Forex Major Currencies Outlook (July 5 – July 9)

USD 

Consumer confidence measured by The Conference Board rose to 127 in June from upwardly revised 120 in May. Consumers are positively assessing job market conditions and are expecting incomes to rise over the next six months. With many states being fully re-opened consumer confidence is booming and hurrying to catch the pre-pandemic levels. 

ISM manufacturing PMI in June came in at 60.6, down from 61.2 in May. This is the fifth consecutive month that reading is above the 60-level indicating a very strong manufacturing sector. Production index rose above the 60 level and new orders keep at immensely strong 66, indicating increased demand for manufacturing products, but the sector has troubles keeping up with the demand. Employment index surprised unpleasantly by coming in below 50 level, albeit at 49.9 indicating struggle for employers to find workers which in turn could lead to employers offering higher wages in order to entice workers. Additionally, prices paid index rose to 92.1, meaning that 92.1% of surveyed saw input prices increase. 

NFP headline number for June came in at 850k, stronger than 700k as expected and up from 583k in May. Surprisingly the unemployment rate ticked higher to 5.9% from 5.8 the previous month while participation rate stayed the same at 61.6%. An encouraging sign is that underemployment rate fell again, this time it is single-digit 9.8% from 10.2% in May. This is the first time the rate is below 10% since March of 2020. Wages continued to increase but at the slower pace than expected. They came in at 0.3% m/m and 3.6% y/y. Additionally, wage growth in May was revised down. 

This week we will have ISM Non-Manufacturing PMI as well as minutes from the last FOMC meeting. 

Important news for USD: 

Tuesday:

• ISM Non-Manufacturing PMI

Wednesday:

• FOMC Minutes 

EUR 

Economic sentiment data for the Eurozone in June continued to improve and pass pre-pandemic levels. Economic sentiment came in at 117.9 and marked highest reading since 2000, indicating overwhelming optimism regarding post-pandemic recovery. Final consumer confidence came in at -3.3 as preliminary reported confirming the best level since November 2018. Preliminary inflation data for June came in as expected with headline number at 1.9% y/y and core number at 0.9% y/y. Inflation eased from the 2% and 1% the previous month, however this seems to be just a small bump rather than reversal of rising trend. German VAT will come into full force the following month and it will push prices higher. 

ECB executive board member Fabio Panetta stated that risk of second-round inflation effects remains limited and added that there needs to be confidence that monetary and fiscal policy support will not be withdrawn prematurely. ECB policy maker Holzmann stated that bank will have a better view of PEPP in September indicating that we could see some changes at their meeting in September. 

GBP 

Final Q1 GDP reading came in at -1.6% q/q vs -1.5% q/q as preliminary reported. Private consumption was weaker than preliminarily reported while business investment was stronger. Additionally, net exports were a positive contributor to GDP. 

Newly appointed UK health secretary Javid, former Chancellor of Exchequer, stated that currently there are no reasons to prolong full reopening past July 19. By that time millions more people will receive a vaccine. 

This week we will have GDP data for the month of May. 

Important news for GBP: 

Friday:

• GDP 

AUD 

Official PMI data from China for the month of June came in weaker compared to previous month, but the drop was smaller than expected. Manufacturing was at 50.9 vs 50.8 as expected, services were at 53.5 vs 52.9 as expected which dragged down composite to 52.9 from 54.2 in May. Covid related issues led to a drop in factory output and new export orders. In combination with lowering of input prices by Chinese government intervention to prevent commodity price speculation it led to a small drop in manufacturing reading. Covid outbreaks within China also had detrimental effect on the services reading as logistics and hospitality were hit hard. Caixin manufacturing PMI came in at 51.3, down from 52 in May but still in expansion. The reading has been in expansion since April of 2020, that is 14 consecutive months. The report shows easing price pressures, rising employment in the sector as well as stable domestic and overseas demand. Industrial profits in China for May came in at an impressive 36.4% y/y. 

This week we will have RBA meeting. No changes in the rate are expected but we could see the bank abandoning November 2024 as 3y bond due to a strong employment report in May. We will have inflation data from China. 

Important news for AUD: 

Tuesday:

• RBA Interest Rate Decision

Friday:

• CPI (China) 

NZD 

RBNZ statement from their latest meeting showed that bank is satisfied with the way the economic recovery is going on. They see the economy now returning to pre-pandemic levels. Bank members noted that the recovery is still vulnerable and that continued monetary and fiscal policy is needed. Their message on normalizing policy was rather convoluted and not revealing much, stating that “As long as COVID-19 is contained and the global and economic recovery is sustained, eventually economic policy settings can be expected to normalize over the medium term.” ANZ survey showed business confidence in June dropping to -0.6 from 1.8 in May with almost 85% of retailers planning to raise their prices in the next three months, thus putting immense pressure on prices. 

CAD 

GDP in April came in at -0.3% m/m vs -0.8% m/m as expected. A drop that was much smaller than expected during the harsh lockdown. Preliminary GDP for May is expected to also come at -0.3% m/m. Economic activity is now at about 1% lower than it was in February of 2020 when the pandemic broke out. 

This week we will have employment data. 

Important news for CAD: 

Friday:

• Employment Change
• Unemployment Rate 

JPY 

The unemployment rate in May continued to climb coming in at 3%, up from 2.8% in April. Although the, trend is negative, almost every country in the world would love to have such low unemployment numbers. Consumption, on the other hand, is not something for envy. In May it came in at -0.4% m/m and 8.2% y/y. This is the second consecutive month of drops and it is highly influenced by state of emergency situation that was imposed across Japan in that time period. 

CHF 

SNB total sight deposits for the week ending June 25 came in at CHF712.5bn vs CHF712.2bn the previous week. With EURCHF sitting comfortably above the 1.095 level SNB is staying away from intervening in the markets. Headline inflation in June remained at 0.6% y/y as in May while core inflation ticket up to 0.3% y/y from 0.2% y/y the previous month. With such low-price pressures, SNB can hold back and wait to see what ECB will do before deciding to act.

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_{Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that our accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.}