- Weak regional indicators from the US, the NFP report pivotal
- Inflation a relief for the euro
- Asia desperate for a positive G20 outcome
US – the next NFP critical for the Fed’s July meeting
This week’s series of US data was moving from weakness to weakness. All the regional Fed indicators were moving sharply down: Dallas, Richmond and Kansas. Consumer confidence deteriorated, data on home sales and durable orders wasn’t particularly strong either and Q1 GDP was revised down (although just marginally) and the week has ended with a contractionary reading of Chicago PMI (49.7 pts., 15 points lower than in February!!!). In that context the next NFP will be critical – if the employment figure disappoints again, the cut will be the only option.
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US business activity took a nose-dive in 2019 – something that we have been pointing at in macroeconomic updates for a while. Source: Macrobond, XTB Research
Europe – inflation a relief for the euro
Flash June inflation is 1.2% y/y – in line with expectations and unchanged from May. That’s hardly a game-changer but a kind of relief for the euro. In Germany the HICP (which is used for calculative EMU-wide inflation) was lower but domestic CPI was higher and both Italy and France had their inflations slightly above expectations (with just Spain below the consensus). A further drop in inflation could speed up monetary easing from the ECB which would likely be bad for the euro and could boost indices.
EURUSD liked the inflation data – the pair has now used the previous resistance as a line of support. Source: xStation5
Asia – Trade relief critical for the region
This week wasn’t particularly heavy in Asia in term of the reports. Today’s output data from Japan has been much better than expected in monthly terms but in y/y terms output contracted again (-1.8%). It was partly because of high base from the last year but we can also see that the trend remains unfavorable. The whole region – China, Japan, North Korea, Australia – needs a fresh air in trade which is why this G20 meeting between Trump and Xi is so important.
The output data in May in Japan was above expectations but it still contracted in annual terms. Source: xStation5
