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US Dollar May Rise as ISM, Beige Book Surveys Hint Prices Firming

US Dollar May Rise as ISM, Beige Book Surveys Hint Prices Firming

Ilya Spivak,

Talking Points:

  • Euro and British Pound will probably look past Eurozone, UK PMI data
  • OECD economic outlook unlikely to stir volatility absent upside surprise
  • US Dollar may rise as ISM, Beige Book surveys hint at firming inflation

A seemingly busy European economic calendar nonetheless lacks truly market-moving event risk. The final revision of May’s Eurozone PMI print is unlikely to deliver lasting Euro volatility considering its limited impact on near-term ECB policy trends. Meanwhile, UK PMI data may not register on traders’ radar as “Brexit” worries predominate, leaving the British Pound rudderless.

The OECD is scheduled to publish its initial 2016 economic outlook for the major economies. Worries about global economic slowdown have been at the forefront in recent months so investors are unlikely to be surprised with all but very dismal forecasts.

On the other hand, an unexpectedly rosy outlook – like an unchanged global growth rate this year compared with 2015, for example – may boost risk appetite and offer a lift to sentiment-linked currencies like the Australian, Canadian and New Zealand Dollars. Private-sector estimates anticipate worldwide GDP will add 3 percent in 2016 versus 3.1 percent last year.

Fed rate hike speculation returns to the forefront later in the day as May’s ISM Manufacturing survey and the central bank’s Beige Book survey of regional economic conditions cross the wires. Evidence of upward price pressures may prove to be particularly important as Janet Yellen and company build the case for the resumption of stimulus withdrawal.

Leading PMI survey data from Markit Economics suggested inflation firmed on both the manufacturing and services side of the equation for a second consecutive month in May. If this is confirmed within the Fed survey and the ISM data set, a hawkish shift in priced-in policy bets may broadly boost the US Dollar against its top counterparts.

The Australian Dollar outperformed in overnight trade following a supportive set of first-quarter GDP figures. The Yen rose as stocks declined, boosting demand for the anti-risk currency. Prices did not seem particularly responsive after Japanese Prime Minister Shinzo Abe announced that a planned sales tax hike slated for this year will be delayed by 2.5 years.

Asia Session

22:45NZDTerms of Trade Index (QoQ) (1Q)4.4%1.0%-2.0%
23:01GBPBRC Shop Price Index (YoY) (MAY)-1.8%--1.7%
23:30AUDAiG Perf of Mfg Index (MAY)51.0-53.4
23:50JPYCapital Spending (YoY) (1Q)4.2%2.4%8.5%
23:50JPYCapital Spending Ex Software (1Q)4.3%4.0%8.9%
23:50JPYCompany Profits (1Q)-9.3%--1.7%
23:50JPYCompany Sales (1Q)-3.3%--2.7%
23:50JPYLoans & Discounts Corp (YoY) (APR)3.05%-2.58%
00:00AUDCoreLogic RP Data House Px (MoM) (MAY)1.6%-1.7%
00:00NZDQV House Prices (YoY) (MAY)12.6%-12.0%
01:00CNYManufacturing PMI (MAY)
01:00CNYNon-manufacturing PMI (MAY)53.1-53.5
01:30AUDGDP (QoQ) (1Q)1.1%0.8%0.7%
01:30AUDGDP (YoY) (1Q)3.1%2.8%2.9%
01:45CNYCaixin China PMI Mfg (MAY)
02:00JPYNikkei Japan PMI Mfg (MAY F)47.7-47.6
05:00JPYVehicle Sales (YoY) (MAY)6.6%-7.2%

European Session

05:45CHFGDP (QoQ) (1Q)0.3%0.4%Medium
05:45CHFGDP (YoY) (1Q)0.9%0.4%Medium
06:00GBPNationwide House Px (MoM) (MAY)0.3%0.2%Medium
06:00GBPNationwide House Px (YoY) (MAY)4.8%4.9%Medium
06:30AUDCommodity Index AUD (MAY)-87Low
06:30AUDCommodity Index (YoY) (MAY)--9.4%Low
07:00EURECB’s Lautenschlaeger in Frankfurt --Low
07:15CHFRetail Sales Real (YoY) (APR)--1.3%Low
07:30CHFPMI Mfg (MAY)54.054.7Medium
07:45EURMarkit/ADACI Italy Mfg PMI (MAY)53.053.9Low
07:50EURMarkit France Mfg PMI (MAY F)48.348.3Low
07:55EURMarkit/BME Germany Mfg PMI (MAY F)52.452.4Medium
08:00EURMarkit Eurozone Mfg PMI (MAY F)51.551.5Medium
08:30EUROECD Economic Outlook --Medium
08:30GBPNet Consumer Credit (APR)1.6b1.9bLow
08:30GBPNet Lending Sec. on Dwellings (APR)3.8b7.4bLow
08:30GBPMortgage Approvals (APR)67.9k71.4kMedium
08:30GBPM4 Money Supply (MoM) (APR)--0.4%Low
08:30GBPM4 Money Supply (YoY) (APR)-1.6%Low
08:30GBPM4 Ex IOFCs 3M Annualised (APR)-6.5%Low
08:30GBPMarkit UK PMI Mfg SA (MAY)49.649.2High

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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