It was generally a positive week for the US dollar, on the back of mostly upbeat economic data. The all important job report came mixed, as the NFP showed another positive month of employment, but the unemployment rate came back up to 5.5% after previously reaching the lowest point since the post recession period in April. On the other side of the world, Greece had to stick with plan B, which is the option of bundling its June obligation to the IMF into one payment, after failing to seal a last minute deal with its European creditors. The Organization of Petroleum Exporting Companies (OPEC) chose to maintain its oil production rate at the same level for the next six months during its member meeting on Friday. This sent oil up about $1, paring some of the losses during the week.
US DATA SOFTNESS
During the annual assessment of the economy, the IMF suggested that the Fed should wait till the first half of next year before commencing the much anticipated increase in interest rates. The fund sited the mixed data from the US in recent times, therefore the timeframe of early next year could allow for a clearer picture of the economic stance. Nonetheless, I believe this advice will be ignored as the majority of the FOMC members already seem bent on a rate hike this year, possibly September even. The Trade balance also showed a slightly declined deficit as imports dipped, depicting a rebound in merchandise flows after the port-related surge. The Non-farm payroll employment report thrashed forecast to come at 280k, again showing the strength in the job sector. The unemployment rate edged upwards to come at 5.5%, after coming at 5.4% in April. The USD strengthened sharply, driven by the strong NFP report.
GREECE MISSES PAYMENT
After an urgent meeting of: the European Commission, International Monetary Fund and European Central Bank, it is believed they came up with a “take it or leave it” kind of deal. By all indications, Athens didn’t take the deal. What is the way forward for Greece? Will government hold an internal Referendum? Will it compromise on its standards and enforce VAT increase and pension cuts as demanded by its creditors? Or will it be pressured into leaving the Euro? We wonder!
THE WEEK AHEAD
Coming out of an eventful week, we step into a less fundamentally packed calendar. Today, the G7 meeting commences. This week, we have speech from RBA Gov. Stevens, BOE Gov. Carney and BOC Gov. Poloz, amongst other vital data releases.
Monday, June 8th- The second day of the G7 meeting of finance ministers and central bankers from 7 industrialized nations – Canada, Italy, France, Germany, Japan, the UK, and the US. We also have Japan’s quarterly Current account and final quarterly GDP due. As well as Canada’s building permits for the month.
Tuesday, June 9th- A relatively silent day with only the NAB Business Confidence from Australia being the only serious release. The last two months showed calm business confidence, both coming at 3. According to the NAB report, business confidence was unchanged in April, at relatively subdued levels.
Wednesday, June 10th- RBA GOv. Poloz speaks at the Economic Society of Australia, in Melbourne. More information as regards the Central bank’s perception on the economic condition is expected, as well as hints on further monetary policy actions. We also have Australia’s Westpac consumer sentiment. From New Zealand, we have the official cash rate, expected to remain at 3.50%. This will be accompanied by RBNZ monetary policy rate statement. Bank of England’s Governor Carney is also scheduled to speak.
Thursday, June 11th- Australia’s employment change and unemployment Rate will be announced. The employment change is forecast for a lift to 15.2k from the disappointing -2.9k last month as a mining investment boom finally slows and the strong Aussie weakens the competitiveness of local industries. Other news for the day is US core retail sales, Retail sales and unemployment claims. Canada’s Gov. Poloz is also scheduled to hold a press conference about Financial System Review, in Ottawa.
Friday, June 12th- USD will be again on the front-line as the week ends with the producer price index and prelim UoM consumer sentiment data forecast to come at 0.4% and 91.3 respectively.