The US Dollar advanced on Powell’s hawkishness but fell on Trump’s criticism of this policy. What’s next? The ECB decision and the first release of US GDP stand out. Here are the highlights for the next week.
US President Donald Trump met his Russian counterpart Vladimir Putin in Helsinki in a meeting that resulted in smile and controversies but did not rock markets. Concerns about trade wars were elevated after warnings from the IMF and Larry Fink, a prominent investor, but markets seem untroubled, at least for now. Trump elevated his rhetoric against China, talking about imposing tariffs on all of around $500 billion of Chinese goods exported to the US. More importantly, Trump directly criticized the Federal Reserve for raising rates and said he preferred lower ones and also a weaker US Dollar. His words sent the greenback down. In the UK, the turmoil in parliament, talk of a “no-deal” Brexit and weak data weighed heavily on the pound.
- US Existing Home Sales: Monday, 14:00. Most transactions in the housing market are of second-hand, existing homes. Annualized sales stood at 5.43 million in May and a similar figure is likely in June: 5.46 million.
- Australian CPI: Wednesday, 1:30. Contrary to most other countries, Australia publishes inflation data only once per quarter. The pace of price rises slowed down to 0.4% q/q in the first quarter of 2018. Core inflation, known in Australia as Trimmed Mean CPI, advanced by 0.5%, faster than previously. We will now get the fresh data for Q2 2018. The publication impacts the Reserve Bank of Australia which has not changed interest rates in nearly two years. Both figures are projected to rise by 0.5%.
- US New Home Sales: Wednesday, 14:00. Sales of new homes trigger a broad range of economic activities, such as infrastructure spending. The report for May surprised on the upside by advancing to 689K annualized sales. The high levels are expected to be maintained in the figures for June.
- ECB decision: Thursday, 11:45, press conference at 12:30. The European Central Bank sent EUR/USD plunging in its previous decision on June 14th. While they announced the beginning of the end of the bond-buying scheme, they added many conditions to any tightening move and pledged to leave interest rates unchanged “through the summer of 2019”. Since then, various reports about the meaning of this phrase have floated. Any clarification or lack thereof will move the euro. Comments about trade will also be watched very closely.
- US Durable Goods Orders: Thursday, 12:30. Orders of durable goods reflect investment and are eyed by the Fed. This specific publication is for the month of June, concluding the second quarter and feeding into the GDP report the following day. Headline orders dropped by 0.4% and this volatile figure may bounce back in June: a jump of 2.7% is on the cards. Core orders, which carry more weight, remained flat in the final read. Also here, we could see a small advance: an increase of 0.5% is on the cards.
- US Advance GDP: Friday, 12:30. The world’s No. 1 economy publishes the first release of Q2 GDP. The final read for the first quarter stood at 2.3%, annualized, better than previous first quarters of the year but better than peers in the developed world. Expectations for the second quarter are already much higher, with various estimates standing at around 4% and the consensus is at an annualized jump of 4.1%. It is important to note that durable goods orders may modify projections at the last moment.