Olivia

China Q2 GDP – 15/07 – this week’s China Q2 GDP numbers are unlikely to tell a positive story. With retail sales and industrial production affected by the various covid lockdowns that were imposed across the country and Shanghai locked down for most of April it’s going to be a very tall order for the Chinese economy get anywhere close to its annual GDP target for this year of 5.5%. In Q1 the economy was said to have seen an expansion of 4.8%, which comes across as extremely generous. Retail sales plunged in April and May and are likely to have remained weak in June, while industrial production has also been disappointing. The various lockdowns have also shutdown Chinese ports as well businesses. One particularly significant statistic during April was that not a single car was sold in Shanghai through the entire month. Against such a backdrop its hard to make the case for any sort of significant economic expansion during Q2 at all. Annualised GDP is expected to come in at 1% and decline -2.3% Q/Q.   China retail sales (Jun) – 15/07 – it’s set to be a disappointing quarter for Chinese retail sales. Having declined by -11.1%… Read More »The week ahead: China Q2 GDP, US CPI, US bank earnings

The summer calm will have to wait a little longer as the coming week is filled with crucial events. Canada and New Zealand are geared to raise interest rates, although their currencies are ultimately at the mercy of global recession risks. In China, it’s a close call whether the economy contracted in Q2. Most importantly, US inflation might finally be losing its punch.

As written Sunday, CAD/JPY target at 103.24 traded to 103.35 lows from 106.00's and 300 pips. CAD/JPY is the middle currency pair that trades between AUD/JPY and NZD/JPY Vs EUR/JPY and GBP/JPY. CAD/JPY is the preferred currency to trade along with EUR/JPY and GBP/JPY. For next week, CAD/JPY sits oversold , EUR/JPY doesn't have a clue to direction at 137.00's, GBP/JPY do or die at 162.06. AUD/JPY short next week at 93.00's and short NZD/JPY at 84.00's. USD/JPY has been a dead issue for 2 weeks and stuck from 136.00's to 134.00's. Nothing more expected and the problem is seen from DXY. DXY achieved severe overbought status this week at 106.00's and decided to travel 100 pips higher to more overbought at 107.00's. DXY higher is traveling 100 pips higher into more massive overbought week to week and caught inside 200 pip ranges. Higher DXY into overbought sends EUR/USD lower to trade massive oversold. DXY and EUR/USD as FX leaders remains key drivers to overall markets as the distance between both are separated to extremes. Both must meet in the middle to normalize markets then decide proper normalized levels. All markets as FX prices drive and dictate all markets. SPX… Read More »FX next week: EUR/USD, ECU units and parity

We’ve experienced some interesting market moves since the beginning of this year. Most significantly, at least for those who have pensions and investments, has been the savage decline in equities, particularly those in the tech sector. After hitting its all-time high in November last year, the US NASDAQ 100 lost 34% of its value over the following seven months. It had a modest rally, but the index has since given back most of these gains and remains within spitting distance of its mid-June low. The last time we experienced such market carnage was back in early 2020 when the NASDAQ 100 fell 31% on the pandemic panic. But it did this in the space of one month, whereas the current sell-off has lasted considerably longer. This latest decline came as investors reacted to a sudden hawkish turn from central bankers who finally reacted to headline inflation numbers as they hit multi-decade highs. Led by the US Federal Reserve, developed world central banks had previously insisted that the post-pandemic pick-up in inflation was transitory in nature, suggesting there was no need for monetary tightening. The thinking went that the global economy would soon return to normality as supply disruptions were eliminated… Read More »Recession fears are everywhere

We’ve experienced some interesting market moves since the beginning of this year. Most significantly, at least for those who have pensions and investments, has been the savage decline in equities, particularly those in the tech sector. After hitting its all-time high in November last year, the US NASDAQ 100 lost 34% of its value over the following seven months. It had a modest rally, but the index has since given back most of these gains and remains within spitting distance of its mid-June low. The last time we experienced such market carnage was back in early 2020 when the NASDAQ 100 fell 31% on the pandemic panic. But it did this in the space of one month, whereas the current sell-off has lasted considerably longer. This latest decline came as investors reacted to a sudden hawkish turn from central bankers who finally reacted to headline inflation numbers as they hit multi-decade highs. Led by the US Federal Reserve, developed world central banks had previously insisted that the post-pandemic pick-up in inflation was transitory in nature, suggesting there was no need for monetary tightening. The thinking went that the global economy would soon return to normality as supply disruptions were eliminated… Read More »Recession fears are everywhere

Summary United States: Payroll Growth Sizzles in June Despite Recession Fears June brought a strong 372K payroll gain, beating the consensus and calming recession concerns. The unemployment rate held at 3.6%. Total job openings remain highly elevated but fell by 427K to 11.3 million in May. The ISM services index edged down to 55.3 during June, marking a two-year low. The trade gap narrowed to $85.5 billion in May as exports rose at a slightly faster pace than imports. Next week: Consumer Price Index (Wed.), Retail Sales (Fri.), Industrial Production (Fri.) International: Some Cracks in Canada's Economic Outlook The past week saw some underwhelming news from Canada. June employment unexpectedly fell by 43,200, and while the Bank of Canada's Business Outlook Survey reported solid sales over the past three months, it also signaled a slowing in sales going forward. We expect Canadian GDP growth of 3.9% in 2022, but growth of just 1.5% in 2023. In Scandinavia, Sweden's GDP rose in May, while Norway's mainland GDP fell. Finally, the Reserve Bank of Australia raised its policy rate 50 bps at this week's monetary policy meeting, as expected. Next week: U.K. GDP (Wed.), Bank of Canada Policy Announcement (Wed.), China GDP… Read More »Weekly economic and financial commentary

EUR/USD – 1.0169 Euro's selloff below May's 5-year low of 1.0350 to 1.0163 Wed and yesterday's break there to a fresh 20-year bottom of 1.0145 in New York on continued safe-haven usd buying suggests price would head to 1.0100/05, loss of momentum may keep price above projected 1.0075/80 support today. On the upside, only a daily close above 1.0236 confirms a temporary low is in place and risks stronger retracement to 1.0271/76. Data to be released on Friday: Japan all household spending, current account, trade balance, eco watchers current, eco watchers outlook. France current account, trade balance, imports, exports, Italy industrial output. US non-farm payrolls, private payrolls, unemployment rate, average weekly earnings, wholesale inventories, wholesale sales, Canada employment change and unemployment rate.

The US labour market seems to be letting off steam. Indicators ahead of official employment statistics point to a cooling of the market. New weekly jobless claims data showed an increase to 235k against expectations of 230k and 231k a week earlier. The upward trend has been in place for the last three months after touching lows of 168k.  The open job vacancy figures for May are mainly in the same way. Their decline in the last six months from the historic highs should not be construed as a deterioration in the economy. However, the current volume of applications and a slight decrease in open job vacancies are more likely to indicate a recovery from workers who have started to change jobs more actively. Perhaps they needed time to refresh their skills. If we are right, Friday’s June data release could prove strong. Employment growth is expected to slow from 390K to 275k and wage growth to 5% y/y. Significantly higher data would indicate a labour market rotation. In this case, the 20-year highs for the Dollar look justified, and there remains further upside potential on expectations of further aggressive tightening from the Fed.  If the rate of new job… Read More »US labour market: Rotation or cooling off?

EUR/USD tumbled to a fresh two-decade low and was pressured by a combination of factors. The energy crisis in Europe continued furling recession fears and weighed on the shared currency. The USD prolonged its recent bullish run and further contributed to the pair’s sharp downfall. The EUR/USD pair witnessed heavy selling for the second successive day on Wednesday, marking the fifth day of a downfall in the previous seven and plunged to a fresh decade low. Recession fears remain the central theme in the markets, which, along with the energy crisis in Europe, cast a shadow over the region's economic outlook. This, in turn, continued undermining the shared currency, further pressured by softer domestic data. The Eurozone Retail Sales posted a modest 0.2% increase in May and German Factory Orders fell 3.1% during the reported month. Apart from this, strong follow-through US dollar buying exerted additional downward pressure on the major.  Against the backdrop of the worsening global economic outlook, aggressive Fed rate hike expectations assisted the safe-haven USD in prolonging its recent bullish run. The prospects for a faster policy tightening by the Fed were reaffirmed by the unsurprisingly hawkish minutes of the June 14-15 FOMC meeting. Policymakers emphasized the… Read More »EUR/USD Forecast: Attempted recovery from 20-year low could be seen as a selling opportunity

Summary The message from the June ISM report is that service activity is cooling rather than buckling. Business activity rose during the month and while new orders declined, the index remains above the 50-threshold designating expansion from contraction. Service-providers continue to contend with an array of supply issues, which are limiting capacity and keeping the heat turned up on prices. Source: Institute for Supply Management and Wells Fargo Economics Read the full report