Key Events In The Shortened Week

Despite closed US stock markets today, FaceBook stock still managed to decline, while Europe dipped yet once again on all the same fears: Greece, Spain, bank runs, contagion, etc. Shortly Europe will reopen, this time to be followed by the US stock market as well. While in turn will direct market participants' attention to a shortened week full of economic data, which as Goldman says, will likely shape the direction of markets for the near future. US payrolls and global PMI/ISM numbers are expected to show a mixed picture with some additional weakness already fully anticipated outside the US. On the other hand, consensus does expect a moderate improvement in most US numbers in the upcoming week, including labour market data and business surveys. As a reminder, should the Fed wish to ease policy at its regular June meeting, this Friday's NFP print will be the last chance for an aggressive data-driven push for more QE. As such to Zero Hedge it is far more likely that we will see a big disappointment in this week's consensus NFP print of +150,000. Otherwise the Fed and other central banks will have to scramble with an impromptu multi-trillion coordinated intervention a la November 30, 2011 as things in Europe spiral out of control over the next several weeks. Either way, risk volatility is most likely to spike in the coming days.

More from Goldman's FX team:

In terms of policy meetings, the performance of two high-yielding currencies could get influenced by central bank meetings. In Brazil, BACEN is expected to cut rates to a record low level of 8.50%, while in Turkey CBRT will likely be on hold but could twist its macro prudential tools. The combination of significantly stepped-up FX intervention by the Brazilian authorities to stabilise the BRL below $/BRL 2.10 and a likely rate cut will be interesting to watch as both seem to work in opposite directions. A similar change in FX policy may have occurred in India last week. After substantial INR weakness, stepped-up rhetoric and a series of measures appears to have stabilised the INR – at least for now. However, the underlying external imbalance remains large and hence the path of the INR will depend on the RBI’s willingness to deploy part of their sizable FX reserves.

Finally, the latest twists in the Eurozone crisis will remain important for most FX investors. Very little additional information can be expected out of Greece until after the elections. Our base case is that Greece will stay in the Eurozone at the very least until a stable government has been found. Still, the situation for the Euro remains tricky with weak activity data on one hand and substantial unwinding risks of sizable short positions on the other.

Linked to the Greek situation it is also worth keeping an eye on EUR/CHF, which has displayed more intraday volatility in recent days, possibly a sign that the authorities are worried about spot remaining extremely close to the 1.20 intervention level.

Tue, May 29th

  • Japan Labour Market Data (Apr): We forecast an increase to 0.77X for the job offers/seekers ratio, while the unemployment rate has likely remained unchanged (GS 4.5% , consensus 4.5%, last 4.5%).
  • Japan Retail Sales (Apr): Retail sales have likely been close to flat mom in April. (consensus 0.1% mom, last -1.2%)
  • Turkish Central Bank Meeting: Consensus expects the rate to stay on hold at 5.75% but CBRT could attempt to tighten front end liquidity to stabilise the currency, while easing via credit tools at the longer end of the curve.
  • South Africa GDP (Q1): GS expects +2.8% qoq ann growth in Q1 (consensus 2.1% qoq ann, last 3.2% qoq ann).
  • German Consumer Price Inflation (May): Consensus expects stable prices since April (consensus 0.0% mom, last 0.1% mom).
  • US Consumer Confidence (May): On the Conference Board measure we expect a small decline (GS 68.5, consensus 69.5, last 69.2).
  • Also Interesting: US Case Shiller Home Prices (Mar), Dallas Fed Manufacturing Activity (May), Bank of Portugal Financial Stability Report, Hungary
  • MPC Meeting (GS: on hold).

Wed, May 30th

  • Australia Retail Sales (Apr): Consensus 0.2% mom, last 0.9% mom.
  • Canada Industrial Production (Apr): Consensus 0.1% mom, last 0.2% mom.
  • Brazil FX Flow Data for the previous week: Given the big swings in recent days, it will be interesting to get a better sense of what kind of flows have hit the market.
  • Brazil Central Bank Meeting: We and consensus expect BACEN to lower the SELIC target rate by 50bp to a record low of 8.50%.
  • Speeches: ECB’s Draghi, Fed’s Dudley, Fed’s Fischer
  • Also Interesting: Eurozone Money Supply (Apr), US Pending Home Sales (Apr), Sweden GDP (Q1).

Thu, May 31st

  • Japan Industrial Production (Apr): Materialization of downside risk in external demand, particularly China demand, has cast a shadow over production growth. We forecast that growth continued at only 0.1% in April (GS +0.1% mom, consensus +0.5% mom, last +1.3% mom).
  • UK Consumer Confidence (May): Consensus -32, last -31.
  • India GDP (Q1): We expect 4QFY12 GDP growth to remain flat at 6.1% yoy (consensus 6.0% yoy, last 6.1% yoy), bringing down our FY12 forecast by a notch to 6.7% yoy. This is on the account of real activity remaining weak this quarter, seen in related indicators such as industrial sector growth and trade; also reflecting in the poor readings of business survey indicators.
  • German Labour Market Data (May): After last months increase in unemployment, consensus expects a renewed decline in the number of jobless workers (Consensus -7k, last +19k).
  • Eurozone CPI (May): Consensus 0.1% mom, last 0.9% mom.
  • US Weekly Claims/ADP Survey (May): The continuing claims number of this survey and the ADP estimates will help fine-tune the estimates for the payrolls numbers on Friday. While consensus expects the weekly claims numbers to remain unchanged again, the estimates are for an improvement in the ADP number to +140k from +119k).
  • Chicago PMI (May): Similarly to consensus, we expect a marginal improvement from April (GS 57, consensus 57, last 56.2).
  • Also Interesting: Korea Industrial Production, German Retail Sales, Brazil IP, US GDP (second estimate).

Fri, June 1st

  • South Korea Trade Balance (May): As every month, South Korean export numbers will be the first actual data point in global demand during the previous month.
  • Indonesia Inflation (May): With recent currency weakness putting pressure on fixed income investments by foreigners in Indonesia, inflation could be an additional risk factor.
  • India Trade Balance (Apr): With substantial pressure on the INR in recent weeks, markets will likely focus on the latest Indian trade data.
  • Global Manufacturing PMIs (May): With global cyclical momentum slowing, the full batch of global PMIs will likely confirm slowing momentum as already indicated by “flash” readings and regional/national surveys.
  • US Manufacturing ISM (May): Regional manufacturing surveys mostly softened in May, pointing to a slight weakening in the ISM (GS 53.5, consensus 53.9, last 54.8).
  • Canada GDP (Q1): Consensus 1.8% qoq ann, last 1.8% qoq ann.
  • Brazil GDP (Q1): The economy remains weak despite the fiscal and monetary stimulus already delivered to the economy. The sluggish performance of the economy reflects the poor performance of the industrial and other tradable sectors and likely also to the fact that imports are increasingly satisfying part of the final demand growth (GS 0.5% qoq, consensus 0.5% qoq, last 0.33% qoq).
  • US Non-Farm Payrolls (May): We forecast that nonfarm payroll employment increased by 125,000 in May, given continued weather “payback” (consensus +150k, last +115k). We expect the unemployment rate to remain unchanged.
  • Also Interesting: Japan Capital Spending (Q1).



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