US Dollar edges higher as China’s data comes in lower than expected
The US dollar gained Monday while commodity sensitive currencies tumbled after Chinese data shows economic growth rate falls short of forecasts, giving the US dollar headway as an investor safe haven.
Chinese industrial output grew 3.8% in July from a year earlier, coming in under the anticipated 4.6% expected where retail sales rose 2.7% from a year ago against the anticipated expectation of 5%. With the missed reports and growth outlook for the second largest economy in the world shows lackluster results, the Peoples Bank of China cut it’s one-year medium-term lending facility by 10 basis points to 2.75% in a surprise move and now all eyes are on the Federal Reserve and their stance on increase and pace of the US interest rate hikes. The U.S. inflation data was weaker than expected last week fueling investor hopes that the central bank could ease back on its aggressive tightening. This puts the release of the Fed’s July meeting, on Wednesday, firmly in focus.
CANADIAN DOLLAR
Statistics Canada is set to release the latest set of consumer price inflation data on Tuesday where the median estimate among economists is a 7.6 per cent year-over-year rise in July.
In June the CPI data climbed to the highest year-over-year level since January 1983. Surging gasoline costs were a big contributor to overall inflation, with prices rising 6.2 per cent on the month and 55 per cent year-over-year. After a larger-than-expected full-point interest rate hike in July, Bank of Canada Governor Tiff Macklem said he expects inflation to continue to run hot for the rest of the year.
Canadian Manufacturing sales fell 0.8 per cent to $71.8 billion in June. The move lower came as sales fell in eight of the 21 industries tracked by the agency and followed a 1.1 per cent drop in May according to Statistics Canada
Statistics Canada said sales in the petroleum and coal industry fell by 7.8 per cent in June as concerns over the global economic slowdown led to lower demand for energy products and contributed to the lower sales.
The CPI will not be the only inflationary index due this week in Canada as investors will also be keeping an eye on the industrial product and raw materials price indices due Thursday.
It is anticipated that the Bank of Canada’s hawkish stance to continue with the next anticipated increase slated for September.
Trade ranges CAD USD 1.2640-1.3135
GREAT BRITISH POUND
The UK’s economy shrank in the second quarter as the country’s cost-of-living rises. Official figures published showed that the UK gross domestic product shrank by 0.1% quarter on quarter in the second three months of the year, less than the 0.3% expected. Inflation hit a 40-year high of 9.4% in July and is expected to continue rising through to the end of 2022. Britain is expected to have the slowest growth among major industrialized nations next year as double-digit inflation and rising interest rates squeeze household spending.
Trade ranges CAD GBP 1.5321-1.5804
EURO
Investors await euro zone flash GDP and HICP inflation numbers due this week, as stocks gain to two month highs as signs of a slowing Chinese economy prompted European investors to turn to safe haven investing.
Inflation in the eurozone is continues to set record highs, hitting 8.9 per cent in July; up from 8.6 per cent in June, 8.1 per cent in May, and 7.4 per cent in April, as Europeans continue to see soaring energy and food prices fuelled in part by the war in Ukraine. The European Central Bank raised interest rates for the first time in 11 years by a larger-than-expected amount, as it targets to combat high inflation and plans to target further hikes in September.
Trade ranges CAD EUR 1.2963- 1.3293
JAPANESE YEN
Japanese Prime Minister Fumio has ordered the government to hold off on raising the price of imported wheat it sells to retailers in October – a move that would assist households to cope with surging commodity prices, and to come up with a package to subsidize its citizens. Chief cabinet secretary Hirokazu Matsuno said the government will aim to compile the package of measures early next month, and tap roughly 4.7 trillion yen ($35 billion) remaining in state reserves to cover the cost.
Coping with rising commodity costs has been among top priorities for Kishida’s and the administration, as Japan’s heavy reliance on imports for energy and food makes its economy vulnerable to rising global raw material prices.
Trade ranges CAD JPY 100.40- 106.35
MAJOR /HIGH RISK REPORTS DUE THIS WEEK
| MON AUG 15 | |
| USD | Empire State Manufacturing Index |
| AUD | Monetary Policy Meeting Minutes |
| TUES AUG 16 | |
| CAD | CPI m/m |
| CAD | Common CPI y/y |
| CAD | Median CPI y/y |
| CAD | Trimmed CPI y/y |
| AUD | Wage Price Index q/q |
| NZD | Official Cash Rate |
| NZD | RBNZ Monetary Policy Statement |
| NZD | RBNZ Rate Statement |
| NZD | RBNZ Press Conference |
| WED AUG 17 | |
| USD | Core Retail Sales m/m |
| USD | Retail Sales m/m |
| USD | FOMC Meeting Minutes |
| AUD | Employment Change |
| AUD | Unemployment Rate |
| THUR AUG 18 | |
| USD | Philly Fed Manufacturing Index |
| USD | Unemployment Claims |
| USD | Existing Home Sales |
| GBP | Retail Sales m/m |
| FRI AUG 19 | |
| CAD | Core Retail Sales m/m |
| CAD | Retail Sales m/m |