PFXS news for week ahead (July 23rd -27th)

On Monday, in the American session we get the Canadian Whole Sale Sales for May. The previous reading release in June was at 0.1%. Any reading above that figure should be taken as good news for the CAD while on the opposite any reading below could be taken as negative and could hurt the Loonie. Later in the American session we get US Existing Home Sales for June. The rate is forecasted to increase and reach 5.44 M compared to previous reading of 5.43 M while the Existing Home Sales are expected to increase to +0.5% mom from previous reading of -0.4% mom.

Should the actual rates meet the forecast we could see the USD caught in mixed financial data, as it would indicate the monthly rate increased but the overall reading has a minor decrease in home sales for June. Please be advised that Existing Home Sales are a very important indication of a healthy economic outlook.

On Tuesday, we get a number of PMI’s from Asia and Europe. Early in the Asian session, the Japanese Manufacturing PMI for July is to be released. The rate has no forecast at the moment, however, the previous reading was at 53.0. A higher figure than the one previously released could be taken as positive for the JPY.

In the European session we get Germany’s, France’s and Euro-zone’s preliminary PMI’s for July. Please note all European PMI’s are set to drop and 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. Please note, on the same day the EU Finance Ministers Meeting will take place but the start time is undisclosed.

On Wednesday, in the Asian session we get Australia’s inflation data for June. The quarterly CPI rate is forecasted to accelerate and reach +0.5% yoy compared to previous reading of +0.4% yoy as well as the yearly CPI rate which is forecasted to reach +2.2% yoy compared to previous reading of +1.9% yoy.

Should the actual rates meet the forecasts we could see the Aussie strengthening. We would also like to stress the fact that in the previous week Australian labour market report came out impressively strong for June. It was noted that with the labour supply still growing, less upward pressure was applied on wages and inflation so Reserve Bank of Australia is not expected to rate hike anytime soon.

In the European session we get German Ifo Business Climate Index for June. The rate is forecasted to drop at 101.5 from previous release 101.8. Should the actual rates meet the forecast we could see the common currency weakening somewhat, though it must be noted that due to the small decrease the market could perceive it as a muted event. However, any greater reading both negative and positive could create volatility for the EUR.

In the US session we get the US New Home Sales rate for June. The US New Home Sales rate is forecasted to drop and reach 0.670 M compared to previous reading of 0.689 M. Should the outcome be the same with the forecast, the greenback could weaken. However, the difference is not so significant, so the reaction could be rather minor.

On Thursday, in the European session, ECB will announce its interest rate decision. The bank is widely expected to remain on hold at 0.00%, as EUR OIS imply a probability for the bank to remain on hold at 97.61%. If the interest rate decision comes out as expected, we could see the market’s attention shifting to the accompanying statement and the following press conference. Should there be any signs of the bank starting to unwind its QE program as suggested by ECB officials previously, we could see the common currency gaining ground. Please be advised that the interest rate decision and the following press conference may leverage volatility on EUR crosses. It is expected that the asset purchases could end this year, as announced, and the market doesn’t expect an update on the policy path until March.

In the US session, we get the US New Home Sales for June. The forecast implies in increase to +2.5% from a previous count of -0.4%. Please be advised the USD could strengthen on the release of the news, should the forecast be realized.

On Friday, early in the European session we get UK’s Nationwide HPI readings for July. The UK’s yearly Nationwide HPI rate previous reading of +2.0 % yoy while the monthly Nationwide HPI headline CPI rate’s last reading was +0.5% mom.

Should the release exceed the previous readings, we may see the GBP gaining some momentum. However, most of the attention in the UK is placed on the Brexit as it is turning out to be a very difficult topic to deal with. The UK remains divided on how the matter should be dealt with and so Cable has been kept down lately.

In the American session we get the US GDP rate for July. This is the most significant event for the day and the US GDP rate is forecasted to accelerate to +4.1% qoq compared to previous reading of +2.0% qoq. Should the headline rate’s actual reading meet the forecast and the US GDP rate accelerate as well, we could see the greenback getting some support. In addition and regarding the US, during the past week Powell said the Fed will continue to slowly raise interest rates for now’ in order to keep inflation near target amid a robust conditions in the U.S. labour market.

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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