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ECB, RBA Rates Remain Unchanged, Aussie GDP Slowed Most in Two Years

The Reserve Bank of Australia left Cash Rate at 2 percent as weakness in the Australian dollar has cushioned the blow of China’s weakness and lower commodity prices.

Australian GDP revealed its weakest growth in two years as it posted 0.2 percent in the second quarter, mainly due to the weakness in export volumes, the latest report from the Australian Bureau of Statistics showed. Retail Sales posted an unexpected 0.1 percent dip in July, the first monthly decline since May 2014. Trade Balance report showed a lower-than-expected deficit of –AUD2.46 billion (analysts were expecting –AUD3.10 billion).

The European Central Bank also kept its minimum bid rate unchanged at 0.05 percent on Thursday. In the press conference, ECB chief Mario Draghi said the bank is lowering its inflation and growth forecasts. Inflation is expected to pick up slightly towards the yearend, he noted. The ECB also mentioned that it has changed its rules regarding the limit on bond issue share, increasing the limit to bond issues the central bank can hold to 33 percent from 25 percent.

In other news, the UK Manufacturing PMI came in at 51.5 for August, following a small increase to 51.9 in July. Net Lending to Individuals stood at GBP3.9 billion as expected. On the other hand, Construction PMI came in close to expectations at 57.3 (57.6 forecast).

In the United States, Chicago PMI came in at 54.4 versus 54.7 expected. ISM Manufacturing PMI registered its lowest reading since June 2013 at 51.1, while ISM Non-Manufacturing PMI came in at 59.0. Jobless Claims in the prior week increased 282,000, 9,000 more than the median forecast. The Non-Farm Employment Change showed an increase of 173,000 in August, disappointing and diverging from the 215,000 forecast. Average Hourly Earnings picked up 0.3 percent, and Jobless Rate eased to 5.1 percent.

 Commodities

Gold sellers won for the second week but not much new ground has been covered this time. Downside risk remains, as price has not recovered the $1,200 level despite the big pushes seen in August. $1,200 will remains an area for buyers to conquer moving forward.

After an enduring multi-month slide, a volatile week saw Oil move, for the most part, between the $43 and $49 zone. The move this week was not surprising given the relentless downside force exerted on black gold. Bulls need a move through $50 to keep this going.

Currency Pairs

EURUSD is back to its normal trading range after a wild end to the month of August. The pair is back below the 1.1400 resistance level and some buyers are attempting to poke through it again. It retains it bullish bias as long as price is below 1.1100.

GBPUSD posted its ninth straight bearish day on Friday as sellers attempt to push for a 1.5100 break. This pair would remain in seller’s territory if bulls won’t be able to bring this back above 1.5500. Let’s see if that would be a tall order for bulls, given the recent slump.

USDJPY posted its third consecutive bearish weekly close but this time it was engulfed by the prior huge weekly bar. Due to the recent JPY strength, this pair has a short-term bearish bias while price is below 122. Medium term, this pair is bullish as long as it remains above 120.

The Week Ahead

On Monday, keep an eye on Australia’s ANZ Job Advertisement; Japan’s Leading Indicators; Switzerland’s Foreign Currency Reserves; and Germany’s Industrial Production. Canada and the US will celebrate Labor Day.

Tuesday will offer Japan’s Current Account and Final GDP; Australia’s NAB Business Confidence; China’s, France’s, and Germany’s Trade Balance; Switzerland’s Jobless Rate; and US NFIB Small Business Index.

Wednesday will be much more active with Australia’s Westpac Consumer Sentiment and Home Loans; UK Halifax HPI, Manufacturing Production, and Trade Balance; Canada’s Building Permits, BOC Rate Statement and Announcement; and US JOLTS Job Openings.

Thursday will be extra busy with RBNZ Rate Announcement, Monetary Policy Statement, and Press conference; Japan’s Core Machinery Orders; Australia’s jobs data; China’s CPI, PPI, and New Loans; UK MPC’s Asset Purchase Facility and Official Bank Rate Votes and Rate Statement; US Unemployment Claims and Import Prices.

Friday will cap the week with Japan’s BSI Manufacturing Index; Germany’s WPI and Final CPI; ECOFIN Meetings; US PPI and Preliminary UoM Consumer Sentiment.

Yuan Devaluation Rattles Markets; Greece Approves Deal Amid Growing Opposition

China’s central bank rocked global markets this week as it initiated devaluation of the Yuan, saying it would begin setting the daily rate based in part on the prior day’s trading. In a press conference on Thursday, PBOC discussed its recent policy moves and Deputy Governor Yi Gang said “adjustment is almost complete”. He further said the possibility of a 10 percent devaluation was “nonsense”, amidst rumors of some government figures pushing for a bigger depreciation. The PBOC started Yuan devaluation on Tuesday by 1.9 percent, 1.6 percent on Wednesday, and finally 1.1 percent on Thursday. Despite the devaluation, PBOC also intervened to manage currency volatility, keeping the market in check.

China’s New Loans surged to CNY1.480 billion in July. This is more than double the median estimate and the third straight monthly increase. M2 Money Supply grew 13.3 percent. Industrial Production and Retail Sales came in at 6 percent and 10.5 percent, respectively.

Japan’s Core Machinery Orders fell 7.9 percent in June, its lowest reading since May 2014.

German ZEW Economic Sentiment slipped to 25.0 from July’s 29.7. This is its fifth consecutive monthly decline. In contrast, the Eurozone German ZEW Economic Sentiment improved to 47.6.

In Greece, the parliament on Friday voted in favor of implementing the measures for the third bailout program. 222 Greek MPs voted Yes and 64 voted No, with a growing number of SYRIZA lawmakers opposing the deal, the third bailout in the last five years. Euro finance ministers will approve lending 85.5 billion Euros in the next three years to Greece for stability support.

 Commodities

Gold recovered this week as it traded within a $37 trading range and pushed through $1,100. An initial bounce toward $1,150 remains possible amidst a bearish backdrop while price is below $1,250.

Oil completed its ninth straight weekly bearish close this week as more sellers joined. The $40 level is now on target, and a move toward the $30-$35 zone is now an increased possibility. Traders should avoid buying any dip.

Currency Pairs

EURUSD recovered this week further after price failed to make a new weekly low. The pair was able to move past 1.1200 but topside selling made it close the week much lower. The goal of buyers for the next few weeks is to sustain momentum and target 1.1400 again.

GBPUSD came close to taking out previous week’s low, but in the end it just formed a bullish weekly inside bar. This was a positive result, which could pave the way for a breakout toward 1.5900 in the coming week or so. This is a big possibility unless support around 1.5400 will be cleared.

The 125 level in USDJPY has been reached but the last three weekly closes has been far from ideal. Most moves towards that level has been thwarted by sellers easily, and this could become a bigger concern for bulls starting this coming week. Sellers could aim for a break of 124 this week.

The Week Ahead

This week will be less active, overall, compared to previous weeks. However, activity would be more evenly distributed.

Monday will offer Japan’s Prelim GDP; Switzerland’s Retail Sales; Canada’s Foreign Securities Purchases; US Empire State Manufacturing Index;

Tuesday will have RBA’s Monetary Policy Meeting Minutes; UK CPI, RPI, PPI Output and HPI; US Building Permits and Housing Starts.

Wednesday will be unusually compact with New Zealand’s PPI Input and PPI Output; Japan’s Trade Balance; US CPI and FOMC Meeting Minutes.

Thursday will have Bank of Japan’s Monetary Policy Statement and press conference; Switzerland’s Trade Balance; UK Retail Sales; Canada’s Wholesale Sales; US Jobless Claims, Existing Home Sales, and Philly Fed Manufacturing Index.

Friday will remain active with China’s Caixin Flash Manufacturing PMI; Flash Manufacturing PMI and Flash Services PMI from France, Germany, and the Eurozone; UK Public Sector Net Borrowing; Canada’s CPI and Retail Sales; and US Flash Manufacturing PMI.

RBA, BOE Put Rate on Hold; Canada, US, NZ, Australia Jobs Outlook Diverge

On Tuesday, the Reserve Bank of Australia left the Cash Rate unchanged at 2 percent. Meanwhile, the Bank of England kept its Official Bank Rate at 0.50 percent. The latest Official Bank Rate votes surprisingly showed only one policymaker out of nine, Ian McCafferty, saw the need to raise rates. Analysts expected two BOE MPC members would want to hike rates. The Asset Purchase Facility (APF) and APF votes came in line with expectations (GBP375 billion and 0-0-9, respectively). BOE Governor Carney hinted that the first rate hike could happen next year but would be “data dependent”.

On the global employment front, New Zealand’s Employment Change fared lower than forecast at 0.3 percent, while the Unemployment Rate came in at 5.9 percent, as expected. On the other hand, Australia’s Employment Change was much stronger as employers added 38,500 jobs in July, but the Jobless Rate slipped to 6.3 percent from 6.1 percent. In the United States, Non-Farm Employment Change was 7,000 below the 222,000 forecast, while the previous reading has been revised higher to 231,000. US Jobless Rate remained fixed at 5.3 percent for the second month in July, according to the latest Bureau of Labor Statistics data. Canada’s Jobless Rate stayed at 6.8 percent for the sixth straight month.

In other news, Australia’s Retail Sales and Trade Balance came in better than forecast. Home Loans were lower at 4.4 percent, while previous reading was revised lower to -7.3 percent.

In the United States, ISM Manufacturing PMI and ISM Manufacturing Prices slipped to 52.7 and 44.0, respectively. However, ISM Non-Manufacturing PMI jumped to 60.3, its best reading since 2005.

Commodities

Gold posted its second weekly inside bar after price hovered just below the $1,100 area. We could then see a bounce toward $1,150-$1,200 initially. However, downtrend remains firm as long as price stays below $1,250.

Oil tracked lower again this week, printing its eighth straight weekly bearish close. The triple bottom is now fully in play, and we could see fireworks in the coming days or weeks. Price is looking for new lows – new multi-year lows, in fact. It is now staring at a possibility of price heading for the $30-$35 zone.

Currency Pairs

EURUSD has been sticking close to the 1.100 level for several weeks now. With the pair’s failure to create a new weekly low, we can see bulls attempt for a move toward 1.1400 again. This area is possibly rich in armies of sellers.

GBPUSD traders are battling within a tight range for the fifth week now. If this pair wants to track higher, it should take out the 1.5700 this week so it can head to 1.5900. Otherwise, GBPUSD would stay in a range, which could trade as low as 1.5400.

Slowly but surely, USDJPY has been moving higher toward 125 for the past couple of weeks. The pair remains content, for now, in staying below 125 (although this figure has been touched twice this week). If it continues to march higher, the June 5 high below 126 is the next target.

The Week Ahead

Monday will offer Japan’s Current Account, Consumer Confidence, and BOJ Monthly Report; and speeches from US FOMC Member Lockhart and Fischer.

Tuesday will start quite early with UK’s BRC Retail Sales Monitor. This will be followed by Australia’s NAB Business Confidence and HPI; China’s New Loans; Germany and Eurozone ZEW Economic Sentiment; Canada’s Housing Starts; and US Prelim Unit Labor Costs and Prelim Nonfarm Productivity.

Wednesday will get busy with Japan’s BOJ Monetary Policy Meeting Minute; Australia’s Wage Price Index and Westpac Consumer Sentiment; China’s Industrial Production, Retail Sales, and Fixed Asset Investment; UK Average Earnings Index, Jobless Rate, and Claimant Count Change; and JOLTS Job Openings

Thursday will be critical again for Greece as its set for another Debt Crisis Vote. Other important news to watch out for include New Zealand’s Business NZ Manufacturing Index and FPI; Japan’s Core Machinery Orders; Australia’s MI Inflation Expectations; France’s CPI; ECB Monetary Policy Meeting Accounts; US Jobless Claims, Retail Sales, Business Inventories and Import Prices.

Friday will have moderate news activity with New Zealand’s Retail Sales; Germany’s Prelim GDP; Eurozone Flash GDP; Eurogroup Meetings; Canada’s Manufacturing Sales; US PPI, TIC Long-Term Purchases, Empire State Manufacturing Index, Industrial Production, Capacity Utilization Rate, and Prelim UoM Consumer Sentiment.

2nd Greek Bailout Vote Passes, Gold & Oil Continue their Decline

The Greek government approved on Thursday some reform-related demands of creditors in order to stay in the Eurozone. The televised voting showed 151 lawmakers supported Prime Minister Alexis Tsipras in passing the second tranche of policy measures. Meanwhile, in his speech in Frankfurt on the same day as the Greek vote, Bundesbank President Weidmann commented that the ESM is only able to provide credit to solvent states.

In the United Kingdom, the MPC voted as expected (no change) in relation to the Official Bank Rate and Asset Purchase Facility. On the other hand, the RBNZ reduced its Official Cash Rate to 3 percent from 3.25 percent as expected on Thursday. The central bank chief expects the New Zealand Dollar to depreciate further amidst weakness in commodity prices. Governor Wheeler further noted that further easing in rates is “likely”.

In other news, Canada’s Wholesale Sales dipped 1 percent in May, while previous reading revised down to 1.7 percent. Retail Sales, both the main and core readings, were higher than anticipated.

New Zealand Trade Balance posted a NZD60 million deficit in June, in contrast to a NZD100 million surplus expected. The previous reading was revised higher to NZD370 million.

US Existing Home Sales came in slightly higher than forecast at 5.49 million in June, but May‘s reading was revised down to 5.32 million from 5.35 million. New Home Sales only gained 482,000 in June compared to 543,000 expected. May’s reading was similar with April’s at 517,000.

Jobless Claims for the previous week came in at 255,000 compared to the 279,000 forecast.

Commodities

Gold created a $57 range this week as it posted its fifth straight weekly downside track and reaching its lowest price in over five years. The next critical support now comes at $1000.

Oil went on post its sixth weekly decline and it broke the $50 level with confidence. The chance for a move to create a triple bottom has therefore increased and we could expect that this coming week. Sellers will now target the $40 to $44 area.

Currency Pairs

EURUSD managed to post some gains this week after pulling close to the 1.0800 level again. Buyers still need to prove their might by forcing through the 1.1450 resistance area. That area is critical if bulls want to revisit the 1.2000s again.

GBPUSD posted an inside bar this week as the 1.5500 level continues to attract buyers and sellers on both sides. Buyers have a slight upper hand here as long as they can maintain a good support around 1.5500. Next target area is 1.5900.

USDJPY posted below-average weekly activity this week after making a strong showing in the past two weeks. Sellers entered the fray around the 124 level, keeping a lid on growing confidence of the buyers. The June 5 high below 126 is the next target.

 The Week Ahead

The overall news activity for this week would be lower than average as July draws to a close.

Monday will showcase Germany’s Ifo Business Climate; Eurozone M3 Money Supply; and US Durable Goods Orders.

Tuesday will remain quiet with UK’s Prelim GDP; Canada’s RMPI and IPPI; and US Consumer Confidence and Richmond Manufacturing Index.

Wednesday will have Japan’s Retail Sales; Germany’s GfK Consumer Climate; UK Net Lending to Individuals and Mortgage Approvals; US Pending Home Sales, and Fed Rate Announcement and Statement.

Thursday will offer more activity with Australia’s Building Approvals and Import Prices; Germany’s Prelim CPI and Unemployment Change; Spain’s Flash CPI and Flash GDP; US Unemployment Claims, Goods Trade Balance, Advance GDP, and Advance GDP Price Index.

Friday will end the week with Japan’s Household Spending, Tokyo Core CPI, and Jobless Rate; New Zealand’s ANZ Business Confidence; Australia’s PPI; Germany’s Retail Sales; France’s Consumer Spending; Eurozone CPI Flash Estimate and Jobless Rate; Canada’s GDP; US Employment Cost Index, Revised UoM Consumer Sentiment, and Chicago PMI.

Greece Stays in EU as Bailout Vote Passes, Euro Declines

The lawmakers in the Greek government approved the bailout agreement on Thursday, allowing the country to remain as a member of the Eurozone. The latest austerity measures have been approved as part of the 86 billion euro aid.

In its latest decision, the ECB’s Minimum Bid Rate stayed at 0.05 percent as expected. However, Bank of Canada reduced its Overnight Rate by 25 percentage points to 0.50 percent as the bank acknowledged the bigger contraction seen in the first half of the year. This is the second rate cut for BOC this year.

In Europe, the German ZEW Economic Sentiment missed estimates and declined to 29.7 from 31.5 from June. The Eurozone counterpart also declined, from 53.7 to 42.7.

UK CPI is flat but PPI Input slipped -1.3 percent, worse than the 0.7 percent dip expected. Jobless Rate increased back to 5.6 percent in July, after two consecutive months of stay at 5.5 percent.

In the United States, the main and core readings of Retail Sales surprisingly declined in May (-0.3 percent and -0.1 percent, respectively). Jobless Claims for the prior week was 3,000 less than expected at 281,000. The Philly Fed Manufacturing Index sank to 5.7 after posting 15.2 in June. Building Permits and Housing Starts increased In June (1.34M and 1.17M respectively). This housing starts figure is the second best reading since late 2007 as builders did more apartment projects. The UoM Consumer Sentiment stayed above 90 at 93.3, but this is lower than the median forecast of 96.

Commodities

Gold is now on its fourth weekly decline as buyers failed to push price back through $1,200. The strong bearish weekly close could signal that price is still willing to move further downward. We now have a weekly triple bottom close to getting broken.

Oil posted its fifth weekly decline and it’s now closer to breaking the $50 level. The triple bottom is getting closer to becoming a reality. Buyers need to be careful and seek support around that key $50 level.

Currency Pairs

Out of five daily closes, EURUSD slipped for four days, giving the pair a very bearish weekly close. This close is in fact its lowest close in at least the past 12 weeks. This pair is likely to revisit the double bottom in the early part of this year.

Although GBPUSD closed higher this week, it showed signs that price is having trouble in the upper-1.56s. 1.5600 could remain attractive to both sellers and buyers.

The significant turnaround in the prior week paved the way for USDJPY to gather momentum higher this week. Resistance remains around 124, then the June 5 high below 126.

The Week Ahead

Monday will mostly be quiet except for the release of China’s New Loans; Germany’s PPI and Bundesbank Monthly Report; and Canada’s Wholesale Sales. Japanese banks will observe Marine Day.

Activity will pick up slightly on Tuesday starting with the publication of Policy Meeting Minutes from BOJ and RBA. This will be followed by the release of Switzerland’s Trade Balance; and UK Public Sector Net Borrowing.

Wednesday’s will have more news activity with Australia’s CPI and Trimmed Mean CPI; UK MPC Asset Purchase and Official Bank Rate votes; and US Existing Home Sales.

Thursday will have New Zealand’s RBNZ Rate Announcement and Statement; Japan’s Trade Balance; China’s CB Leading Index; Greek Government Debt Crisis Vote; Spain’s Jobless Rate; UK Retail Sales; Buba Weidmann’s speech; Canada’s Retail Sales; and US Jobless Claims.

Friday ends the week with New Zealand’s Trade Balance; China’s Markit Flash Manufacturing PMI; France, Germany, and Eurozone Flash Manufacturing and Services PMI; US New Home Sales and Flash Manufacturing PMI.

Greeks Say No to Eurozone; Euro Gaps Down for Second Week

Greece has just edged closer to Euro exit after a Greek referendum ended with “No” votes gaining the upper hand. The referendum centered on whether to accept or reject the creditors’ terms regarding the latest aid package. On Monday’s opening, the EURUSD gapped for a second straight Monday and therefore EURUSD could revisit the 2015 lows in the near future if bearishness persists in the market. In the mean time, lines between the Greek government and creditors are open and discussions are still ongoing.

In Japan, Retail Sales data was much better at 3 percent, while analysts expected a 2.1 percent gain. This is the second straight monthly gain. The Preliminary Industrial Production sagged 2.2 percent. Average Cash Earnings grew 0.6 percent, a tad below the 0.7 percent forecast.

Germany’s Retail Sales advanced 0.5 percent as median estimates for flat growth in May, and April’s reading was revised lower to 1.3 percent from the initial 1.7 percent. Unemployment Change showed a decline of 1,000 compared to an expected 5,000 decline.

Spain’s Unemployment Change also declined below forecast at 94,700.

In the United States, the Chicago PMI for June improved but at 49.4, it is below 50 and lower than anticipated. Non-Farm Employment Change was published one day earlier on Thursday due to US Independence Day celebrations. Employers added 223,000 jobs in June, which is lower than the forecast of 231,000. Bureau of Labor Statistics also announced a 5.3 percent Unemployment Rate, a better-than-expected improvement from May’s 5.5 percent. Meanwhile, Jobless Claims filed in the previous week was 11,000 higher than the 270,000 forecast. Factory Orders dipped one percent.

Commodities

Gold continues its bearish path as it struggles to get through the $1,200 level. The vulnerability of the $1,100 increases and we could see that area will get attacked in the coming week.

Oil seems well protected around the $60 level, so sellers pounced and pressured Oil lower throughout the week. We could see a quick attack on the $50 level soon.

Currency Pairs

Monday’s gap in EURUSD set the stage for a bearish week. With the Greek referendum “No” result, we could see more volatility in the coming week. Avoid buying dips.

GBPUSD started the week with a gap and was significantly bearish the entire week. Sellers easily cut through 1.56 and therefore we could see more downside moves in the coming week.

USDJPY closed the week virtually unchanged, but we have seen the fourth lowest weekly high in the process, nevertheless. Any weakness would be more evident if the 121-122 area fails to hold.

The Week Ahead

Monday’s news will be sparsely scattered throughout the day, starting with Australia’s MI Inflation Gauge and ANZ Job Advertisements; then Germany’s Factory Orders; Switzerland’s CPI; Canada’s Ivey PMI and Bank of Canada’s Business Outlook Survey and US ISM Non-Manufacturing PMI.

Tuesday will be kicked off with New Zealand’s NZIER Business Confidence, followed RBA Rate Announcement and Statement; Switzerland’s Foreign Currency Reserves; UK’s Halifax HPI, Manufacturing Production and Industrial Production; Euro Summit; Canada and US Trade Balance; US JOLTS Job Openings.

Wednesday will be much shorter than usual with Japan’s Current Account; UK Annual Budget Release; Canada’s Building Permits; and US FOMC Meeting Minutes.

Thursday will have Japan’s Core Machinery Orders; Australia’s jobs data; China’s CPI and PPI; UK BOE Official Bank Rate, Asset Purchase Facility, and MPC Rate Statement; Canada’s NHPI; and US Jobless Claims.

Friday will wind down the week with Australia’s Home Loans; China’s New Loans; UK Trade Balance; Canada’s jobs data; and Fed Chair Yellen’s speech.

Greece Reaches No Deal; US Existing Home Sales Bounce Back

The debt issue on Greece remains a big question mark for the markets. Despite previous high-level discussions on the issue, several officials expressed uncertainty. IMF’s Lagarde had said, “there’s enormous work” that still needs to be done. Various Eurogroup meetings happened throughout the week, but ultimately no deal was reached between the Greek government and top officials involved. Banks in Greece are closed (small cash withdrawals allowed) and would stay so until July 6, or until officials take drastic steps to end the stalemate. The Greek government imposed the bank restrictions in order to “protect the financial system”. German Chancellor Angela Merkel expressed willingness for further talks with Greece’s Prime Minister Alexis Tsipras “if he actually wants to”. The Greek PM has called for a referendum on July 5 to discuss the terms offered by the creditors, and request for a bailout extension.

All Flash Manufacturing PMI and Flash Services PMI from Germany, France, and the Eurozone came in better than forecast, unlike in the previous instances.

Germany’s Ifo Business Climate fell to its lowest in the last four months to 107.4 as the Greek risk weighs down on business confidence.

In the United States, the National Association of Realtors reported that Existing Home Sales came in slightly better at 5.35 million May, its best level since November 2009. Unemployment Claims was spot on at 271,000. Personal Spending for May edged up 0.9 percent, while Personal Income matched the previous month with a 0.5 percent increase. Meanwhile, the Revised University of Michigan Consumer Sentiment surged to a five-month high of 96.1 in June, due to improving labor market outlook.

Commodities

Gold continues to have problems breaking through the $1,200 level. Therefore, last week’s warning about the vulnerability of the lower part of $1,100 remains.

Not much has changed in oil as it ping-ponged between $58 and $62 this week. Long-term downtrend remains intact. A move below $56 would ignite further weakness.

Currency Pairs

The break of 1.1300 and 1.1200 speaks volumes about EURUSD’s possibility in moving lower after this week. This eventuality would test the strength of possible support area around 1.08 to 1.10.

Like EURUSD, GBPUSD suffered a bearish week after the 1.5900 level formed a layer of defense from buyers and stuck with this defense throughout the week. Immediate support would come into play around 1.5600-60, if bears are interested to head that way.

USDJPY seems magnetized by the 124 level but somehow it found its way back down to 123 all throughout the week. Sellers might grow impatient and try to push this pair down toward 120 again.

 The Week Ahead

Monday’s news activity will kick off early starting with Japan’s Retail Sales and Prelim Industrial Production, followed by Germany’s Prelim CPI; Spain’s Flash CP; UK Net Lending to Individuals; Canada’s RPMI and IPPI; and US Pending Home Sales.

On Tuesday, news activity will pick up, with New Zealand’s Building Consents; Japan’s Average Cash Earnings; Australia’s Private Sector Credit and ANZ Business Confidence; Germany’s Retail Sales and Unemployment Change; Switzerland KOF Economic Barometer; UK Final GDP and Current Account; Eurozone Jobless Rate and CPI Flash Estimate; Canada’s GDP; and US Chicago PMI and CB Consumer Confidence.

Wednesday will have Australia’s Building Approvals; Japan’s Tankan indices; China’s Manufacturing PMI and HSBC Manufacturing PMI; Spain, Italy, Germany, UK, France and Eurozone Manufacturing PMI; UK BOE Financial Stability Report; and US ADP Non-Farm Employment Change and ISM Manufacturing PMI. Canada will observe Canada Day.

Thursday will have Australia’s Trade Balance; Spain’s Unemployment Change; UK Halifax HPI and Construction PMI; ECB Monetary Policy Meeting Accounts; US Non-Farm Employment Change, Jobless Rate, Factory Orders, and Jobless Claims.

Friday’s activity will be brief with Australia’s Retail Sales; China’s HSBC Services PMI; Spain, Italy, France, Germany, UK, and Eurozone Services PMI; Eurozone Retail Sales. The US will observe Independence Day.

Concessions Could Break Greek Deadlock

In Greece, it has been a defining week as back and forth negotiations continue. In a crisis meeting, Greek PM Tsipras offered a reforms package in an attempt to break the deadlock and receive further aid. Aside from foreign creditors, Greece owes the IMF a debt installment of 1.5 billion Euros ($1.7 billion). IMF’s Lagarde said the June 30 payment deadline for Greece is “definitive”.

All three central banks this week announced no change in their respective rates. The US Federal Reserve, Bank of England, and Swiss National Bank kept their rates at less than 0.25 percent, 0.75 percent, and -0.75 percent, respectively. The BOE MPC also voted unanimously to keep the Asset Purchase Facility unchanged. Meanwhile, the Federal Reserve Board still expects a moderate expansion in economic activity.

A flurry of news has been published in the United States. The Philly Fed Manufacturing Index, Building Permits, Current Account, and Jobless Claims all came in better than forecast. Industrial Production slipped 0.2 percent in May, its third consecutive monthly decline. One economist has declared the factory sector is in a technical recession as IP posted disappointing figures for six straight months.

ZEW Economic Sentiment in Germany and Eurozone were both down this June (31.5 and 53.7, respectively).

In the UK, Claimant Count Change was much weaker than anticipated at -6,500. Meanwhile, Average Earnings Index edged higher by 2.7 percent. CPI was spot on at 0.1 percent, while PPI Input and RPI came in lower at -0.9 percent and 1 percent, respectively.

Commodities

Gold attempted to break the $1,200 level but fell short of doing so. Nevertheless, the yellow metal is on to its second bullish week and we could see more upside attempts. The lower $1,100s remain vulnerable, though.

Oil has seen no change. It remains confined in a tight range close to the $59. We need a strong stimulus to break either side of this consolidation. Long-term downtrend remains intact.

Currency Pairs

EURUSD posted its third bullish weekly close but the overall distance traveled is actually meager. We still need to see a push through 1.1400 before expecting higher ground. Bulls are very much in favor at this time.

Another strong weekly finish put GBPUSD on a higher ground and closer to the 1.6000 level. Expect a retracement back towards 1.5600 if sellers return to the game.

USDJPY posted a bearish weekly inside bar with a close in mid-122s. The attempt through 124 has been pushed down mid-week, so buyers need to try again this week. Further upside failures could more buyers in “abandon ship” mode.

 The Week Ahead

Following a jam-packed week, the last full week of June would be rather brief compared to its usual form.

On Monday, the news releases will be in the form of BOJ Monthly Report; Eurogroup meetings and Euro Summit; and US Existing Home Sales. China will celebrate the Dragon Boat Festival.

Tuesday will have more activity, including China’s HSBC Manufacturing PMI; Flash Manufacturing PMI and Flash Service PMI from Germany, France, and the Eurozone; UK CBI Industrial Order Expectations; US Durable Goods Orders, Flash Manufacturing PMI, and New Home Sales.

Wednesday will be brief but start early with BOJ’s Monetary Policy Meeting Minutes, followed by Germany’s Ifo Business Climate; SNB Quarterly Bulletin; US Final GDP.

Thursday will also be brief with GfK German Consumer Climate; Eurogroup meetings; US Jobless Claims, Core PCE Price Index, Personal Spending, and Personal Income.

Friday ends the week with New Zealand’s Trade Balance; Japan’s Tokyo Core CPI and Household Spending; Germany’s Import Prices; Eurozone M3 Money Supply and Private Loans; and US Revised UoM Consumer Sentiment.

RBNZ Surprises with Rate Cut; Australia’s Jobs Data Shows Improvement

The Reserve Bank of New Zealand decided to slash the Official Cash Rate by 25 basis points to 3.25 percent. In his statement, RBNZ Governor Graeme Wheeler stated the rate reduction was done in view of weak dairy prices, low inflation, falling business and consumer confidence.

In Australia, the Bureau of Statistics reported improved jobs data. Employment Change increased 42,000 in May, while the Jobless rate eased to 6 percent. Home Loans increased 1 percent in April.

In the United States, the Jobless Claims for the prior week came close to expectations (279,000 versus 277,000 forecast). Retail Sales benefitted from lower fuel prices and continued job growth, and rose 1.2 percent in May (core reading 1 percent). Meanwhile, the Preliminary UoM Consumer Sentiment edged up to 94.6 (up from 90.7 in May) on upbeat consumers.

Commodities

After three consecutive bearish weeks, Gold paused with an inside bar and traded just below the $1,200 level this week. This is a very strong area of contention as any strong move on either direction could make a big impact in the medium term. Bulls are still looking for a move through $1,300.

We’ve seen volatility on Oil around $60 for the sixth consecutive week. Sellers have defended the upper-$61 for a second week, while bulls have protected the $56 during that same period. As such, the $59-$60 would remain pivotal this coming week.

Currency Pairs

EURUSD posted another bullish week for the second week, but sellers continue to prevent a move close to 1.14. We could see another stab at that level until it yields to bullish pressure, which is aiming initially at the 1.15 to 1.17 area.

Finally, GBPUSD showed a bullish turn after three consecutive weeks of decline. The weekly close at mid-1.55 could be a serious signal that bulls have woken up.

USDJPY showed very little movement last week, allowing the pair to form its second consecutive inside bar. Traders might be waiting for the FOMC rate announcement, which is coming this week. Bias remains up for now.

The Week Ahead

Monday will start the week during the European session with Switzerland’s Retail Sales and PPI; Canada’s Manufacturing Sales; and US Empire State Manufacturing Index, Industrial Production, Capacity Utilization Rate, and NAHB Housing Market Index

Tuesday’s activity will start with RBA’s Monetary Policy Meeting Minutes and New Motor Vehicle Sales; Switzerland’s PPI; UK CPI, RPI, and PPI Input; German and Eurozone ZEW Economic Sentiment; Canada’s Foreign Securities Purchases; US Building Permits and Housing Starts.

Wednesday will be very brief but meaty, specifically with New Zealand’s Current Account; Japan’s Trade Balance; Australia’s MI Leading Index; UK Claimant Count Change, Average Earnings Index, Jobless Rate, and MPC Asset Purchase Facility Votes and Official Bank Rate Votes; Switzerland’s ZEW Economic Expectations; Eurozone Final CPI; Canada’s Wholesale Sales. The day would be capped by US FOMC Statement, Federal Funds Rate, FOMC Economic Projections, and Press Conference.

Thursday will start early with New Zealand’s GDP; Switzerland’s Trade Balance, SNB Financial Stability Report, Libor Rate Announcement, Press Conference, and Monetary Policy Assessment; UK Retail Sales; Targeted LTRO; Eurogroup meetings; US CPI, Unemployment Claims, Current Account, and Philly Fed Manufacturing Index.

Friday ends the week with only a couple of economic releases such as BOJ Monetary Policy Statement and Press Conference; Eurozone Current Account; ECOFIN meetings; UK Public Sector Net Borrowing; Canada’s CPI and Retail Sales.

Australia Releases Weak Economic Data; US Jobs Data Mixed

All central banks, the Bank of England, European Central Bank, and Reserve Bank of Australia, decided in line with expectations this week, keeping their respective rates unchanged at 0.50 percent, 2.00 percent, and 0.05 percent, respectively. BOE’s Asset Purchase Facility was also unchanged at GBP375 billion.

Meanwhile, Australia had a rough week with the release of some surprisingly weak economic readings. Building Approvals for April surprised with a 4.4 percent decline, compared to the -1.7 percent estimate. The trade deficit grew bigger than anticipated to –AUD3.89 billion, its worst ever since February 2008. Meanwhile, GDP in the first quarter gained 0.9 percent while Retail Sales was flat back in April.

In other news, Spain, Switzerland, and Italy Manufacturing PMI were better than expected (55.8 vs 54.4, 49.4 vs 48.2, and 54.8 vs 53.1, respectively). UK Manufacturing PMI and Services PMI fell short of expectations (52.0 vs 52.7, and 56.5 vs 59.2 respectively), but UK Construction PMI fared better at 55.9 (vs 55.1 forecast).

In the United States, Core PCE Price Index grew just 0.1 percent. Personal Spending was flat (vs 0.2 percent expected), while Personal Income grew 0.4 percent. ISM Manufacturing PMI stood at 52.9, while the ISM Non-Manufacturing PMI disappointed with a decline to 55.7. Construction Spending jumped 2.2 percent in April, while the previous reading was revised higher to 0.5 percent. US Jobless Rate went back to 5.5 percent in May. Non-Farm Employment Change came in better at 280,000.

Commodities

Gold posted its third consecutive bearish week, achieving its lowest weekly close since mid-March. It is now on track to attack the lower $1,100s. Bulls would need to take the yellow metal back through $1,200 to negate further downside moves.

Oil sellers pushed for a move through $60 in the last few days of the week, forcing the first weekly close below that level in four weeks. Sellers might then look for a move toward $55 where potential support could come in.

Currency Pairs

EURUSD has gone higher after the move below 1.1000 lasted very quickly in the prior week. Price could be aiming for a test of the 1.13-1.14 area in the coming week. A support around 1.12 is needed to make this happen.

Like Gold, GBPUSD clinched its third consecutive bearish week, after a move through 1.5400 was denied by sellers. The challenge for bulls now is whether they can hold 1.50-1.51 as support to prevent a move back into the mid-1.40s.

USDJPY blasted to new highs after resistance around 125 proved very fleeting. Continued Dollar strength (or JPY weakness) could push this pair toward 130 soon. Will 125 turn into a support area in the coming weeks?

The Week Ahead

Monday will start the week with Japan’s Current Account, Final GDP, and Bank Lending; China’s Trade Balance; Germany’s Industrial Production and Trade Balance; and Canada’s Housing Starts and Building Permits. Today, some states in Australia will observe the Queen’s Birthday.

On Tuesday, there will be UK’s BRC Retail Sales Monitor; Japan’s Consumer Confidence; China’s CPI and PPI; Australia’s NAB Business Confidence, ANZ Job Ads, and Home Loans; UK’s Trade Balance; and US JOLTS Job Openings.

Wednesday will be very brief but active with Japan’s Core Machinery Orders; Australia’s Westpac Consumer Sentiment; UK’s NIESR GDP Estimate, Manufacturing and Industrial Production; US Federal Budget Balance.

Thursday will be the most news-packed this week with the release of Reserve Bank of New Zealand’s Rate Announcement, Statement, Press Conference, and Monetary Policy Statement; Japan’s BSI Manufacturing Index; China’s New Loans and Fixed Asset Investment; Australia’s Jobs Data and MI Inflation Expectations; ECB Monthly Bulletin; Canada’s NHPI; US Retail Sales, Import Prices, Jobless Claims, and Business Inventories.

Friday caps the week with the release of New Zealand’s Business NZ Manufacturing Index; Eurozone’s Industrial Production; US PPI and Preliminary UoM Consumer Sentiment.