The US$ made some decent gains on Friday , with the DXY reaching its highest level in two weeks, after the encouraging retail sales data for May were released ahead of this week’s FOMC meeting, easing fears that the US economy is slowing sharply and putting into doubt the possibility of a Fed rate cut on Wednesday. although the Fed is still seen cutting rates by July, and perhaps one more time before year-end, but next week’s meeting will be eyed closely for confirmation of that outlook. The dollar finished on its highs against all the major counterparts and looks set for further gains early in the coming week. Elsewhere, the metals were volatile, with both Gold and Silver spiking higher, before sharply reversing their gains following the US data, to actually finish mildly lower on the day. Oil and the US stock indices both traded sideways, with all the focus being centered on the FX markets, with both oil and stocks looking a little put-off by China growth concerns following the soft Chanese data, seen earlier on Friday.
The retail sales rose 0.5% in May, while the April figure was revised up strongly, to +0.3% instead of dropping -0.2%, as previously reported. Also helping the dollar on Friday, the May Industrial Production came in at +0.4% vs +0.2% expected, while the Manufacturing production was at +0.2% vs +0.1% expected.
Looking ahead, the whole week is likely to be spent in either waiting for, and then digesting, the outcome of the FOMC Meeting which is due late on Wednesday (early Thursday for Asia). Following on from his speech last week, when Fed Chair, Powell opened the door to interest-rate cuts, this is definitely a live meeting and the bond market is pricing in the likelihood of a cut as the Fed tries to brace the economy for slowing global growth, lower corporate spending and a weaker consumer outlook. We shall see, although Friday’s Retail sales may be sowing some doubts as to a June cut. If the Fed does not cut, the dollar will fly I suspect, with the Euro, Aud and Nzd likely to be hit rather hard.
Other events this week will be put in the shade by the Fed, but points of note will include the Australian House Price Index, RBA Minutes and ZEW Economic Sentiment Survey (Tue), UK CPI (Wed), BOJ/BOE Interest Rate Decisions (Thur), EU/US Flash PMIs (Fri). Have a good week.
Economic data highlights will include:
Mon: UK Inflation Report Hearing, New York State Empire Mfg Index
Tue: NZ Q2 WBC Consumer Survey, China House Price Index, Australian House Price Index, RBA Minutes, German PPI, EU Trade Balance, CPI, German/EU ZEW Economic Sentiment Survey, US Building Permits, Housing Starts, API Weekly Crude Oil Stock Inventory
Wed: NZ Q1 Current Account, EU Current Account, Construction Output, UK CPI, PPI, RPI, FOMC Meeting/Interest Rate Decision/Press Conference
Thur: RBA Bulletin, Governor Lowe Speech, BOJ Interest Rate Decision, Statement/Press Conference, UK Retail Sales, BOE Meeting/Statement/Minutes/Vote Count/APP Facility, EU Consumer Confidence, US Q1 Current Account, Jobless Claims, Philadelphia Fed Mfg Survey
Fri: Japan CPI, EU/US Flash PMIs, UK Public Sector Net Borrowing Requirements, BOE Quarterly Bulletin, CBI Distributive Trade Survey –Orders, US Existing Home Sales,
Market moves, in brief:
FX: DXY 97.45 (+0.43%)
Bonds: US10Y; 2.090% (-0.71%), German 10Y; -0.257% (-6.17%), UK 10Y; 0.846% (+1.24%), Australian 10Y; 1.382% (-2.26%), NZ 10Y; 1.650% (-2.37 %), China 10Y; 3.284% (-0.27%)
Stock Indices: DJI; -0.07%, S+P; -0.16%, NASDAQ; -0.52%, EUStoxx50; -0.33%, FTSE100; -0.31%, Shanghai Composite; -0.99%,
Metals: Gold $1342 oz (0.00%), Silver $14.87 oz (-0.22%), Copper $2.6295 lb (-1.02%), Iron Ore $104.35 per tonne (NYMEX) (-1.85%),
Oil: WTI $ 52.48 pb (+0.61%)
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