Week ahead in FX: ECB meeting, NFP and Australia GDP

May 30, 3:05 am
manufacturing PMI

The British pound was the strongest currency last week, rising 0.81% against the US dollar. The Sterling gained as opinion polls suggested that the risks of the UK leaving the EU were ebbing, underlining the fact that the sterling was focusing more on the Brexit risks than the fundamentals. Last week saw the UK’s first quarter GDP coming out unchanged at 0.40% at the second revision. The Canadian dollar was the second best currency pair, rising 0.65%. The Bank of Canada left interest rates unchanged last week. The Loonie was also supported by stronger oil prices.

Weekly Spot FX Performance – 27/05/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 27/05/2016 (Source: Finviz.com)

The NZD and the EUR were the weakest currencies last week, including the AUD. The commodity-linked currencies posted steady declines as gold prices continued to fall for the fourth consecutive week. For the euro, despite an upbeat German GDP data, monetary policy divergence was back pushing the single currency lower.

Fundamentals for the Week 30/05 – 03/06

30-May00:50JPYRetail Sales y/y-1.20%-1.00%
01:20USDFOMC Member Bullard Speaks
02:00AUDHIA New Home Sales m/m8.90%
02:30AUDCompany Operating Profits q/q0.50%-2.80%
07:00EURGerman Import Prices m/m0.40%0.70%
All DayEURGerman Prelim CPI m/m0.30%-0.40%
07:45EURFrench Consumer Spending m/m0.10%0.20%
08:00CHFKOF Economic Barometer102.9102.7
EURSpanish Flash CPI y/y-1.00%-1.10%
13:30CADCurrent Account-17.4B-15.4B
CADRMPI m/m2.20%4.50%
CADIPPI m/m0.20%-0.60%
23:45NZDBuilding Consents m/m-9.80%
31-May00:30JPYHousehold Spending y/y-1.00%-5.30%
JPYUnemployment Rate3.20%3.20%
00:50JPYPrelim Industrial Production m/m-1.40%3.80%
02:00NZDANZ Business Confidence6.2
02:30AUDBuilding Approvals m/m-2.80%3.70%
AUDCurrent Account-19.3B-21.1B
AUDPrivate Sector Credit m/m0.50%0.40%
06:00JPYHousing Starts y/y3.90%8.40%
07:00EURGerman Retail Sales m/m1.10%-1.10%
07:45EURFrench Prelim CPI m/m0.30%0.10%
08:55EURGerman Unemployment Change-4K-16K
09:00EURM3 Money Supply y/y5.00%5.00%
EURPrivate Loans y/y1.50%1.60%
10:00EURCPI Flash Estimate y/y-0.10%-0.20%
EURCore CPI Flash Estimate y/y0.80%0.70%
EURItalian Prelim CPI m/m0.20%-0.10%
EURUnemployment Rate10.20%10.20%
13:30CADGDP m/m0.00%-0.10%
USDCore PCE Price Index m/m0.20%0.10%
USDPersonal Spending m/m0.60%0.10%
USDPersonal Income m/m0.40%0.40%
14:00USDS&P/CS Composite-20 HPI y/y5.10%5.40%
14:45USDChicago PMI50.850.4
15:00USDCB Consumer Confidence96.194.2
23:45NZDOverseas Trade Index q/q-2.00%
01-Jun00:01GBPBRC Shop Price Index y/y-1.70%
00:30AUDAIG Manufacturing Index53.4
00:50JPYCapital Spending q/y1.90%8.50%
02:00CNYManufacturing PMI5050.1
CNYNon-Manufacturing PMI53.5
02:30AUDGDP q/q0.60%0.60%
02:45CNYCaixin Manufacturing PMI49.349.4
03:00JPYFinal Manufacturing PMI47.647.6
06:45CHFGDP q/q0.30%0.40%
07:00GBPNationwide HPI m/m0.30%0.20%
07:30AUDCommodity Prices y/y-9.40%
08:15CHFRetail Sales y/y-0.80%-1.30%
EURSpanish Manufacturing PMI52.653.5
08:30CHFManufacturing PMI54.254.7
08:45EURItalian Manufacturing PMI53.553.9
08:50EURFrench Final Manufacturing PMI48.348.3
08:55EURGerman Final Manufacturing PMI52.552.4
09:00EURFinal Manufacturing PMI51.551.5
09:30GBPManufacturing PMI49.649.2
GBPNet Lending to Individuals m/m5.3B9.3B
GBPM4 Money Supply m/m0.20%-0.40%
GBPMortgage Approvals68K71K
14:30CADRBC Manufacturing PMI52.2
14:45USDFinal Manufacturing PMI50.550.5
15:00USDISM Manufacturing PMI50.650.8
USDConstruction Spending m/m0.50%0.30%
USDISM Manufacturing Prices5859
All DayUSDTotal Vehicle Sales17.2M17.4M
TentativeNZDGDT Price Index2.60%
02-Jun00:50JPYMonetary Base y/y27.20%26.80%
02:30AUDRetail Sales m/m0.30%0.40%
AUDTrade Balance-2.11B-2.16B
06:00JPYConsumer Confidence40.440.8
08:00EURSpanish Unemployment Change-110.0K-83.6K
09:30GBPConstruction PMI52.152
10:00EURPPI m/m0.10%0.30%
All DayALLOPEC Meetings
12:45EURMinimum Bid Rate0.00%0.00%
13:15USDADP Non-Farm Employment Change179K156K
13:30EURECB Press Conference
USDUnemployment Claims271K268K
13:35USDFOMC Member Powell Speaks
16:00USDCrude Oil Inventories-4.2M
03-Jun01:00JPYAverage Cash Earnings y/y0.90%1.50%
02:00NZDANZ Commodity Prices m/m-0.80%
02:45CNYCaixin Services PMI5251.8
08:15EURSpanish Services PMI55.655.1
08:45EURItalian Services PMI52.352.1
08:50EURFrench Final Services PMI51.851.8
08:55EURGerman Final Services PMI55.255.2
09:00EURFinal Services PMI53.153.1
09:30GBPServices PMI52.352.3
10:00EURRetail Sales m/m0.40%-0.50%
13:30CADTrade Balance-2.6B-3.4B
CADLabor Productivity q/q0.10%
USDAverage Hourly Earnings m/m0.20%0.30%
USDNon-Farm Employment Change160K160K
USDUnemployment Rate4.90%5.00%
USDTrade Balance-41.9B-40.4B
14:45USDFinal Services PMI51.251.2
15:00USDISM Non-Manufacturing PMI55.455.7
USDFactory Orders m/m0.90%1.10%

Time: GMT+1

Currencies/Events to Watch this Week

AUD: The first quarter GDP data will be the main event to watch for and one which could shift the tide in the AUD’s declines. Economists are looking at 0.60% quarter over quarter growth, same as the previous quarter. On a yearly basis, Australia’s GDP is expected to rise at a slower pace of 2.70% compared the 3.0% annualized GDP growth seen in the previous quarter. A weaker print could likely spur more AUD bears to keep the selling pressure on the Aussie. On Thursday, retail sales numbers will be out and is expected to show a modest increase of 0.30%, down from 0.40% increase seen in March.

NZD: Economic data from New Zealand this week is fairly limited. Building consents are due on Monday while overseas trade index is expected on Tuesday, for the first quarter. The bi-weekly GDT price index is expected on Wednesday with the previous print showing an increase to 2.60% reversing the previous print of 1.40% decline.

JPY: It is likely to be a slow week for the yen next week with the unemployment rate coming out on Monday. Expectations show an unchanged print of 3.20%. Industrial production data is due later and is forecasted to decline 1.50%, down from March’s 3.80% on a monthly basis while on a year over year basis, Japan’s industrial production is expected to fall 5.20%, which is one of the strongest yearly declines since 2014. Later in the week, manufacturing PMI is due followed up by BoJ’s board member, Sato’s speech.

CNY: From China, the markets will be looking to the manufacturing and services PMI this week. Manufacturing PMI is expected to slip to 50.0 in May, which could erase the gains made since March’s increase to 50.2. The Caixin manufacturing PMI is expected to show a contraction with estimates pointing to a slowdown to 49.2 in May from 49.4 in April. On the services side, the Caixin services PMI is expected to rise to 52.0 from 51.8 in April.

EUR: Data from the Eurozone this week will start with inflation estimates. Forecasts are for confirmation that the Eurozone economy slipped into deflation in May, with CPI expected to fall 0.10% on a year over year basis in May. The core CPI, on the other hand, is expected to be steady at 0.70%. The ECB will be meeting next week on June 2nd for its monetary policy meeting. No changes are expected at this event. On Friday, retail sales numbers are expected to show a potential rebound, with sales expected to rise 0.20% in April, after falling 0.50% in March.

CHF: Data from Switzerland this week will include the quarterly GDP report. Estimates point to a 0.20% quarterly increase in GDP in the first quarter of 2016. This is slower than the 0.40% quarterly GDP growth seen in Q4 2015. On an annualized basis, however, Swiss GDP is expected to expand 0.90%, up from 0.40% in the previous quarter.

GBP: From the UK PMI data will be in focus. Manufacturing PMI is expected to moderate with estimates pointing to increase to 49.6 in May, up from 49.2 in April. Construction and services PMI are expected to tick modestly higher.

CAD: From Canada, the markets will be looking to the monthly GDP numbers. Expectations call for a no change to the GDP in March, which follows February’s 0.10% declines. On a quarterly basis, the annualized GDP is expected to rise 2.80%, up from 0.80% in the previous quarter.

USD: A busy week for the US after the markets re-opens on Monday. The PCE price index is expected to rise 1.10%, posting a strong rebound from 0.80% increase seen in March. The Core PCE Price index is expected to rise 1.60% on a year over year basis. On Wednesday, the ISM manufacturing index will be in focus with expectations showing a soft decline to 50.5 in May, from 50.8 in April, while ISM prices paid is expected to slip to 58 from 59.0 in April. Thursday will see the private payrolls report from ADP, which is expected to show a 178k increase in May, up from 156k jobs in April. The ADP report will set the stage for the monthly NFP data on Friday. The US unemployment rate is expected to fall to 4.90%, from 5.0% while the monthly nonfarm payrolls are expected to show 160k jobs being added to the economy.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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