USD
ISM Non-Manufacturing index came in at 59.7 vs 57.4 as expected with prior reading showing 56.7.
This is a strong result for the service sector lead by highest jump in new orders since 2005. Trade balance for the month of December came in at -$59.8bn vs -$57.9bn as expected. Trade deficit continues to widen and is the highest since October 2018. Exports have fallen -1.9% while imports have risen 2.1%. Goods deficit is -$81.54bn while services had a surplus of $21.77bn. US-China trade deficit came in at -$36.83bn vs -$37.86bn the previous month. December was the first month of tariff suspension.
NFP number unpleasantly surprised everyone by coming at 20k vs 180k as expected. Government shutdown and extremely cold weather had an impact on the jobs market but it is yet to be discerned how much of this abysmal number is due to those two factors. The unemployment rate ticked down to 3.8% vs 3.9% as expected. Participation rate stayed the same at 63.2%. Average hourly earnings grew 0.4% m/m vs 0.3% m/m as expected and 3.4% y/y vs 3.3% y/y as expected. The broader U-6 unemployment rate takes discouraged people and those who want full-time jobs but work only part-time into account and it plunged to 7.3% vs 8.1% the previous month. Apart from the terrible headline number this is overall a very favourable report for US economy.
This week we will have data on consumption, inflation, durable goods, housing and consumer sentiment.
Important news for USD:
Monday:
Retail SalesBusiness Inventories
Tuesday:
CPI
Wednesday:
Durable Goods
Thursday:
New Home Sales
Friday:
Industrial ProductionMichigan Consumer SentimentMichigan Consumer Expectations
EUR
Final services PMI for the month of February came in at 52.8 vs 52.3 as expected with all of the main countries showing expansion in services sector thus temporarily removing those dark clouds that hover above the EU economy. Retail sales came in at 1.3% m/m as expected for a nice bounce from -1.4% m/m the previous month.
ECB has left key rates unchanged as expected but they have made changes to forward guidance regarding interest rates and announced new TLTROs (TLTRO III) that will start in September of 2019 and end in March of 2021. Full details of the new TLTRO will be announced in June. Governor Draghi stated that hikes will not be raised until December of 2019 although some members of the Governing Council believe that rate hike should be delayed until 2020. The slowdown is largely due to slower external demand but also country-specific factors. Risks to economic outlook is still tilted to the downside. ECB forecasts for 2019 GDP is now at 1.1% vs 1.7% in January and inflation in 2019 is now at 1.2% vs 1.6% the previous month. Big slashes in projections and since ECB already lowered projections in December, this is the second downgrade in less than 3 months. EURUSD has fallen below 2018 lows after Draghi’s presser.
This week we will have data on industrial production and inflation.
Important news for EUR:
Wednesday:
Industrial Production
Friday:
CPI
GBP
Markit construction PMI for the month of February came in at 49.5 vs 50.5 as expected. The reading dropped into contraction territory, housing and commercial projects are being delayed due to the ongoing Brexit situation. Services PMI came in at 51.3 vs 49.9 thus strongly pushing it away from contraction.
Reports state that Attorney General Cox presented two ideas to EU’s Barnier regarding the Brexit deal and they were both rejected. Seems that PM May will face imminent defeat in Parliament.This week we will have data on industrial and manufacturing production, January GDP as well as trade balance. Additionally, we will have the meaningful vote that will put some clarity on further direction in the Brexit process, although it can cause a great volatility for GBP.
Important news for GBP:
Tuesday:
Meaningful vote in the ParliamentGDPIndustrial ProductionManufacturing ProductionTrade Balance
AUD
Caixin Services PMI came in at 51.1 vs 53.5 as expected for a huge miss. Main culprit is the new businesses index which dropped indicating slowing growth in demand across the services sector. Employment measure also edged down but stayed in expansion. Trade balance for the month of February came in at CNY34.46bn vs CNY252.3bn as expected. Exports were down -16.6% y/y while imports came in at -0.3% y/y. These are awful numbers caused by the trade war, however due to the Lunar new year holidays in January and February data tends to be distorted.
RBA has left rates on hold as expected with comment that low rates are supporting of the economy. They characterized the outlook for household spending and effect of falling housing prices as main uncertainties. Central scenario for underlying inflation is 2% in 2019, and 2.25% in 2020. Labour market remains strong and further fall in the unemployment rate to 4.75% is expected. Wage growth is expected to gradually pick up and central scenario for growth is around 3% this year. RBA continues with their story although data from Australia has constantly fell short of the expectations.
Q4 GDP data came in at 0.2% q/q vs 0.3% q/q as expected and 2.3% y/y vs 2.6% y/y as expected for a big miss. Government spending and inventories were positives while negatives where household consumption, residential construction, business investments and exports. Markets are gradually pricing in a greater chance of a rate cut in the second half of the year with some banks preaching for 2 rate cuts in total of 50 bps with the first being in August.
Trade balance data for the month of January came in at AUD4549m vs AUD2750m as expected. Exports rose 5% m/m while imports rose 3% m/m for the 13th straight month of surplus. However, AUD was hit by the weak retail sales data which came in at 0.1% m/m vs 0.3% m/m as expected. Although it is a decent bounce back from the prior month of -0.4% m/m.
This week we will have housing data from Australia and consumption and industrial production data from China.
Important news for AUD:
Tuesday:
Home LoansWestpac Consumer Confidence
Thursday:
Retail Sales (China)Industrial Production (China)
NZD
The commodity price index for the month of February came in at 2.8% m/m vs 2.1% m/m the previous month. Main contributors were dairy prices and GDT auction showed 3.2% rise in prices. This is the seventh consecutive auction of rising dairy prices which will bode well for exports and GDP figures.
This week we will have data on Food Price Index which is expected to beat the expectations due to positive GDT auction and rise in dairy prices.
Important news for NZD:
Tuesday:
Food Price Index
CAD
Trade balance data for the month of December came in at -CAD4.59bn vs -CAD2.8bn as expected. This is the biggest trade deficit in at least 20 years. Exports have fallen for the fifth consecutive month and came in at -3.8% while imports rose 1.6%. Falling oil prices had a colossal impact on these abysmal numbers with export of energy products falling 21.7%. They can mean that Q4 GDP is very close to negative.
BOC has left interest rate unchanged at 1.75% as was widely expected. BOC stated that recent data suggest that the slowdown in the global economy has been more pronounced and widespread than forecasted in January, trade tensions and uncertainty are weighing heavily on confidence and economic activity. BOC is projecting a temporary slowdown in late 2018 and early 2019, mainly because of last year’s drop in oil prices, the slowdown in the fourth quarter was sharper and more broadly based. It now appears that the economy will be weaker in the first half of 2019 than projected in January.
Canadian net change in employment came in at 55.9k vs 1.2k as expected for a healthy beat. The unemployment rate remained at 5.8% as expected. Hourly wage rate rose to 2.2% vs 1.7% as expected. Participation rate also rose to 65.8 vs 65.6 the previous month. Full-time employment change came in at 67.4k vs 0.8k as expected. More people were employed in professional, scientific and technical services; public administration; natural resources; and agriculture. Very strong report that will give BOC some comfort seeing that tight labour market conditions persist.
This week we will have data on manufacturing sales.
Important news for CAD:
Friday:
Manufacturing Sales
JPY
Nikkei Services PMI came in at 52.3 vs 51.6 the previous month and composite PMI came in at 50.7 vs 50.9 the previous month. Services are in expansionary territory for 29 straight months. New businesses index rose 54.5 vs 52.1 the previous month. This is the highest since May 2013 and it pushed services higher. Drop in composite PMI is caused by drop in manufacturing PMI.
Final GDP numbers for Q4 came in at 0.5% q/q vs 0.3% q/q preliminary and 1.9% y/y vs 1.4% y/y preliminary. GDP was pushed higher by rise in capex and household spending. Household spending came in at 2% y/y vs -0.5% y/y as expected for a huge beat. Current account showed a rise in surplus to JPY600.4bn boosted by lower than expected trade balance deficit which came in at -JPY964.8bn. Although trade balance deficit came in lower than expected it is still the largest in 5 years.
This week we will have BOJ rate decision as the highlight of the week. There will be no changes in the bank rate so more emphasis will be placed on statement and press conference. We have had mixed data coming in from Japan so more clarification on monetary policy measures will be very welcomed. Additionally, we will have trade balance data.
Important news for JPY:
Friday:
BOJ Interest Rate DecisionBOJ Monetary Policy StatementBOJ Press ConferenceBOJ Governor Kuroda SpeechTrade BalanceExportsImports
CHF
CPI for the month of February came in at 0.4% m/m as expected for a nice rebound from -0.3% m/m the previous month, however core CPI has ticked down and came in at 0.4% y/y vs 0.5% y/y as expected. SNB’s Zurbruegg says central bank is ready for Brexit and that they are prepared to take measures if needed. The unemployment rate came in at 2.7% as expected ticking down from 2.8% the previous month.
