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Weekly Market Review - June 10-14
This week, the US dollar has been the best performer among Forex majors, adding 0.79% against euro, 0.13% against Japanese yen, and 0.88% against the British pound. The euro has weakened amid several negative economic reports, which push the European Central Bank (ECB) to consider more stimulus measures.
In the commodities market, gold and silver are benefiting from their status of safe-haven assets amid the current trade tensions between the US and China. The precious metals rose 0.97% and 0.63%, respectively.
Bitcoin has consolidated above the $8,000 level after gaining over 5% for the week.
Macroeconomic News
Japan’s GDP Unexpectedly Rose
Japan’s economic growth in the first quarter demonstrated a faster pace than initially expected, primarily due to capital spending. However, economists are still worried that global trade tensions, with the US and China in the epicentre, will put pressure on the country’s economy. Japan’s GDP increased at an annualised 2.2% in the first quarter, beating analysts’ forecasts at 2.1%. In the previous quarter, the economy grew at a rate of 1.8%.
The UK Economy Affected by Lower Car Production
The British economy significantly cooled in April, mainly because of the largest drop in car production, as automakers couldn’t reverse closures scheduled for the Brexit date on March 29, which was eventually delayed. At the start of 2019, many car manufacturers said that they would temporarily shut down operations in Britain for April. The UK’s GDP contracted by 0.4% in April, after a March drop by 0.1%, which is below analysts’ expectations. The pace of annual growth slowed to 1.3%.
Bank of France Cuts GDP Outlook
The Bank of France cut its economic growth forecast, citing weakening demand from trading partners for exports. Besides, consumers tend to save extra income instead of spending it. Thus, the central bank anticipates that the GDP would add 1.3% this year and 1.4% in 2020, compared to previous estimates at 1.4% and 1.5%, respectively. The forecast for 2021 was maintained at 1.4%. Externally, France is affected by the slowing of global trade growth.
US Government Budget Deficit Was $208B in May
The US government unveiled a $208 billion budget deficit last month as the slight increase in revenue couldn’t offset the higher spending on the military and social welfare programs, including Medicare. On Wednesday, the Treasury Department said that government spending rose to $440 billion, which is 21% higher than in May 2018, while receipts rose 7% year-on-year to $232 billion. Thus, the resulted deficit is the highest ever for the month of May and below analysts’ expectations of $185.5 billion.
US Import Prices Tumble 0.3%
US import prices demonstrated the biggest decline in five months in May driven by a drop in the cost of goods, which points to weak inflation that increases the chances of an interest rate cut by the Federal Reserve this year. On Thursday, the Labor Department announced that import prices fell 0.3% in May, which is the worst reading since December. Data for April was revised down to reflect a 0.1% decline instead of a previously reported increase by 0.2%. Year-on-year, import prices fell 1.5% in May.
US Core Inflation Couldn’t Reach Target Level
The US core consumer price index (CPI), which excludes energy and food prices, failed to keep up with the target level. On Wednesday, the Labor Department said that core inflation rose 2% in May compared to the same period in 2018, below forecasts. In monthly terms, the indicator rose 0.1%, after showing the same growth rate in the previous three months. The broader CPI increased 1.8% year-on-year, also below expectations. Core CPI is closely monitored by the Fed and might force it to cut interest rates by the end of 2019.
Upcoming News to Watch
Next week, the markets will continue to watch the trade tensions between the US and China. Separately, investors will monitor whether Mexico succeeds in implementing the conditions of the deal with the US after Trump decided to temporarily suspend the 5% tariff on Mexican goods.
On Tuesday, the Reserve Bank of Australia will present its meeting minutes.
Wednesday will be a big day, as the Fed will present its interest rate decision while the Federal Open Market Committee (FOMC) of the Fed will release its statement. The central banks of Brazil and Japan will also reveal their interest rate decisions.
On Thursday, the Bank of England will present its interest rate decision and the meeting minutes.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets.
