Most weekdays offer the release of a flurry of economic data that can influence price action in the financial markets. Due to the surplus of information available, it can be difficult to parse and locate which indicators are most helpful in terms of fundamental and sentiment analysis. Here, we explore a selection of important economic news today, which can be helpful for identifying fundamental catalysts, prepare for future volatility, and devise trade setups.
Japan: Economy Watchers Sentiment
Released by Japan’s Cabinet Office at 1 a.m. Eastern Time, this indicator gauges economic sentiment in terms of consumer spending by surveying a few thousand service workers in Japan’s economy. Anything over a score of 50 indicates economic optimism; the forecast had been 51.9, but the actual report was 54. This would usually indicate strength for JPY, as it could help push the Bank of Japan towards tightening monetary policy. However, considering their willingness to continue extreme dovishness, I interpret this as a bearish signal for JPY, since the BOJ may feel further emboldened by economic optimism to extend low interest rates.
Euro Area: Final Employment Change & Revised GDP (both q/q)
Released at 5 a.m. Eastern Time, both metrics of economic health were better than previously expected: employment was forecast to increase by 0.5% and ended up increasing by 0.6%, while GDP growth also clocked in at 0.6%, double the percentage expected. These especially contribute to a bullish case for the EUR, since the Euro Area is clearly dealing with an overheated economy, and the European Central Bank seems primed to potentially act and pivot into gradual hawkishness. We will be hearing from the ECB tomorrow.
United States: Final Wholesale Inventories (m/m) & Crude Oil Inventories
Released at 10 and 10:30 a.m. Eastern Time, respectively, these two indicators may showcase some signs of a slowing US economy. According to the Census Bureau, there was a 2.2% increase in the value of goods in stock for wholesalers, where only 2.1% was expected. This reveals supply of such goods outpacing demand in an unexpected fashion. Likewise, according to the Energy Information Administration, the number of barrels of crude oil held in inventory by commercial firms increased by 2 million, whereas a change of -2.6 million had been expected. With crude oil already at staggering price levels, this indication of slowing demand has further implications throughout the US economy, perhaps as a proxy for consumer spending elsewhere. This is bearish news for USD.
China: USD-Denominated Trade Balance
Tentatively due today, the CGAC will be releasing data on China’s trade balance, which is frequently a surplus to some degree. While China is forecast to have net exported $58 billion, it could exceed expectations like prior months, despite China’s recent zero-COVID policy measures which limited economic activity. Not only do these growing margins signal CNY strength and continued economic growth for China, they also ostensibly indicate lower growth expectations for trade partners and economic competitors, such as the US, due to corresponding trade deficits. This information will come on the heels of lowered global economic growth forecasts from the World Bank and the OECD.
Workers in Japan, observing consumer spending, reported better-than-expected economic optimism about the Japanese economy, which I interpret as indicating the Bank of Japan will be comfortable continuing their ultraloose monetary policy.
With both employment and GDP growth exceeding expectations in the Euro Area, this may mean that the ECB will feel emboldened to tighten their monetary policy soon.
Higher inventories in the US indicate a slowing economy with lower consumer spending, which could cause the Federal Reserve to slightly pump the brakes on its hawkish agenda.
Higher trade surpluses signify healthy economic growth for China and may imply a degree of lower economic growth for trade partners due to deficits, particularly the US.
This morning at 8:30 am Eastern Time, the United States’ Bureau of Economic Analysis released even more bullish USD news. The Core Personal Consumption Expenditures (PCE) Price Index, which measures changes in prices for consumers (excluding volatile food and energy prices), rose more than expected month-over-month. A 0.5% increase was expected for August, with 0.6% […]
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