China Data Disappoints as the Trump Trade War Draws in New Targets

Earlier in the Day:

It was a particularly busy day on the economic calendar through the Asian session this morning.

In the early part of the session, Japan industrial production, inflation, and retail sales figures provided direction.

The main event, however, was the impact of China’s private sector PMI numbers on market risk sentiment, which came ahead of Australia’s private sector credit figures.

For the Japanese Yen,

Tokyo core consumer prices rose by 1.1% in May, which was softer than a forecasted 1.2% rise and a 1.3% increase in April.

According to figures released by the Ministry of Internal Affairs and Communication,

• Rising fuel prices (+4.7%), furniture and household utensil prices (+3.7%) and culture and recreation (+1.4%) supported.
• There were also increases in prices for clothing and footwear (+1%), medical care (+1%), education (+0.7%), and housing (+0.6%).
• Prices for transportation and communication fell by 0.7%.
• While prices for goods increased by 1.7%, year-on-year, prices for services rose by just 0.7% in May.

The Japanese Yen moved from ¥109.566 to ¥109.46 upon release of the figures that preceded production and retail sales data.

Industrial production increased by 0.6% in April, according to prelim figures. The Increase reversed a 0.6% fall in March. Forecasts were for a 0.2% increase. According to prelim figures released by the Ministry of Economy, Trade, and Industry,

• Industries that contributed to the increase were: Motor vehicles, production machinery and transport equipment (excl. motor vehicles).
• Industries that contributed to a decrease were: General-purpose and business orientated machinery, electronic parts and devices, and inorganic and organic chemicals.

Retail sales rose by 0.5% in April, year-on-year, falling short of a forecasted and March 1% increase.

The Japanese Yen moved from ¥109.418 to ¥109.351 upon releases of the figures. At the time of writing, the Japanese Yen was up by 0.26% to ¥109.34 against the U.S Dollar.

Out of China,

In May, the NBS manufacturing PMI slipped from 50.10 to 49.4, which was worse than a forecasted fall to 49.9. The NSB non-manufacturing sector PMI held steady at 54.3, which was in line with forecasts.

Weighing on market risk sentiment was the contraction in the manufacturing sector. The contraction was attributed to a fall in new export orders and a slower pace of output. Import orders also contracted at a faster pace, pointing to softer domestic demand.

The Aussie Dollar moved from $0.69021 to $0.69092 upon release of the figures that preceded Australia private credit numbers.

For the Aussie Dollar,

Private sector credit increased by 0.2% in April, month-on-month, following a 0.3% rise in March. Forecasts were for a 0.3% rise.

According to figures released by RBA,

• Housing credit rose by 0.3% in April, following a 0.3% rise in March, month-on-month.
• Personal credit fell by 0.3%, following a 0.3% fall in March.
• Business credit stagnated, following a 0.5% increase in March.
• Year-on-year private sector credit increased by 3.7%, following a 5% rise in March.
• A 2.8% fall in personal credit weighed on the headline number.

The Aussie Dollar moved from $0.69121 to $0.69137 upon release of the figures. At the time of writing, the Aussie Dollar was up 0.03% to $0.6914.

Elsewhere,

At the time of writing, the Kiwi Dollar was up down by 0.02% to $0.6510.

The Day Ahead:

For the EUR

Economic data due out of the Eurozone is on the heavier side. German inflation and retail sales figures are due out along with Italy’s May prelim inflation numbers.

While any softer than expected inflation figures will be negative for the EUR, the focus will likely be on the retail sales figures. Retail sales are forecasted to be EUR negative for April.

Outside of the numbers, trade war chatter will influence through the day. While Trump has moved his attention to Mexico, it may not be long before the spotlight falls on the EU…

At the time of writing, the EUR was up 0.05% to $1.1135.

For the Pound

A quiet week on the economic calendar comes to a close, with no material stats due out on the day.

While there’s been very little major news or progress on Brexit, a shift in the political landscape continues to pin back the Pound. The prospects of a no-deal Brexit have significantly increased following the EU election results and Theresa May’s resignation.

While the race for the Tory Party leadership continues, the real question will be whether there will be a General Election and whether the Tories can hold on. The polls suggest an end to mainstream politics, with the Brexit Party and Liberal Democrats expected to fight for the leadership.

For now, political uncertainty will continue to be negative for the Pound.

At the time of writing, the Pound was up 0.08% to $1.2636.

Across the Pond

Economic data is on the heavier side later this afternoon.

The FED’s preferred Core PCE Price Index figures are due out along with personal spending, Chicago PMI and finalized consumer expectation numbers.

Market focus will likely be on the inflation and personal spending figures on the day.

Concerns over the global economic outlook will increase sensitivity to the personal spending and Chicago PMI numbers.

Barring a material deviation from prelim numbers, the markets will likely brush aside the finalized consumer sentiment numbers.

Outside of the stats, Trump and the administration will continue to influence market risk appetite through the day.

At the time of writing, the Dollar Spot Index was down 0.03% to 98.110.

For the Loonie

It’s another big day for the Loonie. 1^st quarter GDP and April RMPI figures are due out this afternoon.

While the focus will be on the March, month-on-month GDP number, we can expect the Loonie to be sensitive to any soft figures on the day. Forecasts are Loonie positive.

Outside of the stats, any further downside in crude oil prices would pressure the Loonie further. This morning’s manufacturing PMI numbers out of China won’t have helped…

The Loonie was down 0.21% at C$1.3529, against the U.S Dollar, at the time of writing, with a slide in crude oil prices weighing.