USD
Consumer confidence for the month of May came in at 134.1 vs 130 as expected.
This is the best reading of the year and it shows that US consumers are not phased with the trade war. Present situation and expectations both came out better than expected with jobs hard-to-get index falling to the lowest number since September of 2000. President Trump has announced 5% tariffs on all goods from Mexico starting on June 10. If Mexico does not do more to halt illegal immigration into the US the tariff will jump to 25% by October 2019. Jump will not be sudden; it will be done in steps.
Second reading of the Q1 GDP came in at 3.1% vs 3% as expected. Initial reading was 3.2%. Digging deeper into the numbers we can see that there was an unwelcome downgrade in business investment. Exports were revised up but overall there is no huge difference between initial and second reading. This drop in inflation can be worrisome if Q2 GDP comes in soft. Pending home sales for the month of April came in at -1.5% m/m vs 0.5% m/m as expected.
Core PCE came in at 1.6% y/y as expected. PCE deflator came in at 1.5% y/y vs 1.6% y/y as expected. Results are in line with the expectations and not as bad as feared. On the consumer side personal income came in at 0.5% vs 0.3% as expected and personal spending came in at 0.3% vs 0.2% as expected signalling strong consumer confidence reported earlier.
This week we will have PMI data, trade balance data and employment data. All-important NFP will be traditionally published on first Friday in the month. Projections are for a headline number of 170k, rise in average hourly earnings to 3.4% and rise in unemployment rate to 3.8% on the back of the rise in participation rate.
Important news for USD:
Monday:
ISM Manufacturing PMI
Tuesday:
Factory Orders
Wednesday:
ADP Nonfarm Employment Change
ISM Non-Manufacturing PMI
Thursday:
Trade Balance
Exports
Imports
Friday:
Nonfarm Payrolls
Unemployment Rate
Average Hourly Earnings
EUR
European Parliament elections have shown us the clear rise in support for nationalist parties. The leading example is Mateo Salvini’s Lega party in Italy which won about 30-35% of the votes thus making them the leading party in Italy. In France, Marrie Le Pen’s National Rally party took 24% of the votes and beat President Marcon’s party which garnered 22.5% of the votes. In the UK Nigel Farage’s Brexit party won around 1/3 of the votes.
Although nationalist achieved notable results, it will have more impact on a national level than in the European Parliament where existing EPP and S&D alliances still dominate. EPP’s total vote percentage will fall below 25% for the first time since 1989 and S&D had lowest support since first elections in 1979.
The European Commission is considering implementing the Excessive Deficit Procedure (EDP) in response to the Italy’s blatant disregard of European budget laws. Penalty can go up as high as $4bn. Italy’s Salvini continues to state that EU should not aim for budget deficit below 3% of GDP, but it should aim at cutting unemployment. Germany unemployment change came in at 60k signalling largest one month increase in unemployment in last 10 years. The unemployment rate ticked up to 5% from 4.9%.
This week we will have final PMI numbers for the month of May, inflation, employment and consumption data as well as final Q1 GDP estimate. Inflation is expected to dip down due to lower oil prices and the fact that rise in inflation in April was due to Easter holiday. Headline of the week will be ECB interest rate decision and press conference that follows it. There are no plans to change interest rate, it will stay the same, however the latest economic happenings and data will be assessed by ECB and markets will closely monitor it for further clues on development of monetary policy.
Important news for EUR:
Monday:
Markit Manufacturing PMI (EU, Germany, France)
Tuesday:
CPI
Unemployment Rate
Wednesday:
Markit Services PMI (EU, Germany, France)
Markit Composite PMI (EU, Germany, France)
Retail Sales
Thursday:
Employment Change
GDP
ECB Interest Rate Decision
ECB Monetary Policy Press Conference
GBP
Current president of EU commission Jean Claude Juncker stated that there will be no renegotiations of Brexit withdrawal agreement. Currently 11 Conservatives have announced their aspirations to become new party leader and PM. Boris Johnson has the best chances according to the polls. Jeremy Corbyn stated that first priority should be an election and pledged to support a second referendum on any Brexit deal put to Parliament. Some Labour MPs are opposed to second referendum leaving the opposition torn on the matter. A second referendum on Brexit could lead to a second referendum on Scottish independence.
This week we will have PMI data and it will be the last week of Theresa May in the role of the Prime Minister.
Important news for GBP:
Monday:
Markit Manufacturing PMI
Tuesday:
Markit Construction PMI
Wednesday:
Markit Services PMI
AUD
Private capex data for the Q1 came in at -1.7% q/q vs 0.5% q/q for a huge miss. Global tensions, primarily the US-China trade war, were the main reason business withdrew from investing in Q1. Business approvals continue to slide with -4.7% m/m drop in the month of April. Chinese official manufacturing PMI dropped into contraction territory coming in at 49.4 vs 49.9 as expected and 50.1 the previous month. New export orders fell to 46.5 indicating negative effect trade war has on China’s economy. Non-Manufacturing PMI came in line with expectations at 54.3.
This week we will have PMI data from China, consumption, Q1 GDP and trade balance from Australia. RBA will take centre stage with their interest rate decision and rate statement. Markets are pricing an almost 95% chance of a rate cut. It is possible that rate cut has been completely priced in so we can see a surge in AUD, therefore we advise trading smaller lot sizes than usual.
Important news for AUD:
Monday:
Caixin Manufacturing PMI (China)
Tuesday:
Retail Sales
RBA Interest Rate Decision
RBA Rate Statement
Wednesday:
Caixin Services PMI (China)
GDP
Thursday:
Trade Balance
Exports
Imports
NZD
Building approvals for the month of April came in at -7.9% m/m vs -7.4% m/m the previous month and -4.5% y/y. It is a volatile data, but the second month of falling data cannot be welcomed. Budget surplus forecast has been cut to NZD 1.3bn.
This week we will have bi-weekly GDT auction.
Important news for NZD:
Tuesday:
GDT Price Index
CAD
BOC has left rates unchanged at 1.75% as widely expected. It is reiterated in the statement that accommodative policy interest rate continues to be warranted. BOC will stay data dependent and economic data are in line with projections. The oil sector is beginning to recover and housing is becoming more stable. Escalation of trade conflicts casts doubt on global outlook. Recent economic data from Canada have been very strong which reinforces BOC view that the slowdown in Q4 and Q1 was temporary and there is more evidence of a pick-up in Q2, however the lack of new and improved projections along with perceived shift in tone to neutral was a surprise which hurt CAD. Q1 GDP data came in at 0.4% q/q vs 0.7% q/q as expected. The main driver was household spending which grew the fastest since 2017. Exports declined while imports rose thus making net trade the biggest drag on growth.
This week we will have trade balance data, Ivey PMI and employment data. Employment data will be announced at the same time as NFP which can produce increased volatility on USDCAD pair so we would advise you to be cautious and use small lot sizes. BOC reiterated its data dependency which added additional importance to employment report.
Important news for CAD:
Thursday:
Trade Balance
Exports
Imports
Ivey PMI
Friday:
Employment Change
Unemployment Rate
JPY
Tokyo CPI for the month of May came in at 1.1% y/y vs 1.2% y/y as expected. Excluding food and energy CPI came in at 0.8% y/y as expected but down from 0.9% y/y from the previous month. Inflation is again heading in the wrong direction. The unemployment rate for the month of April ticked down to 2.4% as expected from 2.5% the previous month. Jobs to applicant ratio stayed at 1.63 as expected. Retail sales came in unchanged at 0% m/m vs 0.6% m/m as expected. A drop in consumption along with drop in inflation. Preliminary industrial production data came in at 0.6% m/m vs 0.2% m/m as expected. Japan’s industry was hit hard by trade war so this data is a great result.
This week we will have PMI data as well spending and earnings data.
Important news for JPY:
Monday:
Nikkei Manufacturing PMI
Wednesday:
Nikkei Services PMI
Friday:
Household Spending
Labour Cash Earnings
CHF
Q1 GDP data came in at 0.6% q/q vs 0.3% q/q as expected with prior Q4 reading being revised up to 0.3% q/q. A strong reading looking even better with positive revision of Q4 GDP. GDP is 1.7% y/y vs 1% y/y as expected. Rise in GDP has been achieved thanks to improvements in investments and consumption. The Swiss government stated that growth was achieved due to one-off factors and that negative factors affecting the economy are still present. They will not upgrade annual forecasts and general outlook for the economy remains murky. Trade balance for the month of April came in at CHF2.29bn vs CHF3.18bn the previous month. Exports came in at -0.6% m/m which is concerning but due to global tensions and overall slowdown not surprising and imports came in at 1.5% m/m showing that domestic demand is still robust. Retail sales came in at -0.7% y/y vs -0.8% y/y as expected. Consumption still stays on the weaker side.
This week we will have inflation and employment data.
Important news for CHF:
Monday:
CPI
Friday:
Unemployment Rate
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