The markets opened on Monday on a subdued note with Japan’s GDP data coming out in the early hours. Growth in Japan remained flat in the second quarter, missing estimates of a 0.20% increase and lower than Q1’s GDP growth rate of 0.50%. On a yearly basis, Japan’s GDP growth slowed to 0.20%, down from 1.90% annual growth rate seen in the first quarter.

In the US, the NY Fed’s Empire state manufacturing index contracted unexpectedly in August. The index fell to -4.20 on declining new orders and shipments, missing expectations of an increase to 2.50. The US dollar remained weak on the data with most of the markets seen trading in small ranges.

On Tuesday, the RBA’s meeting minutes were released which showed that members of the monetary policy expected inflation remain subdued, below the RBA’s target band of 2 – 3%. The minutes said, “Underlying inflation was expected to remain low for a time before picking up gradually as spare capacity in labor and many product markets diminished. At the same time, members noted that indicators for the established housing market in the first half of 2016 had pointed to an easing in conditions, including lower housing credit growth and an easing in housing price pressures.”The Australian dollar continued to remain resilient after the Aussie fell sharply last Friday.

In the UK, the focus was on the July’s inflation report which showed consumer prices rising to a 20-month high in July at 0.60% on a year over year basis. However, on a month over month basis, consumer prices fell 0.10% matching economist expectations. The ONS which released the inflation report said that there were no Brexit-effects on consumer prices during the period.

Later in the day, US inflation data showed a softer than expected increase in consumer prices. Headline inflation in the US remained flat for the second consecutive month. Shelter and other items saw increased prices; the gains were offset by a larger than expected declines in gasoline and grocery prices. Excluding food and energy, consumer prices rose 0.10% on the month. The US dollar extended its declines following the report. The dollar index broke the technical bearish flag pattern which signaled further declines.

Wednesday saw the release of the quarterly employment figures from New Zealand. Official data showed that unemployment rate fell to 5.10% in the second quarter with the previous quarter also revised to 5.0% from originally reported 5.50%. Employment growth increased 2.40% in the reported quarter.

The US dollar was seen paring its losses later in the day after NY Fed president; William Dudley said that he expected US interest rates to rise. “We’re edging closer towards the point in time where it will be appropriate I think to raise interest rates further,” Dudley said. The markets were however focused on the upcoming FOMC meeting minutes.

Data from the UK saw the July employment figures. Official data showed that the UK’s labor market remained resilient despite the referendum verdict to leave the EU. The number of people in employment increased as unemployment claims fell by 8.6k in July. The UK’s unemployment rate was steady at 4.90%, unchanged from the previous month and near an 8-year low.

The FOMC meeting minutes were released later in the day which saw the US dollar turn bearish. The minutes revealed that the Fed members were split on the prospects of rate hike with many wanting to see further economic data. Some members of the FOMC also noted that slowdown in the pace of hiring was a concern. The markets continue to price out a rate hike in September meeting as investors await the speech from Fed Chair Janet Yellen next week at the Jackson Hole symposium.

On the commodity front, Oil prices extended their winning streak this week briefly touching a 6-week high. Weekly inventory report from the EIA showed a surprise drawdown in oil inventories. While analysts expected to see an increase of 0.52 million, official EIA inventory report showed a drawdown of 2.5 million. Oil prices surged on the news, but still remain under speculative pressure. Saudi Arabia is expected to ramp up production to meet summer demand, while Iran continued to keep production at the 2.1 million barrels in output per day.

There was more bad news from the US as Friday’s retail sales report showed moderation. After retail sales had increased for two consecutive months, retail sales for June remained flat during the month, while core retail sales contracted 0.30%. Producer price index also remained weak, falling 0.40% on the month.

Thursday saw the release of the Australian labor market data. Beating estimates, Australia’s unemployment rate fell to a 3-year low to 5.70% in July, with most of the job gains coming from part-time jobs which has become an increasing trend. During the month, the Australian economy added 26.2k jobs, more than the estimates of 10k. In the UK, retail sales posted a surprise, rising 1.40% on a month over month basis. Warm weather and a weaker British pound saw both domestic and overseas consumers push retail sales higher in July.

The markets were relatively quiet on Friday, but the US dollar was seen posting a modest recovery into the weekend. In the Eurozone, German producer prices continued to fall but at a moderate pace. Gold prices were seen posting strong declines on Friday after prices closed on Thursday above $1350.

In Canada, retail sales and inflation figures were weak. Headline retail sales fell 0.10% on the month, more than the forecasts of a 0.70% increase. May’s retail sales were revised down from 0.20% to 0.00%. Excluding autos, retail sales fell 0.80% on the month, missing forecasts of a 0.40% increase. Consumer prices remained flat in June following a 0.20% increase in June and missing forecasts of a 0.20% increase.

Summary of Economic events this week

  • UK Rightmove HPI m/m -1.20% vs. -0.90%
  • Japan preliminary GDP q/q 0.0% vs. 0.20%
  • Japan preliminary GDP price index y/y 0.80% vs. 0.70%
  • Japan revised industrial production m/m 2.30% vs. 1.90%
  • Switzerland PPI m/m -010% vs. -0.20%
  • US Empire state manufacturing index -4.2 vs. 2.1
  • RBA releases monetary policy meeting minutes
  • Australia new motor vehicle sales m/m -1.30% vs. 3.50% previously
  • UK CPI y/y 0.60% vs. 0.50%; Core CPI y/y 1.30% vs. 1.30%
  • UK PPI input m/m 3.30% vs. 0.60%; PPI output m/m 0.30% vs. 0.30%
  • Eurozone ZEW economic sentiment 4.6 vs. -6.3
  • German ZEW economic sentiment 0.5 vs. 2.1
  • Eurozone trade balance 23.4bn vs. 23.2bn
  • Canada manufacturing sales m/m 0.80% vs. 0.80%
  • US CPI m/m 0.0% vs. 0.0%; Core CPI m/m 0.10% vs. 0.20%
  • US housing starts m/m 2.10% vs. 0.60%
  • US building permits m/m -0.10% vs. 0.50%
  • US capacity utilization rate 75.90% vs. 75.70%
  • US industrial production m/m 0.70% vs. 0.20%
  • New Zealand employment change q/q 2.40% vs. 0.60%
  • New Zealand PPI input q/q 0.90% vs. 0.50%; PPI output q/q 0.20% vs. 0.20%
  • New Zealand unemployment rate 5.10% vs. 5.30%
  • Australia MI leading index m/m 0.10% vs. -0.20% previously
  • Australia wage price index q/q 0.50% vs. 0.50%
  • UK average earnings index 3m/y 2.40% vs. 2.50%
  • UK claimant count change -8.6k vs. 5.2k
  • UK unemployment rate 4.90% vs. 4.90%
  • Crude oil inventories -2.5 million vs. 0.3 million
  • FOMC Member Bullard speech
  • FOMC meeting minutes released
  • Japan Trade balance 0.32 trillion vs. 0.14 trillion
  • Australia employment change 26.2k vs. 10.2k
  • Australia unemployment rate 5.70% vs. 5.80%
  • UK retail sales m/m 1.40% vs. 0.0%; y/y 5.90% vs. 4.10%
  • UK core retail sales m/m 1.50% vs. 0.10%; y/y 5.40% vs. 3.60%
  • Eurozone current account s.a 28.2bn vs. 27.3bn
  • Eurozone CPI y/y 0.20% vs. 0.20%
  • Eurozone core CPI y/y 0.90% vs. 0.90%
  • ECB releases monetary policy meeting minutes
  • US jobless claims 262k vs. 266k
  • Philly Fed manufacturing index 2.0 vs. 1.4
  • Japan all industries activity m/m 1.0% vs. 0.90%
  • Germany PPI m/m 0.20% vs. 0.10%
  • Canada CPI m/m 0.00% vs. 0.20%
  • Canada Core CPI m/m 0.10% vs. 0.20%
  • Canada retail sales m/m -0.10% vs. 0.70%
  • Canada core retail sales m/m -0.80% vs. 0.40%

Written by John Benjamin from Orbex