Aussie unmoved by narrower China trade surplus

Both imports and exports higher than estimate

Imports rose 27.3% y/y in US dollar terms, the fastest pace of growth since January, and beat economists’ forecasts of +16.2% by a large margin. Exports also topped estimates, rising 12.2% y/y, defying speculation that the imposition of the first US tariffs on Chinese imports would have an adverse effect on trade. The trade surplus narrowed to $28.05 billion, giving back most of June’s gains. The stronger imports numbers gave the Aussie a quick knee-jerk boost, but it failed to breach the 55-day moving average at 0.7450 to the US dollar.

AUD/USD Hourly Chart

Source: Oanda fxTrade

 

RBA’S Lowe says no case for near term rate move

In a speech today, RBA Governor Lowe said there is every chance that the next move in rates would be higher, something he he has said before,  if the economy evolves as predicted, but current conditions do not present a convincing case for a move in the near term. He reiterated that the timing of the move would be dependent on unemployment data and inflation moving to the middle of the target range. He also admitted that an escalation of the trade war could be damaging for the global economy. AUD/USD was already mildly higher after the Chinese trade data and the comments assisted the gains, though not aggressively so. The pair is currently trading at 0.7425.

 

Trade wars continue

Late yesterday the US Administration announced it would be imposing 25% duties on another $16 billion of Chinese imports in two weeks, which prompted China to respond that it would retaliate again with dollar-for-dollar tariffs of its own. In a dinner engagement, US President admitted that they are having a troubled relationship with China at the moment, but praised his own trade policies and predicted that Q3 growth would have a “5” in front of it. That seems an ambitious call, given that the most optimistic of forecasters in surveys conducted by Bloomberg sees only 4.4% quarter-on-quarter growth. The median estimate is for just 2.9%.

 

Barren data calendar

It’s another lackluster day on the data front with US mortgage applications and a speech by Fed member Barkin the only items of note. Weekly EIA crude stockpiles feature on the commodities side, while late in the session the RBNZ will announce its latest interest rate decision. No change in rates is expected and the accompanying statement is not expected to differ much from the last meeting.

 

The full data calendar can be found here: https://www.marketpulse.com/economic-events/

Dollar steady as China trade data looms

The US dollar had a bit of a rollercoaster ride yesterday as weakness in the Asian session was reversed in the US session and the greenback finished almost where it started the day. PBOC’s “verbal intervention” to stabilize the yuan helped cap the dollar’s strength.

PBOC warns don’t follow the herd

In a meeting with local bankers, the PBOC urged them not to adopt a herd mentality when it comes to the local currency and not just sell for the sake of selling. PBOC officials were adamant that they have plenty of tools to stabilize the currency. USD/CNH is now trading at one-week lows as it retraces a part of the near-11% rally since end-March.

Cannot keep the ‘big’ dollar down

Oil prices higher for a third day

Oil prices rose for a second day yesterday as Iran sanctions took hold and concerns about Saudi Arabia’s output continued. The weekly EIA crude inventory data are due later today and are expected to show a drawdown of 3.37 million barrels in the week to July 30, according to the latest survey of analysts, almost completely wiping out the increase of 3.8 million barrels seen last week. Yesterday API data on stockpiles showed a hefty drawdown of six million barrels. WTI is slightly higher so far this morning, trading at 69.558

WTI Daily Chart

Source: Oanda fxTrade

China trade data on tap

China’s trade data for July this morning will be released later this morning with estimates suggesting the trade surplus narrowed to $39.3 billion from $41.5 billion. Markets could be braced for an even lower number given that July is the month when the first tariffs were imposed. Imports are seen rising 10.0% y/y in dollar terms, slower than June’s 11.2% growth, while imports are seen gaining 16.2% y/y. A strong imports number could be beneficial for the Aussie given Australia’s reliance on China as an export market. AUD/USD is currently at 0.7425 with the 55-day moving average sitting above at 0.7450

Source: MarketPulse

Today’s full data calendar can be seen at: https://www.marketpulse.com/economic-events/

Aussie moves higher as RBA holds rates at record low

AUD/USD breaks above 0.7400

The RBA held rates steady for the 21st time, a move that had been unanimously expected, keeping them at record lows as it targets sustainable growth and achieving the inflation target over time. The Bank’s growth forecast for the economy remains unchanged, seeing GDP growth averaging slightly more than 3% in 2018 and 2019 while inflation is expected to trend higher in 2019 and 2020. According to the statement, the only concern is the outlook for household consumption, suggesting that household income has only been growing slowly while debt levels are high. From a business perspective, conditions are positive and non-mining investment is increasing.

The immediate market reaction to the announcement was muted, as one might expect given that nothing new was projected, and AUD/USD attempted a quick burst higher but failed to get past the 0.74 level. In later trading the level gave way and the pair ran up to 0.7431, the highest level so far this month. The pair is currently trading at 0.7429 with the 55-day moving average at 0.7452 the next resistance point.

AUD/USD Daily Chart

Source: Oanda fxTrade

Oil prices firmer as Iran sanctions deadline looms

Crude oil prices have edged higher on the day as the Trump Administration confirmed that the first phase of new Iran sanctions will go into effect later today. Also lending support to crude prices, OPEC sources suggested that Saudi Arabia’s supply had unexpectedly fallen in July even after it had committed to increase production to bridge the gap of other members’ production shortfalls.

Prices continue to hold above the 100-day moving average on a closing basis, now at 68.36, which has held since June 19. The weekly EIA crude inventory data are due tomorrow and are expected to show a drawdown of 1.17 million barrels, according to the latest survey of analysts, compared with an increase of 3.8 million barrels last week. The equivalent API data is due later today.

Germany’s trade surplus narrows

Germany’s trade balance in June showed the surplus narrowing from EUR20.3 billion in May to EUR19.3 billion. That’s the smallest surplus in four months and no doubt a step in the right direction as far as Mr. Trump is concerned, but still a long way to go. A rise in imports by 1.2% y/y was the culprit, though industrial production data for the month, which declined 0.9% m/m suggested they were not directly used in manufacturing. EUR/USD is up marginally on the day, now at 1.1570, after touching its lowest point since June 28 yesterday

The Americas calendar is relatively barren, with the Redbook index for July and the IBD/TIPP economic optimism index for August on tap. Canada’s Ivey purchasing managers index for July is also scheduled as the nation returns from a long weekend.

The full MarketPulse economic calendar can be seen here: https://www.marketpulse.com/economic-events/

Market Insight

AUD/USD edges higher as retail sales beat estimate

Aussie edges higher as retail sales beat estimate

AUD/USD is trading marginally up on the day after Australia’s retail sales came in higher than expected in June. Sales rose 0.4% m/m, matching the expansion seen in May and higher than the +0.3% economists had predicted. With June data now available, the summary for the second quarter is complete and registered a 1.2% increase quarter-on-quarter, also higher than the 0.8% forecast, which could bode well for Q2 GDP, though this is not due to be released until September 4. AUD/USD had a knee-jerk reaction higher, but not aggressively so, reaching an intra-day high of 0.7373, as the US dollar retained its bid tone it had acquired in the NY session.

AUD/USD Hourly Chart

Source: Oanda fxTRade

Other currency pairs were equally confined to tight ranges. USD/JPY slid 0.01% as the Nikkei225 trimmed 0.57% off the index. GBP continued its weaker bias after the Bank of England’s dovish hike late yesterday, sliding to a two-week low of 1.3005 though notably still holding above the 1.3000 handle.

GBP Dives on Dovish BoE Hike

Yuan continues to reflect trade tensions

The People’s Bank of China fixed the yuan weaker by 0.6% against the US dollar today after headlines about China’s intention to retaliate against Trump’s musings to increase the tariff on the next $200 billion of Chinese goods to 25% from 10% hit the wires yesterday. In intraday trading, USD/CNH hit a new recent high of 6.8970, the highest since May 2017.

Today’s data slate included China’s Caixin Services PMI for July which showed a dip to 52.8 from 53.9 the previous month and well below forecasts of 53.7.

Monthly payrolls lottery on tap

Trading was understandably muted in Asia will all eyes on the release of July US nonfarm payrolls later today. Latest surveys suggest the US added 190,000 jobs in July, less than the 213.000 recorded in June and below the six-month moving average of 215,000. Related data is expected to show unemployment easing off to 3.9% after last month’s unexpected surge to 4.0% while average hourly earnings are seen rising 0.3% m/m, a faster pace than in June.

Dollar Awaits Jobs Report Amid Trade Uncertainty

Other data includes services PMI reading from across Europe, Eurozone retail sales and Canada’s trade data for June.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

Have a great weekend.

AUD/USD slides despite jump in trade surplus

Reduced imports the major factor

Today’s release of Australia’s trade data for June saw the trade surplus widening dramatically to A$1.87 billion from a revised A$725 million the previous month. That is the largest surplus in more than a year. A hefty decrease in imports was the reason for the jump, while exports growth slowed from 4% in May to 3%. The implication that slower imports could be a harbinger of slower economic activity going forward weighed on the Aussie dollar after the release. The initial knee jerk reaction to the headline was for a higher Aussie, rising as high as 0.7411, but once it became clear that the import side of the equation was the major influence, the pair reversed track and is now down 0.16% on the day at 0.7392.

Australia Trade Balance

Source: MarketPulse

First Bank of England rate hike in nine months?

The Bank of Japan, Reserve Bank of India and Federal Reserve meetings are now all history and it is the time of the Bank of England to be in the spotlight in what could be one of the more interesting meetings. The majority of economists expect the Bank to deliver a 25 bps hike taking the benchmark rate to 0.75%, which would be the highest since March 2009. The Bank had signaled it was inclined to hike rates in May but that idea was abandoned as data took a turn for the worse. Since then, the data per se has not been particularly impressive and inflation still appears to be on a downward trajectory. Hence there is still an outside chance that the Bank could do nothing, with would be detrimental for sterling.

BoE Super Thursday to live up to its name

Japan yields advance

After the Bank of Japan announced on Tuesday it was widening the target band for 10-year yields, sure enough the yield has climbed to its highest level since February 2017. In a speech earlier today, BOJ Deputy Governor Amamiya commented that the Bank would buy JGBs “promptly” if yields rise rapidly though does not expect yields to ratchet up. He reiterated that it is appropriate to maintain powerful monetary easing and would not loosen the grip on easing just because reaching the inflation target is delayed. However, he admitted that prices have continued to show relative weakness recently.

10-Year JGB Yield

Source: Bloomberg.com

ISM Employment Index rises

In the run up to tomorrow’s key release of US nonfarm payrolls for July, the employment component of the ISM purchasing managers index rose to 56.5 from 56.0 with 13 out of the 18 manufacturing industries surveyed reporting employment growth. This could imply the tomorrow’s number could be on the buoyant side, with the latest survey suggesting payrolls dipped to 195,000 from 213,000 in June. The unemployment rate is also expected to ease back to 3.9% after last month’s surprise jump to 4.0%. Growth in average hourly earnings is seen accelerating to +0.3% m/m from +0.2%.

You can access the full MarketPulse data calendar here: https://www.marketpulse.com/economic-events/

Aussie falters as CPI misses estimate

But inflation climbs into RBA’s target range

Despite headline CPI coming in below economists’ forecasts, it crawled into the RBA’s 2-3% target range for the first time in over a year. Headline CPI rose 2.1% y/y in Q2, up from 1.9% in Q1 but just below estimates of a 2.2% increase. Trimmed mean CPI, the RBA’s preferred measure, rose 1.9% y/y, matching analysts’ estimates, just shy of the lower target band threshold. The last time annual trimmed mean CPI was within the target range was in Q4 2015. Looks like the RBA still has a lot to do to spur inflation and, as you might expect, market pricing is implying that the cash rate will remain unchanged for a considerable period of time, with a less than 50% chance of a hike in the next 12 months.

The reaction in currency markets was a tad volatile. Initially AUD/USD surged to a two-week high of 0.7449 before reversing direction to 0.7398. The pair is currently trading at 0.7399.

AUD/USD 30-Min Chart

Source: Oanda fxTrade

China stimulus chatter fails to rally risk appetite

There is growing speculation that China might be getting ready to introduce a new set of stimulus measures. This comes as Chinese officials keep repeating that they have adequate tools to counter any developments in the economy. China’s Ministry of Industry and Information Technology said yesterday it would appropriately help handle China/US trade dispute and boost steady growth of industrial economy.

China stocks have risen almost 7% in the last three days on this speculation and are taking a slight breather today, easing back 1.3%. The yuan is still trading on the weak side, down 0.06% versus the US dollar, after touching a near-15 month low yesterday. The yuan has fallen as much as 9.3% versus the US dollar since March. No doubt this will irk US President Donald Trump, though China did counter his recent accusations yesterday with the Foreign Ministry saying China has no desire to boost its exports through competitive devaluation, adding that sound economic fundamentals are providing support to the currency.

U.S dollar boosted by higher Treasury yields

German sentiment to remain weak

German sentiment indicators feature heavily in today’s European data deck. The IFO surveys for July are expected to remain at low levels with the expectations index seen sliding to 98.1 from 98.6 in the prior month. That would be the lowest reading since December 2012. The rest of the calendar sees UK mortgage approvals, CBI trades survey and US new home sales for June.

You can see the full MarketPulse data calendar here: https://www.marketpulse.com/economic-events/

Source: MarketPulse

Live FX Market Analysis – 24 July 2018

In this week’s FX webinar, Senior Market Analyst Craig Erlam discusses the latest events that are moving financial markets – Trump attacks the Fed, Brexit plans widely criticized etc – and previews the week ahead.

Craig also gives his live analysis on EURUSD (9:22), GBPUSD (11:48), EURGBP (18:45), AUDUSD (19:34), USDCAD (21:04), GBPCAD (22:14), NZDUSD (23:31), USDJPY (24:38), GBPJPY (27:41) and EURJPY (29:09).

Aussie soars on stellar jobs data

Jobs added in June beat estimates by a mile

The Australian economy added a massive 50.9k jobs in June, well above economists’ forecasts of a 17.0k increase and the biggest monthly gain since November. Adding to the positive headline, the vast majority of the jobs were in the full-time category at 41.2K, while just 9.7k part-time jobs were added. The unemployment rate held steady at 5.4%, even with a higher participation rate of 65.7% from 65.5% in May. Whichever way you cut it, it was a very strong report.

The kneejerk reaction in markets was that the Aussie rallied across the board, gaining as much as 0.59% versus the dollar and 0.55% versus the yen. AUD/USD now stands at 0.7427. Australian equities were also given a boost, rising 0.2% on the day.

AUD/USD 4-Hour Chart

Source: Oanda fxTrade

Japan’s trade balance swings back to surplus

Japan recorded a trade surplus in June, though mostly caused by a reduction in imports. Exports rose 6.7% y/y against a forecast of +7.0% while imports rose a below-estimate 2.5% y/y. Economists were expecting a 5.3% gain. As a result, the trade surplus expanded to JPY721.4 billion from a deficit of JPY580.5 billion in May. There wasn’t much of a reaction in currency markets though USD/JPY looks set for a second day of declines after peaking at a six-month high yesterday.

Is BoE Rate Hike in Doubt After Inflation Data?

UK retail sales boosted by World Cup fever?

UK retail sales for June will be the main event for the European data calendar today with economists expecting a 3.9% y/y increase. Bear in mind the second half of the month saw the start of the FIFA World Cup so, if anything, the risk could be a surprise to the upside. The US session has a relatively bare slate, with weekly jobless claims and the Philadelphia Fed survey on tap. Fed’s Quarles is also scheduled to speak.

The full MarketPulse data calendar is here: https://www.marketpulse.com/economic-events/

Fed’s Powell advances the dollar

China GDP growth slows in Q2

China Q2 GDP growth as expected, though lower than Q1

In this morning’s China data dump, Q2 GDP growth came in as expected but industrial production disappointed. The Chinese economy grew 6.7% y/y in Q2, a slower pace than in Q1 but was in line with economists’ forecasts. Industrial production for May on the other hand failed to match expectations, coming in at +6.0% y/y compared with estimates of 6.5% and a marked slowdown from April’s 6.8% increase.

In other data releases, June retail sales matched forecasts at +9.0% y/y, rising from +8.5% in May while fixed asset investment also equaled forecasts with a 6.0% y/y increase in May.

Source: Oanda MarketPulse

Equity markets fall; currencies stable

In a knee-jerk reaction, markets appeared to focus on the fact that Q2 growth was lower and industrial production missed. Given that the full impact of the first tariff implementations will not be truly felt until Q3, the growth outlook will become more cloudy going forward. AUD/USD slid to a low of 0.7408 though rebounded to near intra-day highs at 0.7434 in late trading.

In the equity space, China shares reacted negatively to the data with the China index sliding 1.72% as the specter of trade wars continues to dog local counters.  The Australia and Singapore indices dropped 0.32% and 0.56% respectively. Japan equity markets were closed for a holiday.

AUD/USD Daily Chart

Source: Oanda fxTrade

China says tariffs to have limited impact on inflation

In a press conference post-data, a China National Bureau of Statistics spokesperson Mao Sheng Yong said trade frictions are unlikely to have a significant impact on CPI and may see a subdued rise in prices in H2. On the outlook for the economy, Mao said the Bureau expects no change in China’s slow/steady growth path though acknowledged the trade sector faces challenges in H2.

Trade, earnings, teapots and the US dollar

In an apparent rebuff at the US and Trump’s trade aggression, Chinese Premier Li said, while meeting EU officials Juncker and Tusk, that China and the EU would uphold multilateralism and free trade as they exchanged offers on a bilateral investment treaty.

Euro-zone trade surplus to widen

The major events on the rest of today’s calendar feature Euro-zone trade balance for May, where the surplus is expected to widen to EUR19.7 billion from EUR18.1 billion, according to economists’ forecasts. US data includes retail sales for Jun, seen at +0.6% m/m which is lower than May’s +0.8% but with be the fourth consecutive month of positive month-on-month growth.

You can access the full data calendar on MarketPulse at https://www.marketpulse.com/economic-events/

Oanda Market Insights Episode 23

Equities shrug off trade tariff tensions

Is the negotiating table being dusted off?

Was it a storm in teacup? Equity markets across Asia shrugged off yesterday’s post-tariff announcement weakness and are trading in the black through the Asian session. Nikkei225 rose 0.95%, Australian stocks rose 0.68% and even China shares managed gains of 2.30%, recouping all of yesterday’s losses. What has caused this shift in sentiment? Well, China’s Vice Minister of Commerce, Wang Shouwen, urged his US counterparts to resolve the current conflict with a new round of bilateral negotiations. Early murmurings from the US administration could imply that they are amenable to a resumption of talks at a high level, Bloomberg reports.

A tenuous and unstable state of affairs

Currencies lag behind

Currency pairs have halted the risk-off trend started yesterday but have yet to reverse yesterday’s moves to any degree. USD/CNH is posting its first down day in three, but so far has only managed a slide of 0.59% while AUD/USD has recovered 0.28% on the day.

AUD/USD Daily Chart

Source: Oanda fxTrade

US inflation data in the headlights

Today’s data calendar is a mixed bag, with German CPI for June kicking off the European session followed by Euro-zone industrial production for May. Inflation is seen holding steady with the increase expected to be the same as May, up 0.1% m/m and up 2.1% y/y. Factory output is expected to rebound from April’s slump, seen rising 1.2% m/m and 2.1% y/y.

US June consumer prices are seen rising 0.2% m/m and 2.9% y/y while core prices, excluding food and energy are forecast to gain 0.2% m/m and 2.9% y/y. Given that the Fed has said recently that it will not overreact if prices stray above their medium target in the near term, it would require a number significantly different from estimate to provoke a meaningful market reaction.

You can access the full data calendar on MarketPulse at https://www.marketpulse.com/economic-events/

Bank of Canada hikes rates with hawkish outlook