The Weekly Update

Further weakness was seen Friday in the US economic data as both Retail sales and the CPI index came in lower-than-expected although previous revisions offset somewhat. This caused US Treasury yields to finish the week around 6bp lower from last Monday’s level and moved the futures market to drop below 80% for a June 14th Fed rate hike, still very much odd’s on. This week we have limited data in the US with Empire Manufacturing today and Capacity Utilisation (CU), Industrial production (IP) along with housing starts tomorrow and the Phili Fed and Leading index on Thursday. Not much to impact markets with IP the focus. Of course we do have a number of Fed members speaking which is always of interest and watch out for any cyber-attacks coming across Twitter from the President of the United States.

The EU is also rather lacklustre in terms of economic evidence this coming week, with just Italian CPI and Greece GDP today, focus will be on tomorrow with the UK’s RPI, CPI and PPI releases as well as EC trade, Germany’s ZEW, French CPI and Italian GDP. Wednesday EU CPI data, UK unemployment and Italian trade are the highlights and Thursday French unemployment and UK Retail sales may be of interest. We close the week looking at Germany’s PPI and the ECB’s Current account.

Overnight we had Chinese IP for April at 6.5% YoY, lower than the 7% expected we also had Retail sales at 10.7% YoY, a tad weaker than expectations. We also had Japanese PPI coming in at 0.2% against -0.1% and Thai GDP YoY at 3.3% better than the 3.1% expected. Tomorrow the RBA minutes from their May meeting will be watched as the statement after the meeting was slightly more upbeat than those of April, we also have New Zealand’s PPI data and Japan's Tertiary Industry Index to contend with. Wednesday the attention will be with Japan as Machinery orders, CU and IP take centre stage although Aussie wages and Malay CPI are also on the agenda. Thursday Japan's GDP and Foreign bond buying data, Australian unemployment and New Zealand consumer confidence lead into Friday and Philippine and Malaysian GDP close the Asian week.

Latam is also looking at a quiet week with Mexican International reserves Tuesday, Chilean GDP Thursday and Colombian GDP Friday.

More of interest could be Russia where we get CPI, GDP and the intriguing Gold and Forex reserve data which is expected to continue to move higher. The last release was at $398.8 billion with the recent low, April 2015 at $350.5 billion, way below the $520 billion levels seen in 2013 before the fall during 2014 of around $132 billion. We know the Russian central bank is active in the Forex market adding to their foreign currency as the oil price has stabilised above $50 making Russia’s production profitable again. They also have one eye on the Ruble which is trading around 57 to the US dollar. You may recall Russia effectively devalued the Ruble during the oil weakness of 2014/2015 pushing it down from the USD 34.00 level to as weak as 82.00 in early 2016, so the move to today’s level is a 32% Ruble strengthening from the lows which means the oil revenue in US dollars buys far less Rubles to pay the production costs; this warrants monitoring especially if you are a Russian central banker sitting under President Putin’s gaze.
 

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