The main event for today will be comments from Fed Chair Yellen, who will be discussing the economic outlook and monetary policy at the World Affairs Council of Philadelphia’s luncheon. As always on Mondays kick start the week with my prepared currency update below.
USD: NFP for May missed estimates by a wide margin, printing 38k vs 164k expected. The Unemployment Rate dropped to 4.7% and Average Hourly Earnings matched expectations at 0.2% m/m. Core PCE for April matched estimates at 0.2% m/m and 1.6% y/y. Second Estimate GDP for Q1 printed at 0.8%, revised up from the First Estimate of 0.5%. Minutes from the April 26-27 meeting were hawkish and woke the market up to the chance of a hike in June. CPI for April came in close to estimates across the board with Core CPI at 2.1% y/y.
EUR: Flash Core CPI for May printed at 0.8% y/y. Flash GDP for Q1 missed expectations at 0.5% q/q versus expectations of 0.6%, and at 1.5% y/y versus expectations of 1.6%.
GBP: Second Estimate GDP for Q1 was at 0.4% and 2.0% y/y. Average Weekly Earnings for March increased by 2.0%, above expectations of 1.7%, Claimant Count Change also beat expectations, decreasing by 2,400 vs an expected increase of 4,000. CPI data for April missed estimates across the board with CPI y/y declining to 0.3%, below expectations of remaining unchanged at 0.5%, core CPI y/y missed at 1.2% versus expectations of 1.4%.
AUD: GDP for Q1 printed at 1.1% q/q, above 0.8% expected and 3.1% y/y, above 2.8% expected. The minutes from the May 3 meeting showed the RBA considered waiting for more data before cutting rates. The RBA’s Statement on Monetary Policy cut inflation forecasts, cementing the chance of future rate cuts. RBA cut the OCR to a new low of 1.75% on May 3. The Bank had clearly signalled their intention to do so in the prior decision statements, if inflation moved lower. CPI for Q1 missed by a wide margin with Trimmed Mean CPI printing at 1.7% y/y, below expectation of 2.0%.
NZD: Inflation Expectations for 2 years out sit at 1.64%. The FSR showed concerns over rising house prices but failed to introduce any new macroprudential controls, which suggests the RBNZ will remain on hold in June. Q1 employment was mixed with the jobless rate rising to 5.7% but job growth smashing estimates at 1.2% q/q.
CAD: GDP for Q1 printed at 0.6% q/q and 2.4% annualised, below expectations. Core CPI for April rose by 2.2% y/y versus expectations of 2.0% and by 1.7% for headline CPI y/y in line with expectations. A neutral to weakly-bullish currency, with sentiment in lock-step with WTI.
JPY: Tokyo-area CPI Ex-Food & Energy for May printed at 0.5% y/y, below prior of 0.6%, and was flat for the m/m. Nationwide CPI Ex-Food & Energy for April printed at 0.7% y/y, in line with prior, and rose 0.3% m/m. The BoJ’s measure of core inflation dropped to 0.9%. The BoJ kept policy unchanged at the April 28 meeting, which saw massive strength in yen across the board, given the market pricing for a potential announcement of further easing. The BoJ may ease further at the next meeting on June 16.
CHF: CPI beat estimates for April, printing at 0.3% m/m, above the 0.1% expected. Fundamentally a weak currency, highly correlated with moves in EUR.