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Macro Events and News


FX News Today

European Outlook: Global stock markets recovered yesterday in tandem with oil prices and Asian markets followed suit with Japan in particular staging an impressive rebound. The Nikkei is up nearly 3.5% and the Topix gained nearly 3% after yesterday’s steep decline. The front end WTI (USOil) future is slightly off earlier highs, but still just shy of the EUR 40 per barrel mark and the weaker Yen helped stock markets to recover in Japan. Mixed U.S and UK stock futures are painting a more cautious picture although the DAX is higher ahead of the official opening. The local calendar has German ZEW investor confidence, seeing improving slightly amid the general recovery in risk appetite, as well as Eurozone current data and the latest ECB bank lending survey. The UK remains focused on the Brexit debate.

IMF Estimates Still too Rosy as Global Growth Slows: The IMF’s recent world growth downgrades left 2016 estimates that are still too optimistic given the ugly Q1 performance for both the developed and emerging economies. The market’s early-year panic alongside the winter oil price plunge proved partly justified, though most of the year’s bad news is hopefully behind us. We expect a modest 2016 undershoot of IMF growth estimates across all the major countries and regions except Canada and the U.K., Brexit risk aside, before an improved trend into 2017.

Fedspeak: The Fed’s Kashkari said Chair Yellen is open-minded in her policy approach. The comments are from an interview posted on the Minneapolis Fed’s website. He noted the various challenges facing policymakers, including a slowing in China which has caused shocks around the world, and Brexit. And he added the Fed of course has a “de facto, huge global influence,” and is aware of its impact on world economic developments (it’s part of the Fed’s calculus). He thinks the existing structure of the Fed is working well. There wasn’t anything new or especially market moving in his remarks, especially since the FOMC is universally expected to be on hold at next week’s meeting.

ECB’s Knot: Realistic to think rates won’t rise for a while. The Dutch central bank head said at a conference in The Hague that “for the short term its realistic to think the interest rate won’t rise”, although he warned home buyers to take possible increases in the future into account. It’s hardly a surprise that the ECB is not thinking about rate hikes at the moment, but Knot is right of course to remind consumers that in the long run rates will go up again. The last thing the ECB needs is a real property bubble and excessive risk taking in the mortgage market.

Main Macro Events Today

US Housing Starts: March housing starts data is later today and should reveal a slight headline increase to 1,185k (median 1,170k) from 1,1798k in February. Permits should be 1,200k from 1,177k in February and completions are seen at 1,040k in March from 1,016k in February. There is some upside risk to the data as construction employment remained firm in March and the NAHB remained stable.
German ZEW: German ZEW investor confidence is expected to have recovered somewhat, in line with the stabilisation on markets and we are looking for a rise in the expectations reading to 7.0 (med 8.0) from 4.3 in the previous month. Confidence data nevertheless is pointing to a gradual loss of momentum in core Eurozone countries including Germany, with the second quarter likely to look weak in comparison to the first quarter

Macro Events and News


FX News Today

European Outlook: The global stock market recovery run out of steam in Asia, with bourses mixed. Chinese equities retreated and Japan managed only slight gains as oil prices retreated. The front end WTI future fell towards USD 40 per barrel, after Kuwait workers said they would end the strike that has disrupted output. A stronger Yen weighed on Japanese markets and US and UK stock futures are also down, indicating that bond futures could recover some of their recent losses in Europe. The calendar has UK labour market and earnings data and a German Bund sale. Markets will be looking ahead to tomorrow’s ECB meeting, with Draghi seen on hold for an extended period, but hopes of further action down the line remain, even if helicopter money may be too much of a leap. And like ECB officials BoJ Governor Kuroda also played down the idea, citing legal issues.

BoJ Governor Kuroda rejects idea of helicopter money, saying that he isn’t thinking about helicopter money and that the version that tries to inject cash into the economy by permanently monetising fiscal deficits would be blurring the line of fiscal and monetary policy and contradicts the current legal framework. Kuroda told lawmakers that “unless the existing legal framework changes, helicopter money isn’t possible, and we at the Bank of Japan aren’t thinking about it at all”.

German PPI -3.1% In March 2016 the index of producer prices for industrial products fell by 3.1% compared with the corresponding month of the preceding year. In February 2016 the annual rate of change all over had been –3.0%. In March 2016 energy prices decreased by 9.2% compared with March 2015, prices of intermediate goods by 2.3% and prices of non-durable consumer goods by 0.3%. In contrast prices of capital goods rose by 0.6% and prices of durable consumer goods by 1.4%. The overall index disregarding energy decreased by 0.9% compared with March 2015.

BoC Governor Poloz: His opening statement provides a summary of the MPR, as is typically the case in these appearances before the House and Senate. He listed the three negative developments for the growth outlook that have emerged since January, which were more than offset by the fiscal measures put forth in the Federal budget in March. The growth outlook is 1.7% in 2016, 2.3% in 2017 and 2% in 2018, as seen in the MPR. Cautious optimism remains in place: economic data have been “encouraging on balance”, but also “quite variable.” There has not been “concrete evidence of higher investment or strong firm creation.

Main Macro Events Today

US Existing Home Sales: March existing home sales data is out later today and should reveal a 4.3% rebound to a 5.300 mln (median 5.236 mln) pace from 5.080 mln in February and 5.470 mln in January. The month’s housing starts release revealed a drop to a 1.089 mln pace from 1.194 mln in February. Secondary measures of housing data were stronger in March with the MBA purchase index up by 4.2% and the NAHB composite holding steady.

Draghi & Poloz: Speeches are scheduled today by the ECB’s Mario Draghi at the ECB Generation Euro competition, in Frankfurt; and the BOC’s Poloz who will continue his testimony to the Finance Committee at the Canadian parliament.

Macro Events and News


FX News Today

European Outlook: The decline on global stock markets continued in Asia overnight, with most markets in the red. UK stock futures are posting slight gains; however as oil prices managed to claw back some losses and the front end WTI future moved above USD 43 per barrel after falling to an earlier low of USD 42.64. A stronger Yen added to pressure on Japanese markets ahead of the BoJ meeting later this week, while the fact that the EUR is holding below 1.13 to the dollar will be welcomed by Eurozone investors. Markets are cautious ahead of this week’s central bank meetings, with the Fed meeting starting today. The local calendar is very quiet with only UK BBA mortgage approvals and French jobseekers.

US Sentiment Mixed Signals: The Empire State and Philly Fed reports revealed opposing April headlines, with a big gain for the Empire State but a dramatic plunge for the Philly Fed. We think the March sentiment upswing will mostly survive this early-April divergence, with a drop-back in the ISM-adjusted average of the major measures to 51 after the March pop to 53 from lower 49 averages in both January and February. The price measures of both surveys were firm, and price gains into April should sustain firmness in the remaining April surveys.

US Dallas Fed manufacturing index falls: The index slipped to -13.9 in April from -13.6 in March, a 16th consecutive monthly decline, though the pace of decline is only about 1/3 of what it was in January. The employment component improved to -3.7 from -10.3, but remained in contractionary territory for a 4th straight month. The workweek was -1.0 from -5.6. New orders jumped to 6.2 from -4.8, and are the highest since October 2014. Prices paid rallied to 5.5 from -0.2, and are in positive territory for the first time since June, with prices received at -6.6 from -8.2. Capital expenditures rose to 1.6 from -0.9. However, the 6-month general business activity index eroded to 0.4 from 6.1, with employment weakening to 9.4 from 13.0, though new orders improved to 32.6 from 29.7, with prices paid edging up to 20.2 from 18.9. Capital expenditures dipped to 8.5 from 13.3. This is a mixed report with some signs that the recession in the region is easing, though the slide in some of the future indicators is disappointing.

US New Home Sales mixed: New home sales saw a 1.5% March drop to a 511k rate, but with prior boosts that left a stronger than expected 515k Q1 sales rate that matched the cycle-high in Q1 of 2015. Inventories beat estimates after upward revisions to leave a six-year high, though median prices fell 3.2% in March after downward revisions to leave a 1.8% y/y decline

Main Macro Events Today

US Durable Goods: March durable goods data is out today and we expect orders to grow 1.0% (median 1.9%) on the month with shipments down 0.5% and inventories down 0.2%. This follows respective February figures of -3.0% for orders, -1.0% for shipments and -0.3% for inventories. Data in line with our forecast would leave the I/S ratio steady at 1.66 for a second month.
US Consumer Confidence: April consumer confidence is also out later today and should reveal a headline decrease to 95.5 (median 95.8) from 96.2 in March. This would fit with the broader trend of confidence declines in April where we saw a Michigan Sentiment decrease to 89.7 from 91.0 and an IBD/TIPP decline to 46.3 from 46.8.

Macro Events and News


FX News Today

European Outlook: Most Asian stock markets are down on the day, disappointing earning results added to Yen strength weighed on Japanese markets. Oil prices are higher and the front end WTI future is comfortably above USD 44 per barrel, but investors remain cautious ahead of this week’s round of central bank decisions, which kicks off with the Fed announcement today, which will be followed by the BoJ tomorrow. Fed is unanimously expected to maintain and unchanged rate stance (there is no press conference). Hence, the focus will be on the nuances of the policy statement and we see some risk that it will be more hawkish than markets expect. In Europe, the focus is on the first release of UK. Q1 GDP data, which is expected to confirm that growth moderated somewhat at the start of the year. The UK. also has CBI reported sales data for April.

Australian CPI much weaker than expected: The headline figure for the quarter (q/q) -0.2% expected +0.2%, previous reading +0.4%. The yearly y/y 1.3% from previous 1.7% and expectations of 1.7%. The ‘trimmed mean’ (Core inflation) also lower at 0.2% (0.5% expected and 0.6% q/q) and 1.7% y/y expectations were for 2.0% previously 2.1%. This is a very large variance over one fifth lower than expectations. Low inflation is effectively a tightening of interest rates so this poor number raises the expectations of the RBA having to cut rates. The RBA next meet May 3. AUDUSD fell over 1.7% and is currently trading at 0.7610.

ECB’s Coeure: Only sharp EUR appreciation would be concern. The Executive Board member seems to suggest that current levels are not a problem and won’t trigger further ECB action on their own. At the same time Coeure hit out at critics of the ECB’s policy, seeing that some of them miss the bigger picture. Especially Germany has been very critical of the central bank’s policies, but Coeure stressed that these critiques do not hamper the central bank’s ability to function, which implies that political pressure won’t prevent further action if the ECB sees the necessity to act.

US Weak Sentiment Signals: Revealed a weak round of March durable goods figures thanks to weak equipment data, and an expectations-led April consumer confidence drop. Yet, the April decline in the Richmond Fed index to 14 from 22 translated to a surprisingly strong 55.7 on an ISM-adjusted basis, while the Markit Services flash PMI rose to 52.1 from 51.3. Thanks to the weak equipment data, the mix lowered our GDP growth forecast to a flat figure from 0.3% in Q1 and a 2.0% clip from 2.2% in Q2. The factory sector remained weak through March despite the bounce for factory sentiment, and we still expect an upturn in the factory figures in Q2.

Main Macro Events Today

FOMC Rate Decision: 18:00 GMT – No change expected and as there is no press conference the actual words in the Monetary Policy Statement released at 18:30 GMT will be scrutinized very closely.

UK – GDP Prelim:. 08:30 GMT – A fall to 0.4% is expected from 0.6% last quarter and the y/y figure is expected to shrink to 2% from 2.1% last time. GBPUSD has been in a strong uptrend recently.

German import price inflation higher than expected


EURUSD, 240 min

German March import price inflation higher than expected, with the annual rate falling to -5.9% from -5.7% y/y in February, against a Bloomberg median of -6.2% y/y. Excluding energy prices, however, the picture is somewhat different, as the annual rate dropped sharply to -3.6% y/y from -2.8% y/y in February and compared to 2.2% y/y in July last year. The data show ongoing dis-inflation pressures from import prices, stemming not only from oil prices and subsequently strengthen Draghi’s push for additional easing last month.

There was no notable market reaction in EURUSD to the release. The pair is ranging between 0.38 and 0.5 Fibonacci retracement levels after yesterday’s move to 1.1278 was rejected and price bounced higher from 30 period MA. Nearest significant support and resistance levels are at 1.1253 and 1.1340. Markets are likely to be in a wait and see mode until the FOMC rate decision. No change is expected and as there is no press conference the actual words in the Monetary Policy Statement released at 18:30 GMT will be scrutinized very closely.

Macro Events and News


FX News Today

BoJ refrained from easing policy, causing widespread disappointment in markets given the backdrop of a strong yen and low inflation. Data today showed April headline CPI unexpectedly falling back into deflation at -0.1% y/y, while the core reading — which the BoJ is mandated to target at 2% — dove to a three-year low of -0.3% y/y, down from 0.0% in March. The central bank left the deposit rate at -0.1% and the annual pace of QQE purchases at Y80 tln. The BoJ has left policy on hold in both of the meetings since its Jan-29 gathering, when it decided to introduce NIRP (implemented on Feb-12). The central bank once again pushed back its forecast for driving inflation to its 2% target to “during fiscal 2017” (once upon a time it was 2015). The statement maintained that the economy has “continued its moderate recovery trend,” but warned that growth would be lower due to weak export performance and kept the door ajar for further easing.

Reserve Bank of New Zealand held rates steady at 2.25% after cutting by 25 bps to 2.25% in March. The 2.25% rate setting is a record low. The March cut was driven by a concern over eroding inflation expectations. Low headline inflation was again noted, with a material decline in shorter term expectations still front and center at the Bank. Despite the lack of action in April, more rate cuts could be in store: Governor Wheeler said “Further policy easing may be required to ensure that future average inflation settles near the middle of the target range.” That’s a repeat from March.

Fed Stuck in Neutral All Over Again: The Fed had a few tricks up its rhetorical sleeves in April, but made few meaningful changes to the economic or policy outlooks in its steady decision. Growth and inflation remained finely balanced and any reference to the “balance of risks” was accordingly left out of the statement, as the FOMC continues to straddle the fence on the next move. Some excitement came with the apparent departure of “global economic and financial developments,” though this snuck back in later in the statement. A closer look at the details shows the Fed is cognizant of the poor outlook for Q1 GDP “even as growth in economic activity appears to have slowed.” It was also a little more downbeat on inflation “inflation has continued to run below the Committee’s 2% longer-run objective,” compared to “inflation picked up in recent months” previously.

Main Macro Events Today

US GDP The first release on Q1 GDP is out today and should reveal a 0.5% (median 0.7%) headline clip for the quarter. This would follow a 1.4% pace in Q4 of last year and 2.0% in Q3. We expect the ongoing inventory unwind to weigh on the headline but the advance trade report yesterday revealed a big 3.4% import decline which is likely an extension of this unwind. Import weakness will likely benefit net exports for the quarter which will help prop up the headline.
US Jobless Claims Claims data for the week of April 23rd should remain steady with a 247k (median 255k) headline that matches last week’s headline. Claims look poised to leave a 255k average in April which would follow a 264k average in March and 261k in February. The monthly employment report is expected to show a 210k headline from 215k in March with the unemployment rate ticking down to 4.9% from 5.0% last month.
German Unemployment
German jobless numbers have fallen to very low levels, but with growth slowing down, the improvement on the labour market is also running out of steam and we are looking for a slight uptick in the German sa jobless number for April of 4K, which should leave the jobless rate at a low 6.2% (medians same). The tight labour market has been pushing up wages and is underpinning consumption but the integration of the large number of refugees will be the main challenge for coming years.

The Economic Week Ahead


The Main Macro Events This Week

United States: The week kicks off with the April ISM manufacturing report (today) and winds up with the employment report (Friday). In between there will be releases on construction, trade, productivity, and services. The ISM is expected to slip slightly to 51.5 in April (median 51.3) after a stronger than expected increase to 51.8 in March. The latter was the highest since June. Construction spending for March (today) is forecast rebounding 0.3% (median 0.5%), recovering somewhat from the 0.5% February slide. But spending is up 6.9% on a 3-month annualized basis and 10.3% y/y. Indeed, the FOMC noted in its statement that the housing sector has improved further since the beginning of the year, though that’s maybe a “glass half full” view given the mix of data. Vehicle sales (Tuesday) are another key for the economy and are projected to increase 2.1% to a 16.8 mln pace, compared to March’s 5.5% drop to 16.5 mln. The April ADP private sector jobs report (Wednesday) will give an initial peak of the month’s employment conditions and is seen rising 200k, the same as in March. The preliminary productivity report for Q1 (Wednesday) should show a 2.5% decline (median -1.5%) following Q4’s -2.2%. Unit labor costs are seen rising 5.5% (median 3.5%) following Q4’s 3.3% increase. The trade report should post as $46.5 bln deficit (median -$41.5 bln) following the smaller than expected $56.9 bln goods deficit. These two reports will have important implications for the growth outlook transitioning into Q2. The service sector continues to provide positive underpinning for the economy as a whole and the April ISM non-manufacturing index (Wednesday) should inch up to 54.7 (median 54.6) from 54.5. Initial jobless claims (Thursday), which have been one of the strongest indicators of the health of the labor market, are projected to be little changed at 256k from the prior 257k. The week’s highlight is the April employment report (Friday) which will provide insight not only on jobs across sectors and key categories, but also on wages, which are a focal point for the FOMC. Employment is forecast rising 210k (median 208), not quite the 215k increase in March, with private payrolls up 200k (median 200k), while manufacturing is unchanged (median -6k). The unemployment rate is expected to tick down to 4.9% (median 5.0%) after the surprise increase to 5.0% in March. The workweek should be steady at 34.4 (median 34.5). Average hourly earnings are projected to rise 0.3% (median 0.3%), as was the case in March following the disappointing 0.1% February drop.

Canada: The Canadian calendar has several top-tier reports this week, which will provide key insights into how the economy performed after the modest 0.1% pull-back in February GDP. The trade report (Wednesday) is expected to reveal an improvement in the trade deficit to -C$1.5 bln in March from -C$1.9 bln in February. Export values are seen improving 2.0% m/m in March after the 5.4% drop in February. Imports are projected to rise 1.0% m/m in March on the heels of the 2.6% decline in February. The employment report (Friday) shares top billing with trade this week, with an anticipated 10.0k rise in April jobs following the 40.6k bounce in March. The unemployment rate is rising to 7.2% from 7.1%. Building permit values (Thursday) are expected to fall 5.0% m/m after the 15.5% run-up in February. The Ivey PMI (Friday) is expected to improve to 53.0 in April from the seasonally adjusted 50.1 in March.

Europe: After the very busy data calendar last week and the central bank decisions in the U.S. and Japan, the markets can take a breather. The ECB publishes its latest economic bulletin (Thursday) which is likely to confirm that the central bank is firmly in wait and see mode and focused on implementing the decisions from March. As Praet repeated again on Friday it will take a major shift in the outlook to prompt further easing and this side of the U.K. referendum this seems very unlikely. In this environment, ongoing negotiations with Greece over the progress of the bailout, rather than data releases, are likely to take centre stage. Contingency measures to safeguard budget targets remain the sticking point in the talks and the IMF is also dragging its feet on debt reductions again. The data calendar is quiet and on the whole won’t change the outlook, with a focus on the final readings of Eurozone manufacturing and services PMIs (today and Tuesday), which are expected to be confirmed at 51.5 and 53.2 respectively (medians same). The recovery is continuing and sectors remain in expansion mode, but it seems already clear that the quarterly growth rate will slow down again in the second quarter, from the better than expected 0.6% q/q in Q1. The Eurozone also has March PPI (Tuesday) data as well as March retail sales numbers, but with April CPI and Q1 GDP already released, the data will mainly give further background information.

United Kingdom: While Brexit risks have ebbed over the last week, as suggested by opinion polls and betting odds with regard to the Jun-23 referendum on EU membership, incoming data have continued to paint a picture of deflating economic momentum. BoE governor Carney said last week that this was “probably related to issues around the referendum,” although fiscal tightening is also a factor, with the government’s deficit reduction efforts back into full swing following a hiatus ahead of the general election last year. This week’s calendar is highlighted by the Markit April PMI surveys, which we don’t expect will change the picture much. The manufacturing PMI (Tuesday) is expected at 51.3 (median same), which would build on the February’s 50.8 cycle low and March’s 51.0 reading, but would still signal a tepid rate of expansion in the beleaguered sector, still not feeling the benefit of sterling’s six-month downtrend. The services PMI (Thursday) is expected at 54.2 (median 54.1), up moderately from March’s 53.7 reading.

China: reveals official April CFLP manufacturing PMI (Tuesday), which is forecast to improve to 50.5 from 50.2. The April Caixin/Markit PMI series (Tuesday) and is penciled in at 49.9 from 49.7. April services PMI (Thursday) is seen up to 52.5 from 52.2 previously. The April trade report is expected on Saturday, with the surplus forecast to widen to $39,0 bln from $29.9 bln.

Japan: calendar begins and ends on today, with the release of the April Markit/Nikkei PMI, which is expected to rise to 49.5 from the previous 49.1 reading. April auto sales will also be released.

Australia: In Australia, Reserve Bank of Australia (Tuesday) is expected to hold rates steady at 2.00%. The Bank also releases its quarterly Statement on Monetary Policy (Friday), which will provide fresh growth and inflation projections. The slate of economic data is relatively heavy this week. The trade report (Thursday) is expected to reveal a -A$3.1 bln deficit in March from -A$3.4 bln in February. Retail sales (Thursday) are seen rising 0.2% m/m in March after the flat reading in February. Building approvals (Tuesday) are projected to slip 1.0% in March after the 3.1% gain in February.

EURAUD nearing a resistance


EURAUD, 60 min

Eurozone Apr manufacturing PMI released earlier today revised up to 105.7 from 105.5 reported initially and versus 105.6 in the previous month. German and French PMIs were actually revised slightly down with the final release, but the Italian PMI jumped to 53.9 from 53.5 against expectations for a decline in confidence. Further confirmation then that the Eurozone recovery is continuing but at a very modest pace and with core countries remaining weak. Especially France continues to underperform despite the stellar GDP result for the first quarter.

EURAUD has touched an area of resistance at 1.5060 – 1.5200 that has seen the sellers to emerge in the past. At the same time the daily Stochastics is getting overbought. In the 60 min chart price action is looking bearish as the latest reactionary high is lower than the one before. Therefore the pair testing a 0.236 Fibonacci level that coincides with the 30 period SMA and lower Bollinger Bands has now a high significance. If buyers emerge now there is still a chance that price could move higher. However, the recent lower high makes it less likely that the support will hold. If the level holds we could see a new attempt on today’s highs but if the support breaks we have a bearish intraday setup. If price moves below 0.236 Fibonacci level (at 1.5039) on a closing basis I will be looking for sell signals at or inside my Sell Area of 1.5053 – 1.5096 with Target 1 at 1.4997 – 1.5018 and Target 2 at 1.4910 – 1.4952. Please, remember that you should always manage your risks. Do not trade based on our analysis unless your own analysis agrees with it and you know how to manage your risks professionally. Please, attend the webinars if you have troubles in understanding how you should take advantage of the analysis that we provide.

Macro Events and News


FX News Today

European Council President Donald Tusk called for a deal in Greek debt talks by the end of the month and said more intensive efforts were needed for that to happen. Talks are dragging on over reforms Greece must carry out to complete the review of its third international financial rescue package, as well as on contingency steps that Athens must prepare in case it misses its fiscal targets. (source: Reuters)

Chinese authorities are training their sights on a new set of targets: economists, analysts and business reporters with gloomy views on the country’s economy. Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and commentators with knowledge of the matter. (source: Wall Street Journal)

New Zealand’s jobless rate rose in the first quarter as the nation’s labour force recorded its biggest increase in 12 years and Auckland drove an increase in employment growth. The unemployment rate rose to 5.7 percent in the first quarter, from a revised 5.4 percent three months earlier, Statistics New Zealand said. The labour force increased by 38,000, or 1.5 percent, the largest increase since December 2004.

SF Fed dove Williams expects the Fed to gradually raise rates over the next couple of years and he agreed with the decision not to raise rates yet this year. He is forecasting 2% GDP growth this year, but needs to see inflation pick up or continued progress on the economy to hike in June. He is supposed to be speaking from a panel on systemic risk from Los Angeles later and his remarks are being picked up Bloomberg Radio. He has leaned toward the hawkishly patient side this year and this fits that profile.

BoC Governor Poloz said yesterday in a panel discussion that low interest rates mean less impact from rate moves. International performance divergence causes volatile foreign exchange. The U.S. economy is in a sweet spot for growth. The time it takes before inflation kick in is an open question, he said. The federal budget is expansionary. The Governor is taking part in a panel discussion.

Main Macro Events Today

The ECB Non-Monetary Policy Meeting: The ECB Governing council will meet today but no monetary policy will discussed in this Non-monetary policy ECB meeting. The European Central Bank (ECB) announced in July last year that the Governing Council meetings dedicated to monetary policy will change to a new six-week cycle, from January 2015. Non-monetary policy meetings will continue to be held at least once a month.
US ADP Unemployment change: The unofficial ADP unemployment report for April is due today. No major change is expected with consensus expectation being at 196K while the previous survey reported 200K new jobs.
US Non-Manufacturing ISM: The ISM-NMI is out on Wednesday and should hold steady at 54.5 (median 54.1) from last month. The ISM for the month declined to 50.8 from 51.8. Broadly speaking, producer sentiment has eased to still firm levels in April after a surge in March. We expect the ISM-adjusted average of all measures to dip back to 51 for April from 53 in March and 49 in both February and January. This could spell some downside risk to the release

Macro News and Events


FX News Today

European Outlook: The global sell off on stock markets continued in Asia overnight, with global growth concerns lingering after mixed U.S. data yesterday were followed by a dip in China’s Caixin Services PMI (more below). Japan, South Korea, Thailand and Indonesia were closed. U.S. and U.K. stock futures are moving higher, so it looks like another early attempt at stabilisation, although we have been there yesterday and stock markets still headed south in the end. Bund futures managed to claw back losses in after hour trade and could post some early gains, but yesterday’s rise in yields and widening of spreads highlights that the Eurozone still remains vulnerable to jitters in confidence. The European calendar has the UK Services PMI for April, which is expected to rise to 54.2 (med 54.1) from 53.7 in the previous month. The UK also has Halifax house price data, while the Eurozone data calendar is empty, leaving the focus on the ECB’s latest economic bulletin and ongoing Greek bailout review talks.

China Caixin Services PMI Falls: The index fell to 51.8 for April from 52.2 in March but is still growing with new business growing the most this year and business expectations remained unchanged. Expectations were for an increase to 52.6 the figures have been received as disappointing overall. “Expansion in the services sector helped offset some of the impact caused by flagging manufacturing. Overall, however, the economy still faces relatively strong downward pressure,” He Fan, chief economist of Caixin, said in a note. “The government needs to keep implementing moderate stimulus to prevent a hard landing of the economy.” The slowing in the headline index may add to market nervousness over growth.

Australian data releases beat forecasts. Retail sales rose 0.4% m/m in March, up from 0.1% the month prior and above the median forecast for a 0.3% rise. The trade deficit deflated to -A$2.2 bln in March from February’s -A$3.0 bln (revised from -A$3.4 bln), and below the median expectation for a deficit of -A$2.9 bln. New homes sales lifted by 8.9% m/m in March, more than reversing the 5.3% drop seen in February, according to Housing Industry Association data. The data is prompting upward revisions to Q1 GDP estimates and has sparked a rally in the Aussie dollar, which is presently up by just over 0.6% versus the US buck.

Main Macro Events Today

US Initial jobless claims: Initial claims data for the week of April 23rd is out today and is expected to show a headline increase to 263k from 257 last week and 248k, forty year low, prior to that. Claims for the month are poised to average 254k from 264k in March and 261k in February.
UK Services PMI: Expectations are for a slight fall to 53.5 from 53.7 in April, following the surprise March low of 52.7.

Macro Events and News


FX News Today

China CPI & PPI: CPI month on month (-0.2%) improved from previous (-0.4%) the year on year figure was a little short of expectations and remained unchanged at 2.3% (expectations were for a slight rise to 2.4%. It eases worries about deflation but the economy remains soft. Producer Price Index (PPI) continued to improve and beat expectations, actual number was -3.4% beating expectations of -3.8% and better than the March figure which was -4.3%.

German Industrial Production & Trade Balance: Worse than expected and was the second consecutive monthly drop. Industrial production was -1.3% from -0.7% last month and significantly weaker than expectations at -0.2%. Conversely the German trade balance exceeded expectations at 23.6bln euro but German exports declined by 0.5% and imports by 4.3% in March 2016 year on year.

Fedspeak: Minneapolis Fed’s Kashkari, monetary policy stance is appropriate and there’s room for improvement in the economy, he said, though non-monetary policies are more important than Fed policy to attain full employment. Indeed, he reiterates that monetary policy has its limits and there’s too much focus on near-term interest rate policy than the need for long-term solutions. Sounds like he continues to straddle the fence and would vote with the consensus in June (whatever that is) if he had a vote.

Japan FM Aso: Yesterday talked of potential intervention by the BOJ and that the US does not object to Japans FX policy, however, overnight he has been quoted “We’ve been saying that one-sided rapid currency moves are undesirable. As a result, the dollar is now moving around 108.00” All very interesting, USDJPY currently trading at 108.80.

Main Macro Events Today

US Wholesale Inventories: An improvement to -0.1% from -0.5% is expected.
UK Trade Balance: We expect a rise to -11.2bln GBP from -12Bln last month. Brexit remains the dominant factor for the GBP.

Macro Events and News


FX News Today

European Outlook: The global uptick in stock markets continued overnight in Asia although gains in Japan, China and Australia are more muted and the Hang Seng is down, as are U.S. and U.K. stock futures. Oil prices are also slightly lower with the front end WTI future trading in a narrow range below USD 45 per barrel. Investors in Japan will have to weigh the stronger yen, against the wealth of earnings reports this week. In Europe, Vivendi, E.ON and Deutsche Post report results, the UK releases industrial production data and there is ECB speak from Nowotny as well as a German Schatz sale.

Mixed Japanese data: Japan’s leading index decreased less-than-expected in March but to the lowest level in forty months, preliminary data from the Cabinet Office showed earlier. The leading index that reflects the future economic activity, fell to 98.4 in March from 98.9 in February. Expectations were for the index to drop to 96.4. The latest reading was the weakest since November 2012, when it marked 97.6. At the same time, the coincident index that indicates the current economic activity rose to 111.2 in March from 110.7 in the preceding month.

The U.S. wholesale report: Revealed the first rise in both sales and inventories in six months, and with a larger sales than inventory rise that allowed modest downward pressure on the inventory-to-sales (I/S) ratio after the steep spike to a 1.37 expansion-high in January. Sales rose 0.7% in March while inventories rose 0.1%, and the I/S ratio sustained the February downtick to 1.36. We still expect a boost in Q1 GDP growth to 0.9% from 0.5%, but with a $2 bln boost in wholesale inventories that accompanies a $6 bln boost in factory inventories, alongside a $1 bln hike in equipment spending and $3 bln boosts in both construction and consumption. We still expect 2.0% GDP growth in Q2 with a $13 bln inventory subtraction that leaves a $56 inventory accumulation rate, after a $9.5 (was $17.5) bln subtraction in Q1, as the rate of inventory accumulation slowly drops back to a sustainable rate in the $40 bln area. For monthly forecasts, we expect a 0.3% March business inventory rise after a 0.1% February drop. Today’s 0.1% March rise for wholesale inventories accompanies a 0.2% bounce for factories and an assumed 0.6% retail inventory rise.

Canadian oil-sands fires: The oil production facilities are 90% unscathed and expected to restart within days, possibly weeks. A report by Bloomberg quotes Steve Williams, chief executive officer of Canada’s largest energy company, Suncor Energy: “Mines and drilling projects north of Fort McMurray are already bringing back some of the roughly 1 million barrels a day of supply that was curbed, Facilities south of the energy hub may take longer”.

Main Macro Events Today

UK Manufacturing Production: (08:30 GMT) A year on year decrease to -1.9% from -1.85% is expected, following a weak q1. The month on month figure is expected to rise to 0.4% from -1.1% last time.
US Crude Oil Inventories: (15:30 GMT) Following last week’s surge to 2.8 million barrels, inventories are expected to show a big drawdown following the Canadian wildfires with only 0.1 million barrels.

Macro Events and News


FX News Today

European Outlook: Higher oil prices and a weaker yen competed with disappointing earnings results in Japan and the U.S. and left Asian stock markets struggling and swinging between gains and losses. U.S. stock futures are higher but FTSE 100 futures are down ahead of the BoE announcement, which is not expected to bring a change in policy, but will be closely watched for dovish signs in the minutes and especially the quarterly inflation report. Mixed leads then for European bond futures, which closed narrowly mixed yesterday, as a reversal of intra-Eurozone safe haven flows weighed on Bund futures. The European calendar also has final French inflation data and Eurozone production numbers.

BoJ Governor Kuroda: Talked up room for easing substantially, if necessary, in a Boersen-Zeitung interview reported yesterday, warning that the BoJ has “certainly not” run out of ammunition. He suggested that a little patience may be required, but the positive inflation trend is absolutely intact. “The quantitative easing, the qualitative easing, the negative interest rate — these are the three dimensions where we can act,” he said. USDJPY has rallied from an overnight low of 108.28 and is currently trading at 108.92, in an attempt to retake 109.00.

Canada’s GDP Outlook Cut Due to Halt in Oil Production: Canada’s Q2 growth outlook has been sharply reduced due to the Fort McMurray wildfire that stopped oil production in the area. We have cut our projection for real Q2 GDP to flat (0.0%) from 1.5%. But we have boosted our Q3 GDP estimate to 2.4% from 1.8% amid the projected return in oil production and rebuilding in the area. Growth for 2016 has been cut to 1.6% from 1.7%, putting growth below the BoC’s 1.7% estimate. But given that the economic impact of the fire is temporary, the events should not sway Bank of Canada policy.

Main Macro Events Today

UK BOE Announcements: A no-change stance by unanimous vote is all but certain as the Old Lady has said that it will refrain from changing policy pending the outcome of the Jun-23 referendum on EU membership. Given the evident deceleration in growth momentum in the UK economy, the minutes are likely to show an uptick in dovish language. However, the focus will be on the updated set of forecasts in the quarterly inflation report although will polls still suggesting a very tight decision any forecasts ahead of the referendum will be subject to high uncertainty and greater error margins.
US Import/Export Prices: April trade price data is out later today and we expect to see some increase with a 0.7% (median 0.6%) import price figure and a 0.2% increase for export prices. This follows respective March figures which had import prices up 0.2% and export prices unchanged. The plunge in oil prices that resumed last fall had helped to keep the headline figures negative but with oil prices rebounding we expect to see a subsequent recovery in the trade price indexes.

GBPAUD: A buy area touch and a move to T1


GBPAUD, 60 min

Yesterday while the pair was still trading at 1.9634 I wrote that there was support at 1.9520 – 1.9560 and that this area coincides with 4h Bollinger Bands and 30 period SMA. Therefore, I said, I was looking for long entry signals inside this buy area with Target 1 at 1.9694 – 1.9740 and Target 2 at 1.9795 – 1.9820. Yesterday GBPAUD moved to my Buy Area during the US session, provided us with buy signals just like the ones I’ve been talking about in the Live Analysis Webinars.

When combined with professional risk management procedures this provided another low risk trading setup that HotForex traders are now quite accustomed to. Market then moved to my Target 1 one at 1.9694 – 1.9740 and those that decided to take profits at the lower end of this range made over 100 pips. Target 2 is at 1.9795 – 1.9820.

People ask me if I’m able to help them to make money in FX markets. The above analysis is an example of how we at HotForex Research can help our clients. However, this is not an isolated case. Recent EURJPY, Crude Oil and EURUSD analyses by me and the AUDUSD & GBPJPY analyses by my colleague Stuart analyses were all very successful.

Sometimes we of course get it wrong as well but that is why we teach clients to follow strict risk management rules. All in all our analyses provide HotForex clients with logical entry levels and reasonable targets. To fully understand how to use the analysis, you need to join our free educational and interactive webinars. To become a good trader requires learning, patience and work mixed with a lot of discipline. If you are ready for that, open an account with HotForex and attend our webinars to start learning how to become an independent and successful trader! We look forward to seeing You there!

Macro Events and News


FX News Today

European Outlook: Risk aversion is picking up, with stock markets continuing to head south in Asia, oil prices down and save haven assets rising. The EUR is little changed against the dollar. However, European bond futures failed to get support from rising risk aversion and a broad decline in stock markets yesterday so weak leads won’t necessarily translate into a drop in yields early in the session, especially if German data at the start is hawkish. The data calendar is very busy see below for German figures on GDP and CPI. Italy also has preliminary Q1 GDP and there are final inflation numbers from Spain and Italy as well as French payrolls data.

German GDP and CPI: The German economy gained pace at the start of this year. In the first quarter of 2016, the gross domestic product (GDP) rose 0.7% on the fourth quarter of 2015 after adjustment for price, seasonal and calendar variations. GDP numbers are stronger than expected, the strong expansion is unlikely to be sustained in the second quarter and the risks to the medium term outlook remain tilted to the downside. Still, for now the numbers back the ECB’s wait and see stance. Consumer prices in Germany fell by 0.1% in April 2016 compared with April 2015. The inflation rate – measured by the consumer price index – thus decreased, following a slight increase in the previous month. A negative rate had last been recorded in January 2015 (–0.3%). Compared with March 2016, the consumer price index fell by 0.4% in April.

BoE Warns Brexit would Lower Growth and Lift Inflation: The BoE once again voted unanimously to keep rates on hold today, as widely expected. The uncertainty ahead of the Brexit referendum on June 23 is now clearly having an impact and the inflation report lowered the expected growth trajectory even though it is based on the assumption that the U.K. will remain in the EU. At the same time the MPC stated very clearly that a a vote to leave the EU would lead to lower growth and higher inflation. The implication for the monetary policy outlook in such a scenario may be ambiguous, but the comments very clearly provide further ammunition to the “remain” camp in the run-up to the referendum.

Fedspeak: George (known hawk) said rates are too low for current conditions, in her speech on “Longer-Term Labor Market Trends, the Economic Outlook and Monetary Policy.” Boston Fed’s Rosengren warned risk of a hike is bigger than markets think. Cleveland Fed’s Mester (hawk): risks around Fed forecasts shouldn’t paralyze policymakers, and oil prices and the dollar have partly stabilized recently.

Main Macro Events Today

US Retail Sales: April retail sales are out on later today and should reveal a 0.6% (median 0.8%) headline with the ex-autos figure up 0.4% (median 0.4%) for the month. This follows March figures which had retail sales down 0.3% and ex-autos up 0.2%. The outlook for the release looks promising as vehicle sales rebounded to a 17.3 mln clip for the month alongside continued strength in construction employment which could help lift building material sales.
US PPI: April PPI is out today and should reveal a 0.4% (median 0.3%) headline with a 0.1% (median 0.1%) core increase for the month. The March headline was -0.1% as was the core and inflation measures had been struggling to post gains alongside the renewed downturn in oil prices that we saw over the winter. Oil prices remain depressed but there was some rebound in April which could help lift the PPI.

Macro Events and News


FX News Today

European Outlook: The major currencies have traded without direction with markets hunkered down into Fed chairwoman Yellen’s speech later today, and ahead of the long U.S. holiday weekend. The dollar has lost its rallying impetus, tracking a decline in U.S. Treasury yields as markets take a more circumspect view of Fed tightening prospects. USDJPY has consolidated in the mid-to-upper 109s after failing to sustain gains above 110.0 this week. Japanese inflation data showed core CPI remained unchanged in April at -0.3% y/y, slightly above the median for -0.4% y/y. The BoJ’s has been (forlornly) targeting core CPI at 2%. The data didn’t impact markets much but will cement expectations for the central bank to expand policy by July. EURUSD has traded a narrow range near 1.1200, above the 10-week low seen on Wednesday at 1.1129. Commodity currencies have settled after recent gains. Oil prices have corrected from the seven-month highs seen yesterday. Asian stocks have mostly gained today. Data out of China showed industrial profit growth decline to +4.2% y/y in April, down from 11.2% in the prior month.

G7 News from Japan: Topics ranged from North Korea, Russia, & China to skirting around the FX situation and vowing to pursue economic growth. “Global growth remains moderate and below potential, while risks of weak growth persist,” the G7 leaders said after a two-day summit in central Japan. “Global growth is our urgent priority.” Japanese Prime Minister Shinzo Abe has been playing up what he calls parallels to the global financial crisis as growth in his country sputters.

US Data Releases; some strong, some weaker: US reports revealed a 3.4% April durable goods pop and a welcome 10k drop in initial claims to a respectable 268k that further unwound the early-May spike to a 294k one-year high. The component data for the durables report were weaker than expected, however, leaving a mixed set of data for the day, and we’ve lowered our Q1 GDP growth estimate to 1.0% from 1.1% in today’s release, versus the 0.5% advance figure. We still expect an inventory-restrained 2.0% GDP growth clip in Q2 with a 3% pace for real equipment spending, despite a disappointing 0.8% April decline for ex-transportation equipment orders, and we still peg the May nonfarm payroll rise at 190k.

Fedspeak: Powell – said another rate hike could be seen “fairly soon,” in the text of his speech on “Recent Economic Developments, the Productive Potential of the Economy and Monetary Policy.” We seldom hear comments on policy or the economy from this Fed official, so his near term forecast is important. However, he wants to see a “significant strengthening in growth” in Q2, including further strong job gains and declines in the unemployment rate and other measures of slack, along with increases in wages. Should data support his expectations, he is in favor of gradual rate increases. He noted the asymmetric risks of zero rates, headwinds from weak global demand and geopolitical events, a lower long-run neutral funds rate, and the “apparently elevate sensitivity of financial conditions to monetary policy.”

Main Macro Events Today

Yellen to speak at Havard As we reported on Monday the highlight of Fedspeak this week. Her colleagues have been fairly consistent in talking up a rate rise at either the June or July meetings. As Chair and chief moderator she is never as direct as some on the FOMC and is unlikely to stray far from that today. However, her speech and interview with renowned Keynesian economist Greg Mankiw will be followed closely.
US GDP Expectations are for 0.7% Q1 rise and for the Annualized figure to be revised up to 0.9% (median- although we expect 1.0%) from 0.5%.

Macro Events and News


FX News Today

Sterling remains under pressure on new Brexit polls that showed a swing in support for the Leave campaign. The FT’s Brexit poll tracker is now showing 46% in favour of Remain and 43% in favour of Leave, versus respective figures of 46% and 41% that were being shown yesterday morning (London time). Bookmaker Ladbrokes are now reporting 75% of all Brexit bets are in favour of the UK remaining in the EU, down from 79% seen yesterday morning and off from the 81% level seen at the end of last week. At the same time in Japan PM Abe announced a two-plus year delay in the planned sales tax hike (which had been scheduled for April next year), raising concerns about fiscal sustainability although a widely anticipated move.

China’s manufacturing PMI was unchanged in May at 50.1, while the Caixin/Markit index slipped to 49.2 from 49.4. Those numbers are disappointing and could leave a bearish tone in equities. Though the manufacturing PMI is above the 50 expansion-contraction mark for a 3rd straight month, it’s been on a softening trend since mid 2014 and will add to worries over a growth slowdown. The non-manufacturing PMI slipped to 53.1 from 53.5. Also, the Caixin manufacturing PMI dipped to 49.2 from 49.4. That’s where it was a year ago. It’s a 15th consecutive month in contraction.

Switzerland’s economy expanded sluggishly in the Q1 2016 as government spending fell for the first time in 12 months. The slowdown to 0.1 % followed a period of expansion of 0.4% in the last quarter of 2015 and was less than the 0.3 % growth that economists forecasted. The report published by the State Secretariat for Economic Affairs in Bern also showed that government spending dropped 0.8 %.

Atlanta Fed’s GDPNow estimate remained at 2.9% for Q2 unchanged from the last reading on May 26 after taking the measure of the personal income report this morning: “The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.9 percent on May 31, unchanged from May 26. The second-quarter forecast for real consumer spending growth remained at 3.6 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.” See the Atlanta Fed GDPNow website for more insight.

Yesterday’s US reports revealed a hefty 1.0% April surge for consumption that beat estimates and dominated the day’s headlines, alongside a largely expected 0.4% April income rise, and disappointing May declines for the Chicago PMI to 49.3 from 50.4, for the Dallas Fed index to -20.8 from -13.9, and for consumer confidence to 92.6 from 94.7 (was 94.2). The big April spending surge lifted our Q2 GDP forecast to 2.6% from 2.0%, with a solid 3.47% (was 2.3%) Q2 growth clip for real consumption. Output is rebounding in Q2 as we approach the end of the inventory headwind, despite the day’s ugly confidence and sentiment setbacks for May.

  • Euro Area Manufacturing PMI: Eurozone Manufacturing PMI numbers for May are out today and are expected to be confirmed unchanged at 51.5. Manufacturing PMI has fallen from 53.2 to 51.5 in 2016.
  • UK Manufacturing PMI: While UK manufacturing PMI high in 2015 was 55.5 the current numbers are considerably lower. Today’s release is expected to confirm the number at 49.6 which would be an improvement from April’s disappointing number of 49.2.
  • US Fed’s Beige Book: Fed’s Beige Book for the month of May is published today. Markets look forward to this publication in order to gain insights on Fed’s thinking process in terms of the future interest rates policy.

Macro Events and News


FX News Today

FX Update: The dollar has trader softer today, which has driven EURUSD to a one-week peak at 1.1213 and USDJPY to a two-week low at 108.83, although some yen outperformance was a factor in the latter. The yen rallied with as the mood in most stocks markets in Asia remained cautious, while currency strength in turn exacerbated losses on the Tokyo Stock Exchange. The Nikkei 225 underperformed the region notably with a 2.3% loss. The longer-than-anticipated delay to the planned sales tax hike, announced by PM Abe yesterday, was held as a yen bullish view by some, though this shouldn’t affect BoJ policy considerations given disinflationary pressures and with the central bank holding two of the “three arrows” in the Abenomics stimulus plan. A Reuters survey two weeks ago found a strong consensus favouring the BoJ to expand policy by July, via the QQE program and possibly by a deepening of NIRP. Two big external events are approaching, the first being the ECB’s June policy meeting today, and the next being the release of the May U.S. payrolls report tomorrow. The former is not likely to be a market shaker as the central bank is an affirmed wait-and-see stance. The latter will be looked to in context of Fed tightening possibility at the upcoming FOMC on June 14th-15th. The general view at the moment is that after indifferent U.S. data this week, and given Brexit vote in the UK on June 23, the Fed will delay the decision until the FOMC in July.

European Outlook: Oil prices are under pressure and the front end WTI future below USD 49 per barrel ahead of the OPEC meeting. U.K. stock futures are posting small gains, but U.S. futures are also down and leads remain supportive for European bond futures, which already moved higher yesterday, with Gilt futures outperforming. Bund traders were cautious ahead of today’s ECB meeting, with Draghi unlikely to strengthen the dovish message at the moment and instead focus on putting further pressure on governments to implement reforms to complement the accommodative policy.

Poor Global manufacturing PMI’s: Although U.S. data revealed encouraging May gains in the ISM, to 51.3 from 50.8, and in vehicle sales, which we now peg at a 17.6 mln rate from 17.3 mln in April. Unfortunately, we also saw an April pull-back in construction spending after upwardly-revised Q1 gains that lowered GDP growth prospects on net, though we now assume a Q1 GDP boost to 0.9% from 0.8%. The April construction drop likely reflects some give-back of a winter weather-boost, and we still assume a solid spring-season for housing given April strength in pending, new and existing home sales. The PMI data from Asia and Europe was also weak with on the UK showing a move forward.

Canada Q1 GDP disappoints: Disappointing but not Disastrous: Canada’s 2.4% real Q1 GDP gain undershot relative to expectations. While the 0.2% m/m drop in March GDP left a poor hand-off for Q2 GDP, a contraction had already been factored in for that quarter due to the halt in oil production. Hence, Q1 and March GDP do not alter the underlying growth story for Canada in 2016, although the Q1 performance does suggest and even longer path back to sustainable growth than had been previously assumed. The longer wait implies an even more drawn out period of time at currently accommodative rates from the Bank of Canada.

Main Macro Events Today

ECB Meeting & Press Conference The central bank is widely expected to keep policy on hold at today’s council meeting, leaving the focus on Draghi’s press conference and the updated set of staff projections. We don’t expect a big change to the inflation forecasts, but the growth forecast for this year could be lifted after stronger than expected first quarter growth numbers. Draghi’s overall message though is likely to be the same as the last time around: The ECB is firmly in “wait-and-see” mode and focused on implementing the measures already announced, with the corporate bond purchase program starting this month. The ECB leaves the door to further easing open, but is unlikely to step up the dovish message, as council members increasingly shift the focus to the need for government action and structural forms to complement the ECB’s accommodative policy stance and help lift long term growth potential.

BOE’s Governor Carney speech The new GBP five pound note is being unveiled and the Governor is due to speak, Brexit will inevitably be raised with reporters hanging on to any reference for policy implications.

Macro Events and News


FX News Today

FX Update: Narrow ranges have prevailed among the dollar majors and other currency pairings as markets hunker down into the release of the May U.S. jobs report today. The yen has remained firm with USDJPY edging out an 18-day low of 108.49, surpassing yesterday’s low by only 3 pips. The yen has been trading firm since Wednesday’s announcement by Japanese PM Abe’s of “bold economic measures” later in the year, along with a bigger delay than anticipated in the planned sales tax hike (to at least 2019), which seemed to suggest a shift in policy toward fiscal and away from monetary. Elsewhere, EURUSD has seen barely more than a 15 pip range centred around 1.1150, settling after yesterday’s short-lived foray above 1.1200. The U.S. employment report will arrive today with recent data having failed to ignite expectations for a Fed rate hike as soon as June 15. We’re forecasting a 190k increase in nonfarm payrolls, but note risk is to the downside (the median forecast is for a 150k headline). Hourly earnings and average workweek components will be watched closely as they’re also key to the FOMC’s decision, while the unemployment rate is seen ticking down to 4.9% from 5.0%. Unless we see an outcome near to our forecast, or above, the dollar will likely take a tumble.

European Outlook: Bund and Gilt futures managed robust gains yesterday, as Draghi left the door open for further easing, although the lack of further measures in the pipeline left stock markets little changed at the end of the day. FTSE 100 stock futures are slightly higher, and Asian equity markets also managed slight gains, but U.S. stock futures are down and trading remains cautious ahead of U.S. jobs data. Today’s European calendar has final Eurozone Services PMIs and the first reading of the U.K. Services PMI as well as Eurozone retail sales, but it is the Brexit referendum that is starting to cast a big shadow over markets and keeps investors cautious. Oil prices are also little changed, with the front end WTI future holding slightly above USD 49 per barrel.

ECB – Nothing New in the Pipeline: The ECB not only maintained interest rates today, but also implicitly confirmed that it is putting all its hopes on the measures already announced, but yet to be implemented, and that nothing new is in the pipeline. True, the door to additional measures stays open and especially the Brexit referendum remains a near term, but also medium term risk that could spark turmoil and put a strain not just on financial markets, also the European Union and ultimately EMU. Still, in the central scenario the ECB seems done, with the ball firmly in the court of governments now, to push on with the structural reforms necessary to complement the accommodative monetary policy.

Fedspeak: Dallas Fed’s Kaplan: raising rates in June or July is getting to the point where it makes sense, said the moderate non-voter, who noted that inflation picked up in the past 3-months and GDP is seen near 2% this year. He sees room for the labor force participation rate to improve, but notes we’re “pretty darn close” to full employment. Kaplan expects the labor force participation rate to fall in the next 10-years to 61%, however, due to demographics. Overall, this is relatively hawkish, though not out of line with recent Fedspeak.

Main Macro Events Today

US Employment data NFP May employment data is out today and should reveal a 190k (median 155k) headline which would follow 160k in April and 208k in March. We expect the unemployment rate to tick down to the prior cycle low of 4.9% (median 4.9%) from 5.0% in April and March. There is downside risk to the release from the higher initial claims average for the month and the drop in producer sentiment.

US Non-manufacturing ISM The May ISM-NMI is also out today to close out the May producer sentiment releases. We expect a headline decline to 55.0 (median 55.3) from 55.7 last month and 54.5 in March. Most other measures of producer sentiment declined for the month so there is some downside risk to the release as we discuss in our May 23 commentary but the ISM managed to increase to 51.3 from 50.8 in April.

The Economic Week Ahead


The Main Macro Events This Week

United States: Fed’s Yellen will have some dovish food for thought following the May payrolls shortfall when she delivers a prime-time speech today on the economic outlook and monetary policy before the World Affairs Council of Philadelphia from 12:30 ET. The US economic calendar this week may be a little anti-climactic relative to the big May jobs setback on Friday, which upended rising odds favoring a June hike that were all but eviscerated. On tap is the revision of Q1 productivity (Tuesday), forecast to be upgraded to -0.5% (median -0.6%) from -1.0%, while unit labor costs may back up to 4.3% from 4.1%. Rounding out the session will be an update of April consumer credit, which is set to be cut in half to $15.0 bln from the surprise $29.7 bln surge in March. MBA mortgage applications are due (Wednesday), along with Yellen’s favorite JOLTS and the EIA energy inventories report. Initial jobless claims are expected to be steady at 267k (median 270k) for the June 4 week (Thursday), while the wholesale trade report may show a 0.1% gain for inventories and 1.3% rise in sales for April. Capping the meager week of data (Friday) will be Michigan sentiment, seen ebbing to 94.5 in June (median 94.0) from 94.7 and the Treasury budget gap is set to widen to -$61.0 bln in May (median -$60.0 bln) vs the tax-related $106.5 bln April surplus.

Canada: In Canada a busy week is highlighted by the May employment report and the Bank of Canada’s Financial Stability Report. Economic data begins with the May Ivey PMI (Tuesday), expected to slip to a seasonally adjusted 51.0 in May from 53.1 in April. Housing starts (Tuesday) are seen slowing slightly to 190.0k rate in May from 191.5k in April. Building permit values are expected to slip 1.0% m/m in April after the 7.0% tumble in March. The new home price index (Thursday) is seen improving 0.2% m/m in April after the 0.2% gain in March. The rate of capacity utilization (Thursday) is projected at 81.3% in Q1 from 81.1% in Q4. Employment is expected to nudge 5.0k higher in May after the 2.1k drop in April. The unemployment rate is seen steady at 7.1%. The Bank of Canada’s Financial System Review (Thursday) will be followed by a press conference. The Financial System Review is released twice a year.

Europe: With the ECB entrenched in wait-and-see mode and focused on implementing the March measures, all the while eying the wider implications of the UK referendum on the EU and the Eurozone, data releases may be an important factor in the short term policy outlook. Still, German manufacturing orders (today) in particular will be monitored carefully. We forecast a correction of -0.8% m/m (median -0.5%) in April, after the 1.9% m/m jump in March, with the latter still likely to lift production (Tuesday), however, by 0.8% m/m (median 0.7%). March industrial production numbers (Tuesday) will have been impacted by the earlier timing of the Easter holidays this year, which may not have been fully captured by the seasonal adjustment process and could lead to an upside surprise in the numbers. The final German HICP rate (Friday) is expected to be confirmed at 0.0% y/y (median same), and final Eurozone Q1 GDP (Tuesday) at 0.5% q/q. The numbers were stronger than initially expected and the breakdown is likely to show strong domestic demand and a pick-up in investment, but forward looking indicators already point to a slowdown in growth in the second quarter to around 0.3% q/q at best. The recovery is limping ahead, but even with the ECB’s very accommodative policy, it will take a long time for the output gap to close, especially as governments remain slow to implement unpopular structural reforms. The data calendar also includes French production and German trade data as well as national inflation numbers from the smaller Eurozone countries.

United Kingdom: Brexit polling will remain the central focus for sterling markets as the June 23 vote starts to loom large on the near horizon. Over the last week the “Leave” campaign, aided by immigration numbers hitting near record levels and their neatly coinciding proposals for a points-based immigration system, have narrowed the “Remain” camp’s lead. As of late Friday the FT Brexit tracker was showing 46% support “Remain” and 43% support for “Leave,” down from respective 47% and 41% levels that was being seen a week before. UK bookmaker Ladbrokes was showing that 71% of Brexit bets were for “Remain,” down from 81% a week before. The calendar this week is relatively quiet, featuring the May BRC retail sales survey (Tuesday), which we expect to show a rebound to +0.3% y/y in the headline same-store figure (median same) after the disappointing -0.9% y/y figure of April, April production data (Wednesday), where we anticipate a 0.0% m/m outcome (median same) after +0.3% m/m in March, and trade data (Thursday), where we project a near unchanged goods deficit of GBP 11.0 bln.

China: In China, the May trade surplus (Wednesday) is expected to widen to $53.0 bln from $45.6 bln in April. May foreign direct investment (Wednesday) is seen at up 3.0% y/y from the previous 6.0% outcome. May CPI and PPI (Thursday) is forecast at 2.2% y/y from 2.3%, and -3.3% y/y from -3.4%, respectively. May loan growth (Friday) is penciled in at 14.5% y/y from 14.4%, while May new yuan loans are expected to expand to CNY 700.0 bln from 555.6 bln previously. April leading indicators are tentatively due during the week. May industrial production and retail sales are expected to be released next weekend. Elsewhere in the region, India’s RBI meets (Tuesday) where rates are seen steady at 6.50%. April industrial production (Friday) is seen up 0.5% y/y from 0.1% previously, along with the May trade report. South Korea’s BoK meets (Thursday) with policy seen steady, and rates unchanged at 1.50%. Taiwan May CPI (Tuesday) is forecast to cool to 1.6% y/y from 1.9% previously, while May exports (Tuesday) are seen falling 7.0% y/y from -6.5% in April. In Malaysia, April industrial production (Friday) is forecast to have risen to 3.0% y/y from 2.8% in March. Philippines May CPI (Tuesday) is expected to tick up to 1.2% y/y from the prior 1.1% outcome. April unemployment data is due Thursday, with April exports due on Friday.

Japan: In Japan, preliminary April leading and coincident indices (Tuesday) are expected to rebound 0.5% m/m from -0.4% for the former, and rise 1.0% from the prior 0.4% gain for the latter. Revised Q1 GDP (Wednesday) is forecast to improve to 1.8% q/q from the initial 1.7% outcome. April current account surplus (Wednesday) is predicted to narrower to JPY 2,000 bln from 2,980.4 bln in March. First 20-day May trade data is also due (Wednesday). April machine orders (Thursday) are penciled in at -4.0% from the prior 5.5% increase.

Australia: In Australia, the Reserve Bank of Australia (Tuesday) meets, with no change anticipated to the current 1.75% setting for the cash rate. The data calendar is thin. ANZ job ads (today) are seen falling 0.2% in March after the 0.8% pull-back in April. The Melbourne Institute Experimental Inflation Gauge (today) is expected to rise 0.2% m/m in May after the 0.1% gain in April.