USD
President Trump has been touting China over Twitter to accept a deal and not to retaliate since things will only get worse.
China has announced that it will impose import tariffs on $60bn worth of US goods starting from June 1 and they will range between 5% – 25%. It is reported that China may stop purchasing US agricultural products and energy, cut Boeing orders and restrict US service trade with China. Also, there are talks about dumping US Treasuries.
Advance retail sales for the month of April came in at -0.2% m/m vs 0.2% m/m as expected. Industrial production came in at -0.5% m/m vs 0% m/m as expected. The main culprit for the drop in industrial production was manufacturing output. Weaker than expected results lead Atlanta FED GDP tracker to lower growth in Q2 to 1.2% vs 1.6% as was previously seen. These data conflict with rhetoric about strong and robust US growth.
This week we will have housing data, FOMC minutes, preliminary PMI data for the month of May as well as durable goods.
Important news for USD:
Tuesday:
Existing Home Sales
Wednesday:
FOMC Minutes
Thursday:
Markit Manufacturing PMI
Markit Services PMI
Markit Composite PMI
New Home Sales
Friday:
Durable Goods
EUR
ZEW survey of the current situation in Germany for the month of May rose for the first time in eight months to 8.2 vs 6.3 as expected, however expectations for the outlook in both Germany and EU dropped into negative territory on the back of new escalations in US – China trade war. Preliminary German Q1 GDP came in at 0.4% q/q as expected for a great rebound after 0% q/q GDP in Q4 of 2018. President Trump and US administration have delayed imposing auto tariffs for 180 days which gave a relief rally to EUR.
Trade balance for the month of March came in at EUR17.9bn vs EUR19.4bn as expected. Exports rose 0.9% m/m while imports rose 2.5% m/m which ultimately lead to the narrowing of the trade surplus. Rising exports amidst global tensions is a very welcoming sign for the EU economy. Final inflation numbers for the month of April came in at 1.7% y/y as expected while core CPI ticked to 1.3% y/y vs 1.2% y/y as expected. Rise in inflation is attributed to the Easter holiday.
This week we will have data on consumer confidence and preliminary PMI data for the month of May as well as final Q1 GDP reading and Ifo business climate data from Germany.
Important news for EUR:
Tuesday:
Consumer Confidence
Thursday:
GDP (Germany)
Markit Manufacturing PMI (EU, Germany, France)
Markit Services PMI (EU, Germany, France)
Markit Composite PMI (EU, Germany, France)
Ifo Business Climate (Germany)
GBP
Employment data came mixed. The unemployment rate has dropped down to 3.8% from 3.9% previously but employment change came in at 99k vs 140k as expected with prior reading showing 179k. Average weekly earnings came in at 3.2% 3m/y vs 3.4% 3m/y as expected. A drop in wages is not very concerning when compared to the wage growth in previous years. Strong labour conditions are still present in Britain and were there no Brexit uncertainties BOE would be hiking rates.
The cross-party talks are not progressing well, opposition party is hardening, with an increasing demand to hold a second referendum for any Brexit deal. Both main parties suffered in the local elections in early May and are set for humiliating results in the European Parliament polls on May 26 according to the recent survey. The government has officially announced a fourth vote on Brexit deal in the first week of June. Sir Graham Brady, chairman of an influential committee of backbench Tory MPs, confirmed that PM May is expected to resign whether or not the Brexit deal passes in June. She will resign after the results of the vote. A leadership election this summer is now certain. Labour party is looking more toward the second referendum claiming that cross-party talks have gone as far as they can.
This week we will have data on inflation and consumption.
Important news for GBP:
Wednesday:
CPI
Friday:
Retail Sales
AUD
Employment change came in at 28.4k vs 15k as expected. The unemployment rate came in higher at 5.2% vs 5% as expected while the previous figure was revised higher to 5.1%. Part of the jump in the unemployment rate can be attributed to rise in participation rate from 65.7% to 65.8%. Full time employment was -6.3k so the headline number was entirely made up from part time employment which came in at 34.7k. Overall not a bad report and RBA will not feel pressured to cut rates immediately. Market is pricing over 50% chance for a rate cut in June and many analysts call for rate cut in August. Wage price index for Q1 came in at 0.5% q/q vs 0.6% q/q as expected. Continuation of slow wage will keep inflation pressures low thus making inflation subdued.
Chinese data came out weaker than expected with fixed asset investments coming in at 6.1% y/y vs 6.4% y/y as expected. Industrial production came in at 5.4% y/y vs 6.5% y/y as expected and retail sales came in at 7.2% y/y vs 8.6% y/y. NBS has looked at this data and stated that “China will implement countercyclical adjustments to maintain steady healthy economic development” meaning more stimulus.
This week we will have minutes from the latest RBA meeting as well as Governor Lowe’s speech. Pressures are building for RBA to cut rates so the speech will be closely monitored in the markets.
Important news for AUD:
Tuesday:
RBA Meeting Minutes
RBA Governor Lowe Speech
NZD
Manufacturing PMI for the month of April came in at 53 vs 52 the previous month. Deliveries index holds high at 56.3. All indices are above 50, showing expansion but new orders cooled off to 52.4 which can be worrisome.
This week we will have biweekly GDT auction, consumption data as well as trade balance data.
Important news for NZD:
Tuesday:
GDT Price Index
Wednesday:
Retail Sales
Friday:
Trade Balance
Exports
Imports
CAD
CPI for the month of April came in at 2% y/y as expected for an uptick from 1.9% y/y the previous month. Core measures came in a bit weaker than expected with median coming in at 1.9% y/y vs 2% y/y as expected, common came in at 1.8% y/y as expected and trim came in at 2% y/y vs 2.1% y/y as expected. Weaker core numbers are not very concerning since they still hover around the 2% target. Year over year, the main upward contributor to the CPI were mortgage interest costs (8.2%) and the main downward contributor were traveller accommodation (-9.6%). Manufacturing sales for the month of March came in at 2.1% m/m vs 1.5% m/m as expected with prior reading showing -0.2% m/m.
This week we will have consumption data.
Important news for CAD:
Wednesday:
Retail Sales
JPY
During the week JPY has played its safe heaven role, strengthening during risk off situation. Japan will host G20 Summit in June and they announced that they will not intervene to seek solutions to US-China trade frictions. Finance minister Aso stated that additional easing would help the economy and characterized the problem in economy as lack of demand. Governor Kuroda reiterated the need for rates to stay low for a long period of time in order to support the economy. Current conditions warrant low rates until Spring of 2020 however it is possible for BOJ to keep rates low even after that period if conditions call for it. The Japanese government confirmed that the next round of trade talks with US will take place on May 21 in Washington.
This week we will have preliminary Q1 GDP data, final industrial production data for the month of March, trade balance data, preliminary manufacturing PMI data for the month of May and national inflation data.
Important news for JPY:
Monday:
GDP
Industrial Production
Wednesday:
Trade Balance
Exports
Imports
Thursday:
Nikkei Manufacturing PMI
Friday:
CPI
CHF
The CHF has benefited from risk off conditions and is up around 0.25% for the week.
This week we will have data on industrial production.
Important news for CHF:
Thursday:
Industrial Production
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