Daily Market Outlook by Kate Curtis from Trader's Way

Forex Major Currencies Outlook (Nov 18– Nov 22)

FOMC minutes, preliminary PMI data from Europe and Japan as well as Canadian inflation and consumption data will mark the weak ahead of us.

USD

CPI for the month of October came in at 1.8% y/y vs 1.7% y/y. The energy contributed for more than a half of the increase while healthcare and food also contributed. On the other hand, motor vehicle prices and apparel were the biggest drag. Core CPI came in at 2.3% y/y vs 2.4% y/y as expected. Both real average weekly and hourly earnings came weaker than previous month at 0.9% y/y and 1.2% y/y respectively.

Retail sales in October came in at 0.3% m/m vs 0.2% m/m as expected for a rebound from -0.3% m/m the previous month. Core retail sales came in as expected at 0.3% m/m. Home furnishings were the biggest drag followed by sales at food service and drinking places while online shopping and auto dealers contributed the most to the reading. US consumer starts the Q4 on an elevated note and with high consumer confidence it promises a healthy holiday shopping season (Black Friday and Christmas).

This week we will have housing data and minutes from the last FOMC meeting.

Important news for USD:

Tuesday:

  • Building Permits
  • Housing Starts

Wednesday:

  • FOMC Minutes

Thursday:

  • Existing Home Sales

EUR

ZEW survey of the current situation in German economy came a bit better than the previous month at -24.7 vs -25.3, however big improvements were made in expectations category with German expectations coming in at -2.1 vs -13 as expected and up from -22.8 the previous month. EU expectations came in at -1 vs 23.5 the previous month. Although the readings are still in the negative and significant rebound in global economy is farfetched expectations paint a picture of optimism. Industrial production for September nudged up to -1.7% y/y vs -2.3% y/y and added more optimism regarding slow recovery. Final core CPI in October came in unchanged at 1.1% y/y.

Preliminary German Q3 GDP came in at 0.1% q/q vs -0.1% q/q as expected. The surprisingly positive reading helped Germany avoid a technical recession in 2019. Second reading of EU Q3 GDP came in unchanged at 0.2% q/q but yearly figure was a bit stronger at 1.2% y/y vs 1.1% y/y preliminary.

This week we will have preliminary November readings for consumer confidence and PMIs.

Important news for EUR:

Thursday:

  • Consumer Confidence Index

Friday:

  • Markit Manufacturing PMI (EU, Germany, France)
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)

GBP

Preliminary Q3 GDP came in at 0.3% q/q vs 0.4% q/q as expected, up from -0.2% q/q in Q2. UK has managed to avoid a technical recession in 2019. Total business investment came in flat vs -0.5% q/q as expected while private consumption came in line with the expectations at 0.4% q/q. Manufacturing and industrial production came in weaker than expected with former coming in at -0.4% m/m vs -0.2% m/m and latter at -0.3% m/m vs -0.1% m/m. All of the data points to the economy that is just dragging along, still watching for clarifying signs regarding Brexit. GDP growth of 1% y/y is the lowest in almost a decade.

Employment change in September came in at -58k vs -102k as expected, better than expected but the number of employees continues to drop and it is a biggest drop in 4 years. Average weekly earnings came in at 3.6% vs 3.8% 3m/y as expected, slowing down but still staying high. The claimant count, which is the number of people claiming unemployment benefits, rose to 33k, almost doubling from the previous month and reaching the highest level in two years. CPI for October came in at 1.5% y/y vs 1.6% y/y as expected and down from 1.7% y/y the previous month which is a new three-year low. Energy prices were the main drag on the reading. Core CPI held at 1.7% as expected. Retail sales came in at -0.1% m/m vs 0.2% m/m as expected. Jobs, inflation and consumption all show increasingly bad situation in UK’s economy which could push BOE more toward rate cuts in the future.

Nigel Farage has stated in his campaign that his Brexit party will not contest the 317 seats Tory party won in 2017 and will fight Labour candidates in election. This will increase chances of Tory party to have the majority in the Parliament and GBP has risen on the comments. The Brexit party has also announced that it will step down from fighting for 43 non-Tory seats which additionally increases chances of Tory majority and GBPUSD really liked this news. Latest polls show a double-digit lead for the Tory party with some polls going even up to 14-point lead (42-28).

AUD

Chinese CPI in October came in at 3.8% y/y which is a 7-year high. The rise in food prices, mainly pork due to the swine flu epidemic, pushed inflation higher. PPI data continued their decline and came in at -1.6% y/y vs -1.2% y/y. The drop in PPI will make industrial profits suffer which in turn will have negative impact on the economy as a whole. Industrial production came in at 4.7% y/y vs 5.4% y/y as expected and 5.8% y/y the previous month. This is a substantial miss and shows the negative effects of the trade war on the external sector. Vehicles and smartphones recorded the biggest drops. Retail sales were also weaker than expected coming in at 7.2% vs 7.8%.

Australian employment change came in -19k vs 15k as expected for a huge miss. This led to the unemployment rate rising to 5.3% vs 5.2% previously. RBA wants to push the unemployment rate down to 4.5% so this reading shows that not only are they far away from the desired level, but they are moving in the opposite direction. Full time employment change saw a loss of 10.3k. Participation rate dropped to 66% from 66.1% while chances for RBA cut in December rose.

This week we will have minutes from the last RBA meeting.

Important news for AUD:

Tuesday:

  • RBA Meeting Minutes

NZD

As predicted in our last week’s article, RBNZ has left the cash rate on hold at 1%. This was seen as a surprise move by the markets, especially after inflation expectations data fell to 1.8% from 1.86% previously and NZD strengthened. RBNZ stated that they will continue monitoring economic developments and will act if required. Interest rates will remain at lower levels for a prolonged period of time and additional stimulus will be added if necessary. The weak NZD has helped offset the weaker global economic environment. Employment remains at around maximum sustainable level and inflation is within the target range, although it is below 2%. Governor Orr stated that the decision to leave the rate unchanged was unanimous and he expects thd economy to pick up the following year adding that current policy is very stimulatory.

This week we will have bi-monthly GDT auction.

Important news for NZD:

Tuesday:

  • GDT Price Index

CAD

BOC governor Poloz stated that wage inflation is above 4% in most measures, pointing out the strong wage growth. This month has been tough on CAD so far with the currency dropping against USD in almost every session. Risk off flows have been hurting CAD pushing it down, although by the end of the week it seems that USDCAD stabilised on the back of optimism surrounding the USMCA deal.

This week we will have manufacturing sales, inflation and consumption data.

Important news for CAD:

Tuesday:

  • Manufacturing Sales

Wednesday:

  • CPI

Friday:

  • Retail Sales

JPY

Core machinery orders, which are a good indicator for capex down the road (6 to 9 months), came in September at -2.9% m/m vs 0.9% m/m as expected and 5.1% y/y vs 8.1% y/y as expected. Preliminary Q3 GDP came in at 0.1% q/q vs 0.2% q/q as expected and down from 0.3% q/q the previous quarter. Private consumption came in at 0.4% q/q vs 0.6% q/q the previous quarter. Business spending came in at 0.9% q/q as expected and up from 0.2% q/q the previous quarter for a positive note in the weak reading. Net exports were a drag on the reading with 0.2pp due to exports falling 0.7% q/q. Final industrial production in September has seen improvement since preliminary readings and came in at 1.7% m/m and 1.3% y/y.

This week we will have trade balance and national inflation data as well as preliminary PMIs.

Important news for JPY:

Wednesday:

  • Trade Balance
  • Exports
  • Imports

Friday:

  • CPI
  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

CHF

SNB chairman Jordan stated that CHF is highly valued and reiterated readiness to intervene in the markets if necessary. The danger of deteriorating international situation remains large. SNB Maechler added that SNB wants to limit the burden of negative rates for banks.

This week we will have trade balance data.

Important news for CHF:

Tuesday:

  • Trade Balance
  • Exports
  • Imports

Forex Major Currencies Outlook (Nov 25– Nov 29)

Please note that liquidity will be thin on Thursday and Friday due to the US Thanksgiving holiday, Q3 GDP data from US, Canada and Switzerland along with inflation data from US and EU and consumption data from New Zealand will mark this week.

USD

FOMC minutes showed that most members were satisfied with where the rates are at the moment. “A couple” said that Fed should reinforce statement with clear communication stating that another rate cut is not likely unless signs of “significant slowdown” appear. Prior rate cuts were warranted due to global weaknesses and trade uncertainty. Risks to the economic outlook still remain tilted to the downside according to members.

This week we will have housing and consumer confidence data, second reading of Q3 GDP, durable goods and Fed’s preferred PCE inflation data.

Important news for USD:

Tuesday:

  • New Home Sales
  • CB Consumer Confidence Index
    Wednesday:
  • GDP
  • Durable Goods
  • PCE
  • Personal Spending
  • Pending Home Sales

EUR

Chief Economist at ECB Phillip Lane, who will play a more significant role now that Christine Laragde, non-economist, is the new ECB president, stated that a recession is not looming and he expects a recovery in the next year or two. ECB Vice President Luis de Guindos said that a recession in the Eurozone was “very improbable” and ECB officials stated that growth in the Eurozone is expected to remain subdued for a prolonged period of time. Lagarde stated that monetary policy will remain supportive of the economy and that is a key element is euro area fiscal policy. Preliminary consumer confidence in November shows -7.2 vs -7.6 the previous month. It is a slow climb up.

Preliminary PMI for Eurozone shows manufacturing at 46.6 vs 45.9 the previous month, services at 51.5 vs 52.2 the previous month and composite at 50.3 vs 50.9 the previous month. Rebounds in manufacturing PMI and drops in services PMI have been made by both Germany and France. Improvement of German manufacturing PMI possibly signals that bottom in the reading has been reached, however drop of services PMI to 38-month low is causing a concern of dropping domestic demand. Composite reading for EU still shows a sluggish growth.

This week we will have data on business climate from EU and Germany, preliminary inflation data for November as well as the unemployment rate.

Important news for EUR:

Monday:

  • Ifo Business Climate (Germany)
    Thursday:
  • Business Climate Indicator
  • Consumer Confidence Index
    Friday:
  • CPI
  • Unemployment Rate

GBP

The latest polls see the Conservative party at 42% while Labour is second with 31%. The televised debate between Johnson and Corbyn has been characterized as a draw with reports suggesting that Johnson fared better in the first half and Corbyn did better in the second half. Nationalisation of industries has become official party policy for the Labours which increased investors’ preference for the Tory party. Preliminary manufacturing PMI for November shows further drops in the reading coming in at 48.3 vs 49.6 the previous month. Services also plummeted below 50 coming in at 48.6 vs 50 the previous month thus pushing the composite to 48.5 vs 50 the previous month. General election is providing additional uncertainty to the existing one caused by Brexit and business output and orders are dropping significantly. This all adds calls for rate cut next year.

AUD

RBA minutes show board’s readiness to easy further if the need arises. They have recognized the negative effect that lower rates have on savers and confidence. Extended period of lower rates is needed for desired goals to be achieved. They decided to be wait and asses the effect of already delivered “substantial” stimulus. AUD is at the lower end of recent range. The minutes had an overall dovish feel especially considering that the board agreed that a “case could be made” for a rate cut in November.

This week we will have a speech by RBA governor Lowe as well as official PMI data from China.

Important news for AUD:

Tuesday:

  • RBA Governor Lowe Speech
    Saturday:
  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)

NZD

GDT auction showed increase in price of 1.7% thus making this the fifth consecutive auction of rising prices. NZD rose on the week against USD on the back of positive US-China trade talks, but as the week went along and the talks begin to sour due to US Senate’s Hong Kong support bill NZD started losing ground.

This week we will have consumption and trade data, speech by RBNZ governor Orr as well as ANZ business confidence which is a very closely watched metric by RBNZ.

Important news for NZD:

Monday:

  • Retail Sales
    Tuesday:
  • Trade Balance
  • Exports
  • Imports
  • RBNZ Governor Orr Speech
    Thursday:
  • ANZ Business Confidence

CAD

Manufacturing sales in September came in at -0.2% m/m vs -0.5% m/m as expected. A better than expected reading but a big drop from 0.8% m/m the previous month. Sales were down in almost half of sectors (10 of 21). Soft sales in the petroleum and coal product (-1.9%) and the motor vehicle parts (-4.3%) were the main drag while sales in machinery (5.5%) and motor vehicles (2.9%) contributed positively.

CPI in October came in at 1.9% y/y as expected, unchanged from previous month. Excluding gasoline, it came in at 2.3% y/y. While inflation in goods stayed the same at 0.2% m/m inflation in services improved to 0.4% m/m from -0.9% m/m the previous month. Core measures all came in line with expectations, median at 2.2%% y/y, common at 1.9% y/y and trimmed at 2.1% y/y. Readings in line with expectations pushed CAD higher putting more credibility that BOC will hold rates at their December meeting. Governor Poloz came out with less dovish comments than expected which gave CAD a boost. He stated that the economy is in a good place and that global easing is starting to provide a glimmer of response.

September retail sales came in at -0.1% m/m vs -0.3% m/m as expected. Previous month’s reading was revised to 0.1% m/m. Food and beverage stores and building materials were the main contributors while new car sales, furniture sales and gasoline station sales contributed negatively.

This week we will have wholesale trade data as well as Q3 GDP.

Important news for CAD:

Monday:

  • Wholesale Trade
    Friday:
  • GDP

JPY

Trade balance data for October show surplus of JPY17.3 bn vs JPY229.3 bn as expected. Exports have fallen -9.2% y/y thus making this the biggest drop in exports in the last 3 years. Imports came in at abysmal -14.8% y/y, the biggest drop in 3 years as well. Exports to US, China and Asia are all down in double digits. The weak global demand has affected exports while sales tax hike and damage caused by typhoon have impacted imports.

Preliminary PMI data for November shows small improvements with manufacturing coming at 48.6 vs 48.4 the previous month and services coming at 50.4 vs 50.3 the previous month. Looking at the report IHS Markit stated that “there is a strong possibility of Japan’s economy contracting in the fourth quarter.” National CPI in October came in at 0.2% y/y vs 0.3% y/y as expected. CPI ex food and energy came in at 0.7% y/y vs 0.6% y/y as expected. The sales hike tax did not have the desired impact on inflation in the first month of its inception.

This week we will have consumption data for October, first after the sales tax hike so the big drop from previous month is expected, Tokyo area inflation, unemployment rate and preliminary industrial production data for October.

Important news for JPY:

Thursday:

  • Retail Sales
    Friday:
  • CPI
  • Unemployment Rate
  • Industrial Production

CHF

Trade balance data in October show shrinking of trade surplus to CHF3.5 bn vs CHF4.02 bn the previous month. The shrinking occurred due to both fall in exports and imports, however exports fell more significantly -1.3% m/m vs 2.7% m/m the previous month. SNB Maechler came out and stated that Swiss short-term growth outlook has worsened adding that easy monetary policy is still needed and reiterated their readiness to intervene in FOREX markets if the need arises.

This week we will have Q3 GDP data.

Important news for CHF:

Thursday:

  • GDP

Forex Major Currencies Outlook (Dec 2– Dec 6)

After Thanksgiving holiday markets are back in full swing and we will have rate decisions from RBA and BOC as well as Q3 GDP data from Australia and then on Friday NFP and Canadian employment report.

USD

Preliminary durable goods in October positively surprised and came in at 0.6% m/m vs -0.9% m/m as expected. Capital goods orders non defense ex air came in at 1.2% m/m vs -0.2% m/m as expected. On the back of strong durable goods report second reading of Q3 GDP came in at 2.1% vs 1.9% in the preliminary reading. Personal consumption added 1.97 pp vs 1.93 pp from the previous reading confirming the strong impact of US consumer on GDP. Gross private investment dragged the reading with -0.01 pp, much better than -0.27 pp in the preliminary reading. A rise in inventories contributed with 0.17 pp vs -0.05 pp in the first report. Personal spending came in at 0.3% as expected but personal income came in flat. This indicates that personal debt is increasing which will stimulate Fed to keep rates low for longer time.

After the markets closed on Wednesday president Trump signed a bill supporting Hong Kong protesters. China has warned the president that it will retaliate in the case of signing the bill. AUDJPY dropped on the news and risk off appetite is back in the markets. It is yet to be seen how this act will influence already shaky “phase one” trade deal.

This week we will have ISM PMI data, trade balance data and NFP on Friday as highlight of the week. The headline number expected is around 170k and there are expectations for a tick up in the unemployment rate due to rise in participation rate. Earnings are expected to stay the same at 0.2%.

Important news for USD:

Monday:

  • ISM Manufacturing PMI

Wednesday:

  • ISM Non-Manufacturing PMI

Thursday:

  • Trade Balance
  • Exports
  • Imports

Friday:

  • Nonfarm Payrolls
  • Unemployment Rate
  • Average Hourly Earnings

EUR

German Ifo business climate index in November ticked up to 95 vs 94.7 the previous month. Expectations index also climbed to 92.1 vs 91.6. Small improvements give credibility to German stability in Q4, but are far from serious rebound. According to Ifo German manufacturing is still stuck in recession. Strong domestic demand will produce positive GDP reading from Germany as they expect Q4 GDP to come in at 0.2% q/q.

Preliminary November CPI came in at 1% y/y vs 0.9% as expected and up from 0.7% y/y the previous month. Core CPI came in at 1.3% y/y vs 1.2% y/y as expected and up from 1.1% y/y the previous month which along with the reading from May is a 6-year high. Inflationary pressures are picking up which is a good sign for the economy as general, however consistency is still needed. Final consumer confidence in November came in at -7.2 as preliminary reading showed, up from -7.6 the previous month. Economic confidence came in at 101.3 vs 100.8 the previous month indicating the slowly improving situation in Euro area. The unemployment rate holds the ground at 7.5%. Ursula von der Leyen has been officially confirmed as the next European Council president. She received 461 votes out of 707 and will succeed Juncker from December 1.

This week we will have final November PMI data, consumption data and last reading of Q3 GDP.

Important news for EUR:

Monday:

  • Markit Manufacturing PMI (EU, Germany, France)

Wednesday:

  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)

Thursday:

  • Retail Sales
  • GDP

GBP

Prime minister Johnson continued the election campaign by promising Brexit vote before Christmas if he wins the election on December 12. Tory party still enjoys a comfortable double digit lead in the polls, although during the week there were reports of Labour party tightening the gap. GBP did not take that well since investors like clear majority by business friendly Tories so GBPUSD weakened. On Wednesday the YouGov MRP model, which successfully predicted that Theresa May will not maintain majority in 2017 elections, showed that Tories will win 359 seats while Labour will held 211 seats. Since total number of seats in the Parliament is 650 this poll shows a clear majority, 68 seats, for the Tories which would be the greatest victory for the party since 1987.

This week we will have November PMI data.

Important news for GBP:

Monday:

  • Markit Manufacturing PMI

Wednesday:

  • Markit Services PMI

AUD

RBA governor Lowe stated that 0.25% is the effective lower bound for rates adding that they are long way from introducing QE. They expect employment growth to be slow but still positive and reasonable. There are a lot of positives in the economy according to them and the most important thing is to get inflation to move in the right direction. It will take more time for wages to push inflation up. Private capex for Q3 came in at -0.2% q/q vs flat as expected. It was up from -0.5% q/q the previous quarter but investment is still very weak.

Industrial profits from China in October fell -9.9% y/y from -5.3% y/y the previous month. This is the third consecutive month of falling profits and the biggest fall since 2011. Such a poor record can negatively influence the capex as firms cut back on investments. Falls in profits are attributed to the falling producer prices for manufacturing goods as well as slower production and sales growth. Sectors that are very sensitive to the trade war and US tariffs were hit the hardest and this reading may warrant further easing by PBOC as stimulatory measure.

This week we will have Q3 GDP and trade balance data from Australia with RBA rate decision as the highlight of the week. We expect RBA to stay on hold and reassess situation before choosing to act in 2020. We will have Caixin PMI and trade balance data from China.

Important news for AUD:

Monday:

  • Caixin Manufacturing PMI (China)

Tuesday:

  • RBA Interest Rate Decision
  • RBA Rate Statement

Wednesday:

  • GDP
  • Caixin Services PMI (China)

Thursday:

  • Trade Balance
  • Exports
  • Imports

Sunday:

  • Trade Balance (China)
  • Exports (China)
  • Imports (China)

NZD

Retail sales for Q3 smashed the expectations and came in at 1.6% q/q vs 0.5% q/q as expected. A huge beat indicating that consumers are fully embracing rate cuts which may explain RBNZ’s decision to hold rates at current level at their November meeting. October’s trade balance data show the lowering of trade deficit to -NZD1013m vs -NZD1242m the previous month. Both exports and imports were higher than the previous month indicating stronger external and domestic demand.

ANZ business confidence made a healthy improvement to -26.4 vs -42.5 the previous month. Activity outlook, which is used as a proxy for GDP, improved significantly to 12.9 vs -3.5 the previous month. Aggressive lowering of rates this year, 0.75%, is paying dividends for New Zealand economy which will keep RBNZ happy and on hold.

This week we will have bi-monthly GDT auction.

Important news for NZD:

Tuesday:

  • GDT Price Index

CAD

Wholesale trade in September came in at 1% m/m vs flat as expected and up from -1.2% m/m the previous month. Q3 GDP came in at 1.3% y/y as expected down from the very strong Q2 GDP which was revised down to 3.5% y/y. Residential investment rose 13.3% for the fastest rate in 7 years while business investment was up 2.6%. Household consumption rose 1.6%, a very welcoming sign considering the growing debt to income ratio. Inventories and net exports were the main drag cutting 1.62 pp and 0.49 pp from GDP respectively.

This week we will have trade balance and employment data as well as BOC rate decision. We expect BOC to stay on hold as Canadian economy has shown resilience but may continue with the dovish messages in the wake of weaker business sentiment and overall deteriorating conditions.

Important news for CAD:

Wednesday:

  • BOC Interest Rate Decision
  • BOC Rate Statement

Thursday:

  • Trade Balance
  • Exports
  • Imports

Friday:

  • Employment Change
  • Unemployment Rate

JPY

Retail sales in October fell -14.4% m/m vs -10.4% m/m as expected and -8.2% y/y vs -3.8% y/y as expected. This is the first month that sales tax hike was introduced and it caused a huge drop, much worse than expected. There is a fact that consumers did a stockpiling before the sales tax hike, hence the great September retail sales numbers, however the reading here is very weak.

CPI for Tokyo area in November came in at 0.8% y/y vs 0.4% y/y the previous month. CPI excluding fresh food came in at 0.6% y/y up from 0.5% y/y the previous month. Small improvements in the reading thanks to the sales hike tax, moves in the right direction, but there is still a ton of room to go to desired 2% and BOJ governor Kuroda confirmed that they will not lower that level. The unemployment rate in October stayed unchanged at 2.4%. Preliminary industrial production in October plunged to -4.2% m/m vs -2% as expected and -7.4% y/y vs -5.2% y/y as expected. Slower global demand as well as negative effects on domestic demand caused by sales tax hike and typhoon caused the worst reading in almost 2 years.

This week we will have final November PMI data as well as spending and wage data.

Important news for JPY:

Monday:

  • Markit Manufacturing PMI

Wednesday:

  • Markit Services PMI
  • Markit Composite PMI

Friday:

  • Household Spending
  • Labour Cash Earnings

CHF

Q3 GDP came in at 0.4% q/q vs 0.2% q/q as expected and pushed yearly figure to 1.1% y/y vs 0.8% y/y as expected. A surprising beat was helped by the rise in exports and government spending.

This week we will have consumption and inflation data.

Important news for CHF:

Monday:

  • Retail Sales

Tuesday:

  • CPI

Forex Major Currencies Outlook (Dec 9– Dec 13)

Fed’s, ECB’s and SNB’s interest rate decisions along with the General Election in UK will be the main movers of the week with the first results of the election being published on Friday morning volatility on all GBP pairs will be increased.

USD

ISM manufacturing index for November came in at 48.1 vs 49.2 as expected and down from 48.3 the previous month. Not only did the expected rebound in manufacturing missed but the decline continued as well. New order and employment sub indices dropped the most while the production index was up. ISM non-manufacturing index also came weaker than expected with 53.9 vs 54.5. Employment sub index showed an improvement but huge drop in production index pushed the overall index down. The US economy is slowing down in Q4 according to these numbers. Trade balance in October came in at -$47.2bn vs $-48.5bn as expected. Lower deficit was achieved in the worst possible way by both falling export (-0.2%) and falling imports (-1.7%). Trade deficit with China fell to -$27.8bn which is a 7-month low.

NFP in November came in at 266k vs 180k as expected. The unemployment rate dropped to 3.5% from 3.6% the previous month, however participation rate also dropped to 62.3% from 62.3% the previous month. Average hourly earnings climbed to 3.1% y/y vs 3% y/y the previous month and underemployment ticked to 6.9% from 7%. This is a very strong report that will cement Fed’s decision to keep the rates on hold.

This week we will have inflation and consumption data with interest rate decision as the highlight of the week. The rate is expected to stay the same, so all of the attention will be on new economic projections and the accompanying press conference.

Important news for USD:

Wednesday:

  • CPI
  • Fed Interest Rate Decision
  • FOMC Press Conference
  • FOMC Economic Projections

Friday:

  • Retail Sales

EUR

Final Eurozone manufacturing PMI for November came in at 46.9 vs 46.6 preliminary on the back of improved German 44.1 and French 51.7 readings. The reading is slowly moving in the right direction and it looks like manufacturing PMI has bottomed out in September. Final services PMI came in at 51.9 vs 51.5 preliminary on the back of improved German and Spanish readings which propped composite up to 50.6 vs 50.3. Overall economic conditions in the EU are improving slowly as composite stays in the expansion territory.

Retail sales in October came in at -0.6% m/m vs -0.5% m/m as expected and down from 0.1% m/m the previous month. Bigger than expected slump to indicate weak start of Q4. Consumers are holding back, however the holiday season will bring retail sales back up. Final reading of Q3 GDP came in line with previous readings at 0.2% q/q and 1.2% y/y.

This week we will have ZEW survey, industrial production data and the first ECB monetary policy press conference led by new governor Lagarde. No changes to monetary policy are expected. In her first testimony she was not as dovish as expected which pushed EUR higher.

Important news for EUR:

Tuesday:

  • ZEW Economic Sentiment Index (EU and Germany)

Thursday:

  • Industrial Production
  • ECB Interest Rate Decision
  • ECB Monetary Policy Press Conference

GBP

Final manufacturing PMI for November came in at 48.9 continuing with contraction. Services also continued to be in contraction territory, however the reading improved to 49.3 vs 48.6 preliminary. Markit notes that after November’s PMI reading Q4 is projected at -0.1% q/q.

Latest election polls still show a double-digit lead for the Tory party. PM Johnson said that the UK will leave the EU by the end of January if the Tory party wins the majority.

This week we will have GDP as well as manufacturing and industrial data. Thursday is the day when elections will be held.

Important news for GBP:

Tuesday:

  • GDP
  • Manufacturing Production
  • Industrial Production
  • Construction Output

Thursday:

  • General Election

AUD

RBA has left the key rate at 0.75% as widely expected. Rates will remain low for a prolonged period of time and RBA is ready to further ease monetary policy if need arises. The decision to stay on hold with rates was necessary due to long lags in transmission of monetary policy. Lower rates are supporting employment and income growth. Outlook for the global economy has improved but risks connected to it are still tilted to the downside. The Australian economy appears to have reached a gentle turning point according to them. RBA’s next meeting is in February 2020 so although they hinted that they will hold rates steady there will be plenty of data to digest until the next meeting.

Q3 GDP came in at 0.4% q/q vs 0.5% q/q as expected but Q2 GDP has been revised up to 0.6% q/q which gives the more upbeat tone to the weak reading. Yearly GDP came in at 1.7% y/y as expected and up from 1.4% y/y the previous quarter. Consumption and exports were the main contributors to the GDP growth. Slow economic growth is the main reason for RBA to keep the rates low and if weakness in GDP persists, they may be pushed to lower them in H1 of 2020.

Trade balance for October came in at AUD4502m vs AUD6500m as expected. The big drop from the previous number of AUD7180m was due to the falling exports while imports remained flat. This is a very concerning sign since exports to China constitute 40% of total exports. Retail sales came in flat vs 0.3% m/m as expected adding another weak data point. Higher food sales managed to keep the reading flat while sales of household goods showed -0.8% y/y.

Official PMI numbers from China show improvement all over the board. Manufacturing PMI came in at 50.2 returning to the expansion territory for the first time since April. The new export orders also made a 7-month high. Services PMI came in at 54.5 vs 53.1 as expected which pushed the composite to 53.7 vs 52 the previous month. Government’s stimulus is producing results as the readings show. Caixin manufacturing PMI came in at 51.8 vs 51.7 the previous month for a fourth consecutive reading above 50. Caixin services PMI smashed the expectations coming in at 53.5 vs 51.2 as expected pushing composite PMI to 53.2 vs 52 the previous month.

This week we will have a speech by governor Lowe and inflation data from China.

Important news for AUD:

Monday:

  • RBA Governor Lowe Speech

Tuesday:

  • CPI (China)

NZD

First dairy auction of the month came in at -0.5% making it the first drop after four consecutive auctions of rising prices. NZD has started the week strong on the back of trade optimism and better than expected China data and rode on that strength till the end of the week. RBNZ governor Orr stated that they are in “hold phase” of monetary policy thus adding more to NZD strength.

This week we will have data on electronic card consumption.

Important news for NZD:

Tuesday:

  • Electronic Card Retail Sales

CAD

BOC has left the rate unchanged at 1.75% as widely expected. They see signs of the global economy stabilizing and feel that it is appropriate to keep rates at the current level. Inflation is around 2% and they expect it to stay close to 2% in the next 2 years. Future decisions will be guided by the BOC’s monitoring of consumer spending and housing markets and the damage from trade wars. Overall tone of the statement was neutral. Trade balance in October came in at -CAD1.08bn vs -CAD1.45bn as expected. Exports were up 0.8% while imports were up 0.5% indicating both strong external and domestic demand. Exports to China plunged 19.3% for a biggest drop since 2012 thus further increasing the deficit in trade. Consumer goods were the largest contributor to exports.

Net change in employment in November came in at -71.2k vs 10k as expected. Both full-time and part-time employment change showed a significant decline which propelled the unemployment rate to 5.9% vs 5.5% the previous month. Abysmal numbers came after the BOC decision to keep rates on hold. This will surely make them reconsider next their decision at their next meeting.

This week we will have a speech by governor Poloz.

Important news for CAD:

Thursday:

  • BOC Governor Poloz Speech

JPY

Final manufacturing PMI came in at 48.9 vs 48.6 preliminary while services PMI came in at 50.3 vs 50.4 preliminary but back in expansion territory from 49.7 in October for composite of 49.8. Q3 capex data came in at 7.1% y/y vs 1.9% y/y in the Q2. Next week’s Q3 GDP projection has been revised up on the back of strong capex data. Household spending in October came in at -5.1% y/y vs -3.2% y/y as expected due to sales tax hike. Average wages came in at 0.5% y/y, same as previous month.

Economic stimulus package in the amount of 26 trillion of which central government is 7.6 trillion. Japanese government further opening its purse to stimulate the economy and it is expected that it will push GDP up by 1.4%.

This week we will have final Q3 GDP and industrial production data as well as machinery orders data.

Important news for JPY:

Monday:

  • GDP

Thursday:

  • Core Machinery Orders

Friday:

  • Industrial Production

CHF

October’s retail sales came in at 0.7% y/y vs 1.6% y/y (revised up from 0.9 originally). The huge revision to previous month’s reading gives more positive note to October reading. November CPI came in at -0.1% m/m and -0.1% y/y as expected while core measure ticked up to 0.4% y/y from 0.2% y/y the previous month. The small rise in core reading will be welcomed by SNB, but considering the distance from the targeted inflation it is almost negligible.

This week we will have employment data and SNB rate decision.

Important news for CHF:

Monday:

  • Unemployment Rate

Thursday:

  • SNB Interest Rate Decision

Forex Major Currencies Outlook (Dec 16– Dec 20)

In the last full trading week of the year we will have BOE and BOJ meetings, Fed’s preferred inflation measure PCE, employment data from UK and Australia, Q3 GDP from New Zealand as well as preliminary PMI numbers from EU.

USD

Fed left the rate unchanged in range of 1.50-1.75% as widely expected. Chairman Powell stated in his opening statement that moderate growth is expected to continue and added that wages have been rising, particularly for the low-paying jobs. Monetary policy is not on a pre-set course and it will be adjusted according to material changes in the outlook. During the uneventful press conference while pressed by reporters to say what will take for Fed to hike rates Powell reiterated his stance that a persistent rise in inflation rates is necessary for a rate hike indicating that the bar for raising rates is higher than the bar for cutting rates. Powell stated that this is his personal view but it still dropped the USD down.

November CPI came in at 2.1% y/y vs 2% y/y as expected and up from 1.8% y/y the previous month. Core CPI was unchanged at 2.3% y/y. Retail sales came in at 0.2% m/m vs 0.5% m/m as expected with core reading showing 0.1% m/m vs 0.3% m/m as expected. Online retailers and electronics were the biggest contributors while health and personal care was biggest drag on the reading. President Trump signed a deal thus the tariffs projected for December 15 will not be implemented which caused a rally in risk assets.

This week we will have housing, industrial production and inflation data as well as final reading of Q3 GDP.

Important news for USD:

Tuesday:

  • Building Permits
  • Housing Starts
  • Industrial Production

Thursday:

  • Existing Home Sales

Friday:

  • GDP
  • PCE
  • Personal Spending

EUR

ZEW survey of expectation or German economy rebounded to 10.7 from -2.1 previous month. German exports, private consumption and a tight labour market propelled the reading into positive matching the levels from February of 2018. Eurozone expectations also rebounded to 11.2 from -1 the previous month.

ECB left key rates unchanged as expected. Rates will remain at present or lower levels until inflation outlook converges close to but bellow 2% level. The bond buying program will continue until shortly before rates are raised. New ECB president Lagarde stated that incoming data point to continued muted inflation pressures and that highly accommodative policy is still needed. Some initial signs of stabilisation start to appear in global growth. During the Q&A part she stated that inflation direction in 2022 is good but still not at the desired target of close to 2%. Ultimately, she added that she is neither a dove nor a hawk and that her ambition is to be an owl.

This week we will have preliminary December PMIs and consumer confidence as well as final inflation data for November.

Important news for EUR:

Monday:

  • Markit Manufacturing PMI (EU, Germany, France)
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)

Wednesday:

  • Ifo Business Climate (Germany)
  • CPI

Friday:

  • Consumer Confidence Index

GBP

GDP in October came in flat vs 0.1% m/m as expected, with 3-month rolling average also staying flat, indicating stagnation or contraction in Q4. Manufacturing and industrial production improved on monthly and yearly basis while construction output continued to deteriorate at increased pace. Trade balance deficit widened in October due to imports rising 8.3% m/m while exports improved by 1.8% m/m. Brexit stockpiling is still in play.

Election results showed a clear majority for Tory party which won 364 seats of 650 available making this the largest Conservative victory since 1987 when they were led by Margaret Thatcher. The clear victory of business friendly Tories ignited investor confidence and GBP surged across the markets more than 300 pips. PM Johnson stated that UK will leave EU on January 31. Labour party leader Corbyn announced his resignation.

This week we will have preliminary December PMIs, employment, consumption and inflation data as well as final reading of Q3 GDP. The main event will be BOE’s rate decision. No change is expected but the incoming data has been bad so we will see if more members opted for a rate cut, last time there were 2 votes. Conservative victory in election should move members to a more neutral stance, however the issue of Brexit is still weighing on the economy.

Important news for GBP:

Monday:

  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

Tuesday:

  • Claimant Count Change
  • Average Hourly Earnings
  • Unemployment Rate

Wednesday:

  • CPI

Thursday:

  • Retail Sales
  • BOE Interest Rate Decision
  • BOE MPC Meeting Minutes

Friday:

  • GDP
  • Business Investment

AUD

Chinese trade balance for October came in at $38.73bn vs $42.81bn the previous month. Exports continued their decline coming in at -1.1% y/y, the fourth consecutive month of falling exports, with exports to plunging by 23%. Imports showed their first positive reading since April coming in at 0.3% y/y. The rise in imports will bring joy to all of the exporting nations around the globe and may improve global economic situation. CPI in November rose to 4.5% y/y from 4.3% y/y the previous month. Food prices were the biggest contributor with 19.1% y/y due to the devastation caused by the swine flu (pork prices rose 110% y/y!). Core CPI is holding at 1.4% y/y. PPI came in better than expected with -1.4% y/y but still in the negative territory creating concerns about industrial profits and capex.

This week we will have minutes from the latest RBA meeting as well as employment data from Australia and consumption and industrial production data from China.

Important news for AUD:

Monday:

  • Retail Sales (China)
  • Industrial Production (China)

Tuesday:

  • RBA Meeting Minutes

Thursday:

  • Employment Change
  • Unemployment Rate

NZD

Card spending in November came in at 2.6% m/m vs 0.5% m/m as expected and 5.1% y/y. A strong rebound in the consumption with card spending making up to 70% of core retail sales. Yet another sign of positive effect that low rates have on the economy. The New Zealand government announced that government spending will rise to NZD12bn with the majority of it on infrastructure.

This week we will have data on business confidence, bi-monthly GDT auction as well as Q3 GDP and trade balance data.

Important news for NZD:

Tuesday:

  • ANZ Business Confidence
  • GDT Price Index

Wednesday:

  • GDP
  • Trade Balance
  • Exports
  • Imports

CAD

Housing starts in November slowed down to 201.3k vs 215k as expected with previous reading showing 202k. Building permits for October also missed the expectations coming in at -1.5% m/m vs 2.8% m/m as expected. Residential permits was -3.2% and it was the lowest reading since March.

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:

  • CPI

Friday:

  • Retail Sales

JPY

Final Q3 GDP reading came in at 0.4% q/q vs 0.1% q/q preliminary. Private consumption came in at 0.5% q/q while business spending contributed with 1.8% q/q. The rise in capex, published last week, is a very encouraging sign of things to come, however the sales tax hike will undoubtedly have a negative effect on personal consumption in Q4. Core machinery orders in October fell heavily coming in at -6% m/m vs -2.9% m/m the previous month so future capex is not encouraging and it indicates the contraction in Q4 GDP which is projected between 2.7% and 3% y/y.

This week we will have preliminary December PMIs, trade balance and national inflation data as well as BOJ interest rate decision.

Important news for JPY:

Monday:

  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

Wednesday:

  • Trade Balance
  • Exports
  • Imports

Thursday:

  • BOJ Interest Rate Decision
  • BOJ Monetary Policy Statement

Friday:

  • CPI

CHF

SNB has left the policy rate unchanged at -0.75% as widely expected. The accompanying statement showed that they consider the franc to be highly valued with fragile FX market. They reiterated their willingness to intervene in FX market if need arises and assessed that risks to the global economy are tilted to the downside. SNB chief Jordan stated that the franc would appreciate rapidly without negative rates and that inflation would turn negative if monetary policy would is tightened. Seasonally adjusted unemployment rate in November stayed at the same level of 2.3%.

This week we will have trade balance data.

Important news for CHF:

Thursday:

  • Trade Balance
  • Exports
  • Imports

Forex Major Currencies Outlook (Dec 23– Dec 27)

Holiday lull dominates the markets, liquidity will be thin so volatility may be increased, therefore we would advise you to use tight stop losses and trade small lot sizes.

USD

Stronger than expected industrial production and housing data propelled Atlanta Fed’s GDP tracker for Q4 GDP to 2.3% from 2% the previous week. November PCE came in at 1.5% y/y as expected and up from 1.4% y/y the previous month while core PCE came in at 2.1% y/y also as expected. Personal income came in at 0.5% m/m vs 0.3% m/m as expected and up from flat the previous month while personal spending came in at 0.4% m/m as expected. The rise in income is very encouraging and due to the fact that it is close to the holidays it will positively impact December retail sales. Boeing announced that it will halt the production of their 737 MAX model which in turn will shave around 0.5% of Q1 GDP in 2020.

This week we will have housing and durable goods data.

Important news for USD:

Monday:

  • –New Home Sales

Tuesday:

  • –Durable Goods

EUR

Preliminary December manufacturing PMI in Eurozone came in at 45.9 vs 46.9 the previous month thus reversing back deeper into the contraction territory. German manufacturing resumed the drop shattering the illusion that the worst is over. Services PMI came in at 52.4 vs 51.9 the previous month which helped keep the composite PMI steady at 50.6. Ifo business climate came in at 96.3 vs 95 the previous month indicating recovery in sentiment. This needs to be backed by positive data in order for economy to recover. Ifo economist state that German industrial sector is still in recession and that it will take time for it to recover. Consumer confidence turned sour at the end of the trading week coming in at -8.1 vs -7 as expected and -7.2 the previous month.

GBP

December PMI numbers show manufacturing slump to 47.7 from 48.9 the previous month. Services also declined coming in at 49 vs 49.3 the previous month thus dragging the composite reading deeper into contraction at 48.5 vs 49.3 the previous month. Both core and headline CPI came in unchanged in November at 1.7% y/y and 1.5% y/y respectively. Retail sales came in at -0.6% m/m vs 0.2% m/m as expected. Although it is a poor reading it should be noted that due to the calendar date Black Friday sales were not included. They will be included in December report.

Employment change in October came in at 24k vs -14k as expected with prior month being -58k. The unemployment rate stayed at 3.8%. On the other hand, average weekly earnings came in at 3.2% vs 3.4% 3m/y as expected and down from 3.7% 3m/y the previous month. The employment rate rose to new record high of 76.2%. Overall mixed reading indicating waning wage pressures but tight conditions in the labour market. Q3 GDP came in at 0.4% q/q vs 0.3% q/q due to stronger services.

BOE has left the bank rate unchanged at 0.75% with a vote of 7-2 as was widely expected. They stated that it is too early to tell how much policy uncertainties have declined since the election. “If global growth fails to stabilise or Brexit uncertainties remain entrenched, monetary policy may need to reinforce expected UK recovery”. Basically, they are saying that they will continue monitoring the developments and then decide on the proper course of action.

According to the UK press PM Johnson will guarantee Brexit by the end of 2020 regardless whether the trade deal is agreed upon or not. This increases the chance of a No deal Brexit since UK wants to sign a deal similar to the one Canada has with EU. It took Canada and EU 7 years to work out the details of the deal and additional one to ratify it so it is very optimistic to think that UK would be able to do it by the end of 2020. Head of the FCA Andrew Bailey will be the new BOE governor starting from March 16 2020. His stance regarding Brexit is similar to government’s and he will continue in Carney’s footsteps regarding monetary policy.

AUD

RBA minutes from December showed that board members agreed to reassess economic outlook at February meeting. They have the ability and are ready to ease further if need arises and incoming data disappoints. Extended period of low interest rates is necessary to meet employment and inflation targets. It was reiterated that economy appeared to have reached a gentle turning point. The overall tone was dovish with the main theme being “wait and see” for the incoming data before making a decision.

Employment change in November came in at 39.9k vs 15k as expected and a big rebound from -24.8k the previous month. The unemployment rate ticked down to 5.2% with participation rate staying the same at 66%. A small dent in an overall very strong jobs report is that majority of jobs, 35.7k, were part-time.

November retail sales from China came in at 8% y/y vs 7.6% y/y as expected and up from 7.2% y/y the previous month. Online shopping festive, the Double-11 (Singles’ day) propelled the reading higher than expected. Industrial production posted even more impressive numbers coming in at 6.2% y/y for vs 5% y/y as expected and up from 4.2% y/y the previous month. Electronic equipment and steel production were the largest contributors. The readings show positive effects of fiscal stimulus mainly directed into infrastructure projects.

NZD

ANZ business confidence continued its rise toward the positive territory and came in at -13.2 vs -26.4 the previous month. The activity outlook missed the expectations by bit coming in at 17.2 but it showed a great improvement from 12.9 the previous month. Global dairy trade came in at -5.1% for the largest decline of the year and second consecutive auction of falling prices.

Q3 GDP figures came in at 0.7% q/q vs 0.5% q/q as expected thus levying the year on year figure to 2.3% from 2.1% the previous quarter. A very solid beat gives more confidence to the RBNZ that they are steering the economy in the right direction and that further rate cuts are not necessary at the moment. Trade balance in November showed a decrease in deficit to -NZD753m vs -NZD1039m the previous month. Exports rose while the imports fell on a month indicating healthy foreign demand but weakening domestic demand.

CAD

Headline CPI jumped from 1.9% y/y to 2.2% y/y on the back of rising energy prices. Common and trim CPI came in as expected at 1.9% y/y to 2.2% y/y respectively while median CPI came in at 2.4% y/y vs 2.2% y/y as expected making it the highest reading in the decade. With inflation hovering little above 2%, a dream for many developed economies, BOC can relax and stand pat.

Retail sales in October posted a worst month in almost a year coming in at -1.2% m/m vs 0.5% m/m as expected. Sales were lower in 8 out of 11 subsectors. Motor vehicles, building materials and electronic and appliances were the biggest drag with electronic and appliances stores falling an amazing 17.2% y/y. Sales at gasoline stations and clothing and accessory stores were the only positives in the weak reading. CAD has lost around 40 pips across the markets on the report.

This week we will have monthly GDP data.

Important news for CAD:

Monday:

  • –GDP

JPY

Preliminary manufacturing PMI in December came in at 48.8 vs 48.9 the previous month marking its eighth consecutive month in contraction. Services PMI came in at 50.6 vs 50.3 the previous month thus making composite PMI stay at 49.8. Trade balance data for November came in at -JPY82.1bn vs -JPY355.bn as expected. Exports were down 7.9% y/y vs 8.9% y/y as expected for a year of consecutive falling exports while imports plunged to -15.7% y/y vs -12.8% y/y as expected. Exports to US showed the biggest decline from the previous year coming in at -12.9% y/y. National CPI came in at 0.5% y/y as expected up from 0.2% y/y the previous month while CPI ex food and energy came in at 0.8% y/y vs 0.7% y/y as expected.

BOJ left the short-term interest rate at -0.1% as widely expected. They reiterated their stance that rates will stay at present or lower levels for prolonged periods of time, as long as needed. They see economy moderately expanding as a trend and it will likely continue to do so. Assessment of industrial production has been cut due to natural disasters that hit Japan.

This week we will have inflation data for the Tokyo area, consumption and employment data as well as preliminary November industrial production data.

Important news for JPY:

Friday:

  • –CPI
  • –Retail Sales
  • –Industrial Production
  • –Unemployment Rate
  • –BOJ Summary of Opinions

CHF

SNB Chief Jordan reiterated his stance that there is no need for further rate cuts at the moment but if the need arises SNB is prepared to act. He also added that tightening of monetary policy would lead to strong appreciation of CHF which would in turn hurt the economy. Trade balance data in November came in at CHF3.92bn vs CHF3.54bn the previous month. Exports are still falling but they were better than previous month while imports improved showing the improvement in domestic demand.

Forex Major Currencies Outlook (Jan 6– Jan 10)

First full trading week of the year will be dominated by NFP and Canadian jobs report that will be published at the same time and will cause increased volatility in the markets, additionally we will have preliminary December inflation data for the EU.

USD

US has launched the air strikes in Iraq which killed Iranian general leading the Quds force Qassem Soleimani. The decision to eliminate Soleimani was made by president Trump. Oil and gold jumped higher on the news and are still going higher. Iran’s Ayatollah Ali Khamenei threatened retaliation which can push both oil and gold even higher. This has already turned safe haven flows into USD which is strengthening across the markets.

This week we will have trade balance and Non-Manufacturing PMI data from ISM with NFP on Friday. Expectations are 165k for the headline number, the unemployment rate is expected to tick up to 3.6% while average hourly earnings will stay the same at 0.2% m/m and 3.1% y/y.

Important news for USD:

Tuesday:

  • –Trade Balance
  • –Exports
  • –Imports
  • –ISM Non-Manufacturing PMI

Friday:

  • –Nonfarm Payrolls
  • –Unemployment Rate
  • –Average Hourly Earnings

EUR

Final manufacturing PMI for Eurozone in December came in at 46.3 vs 45.9 preliminary but still down from 46.9 the previous month. The revision up to the preliminary reading was propped by German and French PMIs which were also revised up,

This week we will have final services and composite PMI data for December, consumption data, preliminary December inflation data which is expected to tick higher based on increases in energy prices, consumer and business confidence measures as well as the unemployment rate.

Important news for EUR:

Monday:

  • –Markit Services PMI (EU, Germany, France)
  • –Markit Composite PMI (EU, Germany, France)

Tuesday:

  • –Retail Sales
  • –CPI

Wednesday:

  • –Consumer Confidence Index
  • –Business Climate Indicator

Thursday:

  • –Unemployment Rate

GBP

UK finance minister Javid stated that the minimum wage will be raised by 6.2% in April of 2020 and it currently sits at £8.21. The five-year plan is to raise the minimum wage to £10.50 which is the increase of about 28%. PM Johnson will meet with the President of the European Commission Ursula von der Leyen on Wednesday at Downing Street to discuss further steps regarding transition period after UK leaves the EU on January 31. Transition period will end at the year’s end and Johnson is adamant on not extending it.

This week we will have final services and composite PMI data for December.

Important news for GBP:

Monday:

  • –Markit Services PMI
  • –Markit Composite PMI

AUD

Official Chinese manufacturing PMI for December came in at 50.2 vs 50.1 as expected but unchanged from the previous month. New export orders index returned to expansion for the first time in 18 months. The output index rose as well while the employment index stayed the same in contraction territory. On the other hand, non-manufacturing PMI came in short at 53.5 vs 54.2 as expected and down from 54.4 the previous month. Composite reading was dragged down by weaker than expected services reading to 53.4 vs 53.7 the previous month. Caixin manufacturing PMI came in at 51.5 vs 51.8 the previous month. The report shows that growth in domestic demand is showing more rapid slowdown. Employment subindex ticked down while there was an improvement in business confidence making this a mixed report.

This week we will have Caixin services PMI and inflation data from China as well as trade balance and consumption data from Australia.

Important news for AUD:

Monday:

  • –Caixin Services PMI (China)

Thursday:

  • –CPI (China)
  • –Trade Balance
  • –Exports
  • –Imports

Friday:

  • –Retail Sales

NZD

Kiwi has been falling since New Year due to risk off sentiment in the markets caused by tensions in the Middle East.

This week we will have first GDT auction of the year.

Important news for NZD:

Tuesday:

  • –GDT Price Index

CAD

CAD has been strengthening since the start of the year due to the rising oil prices caused by tensions in the Middle East.

This week we will have trade balance data and speech from governor Poloz followed by the employment report on Friday.

Important news for CAD:

Tuesday:

  • –Trade Balance
  • –Exports
  • –Imports

Thursday:

  • –BOC Governor Poloz Speech

Friday:

  • –Employment Change
  • –Unemployment Rate

JPY

Japanese markets were closed after the New Year. JPY has been strengthening on the back of its safe haven appeal as well as seasonal patterns since January is the second strongest month for the yen.

This week we will have final PMI data for December as well as data on earnings and spending.

Important news for JPY:

Monday:

  • –Markit Manufacturing PMI

Tuesday:

  • –Markit Services PMI
  • –Markit Composite PMI

Wednesday:

  • –Labour Cash Earnings

Friday:

  • –Household Spending

CHF

This week we will have inflation, consumption and employment data.

Important news for CHF:

Tuesday:

  • –CPI

Thursday:

  • –Retail Sales

Friday:

  • –Unemployment Rate

Forex Major Currencies Outlook (Jan 13– Jan 17)

Q4 GDP from China that can drop below 6% for the first time in almost 30 years, inflation data from US, EU and UK and consumption data from US and UK will be highlights of the week along with signing of “phase one” deal between US and China on January 15.

USD

Trade balance in November came in at -$43.1bn vs -$43.7bn as expected. It is both a beating on the estimates and lowering of trade deficit compared to last month. It is the smallest trade deficit in the last three years. Exports were up 0.7% while imports were down -1%. The biggest contributor to lowering of trade deficit has been shale oil. Trade deficit with China has been lowered to -$26.37bn vs -$31.3bn the previous month. The reading will have positive impact on Q4 GDP.

ISM non-manufacturing PMI for December came in at 55 vs 54.5 as expected and up from 53.9 the previous month. Better than expected reading little tainted by drop in new orders and employment sub-indicies, however both of them are well above 50 level. The reading reflects robust consumption and domestic demand.

December NFP came in at 145k vs 166k as expected. Both the unemployment rate and participation rate stayed the same at 3.5% and 63.2% respectively. Average hourly earnings on the other hand missed badly coming in at 0.1% m/m vs 0.3% m/m the previous month and 2.9% y/y vs 3.1% y/y the previous month which is the worst reading in 18 months. Although there are clear tight labour market conditions, wages are not following the suit and without rising wages, it is difficult for inflation to rise which may in turn spur Fed to action sooner rather than later.

Iran has fired missiles at two American bases in Iraq. The initial reaction in the markets was risk-off with oil and gold shooting up. Tehran has claimed that 80 lives were lost while the Pentagon has yet to report about any casualties. The attack was Iran’s response to last Friday’s killing of a top Iranian general Qassem Suleimani. The situation de-escalated during the week which brought calm in the markets putting oil back under $60 and gold around $1550.

This week we will have inflation, consumption, housing and industrial production data.

Important news for USD:

Tuesday:

  • CPI

Thursday:

  • Retail Sales

Friday:

  • Housing Starts

  • Building Permits

  • Industrial Production

EUR

Finale Eurozone services PMI for December came in at 52.8 vs 52.4 preliminary. Better than expected results came from Germany, Spain and Italy while France stayed the same. Composite was pushed to 50.9 vs 50.6 preliminarily. Notably German composite returned to expansion for the first time since August. Domestic demand is keeping the Eurozone afloat. Final consumer confidence came in at -8.1 down from -7.2 the previous month. Economic confidence and services confidence ticked up while business climate and industrial ticked down indicating still sluggish sentiment.

Retail sales for November came in at 1% m/m vs 0.7% m/m as expected. German retail sales for the same period more than doubled expectations coming in at 2.2% m/m vs 1% m/m as expected. The readings were helped by Black Friday, so the holiday effect should be taken into consideration, although beatings on expectations are very hefty and are an additional sign of strong domestic demand in the Eurozone. Preliminary CPI reading for December came in at 1.3% y/y as expected, up from 1% y/y the previous month. Core CPI stayed the same at 1.3% y/y as expected. Stronger energy prices lifted the inflation.

This week we will have trade balance and industrial production data as well as final inflation data for the November.

Important news for EUR:

Wednesday:

  • Trade Balance

  • Industrial Production

Friday:

  • CPI

GBP

Final services PMI for December came in at 50 vs 49 preliminary. A decent revision higher putting the reading back to 50 level. Composite PMI was pushed to 49.3 vs 48.5 preliminary. BOE governor Carney stated that projected rebound in pound for this year is not assured adding that UK’s economic growth has slowed below its potential. Since there is a limited space for rate cuts BOE will be prepared to act and cut down rates if there is a significant deterioration in the incoming data. GBP has dropped on these statements with GBPUSD falling to 1.30150 before stabilizing.

European Commission president von der Leyen stated that there is not enough time for a comprehensive deal between EU and UK by the end of 2020, therefore both sides will have to prioritize what they want agreed if there will be no extension of the transition period. The Withdrawal Bill has passed House of Commons and now waits for approval in the House of Lords.

This week we will have GDP, trade balance, inflation and consumption data.

Important news for GBP:

Monday:

  • GDP

  • Trade Balance

  • Industrial Production

  • Manufacturing Production

  • Construction Output

Wednesday:

  • CPI

Friday:

  • Retail Sales

AUD

Trade balance for November came in at AUD5800mn vs AUD4075mn the previous month. Exports were up 2%, iron ore exports surged, while the imports fell -3% m/m. The big drop in imports indicates issues with domestic demand for foreign products which, if it continues for some time, will raise serious concerns. Retail sales beat the expectations coming in at 0.9% m/m vs 0.4% m/m as expected. Black Friday sales were responsible for the result as electronic goods and online sales showed a very strong growth.

Caixin services PMI for December came in at 52.5 vs 53.5 the previous month. With manufacturing reading falling as well composite was dragged down to 52.6 vs 53.2 the previous month. CPI stayed the same at 4.5% y/y while PPI showed an improvement to -0.5% y/y vs -1.4% y/y the previous month. The price of pork fell on the month which prevented inflation from going higher. Improvement in PPI is welcomed as it will raise industrial profits, however it is still in the negative territory which is troublesome for the economy.

This week we will have trade balance, GDP, industrial production and consumption data.

Important news for AUD:

Tuesday:

  • Trade Balance (China)

Friday:

  • GDP (China)

  • Industrial Production (China)

  • Retail Sales (China)

NZD

GDT price index came in at 2.8%, a nice rebound after -5.1% result of the previous auction.

This week we will have consumption data.

Important news for NZD:

Wednesday:

  • Electronic Card Retail Sales

CAD

Trade balance for November came in at -$1.09bn vs -$1.2bn as expected. Exports were down -1.4% m/m all due to the drop in energy exports while imports were down -2.4% m/m. Surplus in trade with US was decreased to $4.2bn vs $5.2bn the previous month while deficit in trade with the rest of the world shrunk to $5.3bn from $6.7bn the previous month. Statistics Canada noted that the declines in exports and imports occurred at the same time as labour disruption on the railways.

December employment report showed a net change in employment of 35.2k, a big rebound from -71.2k the previous month. A Very encouraging sign is the change in full-time employment which came in at 38.4k vs -38.4k the previous month. The unemployment rate was shaved down to 5.6% from 5.9% the previous month with participation rate ticking down to 65.5% from 65.6% the previous month. A small concerning sign in overall strong report is the drop in the hourly wage rate for permanent employees to 3.8% y/y from 4.4% y/y the previous month.

JPY

Final manufacturing PMI for December came in at 48.4 vs 48.9 the previous month. Continuation of the negative trend putting the reading deeper into contraction indicates deeper issues with the manufacturing sector. Services PMI came in at 49.4, back to contraction territory after posting 50.3 the previous month, which is the weakest reading in more than 3 years. Composite PMI was brought down to 48.6. Combination of bad weather (typhoon), sales tax hike and increased global tensions will contribute to negative Q4 GDP.

Labour earnings in November fell for the first time in three months coming in at -0.2% m/m vs 0% m/m the previous month. Real cash earnings fell by -0.9% m/m vs -0.4% m/m the previous month. With cash earnings dropping there is a little hope for core inflation to pick up as headline will rise on the back of rising oil prices. Household consumption came in at -2% y/y vs -5.1 y/y the previous month indicating that consumption is slowly improving after the sales tax hike.

This week we will have data on machinery orders.

Important news for JPY:

Thursday:

  • Core Machinery Orders

CHF

CPI in December came in flat vs -0.1% m/m and improved to 0.2% y/y vs -0.1% y/y the previous month. Core CPI came steady at 0.4% y/y. Seasonally adjusted unemployment rate stayed the same at 2.3%. Retail sales for November came in flat vs 0.4% y/y the previous month. Particularly worrying fact is that reading encompassed holiday season shopping and it still came in flat.

Forex Major Currencies Outlook (Jan 20 – Jan 24)

ECB, BOC and BOJ meetings accompanied by employment data from UK and Australia as well as preliminary PMI data from EU, UK and Japan will be the highlights of the week during which we will have the annual world economic forum in Davos.

USD

CPI in December came in at 2.3% y/y up from 2.1% y/y the previous month. Core CPI remained 2.3% y/y as expected. Real average weekly earnings were flat vs 0.8% y/y the previous month with real average hourly earnings coming in at 0.6% y/y vs 1.1% y/y the previous month. The rise in headline inflation is attributed to rising energy prices. Fed chairman Powell stated that rate hikes will be considered only if inflation overshoots the target for a prolonged period of time. The drop in wages is cause for concern as it would stifle consumption. December retail sales came in at 0.3% m/m as expected with previous month’s reading being revised up to 0.3% m/m which pushed the USD higher. Control group, “core”, which is included in GDP, came in at 0.5% m/m vs 0.4% m/m but previous month’s reading was revised down to -0.1% m/m.

The “Phase 1” trade deal has been signed. The agreement will be effective 30 days after signing. Details of the deal show that China is to import no less than $12.5bn above 2017 baseline for agricultural goods in 2020 and $19.5bn in 2021, $12.8bn more in services this year, $25.1bn in second year, $18.5bn more in energy this year, $33.9bn in the second year and$12.5bn more in manufactured goods this year and $44.8bn in the second year. Overall China has agreed to increase imports from the US in the amount of $200bn. US will cut by half the tariff rate it imposed on September 1 on a $120bn of Chinese goods, to 7.5% while tariffs of 25% on $250 billion worth of Chinese goods put in place earlier will remain unchanged and could be rolled back as part of a Phase 2 trade negotiation. Treasury secretary Mnuchin stated that certain tech and cybersecurity issues will be in Phase 2 of the trade deal and that there could be multiple steps in Phase Two such as 2A, 2B, 2C, etc. which potentially can drag the matter for years. Although the deal will narrow the deficit with China there is a decent probability that it will widen the deficit with the rest of the world.

This week we will have housing data.

Important news for USD:

Wednesday:

  • Existing Home Sales

EUR

Industrial production data for November came in at 0.2% m/m vs 0.3% m/m as expected but up from the previous month which was revised down to -0.9% m/m thus almost negating the mild improvement in the industrial activity. The narrative of soft conditions continues. Trade balance surplus shrunk in November to EUR19.2bn from EUR24bn the previous month on the back of both falling exports (-2.8%) and falling imports (-0.5%).

This week we will have economic sentiment data and preliminary January PMIs with consumer confidence. The highlight of the week will be ECB interest rate decision accompanied by press conference. New strategic review focusing on measuring and implement price stability target will be published.

Important news for EUR:

Tuesday:

  • ZEW Economic Sentiment (EU and Germany)

Thursday:

  • ECB Interest Rate Decision
  • ECB Monetary Policy Press Conference
  • Consumer Confidence Index

Friday:

  • Markit Manufacturing PMI (EU, Germany, France)
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)

GBP

November GDP data continue to show deteriorating conditions in the UK economy coming in at -0.3% m/m vs 0.1% m/m the previous month. The reading adds more to the belief that Q4 GDP will be negative. Industrial and manufacturing production continued their decline while construction output showed an improvement. Trade balance deficit was lowered to -£5.3bn vs -£10.9bn the previous month on the back of rising exports (2.2%) and plunging imports (-11.6%). Imports have plummeted due to previous stockpiling, mostly done in October, caused by the fear of no-deal Brexit.

CPI for December came in at 1.3% y/y vs 1.5% y/y as expected with core reading also dropping to 1.4% y/y vs 1.7% y/y the previous month thus adding another nail in the GBP data coffin. Headline inflation number is lowest in three year. BOE member Vlieghe stated that if upcoming data does not improve, he will vote for a rate cut.

The final nail in the coffin for the UK data came in the form of retail sales for December which slumped to -0.6% m/m vs 0.6% m/m as expected. December reading includes Black Friday and Cyber Monday sales and previous reading was revised down so that makes the reading even more frightening. Retail sales have not shown growth in five months. Q4 retail sales were down -1% and that will have negative impact on Q4 GDP. OIS are showing that a rate cut by May is fully priced in and bond markets are pricing about 73% chance of a rate cut at the January meeting.

This week we will have employment data and preliminary January PMI, first post-election data. Given that recent data have disappointed and increased chances for a rate cut every release from UK will have more profound impact on the markets.

Important news for GBP:

Tuesday:

  • Claimant Count Change
  • Unemployment Rate
  • Average Weekly Earnings

Friday:

  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

AUD

Chinese trade balance in December beat the expectations and came in at 329.27bn vs 274.21bn. Exports were up 9% y/y vs 1.3% y/y the previous month while imports were up whooping 17.7% y/y vs 2.5% y/y the previous month. These are data in Yuan. Data in USD show trade surplus widen to $46.79bn vs $37.93bn the previous month. Exports were up 7.6% y/y vs -1.3% y/y the previous month while imports were up huge 16.3% y/y vs 0.5% y/y the previous month. Beats on expectations all around and huge increases in imports indicate that domestic demand for foreign goods is picking up which is a great sign for all export-oriented countries. Trade between US and China was reduced by 10.7% y/y in 2019.

China Q4 GDP came in at 1.5% q/q as expected which put yearly GDP figure at 6% thus reaching the lower bound of the growth set by Chinese government. Retail sales in December came in at 8% y/y vs 7.8% y/y as expected for a nice beat but the highlight were industrial production numbers which came in at 6.9% y/y vs 5.9% y/y. Such a solid beat will keep AUD well supported.

This week we will have employment data. Australia has been dealing with horrendous fires and we will see how much of effect they had on the employment rate.

Important news for AUD:

Thursday:

  • Employment Change
  • Unemployment Rate

NZD

Card spending in December came in at -0.8% m/m vs 0.1% m/m as expected for a big miss and down from 2.6% m/m the previous month. Since card spending amounts to about 70% of core retail sales, we can expect a weak December retail sales reading.

This week we will have Q4 inflation data and bi-monthly GDT auction.

Important news for NZD:

Tuesday:

  • GDT Price Index

Thursday:

  • CPI
  • CAD

In the absence of important economic releases USDCAD has been confined to a 50 pip range.

This week we will have inflation and consumption data with BOC interest rate decision as the most important event. No change in rate is expected, however possible changes in the tone of BOC are possible.

Important news for CAD:

Tuesday:

  • Manufacturing Sales

Wednesday:

  • CPI
  • BOC Interest Rate Decision
  • BOC Rate Statement

Friday:

  • Retail Sales

JPY

BOJ regional economic report showed that Japan’s economy continues to either expand or recover in all its nine regions as domestic demand, such as capital investment and private consumption, continue rising. Slowdown in overseas economies and natural disasters were affecting exports, production and business sentiment, but the impact was limited. Three of the nine regions cut their assessment from the previous quarter, with the remaining six regions keeping their view unchanged. Preliminary machinery tool orders in December showed a bit of improvement while core machinery orders showed a huge beat coming in at 18% m/m vs 2.9% m/m as expected and up from -6% m/m the previous month and now showing 5.3% y/y vs -6.1% y/y the previous month.

This week we will have final industrial production data, trade balance and national inflation data, preliminary January PMIs and BOJ interest rate decision. No change in interest rate is expected but BOJ will offer new forecasts.

Important news for JPY:

Monday:

  • Industrial Production

Tuesday:

  • BOJ Interest Rate Decision
  • BOJ Monetary Policy Statement

Thursday:

  • Trade Balance

Friday:

  • CPI
  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

CHF

US has included CHF on its FX manipulation watchlist and SNB responded by saying that they do not manipulate currency for gaining export advantages, their interventions are a part of monetary policy to prevent effects of CHF getting too strong.

Forex Major Currencies Outlook (Jan 27 – Jan 31)

The Fed and BOE interest rate decisions, Q4 GDP data from US and EU, preliminary January inflation from EU and AU and US inflation will be the key events this events this coming week.

USD

President Trump has reiterated his threat to impose tariffs on European cars. Treasury secretary Mnuchin stated that government has started working on Tax Cut 2.0 that will focus on middle class. The fear of coronavirus is gripping the markets. In Chinese city of Wuhan the virus has already killed 25 people and infected more than 600 people. The virus is said to spread with human contact. The Chinese Lunar New Year is approaching and it is the largest human migration in the world, mass travel is expected which only increases concerns. One instance of coronavirus has been discovered in Seattle, two more have been confirmed later on while there are fears that it can also be found at the Davos meeting. Risk appetite in the markets has been subdued. Beijing announced that they will be cancelling all major events, including the New Year celebrations because of the new outbreak. Currently 10 Chinese cities have been closed due to the virus.

This week we will have housing, durable goods and consumer confidence data as well as Fed’s preferred inflation measure with personal spending and income. Q4 GDP will be published as well. No changes are expected in the rate, however chairman Powell’s words will be closely watched and analysed as always.

Important news for USD:

Monday:

  • New Home Sales

Tuesday:

  • Durable Goods Orders
  • CB Consumer Confidence Index

Wednesday:

  • Fed Interest Rate Decision
  • FOMC Press Conference

Thursday:

  • GDP

Friday:

  • PCE

EUR

First data published in the new year 2020 paints an improving picture for both Germany and Eurozone. ZEW survey of the current situation in Germany came in at -9.5 vs -19.9 the previous month. Expectations for Germany came in at 26.7 vs 10.7 the previous month while expectations for Eurozone came in at 25.6 vs 11.2 the previous month. The jump is mainly due to the US-China trade deal, giving rise to hope that the negative effects from trade on the German economy will be less pronounced. The jump is mainly due to the US-China trade deal, giving rise to hope that the negative effects from trade on the German economy will be less pronounced, according to ZEW.

ECB has left the key rates unchanged as was expected. President Lagarde stated that incoming data are in line with baseline scenario. Manufacturing remains a drag on the economy while employment growth supports it. There are some signs of an increase in inflation and they are in line with expectations. After initial rise EURUSD returned all of its gains and continued to slide downwards indicating that bears are in control.

Preliminary January manufacturing PMI came in at 47.8 vs 46.3 the previous month. Services PMI came in at 52.2 vs 52.8 the previous month while composite came unchanged at 50.9. German readings beat the expectations while in France only manufacturing improved, services and composite declined but are still above 50 level.

This week we will have economic health indicators, preliminary Q4 GDP and January CPI readings.

Important news for EUR:

Monday:

  • Ifo Business Climate (Germany)

Thursday:

  • Economic Sentiment Indicator
  • Business Climate Indicator
  • Consumer Confidence Index

Friday:

  • GDP
  • CPI

GBP

November employment data showed an increase in employment change to 208k vs 110k as expected. The unemployment rate and average weekly earnings both stayed the same at 3.8% and 3.2% 3m/y respectively. The stable wages growth increases the probability of inflation picking up down the road. After last week’s weak data this is a much needed positive for pound and it rallied on the news across the markets. The trouble is that the employment data is a very outdated, since it is for November, so the rally may be short-lived. Preliminary January PMI data showed improvement in all readings. Manufacturing came in at 49.8 vs 48.8 as expected, services jumped to 52.9 vs 51.1 as expected and propelled composite back to expansion territory at 52.4 vs 49.3 the previous month.

The UK will officially leave EU on January 31, it will however still remain a member until the end of 2020 when the transition period expires. OIS was pricing less than a 50% chance of a rate cut on the back of improvement in business optimism and the probability came tumbling down after the upbeat PMI figures. This will be governor Carney’s last meeting before he steps down.

Important news for GBP:

Thursday:

  • BOE Interest Rate Decision
  • BOE Monetary Policy Report

AUD

Employment report for December showed employment change of 28.9k vs 10k as expected. The unemployment rate has ticked down to 5.1% from 5.2% the previous month which in turn will not push RBA to cut rates at the February meeting. The probability of a cut has dropped to 23%. The participation rate stayed at 66%. Part-time employment came in at 29.2k while full-time employment came in at -0.3k.

This week we will have Q4 inflation from Australia and official PMI data from China.

Important news for AUD:

Wednesday:

  • CPI

Friday:

  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)

NZD

GDT price index came in at 1.7%. This comes after the rise of 2.8% at the previous auction, thus making both auctions in 2020 positive. Q4 CPI came in at 0.5% q/q vs 0.4% q/q as expected and 1.9% y/y vs 1.8% y/y as expected. The upbeat results pushed NZD higher and will keep RBNZ on hold.

This week we will have trade balance data.

Important news for NZD:

Wednesday:

  • Trade Balance

CAD

CPI in December came in unchanged at 2.2% y/y vs 2.3% y/y as expected. Core measures were mixed with median coming in 2.2% y/y vs 2.4% y/y the previous month, trimmed came in at 2.1% y/y vs 2.2% y/y the previous month while common came in at 2% y/y vs 1.9% y/y the previous month. Both headline and core readings are above 2% and although the report was bit weaker than expected it will help keep CAD supported. The same cannot be said for wholesale trade which in November came in at -1.2% m/m vs -0.4% m/m as expected and weakened the CAD into the BOC rate decision. Finally, November retail sales came in at 0.9% m/m vs 0.6% m/m as expected for a great rebound from -1.1% m/m the previous month. Ex-autos category came in at 0.2% m/m vs 0.5% m/m as expected but overall consumption report was a solid one.

BOC left the key rate unchanged at 1.75% as widely expected, however the tone of the statement was more dovish than expected. The previous statement had a description of key rate as appropriate and that was removed in the current statement. Governor Poloz said that it was not time to cut rates at this meeting, but the change in tone around the key rates opens the door for possible rate cuts in the future. Incoming data will be closely watched for clues “to see if recent growth slowdown is more persistent than forecast”. The Canadian economy is no longer operating close to capacity which will put downward pressure on inflation and indicators of consumer confidence and spending have been unexpectedly soft, it is said in the statement.

This week we will have monthly GDP data.

Important news for CAD:

Friday:

  • GDP

JPY

BOJ left the interest rate at -0.1% and kept the monetary policy unchanged as widely expected. In their forecasts they have raised the outlook for growth based on fiscal stimulus and positive effect of the summer Olympic Games that will be held in Tokyo and lowered the outlook for inflation as well as for business investment. Since inflation is still well below the 2% target loose monetary policy will be prevalent for longer period of time. According to the quarterly outlook report the economy continue to expand moderately and will be impacted by the global slowdown. Risks have been assessed as skewed toward the downside for the economy and prices.

Trade Balance data in December came in at -JPY152.5bn vs -JPY85.2bn the previous month. Exports have improved a bit to -6.3% y/y vs -7.9% y/y the previous month while imports showed a bigger improvement, but still negative, coming in at -4.9% y/y vs -15.7% y/y the previous month. Exports to the US and EU were the main drag coming in at -14.9% y/y and -8.1% y/y respectively with exports to China rising for the first time in 10 months, although only 0.8% y/y.

CPI in December came in at 0.8% y/y vs 0.7% y/y as expected and 0.5% y/y the previous month. Core measures came in line with expectations but also up from the previous month coming at 0.7% y/y (ex-fresh food) and 0.9% y/y (ex-fresh food and energy). Sales tax hike was the main reason inflation went up. Preliminary manufacturing PMI for January came in at 49.3 vs 48.4 the previous month. Services staged a recovery back to boom level coming in at 52.1 vs 49.4 the previous month which pushed composite PMI to 51.1 from 48.6 the previous month.

This week we will have inflation data for Tokyo area, unemployment and consumption data as well as preliminary December industrial production data.

Important news for JPY:

Friday:

  • Tokyo CPI
  • Unemployment Rate
  • Retail Sales
  • Industrial Production

CHF

SNB Maechler reiterated the bank’s readiness to intervene in the FX market if the need arises adding that SNB conducts policy that is most appropriate for economic conditions in Switzerland and their policy is not fazed by the US decision to put them on currency watch list. Governor Jordan added that negative rates are a necessity and although they have negative effects SNB is working to minimize them.

This week we will have trade balance and consumption data.

Important news for CHF:

Tuesday:

  • Trade Balance

Friday:

  • Retail Sales

Forex Major Currencies Outlook (Feb 3 – Feb 7)

NFP in combination with Canadian employment published at the same time will provide volatility in the markets, with New Zealand employment report, ISM PMI numbers from US and RBA rate statement being the other high impact events of the week.

USD

Preliminary durable goods in December came in at 2.4% m/m vs 0.4% m/m as expected. It is a great beating on the estimates but the number is very volatile and susceptible to revisions. Prior month’s reading was revised to -3.1% m/m from -2.1% m/m. The more concerning sign is that core durable orders, characterized often as core CAPEX, came in at -0.9% m/m vs 0.2% m/m as expected indicating that businesses are reluctant to invest. Consumer confidence climbed to 131.6 vs 128 as expected showing that consumer will continue to drive growth and will not allow for slowdown at the beginning of 2020.

Fed has left the interest rate unchanged as was expected. The whole meeting was an uneventful one with chairman Powell stressing their insistence on reaching the 2% inflation target. They have also reaffirmed their commitment to support the repo market. Reserves of 1.5 trillion will be the bottom end of the range. Powell also stated the importance of the Coronavirus outbreak and the uncertainties it brings. The labour market is continuing to perform well with wages rising, particularly for the lowest paying jobs. The view on household consumption has softened.

First reading of Q4 GDP came in at 2.1% q/q, same as the previous quarter. Personal spending came in at 1.8% vs 2% as expected contributing 1.2 pp to the final number. Inflation numbers were also down. Business investment overall was -1.5% and it was a drag of -1.08 pp. Inventories reduced GDP by 1.09 pp while trade balance added 1.48 pp to GDP mostly due to falling imports. GDP of 2.3% y/y was the lower than 2.9% y/y for the previous year.

The World Health Organisation has declared coronavirus a public health emergency. They have applauded China’s attempts to contain the virus and fear that the biggest threat will be for the countries with weak health systems. They did not recommend curbing of trade and travel between the countries. Number of victims in China rose tot least 213. On the earnings front, many companies have beaten earnings forecasts but Amazon topped them all. The tech giant smashed the earnings by 60% over the expectations.

This week we will have ISM PMI data for January and trade balance for December. The central stage will be taken by the NFP report. The headline number is expected around 140k, an uptick in the unemployment rate to 3.6% is expected as well as rise in wages to 3%.

Important news for USD:

Monday:

  • ISM Manufacturing PMI

Wednesday:

  • Trade Balance
  • ISM Non-Manufacturing PMI

Friday:

  • Nonfarm Payrolls
  • Unemployment Rate
  • Average Hourly Earnings

EUR

Ifo business climate index and expectations readings fell while current situation reading improved. Ifo economist stated that there is a reason to be cautiously optimistic about the German economy and that the industrial sector is slowly emerging from crisis. Uncertainty has been decreased thanks to the Phase 1 deal between US and China and clarity on the Brexit front. Consumer confidence came in unchanged while economic sentiment continued to improve for the Eurozone. Industrial confidence and business climate recorded a nice rebound while services sentiment stumbled. The unemployment rate ticked down to 7.4% showing a continuation of tight labour market conditions.

Preliminary Q4 GDP came in at 0.1% q/q vs 0.2% q/q as expected on the back of unexpected negative Q4 GDP from France and Italy. Preliminary CPI for January came in at 1.4% y/y vs 1.3% y/y the previous month while core CPI dropped to 1.1% y/y from 1.3% y/y the previous month.

This week we will have final PMI data as well as consumption data.

Important news for EUR:

Monday:

  • Markit Manufacturing PMI (EU, Germany, France)

Wednesday:

  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
  • Retail Sales

GBP

At his final meeting as the head of BOE governor Carney did not cause any disturbances in the market. The BOE has left the rate unchanged at 0.75%. The vote came in at 7-2, 7 votes for no change and 2 votes for a rate cut; the same as the previous month while the consensus was for 6-3 vote. Inflation has been given the top priority and if there is a drop in inflation over the coming months BOE will be ready to act. The statement showed “if the economy recovers broadly in line with the MPC’s latest projections, some modest tightening of policy may be needed to maintain inflation sustainably at the target”. Carney stated that, according to the survey data, economic activity has improved after the election and the UK recovery appears to be on track. The overall tone of the statement and Carney’s press conference was hawkish sending GBP higher across the markets. Andrew Baily will be the Governor at the next meeting on March 26.

This week we will have final PMI data.

Important news for GBP:

Monday:

  • Markit Manufacturing PMI

Wednesday:

  • Markit Services PMI
  • Markit Composite PMI

AUD

CPI for Q4 came in at 0.7% q/q vs 0.6% q/q as expected and 1.8% y/y vs 1.7% y/y as expected. Core measure trimmed mean came in at 0.4% q/q and 1.6% y/y as was expected. The drought and devastating fires caused the price of food to go up. In combination with a falling unemployment rate published the previous week, this small rise in headline inflation will put RBA on hold regarding interest rates. Markets are pricing around 15% chance of a rate cut.

Official manufacturing PMI from China for January came in at 50 as expected while services came in at 54.1 vs 53 as expected. Composite was dragged down on manufacturing PMI to 53 vs 53.4 the previous month. Next month’s figures will not be this good as the coronavirus takes its toll on the economy. Beijing asked companies to resume work on February 10 instead of February 3 as previously planned.

This week we will have trade balance and consumption data along with RBA rate decision. In the light of improving data RBA will not cut, however the statement will be of great interest. The coronavirus outbreak in China will have consequences on the Australian economy so RBA’s thoughts on that will be scrutinized. We will have Caixin PMI and trade balance data from China.

Important news for AUD:

Monday:

  • Caixin Manufacturing PMI (China)

Tuesday:

  • RBA Interest Rate Decision

Wednesday:

  • Caixin Services PMI (China)
  • Caixin Composite PMI (China)

Thursday:

  • Trade Balance
  • Retail Sales

Friday:

  • RBA Monetary Policy Statement
  • Trade Balance (China)

NZD

Trade balance for December came in at NZD547m vs NZD100m as expected. Better than expected reading was achieved on the back of rising exports, rose less than expected and falling imports, fell more than expected. Dairy exports hit a new high thanks to raising dairy prices and China took 28% of New Zealand’s exports in this fiscal year. Although a positive data point it did not change the fortune of Kiwi as it was hammered the entire week due to risk off sentiment caused by the Coronavirus outbreak.

This week we will have bi-monthly GDT price index and Q4 employment data.

Important news for NZD:

Tuesday:

  • GDT Price Index
  • Employment Change
  • Unemployment Rate

CAD

GDP for November came in 0.1% m/m vs flat as expected and up from -0.1% m/m the previous month. There was a rise in 15 out of 20 sectors and yearly figure came in at 1.5% y/y vs 1.4% y/y as expected. Utilities, construction and retail sales were the main contributors while mining, oil and gas and transportation were the laggards. Markets took notice of this data but CAD continued to decline as it has done the whole week on the back of rising worries for commodity currencies due to a potential global slowdown caused by outbreak of coronavirus.

This week we will have trade balance and employment data.

Important news for CAD:

Wednesday:

  • Trade Balance

Friday:

  • Employment Change
  • Unemployment Rate

JPY

Tokyo CPI for January came in at 0.6% y/y vs 0.7% y/y as expected. Inflation is again heading in the wrong direction despite the sales hike tax. Ex food category came in at 0.7% y/y vs 0.8% y/y as expected while Ex food and energy came in line with expectations at 0.9% y/y. The unemployment rate in December came in at 2.2%, same as the previous month, while expectations were for a rise to 2.3%. Retail sales continued their decline and came in at 0.2% m/m vs 4.5% m/m the previous month and -2.6% y/y vs -2.1% y/y the previous month. Preliminary industrial production data were the bright spot coming in at 1.3% m/m vs 0.7% m/m as expected and -3% y/y vs -3.6% y/y as expected.

This week we will have final PMI data, as well as wages and spending data.

Important news for JPY:

Monday:

  • Markit Manufacturing PMI

Wednesday:

  • Markit Services PMI
  • Markit Composite PMI

Friday:

  • Household Spending
  • Labour Cash Earnings

CHF

Trade balance in December more than halved to CHF1.96bn from CHF3.95bn the previous month. Exports showed a drop of -3.4% m/m while imports rose 0.2% m/m. Retail sales came in at 0.1% m/m vs being flat the previous month but with previous month being revised to 0.5% m/m it gives more strength to the reading.

Forex Major Currencies Outlook (Feb 10 – Feb 14)

Consumption data from US, preliminary Q4 GDP from UK and RBNZ meeting will be the highlights of the week.

USD

ISM manufacturing index in January came in at 50.9 vs 48.5 as expected and up from 47.2 the previous month. Manufacturing is back to expansion thanks to surge in new orders and improvement in the employment sub-index. ISM non-manufacturing index came in at 55.5 vs 55.1 as expected. Business activity has jumped to 60.7 with new orders also being on the rise. The reading is moving back toward the levels from the first half of 2019.

Trade balance for December showed an increase in the deficit to -$48.9bn vs -$48.2bn as expected. Both exports and imports rose, with former rising 0.8% m/m and latter 2.7% m/m. Trade deficit with China lessened to -$24.79bn on the back of both falling exports (-11.3%) and falling imports (-16.2%). Trade surplus with OPEC countries improved to $1.33bn. On an annual basis the trade deficit shrunk for the first time in 6 years to -$616.8bn of which deficit with China alone is -$345.6bn.

NFP headline for January came in at 225k vs 165k as expected and up from 147k the previous month. The unemployment rate has ticked up to 3.6% on the back of increase in participation rate to 63.4% from 63.2% the previous month. Average hourly earnings were mixed, coming in at 0.2% m/m vs 0.3% m/m as expected and 3.1% y/y vs 3% y/y as expected. Both showed the increase compared to the previous month. Sluggish wage growth indicates that great majority of newly created jobs are low paid jobs in services sectors such as health care (50k) and bars and restaurants (24k).

This week we will have inflation, consumption and industrial production data.

Important news for USD:

Thursday:

  • CPI

Friday:

  • Retail Sales
  • Industrial Production

EUR

Final manufacturing PMI for the month of January came in at 47.9 vs 47.8 preliminary on the back of small improvements in German and French readings. Services came in at 52.5 vs 52.2 preliminarily which pushed the composite reading at 51.3 vs 50.9 preliminary. Beatings on all fronts show that recovery in Eurozone is real but slow and susceptible to external shocks. Retail sales for December painted a different picture. After rise in previous month due to Black Friday this month they came at -1.6% m/m and 1.3% y/y with previous reading showing 0.8% m/m and 2.3% y/y.

This week we will have industrial production and trade balance data as well as the second reading of Q4 GDP.

Important news for EUR:

Wednesday:

  • Industrial Production

Friday:

  • GDP
  • Trade Balance

GBP

Final manufacturing PMI for the month of January came in at 50 vs 49.8 preliminary. A small improvement bringing the reading back into neutral 50 level. New orders have returned into expansion territory showing post-election optimism. Services continued to show the same optimism coming in at impressive 53.9 vs 52.9 as expected and 50 the previous month thus returning composite back to expansion with 53.3 reading.

The UK has finally left the EU on January 31. It took 1317 days after the referendum. Boris Johnson took over the weekend much firmer stance regarding trade deal with EU than markets expected. He stated that there is no need for a free trade agreement to involve UK accepting EU rules, any more than the EU should be obliged to accept UK rules. The pound dropped more than 100 pips at the beginning of the week.

This week we will have preliminary Q4 GDP, trade balance and production data.

Important news for GBP:

Tuesday:

  • GDP
  • Industrial Production
  • Manufacturing Production
  • Construction Output
  • Trade Balance
  • Business Investment

AUD

RBA left the official cash rate unchanged at 0.75% as was widely expected. They reiterated their willingness to cut rates if it is necessary to support economic growth. Lower rates will stay for a prolonged period of time and RBA will closely monitor developments in labour market. They expect the economy to grow by 2.75% in 2020 and 3% in 2021 with inflation being close to 2% in those years. Coronavirus has been deemed as uncertainty for global growth but it is too early to assess the long-term impact of the virus.

Retail sales in December missed coming in at -0.5% m/m vs -0.2% m/m. The November figure was great due to Black Friday and it was even revised up so the decline in December’s reading was expected, but the drop was bigger than hoped for. Trade balance for the same month came in at AUD5223mn vs AUD5950mn as expected. The imports rose 2% m/m while exports rising only 1% m/m. Due to coronavirus fears the AUD has dropped at the end of the week to the lowest levels since 2009.

Caixin manufacturing PMI in January came in at 51.1, down from 51.5 the previous month. The survey was done before the outbreak of the virus so it does not take into the account its effects making the drop in the reading even more concerning. Employment and new export orders sub-inidicies were below 50 while total new orders dropped to lowest in 5 months. Services PMI came in at 51.8 and composite was at 51.9, both of them weaker than the previous month. Industrial profits for December, coronavirus had no influence on them, plunged to -6.3% vs 5.4% the previous month. China has again cut rates and injected additional liquidity into economy in order to fight the economic slowdown. Ban on short selling has been implemented as well to prevent market crash. Number of coronoavirus deaths grew to 600 while number of infected is estimated at over 30 000.

This week we will have speech by RBA governor Lowe and inflation data from China.

Important news for AUD:

Monday:

  • CPI (China)

Thursday:

  • RBA Governor Lowe Speech

NZD

Employment report for Q4 was very mixed. The unemployment rate dropped to 4% from 4.1% the previous quarter, however employment change was flat on the quarter vs 0.3% q/q as expected and as it was in the previous quarter. Additionally, the participation rate dropped to 70.1% from 70.4% the previous quarter. Average hourly wages were down to 0.1% q/q vs 0.6% q/q the previous quarter but private wages held steady at 0.6% q/q. GDT price auction came in at -4.7% for a first negative auction in 2020. The main culprit were whole milk powder prices which fell -6.2%.

This week we will have card spending for January and RBNZ interest rate decision. RBNZ’s 2-year inflation expectations have risen to 1.93% from 1.8% previously with 1-year expectations rising to 1.88% from 1.66% the previous month which should keep the OCR steady.

Important news for NZD:

Tuesday:

  • Electronic Card Retail Sales

Wednesday:

  • RBNZ Interest Rate Decision
  • RBNZ Rate Statement

CAD

Trade balance data for December showed a serious decline in the trade deficit. The reading came in at -$0.37bn vs -$1.09bn the previous month which was revised down to -CAD1.2bn. Exports were up 1.9% m/m with imports being up 0.2% m/m. Energy products contributed the most to the rise in exports (9.5%) while consumer goods contributed the most to the rise of imports (4%). Trade surplus with US widened to $5.2bn for the month. Total trade deficit in 2019 was -$18.3bn which is the smallest since 2014. Trade surplus with US was $51.6bn for the year while exports to China were down -16% for the year. The drop in exports to China shows the devastating effects of Canada’s decision to arrest the daughter of Huawei’s founder.

Employment change in January came in at 34.5k vs 17.5k as expected. The unemployment rate has dropped to 5.5% from 5.7% the previous month on the tick down in participation rate to 65.4% from 65.5%. Hourly wages for permanent employers rose 4.4% y/y vs 3.6% y/y as expected and up from 3.8% y/y the previous month. Markets have embraced the rise in wages and CAD strengthened. Full-time employment came in at 35.7k while part-time employment came in at -1.2k for another strong data input from the report. All of the jobs created were full-time and with a healthy wage rise this will be a great sign for the Canadian economy.

This week we will have housing data and speech by governor Poloz.

Important news for CAD:

Monday:

  • Housing Starts
  • Building Permits

Thursday:

  • BOC Governor Poloz Speech

JPY

Final manufacturing PMI for the month of January came in at 48.8 vs 48.6 preliminary and up from 48.4 the previous month. Services PMI came in at 51 vs 49.4 the previous month which helped push the composite back to expansion territory at 50.1. A fragile recovery will be under fire when the February data comes out showing the effects of the coronavirus.

Labour cash earnings came in flat after the previous month’s reading has been revised up to 0.1% y/y. Household spending came in at -4.8% y/y vs -1.7% y/y as expected. With wages staying stagnant there was no chance for the spending to rise, however the drop is much more severe than expected. Inflation pressures will still be missing.

CHF

Manufacturing PMI in January heavily missed the expectations coming in at 47.8 vs 50.3 as expected. Previous month’s reading has been revised to 48.8 from 50.2 indicating deep plunge into contraction. The only saving grace is that manufacturing contributes to around ¼ of GDP so the result can be digested more easily.

This week we will have employment and inflation data.

Important news for CHF:

Monday:

  • Unemployment Rate
  • CPI

Forex Major Currencies Outlook (Feb 17 – Feb 21)

Employment data from UK and Australia as well as preliminary February PMI numbers from EU, UK and Japan will take the centre stage, US markets will be closed on Monday due to President’s day so the liquidity will be thin.

USD

CPI in January came in at 2.5% y/y vs 2.4% y/y as expected and up from 2.3% y/y the previous month. The rise in headline number was caused by the rise in energy prices. Core CPI came in unchanged from previous month at 2.3% y/y. Chairman Powell stated that Fed needs to see inflation over 2% for prolonged period before deciding to act and raise rates. He was referring to PCE and divergence between CPI, above 2% and PCE, below 2%, rises. In addition, due to low demand for oil from China caused by coronavirus outbreak energy prices have fallen which will put downward pressures onto inflation.

Retail sales in January came in at 0.3% m/m as expected with previous month’s reading being revised down to 0.2% m/m. Core retail sales, control group that is used for GDP calculation, came in flat with prior reading being revised down to 0.2% m/m from 0.5% m/m. Negative revisions and miss in control group will prompt downward revisions to Q4 GDP.

This week we will have housing data and minutes from the latest FOMC meeting.

Important news for USD:

Wednesday:

  • Housing Starts
  • Building Permits
  • FOMC Minutes

Friday:

  • Existing Home Sales

EUR

Industrial production for Eurozone in December came in at -2.1% m/m vs -2% m/m as expected and -4.1% y/y vs -2.5% y/y. The reading reaffirms weak conditions shown in the German and French readings. The slump in manufacturing activity accelerated EURUSD downfall to the lowest levels since 2017. ECB’s chief economist Lane stated that impact of coronavirus may be pretty serious short-term and that they expect gradual pick up in inflation. ECB member de Cos confirmed that rates will stay low and accommodative policy will remain for prolonged period of time. The EU confirmed their forecast of GDP at 1.2% in both 2020 and 2021.

Germany reported flat Q4 GDP vs 0.1% q/q as expected and 0.4% y/y vs 1.1% y/y as expected. Eurozone Q4 GDP seemed undisturbed by Germany’s reading and came in at 0.1% q/q as expected and 0.9% y/y vs 1% y/y as expected. Trade balance in December for Eurozone came in at EUR22.2bn vs EUR19.3bn as expected. Exports grew 0.9% m/m while imports fell -0.7% m/m.

This week we will have sentiment data, final January inflation data and preliminary February PMI numbers.

Important news for EUR:

Tuesday:

  • ZEW Economic Sentiment Indicator (EU and Germany)

Thursday:

  • Consumer Confidence Index

Friday:

  • Markit Manufacturing PMI (EU, Germany and France)
  • Markit Services PMI (EU, Germany and France)
  • Markit Composite PMI (EU, Germany and France)
  • CPI

GBP

Preliminary Q4 GDP number came in flat as expected but yearly figure came in stronger than expected at 1.1% y/y on the back of positive revision to Q3 reading. GDP in December came in at 0.3% m/m vs 0.2% m/m as expected and helped keep the economy from contracting in Q4. Net exports and government spending were the biggest contributor to Q4 GDP while business investment was a drag. Government spending showed the biggest increase since Q1 of 2012. Industrial and manufacturing production rebounded from the previous month’s lows but recovery was weaker than expected. Trade balance in December came in at £0.8bn on the back of astonishing rise in exports of 17.4% driven by exports of precious metals. Exports are a fickle category so danger for contraction in Q1 2020 is present considering the highest drop in business investment since 2016.

Prime minister Johnson made a cabinet reshuffle which lead to the resignation of Sajid Javid, Chancellor of Exchequer (minister of finance). He declined to sack his top advisors and will be replaced by Rishi Sunak and this move is seen as positive for pound as Sunak will boost infrastructure spending and investments, thus stimulating the British economy.

This week we will have employment, inflation and consumption data as well as preliminary February PMI numbers.

Important news for GBP:

Tuesday:

  • Unemployment Rate
  • Average Weekly Earnings

Wednesday:

  • CPI

Thursday:

  • Retail Sales

Friday:

  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

AUD

January CPI from China came in at 5.4% y/y vs 4.9% y/y as expected. Food inflation has increased exponentially to 20.6% y/y, mainly due to rise in pork price which were up 8.5% m/m for a total of more than 100% y/y, while non-food items were up 1.6% y/y. Core CPI ticked up to 1.5% y/y. PPI came in at 0.1% y/y for a first rise in 7 months. China’s oil imports are down due to economic stoppage caused by Coronavirus. This in turn has pushed the price of WTICrude below $50 at the beginning of the week.

This week we will have minutes from the latest RBA meeting as well as employment data.

Important news for AUD:

Tuesday:

  • RBA Meeting Minutes

Thursday:

  • Employment Change
  • Unemployment Rate

NZD

RBNZ has left the cash rate unchanged at 1% as widely expected. According to their forecasts no rate cuts are expected this year which boosted NZD. They assessed the impact of coronavirus on New Zealand as short lived with risk of potential bigger impact present. Governor Orr assumes that coronavirus impact will last for 6 weeks. He added that fiscal boost eases pressures on monetary policy. RBNZ sees low interest rates as necessary to keep inflation and employment levels close to target and expect economic growth to accelerate over the second half of 2020. Electronic card spending in January came in at -0.1% m/m vs 0.4% m/m as expected.

This week we will have bi-monthly GDT price auction as well as Q4 retail sales which are expected to come higher than previous quarter.

Important news for NZD:

Tuesday:

  • GDT Price Index

Sunday:

  • Retail Sales

CAD

Housing data showed an improvement compared to last month and expectations with building permits coming in at 7.4% m/m for the month of December and housing starts at 213.2k for the month of January.

This week we will have inflation and consumption data.

Important news for CAD:

Tuesday:

  • Manufacturing Sales

Wednesday:

  • CPI

Friday:

  • Retail Sales

JPY

Preliminary machine tool orders in January continued their decline from already low levels coming in at -35.6% y/y vs -33.5% y/y the previous month. Lackluster start of the year. Although Olympic Games are in late July questions slowly arise whether it will be possible to held the games due to the virus threat. Cancellation of games would be a devastating blow to Japanese economy.

This week we will have preliminary Q4 GDP reading which is expected to come in negative due to sales tax hike and problems caused by weather (typhoon). We will also have final industrial production data for December, core machinery orders, trade balance, national inflation data and preliminary February PMI numbers.

Important news for JPY:

Monday:

  • GDP
  • Industrial Production

Wednesday:

  • Core Machinery Orders
  • Trade Balance

Friday:

  • CPI
  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

CHF

January seasonally adjusted unemployment rate stayed at the low level of 2.3% showing very tight labour market conditions. Headline CPI for the same month came in at 0.2% y/y same as the previous month, however very concerning is the drop in the core number which also came in at 0.2% y/y but down from 0.4% y/y the previous month. Switzerland is struggling with missing inflation for years now and the situation is deteriorating. CHF has been gaining strength due to its safe haven status, especially against EUR which may prompt SNB to react in order to weaken it.

This week we will have trade balance data.

Important news for CHF:

Thursday:

  • Trade Balance

Forex Major Currencies Outlook (Feb 24 – Feb 28)

PMI data from China showing the impact of the coronavirus on the economy, inflation data from US and EU, and Canada’s Q4 GDP, will highlight the week.

USD

He housing market showed tremendous strength with both housing starts and building permits beating the expectations. Building permits came in highest since 2007 which in combination with overall strong data coming from US kept dollar bought throughout the week. FOMC minutes from the January meeting provided no new clues into Fed’s thinking. They find the current monetary policy appropriate and noted that surrounding risks are “somewhat more favourable” than at the previous meeting. They expect economic growth to continue at a “moderate pace” and will continue watching how the situation with the coronavirus unfolds. Regular open market operations are still needed to ensure ample reserves.

This week we will have consumer confidence and housing data as well as a second estimate of Q4 GDP, durable goods orders, PCE inflation data and data on personal spending and income.

Important news for USD:

Tuesday:

  • Consumer Confidence Index

Wednesday:

  • New Home Sales

Thursday:

  • GDP
  • Durable Goods
  • Pending Home Sales

Friday:

  • PCE
  • Personal Spending
  • Personal Income

EUR

ZEW survey in February for Germany showed a drop to -15.7 vs -10 as expected. Expectations dropped from the previous month for both Germany and the Eurozone, coming in at 8.7 and 10.4 respectively. Coronavirus threat reared its ugly head and caused concerns about a global slowdown which will particularly hurt export-oriented economies like Germany. Final January CPI came in at 1.4% y/y with core being at 1.1% y/y.

Preliminary consumer confidence in February came in at -6.6 vs -8.2 the previous month which gave a short-lived boost to EUR as markets braced for PMI data. PMI data beat the expectations with manufacturing coming in at 49.1 on the back of jump in German manufacturing reading. Services were up to 52.8 which pushed composite to 51.6. A caveat to German manufacturing data is that almost half of the gain can be attributed to decrease in Supplier Delivery Index which indicates increased supply availability - and possibly decreased economic activity.

This week we will have sentiment and preliminary inflation data for February from Germany and EU as well as final Q4 GDP from Germany.

Important news for EUR:

Monday:

  • Ifo Business Climate (Germany)

Tuesday:

  • GDP (Germany)

Thursday:

  • Business Climate Indicator
  • Economic Sentiment Indicator
  • Services Sentiment Indicator
  • Consumer Confidence Index

Friday:

  • CPI

GBP

The unemployment rate in December came in unchanged at 3.8% as expected. Claimant counts dropped from November and employment change in last three months of the year came in better than expected, but average weekly earnings dropped to 2.9% 3m/y from 3.2% 3m/y the previous month. Expectations were for drop to 3% 3m/y. Data still shows tight labour market from UK. Additionally, this is the data from December before the elections while there was a lot of uncertainty in the economy.

January headline inflation came in at 1.8% y/y vs 1.6% y/y as expected and up from 1.3% y/y the previous month. The rise in petrol prices was the main contributor to the inflation growth. Core reading came in at 1.6% y/y vs 1.5% y/y as expected. Although BOE’s target is 2% this move in the right direction will give them cause for happiness and keep them away from further rate cuts. Retail sales staged a rebound in new year coming in at 0.9% m/m vs 0.7% m/m as expected and up from -0.5% m/m the previous month on the back of strong clothing and footwear sales. Ex-fuel sales growth came in at 1.6% m/m, the strongest gain since May 2018.

Preliminary February PMI data showed services at 53.3 vs 53.9 prior, manufacturing at 51.9 vs 50 prior and composite the same at 53.3. Markit notes emergence of supply chain disruptions due to the coronavirus outbreak but they still forecast Q1 GDP to be at 0.2% q/q.

AUD

February meeting minutes showed board’s decision to keep rates on hold with their willingness to ease further if need arises. It is reasonable to expect periods of lower rates and further rate cuts will be taken only in order to support growth in inflation and job creation. The coronavirus has been characterized as a new risk for the global economy, but it is too early to judge its impact. Slowdown in Q4 of 2019 and Q1 2020 will be shown due to wildfires but they expect full recovery by the end of the year. Outlook for the economy remains positive.

Employment change in January came in at 13.5k vs 10k as expected. Full-time employment change came in at 46.2k for a big beat and boost to the economy. Part-time employment came in at -32.7k. As for the ugly side of the report, the unemployment rate jumped to 5.3% from 5.1% the previous month. RBA targets the unemployment rate trying to push it down to around 4.5% so this jump is particularly unwelcoming. This rise will spur talks about RBA rate cuts that may come sooner than later. Participation rate ticked up to 66.1% from 66% and this may ease the rise in the unemployment rate a bit.

AUD continues to drop toward new lows mainly on the back of stagnating wages. RBA noted in their minutes that they would welcome the rise in wages, but they do not expect to see it in the next 2 years. China reported that their refineries processed 25% less oil in 2020 than the average in H2 2019 indicating serious slowdown in demand for oil and consequently the fall in economic activity which lead Apple to state that they will not be able to reach their Q1 targets. Moody’s lowered China’s growth to 5.2% from 5.8% previously. China is trying to battle the economic slowdown with rate cuts, a cut to 4.05% from 4.15% on the 1-year loan prime rate as well as a cut to the 5-year rate to 4.75% from 4.80% previously.

This week we will have February PMI data from China showing the effect of coronavirus outbreak.

Important news for AUD:

Saturday:

  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)

NZD

GDT price index came in at -2.9%. Second consecutive negative auction. Low demand from China seems to be the main culprit. Governor Orr characterized the economy and monetary policy as being in a “good position”. NZDUSD dropped below 0.64 on risk-off sentiment caused by perceived detrimental impact of coronavirus on global economy.

This week we will have trade balance and activity data.

Important news for NZD:

Wednesday:

  • Trade Balance

Thursday:

  • ANZ Business Confidence
  • ANZ Activity Outlook

CAD

Manufacturing sales in December badly missed coming in at -0.7% m/m vs 0.7% m/m as expected with the prior month’s reading being revised down to -1% m/m from -0.6% m/m. This is the fourth consecutive month of negative readings. The decline was led by motor vehicles and aerospace products. Ex-auto category actually came in positive on month at 0.1% m/m. Sales were down in 11 out of 21 sectors.

Headline inflation in January came in at 2.4% y/y vs 2.3% y/y as expected and up from 2.2% y/y the previous month. Median and trim core inflation came in as expected at 2.2% y/y and 2.1% y/y respectively while common declined to 1.8% y/y from 2% y/y as expected. Retail sales in December came in flat vs 0.1% m/m as expected. The bright spot is that the previous month’s reading has been revised up to 1.1%. Ex-auto category came in at 0.5% m/m vs 0.3% m/m. The biggest contributors were building materials while biggest drag were gasoline stations and motor vehicles. Cannabis sales were up 8.1% m/m.

This week we will have Q4 GDP data.

Important news for CAD:

Friday:

  • GDP

JPY

Preliminary Q4 GDP data came in at -1.6% q/q vs -1% q/q as expected for the first contraction in 5 quarters. The annualized reading came in at -6.3% which is a biggest drop since Q2 of 2014. Private consumption came in at -2.9% q/q vs -2% q/q as expected with business spending coming in at -3.7% q/q vs -1.6% q/q as expected. Expectations for the reading were low and data managed to miss even these low expectations. Both exports and imports dropped although net exports were positive and contributed with 0.5 pp. An atrocious quarter caused by sales tax hike and typhoons. With Japan being the export-oriented economy, the coronavirus outbreak will dampen the recovery in Q1, so the Olympic Games may act as a saving grace for the economy.

Trade balance data for the first month of 2020 came in at -JPY1312.6bn vs -JPY1984.8bn as expected but still a huge fall from -JPY154.6bn the previous month. Exports came in at -2.6% y/y vs -7% y/y as expected for a small positive from the reading, although it is the 14th consecutive month of negative exports. while imports fell -3.6% y/y vs -1.8% y/y as expected. Core machinery orders which serve as the capex indicator for 6 to 9 months in the future continued their decline coming in at -12.5% m/m vs -8.9% m/m as expected and -3.5% y/y vs -0.7% y/y as expected. Industrial production in December came in at 1.2% m/m and -3.1% y/y. Both readings came in better than previous month, however they were not enough to save the GDP.

National CPI data for January came in as expected. Headline number was at 0.7% y/y, ex-fresh food was at 0.8% y/y same as ex-fresh food, energy category. Those are some weak numbers that will pressure BOJ to continue with their massive monetary stimulus. If the sales hike effect is removed, the core CPI came in at just 0.4% y/y. Preliminary February PMI data showed the devastating effect of the coronavirus and China with a slowdown on exports - at 47.6 for manufacturing, 46.7 for services and 47 for composite. All three much weaker than the previous reading and all three in contraction.

This week we will have Tokyo area inflation, consumption, industrial and employment data.

Important news for JPY:

Friday:

  • Tokyo CPI
  • Unemployment Rate
  • Retail Sales
  • Industrial Production

CHF

Trade balance data for the year start came in at CHF4.78bn vs CHF1.96bn the previous month on the back of 1.7% m/m exports and falling imports -1.8% m/m.

This week we will have consumption data.

Important news for CHF:

Friday:

  • Retail Sales

Forex Major Currencies Outlook (Mar 2 – Mar 6)

BOC and RBA meetings, followed by preliminary inflation data from EU, Caixin PMI data from China and employment data from US (NFP) and Canada will highlight the week ahead
.
USD

Consumer confidence index for February came in at 130.7 for a small increase from 130.4 in January. Consumers should continue to contribute to spending and growth in H1 of 2020. New home sales surged to 764k from upwardly revised 708k the previous month for the highest level in almost 13 years. The situation in the market causes demand for bonds which in turn pushes their yield lower. The dramatic change in the short end of the yield curve now implies that markets now fully price in a rate cut at the March meeting.

Second reading of Q4 GDP came in at 2.1% annualized as expected. Personal spending came in at 1.7%, down from 1.8% preliminary. Business investment came in at -2.3% vs -1.5% preliminary for a third consecutive quarter of falling investments. Net exports were revised up and propped GDP to stay at the same level as preliminary reported. Preliminary durable goods orders in January came in at -0.2% m/m vs -1.4% m/m as expected with prior month’s reading being revised up to 2.9% m/m. Core durable goods rebounded to 1.1% m/m from -0.8% m/m the previous month which was revised up to -0.5% m/m. A strong start of the year for business investment, but the effects of Boeing and coronavirus will certainly dampen the numbers in the coming months. Personal income came in at 0.6% m/m up from 0.2% m/m the previous month while personal spending came in at 0.2% m/m, down from 0.3% m/m the previous month.

This week we will have ISM PMI data and trade balance data. NFP on Friday is expected to come around 175k, the unemployment rate is expected to tick up to 3.7% while average hourly earnings are expected to stay at 0.2%.

Important news for USD:

Monday:

  • ISM Manufacturing PMI

Wednesday:

  • ADP Nonfarm Employment
  • ISM Non-Manufacturing PMI

Friday:

  • Nonfarm Payrolls
  • Unemployment Rate
  • Average Hourly Earnings
  • Trade Balance

EUR

Ifo business climate index in February came in at 96.1 vs 95.3 as expected. Both expectations and current assessment categories beat the expectations. According to Ifo economists, the coronavirus outbreak did not affect the German economy. The problem with the survey and this statement is that it was conducted before the virus took the lives of four people in Italy. Later on, an Ifo economist stated that the development of the coronavirus epidemic is not yet fully reflected in the survey. German’s Q4 GDP has been confirmed flat for the quarter and only 0.3% y/y. Exports were down, businesses investment was cut and consumption stagnated. February sentiment data showed that EU’s economy does not appear to be threatened by coronavirus. Consumer confidence improved to -6.6 with other indicators also showing improvement, most notably the economic sentiment indicator pushing up to 103.5.

The Venice Carnival has been cancelled, football games in northern Italy have been postponed and schools have been closed. The number of reported deaths is 11 while number of people affected with virus is climbing toward 4-digit number. New cases showed up in Spain, Germany, Denmark, UK and Austria as well.

This week we will have final PMI February data, preliminary February inflation data, the unemployment rate and consumption data for January.

Important news for EUR:

Monday:

  • Markit Manufacturing PMI (EU, Germany, France)

Tuesday:

  • CPI
  • Unemployment Rate

Wednesday:

  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
  • Retail Sales

GBP

Official talks regarding future trade relationship between UK and EU are set to start on Tuesday. UK has affirmed in their negotiating mandate that they are looking for Canada, Japan-style deals and that they are willing to trade on no-deal basis with EU if the talks fail to produce results. The government stated their willingness to quit talks by June and turn their attention on preparations for no-deal scenario if no progress is made on the deal. GBP has weakened on this news.

This week we will have final PMI data and start of EU/UK talks regarding future trade relationship, so headlines will dominate the movements in the GBP.

Important news for GBP:

Monday:

  • Markit Manufacturing PMI

Wednesday:

  • Markit Services PMI
  • Markit Composite PMI

AUD

Private capital expenditure in Q4 missed the expectations badly coming in at -2.8% q/q vs 0.5% q/q as expected. The decline was mainly due to a drop in construction activity and this will be a huge drag on Q4 GDP number. AUDUSD fell to new lows. Lowest levels in 11 years have been reached on the back of worrying reports about coronavirus impact.

This week we will have Q4 GDP, which may surprise to the downside due to weak capex data, trade balance and consumption data from Australia. RBA will hold their meeting. Expectations are for the rate cut in April and no changes in March. Caixin PMI and trade balance data will be published from China.

Important news for AUD:

Monday:

  • Caixin Manufacturing PMI (China)

Tuesday:

  • RBA Interest Rate Decision
  • RBA Rate Statement

Wednesday:

  • GDP
  • Caixin Services PMI (China)
  • Caixin Composite PMI (China)

Thursday:

  • Trade Balance

Friday:

  • Retail Sales

Saturday:

  • Trade Balance (China)

NZD

Retail sales for Q4 came in at 0.7% q/q vs 0.8% q/q as expected, down from 1.6% q/q the previous quarter. Core retail sales also missed expectations coming in at 0.5% q/q vs 0.9% q/q as expected and much weaker than 1.8% q/q the previous quarter. Yearly figure dropped to 3.3% y/y vs 4.5% y/y the previous quarter. Department stores along with fuel sales were the main drag while pharmaceuticals showed an increase.

Trade balance for the first month of the year came in at -NZD349m vs -NZD549m as expected. Both exports and imports were positive and beat the expectations which lead to lower than expected trade deficit. After several months of improvement in business confidence the reading showed a step back and came in at -19.4 vs -13.2 the previous month. NZDUSD pair has dropped under 0.63 level.

This week we will have bi-monthly GDT auction.

Important news for NZD:

Tuesday:

  • GDT Price Index

CAD

Wholesale trade in December came in at 0.9% m/m vs 0.4% m/m as expected and rebounded from -1.2% m/m the previous month. The automotive sector was the main drag. A drop in oil prices due to slowing of global demand pushed CAD down against major pairs. WTICrude was trading below psychologically important $50/barrel during the week, falling even bellow $45/barrel for a brief period. Q4 GDP came in as expected at 0.3% q/q and 1.3% annualized.

This week we will have employment and trade balance data and BOC rate decision. Chances of a rate cut have increased. Markets are now pricing almost 30% chance of a rate cut.

Important news for CAD:

Wednesday:

  • BOC Interest Rate Decision
  • BOC Rate Statement

Friday:

  • Employment Change
  • Unemployment Rate
  • Trade Balance

JPY

Tokyo area CPI in February continued to move in the opposite direction from the BOJ target. Headline number came in at 0.4% y/y vs 0.5% y/y as expected and down from 0.6% y/y the previous month. Ex-fresh food category came in at 0.5% y/y vs 0.7% y/y the previous month while ex-fresh food, energy category came in at 0.7% y/y vs 0.9% y/y the previous month. The unemployment rate in January jumped to 2.4% from 2.2% the previous month. Retail sales finally bounced back and showed a strong reading, coming in at 0.6% m/m vs -0.1% m/m as expected and -0.4% y/y vs -1.3% y/y as expected. Preliminary industrial production numbers were also better than expected coming in at 0.8% m/m vs 0.2% m/m.

This week we will have final PMI data as well as data on household spending and wages.

Important news for JPY:

Monday:

  • Markit Manufacturing PMI

Wednesday:

  • Markit Services PMI
  • Markit Composite PMI

Friday:

  • Household Spending
  • Labour Cash Earnings

CHF

SNB’s Maechler reiterated willingness to act in the market if the need arises. Swissy has been gaining strength due to its safe haven status, pushing EURCHF down to 1.06, so it is reasonable to believe that they will act to preserve that level and ease the CHF strength. The US treasury has SNB on the watch list for potential currency manipulation. January retail sales came in at -0.1% m/m but the previous month’s reading was revised up to 0.8% m/m.

This week we will have Q4 GDP and inflation data.

Important news for CHF:

Tuesday:

  • GDP

Wednesday:

  • CPI

Forex Major Currencies Outlook (Mar 9 – Mar 13)

ECB meeting will dominate the otherwise slow week with economic data followed by GDP readings from EU, UK and Japan and unavoidable coronavirus news.

USD

ISM manufacturing PMI in February came in barely above boom level at 50.1 vs 50.9 the previous month. New orders and prices paid dropped into contraction, production dropped but stayed in expansion while employment showed a small improvement but still well below the 50 level. ISM Non-manufacturing PMI painted a different picture, smashing the expectations and coming in at 57.3 vs 54.9 as expected. Main drivers were employment, new orders and new export orders categories. This is the highest reading since February of 2019 and since the US economy is much more services oriented this is a great reading.

Fed surprised the markets with 50bp rate cut delivered in between the meetings, putting the rate at 1% to 1.25%. The cut was delivered in order to ease the economic disruption caused by the virus outbreak. Chairman Powell quickly added that US fundamentals are strong and that a rate cut was necessary due to the emergency situation. He added that move should provide a meaningful boost to the economy. Markets are now pricing an additional 50bp rate cut at the March meeting as yields on 10-year treasuries fell below 0.80%. The House of Representatives approved $8.3bn emergency spending to cope with the virus, thus adding fiscal support on top of the monetary one.

NFP numbers for February smashed the expectations coming in at 273k vs 175k as expected with previous reading being revised upwards to 273k as well. The unemployment rate ticked back down to 3.5% with participation rate staying the same at 63.4%. Average hourly earnings climbed to 0.3% m/m from 0.2% m/m the previous month. The underemployment rate was the only weak point in the report climbing to 7% from 6.9% the previous month. Trade balance in January came in at $-45.3bn vs -46.1bn as expected. Exports were down -0.4% m/m while imports showed even bigger drop coming in at -1.6% m/m. Trade deficit with China increased compared to the previous month but it decreased compared to the previous year.

This week we will have inflation data.

Important news for USD:

Wednesday:

  • CPI

EUR

Final manufacturing PMI for EU improved slightly to 49.2 from 49.1 preliminary. Both German and French readings improved as well but on the back of rise in deliveries sub index, which indicates a serious disruption in supply chains. The new orders category continued to decline. Services PMI came in at 52.6 vs 52.8 preliminary due to the drop in German services reading. Composite came in at 51.6 as preliminary reported. Retail sales bounced back in January coming in at 0.6% m/m from -1.1% m/m in December with yearly reading staying the same at 1.7% y/y.

Preliminary inflation in February came in at 1.2% y/y as expected, a drop from 1.4% y/y in January due to a drop in energy prices, but the core CPI climbed to 1.2% y/y from 1.1% y/y the previous month. G7 meeting showed the willingness of central bankers and finance ministers to use all appropriate policy tools, including fiscal measures, to achieve strong growth. However, the fiscal measures will be used only where it is deemed as appropriate meaning there will be no coordinated action and that there is no push for Germany to loosen up their fiscal policy. Italy has pledged to provide a fiscal boost to its economy which will grow her debt to 2.4% of GDP. The EU commission expects to downgrade GDP forecasts and that Italy and France face risk of technical recession.

This week we will have final Q4 GDP reading and industrial production data. ECB meeting will be closely watched. The markets are pricing 7bp out of 10bp rate cut.

Important news for EUR:

Tuesday:

  • GDP

Thursday:

  • Industrial Production
  • ECB Interest Rate Decision
  • ECB Monetary Policy Press Conference

GBP

Final manufacturing PMI for February came in at 51.7 up from 50 the previous month. Services came in a bit weaker from the previous month coming in at 53.2 vs 53.9 which brought down composite to 53 vs 53.3 the previous month.

This week we will have GDP, trade balance and industrial data as well as information about budget that will be published on March 11.

Important news for GBP:

Wednesday:

  • GDP
  • Trade Balance
  • Manufacturing Production
  • Industrial Production
  • Construction Output

AUD

RBA has cut the interest by 25bp and it now stands at 0.50%. Coronavirus outbreak and the need to support the economy have been cited as the main reasons for the cut. Coronavirus has been blamed for everything starting with the delay in progress on jobs and inflation to global slowdown. They also stated that it is too early to assess the effects of the virus and at what point will the global activity pick up. The housing market seems to have reached a turnaround as the latest abysmal housing data show. AUD has jumped on the news as markets were expecting a 50bp cut. RBA deputy governor, Guy Debelle stated that RBA has room for one more rate cut and after that they will have to consider introducing QE. Markets are pricing almost 97% chance for a rate cut at April’s meeting.

Q4 GDP came in at 0.5% q/q vs 0.4% q/q and 2.2% y/y vs 2% y/y as expected. Household consumption and change in inventories were the biggest contributors while private capital formation was the biggest drag. Government spending contributed to more than half of the yearly figure. Trade balance figures for January came in at AUD5.21bn vs AUD4.8bn as expected. Both exports and imports were -3% m/m. Exports to China have fallen again and in February and March they will continue to drop and hurt the trade balance. January retail sales came in at -0.3% m/m vs flat as expected. Bad start of the year for retailers caused by the raging wildfires at the time.

Official PMI data from China disappointed even with the bar being set very low. Manufacturing PMI plunged to 35.7 vs 45 as expected while non-manufacturing PMI collapsed to 29.6 vs 51 as expected. Composite reading was dragged down to 28.9, a record low, showing the full impact of work stoppage caused by coronavirus. Caixin PMI manufacturing showed a decline to 40.3 vs 45.7 as expected with record falls in new orders, employment and output components. Caixin services plunged to 26.5 which dragged down composite to 27.5, both readings are record lows. New orders, new export orders and employment category dropped.

This week we will have inflation data from China.

Important news for AUD:

Tuesday:

  • CPI (China)
  • PPI (China)

NZD

GDT price index again came in negative (-1.2%), however a positive trend is forming and prices should move to the positive within the couple of next auctions. Butter Milk Powder (-4.8%) and Cheddar (-4.7%) where the main drags. Kiwi has gained grounds during the week against USD due to the dollar weakness and NZDUSD stood above 0.63 level.

This week we will have data on card spending.

Important news for NZD:

Tuesday:

  • Electronic Card Retail Sales

CAD

BOC has followed Fed’s lead and cut rates by 50bp, bringing it down to 1.25% citing that outlook is now clearly weaker than it was in January. Markets were expecting a 25bp cut so this move weighed heavily on CAD sending USDCAD to 1.34 and beyond. Business activity has fallen sharply in some regions and supply chains have been disrupted. They expect business activity and consumer confidence to further drop as the virus spreads. Rail line blockades, strikes by Ontario teachers, and winter storms in some regions are additional factors slowing economic activity in the first quarter.

Employment change in February came in at 30.3k vs 11k as expected. The unemployment rate stayed at 5.6% with participation rate climbing to 65.5%. Full-time employment was 37.6k while part-time was -7.3. Hourly wage rate jumped to 4.3% from 3.9% the previous month. Overall a very strong employment report with wages and full-time employment leading the way. Trade balance deficit widened in January coming in at -CAD1.47bn. Exports have fallen by 2% m/m while imports dropped by 0.5% m/m. Exports declined in 9 out of 11 sectors while imports declined in 6 out of 11 sectors. Motor vehicles showed the biggest drop in exports and consumer goods showed the biggest drop in imports.

JPY

Final February manufacturing PMI came in at 47.8, a bit better than preliminary reading of 47.8. New orders category showed a biggest drop since late 2012. Firms have cut production due to the slowdown in global demand. Services came at 46.8 and put composite PMI down into contraction at 47. Business activity suffered a biggest drop since 2014 due to fall in tourism caused by the virus. Capex for Q4 came in at -3.5% vs -2.5% as expected with ex-Software category showing even bigger drop of -5% vs -2% as expected. Newly published data will cause downward revision to next week’s Q4 GDP.

Earnings data for January showed a surprising rise in wages to 1.5% y/y vs 0.2% y/y as expected and up from being flat in December. Although base wages did increase, the real push came from bonuses that jumped 10.2%. The rise in wages did not fully transition into consumption as household consumption numbers came in at -3.9% y/y vs -4.8% y/y the previous month for the fourth consecutive month with negative reading.

This week we will have final Q4 GDP reading.

Important news for JPY:

Monday:

  • GDP

CHF

Q4 GDP came in at 0.3% q/q vs 0.2% q/q as expected and 1.5% y/y vs 1.3% y/y as expected. On the inflation side, headline CPI in February came in at -0.1% y/y vs 0.1% y/y as expected but core CPI stood the ground at 0.2% y/y.

This week we will have employment data.

Important news for CHF:

Monday:

  • Unemployment Rate

Forex Major Currencies Outlook (Mar 16 – Mar 20)

Fed’s meeting will be the main event of the week followed by BOJ and SNB meetings, employment data from UK and Australia as well as consumption data from US and Canada.

USD

Inflation in February came in at 2.3% y/y vs 2.2% y/y as expected and down from 2.5% y/y the previous month. Core measure climbed to 2.4% y/y vs 2.3% y/y the previous month. Fed will increase the amount offered in its repo operations from $100bn to at least $150bn in attempt to ramp up the liquidity and then again raised the amount to $175bn indicating critically illiquid conditions in the repo market. Finally, the NY Fed has pumped $500bn in the repo market and pledged to do so 3 days in a row making this an extraordinary $1.5 trillion liquidity injection. There are talks about $5 trillion injection over the next month. President Trump enacted a 30-day ban on all travel from the EU Schengen zone and later clarified that it refers only on travel of people, not goods.

This week we will have data on consumption, housing and industrial production. Fed interest rate decision will dominate the markets. The question is not will Fed cut, but how much? Estimates are varying from 0.50% to full 1% as stated by Goldman Sachs. New economic projections, the dot plot, will provide us with more insight in how Fed sees the impact of the virus on US economy.

Important news for USD:

Tuesday:

  • Retail Sales
  • Industrial Production

Wednesday:

  • Housing Starts
  • Building Permits
  • Fed Interest Rate Decision
  • FOMC Press Conference
  • FOMC Economic Projections

Friday:

  • Existing Home Sales

EUR

Final Q4 GDP came in at 0.1% q/q and 1% y/y. Industrial production in January came in at 2.3% m/m vs 1.5% m/m and -1.9% y/y vs -2.9% y/y as expected. Better than expected results for the Eurozone as a whole on the back of previously reported improvements from Germany and France. The caveat with data is that it is pre-virus.

ECB has left the interest rate unchanged, however it has announced a bonds purchase of EUR120bn until the year and on top of EUR20bn that are already conducted. Additional TLTROs will be conducted in order to provide immediate liquidity. More favourable terms will be applied to TLTROs during period from June 2020 to June 2021. Governor Lagarde stated that decision on package was unanimous and that reversal rate has “definitely” not being reached yet. She also asked for coordinated fiscal support to go along with monetary policy measures. The virus has been characterized as a major shock and ECB will use measures best targeted for crisis.

This week we will have ZEW survey, final February inflation and trade balance data.
Important news for EUR:

Tuesday:

  • ZEW Economic Sentiment Indicator (EU and Germany)

Wednesday:

  • CPI
  • Trade Balance

GBP

BOE followed the Fed and cut the interest rate between the meetings by 50bp, so new rate is 0.25%. In the accompanying statement it was said that move will help support business and consumer confidence during these difficult times by improving the availability of funding. Governor Carney, who will be leaving the post and will be replaced by Andrew Bailey next week, stated that move was necessary to prevent temporary disruptions from causing long-term damage. He added that they further cut rates from 0.25% but close to and above 0%. They will launch a lending scheme of around £100bn to small and medium-sized business. Today’s move was characterized as “big, big package”. Government will also prepare a set of measures intended to fight of the economic slowdown and assist households and businesses.

GDP in January came in flat vs 0.2% m/m as expected. Manufacturing production came in line with expectations while industrial production and construction output missed expectations. Seems that post-election exuberance did not hold for long in UK and with disruption caused by the virus the figures will only get worse, therefore the BOE’s decision. Visible trade balance in January came in at -£3.7bn due to big drop in exports (-2.8%) and rise in imports (0.7%). Again, these are pre-virus data.

The UK delivered a huge support package for workers and businesses in order to fight the coronavirus. Statuary sick pay will be made for all that are advised to self-isolate. Temporary loans will be provided to businesses with government guaranteeing 80% of bank loans for up to £1.2m for small businesses. Self-employed people will get sick benefits from day one and business rates will be abolished for small businesses ‘entirely’ for a year. Total stimulus package will be worth around £30bn with further loosening of up to £18bn on the year. Total coronavirus measures will cost £7bn.

This week we will have employment data.

Important news for GBP:

Tuesday:

  • Employment Change
  • Unemployment Rate
  • Average Weekly Earnings

AUD

Economic package from Australia will provide AUD17.6bn stimulus to the economy. The two-year package will total AUD22.9bn, almost 1.2% of GDP, out of which AUD11bn will be distributed before June 30 of 2020.

January-February trade balance data from China showed a decline in trade surplus due to huge drop in exports of -17.2% while imports dropped -4%. Trade surplus with US almost halved to $25.37bn vs $42.16bn at the same time previous year. Inflation figures for February show drop in both CPI (5.2% y/y) and PPI components (-0.4% y/y).

This week we will have meeting minutes from RBA’s meeting and employment data from Australia as well as consumption and industrial data from China followed by decision on loan prime rate on Friday.

Important news for AUD:

Monday:

  • Retail Sales (China)
  • Industrial Production (China)

Tuesday:

  • RBA Meeting Minutes

Thursday:

  • Employment Change
  • Unemployment Rate

Friday:

  • Loan Prime Rate (China)

NZD

Business surveys plunged as preliminary business confidence for March dropped to -53.3 from -16.4 the previous month and activity outlook went back into negative territory with -12.8% vs 12% the previous month. RBNZ is closely monitoring these surveys and they influence their decisions so this can be additional sign, apart from global easing moves, that RBNZ will cut at their March meeting. Governor Orr stated that they are prepared to do everything that is needed as well as that they see lower bound for rates in the negative territory. Electronic card retail sales for the month of February beat expectations and came in at 0.6% m/m and 8.6% y/y.

This week we will have bi-monthly GDT auction as well as Q4 GDP which is expected to weaken from the previous quarter.

Important news for NZD:

Tuesday:

  • GDT Price Index

Wednesday:

  • GDP

CAD

Saudi Arabia plans to increase their oil production next month and they have cut their price for all crude. The move is equivalent to a “price war” and crude oil plunged on opening to $33/barrel and with it USDCAD gapped up 150+ pips. USDCAD climbed as high as 1.3750 level while oil dropped down to barely above $27/barrel level.

January was a strong month for housing with building permits coming in at 4% m/m vs -3% m/m as expected due to good weather. February housing starts came in a bit weaker from than the previous month but still better than expected at 210.1k. The government has announced CAD1.1bn stimulus package to fight off the coronavirus and stated their readiness to add more., h However in the light of other country’s measures this seems utterly insufficient. BOC has announced that they will expand their operations in the repo market, similar to Fed’s. They will be conducted weekly starting from March 17. Late on Friday BOC cut the interest rates additional 50 bp for a second cut in a month putting it at 0.75%.

This week we will have data on manufacturing sales, inflation and consumption.

Important news for CAD:

Tuesday:

  • Manufacturing Sales

Wednesday:

  • CPI

Friday:

  • Retail Sales

JPY
Final Q4 GDP data came in even worse than preliminary reported at -1.8% q/q and -7.1% y/y. Capex fell -4.6% q/q for the biggest quarterly drop in over a decade. Private consumption came in a bit better at -2.8% q/q vs -2.9% q/q preliminary. Domestic demand contribution came in at -2.3% q/q vs -2.1% q/q. Chances of the economy contracting again in Q1 are rising due to drops in exports and production as well as private consumption. Government approved an additional $4.1bn package to fight off the coronavirus induced economic fallout. This will be a part of greater economic package of approximately $16bn.

This week we will have data on core machinery orders, industrial production and national inflation. BOJ will meet on Monday and additional easing measures to keep the liquidity are expected.

Important news for JPY:

Monday:

  • Core Machinery Orders
  • BOJ Interest Rate Decision

Wednesday:

  • Trade Balance

Thursday:

  • CPI

CHF

February seasonally adjusted unemployment rate keeps steady for months now at 2.3%. Swissy has strengthened on the back of risk aversion in the markets. On market open and in first hours of trading USDCHF fell below 0.92 level.

This week we will have trade balance data. SNB will be forced to take more easing measures to fight the strength of CHF.

Important news for CHF:

Thursday:

  • Trade Balance
  • SNB Interest Rate Decision

Forex Major Currencies Outlook (Mar 23 – Mar 27)

We expect lockdowns to engulf more and more countries making economic data secondary to the fiscal and monetary measures, preliminary PMI data will be among the first to show direness of the situation.

USD

At the emergency meeting held over the weekend Fed has cut rates to 0%. The length of loans to banks has been increased to 90 days and reserve requirements for banks have been lowered. They have launched a new QE program which will total $700bn of which $500 is for treasuries and $200 for MBS (Mortgage Backed Securities). The cut was deemed necessary to alleviate the pain of economic slowdown caused by the virus and ease the credit conditions as liquidity is seriously drying up.

Retail sales for February disappointed coming in at -0.5% m/m vs 0.2% m/m as expected. Core retail sales came in flat vs 0.4% m/m as expected. Silver lining is that both headline and core readings for previous month have been revised up. These are the pre-virus data and although there will be some initial surge on grocery buying in March, April reading going to be very bad. Industrial production came in at 0.6% m/m vs 0.4% m/m as expected.

This week we will have housing and durable goods data along with final reading of Q4 GDP and data on PCE inflation, personal spending and income.

Important news for USD:

Tuesday:

  • New Home Sales

Wednesday:

  • Durable Goods Orders

Thursday:

  • GDP

Friday:

  • PCE
  • Personal Spending
  • Personal Income

EUR

ZEW survey numbers for March were abysmal. Current situation plunged to -43.1 vs -15.7 the previous month. Both German and EU expectations plunged back into negative coming in at -49.5. Prevailing pessimism is shown in the expectations reading indicating that, apart from a certain contraction in Q1, contraction in Q2 is highly likely. Both final headline and core CPI for February came in at 1.2% y/y while the trade surplus in January shrank to EUR17.3bn from EUR21.5bn the previous month on the back of falling exports -0.1% and rising imports 2.4%. Ifo data plunged showing the state and expectations in German economy with Ifo president saying that German economy could shrink by 6% due to the economic slowdown.

France has imposed a ban on short selling of stocks. The duration of the ban is not stated, but possibly it could last a month. Italy joined them with ban on short selling lasting 3 months. France will guarantee EUR300bn of bank loans to businesses and defer taxes and social security payments. Germany announced the willingness to provide up to EUR500bn of bank loans to businesses. ECB has announced EUR750bbn stimulus package to fight the off the economic impact of coronavirus named Pandemic Emergency Purchase Program (PEPP). It is a new and temporary asset purchase program targeting private and public sector securities that will be conducted by the end of 2020.

This week we will have preliminary March PMI and consumer confidence data.

Important news for EUR:

Monday:

  • Consumer Confidence Index

Tuesday:

  • Markit Manufacturing PMI (EU, Germany, France)
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)

GBP

The January employment report already started to show cracks as the unemployment rate and claimant count change ticked up to 3.9% and 3.5% respectively. Employment change (three month) came in at 184k vs 140k as expected with average weekly earnings coming in at 3.1% 3m/y vs 3% 3m/y as expected but ex-bonus category showed a drop.

The UK announced a new support package which includes a loan guarantee program for £330bn, almost 15% of GDP as well as £20bn grant and tax cuts. Airlines, retailers, and hospitals are the main targets to receive support. GBPUSD has fallen below 1.18 for a lowest reading since 1985. In an extraordinary meeting BOE has made an additional 15bp rate cut putting the interest rate at 0.10%. They have also decided to increase holdings of government bonds, effectively introducing new QE. The majority of new purchases will comprise of government bonds but the BOE will also buy corporate bonds. The size of the program rises to £645bn from £200bn.

This week we will have preliminary March PMI data, inflation and consumption data and BOE meeting. Interest rate has already been lowered to 0.10% and we expect it to stay there.

Important news for GBP:

Tuesday:

  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

Wednesday:

  • CPI

Thursday:

  • Retail Sales
  • BOE Interest Rate Decision

AUD

Meeting minutes showed RBA’s preparedness to ease further should economic conditions deteriorate. An extended period of lower rates is necessary to support the economy. Q1 growth will be noticeably weaker than expected and it is hard to predict length of slowdown. AUDUSD has fallen below 0.60 for the first time since 2003. February employment report showed employment change of 26.7k vs 13.5k the previous month. Full-time employment was 6.7k while part-time employment was 20k. The unemployment rate fell to 5.1% from 5.3% and participation rate has ticked down to 66% from 66.1%. Although the reports are very good, with falling unemployment rate, the situation in the world is deteriorating and RBA is under pressure to react and they have delivered. Another 25bp rate cut was announced putting the rate at 0.25%. They started buying bonds in secondary market across the yield curve on Friday. RBA governor Lowe stated that purchase of bonds will be done selectively.

February data from China show devastating numbers. Retail sales fell -20.5% y/y vs -4% y/y as expected, industrial production fell -13.5% y/y vs -3% y/y as expected while fixed asset investments managed to plunge -24.5% y/y vs -2% y/y as expected. The impact of coronavirus on the economy has shattered even the worst expectations.

NZD

RBNZ has also cut interest rate in an emergency meeting over the weekend. New OCR is now set at 0.25% from 1% previously. RBNZ states that OCR will stay at this level for at least 12 months. If more stimulus is required, they prefer introducing QE than pushing rates into negative territory. When the markets opened upon hearing the news NZDUSD was pushed below 0.60 level and continued declining to new 11-year lows. GDT auction came in at -3.9% for a fourth consecutive auction of falling prices with skim milk powder leading the way of decline (-8.1%).

This week we will have trade balance data.

Important news for NZD:

Tuesday:

  • Trade Balance

CAD

Manufacturing sales in January came in at -0.2% m/m vs -0.6% m/m as expected. This is the fifth consecutive month of declining sales. Sales decreased in 9 of 21 industries, led by lower sales in the transportation equipment and petroleum and coal products industries. The food industry posted the largest gain. Oil has dropped almost below $20/barrel and in combination with other issues caused by global slowdown it propelled USDCAD above the 1.465 level.

February CPI came in at 2.2% y/y down from 2.4% y/y the previous month while core measures came in-line with expectations, 2.1% y/y for median, 1.8% y/y for common and 2% for trimmed. These readings have very little value and impact on the market which is preoccupied with virus. March reading will be of much more interest.

JPY

BOJ kept the rate steady at -0.1% and doubled the annual pace of ETF purchases to JPY12 trillion with willingness to take additional easing measures if needed to support the economy. Governor Kuroda stated that these measures are a part of cooperation with other nations and added that -0.1% is not a limit and that rate could go lower. He added that there will be increases in purchases of corporate bonds as well. Government is considering ramping the support with an economic package worth more than JPY30 trillion.

Core machinery orders in January improved to 2.9% m/m and -0.3% y/y while final January industrial output saw an improvement from preliminary reading to 1% m/m and -2.3% y/y. February trade balance report showed larger than expected surplus of JPY1109.8bn that was achieved on imports (-14%) falling faster than exports (-1%). National CPI fell to 0.4% y/y from 0.7% y/y the previous month and both ex-food and ex-food, energy came in at 0.6% y/y down from 0.8% y/y the previous month.

This week we will have preliminary March PMI and inflation data.

Important news for JPY:

Tuesday:

  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

Friday:

  • Tokyo CPI

CHF

SNB total sight deposits for the week have risen indicating their action to limit CHF’s gains. They have left the rate unchanged at -0.75% and added that they will intervene more strongly in the FX market to stabilise the situation. The Franc is now, according to them, “even more highly valued”. Governor Jordan reiterated the need for fiscal policy to assist with monetary policy measures adding that cutting rates is unfavourable at the moment. Given that they are already at -0.75% there is really no point in cutting them even lower.

Forex Major Currencies Outlook (Mar 30 – Apr 3)

Government actions and news events will dominate the week along with resurgence in importance of employment data from US.

USD

Fed has announced that it will keep purchases of MBS and Treasuries in the amounts needed. They will purchase $75bn of Treasuries and $50bn of agency MBS each day this week. This is essentially open-ended QE that will lead to Fed owning entire debt. US Senate has reached a deal on $2 trillion bill that includes cash payment for low and middle-income earners of $1200 for adults and $500 for children and $500bn of corporate and local government assistance. Almost $365bn is penned for small and medium-sized businesses with unemployment compensation being increased and broadened. Hospitals will get $150bn.

Initial jobless claims, data that threatens to overtake NFP as most tracked economic measure, for the week of March 21 skyrocketed to 3283k vs 1640k as expected and up almost 11 times from the previous week’s reading of 282k (more than 3 million). The report is with a week delay, so it refers to the week of March 14 and we can only assume that the number will continue growing as lockdown goes on. President Trump hopes that country can reopen by April 12, that is when Easter is. The time period is very short and it is frowned upon by most scientists as eight weeks are thought to be minimum for the virus cycle.

This week we will have ISM PMI, trade balance and employment data. Initial jobless claims rose to over 3 million in the past week and they could continue their rise to over 4 million while NFP is expected to show a drop of almost 300k. Projections for the unemployment rate go from 4% all the way up to 7%.

Important news for USD:

Tuesday:

  • Consumer Confidence Index

Wednesday:

  • ISM Manufacturing PMI

Thursday:

  • Trade Balance
  • Initial Jobless Claims

Friday:

  • Nonfarm Payrolls
  • Unemployment Rate
  • Average Hourly Earnings
  • ISM Non-Manufacturing PMI

EUR

German government has signed the €750bn economic package to fight off the fallout caused by the virus outbreak. The size of the package is whopping 22% of the GDP. The package will have €150bn in supplementary government budget, €100bn for an economic stability fund that can take direct equity stakes in companies, €100bn in credit for loans to struggling businesses, and €400bn in loan guarantees to secure corporate debt at risk of defaulting.

Preliminary March manufacturing PMI came in at 44.8 due to the supplier delivery times being inversely calculated. The longer delivery times are calculated as a positive. Services PMI show the full picture of the slowdown coming in at 28.4 vs 39.5 as expected and dragging composite PMI to 31.4 vs 38.8 as expected. Preliminary consumer confidence index came in at -11.6 vs -13 as expected. Ifo numbers for March showed decline both from February readings and from preliminary March readings indicating the deterioration in economic conditions. Business climate came in at 86.1 vs 87.7 preliminary announced last week, down to the July 2009 level. Ifo economist stated that drop in GDP for 2020 could be between 5 and 20% and it will depend on the length of the shutdown.

This week we will have sentiment data, preliminary March inflation, consumption and employment data as well as final PMI readings.

Important news for EUR:

Monday:

  • Business Climate Indicator
  • Industrial Confidence Indicator
  • Services Sentiment Indicator
  • Economic Sentiment Indicator
  • Consumer Confidence Index

Tuesday:

  • CPI

Wednesday:

  • Markit Manufacturing PMI (EU, Germany, France)
  • Unemployment Rate

Friday:

  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
  • Retail Sales

GBP

Preliminary March manufacturing PMI came in at 48 vs 45 as expected due to disruption in the supply chains. Services came in at 35.7 vs 45.0 as expected dragging down the composite to 37.1 vs 45 as expected. February CPI came in at 1.7% y/y as expected, a tick down from 1.8% y/y the previous month due to the drop in oil prices. Core CPI however pushed higher to 1.7% y/y from 1.6% y/y the previous month. The rise in core is encouraging, however it is a pre-virus data and as such it will not have an impact. Retail sales came in at -0.3% m/m vs 0.2% m/m as expected and they were flat on the year vs 0.7% y/y as expected.

BOE has left bank rate unchanged at 0.10% stating that MPC can expand asset purchases further. The economic package is estimated to be around 15% of GDP making it the largest fiscal stimulus in the Western world. British Parliament that is scheduled for recess from March 31 to April 21 due to Easter holidays was closed as week earlier amidst the virus fears.

This week we will have final Q4 GDP and PMI data.

Important news for GBP:

Tuesday:

  • GDP

Wednesday:

  • Markit Manufacturing PMI

Friday:

  • Markit Services PMI
  • Markit Composite PMI

AUD

Australian government announced a fiscal package that combined with central bank’s measures to almost 10% of GDP. More than 50% of it is assistance for small and medium-sized businesses and it also includes expanding the eligibility of collecting benefits and doubling the income support for job seekers allowance.

Singapore reported Q1 GDP and the figure is abysmal. It came in at -10.6% q/q annualized, much worse than already very bad expectations for -8.2% q/q annualized. This is just the beginning of terrible Q1 reports from around the Globe. As a result of the GDP reading Singapore added additional S$48bn to their stimulus package. As a part of fiscal measures they tripled cash payouts to S$300-S$900 which will total to around S$4.6bn. China will implement $344bn stimuuls of which majority will be in fiscal measures. That constitutes around about 2.5% of GDP.

This week we will have consumption data from Australia as well as official and Caixin PMI data from China.

Important news for AUD:

Tuesday:

  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)

Friday:

  • Retail Sales
  • Caixin Services PMI (China)
  • Caixin Composite PMI (China)

NZD

RBNZ has announced a bond purchase program. They will buy NZD30bn of bonds over the next year at a pace of around NZD750mn per week. Governor Orr stated that aim of the QE program is to keep rates very low and that they may consider buying additional assets. RBNZ has bought NZD250mn with their first QE move while there was NZD810mn offered. Trade balance for February returned to surplus with NZD594mn due to rise in exports and drop in imports.

This week we will have ANZ business confidence and activity outlook which are closely watched by RBNZ.

Important news for NZD:

Tuesday:

  • ANZ Business Confidence
  • ANZ Activity Outlook

CAD

Canadian parliament has passed an emergency spending plan that will total CAD107bn out of which CAD55bn will be in tax deferments. CAD was a beneficiary of weak USD during the week so USDCAD retraced almost 50% and then BOC cut rates by additional 50bp pushing USDCAD higher. Current rate is at 0.25%. They have launched QE program pledging to buy government bonds in the amount of CAD5bn per week and plan to continue doing so “until the economic recovery is well underway”. Separate program has been announced that will concern with buying of commercial paper. They stated that policy rate is now at the effective lower bound. Their intent is to support financial system and to lay foundation for return to normalcy.

This week we will have January GDP and February trade balance data.

Important news for CAD:

Tuesday:

  • GDP

Thursday:

  • Trade Balance

JPY

Preliminary March manufacturing PMI came in at 44.8 while services plunged to 32.7 for a composite of 35.8. Finance minister Aso stated that stimulus to consumers will most likely be in vouchers, not in cash as cash can be saved while vouchers will be spent and put back into the economy. Headline CPI for Tokyo area came in same as the previous month at 0.4% y/y.

Summer Olympic Games that were supposed to be held in Tokyo in 2020, have been postponed to 2021. Another heavy blow for Japanese economy that hoped to use the games as a springboard. Government has downgraded their economic view and assessed the situation as severe, extremely depressed by the Novel Coronavirus.

This week we will have employment, consumption and industrial production data as well as final PMI readings.

Important news for JPY:

Tuesday:

  • Unemployment Rate
  • Retail Sales
  • Industrial Production

Wednesday:

  • Markit Manufacturing PMI

Friday:

  • Markit Services PMI
  • Markit Composite PMI

CHF

SNB total sight deposits have been rising for the second week in a row indicating that SNB is intervening in the FX markets to keep CHF from strengthening too much. They have stated in last week that the Franc is now “even more highly valued” which explains their actions. Later on during the week SNB set up refinancing facility and deactivated counter-cyclical buffer with no upper limits.

This week we will have consumption and inflation data.

Important news for CHF:

Tuesday:

  • Retail Sales

Thursday:

  • CPI

Forex Major Currencies Outlook (Apr 6 – Apr 10)

News relating to the virus and government actions will continue to dominate the markets with employment data from Canada being a potential market mover.

USD

ISM March manufacturing PMI came in at 49.1 vs 45 as expected. The main drop was seen in new orders category followed by new export orders and employment. The reading beat the expectations thanks to the jump in supplier deliveries category which indicates potential supply problems in the future. February trade balance came in at -$39.9bn from -$45.3bn. Exports were down -0.4% while imports showed a bigger decline of -2.5%. The deficit with China decreased by $4bn to $19.7bn due to both falling exports and imports. Initial jobless claims for the week of March 28 came in at 6648k vs 3700k as expected. The number doubled expectations and previous week’s record reading of 3370k. That is 10 million people applying for unemployment compensation in just two weeks. Coronavirus is wrecking chaos in the labour markets.

A record run of 113 months of jobs growth ended today with nonfarm payroll number coming in 7 times worse than expected at -701k. The unemployment rate jumped to 4.4% from 3.5% the previous month and participation rate slipped to 62.7% from 63.4% the previous month. U6 underemployment jumped to 8.7% from 7% the previous month. On the positive side, average hourly earnings came in at 0.4% m/m and 3.1% y/y both up from the previous month’s readings. The report encompasses data up to March 12 which was before the majority of jobs were lost, so April’s reading has a potential to be even worse.

President Trump suggested that the US should continue its social distancing policies until at least April 30 instead until Easter as previously planned. Fed announced that they will temporarily ease capital requirements for big bangs. The temporary change would exclude US Treasury securities and deposits at Federal Reserve Banks from the calculation of the leverage ratio, and will be in effect until March 31, 2021. The vote to ease the requirement was unanimous.

This week we will have rapidly climbing initial jobless claims and inflation data.

Important news for USD:

Thursday:

  • Initial Jobless Claims

Friday:

  • CPI

EUR

Sentiment in the EU in March showed a decline as was expected. Economic sentiment plunged below 100 to 94.5, matching the low levels from August 2013. Preliminary CPI for March came in at 0.7% y/y vs 0.8% y/y as expected dropping from 1.2% y/y the previous month due to fall in oil prices. Core CPI came in at 1% y/y vs 1.1% y/y as expected and also down from 1.2% y/y the previous month which poses greater reason for concern. Final manufacturing PMI came in at 44.5 vs 44.8 preliminary on the back of falling German reading. New orders, output and purchasing all fell while supplier deliveries index held the reading high. Final services came in at 26.4 vs 28.4 preliminary which dragged composite to 29.7 vs 31.4 preliminary. Record low readings for EU, Germany and France which will seriously damage GDP readings. February retail sales came in at 0.9% m/m vs 0.7% m/m as expected.

Talks about coronabonds are ongoing. The southern states including France have been pushing for a collective bonds while northern countries, Germany and Netherlands, are vehemently opposed to it. The decision has to be unanimously made. Introduction of coronabonds will ease the pressure on southern countries due to the countries with strong credit rating, namely Germany, lowering the rate.

GBP

Final Q4 GDP came in flat and 1.1% y/y as preliminary reported. There were some changes in the details of the report, with government spending dropping and business investment rising, but the reading is still very weak and it reflects the economy that was not impacted by the virus stoppage. Final manufacturing PMI for March came in at 47.8 vs 48 preliminary while services came in at 34.5 vs 35.7 preliminary dragging down composite to 36 from 37.1 preliminary.

This week we will have GDP, industrial, construction and trade balance data.

Important news for GBP:

Thursday:

  • GDP
  • Manufacturing Production
  • Industrial Production
  • Construction Output
  • Trade Balance

AUD

Retail sales from February came in at 0.5% m/m vs 0.4% m/m as expected and rebound from -0.3% m/m the previous month. The rebound can be attributed to panic buying caused by the virus outbreak. March numbers should post the same picture.

Official PMI data from China for the month of March showed a big rebound, a V shaped one. Manufacturing came in back in expansion at 52, services followed the suit with 52.3 while composite came in at 53. Output, new orders and employment categories all bounced back to expansion territory. Many analysts are questioning the validity of report, however due to the abysmal numbers from the previous month and the fact that PMI is measured comparing to previous month many surveyees might have set the bar too low, therefore any signs of improvement have been warmly welcomed. Caixin manufacturing PMI also went into expansion territory coming in at 51 with services also jumping to 43 from 26.5 the previous month and combining for 46.7 in composite reading.

This week we will have trade balance data and RBA rate decision that is expected to be non-event due to the recent moves made by RBA. They need to give more time so that their measures start producing effects. Inflation data from China will be published.

Important news for AUD:

Tuesday:

  • Trade Balance
  • RBA Interest Rate Decision
  • RBA Rate Statement

Friday:

  • CPI (China)

NZD

Activity numbers in March paint a very dark picture. Business confidence plummeted to -63.5 while activity outlook plunged to -26.7. According to the report the second part of the month was particularly troublesome indicating that next month’s readings will be even weaker. Report also states that a net 23% of firms intend on laying off staff, including a net 35% of retailers.

This week we will have bi-monthly dairy price auction.

Important news for NZD:

Tuesday:

  • GDT Price Index

CAD

February trade balance came in at -CAD0.98bn vs -CAD2.3bn as expected. Exports were up 0.5% because of higher exports of aircraft, while imports were down 0.8% mostly due to a decrease in crude oil imports. This data had little to no impact as it was pre-virus news and currently everything revolves around virus related news.

This week we will have housing and employment data.

Important news for CAD:

Wednesday :

  • Housing Starts
  • Building Permits

Thursday:

  • Employment Change
  • Unemployment Rate

JPY

The great number of data from Japan started with the unemployment rate for February which stayed at 2.4%. It continued with retail sales beating expectations coming in at 0.6% m/m and finally preliminary February industrial production came in at 0.4% m/m vs flat as expected and -4.7% y/y. Figures seem encouraging but a rude awakening and sharp drops are expected in March. Final manufacturing PMI plunged even deeper to 44.8 from 47.8 the previous month while services PMI came in at 33.8 a bit better from the preliminary reading pushing composite to 36.2.

This week we will have spending, earnings and core machinery data.

Important news for JPY:

Tuesday:

  • Household Spending
  • Labour Cash Earnings

Wednesday:

  • Core Machinery Orders

CHF

SNB total sight deposits for the week ending 27 March jumped to CHF620.5bn from CHF608.8bn the previous week indicating bank’s increased activity in the financial markets. The activity is aimed towards fighting the strong CHF. February retail sales bounced back into positive with 0.3% m/m. CPI in March came in at -0.5% y/y as expected while core CPI dived into negative territory with -0.1% y/y indicating deflation.

This week we will have employment data.

Important news for CHF:

Wednesday:

  • Unemployment Rate