Daily Market Outlook by Kate Curtis from Trader's Way

[katetrades]

Forex Major Currencies Outlook (Mar 16 – Mar 20)

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

USD

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

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

Important news for USD:

Tuesday:

• Retail Sales
• Industrial Production

Wednesday:

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

Friday:

• Existing Home Sales

EUR

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

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

This week we will have ZEW survey, final February inflation and trade balance data.

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Wednesday:

• CPI
• Trade Balance

GBP

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

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

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

This week we will have employment data.

Important news for GBP:

Tuesday:

• Employment Change
• Unemployment Rate
• Average Weekly Earnings

AUD

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

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

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

Important news for AUD:

Monday:

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

Tuesday:

• RBA Meeting Minutes

Thursday:

• Employment Change
• Unemployment Rate

Friday:

• Loan Prime Rate (China)

NZD

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

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

Important news for NZD:

Tuesday:

• GDT Price Index

Wednesday:

• GDP

CAD

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

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

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

Important news for CAD:

Tuesday:

• Manufacturing Sales

Wednesday:

• CPI

Friday:

• Retail Sales

JPY

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

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

Important news for JPY:

Monday:

• Core Machinery Orders
• BOJ Interest Rate Decision

Wednesday:

• Trade Balance

Thursday:

• CPI

CHF

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

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

Important news for CHF:

Thursday:

• Trade Balance
• SNB Interest Rate Decision

 

[katetrades]

Forex Major Currencies Outlook (Mar 23 – Mar 27)

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

USD

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

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

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

Important news for USD:

Tuesday:

• New Home Sales

Wednesday:

• Durable Goods Orders

Thursday:

• GDP

Friday:

• PCE
• Personal Spending
• Personal Income

EUR

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

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

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

Important news for EUR:

Monday:

• Consumer Confidence Index

Tuesday:

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

GBP

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

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

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

Important news for GBP:

Tuesday:

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

Wednesday:

• CPI

Thursday:

• Retail Sales
• BOE Interest Rate Decision

AUD

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

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

NZD

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

This week we will have trade balance data.

Important news for NZD:

Tuesday:

• Trade Balance

CAD

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

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

JPY

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

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

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

Important news for JPY:

Tuesday:

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

Friday:

• Tokyo CPI

CHF

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

 

[katetrades]

Forex Major Currencies Outlook (Mar 30 – Apr 3)

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

USD

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

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

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

Important news for USD:

Tuesday:

• Consumer Confidence Index

Wednesday:

• ISM Manufacturing PMI

Thursday:

• Trade Balance
• Initial Jobless Claims

Friday:

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

EUR

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

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

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

Important news for EUR:

Monday:

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

Tuesday:

• CPI

Wednesday:

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

Friday:

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

GBP

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

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

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

Important news for GBP:

Tuesday:

• GDP

Wednesday:

• Markit Manufacturing PMI

Friday:

• Markit Services PMI
• Markit Composite PMI

AUD

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

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

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

Important news for AUD:

Tuesday:

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

Friday:

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

NZD

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

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

Important news for NZD:

Tuesday:

• ANZ Business Confidence
• ANZ Activity Outlook

CAD

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

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

Important news for CAD:

Tuesday:

• GDP

Thursday:

• Trade Balance

JPY

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

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

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

Important news for JPY:

Tuesday:

• Unemployment Rate
• Retail Sales
• Industrial Production

Wednesday:

• Markit Manufacturing PMI

Friday:

• Markit Services PMI
• Markit Composite PMI

CHF

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

This week we will have consumption and inflation data.

Important news for CHF:

Tuesday:

• Retail Sales

Thursday:

• CPI

 

[katetrades]

Forex Major Currencies Outlook (Apr 6 – Apr 10)

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

USD

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

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

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

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

Important news for USD:

Thursday:

• Initial Jobless Claims

Friday:

• CPI

EUR

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

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

GBP

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

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

Important news for GBP:

Thursday:

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

AUD

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

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

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

Important news for AUD:

Tuesday:

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

Friday:

• CPI (China)

NZD

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

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

Important news for NZD:

Tuesday:

• GDT Price Index

CAD

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

This week we will have housing and employment data.

Important news for CAD:

Wednesday:

• Housing Starts
• Building Permits

Thursday:

• Employment Change
• Unemployment Rate

JPY

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

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

Important news for JPY:

Tuesday:

• Household Spending
• Labour Cash Earnings

Wednesday:

• Core Machinery Orders

CHF

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

This week we will have employment data.

Important news for CHF:

Wednesday:

• Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (Apr 13 – Apr 17)

The world continues to be dominated by the coronavirus related news and it will continue in this post-Easter week with special attention paid to data from China, the country where it all originated, and where life first started to go back to normal.

USD

Initial jobless claims for the week ending with April 3 came in at 6606k vs 5500k as expected. There was a small drop compared to prior week’s reading of 6867k, however the numbers are still much worse than expected and there is no sign of the data slowing down. Headline CPI in March fell to 1.5% y/y from 2.3% y/y the previous month on the back of slumping oil prices. Core CPI dropped to 2.1% y/y from 2.4% y/y which will be a cause for concern during normal times but now the reading is brushed off.

Fed has announced new plan of $2.3 trillion in lending programs to support the economy. $600bn is intended for small and mid-sized businesses through Main Street Lending Program. Municipal Liquidity Facility will offer up to $500bn in lending to states and municipalities. Primary and secondary corporate debt facilities and TALF will be expanded using the remaining amount.

This week we will have consumption, housing and industrial production data as well as initial jobless claims for week leading up to the Easter holiday.

Important news for USD:

Wednesday:

• Retail Sales
• Industrial Production

Thursday:

• Housing Starts
• Building Permits
• Initial Jobless Claims

EUR

The Emergency conference held by finance ministers of EU states failed to approve a €500bn aid package. The countries again divided between northern and southern countries over sharing the burden for the hardest hit countries. Italy and Spain pushed for the introduction of coronabonds that would help spread the burden among all of the countries while Germany and Netherlands are opposing it. This decision has to be unanimous in order to be implemented; a simple majority will not suffice. ECB has decided to accept Greek debt as collateral after it was excluded for almost 5 years. At their second meeting they managed to agree on around €540bn rescue package. Restriction on the deal is that funds have to be used for treating issues caused by coronavirus.

This week we will have industrial production data and final March inflation data.

Important news for EUR:

Thursday:

• Industrial Production

Friday:

• CPI

GBP

News that prime minister Boris Johnson has been put into intensive care due to coronavirus lead to the weakening of pound at the start of the week. Foreign secretary Dominic Raab was named as interim leader of the government and due to his hard Brexit stances as well as fiscal conservatism the pound was pushed even lower.

AUD

RBA has left the cash rate unchanged at 0.25% as was expected after the multiple cuts preceding this meeting. They stated that if market conditions continue to improve “smaller and less frequent purchases of government bonds will be required”. The government has voted to subsidize the wages of 6 million workers for at least the next 6 months. Trade balance data for February showed a larger than expected surplus at AUD4.36bn. However, it was achieved on both falling exports (-4.7%) and falling imports (-4.3%). CPI from China for the month of March came in at 4.3% y/y while the food prices were up 18.3% y/y. PPI has continued its deflationary trend sinking even lower to -1.5% y/y due to shutdowns.

This week we will have employment data from Australia and slew of March data from China including Q1 GDP, trade balance, consumption and industrial production.

Important news for AUD:

Tuesday:

• Trade Balance (China)

Thursday:

• Employment Change
• Unemployment Rate

Friday:

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

NZD

Business confidence for Q1 dropped to -70 from -21 the previous quarter. The report states that a net 67% of businesses expects a deterioration in general economic conditions while a net 11 percent reported weaker demand in their own business in the 1st quarter, but a net 13 percent expected weaker demand in the next quarter. RBNZ has increased their QE program to NZD33bn over the 12 months. GDT price index came in at 1.2% thus snapping a streak of four consecutive negative auctions thanks to the rise in whole milk prices.

CAD

March employment data from Canada missed already bleak expectations and came in at -1010k vs -500k as expected - the worst employment report ever, but that unwelcoming title can be overtaken already by April’s report since numbers are gathered up to March 21. The unemployment rate jumped to 7.8% from 5.6% the previous month while participation rate dropped to 63.5% from 65.5% the previous month. Due to the methodology connected with calculation of the unemployment rate it is feared that true rate could be higher, even going to 9%. Part-time employment fell by -536.7k while full-time employment plunged -474k. Those are some atrocious numbers.

OPEC+ countries agreed to reduces output by 10-12 mln bpd in May and June. Oil traders were not impressed by this decision because cuts appear to be small, there is already oversupply and Mexico refused to participate in output cuts, but later on agreed on 100k bpd reduction.

This week we will have BOC meeting that is expected to be a non-event since the rates have already been slashed to 0.25% and started QE program.

Important news for CAD:

Wednesday:

• BOC Interest Rate Decision
• BOC Rate Statement

Thursday:

• Manufacturing Sales

JPY

Household spending in February came in at -0.3% y/y vs -3.9% y/y the previous month, most likely due o stocking up of goods before the virus outbreak. Labour cash earnings beat expectations, coming in at 1% y/y but slowed down compared to 1.5% y/y the previous month. Core machinery orders came in better than expected at 2.3% m/m and -2.4% y/y. This is another data point indicating good pre-virus conditions which will be completely ignored.

Prime minister Abe announced a state of emergency in seven prefectures adding that the government will withdraw the order as soon as it is clear that people's lives are no longer in danger or if the measures are no longer needed. The overall cost of the government fiscal stimulus is said to reach almost 20% of GDP with cash payments to households being primary focus. BOJ has cut economic outlook for all regions.

This week we will have final February industrial production data.

Important news for JPY:

Friday:

• Industrial Production

CHF

Total sight deposits for the week ending with April 3 came in at CHF627.2bn vs CHF620.5bn the previous week. SNB is fighting hard to limit Swissy’s strength. The unemployment rate in March jumped to 2.8%.

 

[katetrades]

Forex Major Currencies Outlook (Apr 20 – Apr 24)

Preliminary April PMI data will give us an insight into the devastative effects of pandemic on economies while investors will be looking for a continuation of slowdown in initial jobless claims.

USD

Retail sales for the month of March came in at -8.7% m/m vs -8% m/m as expected. Control group came in at 1.7% m/m vs -2% m/m as expected. The biggest drop was in clothing stores and restaurants while food and beverage stores as well as pharmacies were up. The stockpiling of food and drugs at the beginning of the month was not enough to improve the reading above the expected number but it did manage to soften the drop. If we exclude the positive impact of grocery and pharmacy stockpiling the retail sales number would come around -20%. Initial jobless claims for the week ending with April 4 eased a bit coming in at 5245k vs 6606k the previous month, but are still at historic highs, almost 20 times higher than a month ago. Continuing claims have reached almost 12 million.

IMF put out new projections for 2020 and now they see global GDP declining by -3%. All of the major economies will have negative GDP with Italy leading the way with -9.1% followed by France with -7.2% and Germany with -7%. US GDP is expected to come at -5.9%. They say that if outbreak lasts into the Q3 it could shave additional 3 pp from the GDP. For 2021 they see a rebound in growth and forecast it at 5.8%. Gilead Science published preliminary results of its Remdesivir drug treatment on coronavirus cases. Positive results were enough to raise markets spirits; however, the drug was tested on the small sample size so they are still partial and not verified.

This week we will have housing data, new look at the initial jobless claims and durable goods data.

Important news for USD:

Tuesday:

• Existing Home Sales

Thursday:

• Initial Jobless Claims

Friday:

• Durable Goods Orders

EUR

France is extending its lockdown to May 11 while Austria and Denmark talk about easing of restrictions. Reports are showing that Germany plans to extend lockdown to May 3. France, Spain, Austria, Belgium and Greece extended the ban on short-selling to middle of the May while Italy keeps it imposed until June. Final inflation data for March show headline CPI at 0.7% y/y and core CPI at 1% y/y.

This week we will have trade balance and sentiment data as well as preliminary consumer confidence and PMI numbers for April.

Important news for EUR:

Monday:

• Trade Balance

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Thursday:

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

Friday:

• Ifo Business Climate (Germany)

GBP

UK is extending its lockdown until May 11. In the absence of economic events in the UK the pound was mostly influenced by the news about Prime Minister Johnson’s health. Movements in GBPUSD were centred around moving averages with buyers taking control during risk-on sentiment and sellers regaining it during risk-off sentiment. Overall the range for the pair was around 250 pips for the week with near-term bias remaining neutral.

This week we will have employment, inflation, consumption and preliminary PMI data for April.

Important news for GBP:

Tuesday:

• Employment Change
• Unemployment Rate
• Average Weekly Earnings

Wednesday:

• CPI

Thursday:

• Retail Sales
• Markit Manufacturing PMI
• Markit Services PMI
• Markit Composite PMI

AUD

Employment report for March showed an employment change of 5.9k vs -30k as expected. Survey was done for the period up to the March 14 which is before restrictions on movement and lockdowns began. The unemployment rate ticked to 5.2% while participation rate stayed at 66%. Full-time employment change came in at -0.4k while part-time employment change came in at 6.4k. The report is of very little value since it catches only pre-virus data.

Chinese trade balance for period of January to March came in at $19.96bn with exports falling -6.6% y/y and imports falling -0.9% y/y. Exports to the EU -24.2%, the US -20.8% and Japan -1.4% fell while imports from the US and the EU fell -12.5% and -6.5% respectively. Imports from Japan rose 4.8%. Both exports and imports beat the expectations indicating that supply chains are not in such a dire state, however collapse of demand due to lockdowns worldwide is yet to be measured. Markets were starving for some good news in the sea of negativity so the beatings on data brought risk-on mood.

China is the first country to publish Q1 numbers and they show the full impact of the economic slowdown. Data came in at -9.8% q/q and -6.8% y/y, the worst since 1992. Retail sales for March came in bit better than previous month but still way worse than expected at -15.8% y/y. Manufacturing sector was not hit that hard so the industrial production number in March came in at -1.1% y/y vs -6.2% y/y as expected. Service industries have been hit very hard; therefore, the number is negative. Markets were encouraged by the beating on the industrial production.

This week we will have minutes from the latest RBA meeting as well as speech by governor Lowe.

Important news for AUD:

Tuesday:

• RBA Meeting Minutes
• RBA Governor Lowe Speech

NZD

RBNZ Governor Orr stated that asset-purchase program can be increased and that idea about implementing negative interest rates is not completely abandoned.

This week we will get Q1 inflation data and bi-monthly dairy auction.

Important news for NZD:

Monday:

• CPI

Tuesday:

• GDT Price Index

CAD

BOC has left the interest rate unchanged at 0.25% adding that it is an effective lower bound. They have announced an additional QE program intended for the purchase of provincial and corporate bonds. Provincial bonds will be acquired in the amount of up to CAD50bn while investment grade corporate bonds will be acquired in the secondary market in the amount of up to CAD10bn. So far BOC has accumulated over CAD200bn of new assets, amounting to about 10% of Canada's GDP. Governor Poloz stated that asset purchases are now the main driver of monetary policy as they do not see the effectiveness of negative interest rates on stability in the financial markets.

WTICrude prices fell below $18/barrel during the week due to the combination of several factors. Oversupply, not big enough production cut by the OPEC and historic drop in demand all weighed heavily on the oil prices. Russia and Saudi Arabia issued a joint statement about the necessity for further easing measures in order to boost the prices.

This week we will have consumption and inflation data.

Important news for CAD:

Tuesday:

• Retail Sales

Wednesday:

• CPI

JPY

Prime minister Abe announced expansion of the state of emergency to whole country until May 6. He told the citizens to avoid travelling to other prefectures. The week from April 29 and May 6 is called “Golden week” as many Japanese holidays are within that week, travelling was supposed to increase exponentially, therefore new measures have been taken. The government will handout JPY100k to households and it is expected that the cost of entire package will be around JPY14 trillion.

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

Important news for JPY:

Monday:

• Trade Balance

Thursday:

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

Friday:

• CPI

CHF

Total sight deposits for the week ending with April 10 came in at CHF634.1bn vs CHF627.2bn the previous week indicating continuation of SNB’s fight to subdue the rising Swissy.

This week we will have trade balance data.

Important news for CHF:

Tuesday:

• Trade Balance

 

[katetrades]

Forex Major Currencies Outlook (Apr 27 – May 1)

Three major central banks (Fed, ECB and BOJ) will hold their meetings during the week and we will have preliminary Q1 GDP readings from US and EU.

USD

Sales of existing homes in March dropped almost 10% to 5.27m from 5.76 the previous month while new home sales plunged over 15% to 627k from 741k the previous month. Initial jobless claims for the week ending April 18 came in at 4427k down from 5245k the previous week. This is the third week of falling claims, however the number is still preposterous as almost 4.5 million people asked for monetary assistance. Continuing jobless claims rose to almost 16 million.

The US Senate approved a $485bn support package that includes around $320bn for the Payroll Protection Plan that turns loans into grants for small and medium businesses that maintain or rehire employees. The remainder of the funds is intended for coronavirus testing and hospitals. The House has also approved the package. Another support package that includes assistance for state and local government is currently being negotiated but it is still in the early stages.

This week we will have preliminary Q1 GDP reading, PCE inflation and personal spending data, initial and continuing jobless claims as well as ISM manufacturing PMI data. Fed should stay dormant at their meeting and let their previous measures start to produce results.

Important news for USD

Wednesday:

• GDP
• Fed Interest Rate Decision
• FOMC Press Conference

Thursday:

• PCE
• Personal Spending
• Initial Jobless Claims

Friday:

• ISM Manufacturing PMI

EUR

ZEW survey of the current situation came in at -91.5 vs -77.5 as expected. Expectations for both EU and Germany surprised and came in positive, 25.2 and 28.2 respectively, however those expectations are not for the short-term. Bounce back in the economy is not expected before Q3.

PMI numbers for April were downright abysmal. Expectations were very low but the readings managed to come way below expectations, particularly services PMI. Manufacturing PMI for Eurozone came in at 33.6 vs 38 as expected while services plunged to only 11.7 vs 22.8 as expected dragging the composite reading to 13.5 vs 25 as expected. French services PMI came in almost single digit at 10.5. The survey was done for the period of 7 – 21 April, right in the middle of lockdowns thus it shows the full devastation that the virus has brought on economic activity. Markit stated: "Our model which compares the PMI with GDP suggests that the April survey is indicative of the eurozone economy contracting at a quarterly rate of approximately 7.5%.” They added that the fall in the employment is among steepest ever.

This week we will have business sentiment indicators, preliminary Q1 and CPI for April readings as well as ECB meeting.

Important news for EUR:

Wednesday:

• Business Climate Indicator
• Consumer Confidence Index

Thursday:

• GDP
• CPI
• ECB Interest Rate Decision
• ECB Monetary Press Conference

GBP

Employment report for March showed a claimant count change of only 12.2k, indicating a not so bleak picture in the jobs market. The government has offered a program to keep people at work and almost 150 000 companies applied for it to receive a partial salary funding for almost 1 million workers in the first day of program’s introduction. This program helped to offset the spike in claimant counts. The unemployment rate ticked to 4% while average weekly earnings slipped to 2.8% 3m/y from 3.1% 3m/y the previous month.

CPI for March came in at 1.5% y/y as expected, down from 1.7% y/y the previous month due to the drop in oil prices. Core CPI came in at 1.6% y/y as expected. Retail sales plunged -5.1% m/m vs -0.3% m/m the previous month. Retail sales ex-autos and fuel dropped -3.8% m/m. Apart from food purchases, which due to virus-induced stockpiling pushed the reading up, all other categories showed significant drops. The greatest drop was seen in clothing stores where sales were down over a third.

Preliminary PMI numbers followed the suit of the European data and came in at 32.9 for manufacturing, 12.3 for services and 12.9 for composite. Easily record low numbers in survey’s 22-year history. According to the report, an estimated 81% of service providers and 75% of manufacturing companies reported a fall in business conditions during the month. PMI numbers indicate that we can expect a drop in Q2 GDP greater than 7%.

AUD

RBA April minutes showed board’s expectations that coordinated monetary and fiscal responses would soften expected economic contraction. They expect that less frequent and smaller purchases of government bonds will be required going on. Governor Lowe reiterated that current rates will likely remain for a few years.

Central bank of China cut its one-year Loan Prime Rate (LPR) by 20 bps to 3.85%. The central bank also cut the five-year LPR by 10 bps to 4.65%. These cuts are intended to ease lending conditions and stimulate the economy.

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

Important news for AUD:

Wednesday:

• CPI

Thursday:

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

NZD

Inflation data for Q1 showed CPI at 0.8% q/q vs 0.4% q/q as expected and 2.5% y/y vs 2.1% y/y as expected. Inflation has shot over the magical level of 2%, but the data captures pre-virus conditions so it is brushed for now. GDT price auction return into negative territory coming in at -4.2%. Prime Minister Ardern announced that they will be easing lockdown measures on April 27.

This week we will have trade balance and business confidence data.

Important news for NZD:

Wednesday:

• Trade Balance

Thursday:

• ANZ Business Confidence

CAD

Retail sales in March came in at 0.3% m/m vs 0.4% m/m the previous month while the ex-autos category came in flat vs -0.1% m/m the previous month. Sales rose in 6 of 11 sub-sectors, representing 62.5% of retail trade. CPI in March crumbled down to 0.9% y/y from 2.2% y/y the previous month due to the collapse in oil prices. Gasoline was down -21.2%. This is the lowest inflation reading since September of 2016. Core measures also came weaker than expected with median coming at 2% y/y, common at 1.7% y/y and trim at 1.8% y/y.

JPY

Trade balance for March came in at JPY4.9bn vs JPY459.9bn as expected. A very big miss was caused by exports slumping -11.7% y/y, which represents 16 consecutive negative y/y readings, while imports fell -5% vs -8.7% as expected. Exports to the US are down -16.5% y/y, to EU they are down -11.1% y/y and to China exports are down -8.7% y/y. Auto exports have fallen more than 13%. National CPI numbers came in as expected with both headline and ex-fresh food readings at 0.4% y/y and ex-food and energy at 0.6% y/y.

Preliminary April manufacturing PMI slipped to 43.7 from 44.8 the previous month while services PMI plunged to 22.8 from 33.8 the previous month. This is a new record low for the services reading. Composite PMI was dragged down to 27.8 from 36.2 the previous month. Markit concludes that we can expect a larger than 10% annual drop in GDP for Q2.

This week we will have employment, consumption, industrial production and Tokyo inflation data. BOJ meeting will leave the rate unchanged but further easing of monetary policy is possible.

Important news for JPY:

Tuesday:

• BOJ Interest Rate Decision
• BOJ Monetary Policy Statement
• Unemployment Rate

Thursday:

• Retail Sales
• Industrial Production

Friday:

• Tokyo CPI

CHF

Total sight deposits for the week ending April 17 came in at CHF637.2bn vs CHF634.1bn the week before. SNB continues to fight Swissy’s strength not paying much attention about being labelled as a currency manipulator. Trade balance in March came in at CHF4.02bn vs CHF3.54bn the previous month. Increase in surplus was achieved in the worst possible way with both falling exports -4% and falling imports -6.7%.

This week we will have consumption data.

Important news for CHF:

Thursday:

• Retail Sales

 

[katetrades]

Forex Major Currencies Outlook (May 4 – May 8)

Employment data from US, Canada and New Zealand coupled with RBA and BOE interest decisions will be the highlights of the economic week.

USD

Q1 GDP data release caused stir in the markets. First the publication was delayed, then it printed positive 4.8% annually and later on it was changed to -4.8% annually. Estimates were for a drop of -4% annually. Personal consumption, the chief motor of US economy, was the main drag falling -7.6%. Net exports were the biggest contributor with 1.3pp. Since Q2 GDP is expected to come even lower we may say that US has entered into a recession defined as two consecutive quarters of falling GDP. Fed Chairman Powell confirmed this fears stating that Q2 GDP may plunge as deep as -30%. The Fed has left the interest rate unchanged but it has pledged to do whatever is necessary to support the economy. They called the government to expand their fiscal stimulus. Rates will stay near zero until employment and inflation move towards their targets.

Initial jobless claims for the week ending April 18 came in at 3839k pushing the number very close to 30 million people. Continuing claims rose to almost 18 million people. Personal spending plunged to -7.5% m/m due to constrictions on movement preventing people from consuming in restaurant, bars, shopping malls, movie theatres, etc. Headline PCE came in at 1.3% y/y while core was at 1.7% y/y. Significant drop in headline number is contributed to plunging oil prices.

This week we will get trade balance, PMI and employment data. NFP for April is, according to some estimates, expected to drop by 20 million while the unemployment rate may rise to double digits at 15.5% while White House expects it to go to 19%.

Important news for USD:

Tuesday:

• Trade Balance
• ISM Non-Manufacturing PMI

Thursday:

• Initial Jobless Claims

Friday:

• Nonfarm Payrolls
• Unemployment Rate
• Average Hourly Earnings

EUR

Unsurprisingly, sentiment data from EU plunged into deep negative territory in April with services sentiment falling to -35 from -2.2 the previous month. Preliminary headline CPI slipped to 0.4% y/y which is the lowest reading since September of 2016 while core held better and came in at 0.9% y/y vs 1% y/y the previous month. Significant drop in headline inflation was due to the sharp drop in oil prices. Preliminary Q1 GDP came in at -3.8% q/q and -3.3% y/y. Spain and France were hit the hardest with both countries showing drops bigger than 5% while Italy came in at -4.7% q/q. French president Macron stated that movement restrictions will be lifted on May 11 but it is only the first step and it will not immediately lead back to normal life.

ECB has left the rate unchanged as expected. They have decided to also leave PEPP unchanged at €750bn. New lending program has been introduced confirming their commitment to do whatever is necessary. Bleak projections about the output for 2020 have been presented. Q2 GDP may fall -15% while total 2020 GDP may be -12%.

This week we will have final PMI and 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

UK Government is not planning to ease social distancing measures before May 7. They stated that five tests need to be met in order for measures to ease: 1) Making sure that NHS can cope with the number of cases, 2) A “sustained and consistent” fall in daily death rate, 3) The rate of infection slowing to “manageable level”, 4) Ensuring supply of tests and PPE (Personal Protective Equipment) can meet future demand and 5) Being confident that any adjustments will not risk a second peak.

This week we will have final PMI data as well as BOE rate decision. No change in the rate is expected, however there is room for additional easing to support the economy.

Important news for GBP:

Tuesday:

• Markit Services PMI
• Markit Composite PMI

Thursday:

• BOE Interest Rate Decision

AUD

Headline CPI number for Q1 from Australia came in at 0.3% q/q and 2.2% y/y. Core CPI came in at 1.8% y/y, still below the RBA’s range of 2-3% and projections for Q2 are abysmal. Due to the stoppage caused by the virus outbreak we could see numbers moving into opposite direction, perhaps even going into deflation.

Official Chinese PMI data for April show manufacturing at 50.8, non-manufacturing at 53.2 and composite up to 53.4. Services were hit especially hard during the lockdowns so it is very encouraging sign to see them rise firmly above the 50 level. Caixin manufacturing PMI came in weaker than official at 49.4. Caixin manufacturing PMI measures smaller enterprises while official number concentrates on larger enterprises. Export orders have significantly plunged due to the lack of demand. Some reports indicate that almost 91% of all firms in China are operational as of late April, however only 4% work with full capacity.

This week we will have consumption and trade data from Australia coupled with RBA rate decision along with trade and Caixin PMI data from China.

Important news for AUD:

Tuesday:

• RBA Interest Rate Decision
• RBA Rate Statement

Wednesday:

• Retail Sales

Thursday:

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

NZD

RBNZ Governor Orr stated that he is open minded about direct monetization of government debt. This is unprecedented for a central bank in high-income countries as they usually buy debt from the market and not directly from the government. Adding to that the RBNZ is not ruling out negative interest rates and NZD was sent down.

Trade balance in March came in at NZD672m, increase of surplus from the previous month, but not as much as expected. Exports rose and reached a new high on the back of kiwifruit, dairy and meat exports. Higher prices of dairy and meat contributed as well. Imports have also risen indicating strong domestic demand. Business confidence continued to deteriorate, although at a slower pace coming in at -66.6 vs -63.5 the previous month.

This week we will have bi-monthly GDT auction and employment data for Q1.

Important news for NZD:

Tuesday:

• GDT Price Index

Wednesday:

• Employment Change
• Unemployment Rate

CAD

GDP for the month of February was published and it showed increase of 0.1% m/m which pushed GDP to 2.2% y/y. Canada was struggling with growth even before the outbreak. Stoppages will have a devastating effect on economy and wipe out the sluggish growth.

This week we will have trade and employment data. Employment change is expected to show a drop of 1.5 million people while the unemployment rate should climb to 8.5%

Important news for CAD:

Tuesday:

• Trade Balance

Friday:

• Employment Change
• Unemployment Rate

JPY

BOJ has kept the policy rate at -0.1% and made further easing of monetary policy as expected. They have pledged to buy unlimited amounts of Japanese Government Bonds. Additionally, they will double the amount of purchases of corporate bonds and commercial papers. They will also expand their loan program aimed to fight the coronavirus and will expand the type of assets they accept as collateral for the loan program. BOJ has lowered its forecasts for growth and inflation for 2020 as the downturn caused by the coronavirus outbreak triggers a harsh reassessment of the economy. Governor Kuroda stated that primary goal of asset purchases is to stabilise markets and added that further easing is possible. Further steps will be taken if need arises.

The unemployment rate ticked up to 2.5% in March, a new 1-year high. Preliminary industrial production data came in better than expected at -3.7% m/m and -5.2% y/y while drop in retail sales matched the expectations of -4.5% m/m and -4.6% y/y. Inflation in the Tokyo area dropped to 0.2% y/y while ex-fresh food measure fell into deflation with -0.1% y/y. Final manufacturing PMI came in at 41.9 vs 43.7 as preliminary reported putting the reading at lowest level since 2009. Japan plans to extend the state of emergency for a month. Final decision will be made on May 6. Previously it was set to expire on May 6.

This week we will have earnings, spending and final PMI data.

Important news for JPY:

Friday:

• Household Spending
• Labour Cash Earnings
• Markit Services PMI
• Markit Composite PMI

CHF

SNB total sight deposits for the week ending 24 April rose to CHF 650.7 bn vs CHF 637.2 bn prior. This is a significant increase in deposits as SNB signals their determination to defend EURCHF 1.05 level and push the pair higher. Retail sales in March plunged -5.6% y/y vs 0.3% y/y the previous month. Impact of lockdown restrictions shows a sharp drop in consumption across the economy.

This week we will have inflation and employment data.

Important news for CHF:

Tuesday:

• CPI

Friday:

• Unemployment Rate

 

[katetrades]

Forex Major Currencies Outlook (May 11 – May 15)

Consumption and inflation data from US, Q1 GDP from US and employment data from Australia will plunge global economies further down the black hole of bad data.

USD

March factory orders came in at -10.3% m/m for the lowest reading since the series has been tracked (1957). The final durable goods reading came in at -14.7% m/m and those numbers combined will push down the second GDP reading. Some analysts see it plunging down to -8%. Trade balance came in at -$44.4bn vs -$44.2bn as expected. Exports were down -9.6% while imports were down -6.2%. Trade deficit with China narrowed to -$11.83bn vs -$16bn the previous month. ISM Non-manufacturing came in at 41.8. This is the lowest reading since Great Financial Crisis and with business activity, new orders and employment measures plunging it indicates the pain that will be felt in jobs market and in Q2 GDP. Initial jobless claims came in at 3169k putting the total number of claims in last two months north of 33.5 million while continuing claims climber to 22.65 million.

NFP for April came in at -20.5 million vs -22 million as expected. Downward revisions were made to the previous month’s reading. The unemployment rate jumped to 14.7% with participation rate dropping down to 60.2%. U6 unemployment rate, measuring workers who are highly skilled but working in low paying or low skill jobs and part-time workers who would prefer to be full-time, rose to staggering 22.8%. The US Labour department stated that the unemployment rate would be 5% higher if that workers were classified correctly which would take the unemployment rate to almost 20%. Average hourly earnings came in at 4.7% m/m and 7.9% m/m beating the estimates due to the fact that low wage employees lost their jobs. The data is arrived at by simple division of total wages paid by the number of hours worked. US Treasury is planning to borrow almost $2 trillion in Q2. It has borrowed almost half of that in previous year. Fed futures contracts implied that from November of 2020 we may get negative interest rates.

This week we will have inflation, consumption and industrial production data along with hugely growing jobless claims.

Important news for USD:

Tuesday:

• CPI

Thursday:

• Initial Jobless Claims

Friday:

• Retail Sales
• Industrial Production

EUR

Final manufacturing PMI came in at 33.4 little changed from the preliminary reading of 33.6. Small uptick was seen in German reading (34.5 vs 34.4 preliminary) while French reading stayed at 31.5 as preliminary reported. Final services came in at 12 with composite at 13.6, a bit better than preliminary but still horrendously low. Spanish composite came in single digits (9.2)! Retail sales in March came in at -11.2% m/m. Expectations are for April to show even bigger decline as the entire continent was under lockdown.

This week we will have industrial production data and second estimate of Q1 GDP.

Important news for EUR:

Wednesday:

• Industrial Production

Friday:

• GDP

GBP

Final services PMI came in at 13.4, a little improvement from 12.3 as preliminary reported but still abysmally low. It dragged composite up to 13.8. Still lowest readings on the record with activity, new work and employment all showing significant declines.

BOE has left the both the bank rate (0.10%) and asset purchase program (£645bn) unchanged. Seven Members of Policy Committee voted in favour of leaving the asset purchase program unchanged with two members voted for increase it for £100bn. BOE expects GDP to drop by -14% in H2 of 2020 before rebounding the following year. Governor Bailey stated that they still have ample monetary policy tools and that they will continue to come up with appropriate responses. Information about removing lockdown measures will be taken into account for June discussions and BOE may expend their QE programme at the June meeting.

This week we will have preliminary Q1 GDP reading, industrial and manufacturing production as well as trade balance data. We will also have continuation of post-Brexit negotiations starting on Monday.

Important news for GBP:

Wednesday:

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

AUD

RBA has left the cash rate unchanged at 0.25% as it is already at their lower effective bound. The rate will not be increased until goals in employment, the unemployment rate below 5%, and inflation, range between 2-3% for the core reading, are met. Given their previous track record and the severity of the global economic downturn the rate may stay at 0.25% for years. They have scaled back size and frequency of bonds purchases but will widen their criteria for bond purchases to include investment-grade non-bank paper. Their assessment is for GDP to drop -10% in the first half of 2020 and -6% for the entire year before bouncing back in 2021.

Retail sales in March came in at 8.5% m/m. The number was inflated due to stockpiling done before the outbreak. Overall Q1 retail sales rose only 0.7% q/q. Trade balance showed a surplus of AUD10.602bn, almost doubling the expectations and more than doubling previous month’s reading. Exports skyrocketed 15% m/m while imports dropped -4% m/m. This data will make Q1 GDP less negative.

Caixin services PMI came in at 44.4 while composite came in at 47.6. Both numbers are below 50 level for the third consecutive month. New export orders plunged deeper indicating a drop in global demand. Reduction in payrolls for the third straight month and a week start for Q2. Trade balance data for April showed a surplus of CNY318.15bn on the back of strong exports (8.2%) and plunging imports (-10.2%).

This week we will have employment data from Australia and inflation, consumption and industrial production data from China.

Important news for AUD:

Tuesday:

• CPI (China)

Thursday:

• Employment Change
• Unemployment Rate

Friday:

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

NZD

Employment data for Q1 were encouraging with employment change coming in at 0.7% q/q vs 0.2% q/q as expected. Although the unemployment rate came in higher than previous month at 4.2% it was less than 4.4% as expected. Participation rate went up to 70.4%. Overall, the report shows that jobs market was going strong before the outbreak. GDT price index came in at -0.8% for a second consecutive drop.

This week we will have consumption data and RBNZ rate decision. No change is expected in the interest rate; the tone of the statement will be scrutinized for more information about direction of the monetary policy and a potential QE increase.

Important news for NZD:

Monday:

• Electronic Card Retail Sales

Wednesday:

• RBNZ Interest Rate Decision
• RBNZ Monetary Policy Statement

CAD

Employment change for April came in at -1993.8k for the worst number ever although beating the more pessimistic estimates of -4000k. The unemployment rate shot to 13% while participation rate fell to 59.8% from 63.5% the previous month. Full-time employment fell -1472k while part-time employment fell -521k. Wages rose to 10.5% m/m due to the lay-offs of low paid workers.

Trade balance in March came in at -CAD1.4bn due to exports falling -4.7% while imports fell -3.5%. BOC governor Poloz’s term at the head of the central bank finishes at the end of the next month and Prime Minister Trudeau announced former deputy governor Tiff Mackem will be his successor.

JPY

Labour cash earnings in May came in at 0.1% y/y, a negligible improvement. Household spending dropped -6% y/y. No wages leads to no spending which leads to no inflation. Final services came in at 21.5 dragging composite down to 25.8. Both readings came weaker than the preliminary ones with new orders and output categories plunging down. This reading indicates GDP contraction of almost -12% annually. The only bright spot is that employment category showed resilience which can be supportive of quicker economic recovery. Prime Minister Abe extended state of emergency until May 31.

CHF

Sight deposits for the week ending May 1 came in at CHF663.8bn vs CHF650.7bn the previous week indicating that SNB is ramping up its activities in currency markets targeting Swissy’s strength. Inflation in April continued to drop with headline inflation coming in at -1.1% y/y and core inflation dropping -0.5% y/y. Deflationary conditions may spur SNB into action even before their scheduled meeting in June.

 

[katetrades]

Forex Major Currencies Outlook (May 18 – May 22)

Preliminary PMI data from the EU and UK along with news regarding easing of restrictions will draw the most interest in the week ahead.

USD

CPI for the month of April came in at 0.3% y/y for the lowest reading since October 2015. Food inflation has risen in April, however that rise was dwarfed by the drop in energy prices of -10.1% m/m. Apparel prices also weighed down on inflation coming in at -4.7% m/m. Core CPI, excluding food and energy, came in at 1.4% y/y vs 1.7% y/y as expected. Initial jobless claims added almost 3 million new requests (2981k) bringing total amount to over 36.5 million requests in 2 months while continuing claims hover around 23 million. Retail sales came in at -16.4% m/m vs -12% m/m as expected with control group coming at -15.3% m/m vs -5% m/m. Given that the American consumer constitutes almost 70% of GDP this reading puts additional downward pressure on Q2 GDP.

Fed chairman Powell stated in a video interview that additional policy measures may be needed to avoid lasting damage. The unemployment may peak in the next month or so before dropping significantly but still staying above the number prior to the outbreak. He then reiterated that Fed’s policy on negative interest rates has not changed and that they are not looking in that direction. Powell also called for more fiscal policy measures.

This week we will have housing data and continuation of initial jobless claims and their run toward 40 million.

Important news for USD:

Tuesday:

• Housing Starts
• Building Permits

Thursday:

• Initial Jobless Claims
• Existing Home Sales

EUR

Industrial production in March showed the pain caused by the virus outbreak. It came at -11.3% m/m and -12.9% y/y. The numbers were included in past week’s Q1 GDP report so they did not cause a stir in the markets but the mere sight of the numbers is devastating. April numbers will be even more terrifying as the entire continent was under lockdown. The Italian government has signed off a new stimulus bill worth €55bn.

Preliminary German Q1 GDP came in at -2.2% q/q as expected and with 2019 Q4 GDP being revised to -0.1% q/q technical recession is official. German economy minister Altmeir stated that deepening of recession is expected in Q2 and that the low point should have been reached in April. Q2 GDP is forecast at -10%, however the real number will depend in part on the easing of restrictions. Second estimate of the Eurozone Q1 GDP came in as preliminary at -3.8% q/q.

This week we will have sentiment, final April inflation and preliminary May PMI data.

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment (EU and Germany)

Wednesday:

• CPI

Thursday:

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

GBP

GDP figure for March came in at -5.8% m/m, a staggering drop but better then the dire expectations. Manufacturing and industrial production as well as construction output also beat expectations but all came in deep into negative. Q1 GDP fell -2% q/q while yearly figure dropped -1.6%. Government spending was the main drag. Net exports plunged thanks to a drop of -10.8% in exports while private consumption fell -1.7% q/q. Business investment improved compared to the Q4 2019 but it only came flat in Q1 2020. Numbers in April will be more horrendous and with Brexit negotiations looming UK economy is in grave condition. BOE governor Bailey ruled off negative interest rates but hinted that they may increase their asset purchase program in June.

This week we will have employment, inflation, consumption and preliminary May PMI data. Brexit trade negotiations will continue this week.

Important news for GBP:

Tuesday:

• Claimant Count Change
• Unemployment Rate
• Average Weekly Earnings

Wednesday:

• CPI

Thursday:

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

Friday:

• Retail Sales

AUD

Employment change in April came in at -594.3k. The unemployment rate rose to 6.2% while participation rate plunged to 63.5% from 66% the previous month. Participation is now the lowest in 15 years. Full-time employment change came in at -220.5k while part-time employment change was -373.8k. This painful picture of jobs market was due to the state wide shutdown for the month.

Inflation data from China for April show headline number at 3.3% y/y, dropping from 4.3% the previous month while PPI fell to -3.1% y/y from -1.5% y/y the previous month. The drop in PPI will have a negative impact on already declining company profits and may lead to further easing from PBOC. China has ramped up its trade war tactic by banning imports from four meat works from Australia stating that beef products from those firms have violated inspection requirements. Industrial production came in at 3.9% y/y doubling the expectations but retail sales came in at -7.5% y/y vs -6% y/y as expected indicating growing issues with domestic demand. These numbers show that while it may not be hard to restart the supply after the virus outbreak, it will be much harder to revive demand.

NZD

Electronic retail sales for April were horrendous, -46.8% m/m and -47.5% y/y. This is yet another chart that will never be the same again. Preliminary business survey in May showed some hope rebounding to -45.6 from -66.6 the previous month with all of the forward-looking activity indicators being up compared to the previous month.

RBNZ has left the cash rate unchanged at 0.25% as widely expected. They have decided to expand their QE program, almost doubling it, to the limit of NZD60bn. Apart from government and local government agency bonds, the program will now include purchases of government inflation-indexed bonds. Members stated that RBNZ is prepared to add other assets in their QE program. Annual inflation is forecast at -0.4% in Q1 2021 while they see Q2 2020 GDP dropping -21.8%. The board stated their preparedness to cut cash rate if need arises but as for now, they see it at 0.25% level through Q1 of 2021. The government approved a NZD50bn stimulus package projecting that debt to GDP ratio will rise over 53%.

This week we will have Q1 consumption data.

Important news for NZD:

Friday:

• Retail Sales

CAD

Manufacturing sales in March slumped -9.2% m/m, more than double than the expected -4.5% m/m. This is the largest monthly decline since December of 2008 and it was led by drop in New orders (-11.3%). Canadian economy was shutdown only in the second half of the March and these numbers show a deeply concerning picture about the state of the economy. Needless to say that April numbers, when the entire economy was shutdown, will be much worse.

Canada's Ministry of Finance launched a new loan facility called "The Large Employer Emergency Financing Facility" which will provide loans to non-financial companies and not-for-profit businesses.

This week we will have inflation and consumption data.

Important news for CAD:

Wednesday:

• CPI

Friday:

• Retail Sales

JPY

The virus outbreak has weighed heavily on Japan’s economy, lowering both consumer demand and capital expenditures. Expectations are for second consecutive drop in GDP of -1.3% q/q and -5% annualised. In the light of those grim projections BOJ governor Kuroda ramped up its rhetoric vowing to do whatever the bank can do to support lending to the real economy. They continue to examine new lending facility. PM Abe has announced decision to lift the state of emergency in 39 prefectures leaving Tokyo, Osaka and Hokkaido from the list.

This week we will have preliminary Q1 GDP data as well as core machinery data, preliminary May PMI data and national inflation data.

Important news for JPY:

Monday:

• GDP

Wednesday:

• Core Machinery Orders

Thursday:

• Trade Balance
• Markit Manufacturing PMI
• Markit Services PMI
• Markit Composite PMI

Friday:

• CPI

CHF

Total sight deposits for the week ending May 8 jumped to CHF669.1bn vs CHF663.8bn the previous week making it eleventh consecutive weekly increase. SNB governor Jordan came out over the weekend and spoke about their commitment to further FX intervention in order to stave off Swissy’s strength. SNB has also further expanded their virus refinancing facility. Now it includes cantonal loan guarantees as well as joint and several loan guarantees for startups. They are taking a page from the Fed’s book in order to prop the economy.