A review of the week past and the week ahead 2018 August 20th
What mattered last week:
- Turkey the focus early last week as USDTRY traded above 7.20 on Monday morning during the Asian time zone, before closing the week at about 6.01 Vs the U.S. dollar.
- Events in Turkey highlight the risks for some emerging markets facing the challenging prospect of higher yields and a stronger U.S. dollar.
- European stock indexes and bank stocks were under pressure due to their exposure to Turkey. Euro banks are the largest foreign lenders to Turkey. However, exposure including ownership of local banks, totals $160bn, or 6% of the capital base, which is not considered a threat to either individual lenders or the European banking system.
- USDCNY traded back below 6.90 after news the China Vice Commerce Minister would visit the U.S. for trade talks. The move in USDCNY was further was aided by measures undertaken by Chinese authorities to tighten offshore liquidity, which appears designed to prevent outflows and support the Yuan.
- Australian Employment fell 3.9k. The Unemployment rate which is the more important measure as far as the RBA are concerned, dropped from 5.4% to 5.3%. Wage growth data remained soft for the June quarter at 2.1% y/y.
- In the US, retail sales were solid at 0.5% m/m in July, much higher than market consensus of 0.1% a possibility flagged in last week’s update. Offsetting this, housing starts after falling -12.9% in June, only managed to etch out a miserly gain of 0.9%, much lower than the consensus forecast of 7.4%.
- Headline Canadian consumer prices jumped 0.5% in July, driven by airline costs (+16.4%) and Travel services (+7.5%). Core measures of CPI were in line with expectations and are averaging 2%, which is the measure that matters most for the Bank of Canada.
For the week ahead, the key events are:
Australia: RBA Governor Phillip Lowe speaks at the launch of ASICS National Financial Capability Strategy and the RBA minutes from the last board meeting (Tuesday). RBA Deputy Governor Guy Debelle speaks at the Economic Society of Australia Luncheon and the title of the speech is “Low Inflation”.
June half Australian reporting season continues with 70 companies due to report, including index heavy weight BHP, as well as Fortescue, A2 Milk, Woolworths, Amcor and Santos.
China: Industrial profits (Monday).
Japan: Flash Manufacturing PMI (Thursday), CPI (Friday). Inflation excluding fresh food and energy is expected to rise from 0.2% to 0.3% in July.
U.S: Existing home sales, FOMC, flash manufacturing and services PMIs (Thursday). New home sales and durable goods (Friday). The impact of higher mortgage rates is being felt by consumers who report relatively poor conditions for buying houses. Mortgage loan applications also have dropped sharply in the U.S, since early July.
The Fed will host the Jackson Hole Central Banking Symposium (23rd-25th). Fed Chair Powell will speak on "Monetary Policy in a Changing Economy". The text of his speech will be published on the Fed's website - https://www.federalreserve.gov/
Canada: Retail Sales (Wednesday) with the market expecting to see a softer number in June of 0.3% as payback after a very strong rise in May of 2.0%.
Euro area: Euro Area flash manufacturing and services PMI as well as the ECB meeting (Thursday) and Germany 2Q GDP (Friday).
UK: Public sector net borrowing (Tuesday) and Mortgage Approvals (Friday).
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