Weekly Market Outlook: Focus Turns To US And China Data

June 10, 2019

By Orbex

Amid the growing trade tensions, the week ahead will offer investors a glimpse into the incoming economic data from the United States and China. The data is crucial as it comes a week ahead of the Fed meeting later in June.

A busy week is in store for the pound sterling as GDP, manufacturing and factory output and jobs report comes out this week. Besides the economic data, investors will also be looking at the political developments in the UK. With PM May now officially resigning, investors will be looking to the leadership from the next British PM. Boris Johnson is one of the front runners for the post.

A week after the RBA cut interest rates, economic data from Australia will cover the monthly jobs report this week. Economists forecast that Australia’s unemployment rate will dip to 5.1% from 5.2% previously in April. The employment change is expected to show a headline print of 16k comparing to 28.4k from the month before.

Data from the US will cover the retail sales report due on Friday with the inflation and producer prices index report coming out earlier in the week.

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Here’s a quick recap of what’s to come in the currency markets this week.

UK GDP, Jobs, and Factory Output

Economic data from the UK will see the week starting off with the monthly GDP data. Forecasts point to another month of contraction in the economy. The UK’s monthly GDP is forecast to fall 0.1% on the month. This would mark a second consecutive monthly decline in economic output.

Manufacturing production could also slip with forecasts showing a 1.1% decline on the month following a 0.9% increase in the month of March.

The UK’s unemployment report due on Wednesday is however forecast to hold up. Economists forecast that the UK’s unemployment rate will remain steady at 3.8%. This marks an unchanged print from the past few months. The economic data will play a role as the Bank of England will meet the week after.

US Inflation and Retail Sales on the Tap

With the recent string of economic reports from the United States coming out worse than expected, investors will be looking to the inflation and retail sales data this week.

Consumer prices are forecast to rise 0.1% on the month in May. This marks a sharp decline from the 0.3% increase previously. Weak inflationary pressures have remained a key issue for the Fed officials. The core inflation rate which excludes the volatile food and energy prices is forecast to rise 0.2%, up from 0.1% previously.

On Friday, the monthly retail sales report will due. Economists forecast that the retail sales will rebound from April’s soft figures. Core retail sales in the US is expected to rise 0.5% on the month while headline retail sales could rise 0.7%. This marks a reversal from the 0.2% decline in headline retail sales the month before.

However, given the recent trade uncertainty, there is a possibility that the retail sales report will disappoint. Still, investors are likely to look through the figures. Focus will be on the inflation data as it could influence the Fed’s decision. The FOMC is due to hold its monetary policy meeting the week after.

Swiss National Bank to Remain on the Sidelines

The Swiss National Bank will be meeting this week for its quarterly monetary policy meeting. The SNB’s meeting, due on Thursday is expected to be a non-event. The three month Swiss Libor rate is expected to remain unchanged at -0.75%.

The central bank, however, is expected to address the recent appreciation in the Swiss franc’s exchange rate. The central bank is likely to maintain the status quo but signal investors against betting too much on the CHF.

The Swiss franc, along with other safe haven currencies have been posting gains in recent weeks. This was largely due to the flight to safety among investors amid the global trade tensions and monetary policy uncertainty.

By Orbex