Inflation data from US and EU along with second estimate of Q1 US GDP and initial reading of Canadian Q1 GDP will be the highlights of the shortened week since Monday is holiday in US and UK and liquidity will be thin in the markets, therefore we advise caution with trading.
USD
Housing market started to crumble with housing starts coming in at 891k, down 30.2% from the previous month and building permits fell 20.8% to 1074k. Sales of existing homes fell from 5.27m in March to 4.33m in April. Increasingly mounting uncertainties, including rising unemployment, are weighing on people and long-term investment in houses is not on their minds. Initial jobless claims showed 2438k new claims for the week which is more than expected but down from the previous week. This puts the total number to over 38 million from their initial rise nine weeks ago. Continuing claims have surpassed the 25 million mark which is a devastating number with grave socioeconomic consequences.
This week we will have second estimate of Q1 GDP, durable goods orders data and Fed’s preferred inflation measure PCE along with personal spending data.
Important news for USD:
Thursday:
GDP
Durable Goods Orders
Friday:
PCE
Personal Spending
EUR
Preliminary PMI data for May showed improvements with EU manufacturing climbing to 39.5, services to 28.7 and composite to 30.5. Data for May shows improving business conditions compared to April but it does not show any sign of significant recovery yet. Markit states that data adds more credence to the belief that downturn bottomed in April. Demand is expected to remain weak for a prolonged period of time and Q2 GDP is expected to drop almost 10% compared to Q1 GDP.
Germany and France announced a plat to increase EU fiscal support by €500bn, coming from new debt raised by the European Commission and distributed as grants. This proposal needs to be approved by all 27 EU state members which may pose a problem, but markets have reacted positively to it pushing EUR higher.
This week we will have sentiment data as well as preliminary May inflation data.
Important news for EUR:
Thursday:
Economic Sentiment Indicator
Friday:
CPI
GBP
Jobless claims in April have skyrocketed to 856.5k from 12.1k previously which pushed claimant count rate to 5.8%. Average weekly earnings came in at 2.4% 3m/y down from 2.8% 3m/y the previous month indicating downward pressures on wages and subsequently inflation. The unemployment rate came in at 3.9%, but as a reminder, this is reading from March when country was not under lockdown for the entire month so we can expect much higher print for April’s reading.
Inflation in April almost halved from previous month’s 1.5% y/y to 0.8% y/y due to the unprecedented drop in energy prices. Core CPI came in at 1.4% y/y as expected, down from 1.6% y/y the previous month. Preliminary May PMI data showed an improvement compared to the previous month reaffirming that bottoming occurred in April. Output and jobs continued to decline, although at a slower pace than in April. Markit states that recovery is very slow and could take years, not months. Retail sales just added to more woes coming in at -18.1% m/m and -22.6% y/y with ex fuel category coming in at -15.2% m/m and -18.4% y/y. The worst retail sales reading in the series. Governor Bailey stated that due to the effects of pandemic on the economy possibility of introducing negative rates is under active review. That along with the data put a lot of downward pressure on GBP.
AUD
RBA May minutes showed that bank is monitoring financial and economic developments. Stimulus package was introduced recently, therefore members opted to maintain current policy and continue monitoring developments. They reiterated their willingness to keep the rates low and credit available to households and businesses in order to support the economy. Global recovery is expected to start in late 2020. H1 GDP is seen falling -10% while personal consumption is expected to drop -15%. Outlook for H2 depends on the easing of restrictions and their overall impact on the economic activity.
This week we will have PMI data from China.
Important news for AUD:
Sunday:
Manufacturing PMI (China)
Non-Manufacturing PMI (China)
Composite PMI (China)
NZD
Retail sales in Q1 came in at -0.7% q/q and 2.3% y/y. The country was under lockdown only in the late part of March so the reading is devastating, indicating that with normal conditions during 85% of Q1 consumption plunged. Additionally, Q4 2019 reading was revised down to 0% q/q which just added another blow to the already weak report.
This week we will have trade balance and business confidence data.
Important news for NZD:
Tuesday:
Trade Balance
Thursday:
ANZ Business Confidence
CAD
Headline inflation number for April came in at -0.2% y/y indicating deflationary conditions caused by the big drop in energy prices. This is the first time since the crisis of 2009 that inflation fell below 0. These conditions should not be prevailing as we have seen oil prices rebound so we can expect May reading to go back into the positive territory. A drop in inflation is also seen with clothing and footwear while food prices showed an increase due to stockpiling caused by virus outbreak. Core measures came in line with the expectations: median at 2% y/y, common at 1.6% y/y and trim at 1.8% y/y. Retail sales in March came in at -10% m/m with ex autos category coming in at -0.4% m/m. Retail ecommerce reported a jump of 16.3% while food and beverage category rose 22%. On the other side, motor vehicle and parts dealers came in at -35.6%. Statistics Canada expects April reading to come at -15.6% m/m.
This week we will get Q1 GDP reading.
Important news for CAD:
Friday:
GDP
JPY
Preliminary Q1 GDP came in at -0.9% q/q vs -1.1% q/q as expected and -3.4% q/q annualised vs -7.1% q/q as expected. Although data came in better than expected this is the second consecutive quarter of negative GDP which puts Japan into recession for the first time since H2 of 2015. Both private consumption and business investment came in negative but stronger than the previous quarter while exports dropped -6% which is the biggest drop in almost a decade. Economy minister Nishimura stated that significant slump is expected in Q2 due to weak overseas demand. Additionally, lockdowns are still in place along the provinces which will add to Q2 GDP woes which is already seen contracting more than 20%.
Trade balance data for April show a deficit of -JPY930.4bn, almost double than it was expected. Exports were down -21.9% y/y, of which most notable are falls in exports to US -37.8% y/y and EU -28% y/y, while imports were down -7.2% y/y. Preliminary May PMI data show continuation in drop of manufacturing reading to 38.4 while services improved from their lows to 25.3 and pushed composite to 27.4 from 25.8 the previous month. Markit notes that PMI numbers for April and May indicate GDP falling at an annual rate greater than 10%. Headline inflation came in at 0.1% y/y, excluding fresh food category slipped into deflation for the first time since 2016 coming in at -0.2% y/y due to a drop in prices of energy and services while ex fresh food, energy category came in at 0.2% y/y. Japan’s fight with deflation continues and they are slowly losing the battle.
This week we will have Tokyo inflation data, employment, consumption as well as preliminary April industrial production data.
Important news for JPY:
Friday:
Tokyo CPI
Unemployment Rate
Retail Sales
Industrial Production
CHF
Total sight deposits for the week ending with May 15 came in at CHF673.5, up from CHF669.1bn the previous week. SNB continues to relentlessly fight Swissy’s strength as EURCHF is getting dangerously close to 1.05 level.
This week we will have industrial production and trade data.
Important news for CHF:
Monday:
Industrial Production
Thursday:
Trade Balance
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