July 29, 2016
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United States (US) Consumer Sentiment was revised up by 0.5 points in late July to 90.0%, compared with market expectations for an increase to 90.2%. Sentiment has improved by 1.0 points over the past 3 months. With this month's modest decline, compared to June's final level of 93.5%, sentiment is 3.3% below its year ago level. This month’s drop is likely due to concerns regarding Brexit. On another note, manufacturing activity in the Chicago region expanded moderately in July to 55.8%. So far the score for the regional surveys is mixed but still in favor of a slightly better activity (Richmond, Philly and Dallas over this, Empire and Kansas City), suggesting a modest increase of about 1.0% to 53.7% is possible for ISM Manufacturing, modestly higher than the current market consensus of a decline to 53.0%. Also on another note, employment cost index rose by 0.6% during the 3 months ended in June 2016, in line with market expectations. Labor compensation is 2.3% above its year ago level, modestly above the year-over-year increase in headline consumer inflation thus moving real labor compensation modestly higher. Employment cost inflation peaked at 4.4% in 2002. Wages and Salaries rose by 0.6% and are now 2.5% above their year ago level. Since late 2009, wage growth had flattened out at a very weak rate but is now rising modestly.
Australia’s dollar traded at 75.99U.S. Cents at 10:45 AM PST and New Zealand dollar traded at 72.18 U.S. cents. Final demand producer prices in Australia advanced 0.1% on quarter and 1.0% on year in the second quarter of 2016. Domestic prices added 0.3% on quarter and 0.9% on year, while import prices slipped 1.6% on quarter and climbed 2.1% on year. The total number or building permits in New Zealand issued in June surged a seasonally adjusted 16.3% on month, coming in at 2,752. That follows the 0.9% decline in May. On another note, Business confidence in New Zealand deteriorated in July, with an index core of 16.0. That's down from 20.2 in June. The activity outlook also was down, slipping to a reading of 34.1 from 35.1 in the previous month.
Euro traded at 1.1163 against USD at 10:45 am PST. Eurozone economic growth halved in the second quarter, GDP rose by 0.3% between April and June, in line with expectations but below 0.6% growth in the first quarter. France, the Eurozone’s second-largest economy, saw no growth after expanding by 0.7% in the first quarter. Eurozone inflation rose to 0.2% in July from 0.1% in June as a result of higher food, alcohol and tobacco prices. Data also revealed that the Eurozone jobless rate remained at 10.1% in June. The economic growth figures are the first to be published since Britain voted to leave the European Union (EU).
British Pound exchange rate is 1.3232 against USD at 10:48 am PST. Consumer confidence in the UK has "dramatically" fallen in the month following the Brexit vote. The confidence barometer now stands at -12, compared to -1 in June's poll before the referendum. It shows that consumers are less optimistic about their personal finances for the next 12 months, and that many believe the economy will generally worsen in the coming year. There was also a considerable drop in the public mood when it came to willingness to make a major purchase at some point over the next year.
Japanese Yen traded at 102.10 per USD at 10:48 am PST. The Bank of Japan expanded stimulus on Friday by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government and financial markets for bolder action. Treasuries fluctuated as tumbling Japanese government bonds dragged global sovereign securities lower after a Bank of Japan policy announcement that disappointed investors looking for a bigger stimulus. Japanese benchmark 10-year bonds sank the most in three years as the BOJ expanded its purchases of exchange-traded equity funds, while refraining from making a deeper cut to its negative interest rate or increasing the amount of government debt it buys to boost growth and reduce the risk of deflation. BOJ Policy rate was kept at -.1% despite expectations for further decrease to -.15%. Also on another note, the unemployment rate in Japan fell to 3.1% in June. That was beneath expectations for 3.2%, which would have been unchanged from the May reading. The job-to-applicant ratio was 1.37, matching forecasts and up from 1.36% in the previous month. On another note, Japan’s national consumer price index (CPI) declined 0.4% in June from a year earlier, following a similar decline in May. It was the fourth consecutive month contraction. Japan Tokyo CPI ex Food, Energy (YoY) down to 0.3% in July from previous 0.4%.
Canadian dollar traded at 1.3060 per USD at 10:48 am PST. Canada's economy suffered its biggest one-month contraction in May since March 2009 as wildfires in northern Alberta caused a sharp drop in oil extraction, reinforcing expectations that the economy shrank in the second quarter. Monthly gross domestic product fell 0.6%in May, exceeding economists' expectations for a decline of 0.4%. The wildfires that started in May around the Fort McMurray area in Alberta disrupted production in the province's oil sands and forced residents from their homes in what is expected to be the country's costliest-ever natural disaster. As a result, output from the non-conventional oil extraction industry saw a 22% drop for the month. Activity in the goods-producing sector overall fell 2.8%, including a 2.4% decline in manufacturing on a drop in output at petroleum refineries.
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.