PFXS news for week ahead

In the next week, Market focus on RBNZ’s interest rate decision. Also, in the next week a plethora of financial data releases could attract the market’s attention. Our team handpicked the ones which it considers as the most influential and discusses their possible forecasts and their respective effects on various currencies.

On Monday, during the European session Germany’s ifo Business Climate indicator for June will be released. The indicator is forecasted to drop, reaching as low as 101.8 compared to previous reading of 102.2. Should the actual figure meet the forecast we could see the EUR weakening as the drop of the
indicator would be indicative of the pessimistic views regarding the business climate of the largest economy in the Euro-zone for the next six months. The rather low reading is a continuation of the past two readings and worries may grow as the Business Climate does not seem to be able to rise back up.

On Tuesday, in the American session, the US CB Consumer Confidence indicator for June is due out. The indicator is forecasted to tick up to 128.1 compared to previous reading of 128.0. The uptick could provide some support for the USD as the reading is already at rather high levels and the uptick could underscore the high confidence of the average consumer to the US economy.

On Wednesday, during the American session the US durable goods orders growth rates will be released. The durable goods orders growth rate is forecasted to decelerate, reaching as low as +0.4% mom compared to previous reading of +0.9% mom, while the headline durable goods growth rate is forecasted to accelerate reaching -0.9% mom compared to previous reading of -1.6% mom. Should the actual rates meet the forecast we could see the market getting mixed signals. Despite that slowing down of the decrease in the headline rate, the overall picture is negative as the headline rate remains in the negatives and the core rate is slowing down. The USD could weaken
on such a release.

On Thursday, early in the Asian session we get RBNZ’s interest rate decision. The bank is widely expected to remain on hold at +1.75% and currently NZD OIS imply a probability for the bank to remain on hold at 99.40%. Having said that, it should be noted that RBNZ has a dual mandate over inflation as well as unemployment. The last reading of the headline CPI rate is at +1.1% yoy which could be characterized as rather low compared to the bank’s target of +2.00%±1.00%. Despite the inflation rate being within the bank’s target range the fact that it currently is near it’s lower boundary could hold back the bank for any possible rate hike in the near future. All the above arguments could be strengthened by the fact that RBNZ governor had stated that he would like to see the core CPI rise before any rate hike and that since then there weren’t any updates regarding inflation. On the other hand the unemployment rate is at rather low levels considering the last reading of 4.4%, something which could give the bank some breathing space. Overall we currently see the case for the bank to reiterate the status quo by keeping a more neutral tone and if not maybe have a slightly dovish tone, given recent slight weakening of the financial data.

In the European session we get Germany’s preliminary HICP rate for June. The rate is forecasted to tick down to +2.1% yoy compared to previous reading of +2.2% yoy. Should the actual rate meet the forecast we could see the common currency slipping as such a down tick in Euro-zone’s largest economy could have an indirect effect on Euro-zone’s CPI rate.

In the American session we get the US final GDP growth rate for Q1. The rate is forecasted to remain unchanged at +2.2% qoq compared to the preliminary release. Should the rate remain at +2.2% qoq we could see the USD weakening as the rate is rather low. On the other hand we may have a market which may be expecting the reading as it is the final version, as well as a future
acceleration in the next quarter, hence market reaction may be rather muted.

On Friday, during the Asian morning, Japan’s unemployment rate is due out for May. The rate is forecasted to remain unchanged at 2.5% compared to  previous reading. Should the actual reading meet the forecast we could see the Yen strengthening. Be advised that Japan is rather used to such low unemployment rates hence the market’s reaction may be muted. Later in the European morning, we get the preliminary release of France’s CPI rate for June. The rate is forecasted to tick up reaching +2.4% yoy compared to previous reading of +2.3% yoy. Should the actual rate meet the forecast we could see the common currency getting some support as such a rate could indirectly support the argument for a slight acceleration in Euro-zone’s CPI rate later on. Later in the European session Germany’s unemployment data for June are to be released. The unemployment rate is forecasted to remain unchanged at 5.2%, while the unemployment change is forecasted to narrow to -8k compared to previous reading of -11k. Should the forecasts be realized we could see the EUR slipping as despite the unemployment rate remaining unchanged, the narrowing of the unemployment change deficit is not positive news. Also in the European session we get the final release of UK’s GDP growth rate for Q1. The rate is forecasted to remain unchanged at +0.1% qoq compared to the preliminary reading. The static GDP growth rate should not be good news for the pound especially at so low levels despite BoE considering it as of a rather temporary nature. Last in the European session, Euro-zone’s preliminary CPI rate for June is due out. The rate is forecasted to tick up to +2.0% yoy compared to previous reading +1.9% yoy. Should the actual reading meet the forecast we could see some smiling faces in Frankfurt as the rate hits its target after more than a year. The common currency could get some support from such readings. In the American session we get the US Consumption growth rate for May. The rate is forecasted to slow down to +0.4% mom compared to previous reading of +0.6% mom. If the reading actually slows down we could see the USD slipping as a slowdown to the value of all spending by consumers could imply a decrease of the consumer’s willingness and ability to spend in the economy. At the same time we get from Canada, the GDP growth rate for April. The rate’s last reading was of +0.3% mom. Any reading higher than +0.3% mom could provide some support for the Loonie especially ahead of the BoC meeting on the 11th of July. Later on, in the American session, the final US University of Michigan Consumer Sentiment indicator for June is due out. The figure is forecasted to drop to 99.0 compared to previous preliminary reading of 99.3. Should the actual reading meet the forecast we could see the USD weakening as the indicator’s reading drop implies a more pessimistic view on behalf of the consumer than was implied in the preliminary reading. However the opposite effect could take place considering that previous month’s reading was at lower level.

On Saturday, during the Asian morning we get China’s NBS Manufacturing PMI for June. The figure is forecasted to drop to 51.6 compared to previous reading of 51.9. Should the actual reading meet the forecast we could see the Kiwi and the Aussie slipping on Monday as their respective economies have great exposures to China and such a drop could imply less exports to China.

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PFXS news for week ahead (3rd Week of June)

Next week’s market movers:

  •  On Monday, we get Japan’s Trade balance for May.
  • On Tuesday, Reserve Bank of Australia’s  meeting minutes will be released.
  • On Wednesday, the US Current Account balance for quarter 1 is due out.
  • On Thursday, we get New Zealand’s GDP growth rate for Q1 and later the Bank of England’s interest rate decision could keep the markets on its toes.
  • On Friday, we’ll have a busy day as we get Japan’s inflation data for May, France’s, Germany’s and Euro-zone’s PMIs, Canada’s inflation data for May and Canada’s retail sales growth rate for April. Be advised that on Friday the OPEC meeting will be nearing a close and we could have some volatility in oil prices.

In the next week a number of financial data releases could attract the market’s attention. Our team handpicked the ones which it considers as the most influential and discusses their possible forecasts and their respective effects on various currencies.

On Monday, during the Asian session we get Japan’s trade balance figure for May. The figure is expected to be a deficit of -235.0 B compared to previous reading of +626.0 B. Should the actual figure meet the forecast we could see the yen weakening as the figure would not only be reduced but also taking a negative sign signaling trouble for the Japanese economy which highly export oriented.

On Tuesday, in the Asian session, Reserve Bank of Australia’s (RBA) last meeting minutes will be released. The minutes are to shed light into the bank’s dovish comments contained in the accompanying statement. Especially any opinions regarding the inflation rate remaining low as well as the wage growth rate should illuminate the economic landscape of Australia more. Also any comments made the household consumption and the direction of the US international trade policy would be interesting. Please be advised that market at the time of the release of the decision treated the meeting as a non-event, however it might be the case that the minutes may have a couple of surprises in them.

On Wednesday, during the American session the US Current Account Balance for Q1 is due out. The balance is expected to be a slightly narrowed deficit of -125.0 B compared to previous reading of -128.2 B. Should the actual figure meet the forecast we could see the USD getting some support in these times of extensive tariffs.

On Thursday, early in the Asian session, we get New Zealand’s GDP growth rate for Q1. The rate is forecasted to tick down reaching +0.5% qoq compared to previous reading of +0.6% qoq. Should the actual rate meet the forecast we could see the Kiwi weakening as the deceleration of the rate would be the second in a row weakening the prospect of growth for the economy of New Zealand. In the European session we get the star of the week, namely the Bank of England interest rate decision. The rate is currently forecasted to remain unchanged at +0.50%. The argument for the bank to remain on hold, is strengthened as currently GBP OIS implies a probability of 92.52% to remain on hold. The vote is currently forecasted to be for 7 votes in favor for the bank to remain on hold and 2 votes for the bank to hike rates. Should the interest rate remain unchanged, we could see the market’s attention turning to the accompanying statement. Should the accompanying statement have a more hawkish tone rather than neutral, based for example on the argument that the inflation rate is higher than Band of England’s target we could see the pound strengthening. Should on the other hand a more pessimistic view prevail say for example due to the uncertainty of the Brexit negotiations or the low GDP growth rate we could see the pound weakening. Also, should the votes for a rate hike increase we could see the pound gaining ground and vice versa.

On Friday, during the Asian morning, Japan’s inflation data for May are due out. The core CPI rate is forecasted to remain unchanged at +0.7% yoy while the headline CPI’s rate last reading was at +0.6% yoy. Given the accompanying statement of the latest BoJ interest rate decision, inflation is expected to range between +0.5% yoy and +1.0% yoy. Should the reading be at the lower end of the spectrum we could see the Yen weakening as such a reading could imply that Bank of Japan may become even more hesitant for a possible tapering of its massive stimulus program.

In the European session we get Germany’s, France’s and Euro-zone’s preliminary PMI’s for June. All PMI’s set to drop with the exception of Germany’s services PMI which is forecasted to rise to 52.2 compared to previous reading of 52.1 and France’s Services PMI which is forecasted to remain unchanged at 54.3.

Should the actual readings meet the forecast we could see the common currency weakening as such readings could be regarded as a continuation of Euro-zone’s lukewarm to negative financial indicators.

In the American session we get Canada’s inflation data for May. The last reading for the Bank of Canada Core CPI rate was at +1.5% yoy and for the headline CPI rate was at +2.2% yoy. Any higher readings could increase further the possibility of a potential rate hike in the July 11th meeting as they will be the last readings before the meeting. Given that, we could see the CAD strengthening should there be any acceleration of the inflation rates. From Canada we get also the retail sales growth rate for April. The rate’s last reading was of +0.6% mom. Should there be a higher reading we could see the Loonie getting some support as an acceleration of the rate could imply that the Canadian consumers are willing and able to place more in the Canadian economy hence may have a more optimistic view of the economy. Also a possible acceleration could imply that there are healthy inflationary pressures ahead. Last but not least, the OPEC meeting will be taking place in Vienna during the 21st and the 22nd of the month. The meeting could create volatility in oil prices especially if there are any headlines about a possible loosening of the production curbs in oil, which OPEC and its allies had decided in the past.

PFXS news for week ahead

  • On Monday, we get Australia’s retail sales growth rate for April.
  • On Tuesday, Australia’s Current Account balance for the first quarter of 2018 and UK’s services PMI for May could move the market, but the star of the day should be RBA’s interest rate decision.
  • On Wednesday, the release of Australia’s GDP growth rate for the first quarter of 2018, the US and Canada’s trade balance figures for April could form the main themes of discussion.
  • On Thursday, Australia’s trade balance figure for April and Eurozone’s GDP growth rate for Q1 will be released.
  • On Friday, Japan’s current account for April and GDP growth rate for the first quarter of 2018, China’s trade balance figure for May, as well as Canada’s employment data for May could get the market’s attention.
  • On Saturday, China’s inflation data could keep markets on overtime.

 

On Monday, during the Asian session we get Australia’s retail sales growth rate for April. The rate is forecasted to accelerate and reach +0.2% month on month compared to previous reading of 0.0% mom. Should the actual growth rate meet the forecast, we could see the Aussie strengthening as such an acceleration could at least indirectly, support household consumption which was one of RBA’s worries in the latest accompanying statement.

On Tuesday, during the Asian session we get Australia’s Current account balance for the first quarter of 2018. The figure is forecasted to be a narrowed deficit reaching as low as -9.95 billion AUD compared to previous month’s reading of -14 billion AUD. Should the actual figure meet the forecast we could see the AUD strengthening as it would be the first narrowing of the deficit after four consecutive times of widening of the deficit in previous months. Later on, in the Asian session we get RBA’s interest rate decision. The bank is widely expected to remain on hold at +1.50% as AUD Overnight Indexed Swaps, currently, imply a probability for the bank to remain on hold of 99.65%. Hence the market’s focus could turn to the accompanying statement. Considering the unemployment rate rising and reaching 5.6%, despite the banks predictions in the latest accompanying statement and the wage price index growth rate remaining at low levels, it could be the case that the bank will issue an accompanying statement with a rather dovish tone. On the other side a possible improvement of the GDP growth rate and the retail sales growth rate could provide a tone of optimism. Overall, we could see the market reacting negatively to the interest rate decision, weakening the Aussie or have a rather muted reaction the announcement, as it did at the previous decision. In the European session we get UK’s Services PMI for May. The indicator is forecasted to rise and reach 53.0 compared to previous reading of 52.8. Should the actual reading meet the forecast we could see the GBP strengthening as the increase in the indicator’s reading could imply an improvement of UK’s largest economy sector, especially in the turmoil of the Brexit negotiations.

 

On Wednesday, during the Asian morning we get Australia’s GDP growth rate for the first quarter of 2018. The rate is forecasted to accelerate to +0.8% quarter on quarter compared to previous reading of +0.4% qoq. Should the actual reading meet the forecast we could see the Aussie strengthening at the good news as an accelerated GDP growth rate could imply that the Australian economy is growing at a faster pace. In the American session the US trade balance figure for April is due out. The figure is forecasted to be a widened deficit of -51.0 B USD compared to previous reading of -49.0 B USD. Should the actual reading meet the forecast we could see the USD weakening as a widening of the deficit could spoil the nice picture by last month’s god figure.

Also the figure could get additional attention amid the trade disputes the US is currently in. At the same time, Canada’s trade balance figure is to be released. The figure is forecasted to be a narrowed deficit of -2.24 B CAD compared to previous deficit of -4.14B CAD.  A possible cutting in half of the Canadian trade deficit, could provide some support for the Loonie.

 

On Thursday, during the Asian session we get Australia’s trade balance figure for April. The figure is forecasted to be a lower surplus of +1.000 B AUD compared to previous figure of +1.527 B AUD. Should the actual figures meet the forecast we could see the Aussie weakening, as a reduced by almost a third surplus could imply a slowing down of the Australian economy. In the European session we get Eurozone’s GDP growth rate for the first quarter of 2018. The rate is forecasted to remain unchanged at +0.4% qoq compared to the respective preliminary release.

Should the actual rate meet the forecast we could see the common currency weakening as the rate remains at rather low levels compared to previous quarters.

On Friday, during the Asian morning we get Japan’s current account balance for April. The figure is forecasted to drop, reaching as low as 2.0965 trillion JPY compared to previous month’s reading of 3.1223 trillion JPY. If the forecast is realized we could see the JPY weakening as a slashing of the surplus by nearly a third, could have a negative effect on the intensely export oriented economy. At the same time, we get Japan’s GDP growth rate for the first quarter of 2018. The rate is forecasted to accelerate and reach +0.2% qoq compared to previous reading of -0.2% qoq. Should the actual reading meet the forecast we could see the JPY strengthening as the growth rate has a substantial acceleration and gets out of the red prints.

Later on, in the Asian session we get China’s trade balance figure for May, which is forecasted to be a reduced surplus of 24.70 billion USD compared to previous reading of 28.78 billion USD. Should the actual reading meet the forecast we could see the Aussie and the Kiwi weakening as the China’s imports are forecasted to decelerate to +16.0% compared to previous reading of 21.5% and the Australian and New Zealand economy are heavily exporting to China. In the American session, we get Canada’s employment data for May. The employment change figure is forecasted to rise and reach +17k compared to previous reading of -1.1k and the unemployment rate is forecasted to remain unchanged at 5.8%. Should the actual readings meet the forecast we could see the CAD strengthening as despite the unemployment rate remaining unchanged, the employment change increases and changes to a positive sign, implying a possibility for a tightening labour market. Also the unemployment rate, despite being unchanged it remains at rather low levels for the Canadian economy.

On Saturday, during the Asian session we get China’s CPI and PPI rate for May. Both rates are forecasted to tick up. Specifically, the CPI rate is set to reach +1.9% yoy compared to previous reading of +1.8% yoy and the PPI rate to reach +3.5%mom compared to previous reading of +3.4% mom. The upticks could provide some support on AUD and NZD at the Monday opening, as it could signal positive messages for the Chinese economy and consecutively for the two prementioned currencies, which their respective economies have tight links with the Chinese economy.