The Reserve Bank of New Zealand’s 50 basis-point interest rate cut from 1.5% to 1.0% was, in my opinion, the most significant economic event of an action-packed week which saw an escalation in US/ China trade tensions and Gold breakthrough 1500oz.
In a week where consensus analyst opinion made several wrong calls, New Zealand unemployment also surprised by falling to 3.9% from 4.3%, and this coupled with the rate cut, perhaps sets up the New Zealand dollar for any improvement in US/China relations and attempts to weaken the US dollar.
Other notable events included annualized Japanese 2nd quarter GDP surprising at 1.8% vs 0.5% expected, UK GDP falling to 1.2% and Chinese CPI rising to 2.8% Y/Y for July.
This week, we look forward to receiving US and UK inflation gauges, US retail sales numbers, Australian employment figures and Eurozone GDP, amongst some of the more important global economic data. The University of Michigan will also publish its consumer sentiment survey
On Tuesday, without doubt, the US consumer price index for July will be eagerly awaited with expectations for a slight rise from 1.6% to 1.7% for the annualized figure. Any significant deviation from 1.7% will see Fed watchers, political commentators and of course traders (from the high-frequency variety to those with less rapid execution techniques) react accordingly. As we know by now, weakness in the CPI number is a touch-paper for Presidential pressure on the Federal Reserve. It will be interesting to see what happens if inflation ticks upwards!
On Wednesday, UK CPI is expected to fall to 1.9% Y/Y for July from June’s 2.0%. Similarly, the UK Retail Price Index is expected to weaken to 2.8% from 2.9%. Eurozone 2Q GDP is in line to remain flat at 1.1%.
Thursday starts off with Australian employment figures which are set to report a slight increase of 14,000 new jobs created with the unemployment rate static at 5.2%. Last week the Reserve Bank kept interest rates on hold at 1.0%.
On Thursday afternoon, US Retail sales are expected to fall to 0.3% for the month of July from 0.4% previously. US Industrial production may break into positive territory at 0.1% for July. US Capacity Utilization is set to diminish slightly to 77.8 from 77.9 for the month of July.
On Friday, the University of Michigan Consumer Sentiment Survey is also likely to fall to 97.2 for August from 98.4 in July. We may be in for a positive surprise here as two weeks ago the official Consumer Confidence Index for July hit 135.7 after expectations of a print of 125.
A week to be wary and on guard. Markets are choppy and therefore caution is advised.
Good luck and good trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You Can Too.
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