July 9, 2018

Orbex, Market Trend: 3 Main Economic Events from last week

The U.S. dollar was seen trading subdued for the most part of the week.

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This article is originally referred from Orbex Market Review.

The weakness in the Greenback came amid rising trade tensions.

With most of the trade tariffs expected to come into effect, the markets were on the back foot.

A strong patch of U.S. economic data failed to support the greenback as well.

Events this week include the ISM’s manufacturing and the non-manufacturing PMI’s, both of which beat the median forecasts.

The FOMC minutes showed that officials were on track for two more rate hikes this year.

U.S. unemployment rate rises in June

The latest monthly payrolls report from the U.S. Bureau of Labor Statistics showed that while the economy added a higher than expected number of jobs, wage growth remained subdued while the unemployment rate ticked higher.

After falling to an 18-year low at 3.8%, the U.S. unemployment rate rose to 4.0%. This came amid a higher participation rate as more people were seen looking for jobs.

The economy added 213,000 jobs on a seasonally adjusted basis in the month of June.

U.S. Un employment Rate (June 2018): 4.0% (Source: Tradingeconomics)

Revisions to the previous two months of May and April showed an upward net revision of 37,000.

The average hourly earnings were seen rising 0.2% on a month over month basis. This was below the forecasts of 0.3% increase.

Most of the job gains came from the manufacturing sector including healthcare and business services. The retail industry was seen lagging behind. The U.S. dollar was seen trading subdued following the payrolls report on weaker pace of wage growth and the uptick in the unemployment rate.

With the data for June, the U.S. economy was seen adding jobs for 93 consecutive months.

The average pace of job gains were also higher in the first half of the year compared to the previous year.

The participation rate although higher was seen rising by just 0.6 percentage points from 2015. The participation rate was registered at 62.3%, while in June 2018, the participation rate increased to 62.9%.

BoJ Tankan survey eases further in Q2

The Bank of Japan’s quarterly Tankan manufactuing and non-manufacturing index showed that business sentiment in the region continued to decline.

The index fell more than expected during the second quarter. The declines were attributed to rising trade tensions globally.

BoJ’s Tankan index for large manufacturers dropped three points in the second quarter to 21.0 coming below estimates of the median forecasts of 22. The headline print for sentiment across all industries and companies fell by one point to 16.

The Bank of Japan is seen to rely heavily on the index due to this high response rate.

The large manufacturers expect that the dollar – yen rate would be around 107.26 during the second half of the year compared to the previous expectations of 109.68.

The data for production capacity at large manufacturing firms worsened from -4 to -6 underlining the fact that demand continued to outpace the firms’ capacity.

RBA keeps monetary policy at record lows

The Australian central bank held its monetary policy meeting last week on Tuesday.

As widely expected, the central bank decided to leave the key interest rates unchanged at historic lows of 1.50%.

This came amid concerns of rising global trade wars and that a weaker exchange rate could support exports.

The central bank, in its monetary policy statement said that

“The Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

Policy makers reiterated that the low interest rate would continue to support the economy. The statement said that:

“Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.”

The central bank however maintained a positive outlook on the labor market noting that various indicators pointed to solid growth in the labor market.

The central bank also said that wage growth remained weak due to increasing shortage of skilled workers in some sectors.

Original Source: Orbex Market Review

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