Article Highlights

  • Australia’s AIG manufacturing index up from 51.0 to 51.8 in June
  • Japan’s household spending (y/y) down by 1.1% in May vs. 1.3% decline expected, 0.4% slip in April
  • Japan’s national core CPI down by 0.4% as expected vs. 0.3% slide in April
  • Tokyo’s core CPI drops by another 0.5% in May
  • Japan’s unemployment rate remains at 3.2% in May
  • Japan’s Tankan manufacturing index remains at 6 vs. expected drop to 4
  • Japan’s Tankan non-manufacturing index down from 22 to 19
  • China’s manufacturing PMI slips from 50.1 to 50.0 in June
  • China’s non-manufacturing PMI pops up from 53.1 to 53.7
  • China’s Caixin manufacturing PMI down from 49.2 to 48.6
  • Japan’s final manufacturing PMI up from 47.8 to 48.1 vs. 47.9 expected
  • BOJ’s core CPI (y/y) slips from 0.9% to 0.8% in May
  • Japan’s consumer confidence up from 40.9 to 41.8 in May
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Forex trading was a mixed bag of nuts, as data dumps from the Asian economies and a rise in commodity prices inspired currency-specific moves for the major pairs.

Major Events:

Data dump from Japan – The Japanese markets barely felt the overall risk-friendly environment after it got one-two punched by today’s data dump.

For starters, Japan’s core inflation came in at -0.4% in May, faster than the 0.3% slip in April and marks the sharpest drop since 2013. Tokyo’s core CPI, widely considered as a leading indicator for the national reading, also came in at -0.5%.

Meanwhile the quarterly Tankan reports show that Japan’s biggest manufacturers are feeling “meh” in June from three months earlier. Then again, the survey was conducted before the Brexit vote and could be way off from the manufacturers’ current sentiments.

The silver linings in today’s releases are the employment numbers. The unemployment rate remained at 3.2% in May while the job-to-applicant ratio improved to 1.36, its best reading since October 1991. This means that 136 positions are available for every 100 job seekers.

Considering last week’s reports the overall picture remains grim for the BOJ. With the Brexit vote weighing on investor sentiment and inflation now nudged a bit farther from the BOJ’s targets, we just might see more stimulus from the central bank this month. Watch out!

China’s PMI reports – Manufacturing reports from the world’s second largest economy prevented risk appetite from gaining momentum during the Asian session.

The Caixin manufacturing PMI, the more widely observed report, came in at 48.6 in June against the expected 49.2 reading. This marks the sharpest decline in four months. A closer look reveals the quickest output decline since February, new orders falling further into contraction, and companies cutting their staff and inventories. Meanwhile, prices reflect cheaper input costs and steady output costs even after three months. Will these numbers be enough to prompt the Chinese government to load up another round of stimulus for the economy?

Recovery in commodity prices – Gotta love the markets! Thanks to the Brexit vote and weak economic report readings from China and Japan, more and more traders are expecting stimulus from the policymakers. This is probably why the high-yielding commodities climbed the charts today.

It also didn’t hurt the Black Crack that the U.S. energy minister shared that the “oil market has more supply than demand” after meeting with his Saudi Arabian counterpart in Beijing.

All eyes will be on Uncle Sam’s oil rigs data and other economic reports coming up today. For now Brent crude oil is up by 0.18% to $49.80 while U.S. oil is up by 0.10% to $48.39.

Major Market Movers:

JPY – The yen snuck in a couple more pips on a bit of risk aversion following Japan and China’s weak economic reports.

USD/JPY is down by 43 pips (-0.42%), EUR/JPY is down by 39 pips (-0.34%), and GBP/JPY is down by 32 pips (-0.23%).

Comdolls – The Aussie and Kiwi mostly shrugged off China’s weaker-than-expected PMI readings in favor of the rise in commodity prices.

AUD/USD is up by 10 pips (+0.13%), while NZD/USD is up by 11 pips (+0.15%).

Watch Out For:

  • 7:30 am GMT: Australia’s annualized commodity prices
  • 8:15 am GMT: Switzerland’s retail sales (-1.7% expected vs. -1.9% previous)
  • 8:15 am GMT: Spanish manufacturing PMI (52.1 expected vs. 51.8 previous)
  • 8:30 am GMT: Swiss manufacturing PMI (54.9 expected vs. 55.8 previous)
  • 8:45 am GMT: Italian manufacturing PMI (52.7 expected vs. 52.4 previous)
  • 8:50 am GMT: French final manufacturing PMI expected to remain at 47.9
  • 8:55 am GMT: German final manufacturing PMI (54.5 expected vs. 54.4 previous)
  • 9:00 am GMT: Italy’s unemployment rate expected to remain at 11.7%
  • 9:30 am GMT: U.K.’s manufacturing PMI (50.0 expected vs. 50.1 previous)
  • 10:00 am GMT: Euro Zone’s unemployment rate (10.1% expected vs. 10.2% previous)

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