It was another week of mixed results from the US. The job reports seems to be showing sustainable strength considering the impressive back to back release from the unemployment claims, complementing the positive non-farm payroll (NFP) figures. The US retail sales on the other hand came in disappointing for another month, as consumers seem to be hoarding cash. Again, the USD ended the week lower against most of its major counterparts. As for Europe’s biggest problem at the moment - Greece - progress is being made towards a reasonable compromise. I only wonder after all the tussle, if Greece will concede to its creditor’s demands.
To the relief of all parties involve, there finally seems to be progress being made in negotiations between Greece and its Eurozone creditors. After the meeting on Monday, Eurozone finance ministers welcomed recent progress with Europe’s most indebted nation. Although more time and effort is needed to bridge the gaps. Greece also paid its €750 million debt to the IMF in due time, therefore calming fears of a likely default. This has sparked optimism of a peaceful resolution in sight. As for economic data, Italy and France prelim GDP beat expectations coming at 0.3% and 0.6% respectively. This demonstrates that the core European economies have actually started to show positive signs. Germany’s prelim GDP fell below expectations, coming in at 0.3%, a slowdown from the previous quarter of 0.7% expansion. The market is basking in all the good news, adding fuel to the rise of the EURUSD.
US RETAIL SALES AND JOB REPORTS
Even with savings from the lower gasoline prices, and vibrant employment conditions, consumers have seemingly chosen to hoard their cash. This has reflected in weak retail sales coming in flat at 0.0% as against the forecast of 0.3% as growth outlook seems weak. Three weeks of impressive unemployment claims along with positive NFP figures reflect strong employment conditions. The conflicting situation of good job data and disappointing growth outlook will mean a tougher decision for the Feds on the timing of raising rates.
THE WEEK AHEAD
We enter a very active week in terms of fundamental releases, compared to the first two weeks of the month. We have vital announcements such as the German ZEW economic sentiment, the US FOMC Meeting Minutes, as well as the ECB forum in Portugal, themed "Inflation and Unemployment in Europe” where the ECB president Mario Draghi will be speaking.
Monday, 18th - A relatively quite day with a few medium impact releases like FOMC Member Evan’s Speech on the economy and monetary policy at the Swedbank Global Seminar, in Stockholm. Also RBA Deputy Gov Lowe Speaks at the Corporate Finance Forum, in Sydney.
Tuesday, 19th - We start the day with Australia’s monetary policy minutes. This is followed by the quarterly inflation expectations from New Zealand. As inferred from last week’s RBNZ financial stability report, policy makers are generally positive on the economy. This is expected to reflect in the inflation outlook. The country’s GDT Price index will also be released. The UK’s CPI is also due. As attention has now switched from the elections, this will be closely watched. The big question remains, in light of the 0.0% release last month, will the UK enter deflation? We also have German ZEW economic sentiment, US building permits, as well as a speech from the Bank of Canada’s Gov Poloz.
Wednesday, 20th- We have Japan’s quarterly prelim GDP, UK’s MPC Official Bank Rate Votes, US Wholesale Sales m/m and FOMC Meeting Minutes. The highlight for the day is the FOMC Meeting Minutes. This will be particularly interesting as the investors will get the clue about the Fed’s positioning on the recent disappointing economic data. As the rate hike expectations are diminishing, this meeting’s minutes could spark a big volatile market environment.
Thursday, 21st- From Europe, we have the German and French flash manufacturing PMI and later on the US unemployment claims for the third week of May.
Friday, 22nd- German Ifo Business Climate will shed a light on the business climate in the economic engine of the Eurozone. In the UK, BOE Gov Carney will be speaking in a panel discussion titled "Current perspectives on inflation and unemployment in the euro area and advanced economies" at the ECB Forum. Later on, ECB’s Mario Draghi will also be giving a speech.
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