Oct 17, 2016 - Weekly Macro W42

The Chinese trade data had the most impact on the markets last week. The 10% decline in exports caused a bear run on equities which was however stopped quickly by the better than expected Chinese inflation data the next day. The coming week is full of events, most notable BOC and ECB rate decisions, the CPI and housing data from US as well as the Chinese GDP.

But let’s stop for a moment at the US data from the last week as the markets attention is more and more focused on the December rate decision. The probability of a December rate hike is around 67% according to different polls (BB, Reuters etc.) and the fact that only 2 out of 8 data released last week were worse than expected, seems to support this case.

One of the key factor the Fed is following regarding their comments on the possible rate hike is Consumer Inflation (measured by Core PCE Price index). Last week there were released two leading inflation indicators which can help us to predict how long we will have to wait for increase of the price levels in the US. Both the Core PPI and Core retail Sales came out much better than expected and this fuelled the positive expectation regarding the December hike and caused the EURUSD has broken the significant 1.10 level on Friday. Next week we have the consumer price index, which could be a market mover again.

The Event Risk Calendar for next week you can find in the table at the bottom of page. Below I wrote notes to some of the events for each day.

Monday

We will start the day with Final CPI numbers from the Eurozone with no impact expected providing the release will confirm there is no change in the inflation. A more important data the US Capacity Utilisation Rate will be release in the afternoon. Stanley Fisher 6-7 weeks ago expressed concerns about this indicator and the Fed can’t do anything about it, it’s on the private sector this time and it’s still far from the potential of the economy. Is it good because there is still enough capacity to mobilise or it’s bad because there is not enough demand….?  For sure it`s well below the 77.8% utilisation rate in June 2004 when the Fed started its rate hike cycle under Greenspan. New Zealand will release Consumer inflation data at the end of the US session. The CPI fell from 1.6% in 2014 to just 0.1% at the end of last year. In the first 2 quarters 2016 it held at 0.4% but the RBNZ would like to see this figure above at least 1%. Well, analysts are forecasting another drop to 0-0.1%, so probably more trouble ahead for RBNZ raising the question when the next rate cut will come. The is at key levels and on Friday bounced in front of the uptrend-line so watch this data.

 

Tuesday

It will be inflation day. At the beginning of the European session we have UK inflation and the market is expecting a modest increase for September. The headline CPI is expected to rise to 0.9% from 0.6% and also a rise is expected in PPI for input and output. The main problem of the country is however not the inflation but rather the Current account which is close to record deficits. In the afternoon we have CPI from US. While the monthly headline data is expected to increase, the monthly core CPI is expected to decline. The last price index is coming from New Zealand, the Global Dairy Trade price index is a key index for the country due to the strong Dairy industry. The last month the index dropped below 0 for the first time in 5 weeks.

Wednesday

Strong start to the day is expected from China as the GDP (exp. 6.7%) and Industrial production (exp. 6.4%) will be released. Do you remember how much impact the Chinese Trade balance and inflation had…? So watch this data and be prepared that in case of any surprise the market will respond rapidly. The UK employment figures will be out at the beginning of the European session, no improvement is expected in the economy close to full employment. The cable was sold heavily last week and many consider these levels as very oversold so be prepared for a bounce if big positive surprise. We will have a break until early afternoon when US Building Permits and Housing starts will be released, both surprised to the downside. Building Permits are in a downtrend and Housing starts are stuck between 1.04 and 1.21 mil for the last one and a half year. The current max levels are however still far below the numbers of the years of the last rate hike cycle. The Bank of Canada  rate decision is the next big event, even no change is expected the monetary statement could give us some cluse what to expect from the future. 

Thursday

The Australian employment figures are out shortly after midnight and market expect a modest rise of unemployment rate but a rise in employment on the other hand. In the European morning the UK retail sales will be released. The last week the BRC Retail Sales Monitor showed a slight improvement in retail sales but the official numbers are not expected to change compared to August figures. The big event of the day is the ECB rate decision. Of course not too many analysts expect rate cut, but we are wondering if the heads of European central banks will use their creativity like the Japanese did with changing the focus and the tools of monetary policy. The same time as Mr. Draghi will start to speak the US Jobless claims will be released along with the regional Manufacturing index of the Philly Fed but most probably will have muted effect due to ECB. At the end of a busy day we will get Existing home sales from the US which has unusually declined in September.

Friday

This will be the second day of EU economic summit. The calendar is pretty empty for this day except Canada, where the CPI numbers will be released with Retails sales. In both cases the market is optimistic and analyst expect big gains.

Remember to watch your risk and be consistent

Mr. Tech Man

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: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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Sep 21, 2016 - EURUSD 1 hour pre-FOMC chart

Hello guys,

A quick look at EURUSD 1 hour FOMC chart:

We like this channel from intraday perspective:

Above 1.1330 possible 1.1450 then watch for weekly close

Below 1.1070/50 means Yellen did well, watch for weekly close.

All of these levels are intraday and close above/below extremes may push prices further and that could be something bigger but weekly close is important at this point.


Please let us know should you have any additional questions or you would like to discuss other crosses as well. We are here to help you, just contact us at: landoftradingATgmailDOTcom.

Happy Trading

Mr Price Action

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: landoftradingATgmailDOTcom

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Sept 18, 2016 - Weekly Macro Outlook W38

Markets opened in rather negative mood after the sell-off in US equities at the end of the previous week but cautious optimism returned after dovish comments of Fed’s Brainard. The main event was US CPI with a big positive surprise the BoE and SNB rate decisions were non-events. We continue this week with the Central banks.  Wednesday BoJ, Fed and also RBNZ… 

Previous MONDAY we saw a moderate reversal in equities after the Rosenberg caused sell-off as another Fed speaker, Brainard this time, had some very dovish comments… No change in EURUSD. The only thing we should take from these two is the fact that also inside the Fed there are different opinions. Also the DOA WASDE report was due and the expected revision of the Corn yields was less significant as expected, the Wheat global stocks however fell due to weak European harvest. Hedge funds are shorting Wheat heavily, so a short covering could cause rally in the near term. TUESDAY the Chinese Industrial production, Fixed assets and Retails Sales all came out better than expected. If this is the sign of stabilising Chinese economy then the PBOC may start even think about a rate cut… however the real estate bubble will be a significant hurdle. Later that day the UK inflation put some pressure on the pound, worth to note home prices still grew at a pace of 8.3% y/y but the growth is slowing significantly. The EZ and German ZEW sentiment came worse than expected but little changed compared to the previous readings. The New Zealand Current Account went into deficit more than expected and put pressure on the kiwi. WEDNESDAY Average earnings figures in UK were better than estimated but still declined vs previous, however Jobless claims went up while revised down the fall of claim number from last months. We couldn’t see the expected rebound in oil stocks as crude inventories fell further.  Late night the New Zealand GDP q/q came worse than expected but the country economy is growing at incredible pace 3.6% year on year. THURSDAY we started with mixed Aussie employment data, while employment change went into negative as a big surprise, the unemployment rate declined to 5.7%. The AUDUSD didn’t reacted too much. In the morning the SNB rate decision and statement didn’t bring anything notable and the same we can say about the BoE. In the afternoon the US data flow came out worse than expected but after the EURUSD spiked up to 1.1280 the traders probably realised that it wasn’t actually that bad as most of the indicators were actually improving compared to last release (Core Retail Sales, PPI, Core PPI, Current account and Philly Fed and Empire State Manuf. Index…). What should cause concern was the Capacity utilisation, which declined… and as Fisher said this is a kind of key data which on the other hand the Fed can’t influence, this could be the next excuse why not to hike in September. FRIDAY supposed to be a quiet day even the US inflation figures had to be released. However the 0.2% increase CPI and 0.3% in Core CPI was a big surprise and the dollar started a steady appreciation with EURUSD down 100 pips EOD. The outcome from EU summit added weight on the EUR. Renzi rejected to hold a joint press conference with Merkel and Holland. As he explained from his point of view there was no progress in the migrant and austerity questions and if anything else is presented, its just “a flight of fantasy”…

The coming week will be everything about the BoJ and Fed but some events may cause tradable moves. One of them is the series of housing data from US. Be prepared however for a light liquidity and hence a little more short term moves. It will be hard to trade these so be careful…

MONDAY

The National Association of Home Builders will release the results of their survey with the index of current and future single-home sales. They survey almost thousand homebuilders in the US monthly and therefore it makes a leading housing market indicator. Above 50 means good conditions in the sector. During 2009 it fell as low as 9 and during the previous boom high was at 72 index points.

TUESDAY

The RBA Monetary meeting minutes and Home price index (last Q unexpectedly fell into negative) will be AUD movers. At the first half of European session some light weight data from Europe are not expected to move the market. Building permits and Housing starts will take most of the spotlight in the afternoon. The first one is in a downtrend and far away from the levels of the last boom, here we need a positive surprise to give some additional boost to the USD. Again this is a leading indicator of the sector and gives a hint about the future building activity. The Housing starts is rather a medium term leading indicator of the economy due to activation of wide variety of jobs. In the evening the GDT price index will be watched by NZD traders and the API Crude stocks can prepare for CAD traders some excitement.

WEDNESDAY

We have three rate decisions this day, starting with BoJ. Before BoJ however the Australian Treasury will release its Mid-year Economic and Fiscal outlook. And even the BoJ will give the main tone in the Asian session, especially for Asian and Australian Currencies, this broad analyses will give us the idea, how the aussie government assess the economy and its own policy. The long awaited BoJ rate decision will take place before the Fed and this caused some speculations about the coordination of these two central banks. However if the BoJ wants to weaken the yen, they need to use Big Guns. We prepared a separate story on this with more details – link here. The following hours will be rather sleepy as everybody will be waiting for the Fed, but don’t forget that the EIA will release Crude oil inventories in the afternoon. As there was a huge decline 2 weeks ago, the question if there will be a significant correction is still alive. The speculations whether the FED will hike or not are skewed towards the no camp. From our point of view however, even the US economy is not in a perfect shape, there are no economic obstacles to hike the rate if we look at the targets of the Fed, Employment is close to its maximum and Core Inflation is well above 2 percent at 2.3% (although Core PCE is Fed inflation indicator). We have to keep in mind that it is also a political decision and the Fed up to now never hiked in the election year. Please check our detailed piece on FOMC – link here. The RBNZ will release his statement and rate decision later in the evening. Well, they have a huge problem over there. The economy is growing 3.6% y/y, capacity utilization at 92%, Household debt to income ratio at all time high but core inflation at only 0.5% and housing market in bubble which is the key obstacle to cut. Anyway the central bank alone can’t solve such a problem and the politicians need to do their job finally by creating longer-term sustainable housing market rules.

THURSDAY

We can call it “The Day After…” with most probably a hangover kind of mood. The afternoon could be important with Draghi speaking at European Systematic Risk Board. We have also Jobless claims and Existing home sales from the US in the afternoon but after the FOMC likely the reaction will be muted.

FRIDAY

It will be a PMI day starting with Flash manufacturing PMI from Japan and Chinese MNI Business sentiment which could be a good leading indicator prior the official PMIs. At the beginning of the European session there will be released the French, German and Eurozone PMIs. We will end the week with Canadian inflation and Retail sales, both sets of data are expected to increase.

  

 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: landoftradingATgmailDOTcom

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Sep 18, 2016 - FOMC meeting (Sep 20-21) – a discussion about exit strategy, really?

Now or in Dec? Data are ok, we are not all 100% sure yet but… should we wait until Dec? Hmm, Trump president, data might be worse, lots of international risks like Spanish elections, referendum in Italy or Brexit going wrong…our credibility…hmm…

Few words about current developments:

-          The market expectations for a rate hike in Sep are around 20% and 50% for Dec but we should more see it as either a dovish hike or hawkish no hike. Meaning Fed will either hike but will have dovish comments or will not hike and will refer to Dec with some wording about data dependency…etc.

-          Apart from present market risk related to uncertainty and very low predictability of Fed’s actions market is watching underlying data to get some hints about economic growth, inflation and employment. As the economy is getting closer to full employment, the GDP and CPI/PCE numbers are gaining importance.

-          Steepening of the yield curve at longer end – we may see it as market reshuffling over to shorter term maturities based on rate hike expectations

-          Division of the FOMC officials – of course as always is the case

Our expectations:

-          Our base view is one hike in Sep and eventually second one in Dec if data support. Please read more on:

Jackson Hole coming, but what about the rate hike…?  and  US job market - Full time vs. Part time employment

-          The GDP growth may not be at the level all Fed officials would like to see, eventually we may have a different picture after elections but the economy is overall growing and doing well

-          The question about full time employment is also off the table as almost all FOMC members share the same view that the economy is close to full employment with unemployment rate at 4.9% vs 4.8% (Fed’s full employment rate)

-          The only question is inflation - the headline PCE and core PCE. The Fed’s projections show expectations at 1.9% for 2017 and 2% for 2018. The last figures were at 0.8% and 1.6% y/y respectively.

-          As the inflation is lagging the economic growth and monetary actions, we see that the rise of prices is on the right track. Do not forget about still very low oil prices, that housing market is stabilizing and that the costs of medicare will not be a huge contributor to PCE due to administrative measures in place.

-          All in all – data is good enough to support the Sep hike, restore the credibility of the Fed, confirm its data dependency and independence ahead of US elections as well as avoid another round of confusion as we had witnessed last year

-          Fed officials will likely avoid facing the risks of no hike this year (as per risks described on top of the page) and vote for a 0.25% rate hike from almost a zero level what is from a historical perspective completely irrelevant level

-          By gradual hiking (starting in Sep) they will create a room for rate cuts if necessary, to face recession risks in the future. Doing that will also allow to push away discussion about negative rates in US. 

-         From a completely different perspective a rate hike would mean the beginning of the return to normal monetary policy, breaking the dependence on central bank funding, pushing for fiscal and structural reforms, and more innovation 

-         The reaction of the markets – let’s have a look at S&P 500. There is something strange going on as US stocks should be much lower to our taste before a rate hike. Is Fed cooking something for us?

-         The rate hike may be a confirmation for the markets that the US economy is doing well. Of course the initial reaction will be a small pullback that will be followed by a strong rally.

-        In case of no hike, we can see a stop hunting rally and a huge sell off after. Exactly the opposite to what markets are expecting at the moment.

Well, any questions just ask…

Good luck Champs!

Mr Hawk

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: landoftradingATgmailDOTcom

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Sept 11, 2016 - Weekly Macro Outlook W37

The central banks last week have chosen a passive approach with no changed in their monetary policies. The surprise drop in oil inventories this week caused the return of oil bulls however the rally stalled at 47.50 and WTI closed around $46/barrel and Brent after testing $50 dollars returned to $48/barrel. In the stock market Eric Rosenberg caused a sell off on Friday by backing the rate hike later this year. Next week we have BoE and SNB rate decisions.

Last week’s summary:

The USD fell against most of its peers on Tuesday after disappointing ISM Non-Manufacturing PMI. The biggest blow to EURUSD however came from Draghi on Thursday when EURUSD tested 1.1325. Market expected at least some expansion of the monetary easing and the unchanged policy added momentum to the euro bulls. It seems that central banks are running out of ammunition and it may signal the end of the era of loose monetary policies. Cable had a good start to the week after strong services PMI confirming last week’s surprise in manufacturing PMI, the cross tested 1.3450 levels after US ISM figures but during the Asian session lost the momentum and  the disappointing UK Manufacturing production and the mixed mood after inflation hearing caused the GBPUSD gave up its early gains. The diary price index in New Zealand was positive again third month in a row and this gave further boost to the kiwi. USDJPY bounced back from the downtrend line and tested 101 after ISM. The Crude oil gained on supplies concerns as Oil inventories fell dramatically last week. The reason however had nothing to do with fundamentals rather with bad weather which slowed down the unloading of tankers in the gulf. We may see a sharp change to the upside in inventories soon. At the end of the week everything changed however as Rosenberg on Friday seemed to be very confident regarding rate hike this year. The result dollar up against all its peers and stocks, commodities down. The criticism of Greece from Eurogroup also added to the downside for EURUSD weakness. The country accomplished only 2 out of 15 goals set by creditors and even the finance ministers backed the country by saying there is still enough time… they stressed Greece needs to speed up reforms… well we all know all the goals will not be achieved. In response Tsipras hosted a ClubMed meeting of South European countries to unite them in response to the austerity pressures from Germany. Draghi also joined the meeting adding more importance to the event. After the Brexit vote in June it could be seen as an extremely destabilizing step and could mean further pressure on EUR at Monday open.

Next Week Macro Outlook / we will have a pretty busy week ahead

Monday:

As there won’t be any big data released the first day of the week, the markets will have some time to digest the events of the weekend regarding Greece. FOMC and RBA speakers will also take the stage later the day. Before midnight the Japanese manufacturing index may add some volatility to the jen crosses.

Tuesday:

We will start the day with Chinese data, especially industrial production may move the markets, watch AUD and NZD primarily after midnight. The GBPUSD traders will have some rock’n’roll caused by UK inflation which started to pick up this year. Just half an hour later Draghi speaks after the German and EZ ZEW index is published. Look for some hints about the Club Med meeting in Athens during the weekend. In the evening the API will release the US crude inventories which after the last week’s weak data will be more important than usually. The New Zealand Current account balance will be released as last data of the day, the CA was last month in the biggest surplus since Jun 2014.

Wednesday:

We start with the UK employment data and no big changes are expected in the job market given it’s close to maximum employment. Also the oil inventories will attract more attention as usually due to last weeks weak figures and slowing exports. There could be a dramatic change to the upside I oil inventories after the tropical storm passed. Later the GDP figures from New Zealand will be released, which seems to be trending down.

Thursday:

The day is packed with important data. After midnight the Australian employment figures will bring some action to the Aussie traders. With unemployment rate at 5.7% the market expects a little increase in number of employees as the spring/summer gold rally allowed to reopen some mines. The situation in the mining sector is however still very difficult due falling imports to China. In the morning the Swiss and followed by UK rate decision and Monetary policy statement will bring some vols to the market, even booth are expected to keep their MPs unchanged. In the afternoon we have a flood of US figures, Retail sales, PPI and Unemployment claims in the same time. However if one looking for a hint when the rate hike will happen, should keep an eye on Capacity Utilization Rate. Stanley Fisher, deputy head of Fed said two weeks ago that the efficiency of the US economy is the key problem which the Fed can’t really influence. When the rate hike cycle started under Greenspan, this indicator was above 76% (in august 75.9%), when they finished it was over 82%...

Friday:

After a busy Friday we will have the sales figures in the Canadian manufacturing sector and sae time US inflation data. While the Core CPI is already at 2.2% and we know the Fed is looking at Core PCE index (1.6%). A big surprise could be the factor that influences the sentiment in a visible way. Also keep an eye on preliminary University Michigan Consumer sentiment (already at pre crisis level) and inflation expectations (currently only half of the pre-crisis expectations around 5%). 

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: landoftradingATgmailDOTcom

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Weekly Macro Overview 31W

It was a pretty busy week with central bank meetings (Fed and BoJ rate decisions) and GDPs from all over the world. As FOMC was a non-event, the most reactions we saw after BoJ and US GDP on Friday with USD weakness against most of the currencies at the end of the last trading day...

Monday

A few positive data were released at the beginning of the week with the German Ifo Business confidence in the focus. The survey of around 7000 business didn`t reflected the uncertainty caused by the Brexit vote and came out better than expected at 108.3 vs exp. 107.7 even it was a little weaker than the previous reading at 108.8. The market reaction was somewhat muted as the traders were focusing on Wednesday.

Tuesday

After a data light morning the CB Consumer Confidence (97.3 vs exp. 95.6 last 97.4) and New home sales (592K vs exp. 560K last 572K) were released in the US in the afternoon. Both were better than expected. While the Building permits and Housing starts are stagnating or in slight downtrend (check last week`s macro), the demand for new homes seems to be picking up momentum.

Wednesday

The FOMC day a but we started with Australian inflation data which were more or less in-line with expectations. Later in the morning the little better than expected prelim UK GDP was released at 0.6% vs. fc 0.5% last 0.4%. which pushed the cable to the downside. It reversed after testing 1.3075. The negative surprise came in the afternoon ahead of the FOMC meeting. Both Durable Goods orders and Pending Home Sales were worse than the forecast and moreover the Crude inventories grew by 1.7 mil. barrels causing the WTI decline by $1.3 or 3%. The Fed as most of the analyst predicted, didn`t hike the rate but the FOMC Statement gave a little hawkish feeling opening the door for a potential September hike. EURUSD advanced but no firework as the decision was mostly priced in already.

Thursday

The dollar weakening continued in the morning especially after a better than expected European data where the German employment data showed how robust the job market is in Germany with the new claims falling again now by 7K. The inflation is also picking up in the strongest economy of Eurozone by 0.3% vs the exp. 0.2% and last 0.1%. in the afternoon however the market consolidated as waiting for the BoJ. Late evening the better than expected New Zealand Building approvals were release which helped the kiwi to regain some momentum.

Friday

The day was full of very important data starting with Japanese figures prior the rate decision … mostly ignored. BoJ failed to deliver both on the interest rate side and the asset purchase side which caused huge yen rally. The BoJ only increased its ETF buying program by 2.7 tril. yen almost doubling up the annual purchase to 6 tril. Yen which can boost the Nikkei and the consumer confidence. However, this will hardly stimulate new investments and Abe´s fiscal stimulus plans will also need some additional financing. Most probably the BoJ wanted to keep some gunpowder dry for the coming months as well but overall the market took the announcement as a big disappointment and a signal the BoJ is running out of ammunition. We have to add the expectations were super high hence the likelihood of a disappointment was pretty high too. USDJPY reacted sharply to the downside with a potential of testing recent lows.

European GDP figures were in focus in late morning with the French GDP worse than expected and the Spanish and Eurozone GDP in/line with the expectations. The bombshell of the day was the Advanced US GDP expected to grow by 2.6% vs Q1 0.5%. But the reality was a huge disillusion as the Q2 GDP growth was released at 1.2% and Q1 GDP was revise to the upside to1.1%.  The dollar weakened against euro quickly and almost touched 1.1200 and helped the USDJPY to test 102.00.

The last event of the week was the EBA bank stress test where European banking authority tested 51 biggest European banks. The test didn`t have pass or fail levels but the worst result came as expected from Monte dei Paschi, going in negative with Tier 1 equity in case of a 7% drop in GDP. Banks from Italy, Ireland, Spain and Austria were among the worst results but the bailed out Bank of Scotland and Barclays would also experience significant drop in equity.

Next week

Monday

We will start the week with sentiment surveys, first from China after midnight, where both the official and the Markit`s Manufacturing PMI`s will be released. The UK Manufacturing PMI will give us some insights how the UK companies see the post Brexit era. In the afternoon the Manufacturing PMI from US is presented by Institution for Supply management. After the last significant increase, the same or little worse PMI is expected.

Tuesday

After midnight the Australian Trade balance and Building Approvals will be released but don’t expect firework prior the Rate Decision (3 hours later). The market broadly expects some easing from RBA and rate cut. The pressure mounts especially after the appreciation of AUD at the end of the last week due to the weak US GDP data. Later on the UK Construction PMI will be released which is a key sector for Britain. Any weakness may take Cable to the downside. Even the probability of Fed rate hike prior the US elections is close to zero, the Core PCE price index and Personal spending may bring volatility to USD crosses in the afternoon. During the night the GDT Diary price index from New Zealand will come out with not specified schedule and as this is the country`s main industry, Kiwi traders should stay awake.

Wednesday

After the Chinese Services PMI early morning the focus will be on the UK, as the UK Services PMI will be released again we are looking for a hint how the British service providers see the future after the Brexit vote. In the afternoon US automated data processing employment figures may move the lazy summer market and later the ISM Services PMI will be worse to watch. CAD traders should be on alert late afternoon as Crude Inventories will be released, as the economy is quite dependent on the oil industry.

Thursday

Aussie Retail Sales early morning should be watched before the BoE Rate Decision and Inflation Report. The expectations are high so reaction to any disappointment could be strong. Carney speaks half an hour later, explaining the monetary policy in more details. In the afternoon the US ADP unemployment change is worth to watch ahead of Fridays NFP.

Friday

The Asian session will start with the RBA`s quarterly Monetary policy statement where we can get some idea how the policy makers see the economy and what steps could be expected in the second part of the year. Later in the morning German Factory Orders could bring some activity. Later the Halifax house price index from the UK. However, the US Non-Farm Unemployment change is the event of the day where we can see a downside revision of the previous extraordinarily strong data. The expectations for the July employment data are 100k lower than the previous release. Canadian job market and trade data will be released the same time so USDCAD traders should be also on the watch.

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 www.landoftrading.com Contact: landoftradingATgmail.com

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ECB preview - Draghi: Most probably on hold this time...

ECB - market is expecting no change to rates, likely to keep wait and see stance and wait for further macro data, reiterate that EZ is supported with high stimulus, may not be comfortable with GDP growth and Inflation data, and Brexit impact is not possible to assess yet (short time). All in all, Draghi will likely express that it is too soon to make a change in current ECB's policy.

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading       teams view on past and current economic and capital market environment. It is not and shouldn´t been viewed   as an investment advice and the creator of this material shouldn´t been hold liable for any loss resulting from       action where despite this disclaimer someone would consider this  material  as an investment advice. 

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Weekly Macro Overview - Week 28

Previous Week Summary

Bits and pieces of Brexit referendum were still present in the market with not surprising suspension of redemptions from real-estate UK funds, making GBP 15 bln out of GBP 24 bln locked. The GBP is firmly sitting below 1.3000 handle, USDJPY very close to critical level (please bear in mind, that BoJ may show its teeth soon). The Italian banking crisis is keeping Rome, Brussels and Frankfurt busy, as the banks cope with EUR 360 bln of non-performing loans (1/5 of country’s GDP), but the highlight of the week were US NFPs. US stocks flirting with all times highs at the same time as bond yields are printing new lows. No comment on that… Meanwhile, Yuan is weakening fifth week in a row and PBoC doesn’t seem to care as FX monthly report showed big one month rise in foreign FX reserves. Likely, PBoC has stopped its interventions, so the CNY is left to weaken to support the growth. As the situation in Chinese economy deteriorates, another round of RRR cuts may also be on the table in the weeks to come.

Monday – Australia’s elections didn’t resolve the deadlock and S&P lowered the outlook to Negative due to strong budget deficit risks that may not be properly addressed. S&P also commented on UK’s GDP and see it declining 1.2% and 1.0% (2017/18) on Brexit, BoE lowering rates 50 bps before yearend. EZ Sentiment Index was lowest since Jan 2015, UK June Constructions PMI was horrible and corporate tax rate can do to 15% from 20%. All in all more UK is slowing down, more QE we can see. After Boris Johnson, Nigel Farage was the second key Brexit figure leaving the mess he had created to be cleaned up by someone else. I love politicians…

Tuesday – after RBA market sees further easing already in Aug (55% probability); ECB – no need for rate cuts at the moment & bank sector needs consolidation; EZ June Services PMI better, UK’s worse; BoE report – Brexit risks crystallizing, to provide substantial FX liquidity and to support jobs and growth. US Durables and Factory orders lower than expected and Dudley (Fed) pointing to patience with hikes due to low inflation and global uncertainty. Fed stays data dependent and US economy doing OK on average according to him.

Wednesday – Ireland, Spain the highest growth in EU; Greece may return to bond market next year; CH government proposed automatic tax exchange; GE FinMin Schauble on Deutsche Borse/LSE merger – must follow the rules, location of HQ key to approval; US Trade Balance worse, Final Markit Services PMI better, ISM Non-Manufacturing PMI better – proving growing confidence in US economy, will reflect good in Q2 GDP number.

Thursday – UK Industrial & Manufacturing production declined less than expected, ECB Minutes – Brexit risks, inflation conditions weak, not important which assets are purchased under QE, recovery proceeding as expected, drive by domestic demand. US ADP Employment Change and Initial Jobless Claims better, EU – Spain/Portugal failed in reducing budget deficits, may face sanctions.

 

Friday – US NFPs – headline 287k vs 180k exp, Unempl. rate 4.9% vs 4.8% exp, Average hourly earnings 0.1% vs 0.2% exp M/M, 2.6% vs 2.7% exp Y/Y, Participation rate 62.7% vs 62.6% exp. Overall very strong report that put the September rate hike again on the table but recall the above comments from Dudley (Tuesday). The negative was the 11k revision down of previous number from 38k to 27k, what brings the May/June reports at 157k each, thus Q2 average moves to 147k vs 196k in Q1.

Goldman Sachs see markets underpricing the likelihood of Fed hiking the rate at this point and we should see the 2/3 probability or rate hike by yearend.

Upcoming Week Outlook

Sunday were held General elections in Japan where Abe`s Liberal Democratic Party have won a simple majority and will probably able to form a super majority coalition. As the Japanese ultra-easy monetary policy didn`t bring the desired boost to the economy, the government is expected to introduce a stimulus package after the election that could exceed 10 trillion yen. Despite this seems to be partially in-line with the recommendations of the world` s central banks to activate fiscal policies the success is not granted. If the government goes for big infrastructural projects only the positive effects will be short-lived without the tough structural reforms so needed for the economy. The Chinese inflation data released on Sunday were in-line with the expectations.

US earnings season will bring some interesting names during too including some big banks. These earnings can serve as leading indicators on US economy as banks are the centre of the economies financial bloodstream.

Monday –EuroGroup meetings can bring some volatility if info regarding Brexit released. Ester George, (hawkish voting member of FOMC in 2016) will speak about the US economy at the Mid-America Labor Market Conference in Missouri, key Q if there will be any hike this year… The boring start to the week however may offer some healthy short term trends, in the aftermath of the Japanese elections, most likely positive effects on the stock market. For CAD traders the key Q is if there is a housing bubble or not. Housing starts will be released at GMT 12:15 PM may give a hint.

Tuesday – Pound traders should be on the guard during the second day of the week as Inflation hearings will take place in London. Carney and some MPC members will testify before Parliament's Treasury Committee on economy and inflation outlook and while there is no timeline, comments on BOE planned easing can create market volatility. Later on Tuesday BOE Quarterly Bulletin will be released at GMT 11:00 AM and US JOLTS at GMT 02:00 PM. The later will be watched due to the surge in NFP numbers last Friday. Traders will be likely looking for what`s behind the improvement.

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Wednesday – We will start the day with the Chinese Trade Balance before European session, no exact time yet. Bank of Canada will announce overnight rate at GMT 02:00 PM, news conference is held at GMT 03:15 PM. Between them the US crude inventories may create volatility in CAD crosses due to high dependence of the country from oil industry. No rate change is expected but one shouldn`t forget  

Thursday – Malcolm Turnbull`s narrow win in the long Australian elections raises the question how stable will be the new government. Some rating agencies already declared that strong government is needed to keep AAA rating for the country as only this will allow to proceed with the necessary structural reforms which will be painful for the nation. Therefore, the Employment data at GMT 01:30 AM will be watched closely by traders and analysts. The trend in Unemployment rate is to the downside and even there is expected an uptick, this will not change the overall trend. Turnbull promised in his campaign he will seek change in the country`s dependence on mining industry but didn`t specify how he want to do that.

The event of the day will be however the BOE rate decision and Monetary Policy Statement GMT 11:00 AM, where the expectations are mixed from 25 bps cut to no change. But we can agree on that if there is a cut it shouldn`t be more than 25 bps. We thing it would be too soon for the BoE to cut the rates. The pound is weak this itself will boost the economy and MPC may wait with any major stimulus until the implications of the Brexit vote on the UK economy will be clearer. Later the day there will be producer`s inflation and unemployment claims from US, both are expected to worse compared to the last release.

Friday – China GDP will be in focus and it`s expected that the slowing trend of growth will materialize in 6.6% growth rate. As China is the second biggest economy in the world if the slowing pace of growth is confirmed, this will have broad implications on the global economy also to the decisions of central banks (especially Fed) in the coming months. 

Later the day Carney will have a speech in Toronto regarding climate change and economy, we expect some more hints on how they will deal with the Brexit case. Later a bunch of US data is expected, foremost the US inflation and retail sales data may bring some the volatility, no changes are expected except Core Retail Sales. The trend in total vehicle sales turned down this year. As this could be taken for a leading indicator to US consumer confidence than there are more clouds on the horizon as Fed is considering another rate hike this year. The University of Michigan consumer sentiment index at GMT 02:00 PM will be important for the same reason – are the consumers confident enough the spend more money and boost the inflation…?

Event Risk Calendar

 DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading       teams view on past and current economic and capital market environment. It is not and shouldn´t been viewed   as an investment advice and the creator of this material shouldn´t been hold liable for any loss resulting from       action where despite this disclaimer someone would consider this  material  as an investment advice. 

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