BOJ, BOE and FED will hold their meetings this week accompanied with NFP on Friday and slew of economic data worldwide.

USD

Preliminary durable goods for the month of June came in at 2% m/m vs 0.7% m/m as expected. Huge beating on the headline number has been dented by the revision down for the previous month to -2.3% m/m from -1.3% m/m. Capital goods orders non-defense ex-air (core durable orders) came in at 1.9% m/m vs 0.2% m/m as expected. Core orders also strongly beat expectations and there was only mild downward revision for the previous month to 0.0% m/m. Another data point that will strengthen belief in 25bps vs 50bps rate cut.

GDP beat the expectations in Q2 coming in at 2.1% vs 1.8% as expected. Personal consumption led the way with 4.3% vs 4% as expected with prior reading showing 0.9%. Consumer spending on durables jumped to 12.9% vs 0.3% the previous quarter and consumption added 2.85bp to GDP. Trade balance and inventories were not as big of a drag to growth as expected but business and home investment dropped which is concerning. Although we can expect for housing investment to pick up in time with rising wages. Yet another data point that will lower the probability of a 50bps rate cut.

This week will have inflation, housing and trade balance data as well as final PMI numbers for the month of July. Main event of the week will be FED interest rate decision followed by FOMC press conference. A 25Bps rate cut is expected with some chances of 50bps cut, it will be important to see in press conference accompanying the decision if this is an insurance cut or beginning of a rate cut cycle. Nonfarm payrolls will be the second highlight of the week with headline number expected around 160k and the unemployment rate expected to drop to 3.6%.

Important news for USD:

Tuesday:

PCE

Pending Home Sales

Consumer Confidence Index

Wednesday:

ADP Nonfarm Employment

FED Interest Rate Decision

FOMC Press Conference

Thursday:

Markit Manufacturing PMI

ISM Manufacturing PMI

Friday:

Nonfarm Payrolls

Unemployment Rate

Average Hourly Earnings

Trade Balance

Exports

Imports

EUR

Preliminary consumer confidence reading for the month of July came in at -6.6 vs -7.2 as expected. Improvement in confidence did not bring strength to EUR as investors were expecting preliminary PMI numbers which came in weaker than expected. Manufacturing PMI for the Eurozone came in at 46.4 vs 47.6 the previous month on the back of French PMI dropping to 50 from 51.9 the previous month and German dropping down to 43.1 from 45 the previous month. This is the lowest reading from Germany in 7 years and it raises concerns about Germany falling into recession. Services PMI came in at 53.3 as expected supported by climb in German services. Composite PMI was dragged down by the manufacturing PMI to 51.5 vs 52.2 as expected.

German Ifo business climate index dropped down to 95.7 vs 97.2 as expected and down from 97.5 the previous month. Expectations and current assessment categories also missed the expectations and came lower than previous month indicating continuing weaknesses in German economy as we start Q3. Also, this reading adds more to the already raised concerns about Germany falling into recession.

ECB has left key interest rates unchanged at their July meeting with comment that they see rates at present or at lower levels at least through H1 of 2020. Statement said that ECB will examine options for tiering and potential reintroduction of QE program. EUR jumped on the initial no-rate-change news but was subsequently pushed lower after dovish comments on forward guidance and mentioning of additional easing measures. Governor Draghi stated that data points to somewhat weaker growth in Q3 and Q4 and characterized that weakness as due to softer global growth. He stated that outlook is getting “worse and worse” in manufacturing sector and added that “it is hard to be gloomy” as the current situation is of continued growth, emphasizing ongoing rises in wages. Significant monetary stimulus is needed and risks around growth outlook are still tilted to the downside. He said that he wants to see the next round of projections before taking action and added that risk of recession is pretty low. In this way he effectively postponed the decision for the September meeting. Overnight index swaps are pricing in an 85% probability of a cut by the September meeting. ECB released the results of its latest survey of professional forecasters and it showed inflation cut down in 2019 to 1.3% from 1.4% previously, down to 1.4% from 1.5% previously in 2020 and down to 1.5% from 1.6% previously in 2021. Long term inflation is at 1.7% from 1.8% previously.

This week we will have data on business climate, preliminary inflation reading and final manufacturing PMI for the month of July, preliminary Q2 GDP, employment and consumption data.

Important news for EUR:

Tuesday:

Business Climate Indicator

Economic Sentiment Indicator

Wednesday:

CPI

GDP

Unemployment Rate (EU and Germany)

Thursday:

Markit Manufacturing PMI (EU, Germany and France)

Friday:

Retail Sales

GBP

Boris Johnson has become the new leader of the Tory party and thus the new prime minister of United Kingdom. He defeated Jeremy Hunt with 2/3 majority. Dominic Cummings is set to be named as senior adviser to Boris Johnson. He was the campaign director of Vote Leave during the Brexit referendum. Cummings is said to have stated that he will deliver Brexit by October 31 “however hard that is”. In addition, new PM has appointed pro-Brexit supporters at key positions. Dominic Raab is appointed as foreign secretary and Jacob Rees-Mogg as leader of the House of Commons. Sajid Javid is confirmed as Chancellor of the Exchequer which is a position of finance minister in other countries.

This week we will have PMI data and BOE interest rate decision. No change in the rate is expected but BOE may take more dovish stance in line with other central banks. The Parliament is set to observe a recess from 25 July until 3 September.

Important news for GBP:

Thursday:

Markit Manufacturing PMI

BOE Interest Rate Decision

BOE MPC Meeting Minutes

BOE Governor Carney Speech

Friday:

Construction PMI

AUD

RBA governor Lowe stated that RBA is ready to further ease the monetary policy if demand disappoints. He also added that it is reasonable to expect an extended period of low interest rates. The board is “strongly committed” to making sure that inflation returns to range however it will take some time before the inflation returns within target range. According to Lowe it is highly unlikely that RBA will be contemplating higher interest rates until they are confident that inflation will return to around the midpoint of the target range. Underlying foundations of Australian economy have been characterized as strong.

This week we will have inflation and consumption data from Australia as well as official manufacturing and non-manufacturing PMIs from China. Caixin manufacturing PMI will also be published from China.

Important news for AUD:

Wednesday:

Manufacturing PMI (China)

Non-manufacturing PMI (China)

CPI

Thursday:

Caixin Manufacturing PMI (China)

Friday:

Retail Sales

NZD

Trade balance for the month of June came in at $365m vs $100m as expected which helped push the deficit down to -$4.94bn y/y. Unfortunately, the number was achieved on both falling exports ($5.01bn vs $5.29bn as expected and $5.81bn the previous month) and falling imports ($4.65bn vs $5.2bn as expected and $5.54bn the previous month). The decline in imports was led by a 39% drop in fuel and a 16% drop in vehicles. Overall exports in Q2 rose 1.5%, led by a rise in infant formula 18% and aluminium 15%.

This week we will have housing data and data on business confidence.

Important news for NZD:

Tuesday:

Building Consents

Wednesday:

ANZ Business Confidence

CAD

Wholesale sales for the month of May came in at -1.8% m/m vs 0.5% m/m as expected. This is the largest drop in the reading in more than 3 years and a reversal of 1.6% m/m from the previous month. Motor vehicles and parts were the main drag coming in at -4.3% m/m vs 2.7% m/m the previous month. The report breaks a five-month streak of increases and showed declines across a majority of industries, with six out of seven sub-sectors being lower. Also troubling is the rise in inventories since it can signal a weak demand. Average weekly earnings climbed 3.4% in May thus increasing purchasing power of Canadian consumers.

This week we will have GDP for the month of May, manufacturing PMI and trade balance data.

Important news for CAD:

Wednesday:

GDP

Thursday:

Markit Manufacturing PMI

Friday:

Trade Balance

Exports

Imports

JPY

Preliminary PMI numbers for the month of July show manufacturing at 49.6 vs 49.3 the previous month, services at 52.3 vs 51.9 the previous month and composite climbed to 51.2 vs 50.8 the previous month. We can see slight improvements across the numbers but manufacturing is still in contraction territory for the third consecutive month. Tokyo CPI came in at 0.9% y/y vs 1% y/y as expected and 1.1% y/y the previous month. CPI excluding fresh food, energy came in at 0.8% y/y vs 0.7% y/y as expected. Inflation staying subdued at the beginning of Q3.

This week we will have consumption and employment data followed by preliminary industrial production data for the month of June and final manufacturing PMI for the month of July. The main event will be BOJ interest rate decision. BOJ is not expected to ease, however there are chances that they will reduce its inflation outlook down from current level of 1.1%. We will also get minutes from monetary policy meeting.

Important news for JPY:

Monday:

Retail Sales

Tuesday:

Unemployment Rate

Jobs to Applicants Ratio

Industrial Production

BOJ Interest Rate Decision

BOJ Outlook Report

BOJ Press Conference

Thursday:

Manufacturing PMI

Friday:

BOJ Monetary Policy Meeting Minutes

CHF

Talks about intervention from SNB are intensifying. The CHF is already trading at its strongest level against the euro in two years and as the FT writes SNB would really prefer to intervene to prevent it from getting strong but fears repercussions from US president Trump.

This week we will have inflation data.

Important news for CHF:

Friday:

CPI

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