ECB rate decision will be the highlight of the week followed by consumption data from US and employment reports from UK and Australia.
USD
ISM manufacturing PMI for the month of August came in at 49.1 vs 51.2 as expected. This is the first time in 3 years that PMI has fallen below 50 level into contraction territory. New orders and employment categories plunged from 50.8 and 51.7 to 47.2 and 47.4 respectively. New export orders category also saw a huge drop from 48.1 to 43.3. The reading had increased the chance of a 50bp rate cut in September to 20%. July trade balance came in at -$54bn vs -$53.4bn as expected with prior month’s reading showing -$55.5bn. Exports were up 0.6% m/m while imports were down -0.1% m/m. US-China trade deficit was increased despite the tensions due to the trade war. ISM non-manufacturing PMI came in at 56.4 vs 54 as expected. New orders component smashed expectations coming in at 60.3 while employment came in weaker than previous month.
Nonfarm payrolls for the month of August came in at 130k vs 160k as expected. Although the headline is below estimate and below three-month average of 156k, other data point to rather good reading with participation rate ticking up to 63.2% from 63% previously and the unemployment rate stayed the same at 3.7%. Average hourly earnings came in at 0.4% m/m vs 0.3% m/m as expected and 3.2% y/y vs 3% y/y as expected. A rise in wage growth is always a good sign and if it manages to translate to inflation FED will be overwhelmed.
This week we will have inflation and consumption data.
Important news for USD:
Thursday:
CPI
Friday:
Retail Sales
EUR
Final manufacturing PMI for August for Eurozone came in at 47 and with services coming in at 53.5 this put composite at 51.9. Services are holding the EU economy with manufacturing well below 50 but question remains if and when will there be a spillover from manufacturing to services. July retail sales came in -0.6% m/m as expected. Final Q2 GDP came in at 0.2% q/q as preliminary and 1.2% y/y vs 1.1% y/y preliminary.
This week we will have data on industrial production, trade balance and wages. Main event will be ECB rate decision. Additional stimulus is widely expected but it is yet to be seen in which form will it be delivered (rate cuts, QE). Tiering system would help commercial banks deal with bigger negative rate cuts.
Important news for EUR:
Thursday:
Industrial Production
ECB Interest Rate Decision
ECB Monetary Policy Press Conference
Friday:
Trade Balance
Wage Cost
GBP
Manufacturing PMI for the month of August came in at 47.4 vs 48 the previous month thus continuing with declines. Output component and business confidence fell to the lowest readings ever recorded. New export orders also continued to plunge. Political and economic uncertainties weigh heavily on manufacturing all around the World and UK is not exempt from that. Construction PMI came in at 45 vs 46.5 as expected and down from 45.3 the previous month. Services PMI came in at 50.6 vs 51 as expected. This is a hard hit since UK is service oriented economy. Markit added that based on current observations, the UK economy is expected to contract by 0.1% q/q in Q3 thus putting UK in recession.
Cable fell below 1.20 on Brexit fears before Parliament started their session. A conservative MP has switched sides and thus the government lost the majority in the Parliament. Parliament voted to seize control of the House agenda and block no deal until at least January 31, 2020 which leads us closer to the general election. 21 Conservative MPs voted against the government. PM Johnson wants to set it for October 15 while opposition parties want for Brexit delay bill to be passed before the election is called. According to the law Government can change the election date, thus there is a fear that PM Johnson can move the election after October 31 in order to push no deal Brexit. Early election vote proposition has been defeated but if the bill to block no deal Brexit gains Royal Assent, the Labour will support the next election vote thus making it pass and sending Britain to the polls.
This week we will have trade balance, industrial, manufacturing and construction data as well as employment data. Recess in Parliament should also begin.
Important news for GBP:
Monday:
Trade Balance
Manufacturing Production
Industrial Production
Construction Output
Tuesday:
Claimant Count Change
Unemployment Rate
Average Weekly Earnings
AUD
Retail sales in July came in at -0.1% m/m vs 0.2% m/m as expected with prior month’s reading showing 0.4% m/m. A weak start of Q3 for Australian consumers. Q2 GDP came in at 0.5% q/q as expected. Public spending and net exports were positives, pushing the GDP up while construction, retail and wholesale trade were drags. With yearly GDP of 1.4% it is a slowest pace since GFC. Trade balance came in at AUD7.268 bn vs AUD7 bn as expected. With exports rising 1% m/m and imports 3% showing increase in domestic demand.
RBA has left the cash rate unchanged at 1% as was widely expected. In their statement they have stated that they will ease policy further if the need arises to support sustainable growth and that extended period of low rates is reasonable for lowering the unemployment and pushing inflation toward the target. Inflation is likely to remain subdued according to RBA and consumption remains the main uncertainty in the domestic economy, as the latest retail sale reading showed. They have praised strong employment growth and easy global credit conditions. Although the statement shows that RBA is not in a hurry to further cut interest rate, markets are still pricing in around 89% of a rate cut by the end of the year with around 62% chance of a cut at the October meeting.
Official PMI data from China for the month of August show manufacturing at 49.5 vs 49.7 the previous month. This is the fourth consecutive month that the reading is in contraction territory and after creeping slowly back to 50 the previous month it has again turned away and went deeper into contraction. Trade wars and slower domestic demand are persistent negatives. Services PMI came in at 53.8 vs 53.7 the previous month and composite PMI came in at 53. Caixin manufacturing PMI returned to expansion with 50.4 vs 49.8 as expected. The improvement was driven by the recovery in production with production sub index rising to a five-month high, which signals improving market demand. Employment sub index jumped almost to the 50 level while new orders sub index remained in expansion territory. On the other hand, new export orders sub index remained below 50 and fell to the lowest levels for the year indicating declining foreign demand due to escalations in US-China trade war. Caixin services PMI rose to 52.1 from 51.6, and the composite rose to 51.6 from 50.9 for the second consecutive monthly increase.
This week we will have employment data from Australia and inflation and PPI data from China
Important news for AUD:
Tuesday:
CPI (China)
PPI (China)
Friday:
Employment Change
Unemployment Rate
NZD
GDT price index came in at -0.4% for a third consecutive auction with negative numbers. Chinese buyers are the largest participants in the auction while the prices are in USD and with fall in Yuan auctions produce weaker results.
This week we will have data on manufacturing and electric card retail sales.
Important news for NZD:
Monday:
Manufacturing Sales
Tuesday:
Electronic Card Retail Sales
CAD
July trade balance came in at -CAD1.12 bn vs -CAD0.35 bn as expected. Back to the deficit and last month’s surplus has been revised down to -CAD0.06 bn. Imports rose 1.2% m/m while exports dropped -0.9% m/m with exports falling in 6 out of 11 categories. Surplus was achieved in trade with US while deficit was in trade with the rest of the World. Slow start of Q3 in regards to the trade.
BOC has left the rate unchanged at 1.75% as widely expected. They reiterated that current level of monetary stimulus remains appropriate. Uncertainty caused by trade wars is weighing in on Canadian and global economy and its Governing Council will pay more attention on its influence over growth and inflation in Canada. They acknowledged that wages rose but consumer spending has been unexpectedly soft and business investment fell sharply due to trade uncertainties. Canada’s economy is operating close to potential and inflation is on target.
Employment report for August showed a net change in employment of 81.1k vs 20k and back into positive territory from -24.2k the previous month. The unemployment rate stayed the same at 5.7% while participation rate increased to 65.8% from 65.6% the previous month. Full time employment amounted to 23.8k. Hourly wages dropped to 3.8% from 4.5% the previous month but still shows very healthy rise.
This week we will have housing data.
Important news for CAD:
Tuesday:
Building Permits
JPY
Capex data for Q2 came in at 1.9% y/y vs 1.7% y/y as expected. Small beating on the expectations will have positive impact on Q2 GDP. On the other hand, company profits came in at -12%, very disturbing number for future capex and GDP data. Final services PMI in August came in at 53.3 vs 51.2 the previous month bringing some good news. Household spending came in line with expectations at 0.8% y/y while labour earnings missed and came in at -0.3% y/y vs 0.7% y/y as expected. Wage growth will not be able to sustain the spending especially with October’s retail sales tax hike.
This week we will have final Q2 GDP reading, machinery orders and final July industrial data.
Important news for JPY:
Monday:
GDP
Thursday:
Machinery Orders
Friday:
Industrial Production
CHF
Retail sales in July came in at 1.4% y/y vs -0.7% y/y the previous month. CPI for the month of August came in unchanged vs -0.1% m/m as expected and 0.3% y/y as expected with core reading coming in at 0.4% y/y as expected. Inflation continues to be stubbornly low which may prompt additional stimulus from SNB at their next meeting. Q2 GDP came in at 0.3% q/q vs 0.2% q/q as expected with household consumption leading the way and trade being the biggest drag.
This week we will have employment data.
Important news for CHF:
Monday:
Unemployment Rate
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