For most of the last week, the U.S. dollar remained on a defensive mode as markets continued to celebrate de-escalation of Eurozone political risk. Further, the semblance of lifeline emerged as expected amid trade war concerns and investors turned cautious ahead of the G7 summit in Quebec. The outcome of the summit will be available on Saturday and it will set the trend for markets when the Asian market opens on Monday morning.
The Fed is scheduled to meet and announce the monetary policy in the upcoming week. It is widely expected that the Fed hike the interest rate to 2.0 percent. Having said that here is an outlook on some of the major releases scheduled for next week:
#1: U.K. Manufacturing Production (06/11/2018 Monday 08:30 GMT)
In the U.K., manufacturing production rose by 2.9 percent on a year-on-year basis in March after registering a gain of 2.5 percent in the prior month. The reading for March matched with analysts’ expectation. On a month-on-month basis, manufacturing production declined 0.1 percent, following the 0.2 percent decrease in the month of February. With the decline in March, manufacturing production has fallen for the second consecutive month since February last year. The monthly decline is attributable to the 5.2 percent drop in production in the pharmaceutical sector. For the first quarter of this year, manufacturing production rose by 0.2 percent after recording a gain of 1.3 percent in the final quarter of last year. Forecast for month-on-month change in April 2018: an increase of 03 percent
#2: U.K. Average Earnings Index (06/12/2018 Tuesday 08:30 GMT)
In the U.K., the total earnings of workers, including bonuses, increased by 2.6 percent on an annualized basis to £515 per week during the 3 months to March, easing from the 2.8 percent increase recorded in the prior period. However, the reading for the period matched with analysts’ forecasts. Wages increased less in manufacturing and financial services sectors. It remained steady in retailing, hotels and restaurants, and wholesale sectors. Meanwhile, wage growth rose in construction and public sectors.
Excluding bonuses, the earnings rose by 2.9 percent to £484 per week, registering the largest increase ever since the 3 months to August 2015. The increase was in line with analysts’ expectations. In real terms, however, there was no growth in earnings including bonuses. The earnings, excluding bonuses, however, rose by 0.4 percent. This is the second straight month of increase and the highest ever since January 2017.
Wage growth forecast for the three months to April 2018: 2.5 percent
#3: U.S. CPI/Core CPI (06/12/2018 Tuesday 12:30 GMT)
In the U.S., consumer prices rose by 0.2 percent on a month-over-month basis in April, rebounding from the 0.1 percent decline in the prior month. However, the reading for the month came in below analysts’ forecast of 0.3 percent gain. The gasoline and shelter indexes made the highest contribution to the increase. The core inflation rate, which is worked out by removing the prices of volatile items such as food and fuel, rose by 0.1 percent and matched with analysts’ estimates.
Forecast for May 2018: CPI and Core CPI are expected to increase by 02 percent and 0.1 percent, respectively
#4: Australia RBA Gov Philip Lowe Speaks (06/13/2018 Wednesday 02:00 GMT)
Philip Lowe, Governor of the Reserve Bank of India, is scheduled to deliver a speech on “Productivity, Wages, and Prosperity” at an event of the Australian Industry Group in Melbourne. The audience is expected to ask questions. Market volatility is often experienced when he speaks. This is because investors look for interest rate clues.
#5: U.K. CPI (06/13/2018 Wednesday 08:30 GMT)
In the U.K., the annual inflation rate dropped to 2.4 percent in the month of April from 2.5 percent in the prior month. The reading for April came in below analysts’ expectation of 2.5 percent. The reading for April is the lowest ever since March 2017 and is mainly attributable to a decline in transportation, food, clothing, and footwear costs. On a month-on-month basis, consumer prices rose by 0.4 percent after recording a growth of 0.1 percent in March. However, the monthly reading came in below analysts’ forecast of 0.5 percent. Annual inflation rate forecast for May 2018: 2.4 percent
#6: U.S. PPI (06/13/2018 Wednesday 12:30 GMT)
In the U.S., the producer prices in the case of final demand goods rose by 0.1 percent on a month-over-month basis in April after a 0.3 percent increase was reported in March. The reading for April, however, missed analysts’ expectation for a gain of 0.2 percent. Goods prices remained unchanged because of a sharp decline in food prices. However, the prices of services rose as inflation remained steady for trade and transportation and warehousing services. The core PPI, which excludes energy and food, rose by 0.2 percent, in line with analysts’ expectation. On a year-on-year basis, the producer prices rose by 2.6 percent and the core PPI increased 2.3 percent. Forecast for the monthly change in PPI in May 2018: an increase of 0.3 percent
#7: U.S. Crude Oil Stocks Change (06/13/2018 Wednesday 14:30 GMT)
In the U.S. crude oil stocks increased by 2.072 million barrels during the week that ended on June 1, following the 3.62 million barrel drop recorded in the prior period. Analysts’ had expected crude oil stocks to drop by 1.824 million barrels. In the meanwhile, gasoline stocks rose by 4.603 million barrels, following the 0.534 million barrels in the prior week. Analysts had expected only a smaller increase of 0.587 million barrels.
#8: U.S. FOMC Economic Projections (06/13/2018 Wednesday 18:00 GMT)
The U.S. Federal Open Market Committee releases the economic projections report four times in a year. This report indicates the FOMC’s projections with respect to the inflation rate and economic growth during the next two years. More importantly, it would consist of a breakdown of the interest rate forecasts of individual FOMC members.
#9: U.S. FOMC Statement (06/13/2018 Wednesday 18:00 GMT)
The U.S. FOMC releases the Rate Statement eight times in a year. The Fed generally changes the statement a little bit at each release. The traders focus on these changes. It is a tool that the FOMC makes use of to communicate with investors as regards the monetary policy. It provides the outcome of members’ vote on setting interest rates and several other policy measures. It also provides a commentary on the economic conditions that impacted their votes. Most importantly, the Rate Statement discusses the country’s economic outlook and provides clues on future decisions.
#8: U.S. Federal Funds Rate (06/13/2018 Wednesday 18:00 GMT)
In the FOMC meeting in May, the Federal Reserve decided to leave the target range of the federal funds rate unchanged at 1.5 to 1.75 percent. This was very much in line with the analysts’ expectation.
Forecast for June 2018: It is expected that the interest rate will be raised to the 2.0 percent in the FOMC meeting to be held this month.
#9: U.S. FOMC Press Conference (06/13/2018 Wednesday 18:30 GMT)
The Federal Reserve Chair Jerome Powell will hold a press conference (four times in a year) 30 minutes after the announcement of funds rate. The press conference lasts for about an hour and has two parts – reading a prepared statement and questions by the press which often leads to unscripted answers. This causes heavy market volatility.
#10: Australia Employment Change/Unemployment Rate (06/14/2018 Thursday 01:30 GMT)
In Australia, employment rose by 22,600 in April to 12,501,000 jobs. While full-time job providers added 32,700 workers, part-time employment declined by 10,000.
On a seasonally adjusted basis, the unemployment rate unexpectedly rose to 5.6 percent from 5.5 percent in the previous month. Analysts had expected the unemployment rate to remain at the last month’s level of 5.5 percent. This the highest unemployment rate ever since July last year. The number of unemployed people in Australia rose by 10,600 to 741,000.
Forecast for May 2018: Employment change – the addition of 19,200 jobs; Unemployment rate – 5.6 percent
#11: U.K. Retail Sales (06/14/2018 Thursday 08:30 GMT)
In the U.K., retail trade rose by 1.6 percent on a month-over-month basis in April after the reading for the prior month was revised downward to a decline of 1.1 percent. Analysts had expected retail trade to increase by 0.7 percent. This is the largest gain in retail trade ever since October 2016. Petrol sales rebounded after road closures because of bad weather impacted travel in the previous month. Sale of food and non-food products also increased. Only department stores reported a fall in sales.
Forecast for May 2018: an increase of 0.5 percent
#12: Euro Zone ECB Main Refinancing Rate (06/14/2018 Thursday 11:45 GMT)
In the meeting held on April 26, the European Central Bank decided to hold the benchmark refinancing rate steady at 0 percent as was widely expected by analysts. Policymakers confirmed that the net asset purchases will continue at €30 billion per month until September. The purchases will be extended beyond September if deemed necessary. They also agreed that sufficient monetary stimulus is necessary for building up inflation pressures. The deposit facility rate and the marginal lending facility rate were also maintained at -0.4 percent and 0.25 percent, respectively.
Forecast for June 2018: 0 percent
#13: Euro Zone ECB Press Conference (06/14/2018 Thursday 12:30 GMT)
The ECB President and Vice President are scheduled to participate in a press conference held 45 minutes after the announcement of the Minimum Bid Rate. The press conference lasts for about an hour and has two parts – the reading of a prepared statement and questions by the press. As the questions by the press often lead to unscripted answers, heavy market volatility can be expected.
#14: U.S. Retail Sales/Core Retail Sales (06/14/2018 Thursday 12:30 GMT)
In the U.S., retail trade edged up 0.2 percent on a month-over-month basis in April, according to revised data. The previous estimate showed an increase of 0.3 percent. Forecast for May 2018: an increase of 0.4 percent
#15: Japan BOJ Policy Rate (06/15/2018 Friday 03:00 GMT)
In the meeting held in April, the Bank of Japan decided to leave the key policy rate unchanged at the present level of -0.1 percent. Further, the policymakers also decided to keep the 10-year government bond yield target at around zero percent but dropped the target date for achieving 2.0 percent inflation.
#16: Japan BOJ Monetary Policy Statement (06/15/2018 Friday 03:00 GMT)
The Bank of Japan releases the Monetary Policy Statement 8 times in a year. It is the primary tool that the central bank makes use of to communicate with investors as regards the monetary policy. In addition to containing the outcome of the monetary policy decision, it gives indications on asset purchases and offers a commentary on the economic conditions that impacted their decision. More importantly, it provides an economic outlook and offers clues on future votes.
#17: Japan BOJ Press Conference (06/15/2018 Friday 06:30 GMT)
The Bank of Japan holds a press conference (eight times in a year) after the release of the Policy Rate. The central bank uses this as a tool to communicate with investors as regards the monetary policy. It provides information about the factors that impacted the most recent decision, the country’s overall economic outlook, and inflation. Clues as regards future monetary policy decisions are also offered in the press conference.