Market movers today
The release of US Empire manufacturing and retail sales are the two most interesting things on today’s calendar.
The week is overall rather quiet, but a few highlights include Fed Chair Powell’s testimony tomorrow, the UK jobs report also due out tomorrow and UK inflation on Wednesday. In terms of events, US President Trump is meeting the Russian President Putin later this week.
Selected market news
A number of key data points for the Chinese economy were published overnight. Retail sales grew 9.0% y/y in June’s slightly higher-than-consensus expectation, industrial production expanded 6.0% y/y in June, disappointing consensus, while fixed investments rose 6.0% y/y in June in line with the expectation. Overall, the Chinese economy expanded 1.8% q/q and 6.7% y/y in Q2, about as expected by consensus. This is a bit lower than the growth observed over recent quarters.
The oil market managed to recover some of the lost ground towards the end of last week, with the price on Brent crude creeping back above USD75/bbl. The oil market is likely to have found some comfort in the unchanged US oil rig count, which has not increased for a couple of months now. On the other hand, the market will stay on its toes following speculation that the US will tap into its strategic petroleum reserves.
This morning, we have published our FX forecast revisions. Overall, we have made few changes this month with the most noteworthy changes being higher near-term profiles for EUR/SEK and USD/JPY.
Tit-for-tat trade disputes and the risk of an escalating trade war are likely to stay as a market theme at least until the US mid-term elections in November. This morning, we published FX Strategy – FX ripple effects of global trade war, in which we have developed a framework for how to analyse the impact on FX markets of a wider ranging trade war. In short, our score card approach indicates that the Scandies and CHF are particularly exposed, EUR and GBP moderately so while JPY and USD are among the currencies least exposed. Specifically for the NOK, however, we will have to see a significant escalation in the conflict before Norges Bank postpones its first rate hike in September. That said, in the near term, the global risk environment and ‘summer trading’ should help keep EUR/NOK in a range.
