Key Fundamental Releases this Week (7/14 – 7/18)

June Hike Door is Open, but Don't Expect the FOMC to Walk Through

We wrapped up last week seeing some JPY strength. The USD was generally softer especially against the yen, but managed to claw back some losses at the end of the week. The main theme for the US was the FOMC meeting minutes, which focused on ending QE, but did not provide any guidance on when the next rate hike would be. The Euro remained pressured, and the pound consolidated its recent gains. Here is a look at this weeks key releases that can shake up the markets.

Monday (7/14)
Draghi will speak before the Committee of Economic and Monetary Affairs of the European Parliament. If he notes deflationary risks, or possibility of QE, we are likely going to see further easing in the euro

Tuesday (7/15)
– The Bank of Japan will release its monetary policy statement. Traders are starting to put on yen-strength last week, and the USD/JPY is near its 2014-lows. If the BoJ shows no signs of slowing its stimulus measures, we might see at least some short-term comeback of JPY-weakness. Any mention of moving away from its historic stimulus can accelerate JPY’s gains.
– Germany will release their ZEW Economic Sentiment for July. German sentiment reading is forecast to be around 28.9, down from 29.8. While this would still be positive, it would be the lowest since Dec. 2012.
– From the US, we will get retail sales data for June, which is expected to show a headline reading of 0.6%, up from the 0.3% in May. The core reading is expected to show 0.5% growth. A reading in-line with estimates should help stabilize the USD as it would show positive data for the end of Q2.
– The main theme for Tuesday should be Yellen’s semi-annual testimony in front of congress. With the FOMC meeting minutes providing no clues on the rate-hike forecast, traders will be keen in how Yellen navigates questions regarding the current, historically low interest rate levels.This will be a 2-day meeting and will end on Wednesday.

Wednesday (7/16) – Busiest Day of the Week
Chinese industrial production is expected to have grown 9.0% on the year in June, slightly up from 8.8% in May. This reading would suggest that China’s slow down has not been as drastic, and that the economy continues to hum albeit at a slower rate.
Chinese GDP for Q2 is expected to show an annualized growth of 7.4%, which would match Q1’s reading.
– From the UK, we get its Claimant Count Change for June, which is expected to show a decline of 27.1K jobless claims. The previous month saw a decline of 27.4K claims. Meanwhile, the unemployment rate is forecast to drop 6.5%. These numbers would be in-line with a rate hike at the end of the year, or beginning of 2015, and should keep the GBP buoyant, though a short-term correction/consolidation is possible after the pound’s strong month in June.
– The Bank of Canada will release its monetary policy statement. The loonie has been strong, but was hampered at the end of last week by poor jobs data, which has been volatile. This statement will be followed by a press conference, which occurs 4 times a year.
– After all these key releases from China, UK, and Canada, the main risk for Wednesday might be the conclusion of Yellen’s testimony in front of congress. We should see the USD shake a lot mid-week.

Thursday (7/17)
– The US releases some second-tier data. Building permits is expected to increase to an annualized reading of 1.04M in June, from the 0.99M reading in May. Jobless claims is expected to stick around that 310K-320K level. I believe a few weeks of below 300K reading should finally convince market participants that the labor market improvement in the recent months is here to stay. Another key turnaround will have to be the increase of the participation rate, which has been the caveat to the recently better jobs data.

Friday (7/18)
Canada will release its CPI data for June, which is expected to show 0.1% inflation, down from May’s 0.5% reading. This would be the slowest month-to-month inflation rate this year, and can soften the CAD.
– The preliminary estimate of July’s University of Michigan Consumer Sentiment is expected to be around 83.5, which would be up from last month’s 82.5. A reading in-line with estimate would be the best reading this year, and highest since July 2013 (83.9). Data in-line with estimates should help keep the USD resilient IF Yellen was not too dovish during her testimony. Basically, if traders do not believe the rate hike would be after mid-2015, the USD should strengthen, and the improved UM Consumer Sentiment data can help push it along.

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