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 consider key economic news on June 14th, which I will be keeping in mind for identifying fundamental catalysts, preparing for future volatility, and devising trade setups.
GBP: Another Day of Bad News
The United Kingdom received disappointing new unemployment and employee earnings data from the Office for National Statistics this morning at 2 am Eastern Time. The UK’s Average Earnings Index failed to meet forecasts, while the unemployment rate ticked up by an unexpected 0.1% as more workers filed for unemployment benefits than anticipated. This comes on the heels of yesterday's pessimistic news for the UK, including a shocking month-over-month GDP contraction and a worse trade deficit than what was forecast.
Things are not looking up for GBP; the UK’s economy is clearly not performing well, yet the Bank of England (BoE) is forced to attempt to reckon with high inflation numbers while not causing a recession. This is holistically bearish for GBP, with a mild 25 bps rate hike and Monetary Policy Summary from the BoE expected on Thursday at 7 am Eastern Time. Traders could look to continue shorting GBP beforehand, wait for Thursday's fundamental catalyst(s), or perhaps attempt to buy GBP/JPY as the pair may be erroneously oversold on GBP disappointment.
Other News
Month-over-month German CPI data came in at precisely what was forecast, 0.9%; however, economic sentiment in Europe came in bleaker than expected today according to the ZEW survey(s). US Producer Price Index (PPI) numbers, another metric for inflation, also met forecasts at 0.8% month-over-month, though Core PPI (which excludes food and energy prices) failed to meet expectations by 0.1%. However, this is secondary for USD as tomorrow’s FOMC news remains the focus. China’s year-over-year retail sales and industrial production numbers are also scheduled to be released tonight at 10 pm Eastern Time, along with their unemployment rate.
Key Takeaways
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 consider key economic news today, which I will be keeping in mind for identifying fundamental catalysts, preparing for future volatility, and devising trade setups.
Euro Area: Monetary Policy Statement & ECB Press Conference
This morning the European Central Bank (ECB) made plain their monetary policy intentions: they will be ending their quantitative easing program with the start of July and implementing an interest rate hike of 25 basis points that month as well, with another identical hike scheduled for September. This caused a great deal of volatility for EUR this morning, with buying pressure spiking before quickly being overtaken by bearish momentum. This is likely because, despite a change in tune from the ever-dovish ECB, the markets had already anticipated these plans, and the ECB’s key rate will remain in the negative even after July’s hike.
United States: Unemployment Claims & Natural Gas Storage
The past week saw 229,000 American workers file for unemployment claims, while only 205,000 claims had been forecast. An additional 97 billion cubic feet of natural gas was held in US storage this past week as well. Both data suggest a slowing US economy with more unemployment and less consumer spending, which is bearish news for USD. However, this information is merely the prelude for tomorrow’s CPI and Core CPI data month-over-month, expected from the Bureau of Labor Statistics at 8:30 a.m. Eastern Time. With economic health teetering in response to the Federal Reserve’s pivot towards hawkishness, tomorrow’s inflation data may be a significant fork in the road for USD. The DXY is currently surging today, clearing and then hovering around the 103 level intraday.
Canada: BOC Financial System Review
This morning the Bank of Canada (BOC) released their annual Financial System Review, in which they analyze Canada’s economic wellbeing and any significant threats they are wary of. They revealed particular concern about the effect of rate hikes on the global economy, as well as its effect on those in Canada contending with high household debt and a hot housing market. While they covered a broad variety of topics including cybersecurity and climate strategy, I personally interpreted the report as being rather dovish, though they did express less concern about the effect of rate hikes on Canada’s non-financial businesses. This may have prompted some of the CAD bearish momentum we saw this morning.
China: CPI (year-over-year)
Due tonight from the National Bureau of Statistics of China at 9:30 p.m. Eastern Time, China’s CPI is expected to hit 2.2% year-over-year, though CPI data from the past two months have surpassed forecasts. Considering yesterday’s report on China’s monthly trade balance exceeded forecasts by over $20 billion, it seems plausible that tonight’s CPI data will likewise reflect a booming economy. Though CNY functions somewhat differently than other currencies due to more centralized control of its value and limited access for traders and investors, it is helpful to monitor China’s economy as its performance has global implications regarding trade imbalances and industrial competition.
Key Takeaways
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.
Key Takeaways
