With the weak US inflationary figures on Friday, the market will be watching if the monthly figures will print the same result: that inflation pressures in the US are falling making the USD offered.
MAJOR HEADLINES – PREVIOUS SESSION
UK M4 Money Supply MoM/YoY (JUN) out at 0.7%/12.9%, while 0.8%/13.0% prior.
UK M4 Sterling (JUN) out at 6.7B, while 5.1B prior.
UK Net Consumer Credit (JUN) out at 0.9B, while 0.8B expected, 0.8B prior.
UK Mortgage Approvals (JUN) out at 114K, while 110K expected, 114K prior.
CA Industrial Product Price MoM (JUN) out at -1.3%, while -0.6% expected, -0.5% prior.
CA Raw Materials Price Index MoM (JUN) out at 0.6%, while -0.3% expected, -0.2% prior.
FR Unemployment rate (JUN) out at 8.0%, while 8.1% expected, 8.1% prior.
FR Unemployment Change (JUN) out at -34K, while -19K expected, -21K prior.
JN Jobless Rate (JUN) out at 3.7%, while 3.8% expected, 3.8% prior.
JN Nomura/JMMA Manufacturing PMI (JUL) out at 49.0, while 51.0 expected, 50.4 prior.
JN Overall Household Spending YoY (JUN) out at 0.1%, while 0.7% expected, 0.4% prior.
JN Labor Cash Earnings YoY (JUN) out at -1.1%, while 0.1% expected, -0.6% prior.
AU Building Approvals MoM/YoY (JUN) out at 7.5%/0.9%, while -5.6%/-7.2% prior.
AU NAB Business Conditions Actual/Outlook (2Q) out at 20/30, while 17/22 prior.
AU Private Sector Credit MoM/YoY (JUN) out at 1.8%/15.4%, while 1.2%/14.6% prior.
NZ NBNZ Business Confidence (JUL) out at -38.5, while -37.2 prior.
JN Annualized Housing Starts (JUN) out at 1.354M, while 1.251 expected, 1.155 prior.
JN Construction Orders YoY (JUN) out at 26.4%, while 1.6% expected, 48.3% prior.
GE Retail Sales MoM/YoY (JUN) out at 0.7%/-0.8%, while 1.2%/-1.6% expected, -1.8%/-3.7% prior.
THEMES TO WATCH – UPCOMING SESSION
As we expected, the USD weakened yesterday on back of the weak inflationary figures on Friday, and the PCE Core monthly and yearly figures today, released at 12:30 GMT, will be decisive and give direction for the USD. Expectations are currently MoM/YoY at 0.2%/1.9% vs. 0.1%/1.9% prior. We expect a possibility that the figures could come out a tad lower than expected on back of the weak figures on Friday. which will give scope for a test of 1.3780 in EURUSD. The market will also tune in for the development in the personal spending and personal income figures, with intensified focus on the spending (expected at 0.1% vs. 0.5% prior). Of course the PCE Deflator YoY will also be noted, but we expect this to be in line with expectations at 2.3%.
At the same time as the US figures are released, the Canadian monthly GDP figures for May are released, and we see a potential upside surprise in the figures, sending the CAD higher. With regards to this, we have entered a short position in USDCAD from 1.0635, targeting 1.0560 in the shorter term. We have placed an initial stop at 1.0669 bid and will trim the stop as we get in the money. Another itme supporting this trade is the fact that oil has been upgraded by several houses which will yield extra strength to the CAD.