Manufacturing orders in the UK fell again in June but at a slower pace as compared to May at least. The balance for manufacturing output expectations also increased to 13 from 7 previously, marking the highest since October last year. CBI notes that the readings are „encouraging“ and that the recovery should „broaden out over the summer“.
This article was written by Justin Low at www.forexlive.com.
The USD last week finished
slightly positive but overall, it was a pretty flat week. We got some great US PMIs on Friday which showed growth without
inflationary pressures. In fact, despite the strong PMIs the market pricing for
interest rates remained unchanged. That should be positive for risk sentiment
for the time being.
The EUR, on the other hand,
got hit on Friday following the disappointing Eurozone
PMIs, although the losses were erased this morning. The risk sentiment has
been gradually improving, so we might see the greenback coming back under
pressure if this were to persist.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD has been kind of rangebound around the 1.07 handle as the
sellers have been struggling to get the bearish momentum going further. The
1.0727 remains a key level with the price trading below it being more bearish
and above it more bullish.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a strong resistance
zone around the 1.0727 level where we can also find the confluence of the trendline.
This is where we can expect
the sellers to step in with a defined risk above the trendline to position for
a drop into the 1.06 handle next. The buyers, on the other hand, will want to
see the price breaking higher to pile in with more conviction and start targeting
the 1.08 handle.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have the upper limit of the average daily range for today standing right around the
resistance. Therefore, it’s unlikely that we will see a breakout to the upside today
but watch out for the next days as we get some important US data tomorrow and
on Thursday.
Upcoming
Catalysts
This week is a bit light on the data front although we will still get to see some
important releases. We begin tomorrow with the US Consumer Confidence where the
market will be focused on the labour market details. On Thursday, we get the
latest US Jobless Claims figures, while on Friday we conclude the week with the
US PCE.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
Tuesday
The Canadian CPI Y/Y is expected at 2.6%
vs. 2.7% prior, while the M/M measure is seen at 0.3% vs. 0.5% prior. The
Trimmed Mean CPI Y/Y is expected at 2.8% vs. 2.9% prior, while the Median CPI
Y/Y is seen at 2.6% vs. 2.6% prior.
The last
report showed the underlying inflation
measures falling back inside the BoC’s 1-3% target band which gave the central
bank the green light to deliver the first
rate cut. The market sees a 67% chance of
another rate cut in July but that will depend on the CPI data this week.
The US Consumer Confidence is expected at
100 vs. 102 prior. The last
report showed confidence improving after
three consecutive months of decline. The Chief Economists at The Conference
Board highlighted that “the strong labour market continued to bolster
consumers’ overall assessment of the present situation”.
Moreover, “looking ahead, fewer consumers
expected deterioration in future business conditions, job availability, and
income”. The overall confidence gauge remained within the relatively narrow
range it has been hovering in for more than two years. The Present
Situation Index will be something to watch given the recent misses in the US
Jobless Claims as that’s generally a leading indicator
for the unemployment rate.
Wednesday
The Australian Monthly CPI Y/Y is expected
at 3.8% vs. 3.6% prior. As a reminder, the last
report surprised to the upside with the
underlying inflation measures remaining sticky at higher levels. The RBA kept a
hawkish stance at the latest
policy meeting as it reiterated that
“inflation remains above target and is proving persistent” and added that
“inflation is easing but has been doing so more slowly than previously
expected”.
For this reason, the central bank kept all
options on the table by “not ruling anything in or out”. Some better inflation
data won’t change much for the market, but another disappointment could add some slight chances of a rate hike. The RBA is expected to remain on hold until
mid-2025.
Thursday
The US Jobless Claims
continue to be one of the most important releases to follow every week as it’s
a timelier indicator on the state of the labour market. Initial Claims keep on
hovering around cycle lows, while Continuing Claims remain firm around the
1800K level.
This has led to a weaker
and weaker market reaction as participants become used to these numbers.
Nonetheless, in the last two weeks we started to see the data missing
expectations although it remains below the cycle highs. This is something
to keep an eye on.
This week Initial Claims
are expected at 236K vs. 238K prior, while Continuing Claims are seen at 1820K vs.
1828K prior.
Friday
The Tokyo Core CPI Y/Y is
expected at 2.0% vs. 1.9% prior. Inflation in Japan is basically at target and
there are no strong signals that point to a reacceleration. It’s hard to see a
rate hike given that Japan strived to achieve inflation for decades and it
might ruin this accomplishment by tightening policy. The data shouldn’t change
anything for the BoJ which is expected to trim bond purchases by a
“substantial” amount at the next policy meeting.
The US Headline PCE Y/Y is
expected at 2.6% vs. 2.7% prior, while the M/M measure is seen at 0.0% vs. 0.3%
prior. The Core PCE Y/Y is expected at 2.6% vs. 2.8% prior, while the M/M
reading is seen at 0.1% vs. 0.2% prior. Forecasters can reliably estimate the
PCE once the CPI and PPI are out, so the market already knows what to expect. This report won’t change anything for the Fed as the central bank remains in a “wait and
see” mode until September at very least.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
Mon: BoJ Summary of Opinions, German Ifo Survey (Jun),
German Import Prices (May)
Tue: Japanese Services PPI (May), Canadian CPI (May), UK GDP
(Q1)
Wed: Australian CPI (May), German GfK Consumer Sentiment
Thu: Biden/Trump debate on CNN, Riksbank Announcement, CBRT
Announcement, CNB Announcement, European Council, Chinese Industrial Profits
YTD (May), EZ Sentiment Survey (Jun), US GDP Final (Q1)
Fri: European Council, Japanese Tokyo CPI (Jun)/Activity
Data (May), German Unemployment (Jun), US PCE (May), US University of Michigan
Final (Jun)
Note: Previews are listed in day order
BoJ SOO (Mon):
The BoJ will release the Summary of Opinions
from the June meeting next week which could provide further insight into board
members’ thinking during the latest policy meeting where it kept its short-term
policy rate unchanged at 0.0%-0.1%, as widely expected through a unanimous
vote, although it caught markets off-guard as it defied expectations for the
central bank to announce an immediate tapering of its bond purchases and
instead decided to keep purchases in line with its decision in March. Nonetheless,
the BoJ effectively kicked the can down the road as it declared it is to trim
purchases but will decide on a specific bond-buying reduction plan for the next
1-2 years at the next meeting in July, while the decision on JGB purchases was
made by 8-1 vote in which BoJ board member Nakamura dissented citing the bank
should decide to reduce purchases after reassessing developments in economic
activity and prices in the July 2024 outlook report. Furthermore, the BoJ said
it will hold a meeting with bond market participants (on July 9-10th) on its
policy decision and it expects that underlying inflation is to gradually
accelerate, while Governor Ueda said during the post-meeting press conference
that the reduction of JGB purchases will be a considerable volume and they will
start a reduction of JGB purchases immediately after deciding at the July
meeting, as well as noted that a July hike is naturally possible, depending on
the data.
Canadian CPI (Tue):
In June, the BoC cut rates by 25bps to
4.75%, arguing that monetary policy no longer needed to be as restrictive with
continued evidence that underlying inflation is easing. Recent inflation data
had increased policymakers‘ confidence that inflation will continue to move
towards the 2% target, though it still noted that risks to the inflation
outlook remain. The Governing Council is closely watching the evolution of core
inflation, adding that it remained particularly focused on the balance between
demand and supply in the economy, inflation expectations, wage growth, and
corporate pricing behaviour. Ahead, the BoC said three-month measures of core
inflation suggest continued downward momentum in CPI, adding that it remains
resolute in its commitment to restoring price stability.
Australia CPI (Wed):
The monthly CPI indicator is expected
to tick higher to 3.8% from 3.6%. This month’s data will shed light on the
unfolding of services inflation during the June quarter. That being said,
analysts at Westpac remind us that only 60% of the quarterly CPI is surveyed by
the Monthly CPI Indicator, and many components are surveyed just one month each
quarter, and some only once a year – thus may not accurately reflect the
quarterly CPI. “Our preliminary forecast for the May Monthly CPI Indicator is
for a flat print in the month“. „Given a –0.4%mth decline in May
2023, this would see the annual pace lift from 3.6%yr to 4.0%yr.” Westpac says,
adding that this will be the first instance since September 2023 where the
annual rate of inflation in the Monthly CPI Indicator surpasses that of the
quarterly CPI. As a reminder, in the most recent RBA confab where rates were
maintained, the central bank kept to a hawkish tone on inflation as it
reiterated that inflation remains above target and is proving persistent, as well
as noted that inflation is easing but has been doing so more slowly than
previously expected and remains high. Furthermore, it stated that the path of
interest rates that will best ensure that inflation returns to target in a
reasonable timeframe remains uncertain and the Board is not ruling anything in
or out. On the data itself, RBA’s Bullock said that they need a lot to go their
way to bring inflation back into range and noted that the entire economy is to
be looked at, not just Q2 CPI.
Riksbank Announcement (Thu):
In May, the Riksbank cut its
rate by 25bp to 3.75% and guided participants towards two more cuts occurring
during H2-2024 if the inflation outlook materialises. Guidance implied that
there would not be a cut in June, a point that as recently as end-May has been
explicitly reiterated by Governor Thedeen. More recently, on 4th June, Breman
reiterated the above guidance. On the data front, May’s CPIF-XE Y/Y printed
slightly above the Riksbank’s forecast; note, that the month’s broad inflation
metrics were subject to significant two-way factors including mortgage costs
and electricity prices. For the June meeting, the primary point of focus will
be on when the repo path indicates the two H2-2024 cuts are likely to occur,
respondents to SEB’s investor survey believe the path will show the policy rate
at 3.25% in Dec’24 and 2.75% in Dec’25, broadly in-fitting with the current
path.
CBRT Announcement (Thu):
The CBRT is expected to maintain
its Weekly Repo Rate at 50%, according to all 11 economists polled by Reuters,
as the central bank is expected to remain in a wait-and-see mode for now. The
May CPI data was unfavourable for the CBRT as Y/Y accelerated and topped
forecasts at 75.45% (exp. 74.80%, prev. 69.80%), and PPI rose to 57.68% Y/Y
from 55.66%. At the May meeting, the CBRT maintained its Weekly Repo Rate at
50% for the second consecutive month, in line with all analysts’ expectations.
In its statement, the Bank emphasised its vigilance in monitoring the effects
of monetary tightening on credit conditions and domestic demand, underscoring
the need for a persistent tight monetary stance until a significant and
sustained decline in monthly inflation is achieved, with inflation expectations
aligning with forecasts. The central bank also indicated its readiness to
tighten monetary policy further if inflation risks increase, aiming to
establish disinflation in the second half of the year. The desk at CapEco noted
that while many analysts foresee rate cuts by the end of the year, CapEco
predicts the easing cycle will commence in early 2025. The desk highlighted
that inflation, which is expected to peak at around 75% year-on-year in May,
should drop to 38% by year-end. CapEco believes that the central bank will
likely maintain its current stance due to robust economic activity and
persistent inflation risks. The latest CBRT Survey for June showed that the
Repo Rate is seen at 35.90% in 12 months (prev. 37.11%); end-2024 USD/TRY seen
at 37.7463 (prev. 38.7771); end-2024 GDP growth seen at 3.3% (prev. 3.3%).
Biden/Trump Debate (Thu):
The first debate between President
Biden and former President Trump, will be the first of at least two debates
before the November 5th election. The 90-minute debate will take place in
Georgia and is scheduled to be on CNN at 21:00EST on Thursday, June 27th
(02:00BST on June 28th). Going into the debate, a Fox News poll revealed Biden
has overtaken Trump for the first time since October, with 50% of respondents
indicating that they’d vote for him, while 48% showed a preference for Trump;
analysts said the polling may reflect Trump’s recent felony charges of
falsifying business documents. However, an Ipsos poll finds that Trump would
beat Biden 37% to 35% overall in the seven swing states (Michigan,
Pennsylvania, Wisconsin, Georgia, North Carolina, Arizona, Nevada). In terms of
the market impact, analysts see the debate as focusing attention on the impact
that higher tariffs could have on growth, inflation, and interest rates.
Capital Economics said most of Trump’s major policy initiatives would be inflationary,
whether that be narrowing the trade deficit via tariffs or a dollar devaluation
(reports suggest that Trump would introduce higher tariffs on China and
universal tariffs on other countries to narrow the US trade deficit, which
could result in a higher USD and inflation, and even hit Eurozone growth rates
too), curbing immigration (which could impact the labour market; many argue
that higher immigration is the potential explanation for the strength and
resilience seen in US labour market data), or compromising the Fed’s
independence (there have been multiple reports that Trump would look to replace
Fed Chair Powell, potentially with Kevin Warsh, Kevin Hassett or Art Laffer).
Japanese Tokyo CPI (Fri):
Tokyo inflation data for June is
due next week which is seen as a leading indicator for the national price
trend, while participants will be eyeing the data to see if there is a further
acceleration to the headline and core inflation readings seen in the capital
region last month. As a reminder, Tokyo Inflation in May printed mixed as
headline CPI was firmer-than-expected at 2.2% vs. Exp. 2.1% (Prev. 1.8%), while
Ex. Fresh Food CPI matched estimates at 1.9% vs. Exp. 1.9% (Prev. 1.6%) and Ex.
Fresh Food & Energy CPI also printed in line with forecasts but slowed from
the previous to 1.7% vs. Exp. 1.7% (Prev. 1.8%). The acceleration in the
headline and core readings in May was driven by higher electricity charges
which rose 13.1% Y/Y owing to an increase in the fee added to electricity bills
to cover the cost of promoting renewable energy and is seen as likely to
persist, while prices of food excluding perishables maintained its pace of
growth at 3.2%. However, underlying inflation moderated and is anticipated to
continue doing so which if materialised, would spur doubts regarding the
ability to sustainably and stably achieve the central bank’s 2% target and
could effectively lessen the scope for the BoJ to hike rates further this year.
Recently, Japanese PM Kishida said the government is to extend fuel subsidies
to end-2024, and roll out electricity and gas bill relief measures between
August and October.
US PCE (Fri):
In May, US CPI eased to 3.3% Y/Y (exp. 3.4%,
prev. 3.4%), with the core measure falling to 3.4% Y/Y (exp. 3.5%, prev. 3.6%);
the supercore gauge fell to 4.8% Y/Y, the first decline in the annual supercore
rate since last October. Meanwhile, PPI eased to a rate of 2.2% Y/Y in the
month (exp. 2.5%, prev. 2.3%), while the core measure eased to 2.3% Y/Y (exp.
2.4%, prev. 2.4%). With those data in hand, analysts are able to accurately
predict how the PCE data will come in. The WSJ’s Fed watcher Nick Timiraos said
that inflation modellers expect the core PCE index rose around 0.08-0.13% M/M
in May (vs +0.2% M/M in April); that would translate to a 2.6% Y/Y core PCE
inflation rate, down from 2.8% in April, and would hold the 6-month annualised
core PCE rate around 3.2-3.3% in May, while the 3-month annualised rate would
drop back below 3% for the first time since January. In its June policy
statement, the Fed said that „there has been modest further progress“
on inflation, although updated economic projections saw the central bank
slightly nudge up its end-of-year inflation forecast to 2.6% (previously, it
was forecasting 2.4%). In the post-meeting commentary, officials have generally
welcomed the recent tick lower in prices, but have spoken about the need to see
further lower inflation data to achieve confidence that prices will sustainably
fall back to target before they can feel comfortable in endorsing rate cuts.
The updated economic projections from June also revised down the number of rate
cuts seen this year (the Fed now predicts just one rate cut in 2024, down from
its previous forecast for three, but analysts note how the median and mode are
close, and it would only take a couple of officials endorsing rate cuts to see
two reductions this year). Currently, money markets are pricing around 47bps of
rate cuts this year – which is fully discounting one 25bps cut, and a very high
probability of seeing that second reduction.
This article originally appeared on Newsquawk
This article was written by Newsquawk Analysis at www.forexlive.com.
The week is coming to a close with the USD being the strongest of the major currencies. The JPY is the weakest.The gains in the greenback today were helped by stronger-than-expected flash PMI data that saw services index rise to 55.1 vs 53.7 expected, and the manufacturing rise to 51.7 above estimate of 51.0.
For the USDJPY, it rose to the highest level since the April peak when the price traded to 60.208. The high price today reached 159.774.
Going into the new trading week in the USDJPY, a move above the 160.208 level would take the price of the pair to the highest level going back to 1990 where the high for the year reached to 160.40. Move above that level, and the USDJPY is trading at the highest level since January 1987. Those levels are the progression given more upside momentum in the new week.
Of course, the risk exists that the BOJ intervenes. When the price moved above 160.00 the last time, intervention sent the pair quickly down to 155.19 in short order. Another intervention move sent the price from 157.58 to 152.99. The current price is between the two extremes that attracted intervention.
Today, BOJ and Japan officials tried to jawbone the JPY higher( USDJPY lower), but was unsuccessful. Will they be inclined to be more direct next week?
For the trading week, the USD was mixed. The greenback rose vs the JPY, EUR, GBP, CHF, CAD and NZD and fell vs the CAD and AUD. Look at the major pairs:
The greenback rose vs the CHF despite the SNB cutting rates this week by 0.25%. The BOE kept rates unchanged but the statement was somewhat dovish and flash PMI data was weakish today.
In other markets today, the US stocks ended the day mixed. For the 2nd consecutive day, the Dow is ending higher (only marginally), while the S&P and the Nasdaq indexes moved lower.
The final numbers for the day are showing:
The small-cap Russell 2000 rose 4.64 points or 0.23% at 2022.03.
For the trading week the S&P and Dow Industrial Average average rose while the NASDAQ closed the week virtually unchanged:
This week, the S&P and Nasdaq set new all time high close levels:
In the US debt market:
For the trading week:
Thank you for your support. Have a great weekend
This article was written by Greg Michalowski at www.forexlive.com.
On the week:
The candle on the Nasdaq could be nothing or it could be something, especially with the reversal in Nvidia yesterday that continued with a 3.2% decline today.
This article was written by Adam Button at www.forexlive.com.
Tuesday June 25
Wednesday, June 26
Thursday, June 27
Friday June 28
In addition to the above the US treasury will auction off:
This article was written by Greg Michalowski at www.forexlive.com.
Gold has looked to be forming a head-and-shoulders top over the past two months in a move that would target $2150. However yesterday the bulls made a move and tried to take out the late-May highs. That failed through and today the sellers returned with a vengeance, knocking it lower by $40 to $2318.
While the pattern isn’t exactly textbook, it is a head-and-shoulders top and it comes after some data showing that the US service sector isn’t slowing. In fact, the S&P Global services PMI rose to a 26-month high.
That could keep the Fed from cutting rates at all this year and lead to aggressive profit taking in gold.
This article was written by Adam Button at www.forexlive.com.
Key Points:
Yield Spread Dynamics:
MoF Intervention Pressure:
BoJ Policy Normalization:
Conclusion:
MUFG forecasts that the BoJ will raise rates by 15bps at the upcoming policy meeting and announce plans to reduce JGB purchases. Concurrently, the MoF may face increased pressure to intervene in the currency markets to prevent the yen from depreciating beyond critical levels, particularly if USD/JPY breaches 160.00. The combination of BoJ policy adjustments and potential MoF interventions aims to stabilize the yen and address the ongoing currency depreciation.
For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.
This article was written by Adam Button at www.forexlive.com.
The drop today brings us back to where we were on Friday, testing the waters below the 1.0700 mark. The close at the end of last week was just above the figure level, so that will be one to watch again today to see if sellers can find more conviction for a break under.
For the time being, large option expiries at 1.0650-60 and 1.0700 are keeping price action more contained after the earlier fall. The euro area PMI data was softer than anticipated and that weighed on the euro slightly. The low earlier today touched 1.0670.
Sellers are holding control of the pair since last week and have done well to fade the slight bounce earlier in the week. The high this week failed to breach the 200-hour moving average on the near-term chart, for what it is worth.
And that brings us to where we are now. The next key risk event left before the weekend will be the US PMI data for June. That will impact the dollar side of the equation and broader market sentiment. So, we’ll see if the data will side with sellers in chasing a firmer break below the 1.0700 mark to end the week.
This article was written by Justin Low at www.forexlive.com.