Daily Market Outlook by Kate Curtis from Trader's Way

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:
  1. --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
 
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