The participation rate fell to 70.9% which is still high compared to other countries, however rise in unemployment and a drop in the participation rate are worrisome. A bright spot are wages with average hourly earnings coming in at 1% vs 0.8% as expected. An overall negative report since most data came in worse than expected and sent NZD tumbling down.
This week we will have the RBNZ interest rate decision as a central event. Employment data will add to a more cautious tone from the RBNZ … softer outlook for activity, global growth risks. Hints of rate cuts may be on the table. We will also have data on electronic card retail sales, food inflation and manufacturing index.
Important news for NZD:
Monday:
Electronic Card Retail Sales
Tuesday:
RBNZ Interest Rate Decision
RBNZ Rate Statement
RBNZ Monetary Policy Statement
RBNZ Press Conference
Wednesday:
Food Price Index
Thursday:
BusinessNZ Manufacturing Index
CAD
Employment change heavily beat expectations coming in at 66.8k vs 5k as expected. The jump in employment was mostly among the youth aged 15-24 and in the services-producing industry. Wholesale and retail trade were the main contributors. Unemployment rose to 5.8% vs 5.7% the previous month due to a rise in the participation rate to 65.6%. Both full-time and part-time jobs saw an increase with the former rising 30.9k and latter 36k. Monthly change came in at 0.4% for a very strong report showing tight labour conditions in Canadian economy. Building permits for the month of December came in at 6% m/m vs -1% as expected. Ivey PMI came in at 54.7 vs 59.7 the previous month.
This week we will have trade balance data, monthly report from OPEC regarding oil and manufacturing sales.
Important news for CAD:
Monday:
Trade Balance
Exports
Imports
Tuesday:
OPEC Monthly Oil Market Report
Thursday:
Manufacturing Sales
JPY
Nikkei Services PMI for the month of January came in at 51.6 vs 51 the previous month due to a rise in domestic demand. Composite PMI fell to 50.9 vs 52 the previous month due to the fall in manufacturing activity. Household spending missed expectations coming in at 0.1% y/y vs 0.8% y/y as expected with prior reading showing -0.6% y/y. Labour cash earnings came in at 1.8% y/y vs 1.7% y/y as expected. Beat on the headline reading, however real cash earnings came in at 1.4% y/y vs 1.7% y/y as expected.
This week we will have preliminary Q4 GDP data as well as data on industrial production.
Important news for JPY:
Thursday:
GDP
Friday:
Industrial Production
CHF
The unemployment rate ticked up to 2.8% vs 2.7% the previous month, however the seasonally adjusted unemployment rate holds steady at 2.4% which is the lowest since 2002.
This week we will have data on inflation.
Important news for CHF:
Monday:
CPI
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