Time is Running Out, as 6th July Tariffs Loom Large
Earlier in the Day:
Economic data released through the Asian session this morning included May retail sales and trade figures out of Australia and June Caixin Services PMI figures out of China.
For the Aussie Dollar,
Retail sales rose by 0.4% in May, which was better than a forecasted 0.3% increase, following April’s upwardly revised 0.5% increase.
The ABS reported that the May rise in sales was attributed to a 3.9% jump in department store sales, with sales in clothing, footwear and personal accessories also seeing a solid rise, up 2.2%.
While food sales increased by 0.3% and household goods by 0.1%, sales at cafes, restaurants and takeaways dragged, down 1%, with other retailing down 0.1%.
Australia’s trade surplus widened from a downwardly revised A$0.472bn to A$0.827bn in May, falling short of a forecasted widening to A$1.210bn. The ABS reported that:
- Exports rose by 4% to A$35.562bn, while imports rose by A$3% to $34.735bn, leading to the widening in the trade surplus, on a seasonally adjusted basis.
- The increase in exports came from a 4% (A$938m) rise in the export of non-rural goods and a 22% (A$343m) rise in the export of non-monetary gold, which were partially offset by minor declines in the export of rural goods (-A$4m).
- The increase in imports was attributed to a 6% (A$471m) rise in the import of consumption goods, a 4% (A$459m) rise in the import of intermediate and other merchandise goods and a 23% (A$142m) rise in the import of non-monetary gold. Imports of capital goods slipped by 2% (A$98m).
- For services, the exports of services rose by A$75m (1%), while the import of services rose by just A$23m in May.
The Aussie Dollar moved from $0.74156 to $0.74148 upon release of the figures, before rising to $0.7405 at the time of writing, up 0.26% for the session, supported by the positive stats out of both Australia and China through the morning.
Out of China, the Caixin services PMI rose from 52.9 to 53.9 in June, to come in well ahead of a forecasted decline to 52.7.
- Following the uptick in service sector activity in June, the Caixin composite PMI showed that business activity continued to expand at the end of the 2nd quarter, with the composite output index rising from 52.3 to 53.0 in June, which was the steepest rate of growth since February.
- The rise in the output index was support by stronger growth across both the manufacturing and services sectors, though the services sector saw activity expand at the quickest pace in 4-months, with growth in the manufacturing sector also improving to a 4-month record, while at a more moderate pace and weaker pace than in the services sector.
- In spite of the uptick, the rate of increases was weaker than at the start of the year.
- New business continued to rise across the private sector, though new order growth was modest across the manufacturing sector, which was in contrast to the services sector that reported a stronger pace of growth.
- Optimism across the private sector slipped, with service providers having stronger optimism than goods producers.
Elsewhere, the Japanese Yen was up 0.12% to ¥110.46 against the Dollar at the time of writing, while the Kiwi Dollar was up 0.21% to $0.6770, the Kiwi Dollar finding support from relatively upbeat stats out of China, offsetting Tuesday’s reported 5% fall in New Zealand’s GlobalDairy Trade Index.
In the equity markets, it was another day of losses for the Nikkei and Hang Seng, the pair down 0.45% and 1.07% respectively at the time of writing, while the CSI300 and ASX200 were down 0.85% and 0.39% respectively, the pair looking to reverse Tuesday’s gains, in spite of positive stats out of both China and Australia through the morning, the slide across the equity markets continuing to provide support for the Yen.
Friday’s trade tariffs are looming large and the markets are feeling the harsh reality of a trade war escalation, neither side willing to back down, with other economies being dragged in.
The Day Ahead:
For the EUR, economic data scheduled for release through the day includes service sector PMI numbers out of the Eurozone and member states. Focus will be on Spain and Italy’s numbers, barring material deviation from prelim numbers out of France and Germany, a downward revision to France’s manufacturing PMI expected to leave the Eurozone’s Markit Composite on a weaker footing at the end of the 2nd quarter.
Geo-political risk stemming from the Italian general election, Merkel’s weaker position in Germany and the risk of a trade tariff war have certainly contributed to the weaker growth in the Eurozone, the slower growth not just down to Trump, with the softer first quarter growth having hit before the trade tariff spat began.
Outside today’s data, geo-political noise will continue to influence, with noise from the Trump Tweet machine also needing to be considered, particularly on Independence Day.
At the time of writing, the EUR was up 0.05% to $1.1664, with today’s stats and any political chatter from both sides of the Atlantic being factors to consider through the day.
For the Pound, economic data is limited to June’s UK services PMI, which will provide the Pound with further direction, following the better than expected manufacturing and construction PMI numbers released earlier in the week, any pick up in service sector activity likely to drive the Pound back towards to $1.33 levels, with negative news on Brexit the only possible speed bump as the UK economy shows signs of a recovery from the 1st quarter.
At the time of writing, the Pound was up 0.07% to $1.3202, with Brexit and PMI numbers the key drivers through the day.
Across the Pond, there are no stats scheduled for release with the U.S on holiday, trading volumes expected to be on the lighter side through the day.
While there are no stats, Tweeter is still active, which could hit the European markets through the day should there be any further trade tariff talk, the U.S now in a position to retaliate, not just to Canada, but also against the EU and India ahead of 6th July trade tariffs to be introduced by both China and the U.S.
At the time of writing, the Dollar Spot Index was down 0.05% to $94.545, with the Oval Office the only possible direct influence through the day.
For the Loonie, there are no material stats scheduled for release that could influence direction for the pair, with the U.S on holiday, leaving the Loonie in the hands of sentiment towards trade tariffs and any U.S retaliation to tariffs introduced by Canada over the weekend.
At the time of writing, the Loonie was up 0.05% to C$1.3133, with trade war chatter the key driver through the day.