USD
IMF cut the global growth forecast to 3.5% for 2019 which is the lowest in 3 years; they see growth in 2020 to be at 3.6%.
They maintain USD growth forecast at 2.5% for 2019 and 1.8% for 2020. Risk to global growth are tilted to the downside according to them and further escalation of trade tensions remains the key risk factor.
The Government shutdown has been suspended for three weeks until February 15th, by which time President Trump expects Congress to come to an agreement on the budget, otherwise he has stated that he will let the shutdown begin once again.
The overall consensus is that there will be no damage to the US economy in the long run since the state will reimburse workers for their lost salaries. All back-pay during the one-month shutdown is scheduled to be paid during this week. If the government shuts down again, the longer it lasts, the more of a chance the growth of Q1 2019 will be affected. For every week that the government is closed, a little more than 0.1% of GDP is slashed. So far conservative estimates are that the shutdown has cost at least 0.7% of GDP.
This week we will have data on consumer confidence, housing and final PMI numbers. An interest rate decision is expected to stay unchanged. Big event will be Nonfarm payrolls. It is expected that the number will be around 170k, which is a big drop from the December figure. Again, more eyes will be drawn to the average hourly earnings numbers, although the kneejerk reaction will be on the headline NFP number.
Important news for USD:
Tuesday:
Consumer Confidence Index
Wednesday:
ADP Nonfarm Employment Change
Pending Home Sales
FED Interest Rate Decision
FOMC Statement
Friday:
Nonfarm Payrolls
Unemployment Rate
Average Hourly Earnings
Markit Manufacturing PMI
ISM Manufacturing PMI
EUR
IMF cut the Eurozone growth forecast for 2019 to 1.6% from 1.9% projected in October. Bank of Italy cut its GDP growth forecast to 0.6% for 2019 from 1% in December and to 0.9% for 2020 from 1.1% previously. ZEW survey of current situation in Germany plunged to 27.6 vs 45.3 as expected. With Germany being the leading economy in the EU survey shows bleak situation.
Preliminary European PMIs came weaker than expected across the boards. They are still in expansionary territory however manufacturing PMI that came in at 50.5 is weakest since November 2014, services PMI that came in at 50.8 is weakest since August 2013 and composite PMI that came in at 50.7 is weakest since July 2013. Everything points to a stall in EU growth. French composite and services PMI slumped deeper into contraction while a dropdown in German manufacturing PMI, showing contraction due to issues with auto industry and slowing China demand, was offset with a rise in services PMI which lead to expansionary composite PMI reading. According to the PMI data, EU Q1 GDP is 0.1%.
ECB Draghi delivered a message that represents fine balance between risks and confidence during the press conference. Incoming data have continued to be weaker than expected and slowdown is due to fall in external demand as well as some country specific reasons. According to him: “The risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.” Confidence in the outlook is based on continued growth and strong employment and financial conditions are favorable with very low likelihood of recession. The only assessment of the current situation was done in this meeting while new forecasts will be done in March.
This week we will have data on sentiment in the EU as well as preliminary inflation and unemployment from both Germany and EU, preliminary Q4 GDP and final PMI numbers.
Important news for EUR:
Wednesday:
Business Climate Indicator
Economic Sentiment Indicator
CPI (Germany)
Thursday:
Unemployment Rate (Germany)
GDP
Unemployment Rate
Friday:
Markit Manufacturing PMI (Eurozone, Germany, France)
CPI
GBP
Average hourly earnings came in at 3.4% 3m/y vs 3.3% 3m/y as expected. This is the highest reading since July 2008 and if it can turn into consumption it will be great boost for the UK economy. Unemployment ticked down to 4% vs 4.1% as expected.
PM May’s Plan B seems to rest on convincing the European Commission to make some concession on the Irish backstop, which keeps the UK in the customs union until a new agreement is struck. Cross-party alliance is emerging for the House of Commons to take control over Brexit if there is no deal by the end of February 26. Additionally, around 40 members of the government threaten to resign next week if the Tory MPs are banned from voting on a plan to prevent a no-deal exit. Hints that Brexit will be delayed from the end of March are pushing GBP higher across the markets.
This week we will have Parliament voting on PM May’s plan B for Brexit, speech from governor Carney and final PMI number.
Important news for GBP:
Tuesday:
Voting on plan B in the Parliament
Wednesday:
BOE Governor Carney Speech
Friday:
Manufacturing PMI
AUD
Chinese Q4 GDP data came in at 6.4% y/y as expected ticking down a notch from 6.5% y/y the previous month. GDP for the full year is 6.6% as expected, readings were in line with expectations, however GDP is the lowest in 28 years and Q4 GDP was the lowest in a decade. Industrial production came in at 5.7% y/y vs 5.3% y/y as expected for a very nice beat and retail sales followed the suit coming in at 8.2% y/y vs 8.2% y/y as expected. IMF cut China’s growth forecast for 2019 and 2020 to 6.2% and warned that economic activity may fall short of the expectations if trade tensions persist.
The employment report for the month of December showed that employment change came in at 21.6k vs 18k as expected. The Unemployment rate fell to 5.0% and participation rate ticked down to 65.6%. All employment change came through part time employment which is concerning, however it shows that labour market conditions are tight. Preliminary PMIs for the month of January came in mixed. Manufacturing ticked higher to 54.3 while services went lower a lot to 51.0 thus dragging the composite lower to 51.5. Weak start for the Australian economy in 2019. Turns in Manufacturing can lead to turns in the Services by two months.
This week we will have inflation data from Australia as well as PMI data from China.
Important news for AUD:
Wednesday:
CPI
Thursday:
Manufacturing PMI (China)
Non-Manufacturing PMI (China)
Caixin Manufacturing PMI (China)
Sunday:
Caixin Services PMI (China)
NZD
Services PMI for the month of December came in at 53.0 vs 53.5 the previous month. New orders sub index improved from November to 59.2 but activity/sales continued to drop and posted 52.2. Growth in the service sector has been slower over the past six months but this reading shows that growth is slowly stabilising and not deteriorating further.
Inflation in Q4 surprised to the upside coming in at 1.9% y/y vs 1.8% y/y as expected. Uptick is more surprising given the weak credit card spending data from New Zealand from the last week. NZD reacted very favourably to the number and strengthened across the markets against various currencies.
This week we will have trade balance data.
Important news for NZD:
Monday:
Trade Balance
Exports
Imports
CAD
Manufacturing sales for the month of November came in at -1.4% vs -1% as expected. Wholesale trade data came in at -1% vs -0.3% as expected. Misses on both fronts signalling a slowdown in the Canadian economy due to the slump in country’s oil sector and generally weaker economic growth. Retail Sales for the month of November disappointed coming in at -0.9% m/m vs -0.6% m/m as expected. Ex autos category came in at -0.6% m/m vs -0.4% m/m as expected. Consumer spending has slowed down in Canada noticeably.
BOC Governor Poloz said in Davos that oil prices will contribute to a drop in GDP of 0.4bp. He emphasized the dangers of the trade war and concluded that it would be a disaster if it escalated. The Canadian economy is in good shape and the pace of future rate hikes will be data dependant. After this week’s retail sales data a rate hike will be pushed further in the future for sure.
This week we will have GDP data as well as final PMI number.
Important news for CAD:
Thursday:
GDP
Friday:
Markit Manufacturing PMI
JPY
Trade balance data for December came in at -JPY55.3 bn vs – JPY42.3bn as expected. Exports fell -3.8% y/y vs -1.8% y/y as expected for the sharpest fall in 2 years while imports rose 1.9% y/y vs 4% y/y as expected. Misses on all fronts showing that the trade war and global slowdown have impacted Japan’s exporters and that domestic demand is not as strong as expected. Exports to China came in at -7% y/y and they were the biggest contributor to export declines.
BOJ left the interest rate unchanged and monetary policy unchanged as expected. The Median Core CPI forecast for the FY 2019/20 has been slashed down to 0.9% vs 1.4% projected in October. Median Real GDP forecast for fiscal 2019/20 is at 0.9% vs 0.8% as projected in October. Governor Kuroda stated that the drop in oil prices is the key reason for downgrades in the price outlook. He added that it is appropriate to continue with current easing policies and that he doesn’t see a big change in economic fundamentals.
Tokyo area CPI came in at 0.4% y/y vs 0.2% as expected and CPI excluding food, energy came in at 0.7% y/y vs 0.6% y/y as expected. Positive beats for a much-needed rise in inflation to make BOJ encouraged.
This week we will get minutes from the latest meeting of the monetary policy comity, consumption data, industrial production data and employment numbers.
Important events for JPY:
Monday:
BOJ Monetary Policy Meeting Minutes
Wednesday:
Retail Sales
Thursday:
Industrial Production
Friday:
Unemployment Rate
Jobs to Applicants Ratio
CHF
SNB Zurbruegg assessed the outlook for the Swiss economy as favourable. He added that the situation on Forex market remains fragile and that heightened uncertainty, highly valued Frank, low inflation pressure and global low rates warrant expansive policy. SNB Machlear added that negative rates and market interventions are needed to prevent a rise in CHF. SNB Governor Jordan stated that they still have room to maneuver on interest rates and added that there is no need for any change to SNB monetary policy.
This week we will have data on trade and consumption.
Important news for CHF:
Tuesday:
Trade Balance
Exports
Imports
Friday:
Retail Sales
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Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets.Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.
