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Macro Events & News

Market Analysis
2017-05-30_09-05-37

FX News

European Outlook: Asian stocks didn’t manage to make much headway. Hong Kong was on holiday and Chinese markets remained shut for a second day. Japan’s indices moved sideways swinging between gains and losses and the ASX is currently up a modest 0.33%. A stronger Yen weighed on Japanese markets and comments from ECB President Draghi yesterday that the Eurozone economy still needs substantial monetary support may have been designed to dampen tapering speculation, but also seem to have rekindled growth concerns especially as talk of early elections in Italy sparked a fresh wave of risk aversion and political concerns. Italian bond and stock markets underperformed, EMU spreads widened and the EUR remains under pressure as U.K. and U.S. return from their holidays and the data calendar heats up. Ahead of the June council meeting today’s Eurozone ESI confidence reading and the preliminary German HICP number will be watched very carefully. The busy calendar also has French consumption and final Q1 GDP, as well as Spanish inflation and Swedish GDP.

Draghi: Economy still needs extraordinary ECB support. Draghi said the ECB “remains firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary”. Speaking at his hearing before the European Parliament, Draghi said domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation toward our medium-term objective”. More indications then that the ECB heavy weights are pushing back against a too drastic change of the forward guidance at the June policy meeting.

ECB’s Weidmann: Exit Debate legitimate given price outlook. The Bundesbank President said late yesterday that “in light of subdued price pressures, an expansionary monetary policy continues to be appropriate in principle”, but added that “given the continued economic recovery and a – by all forecasts predicted – inflation rate of just below 2 percent in the year 2019, it is indeed legitimate to ask when the ECB council should consider a monetary policy normalization”. Weidmann admitted that inflation will slow in the second half of the year as base effects from energy prices fall out of the equation and that despite stronger growth “price stability beyond traditionally very volatile energy costs are still quite muted”.

Main Macro Events Today

  • Eurozone ESI – Eurozone Economic Confidence is expected to rise slightly to 110.1 in May from 109.6. Preliminary consumer confidence came in better than expected, while EMU PMIs moved sideways at very high levels, and against that background a slight improvement in the ESI is expected, which would leave the May round of confidence data again confirming that growth continues to strengthen.
  • German May HICP – Eurozone inflation numbers are expected to fall back in May, after the Easter fueled jump in April. The German headline rate expected at 1.6% y/y down from 2.0% y/y in the previous month.
  • US Data – April personal income is forecast to rise 0.4%, while spending is seen up 0.6% and core PCE prices are set to rise just 0.2%. S&P Case-Shiller home prices are expected to rise 0.5% in March and May consumer confidence is projected to hold at an elevated 120.1 vs 120.30 in April.
  • Canada Current Account – The current account deficit, is expected to widen to -C$11.5 bln in Q1 from -C$10.7 bln in Q4.

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Andria Pichidi

Market Analyst

HotForex

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