In the coming week we will get plenty of PMI´s and also US
employment data. First we will start however with US inflation, more accurately
with the indicator mostly watched by the Fed – The Personal Consumption Expenditures. While year on year the Core CPI
is already at 2.2% and would exceed the Feds inflation target justifying
another rate hike, the Core PCE is only at 1.6% and couldn´t get any closer to
the Fed’s target since April...
Last Week
After a boring Monday
the European PMIs and New Home Sales from the US were supposed to bring some
volatility into the lazy summer markets the next day. While the European PMI data came out mixed on Tuesday, the latest US New Home Sales caused a big surprise
coming out at 654 tsd. as we haven`t seen such number since 2008. The
construction sector is an important component of US GDP its share on the US GDP
is declining and therefore any sign of revival is very important. However, on Wednesday the Existing Home Sales in the US came out
worse than expected as failed to hold the 5.5 million level. The increasing Crude inventories surprised the market
and caused a drop in WTI testing again the $46.5/barrel, USDCAD didn`t react much
on the news despite the dependence of Canada on the oil industry. On Thursday the market focused
almost purely on the awaited speech of Janet Yellen in Jackson Hole schedule
for Friday and ignored the weak German
Ifo Business Climate and the better than expected Durable Goods Orders which increased in the second fastest pace in
the last 27 months. On Friday
the kind of hypnotized trading mode continued. The GDP estimates from UK and US where in-line with expectations and
the market reacted little. The rock`n`roll started after Yellen`s speech. While she said the case for rate hike strengthened
in recent months at the end stressed the outlook is still uncertain, and rate hikes
are not on pre-set course. The US labor
market is close to maximum employment and the FOMC anticipates further
strengthening. Regarding Fed Funds Rate,
Fed anticipates gradual rate increase. According to Yellen the Board of Fed
governors see inflation rising to 2%
in the next few years (keep in mind that inflation is measured by Fed by Core
PCE Price index) and they are not considering higher inflation or nominal GDP targets. After initial half an hour
confusion finally the market translated the message (together with several Fed
governor statements during the day) as hawkish. USD strengthened in the last
few hours of the trading week 1.1% against EUR and GBP, more than 1.7% against
JPY and AUD and 2.1% against NZD.
Next week
Monday (USD, JPY):
On the first day of the week Jackson Hole Symposium will
probably resonate all over the marketplace. Also the Personal Consumption Expenditures will be released, which is the
Feds inflation indicator. While year on year the Core CPI is already 2.2% the
Core PCE is only at 1.6% and no change is expected for Monday but looking at
the bullish mood on USD from Friday, any positive surprise can easily cause
further dollar strengthening. Before midnight we will take a look at the spending of the Japanese households.
The notoriously weak private spending is a key problem of reaching the BoJ`s
inflation target.
Tuesday (AUD, GBP,
EUR, USD, CAD):
Early morning AUD traders should be ready for some
volatility as the Building Approvals
missed estimates in the last 2 months. The data is a leading indicator to
inflation and growth and will be watched closely. The RBA cut the cash rate on
the 3rd of August by 25 bps and while there is no expectation that
the RBA will cut again on the next rate decision scheduled for the 6th
September. During the day plenty of European data will be announced, but early
afternoon the Canadian Trade balance
numbers will show us if there is any tendency to get into positive territory
where the economy was last time in 2008. Later the Conference Board Consumer Sentiment survey will be released. As
it´s a leading indicator to US economic activity this could be the data of the
day.
Wednesday (NZD, EUR,
USD, CAD):
Early morning the ANZ Business Confidence, the result of
a survey of about 1500 companies will be released in New Zealand. Could be
important as kiwi finished the week with a shooting star on the weekly chart
confirming a kind of engulfing pattern (not clear) a few weeks ago however it
couldn’t close below key support 0.7200. In the morning we will have important
data from Europe, German Retail sales
and Unemployment change first, and later the Eurozone flash Inflation could spur the EUR. In the afternoon we
will focus on the US ADP employment
and 1.5 hour later the Chicago PMI
with Pending Home Sales. According
to Yellen the US employment is close or at its maximum so there could be a
lower reading in ADP but Pending home sales could surprise to the upside as
last week´s Existing Home Sales were weaker than expected and the key could be
in the number of the unfinished purchase contracts. The Monthly GDP from Canada
is expected to be well in positive territory after a negative surprise last
month. Later the EIA Crude inventories
will affect the CAD as well.
Thursday: (CNY, AUD,
EUR, GBP, USD):
It`s going to be a PMI
day and even the market will be waiting for the NFP next day, there could
be interesting moves. Especially the Chinese
Manufacturing PMIs where the 50 point level is the threshold of recession.
The official PMI dropped below 50 pts last time but the Markit PMI hold above.
Between these two data the Australian
Retail sales and Private Capital
Expenditures will be released. As the last rate cut had practically zero
effect on AUDUSD, this could give us a hint whether there is a chance for
further rate cuts in the fall. We will continue the day with the Spanish, UK and US ISM manufacturing PMI,
from these the later has the biggest potential to move the markets. The US jobless claims and US Non-Farm Productivity released in
between the PMIs could give a hint if Yellen was right on Employment last
Friday.
Friday (GBP, CAD,
USD):
One of the most watched US number will be released in the
afternoon, the US Non-Farm Payrolls.
However, in the morning we will have first the UK Construction PMI. Very important if we think there is a bubble
in the UK property market. Even though the last reading showed a slight
improvement, the trend in the sectors PMI is not encouraging. While in the
first half of 2014 the figure was above 55 points each months, in 2015 hardly
could reach this number and the average was around 52.5 and this year only
twice reach 52… The US NFP is
expected to hold but as the economy is near full employment, there could be
come negative surprise.
Have a successful week and don’t forget:
Watch you risk and be consistent in your trading!
Mr TechMan
DISCLAIMER: This material was created
for informational purposes only and represents the Land of Trading team’s view
of the past and current economic and capital market environment. It is not an
investment advice and should not be viewed that way at all, and the creators of
this material cannot be held liable for any potential losses resulting from
trading, where despite this disclaimer someone would consider this material as
an investment advice. All rights reserved ©2016. Contact:
landoftradingATgmail.com
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