USD

Over the weekend President Trump has opted to postpone a tariff hike on Chinese imports stating that positive progress has been made in on-going negotiations.

Housing starts for December came in at 1078k vs 1256k as expected with a drop of -11.2 m/m. This is the lowest number since September 2016. Dreadful housing data shows pains of the housing market in the US and gives more sign to the FED that they cannot continue with rate hikes. Consumer confidence came in at 131.4 vs 124.9 showing a strong belief in US economy by consumers and easing the worries from the end of 2018. Advanced goods trade balance came in at -$79.5bn vs -$73.9bn as expected for the record high deficit. Factory orders in December came in at 0.1% m/m vs 0.6% m/m as expected and revision lower to core durable orders from -0.7% to -1% adds further worry to a poor durable goods report.

GDP for Q4 came in at 2.6% q/q vs 2.2% as expected and 3.1% y/y. GDP for 2018 was 2.9% which is highest since 2015. Personal consumption was 2.8% and business investment (capex) added 6.2% to GDP for a nice beat of the expectations. Inventories contributed as well to the GDP while Net exports subtracted from GDP less than expected. Regarding inflation data, the GDP price index came in at 1.8% q/q vs 1.7% q/q as expected with prior reading being 1.8% q/q and core PCE came in at 1.7% q/q vs 1.6% q/q as expected with prior showing 1.6% q/q.

FED Chairman Powell reaffirmed a patient approach toward monetary policy in his testimony before Senate. He also added that FED sees favourable economic outlook with some cross-currents. Recent economic data has ‘softened’ but 2019 expected to be ‘solid’ although slower than 2018. There are some signs of stronger wage growth. The balance sheet reduction program could end by the year which is exactly what the markets’ want to hear.

This week we will have more PMI data, housing and trade balance data with NFP on Friday as the prime event. The labour market is very strong in the US so it is expected for that trend to continue. Earnings will be of bigger importance as an increase in earnings leads to a higher standard of living and potentially can add to upward pressures on inflation.

Important news for USD:

Tuesday:

Markit Services PMI

Markit Composite PMI

New Home Sales

ISM Non-Manufacturing PMI

Federal Budget Balance

Wednesday:

ADP Nonfarm Employment Change

Trade Balance

Exports

Imports

FED Beige Book

Friday:

Nonfarm Payrolls

Unemployment Rate

Participation Rate

Average Hourly Earnings

EUR

Eurozone consumer confidence for the month of February came in at -7.4 as expected. Industrial confidence shows a decline while services, overall economic confidence and business climate indicator show a slight improvement. They are however all on the weak side showing a growth slowdown in the region. The unemployment rate has ticked down to 7.8% continuing its trend downwards. Preliminary CPI for the month of February came in at 1.5% y/y as expected, prior reading was 1.4% y/y. Core CPI however slipped to 1% y/y vs 1.1% y/y as expected. The rise in headline inflation can be attributed to rising oil prices, but fall in core CPI will give headache to ECB.

This week we will have final PMI readings along with consumption data and third reading of Q4 GDP. Main event will be ECB interest rate decision followed by press conference. It is expected that interest rate will stay unchanged but language of the statement will be closely monitored since data coming in from EU lately has not been encouraging.

Important news for EUR:

Tuesday:

Markit Services PMI (EU, Germany, France)

Markit Composite PMI (EU, Germany, France)

Retail Sales

Thursday:

ECB Interest Rate Decision

ECB Monetary Policy Press Conference

Employment Change

GDP

GBP

Meaningful vote in Parliament will be postponed until March 12 at the latest while PM May continues to seek concessions from the EU. If PM May’s deal doesn’t go through Parliament will seek to take control of the process. They will most likely ask for a delay in the process and remove No Deal Brexit from the table which will strengthen the GBP. PM May confirmed in parliament that a second meaningful vote will be held by March 12. If government loses the meaningful vote, a new vote on leaving the EU without a deal will be held. The UK will only leave without a deal on explicit consent of parliament. If parliament rejects deal and no-deal, a new vote will be held on March 14 to vote on limited Article 50 extension.

This week we will have final services PMI data along with speech from governor Carney. Brexit talks will continue and they can have a high impact on GBP, however meaningful vote will be next week.

Important news for GBP:

Tuesday:

Markit Services PMI

BOE Governor Carney Speech

AUD

Construction work done in the Q4 of 2018 came in at -3.1% q/q vs 0.5% q/q as expected. A huge miss and continuation of the downward spiralling trend since Q3 was at -2.8% q/q. Expected bounce back in Q4 has not occurred. Total construction work has fallen for three quarters and other components of construction sector show multi-quarter falling trend. This data will have negative impact on Q4 GDP. Capex for Q4 came in at 2% q/q vs 1% q/q as expected suggesting positive investment outlook and it will partially offset abysmal construction data.

Chinese Manufacturing PMI for the month of February came in at 49.2 vs 49.5 as expected for a third consecutive month of contraction (below 50). This is a three-year low. Since China is the main importer of Australian metals this reading is worrisome for AUD. Non-Manufacturing PMI came in at 54.3 vs 54.5 as expected and composite PMI came in at 52.4 vs 53.2 the previous month. Caixin Manufacturing PMI came in at 49.9 vs 48.5 for a hefty beat although barely in the contraction territory. New orders rose to 50.2, back into expansion.

This week we will have very busy calendar for AUD. RBA interest rate decision will take centre stage. Rate is expected to stay unchanged so the text of the statement and speech by governor Lowe will be closely monitored for further guidance on monetary policy. We will also have housing, trade balance and consumption data as well as Q4 GDP. Additionally, we will have PMI, inflation and trade balance data from China.

Important news for AUD:

Monday:

Building Approvals

Tuesday:

RBA Interest Rate Decision

RBA Rate Statement

Caixin Services PMI (China)

RBA Governor Lowe Speech

Wednesday:

GDP

Thursday:

Trade Balance

Exports

Imports

Retail Sales

Friday:

Trade Balance (China)

Exports (China)

Imports (China)

Saturday:

CPI (China)

NZD

Retail sales data for Q4 came in at 1.7% q/q vs 0.5% q/q as expected. This is the highest reading since Q1 of 2017 and it is an impressive beat, especially taking into consideration how poorly retail sales data were for other countries. Trade balance for the month of January came in at -NZD914m vs -NZD300m as expected. Exports came in lower than expected while imports were higher than expected resulting in higher than expected trade balance deficit.

This week we will have bi-weekly GDT auction, manufacturing sales and consumption data.

Important news for NZD:

Tuesday:

GDT Price Index

Thursday:

Manufacturing Sales

Sunday:

Electronic Card Retail Sales

CAD

CPI for the month of month of January came in at 1.4% y/y vs 1.5% y/y as expected with prior reading being 2% y/y. CPI common, trim and core came in in-line with the expectations with first two coming at 1.9% y/y and core at 1.8% y/y. Q4 GDP came in at 0.4% q/q vs 1% q/q as expected and -0.1% m/m vs 0% m/m as expected. Horrible GDP data and it was released earlier so there was no immediate huge spike on CAD pairs but it continues to weaken across the boards. Business investment data show huge drop led by residential investment of -14.7%.

This week we will have trade balance data and employment data on Friday which will be published at the same time as NFP data. BOC Rate decision is not expected to bring a rate change and we will see if the statement continues with hawkish tone after abysmal GDP data.

Important news for CAD:

Wednesday:

BOC Interest Rate Decision

BOC Rate Statement

Trade Balance

Exports

Imports

Friday:

Employment Change

Unemployment Rate

Participation Rate

JPY

Retail sales for the month of January came in at -2.3% m/m vs -0.8% m/m. This is a huge miss and troubling data. If consumption continues to fall deeper into negative territory inflation will never reach target of 2%. Industrial production was also a big miss coming in at -3.7% m/m vs -2.5% m/m as expected for a third consecutive month of falling output. Data can be distorted in January and February due to Chinese Lunar New Year, however this is such a huge miss that it cannot be attributed solely to the usual distortions and it will certainly not deter BOJ from further easing.

Headline inflation for Tokyo area came in at 0.6% y/y vs 0.4% y/y as expected. Core CPI came in at 1.1% y/y vs 1% as expected so at least inflation in Tokyo area is picking up. The unemployment rate ticked higher to 2.5% and the job to applicant ratio stayed at 1.63 as expected. Manufacturing PMI fell into contraction territory for the first time since August of 2016, coming in at 48.9. Output component fell most heavily to 47.7 from 54.4 in January.

This week we will have final Q4 GDP reading as well as data on household spending and trade balance.

Important news for JPY:

Friday:

GDP

Household Spending

Current Account

Goods Trade Balance

CHF

GDP figures for Q4 came in at 0.2% q/q vs 0.4% q/q as expected with prior reading showing -0.3% q/q. Bounce back was softer than expected, but a technical recession was avoided since Q4 GDP came in positive. Retail sales number came in at -0.4% y/y vs 0.4% y/y as expected. Consumption continues to hinder economic confidence.

This week we will have data on inflation and employment.

Important news for CHF:

Tuesday:

CPI

Thursday:

Unemployment Rate

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