Some of last week’s key US data significantly underperformed and added weight to the calls of those who have for some time been pushing for the Federal Open Market Committee to cut interest rates.
Tuesday’s Consumer Confidence number came in a full 9.5 points lower than expectations at 121.5 vs 131, resulting in the 10-year US treasury note briefly trading below 2.0%. 1st quarter GDP was revised downwards to 3.1% Y/Y and Core Personal Consumption for May posted an unremarkable 1.6%. Irrespective of whether this week’s two US employment reports show strength, I expect the US FOMC to cut rates by 25 basis points in July.
Equity markets were generally buoyant throughout the week, Gold eased back from its highs to trade around 1410 oz and the Canadian dollar, despite a slightly weaker than expected GDP reading of 1.5% Y/Y for April, continued its rally of late with USDCAD closing the week out at 1.3092.
The G20 meeting in Osaka, Japan passed with conviviality between the US President and Russian President, Chinese President, Saudi Arabian Crown Prince and Supreme Leader of North Korea. Outgoing UK Prime Minster May had some strong words for Russian President Putin over certain covert Russian activities. Hopes of renewed US/ China trade talks may bolster markets on Monday morning.
Aside from the two important US employment reports (ADP employment numbers on Wednesday are pointing to a print of +140,000 and the Bureau of Labour Statistics’ Non- Farm Payrolls on Friday is expected to print 155,000 new jobs created) the Institute of Supply Management releases its Manufacturing Survey for June on Monday (exp 51 vs last month’s 52.1) and Non-Manufacturing/ Services Survey for June on Wednesday (exp 56 vs vs last month’s 56.9). US markets are closed on Thursday for Independence Day.
The Reserve Bank of Australia is in the limelight on Tuesday with consensus opinion that the RBA may cut Australian Interest rates to 1%. Guidance as to how the bank is thinking is expected shortly after the meeting when Governor Philip Lowe speaks in Darwin. The Australian Labour market is one on which the RBA places much scrutiny. Inflation and house prices are also of concern.
Australian Retail Sales will be released on Thursday with expectations of a bounce back to a positive reading of 0.2% M/M for May from April’s -0.1%. The Australian dollar was trading above 0.7020 as of last Friday’s close.
Canadian employment numbers will be released on Friday with a small increase of 5,000 jobs expected for June. The unemployment rate is expected to rise marginally to 5.5% from 5.4%.
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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