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It was a mixed session for the major currencies, as this week’s major themes got mixed in with a bit of profit-taking.

  • U.K. GfK consumer confidence down to -10 vs. -7 expected, -5 in May
  • Japan’s household spending (y/y) slips by 0.1% vs. -0.7% expected, -1.4% previous
  • Japan’s national core CPI (y/y) rises to 0.4% as expected vs. 0.3% in April
  • Japan’s Tokyo core CPI (y/y) flat vs. 0.2% gain expected, 0.1% in May
  • Japan’s unemployment rate (y/y) up to 3.1% vs. 2.8% expected and previous
  • Japan’s preliminary industrial production down by 3.3% vs. 3.1% slip expected, 4.0% uptick in April
  • China’s manufacturing PMI shoots up to 51.7 vs. 51.0 expected, 51.2 previous
  • China’s non-manufacturing PMI up from 54.5 to 54.9 in June
  • AU private sector credit retains 0.4% growth in May as expected

Major Events/Reports:

Japan’s data dump

It was a mixed day for Japan’s medium-tier reports, household spending and employment slip even as headline prices rose for another month.

Data from Japan showed that household spending dipped by 0.1% from a year earlier in May, which is an improvement from April’s 1.4% decline but nevertheless extends the streak to 15 months.

Consumer prices might have something to do with it. See, falling prices tend discourage consumers who would rather wait for prices to drop further than spend their moolah right now.

Thing is, inflation prospects aren’t improving fast enough. Japan’s core consumer prices rose for a fifth straight month in May, this time by 0.4% from a year earlier.

However, Tokyo’s core CPI, which many consider a leading indicator for the country’s price trends, showed a flat reading in June after gaining by 0.2% in May.

Japan’s employment was also iffy, as the unemployment rate unexpectedly rose from 2.8% to 3.1% even as the jobs-to-applicant ratio inched higher from 1.48 to 1.49 to mark the highest since February 1974.

Basically, today’s reports tell us that:

  • There are still no significant uptrends in consumer prices;
  • Consumers know it and are postponing their spending, and
  • Japan’s firms are hiring more but have yet to offer higher wages.

No wonder Kuroda and his gang are allergic to any tapering talk!

China’s PMI releases

Data from the world’s second largest economy showed the manufacturing AND the services sector accelerating more than expected in June.

The official manufacturing PMI came in at 51.7 for the month, higher than 51.2 in June. Improvements are seen across the board with new export orders hinting at stronger foreign demand.

Meanwhile, higher imports point to strong domestic pressure. Prices have also increased, suggesting that the downward pressure on producer prices may be easing.

Meanwhile the services PMI came in at 54.9 in June, higher than May’s 54.5 reading. While the manufacturing PMI is usually closely-watched, China’s pivot towards domestic consumption is increasing the popularity of the services sector. For newbies out there, this includes industries such as real estate, retail, and leisure.

Profit-taking in the works?

The major currencies’ price action was a mixed bag of nuts, as profit-taking in the equities markets failed to translate to risk aversion in the forex scene.

Whether it’s end-of-quarter profit-taking, tracking of the U.S. session’s equities moves, or Asian equities traders just realizing that the central bankers’ hawkish remarks from Wednesday would mean less stimulus, the Asian bourses ended the session broadly lower.

  • Nikkei is down by 1.22% to 19,973.50
  • Australia’s A SX 200 is down by 1.47% to 5,732.60
  • Shanghai index is down by 0.49% to 11,430.19
  • Hang Seng is down by 0.95% to 25,719.00

Meanwhile, oil prices continued to trudge higher and extended its recovery from a decline in weekly U.S. crude production.

  • Brent crude oil is up by 0.8% to $47.77
  • WTI crude is up by 0.7% to $45.20.

Major Market Mover(s):

Comdolls

Better-than-expected data from China, extended dollar weakness, and higher commodity prices all pushed commodity-related currencies higher.

AUD/USD is up by 16 pips (+0.21%) to .7700, USD/CAD is down by another 20 pips (-0.15%) to 1.2986, and NZD/USD is up by 38 pips (+0.52%) to .7333.

Watch Out For:

  • 5:00 am GMT Japan’s housing starts (y/y) (-1.1% expected, 1.9% previous)
  • 6:00 am GMT: German retail sales (0.3% expected, -0.2% previous)
  • 6:45 am GMT: French consumer spending expected to remain at 0.5%
  • 6:45 am GMT: French preliminary CPI expected to remain flat
  • 7:00 am GMT: Switzerland’s KOF economic barometer (102.5 expected, 101.6 previous)
  • 7:55 am GMT: German unemployment change (-10K expected, -9K previous)
  • 8:30 am GMT: U.K. current account (-17.2B GBP expected, -12.1B GBP previous)
  • 8:30 am GMT: U.K. final GDP expected to remain at 0.2%
  • 9:00 am GMT: Euro Zone CPI flash estimate (y/y) (1.2% expected, 1.4% previous)
  • 9:00 am GMT: Euro Zone CPI flash estimate (y/y) (1.0% expected, 0.9% previous)