This Week's Data and Events
The US currency finished the week on a decent note, after being able to either fully reverse or at least reduce earlier losses. A pullback in the oil price and the stock indices provided an island of peace. Washington worked hard to put on a façade of normalcy on the financial disaster that has been eating away wealth and threatened a worldwide depression. It worked last week. The dollar remains weak in the medium term, but if the oil drops below $125/gallon, perhaps it can mount a more sustainable recovery.
This Week's Data and Events
United States
The US economic calendar will begin on Monday with the release of the Leading indicators report for June. That's not typically a market mover, but the market is starved for any good news about the economy that a positive report might support the dollar briefly.
The Fed will release its Beige Book on Wednesday; low growth, high inflation? Sounds about right...
Thursday will host the release of the existing home sales report for June.
Friday will bring a host of more significant data. The new home sales report for June should be key, but keep in mind that the report may be inflated because a change in New York regulation.
The durable goods orders report for June and the final University of Michigan confidence Index for July are due on Friday as well.
The Eurozone
The Eurozone economic agenda will start on Tuesday with the release of the Italian consumer confidence index for July. This is irrelevant in itself, but the piling of weak data from non-core Eurozone members should increase discomfort with the overbought euro.
The French consumer spending report for June is due on Wednesday.
Thursday will be a busy day in the Eurozone. The core report is Germany's IFO index of business confidence for July.
But also be on the look out for the Eurozone PMI manufacturing index and services index for July, the Eurozone current account report for May, the French business climate index for July, and the Italian business confidence index for July.
Date GMT Event Period UBS Previous Market
Japan
The Japanese economic calendar will open on Tuesday with the release of the all industry activity index for May; this is a yawner for FX.
The merchandise trade balance report for June is due on Thursday.
Friday will see the release of the Nationwide CPI report for June and of the Tokyo CPI report for July.
The UK
The UK calendar will start on Monday with the release of the Rightmove house prices report for July. The housing sector remains in trouble and it's too early to expect a real improvement.
On Wednesday, look out for the release of the MPC minutes, the BBA loans for house purchases report for June, and the CBI industrial trends survey for the third quarter.
Thursday will see the release of the retail sales report for June.
Friday will see the release of the index of services report for May and of the second quarter GDP data.
Canada
Canada's economic calendar will begin on Tuesday with the release of the retail sales report for May.
The CPI report for June is due on Wednesday.
Past Week's Data and Events
United States
It was a tad surprising that the oil price dropped so much so fast and the uninformed media got excited by the drop in price; of course, the way to think in percentages, and that decline measured less than 10%. Can any “expert” still say it with a straight face that speculation is nor rampant in this sector and that a few giant specs are actually dragging us in (at least) a recession?
The economy is worsening, and if we see any bounce, it will only be temporary - in an election year, you seem one needs window dressing. We were all happy that Citibank and a few other big names had less-horrible-than-expected earnings. But their disease is not gone and we van only hope it's curable. In fact, Federal Reserve Chairman Bernanke signaled policy makers are unclear about the direction of interest rates because the risks to both growth and inflation have increased. Wait until jobs really start to dry up.
Inflation remains enormous, as one can see with the naked eye.
PPI surged 1.8 percent in June, the biggest gain since November and followed a 1.4 percent jump in May. This was the sixth month of an increase in inflation. Surprise! The core PPI apparently increased by only 0.2 percent.
In the same vein, CPI surged 1.1 percent in June, the most since September 2005, after a 0.6 percent gain the prior month. Core CPI climbed 0.3 percent. Inflation is obviously soaring on costs for fuel and food.
Retail sales were not so bad, all things considered. The headline number rose only 0.1 percent in June, as auto sales posted their biggest drop in more than two years, and the May report was revised downward to +0.8 percent from a 1.0 percent rise. Excluding autos, retail sales rose 0.8 percent. On a yearly basis, sales expanded 3.0 percent from 2.1 percent.
The New York Fed's "Empire State" general business conditions index improved to -4.92 in July from -8.68 in June. But remained in negative territory since January. The sub-index of prices paid rose to 77.89 in July from June's 66.28.
Business inventories rose by a less than expected 0.3 percent in May, while sales rose 0.8 percent.
Industrial production unexpectedly rose 0.5 percent in June after an unrevised 0.2 percent drop in May. Meanwhile, capacity utilization rose in June to 79.9 percent from 79.6 percent in May.
Net overall capital flows reversed sharply to show outflows of $2.5 billion in May, from an upwardly revised inflow of $61.6 billion (from $60.6 billion) in April, the Treasury Department said.
Housing starts rose 9.1 percent to a 1.066 million pace from a revised 977,000 rate in May. But don't get excited. Excluding a change in New York City building codes, however, starts would have decreased by 4.0 percent! Building permits climbed to 1.091 million from 0.978 million.
The Philly Fed contracted for the eighth consecutive month, this time by 16.3 in the month of July. Any reason to expect the ninth month to be positive? No!
Initial jobless claims gained 18,000 to 366,000 in the week ended July 12 from the upwardly revised figure of 348,000 (originally 346,000).
The Eurozone
The euro/dollar spiked up to an all-time high but then promptly reversed gains. The pair remains in an uptrend for the time being. Let's keep one thing straight: the Eurozone economy is in increasing trouble and the euro is strong only because the US problems are bigger that theirs!
The Eurozone industrial production contracted by a massive 1.9 percent in May, the biggest decline since December 1992, and this led the annual growth rate to decrease 0.6 percent. But this didn't prevent euro/dollar from rallying on Monday.
The ZEW research institute's gauge of German economic sentiment fell to -63.9 in July from -52.4 in June, the lowest since the survey began, but this didn't preclude euro/dollars to reach 1.6000.
Along the same lines, confidence among French manufacturers fell to 95 in June, the lowest since July 2003, from a revised 96 in May.
The final Eurozone CPI report for June confirms the headline inflation rate rose from 3.7 percent to a new record high of 4.0 percent.
German producer prices rose 6.7 percent in June from a year earlier, the most since March 1982, after rising an annual 6 percent in May.
The euro/dollar was capped on Friday by European Central Bank President Trichet, who said the Eurozone growth is likely to be weak in the second and third quarters.
The Eurozone trade balance recorded a deficit of 1.5 billion euros in May, after a
downwardly-revised 1.4 billion euros surplus in April.
Japan
After marking time or four weeks, dollar/yen traded stupidly; it first collapsed and then surged +300 pips without an obvious reason. Oh, such is life in the exciting world of FX!
Fundamentally, Japan had nothing to offer.
Bank of Japan left interest rates on hold at 0.5 percent, but downgraded its growth forecasts, warning high energy costs will its economy.
The tertiary index decreased 0.2 percent.
The UK
Sterling/dollar made a sharp rally to a four-month high before giving nearly all of it up. That's because fears of inflation conflicted with concern about the slowing economy. Well, it's a mini-US after all, isn't it?
The UK producer prices surged 2.1 percent in June, with the output prices up 0.9 percent and core output prices up 0.3 percent.
Also, consumer prices rose 0.7 percent in June and climbed 3.8 percent on a yearly basis. This exceeds the government's 3 percent upper limit for a second month and the highest reading since records began in 1997. The core CPI accelerated to 1.6 percent in June, the fastest pace since August 2007.
The RICS Housing Market Survey fell to -88 percent in June, near the record low of -94 percent reached in April, and below the trough reached in the 1990s housing market crash (-64 percent).
The labour report shows that employment is worsening. The claimant count in June rose by 15,500 rise, the biggest monthly rise since 1992, and May's rise was revised upward by 5,000 to 14,300. The ILO unemployment rate is 5.2 percent.
The budget deficit widened to 9.2 billion pounds in June and rose to 24.4 billion pounds in the second quarter.
Canada
Dollar/Canada continued to consolidate last week.
The Bank of Canada left its key interest rate unchanged at 3 percent, the lowest since December 2005, as economic risks are balanced between inflation and the slowest growth since the country's last recession.
Canadian factory shipments rose 2.7 percent in May, the largest one-month gain since March 2007 and more than five times as much as expected. The surge owes to rising sales of petroleum and coal products. But the loonie showed little reaction.
Canada's dollar rose after a government report showed foreigners increased holdings of the nation's securities by a net C$10.7 billion in May.
The composite leading index was unchanged in June after increasing 0.2 percent in May and 0.1 percent in April, as weakness in housing and new orders for factory goods offset strong consumer spending. The housing index declined 1.1 percent after increasing 1.9 percent in April.
Switzerland
Dollar/Swiss franc surged from near parity, but the downtrend remains in place.
The Swiss ZEW fell to -76.9 in July from -63.8 in June.
Australia
The Australian dollar gave up gains after nailing another multi-decade high last week. Only of the commodity prices start declining from the stratosphere will the Aussie & Co start feeling the force of gravity.
Cornelius Luca
http://www.gftforex.com
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