Press review - page 526

[Sergey Golubev]

USD/CNH Intra-Day Fundamentals: China Industrial Output and range price movement 

2017-06-14 03:00 GMT | [CNY - Industrial Production]

• past data is 6.5%
• forecast data is 6.4%
• actual data is 6.5% according to the latest press release

if actual > forecast (or previous one) = good for currency (for CNY in our case)

[CNY - Industrial Production] = Change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities. 

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From MarketWatch article :

• "Industrial output growth in China held steady in May following a strong start to the year, data official data showed Wednesday."
• "Value-added industrial output, a rough proxy for economic growth, in May rose 6.5% from a year earlier, the same pace as in April, the National Bureau of Statistics said. The increase was slightly above a median forecast of 6.4% growth from a Wall Street Journal poll of 11 economists."

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USD/CNH M5: range price movement by China Industrial Output news event

[Sergey Golubev]

Federal Funds Rate forecast by Danske Bank (based on the article)

Danske remains tactically short EUR/USD targeting 1.09:

• "Danske Bank FX Strategy Research holds an anti-consensus view that sees the Fed skipping hiking at the meeting and instead announcing the triggers for quantitative tightening (QT). However, Danske argues that such an outcome should be USD positive and should lead to the start of a correction in EUR/USD over the Summer."
• "For EUR/USD, a hawkish stance from the Fed would come at a time where the ECB has admittedly moved a tad closer to ‘neutral’ on rates but at the same time laid out an inflation outlook that deters Draghi and co from looking for an easing exit any time soon. In our view, this makes for a period where EUR/USD could move to the lower end of its newfound 1.08-1.13 range. Should the Fed refrain from hiking in June, the knee-jerk reaction will most likely be to send EUR/USD higher, but we do not expect a move much above the 1.13 level. However, in our base case that a summer hike will come – if not June, then July – we think that as markets digest the boldness with which we think the FOMC will move near term, USD strength will materialise for a while."

[Sergey Golubev]

Intra-Day Fundamentals - Dollar Index and GOLD (XAU/USD): U.S. Consumer Price Index

2017-06-14 13:30 GMT | [USD - CPI]

• past data is 0.2%
• forecast data is 0.2%
• actual data is -0.1% according to the latest press release

if actual > forecast (or previous one) = good for currency (for USD in our case)

[USD - CPI] = The Consumer Price Index m/m measures changes in prices of a basket of consumer goods and services in the given month compared to the previous one. The index shows price changes from the perspective of the consumer.

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From official report:

• "The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.9 percent."

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Dollar Index M5: range price movement by Consumer Price Index news events

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XAU/USD M5: range price movement by Consumer Price Index news events

[Sergey Golubev]

Intra-Day Fundamentals - EUR/USD, AUD/USD and Brent Crude Oil: FOMC Federal Funds Rate

2017-06-14 19:00 GMT | [USD - Federal Funds Rate]

• past data is 1.00%
• forecast data is 1.25%
• actual data is 1.25% according to the latest press release

if actual > forecast (or previous one) = good for currency (for USD in our case)

[USD - Federal Funds Rate] = Interest rate at which depository institutions lend balances held at the Federal Reserve to other depository institutions overnight.

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From official report:

• "In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation."
• "In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."

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EUR/USD M5: range price movement by Federal Funds Rate news events

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AUD/USD M5: range price movement by Federal Funds Rate news events

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Brent Crude Oil M5: range price movement by Federal Funds Rate news events

[Sergey Golubev]

Why The Fed Is Raising Interest Rates When Inflation Remains Low (based on the article)

• "The Federal Reserve Board and the regional Federal Reserve bank presidents mostly have a model in their heads—and in their computers—in which time lags are substantial.  Rounding broadly, there is a one-year time lag between actions taken by the Federal Reserve and effects on spending, production and employment.  Then there is another one-year time lag until inflation rises or falls.  This is the greatest challenge that the Federal Reserve has.  Milton Friedman famously said that the time lags in monetary policy are long and variable. It is as if you had to turn your car’s steering wheel two blocks before you wanted the car to turn.  But sometimes it was just a block and a half early, and at other times it was two and a half blocks early.  Heaven help the pedestrians.  And heaven help those of us who rely on a healthy economy for our incomes."
• "This description is an oversimplification, of course.  There will be a few spending and production impacts fairly quickly, then more impacts in the 6-to-18 month time horizon, and then some final small final impacts up to two years away.  The same is true of the inflation time lag."
• "The argument for expecting inflation to become a problem is pretty strong.  The labor market is very tight, suggesting that we’re trying to produce more than we have the capability to produce.  Rising wage rates will be a signal that overall prices are too low."

[Sergey Golubev]

NZD/USD Intra-Day Fundamentals: New Zealand Gross Domestic Product and range price movement 

2017-06-14 23:45 GMT | [NZD - GDP]

• past data is 0.4%
• forecast data is 0.7%
• actual data is 0.5%% according to the latest press release

if actual > forecast (or previous one) = good for currency (for NZD in our case)

[NZD - GDP] = Change in the inflation-adjusted value of all goods and services produced by the economy. 

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From official report :

• "Economic activity, as measured by gross domestic product (GDP), grew 0.5 percent in the March 2017 quarter, following 0.4 percent growth in the December 2016 quarter."

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NZD/USD M5: range price movement by NZ GDP news event

[Sergey Golubev]

GBP/USD Intra-Day Fundamentals: MPC Official Bank Rate and range price movement 

2017-06-15 12:00 GMT | [GBP - 0.25%]

• past data is 0.25%
• forecast data is 0.25%
• actual data is 0.25% according to the latest press release

if actual > forecast (or previous one) = good for currency (for GBP in our case)

[GBP - 0.25%] = Interest rate at which the BOE lends to financial institutions overnight. 

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From official report :

• "The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.  At its meeting ending on 14 June 2017, the MPC voted by a majority of 5-3 to maintain Bank Rate at 0.25%.  The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion.  The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion."

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GBP/USD M5: range price movement by Official Bank Rate news event

[Sergey Golubev]

USD/JPY Intra-Day Fundamentals: BOJ Policy Rate and range price movement 

2017-06-16 03:54 GMT | [JPY - BOJ Policy Rate]

• past data is -0.10%
• forecast data is -0.10%
• actual data is -0.10% according to the latest press release

if actual > forecast (or previous one) = good for currency (for JPY in our case)

[JPY - BOJ Policy Rate] = BoJ Interest Rate Decision is made 8 times a year. The regulator's interest rate is used to provide loans to commercial banks. Establishing an interest rate is one of the main tools of the monetary policy used by the Bank of Japan to regulate the strength of its currency. Increase in the percentage rate has a positive effect on JPY.

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From zerohedge article : Bank Of Japan Leaves Policy, Economic Outlook Unchanged

• "As expected by all 43 economists who estimate such things, the Bank of Japan left their policy mix unchanged and in a desperate bid to appear modestly positive about how things are going, maintained that"Japan's economy has been turning toward a moderate expansion," adding that that consumer spending "increased its resilience." Hardly a rousing evaluation of the state of the economy after who-knows-how-many-years of so-called 'stimulus'."
• "USDJPY chopped around a litle, but NKY futures were entirely unimpressed as Kuroda delivered the anticipated 'nothing-burger'."

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USD/JPY M5: range price movement by BOJ Policy Rate news event

[Sergey Golubev]

Weekly Outlook: 2017, June 18 - June 25 (based on the article)

The US dollar enjoyed some strength thanks to the Fed’s hawkish hike. Can it continue advancing? The Fed can continue influencing currencies thanks to speeches from top Fed officials. In addition, we have housing data from the US and other events. Here are the highlights for the upcoming week.

1. FOMC’s Dudley talks: Monday, 12:00. New York Fed President Bill Dudley is No. 3 at the Federal Reserve and usually a dove. In his speech in Plattsburgh, Dudley could provide more insight about the next moves of the Fed.
2. FOMC’s Fischer talks: Tuesday, 12:00. Stanley Fischer is the Vice Chair of the Fed and contrary to Dudley, he is considered a hawk. Fischer will be speaking across the pond, in Amsterdam.
3. US Existing Home Sales: Wednesday, 14:00.
4. Crude oil inventories: Wednesday, 14:30.
5. New Zealand rate decision: Wednesday, 21:00. The team led by Governor Graeme Wheeler is likely to leave the interest rate unchanged at 1.75% and the statement will make a difference. They usually try to talk the currency down.
6. US jobless claims: Thursday, 12:30. A similar number is on the cards: 241K is predicted.
7. US new home sales: Friday, 14:00. New home sales stood at 569K in April and a rise to 599K is forecast now.

[Sergey Golubev]

Weekly EUR/USD Outlook: 2017, June 18 - June 25 (based on the article)

EUR/USD failed to move higher and eventually dropped after the Fed raised rates. Has the trend changed? The second round of the French Parliamentary elections and PMIs stand out. Here is an outlook for the highlights of this week.

1. German PPI: Tuesday, 6:00. This time, a drop of 0.1% is projected.
2. Current Account: Tuesday, 8:00. A narrower surplus of 31.3 billion is expected.
3. ECB Economic Bulletin: Thursday, 8:00. The ECB usually doesn’t provide big surprises in this bulletin, but the data can still move markets.
4. Consumer Confidence: Thursday, 14:00. This time the score is expected to remain unchanged at -3.
5. Flash PMIs: Friday, 7:00 for France, 7:30 for Germany and 8:00 for the whole euro-zone.
6. Belgian NBB Business Climate: Friday, 13:00. A small improvement to -0.8 is predicted now.