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With the G20 Underway, the Markets Play it Safe Early

Throughout most of last week, we focused on the risk that the G20 Summit held a gapping risk, knowing that the bar was low for a positive surprise.

Earlier in the Day:

Economic data was on the heavier side through the Asia session this morning. Out of Japan, key stats included May’s job/application ratio, industrial production figures, and Tokyo’s June inflation numbers.

Out of Australia, May private sector credit figures provided the Aussie Dollar with direction.

Ultimately, however, the stats had a muted impact on the pairings. The G20 Summit got underway this morning and there was plenty for the markets to consider going into the weekend.

For the Japanese Yen

May’s job/applications ratio came in at 1.62, marginally lower than April’s 1.63. Tokyo’s annual rate of baseline inflation eased from 1.1% to 0.9%, which was worse than a forecasted 1%.

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According to consumer price figures released by the Ministry of Internal Affairs and Communication,

  • Prices for transportation and communication fell by 1.4%, weighing on core inflation.

  • A 3.6% jump in charges for fuel, light and water and a 2.4% rise in prices for furniture and household utensils provided support.

  • There were also price increases for culture and recreation (+1.6%), clothes and footwear (+0.8%), housing (+0.7%), and education (+0.7%).

  • Prices for Medical Care rose by just 0.6%.

  • By sector, prices for goods rose by 1.6%, whilst prices for services increased by just 0.7%.

The Japanese Yen moved from ¥107.729 to ¥107.728 upon release of the figures, which preceded the industrial production numbers.

Industrial production rose by 2.3% in May, month-on-month, according to prelim figures. Forecasts were for a 0.2% rise off the back of a 0.6% increase in April.

According to prelim figures released by the Ministry of Economy, Trade, and Industry,

  • Industries that mainly contributed to an increase were:

    • Motor vehicles

    • Electrical machinery and information and communication electronics equipment.

    • Production machinery.

  • Industries that mainly contributed to a decrease were:

    • Transport equipment (excl. motor vehicles).

    • Other manufacturing.

The Japanese Yen moved from ¥107.04 to ¥107.748 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.09% to ¥107.69 against the U.S Dollar.

For the Aussie Dollar

Private sector credit rose by 0.2% in May, month-on-month, following a 0.2% increase in April. Economists had forecast for a 0.2% increase in May

According to figures released by RBA,

  • Personal credit fell by 0.6%, following a 0.3% fall in April.

  • Housing credit rose by 0.2%, following a 0.3% rise in April.

  • Business credit rose by 0.1%, after stalling in April.

  • Year-on-year, total credit increased by 3.6%, compared with 4.8% in May 2018.

  • Housing credit slid by 3.2%, year-on-year. In May 2018, housing credit had fallen by 1.4%.

The Aussie Dollar moved from $0.70048 to $0.70006 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.12% to $0.6999.

Elsewhere

At the time of writing, the Kiwi Dollar was flat at $0.6700.

The Day Ahead:

For the EUR

It’s another relatively busy day ahead on the economic data front.

Key stats include June prelim inflation figures for France, Italy and the Eurozone. French consumer spending and Spanish 1st quarter GDP numbers are also due out.

We would expect the inflation numbers to be the key driver and the Eurozone core inflation figures in particular.

The stats will likely have a muted impact on the day, however, with updates from the G20 Summit the key driver on the day.

At the time of writing, the EUR was down by 0.02% to $1.1367.

For the Pound

It’s a busier day ahead. Key stats due out of the UK include finalized 1st quarter GDP, current account and business investment figures.

Barring deviation from prelim, the stats are unlikely to have an impact, with the focus remaining on Brexit and the leadership race.

Away from the UK, the G20 Summit will also be in focus, though we would expect the Pound to be more resilient to any negative chatter.

At the time of writing, the Pound was down by 0.02% to $1.2672.

Across the Pond

It’s a relatively busy day on the economic calendar.

Key stats due out of the U.S include the FED’s preferred core PCE price index and personal spending numbers in the early part of the session.

The focus will then shift to Chicago’s June PMI numbers and finalized consumer sentiment figures for July.

We will expect the inflation and personal spending figures to be the key driver from the economic calendar. FED Chair Powell as assured the markets of monetary support should inflation soften…

Outside of the stats, Trump is back on the world stage at the G20 Summit. Will China cower to Trump’s demands or draw support from the rest of the world.

At the time of writing, the Dollar Spot Index was up by 0.02% to 96.211.

For the Loonie

Following a quiet week, April GDP and May RMPI numbers will provide direction in the early afternoon.

By the time the stats are out, the markets will have an idea of how Trump – Xi talks are progressing.

It will all boil down to when the two will meet and then update via the news media.

It’s not just China that will be in focus, with the latest sanctions on Iran likely to also create some debate over the right approach.

Will Trump snub Canadian Prime Trudeau for a 2nd time? Trudeau has been caught in the middle of the U.S – China trade war and it hasn’t been the best place to be…

The Loonie was down by 0.02% to C$1.3098, against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

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