CALENDAR HIGHLIGHTS: Monday: AU/GE Holiday, JN GDP, Current Account, Bank Lending, CN Trade Balance, FDI, IT Industrial Production, UK GDP, Industrial/Manufacturing Production, Trade Balance, Construction Output, NIESR GDP Estimate, EZ Sentix Investor Confidence, US JOLTs Job Openings, CB Employment Trends, BoE's Saunders speaks, JN/US Hold Trade Talks Day 1
Tuesday: JN Machine Tool Orders, AU NAB Business Confidence, CN New Loans, UK Average Earnings, Claimant Count Rate, Unemployment Rate, US NFIB Small Business Optimism, PPI, IBD/TIPP Economic Optimism, WASDE Report, 3-yr Note Auction, Weekly API Inventories, JN/US Hold Trade Talks Day 2
Wednesday: JN PPI, Core Machinery Orders, CN CPI/PPI, AU Westpac Consumer Sentiment, FR Non-Farm Payrolls, SP CPI, GE 10-yr Bund Auction, US CPI, Real Earnings, Weekly DoE Inventories, 10-yr Note Auction, Federal Budget, ECB's Draghi, De Guindos, RBA's Ellis to speak
Thursday: JN 30-yr JGB Auction, AU Employment Change, Unemployment Rate, GE CPI, SZ Interest Rate Decision, IT Quarterly Unemployment Rate, 3/7/30-yr BTP Auctions, IR CPI, EZ Industrial Production, Eurogroup Meeting (tentative), UK RICS House Price Balance, WR OPEC Monthly Report, US Weekly Jobless Claims, Import/Export Price Index, 30-yr Bond Auction, CA New Housing Price Index, First Round of Ballots for Conservative Leader
Friday: CN Industrial Production, Fixed Asset Investment, Unemployment Rate, Retail Sales, Outstanding Loan Growth, JN Industrial Production, Capacity Utilisation, FR CPI, IT Industrial Sales/Orders, CPI, EZ Finance Ministers Meeting (tentative), WR IEA Monthly Report, US Retail Sales, Industrial/Manufacturing Production, Business Inventories, Michigan Sentiment (Prelim), Baker Hughes Rig Count
MACRO OVERVIEW - Piers Curran (@pierscurran)
- An overview of general market sentiment
- Japanese Q1 GDP data marginally beats expectations
- Chinese import data shows a larger drop than expected in May as growing tensions with the US cloud trade
- US and Mexico agree a deal on trade - although Mexico do not back up Trump's Twitter claims of big farm deal
- Fed rate cut expectations get stretched with 3 rate cuts priced in before year end following disappointing jobs data announced on Friday.
- Conservative Party leadership trade: Michael Gove suffers set back with cocaine scandal and Boris may benefit from the UK agreeing trade deal with South Korea TECHNICAL OVERVIEW The rate cut euphoria continues after the release of the latest US Jobs report on Friday which saw a miss on expectations for wage and job growth. Market expectations are now pointing at three 25 bbp cuts by the end of 2020 with the implied odds for the upcoming July cut at 66.3%.- After an initial dip after the NFP data, the SP500 then surged higher at Friday's US cash open from the 2730.25 level breaking back above the 50 DMA and the trend line from the May all-time high.- However, the upcoming area of resistance around the 2900 area is important and a break above it should see a quick run back to the all time high. - But, we may need to wait for Wednesday's key US CPI data before the index can make its next big move. This data will play an important role in determining whether the Fed go early and cut rates at their 31st July meeting or not. - If inflation comes in below forecast then we expect the S&P to break above 2900. If inflation is higher than expected then last week's strong rally may well be eroded.
GBPUSD Futures- It was a strong week for GBPUSD last week as the US Dollar weakness saw a bounce back to test resistance from the 28th May high at 1.2762.- However, this morning very weak Manufacturing and Industrial Output data (worst for 17 years) has seen Friday's gains wiped out. - With the Conservative part leadership race hotting up and the first round of ballots coming on Thursday, we would expect the GBP to remain under pressure. Especially if the US CPI data on Wednesday is strong.- The Feb 2019 low at 1.2762 remains the key resistance on the upside with the May low at 1.2568 being the key downside target if fundamentals turn negative.
EURUSD Futures- The EURUSD had an explosive move higher last week and having attempted to break the 1st May high on both Wednesday and Thursday, it was final the weak US NFP data that drove a move up through the 1.13 handle.- Key upside technicals this week are the downward trend line that extends back to Sept 2018 and then the April high at 1.13855.- However, if US CPI inflation comes in strong on Wednesday then we would expect a move back below the 1.12 handle with the low of the year the key target at 1.11265
WTI Crude Oil Futures - Crude oil prices recovered on Thursday and Friday last week after Wednesday's bearish US DoE data pushed prices to a 5 month low and flirted with the $50 handle. - If tghe rebound continues this week then the key resistance is $55.17 which is both the March 2019 low and also the 50% Fib retracement level of the Dec 18 to Apr 19 uptrend.- OPEC+ have indicated that they are looking to extend production cuts, the US Mexican trade deal news is also a positive and we await to see if any of the multiple supply risk scenarios escalate. A break above $55.17 would see a move back towards $57- However, if the trade tensions escalate or the US Dollar strengthens off higher than expected inflation data then we may see the bounce at the end of last week being retraced.
Have a great week
Piers Curran – Head of Trading
Tommaso Iaquone – Junior Market Analyst