The EUR Jumps ahead of Inflation and German Unemployment Numbers

Earlier in the Day:

Economic data released through the Asian session this morning was on the heavier side, with key stats including May building consents out of New Zealand, prelim May industrial production, jobs / applications ratio numbers and June core inflation figures out of Japan, with May new home sales and private sector credit figures out of Australia.

For the Kiwi Dollar, May building consents were released in the early hours, with consents surging by 7.1% to more than reverse April’s revised 3.7% slide. NZ Stats reported that:

• Auckland saw the highest number of consents since late 2002.
• Total consents for houses only rose by 6.5%.
• Year-on-year, new home consents were up 6.5% in NZ and by 18% in Auckland.

The Kiwi Dollar moved from $0.67491 to $0.67524, before rising to $0.6766 at the time of writing, a gain of 0.10%, supported by the positive numbers and improved risk sentiment through the morning.

For the Japanese Yen,

The Job / Applications ratio improved rose from 1.59 to 1.60 in May, coming in ahead of a forecasted 1.59, to reach its highest level since 1974, which is good news for the government and BoJ who have been looking for upward pressure on wage growth to drive spending and inflation.

Tokyo core consumer prices rose by 0.7% year-on-year in June, coming in ahead of a forecasted 0.6% rise, following May’s 0.5% increase.

Driving consumer prices was a 3.2% rise in the prices for fuel, light and water charges and a 2.3% rise in prices for medical care, with prices also on the rise for culture and recreation (+1.5%); education (+0.8%) and transportation and communication (0.3%), with miscellaneous also up 0.7%.

Prices for furniture and household utensils was the only drag, down 0.3%.

While this was good news on the inflation front from the BoJ, fuel price rises were the primary contributor, which may not be sustainable.

The Yen moved from ¥110.469 to ¥110.454 against the Dollar upon release of the figures, which came before the release of prelim industrial production figures later in the morning.

Month-on-month, industrial production fell by 0.2% in May, according to prelim figures, which was better than a forecasted 1.1% fall, following April’s 0.5% rise, the fall being the first since February’s 6.8% slide.

• Industries that contributed to the decrease were transport equipment, iron and steel and electrical machinery.
• Industries that saw an increase in production were electronic parts and devices, general purpose, production and business orientated machinery and information and communication electronics equipment.

For the month of June, industrial production forecasts were increased from 0.3% to 0.8% from April forecasts, with industrial production forecasted to rise by 0.8% in July

According to the Ministry of Economy, Trade and Industry, industrial production is picking up slowly, following the lower than expected fall in May and positive forecasts for June and July.

The Yen moved from ¥110.484 to ¥110.503 against the Dollar upon release of the figures, before easing to ¥110.71 at the time of writing, down 0.20% for the session.

For the Aussie Dollar,

New home sales fell by 4.4% in May, following on from April’s 4.2% slide, raising further concerns over the construction sector that has been an area of focus for the RBA of late.

The HIA noted that new home sales are now 12.8% lower than the most recent cyclical high hit back in December of last year, with the decline being attributed to tightening credit availability over the last 12-months, as banks respond to lower house prices and the Banking Royal Commission.

It was also noted the sales in Melbourne declined for the first time in the current cycle.

The Aussie Dollar moved from $0.73409 to $0.73442 upon release of the figures, which were released prior to private sector credit figures.

Private sector credit rose by 0.2% in May, coming up short of a forecasted and April 0.4% rise. While the month-on-month figures disappointed, private sector credit was up 4.8% year-on-year, coming in just shy of a forecasted 5% rise and April’s 5.1% increase.

The Aussie Dollar moved from $0.73411 to $0.74443 upon release of the figures, before rising to $0.7373 at the time of writing, up 0.29% for the session, supported by a shift in risk sentiment through the session.

In the equity markets, it was a mixed bag through the morning, the Nikkei down 0.34%, while the CSI300 and Hang Seng found much needed support, up 1.36% and 1.15% respectively at the time of writing. The ASX200 was relatively flat ahead of the close, up just 0.03%.

The gains across the Hang Seng and CSI300, coming off the back of the gains in the U.S on Thursday, will be of little comfort following sizeable losses through the month, the CSI300 having shed 10% through May to yesterday’s close, as trade war jitters gripped the markets through May and much of the 2^nd quarter.

The Day Ahead:

For the EUR, it’s a busy day ahead, with key stats scheduled for release through the day including May retail sales figures out of Germany and France, June unemployment numbers out of Germany and prelim June inflation figures out of France and the Eurozone.

While we can expect the EUR to respond to the German unemployment and Eurozone prelim inflation figures, the EU Summit will continue to be the area of focus for the markets, with trade tariffs and Brexit still on the table following the reported migration agreement.

At the time of writing, the EUR was up 0.51% to $1.1628, with news of a migration deal at the EU Summit providing support through the early hours of this morning.

For the Pound, finalized 1^st quarter GDP and current account figures are scheduled for release later this morning, with any material deviation likely to impact the Pound, particularly should there be any downward revisions, Brexit already tempering market sentiment towards BoE monetary policy, which has recaptured the spotlight following the hawkish BoE MPC vote count last week.

Outside of the data, Brexit chatter from the EU Summit will also provide direction, the question being whether the EU will unite against Britain as Brexit is discussed.

At the time of writing, the Pound was up 0.21% to $1.3105, with Brexit and GDP numbers the key drivers through the day.

Across the Pond, it’s a busy day on the data front, with key stats through the day including the FED’s preferred Core PCE Price Index figures for May, along with personal spending, ahead of June’s Chicago PMI and finalized consumer expectation numbers.

While focus will be on personal spending and inflation numbers that could influence sentiment towards monetary policy, rising concerns of a peaking in the U.S economy through the 2^nd quarter that could temper expectations of a more aggressive FED, irrespective of a pickup in inflation, with the Dollar likely to be more sensitive to spending and PMI numbers on the day.

Outside of the data, the Oval Office will have its influence through the day, the markets yet free from the prospects of a trade war, with both China and the U.S currently scheduled to introduce tariffs late next week.

At the time of writing, the Dollar Spot Index was down 0.37% to $94.956, with the Oval Office and today’s stats in focus through the day.

For the Loonie, after a particularly quiet week, key stats through the day include April GDP and May RMPI figures, with the Bank of Canada’s Business Outlook Survey also scheduled for release.

We will expect the stats to have a material influence in the early afternoon, with the BoC’s business outlook survey also needing consideration after BoC Governor Poloz’s Q&A earlier in the week that left a near-term rate hike on the table in spite of the lack of progress on NAFTA talks and introduction of trade tariffs on aluminium and steel.

At the time of writing, the Loonie was up 0.08% to C$1.3239, with stats the key driver through the day, which could be overshadowed by trade war chatter in event of an escalation ahead of the weekend.