Daily Forex Fundamental Overview

Fundamental Analysis

EUR

"While domestic orders dropped by 1.9% MoM, foreign orders increased by 1.4%, with continued strong demand from Eurozone peers. Demand from outside the Eurozone, however, remains weak ".

- Carsten Brzeski, ING Bank NV

Factory orders in Germany posted no improvement in May when measured on a monthly seasonally adjusted basis. According to the latest report from the German statistical office Destatis, factory orders in the Euro zone's largest economy kept unchanged in the fifth month of 2016, when they fell a revised 1.9%. Economists had predicted a 1% rise in the data, which is typically volatile. On a yearly basis, the gauge decreased by 0.2% in the reported month, after posting a 0.4% decline in the previous month, measured on a non-seasonally adjusted basis. Markets had projected growth of 0.9% year-on-year in May. Meanwhile, according to the report, domestic orders decreased by 1.9%, while foreign orders increased by 1.4% on the previous month. New orders from the euro area were up 4.0% on the previous month, while new orders from other countries decreased by 0.3% compared to April 2016.

There are growing signs that, after a good start to the year, Germany's economy will at best have achieved only modest growth in the second quarter. The sideways trend in manufacturing points to it too, making only slight advances in the coming quarters. Moreover, the British vote in June, in which the nation opted to quit the EU, could further weaken the German economy.

USD

"There will be concerns that domestic political factors will also unsettle US companies ahead of the November elections with uncertainty a contributory factor to the dip in expectations seen in the June survey. The Federal Reserve will inevitably be very sensitive to US data releases in the short term".

- Time Clayton, Economic Calendar Good news from the American side, the services sector activity advanced during the previous month from lows where it had been settling during more than two years. Moreover, data managed to beat significantly consensus expectations. The ISM Non-Manufacturing PMI soared to 56.5 points, showing steep growth rather than mediocre growth. It is important to mention, that the May reading had been the weakest release since February 2014, while June's number, in turn, was the highest since October 2015. Although, the employment component rose from 49.7 to 52.7 points, which is a good sign for the jobs report. The following rebound could imply a jump in jobs, which is highly desirable after May's terrible report. In the meantime, the final June US PMI services-sector data slipped to 51.4 from the flash 51.3, however, markets were expecting a slightly bigger upward revision. The composite index was confirmed at 51.2 from 50.9 previously.

Overall strong doubts surrounding the economic performance will continue to persist, especially, taking into account weak business confidence, despite the ISM data, which was notably more encouraging with a significant monthly improvement in June.

CAD

"These are the two worst reading in at least 20 years for Canadian trade. Nothing is going right for the Canadian economy at the moment and USD/CAD is gunning for the session high of 1.3048 after the data".

- Adam Button, Forexlive

According to the figures released on Wednesday morning by Statistics Bureau, Canada's trade data for May did not meet economists' expectations showing a deficit of C$3.28bn compared with an expected number equalling C$2.6bn. The April deficit, in turn, was also revised sharply higher to C$3.32bn versus the original C$2.9bn. It is worth to point out, that the April and May deficits were the highest on record. Overall exports declined 0.7% on the month to C$41.1bn with a 2.3% drop in volumes as well as there was a 3.4% annual plunge in export values. However, there was an advance in energy exports of 7.1% in June as crude oil prices rose sharply with oil exports being slightly higher. Exports went down in 7 out of 11 categories with lower shipments across most industrial sectors including industrial machinery exports, which slide by 4.9% on the month. Imports, in turn, lost 0.8% slipping to C$44.4bn with a 0.9% drop in volumes, mainly due to a slide in aircraft imports.

In the meantime, the wider than forecasted trade deficit will tend to provoke a downward adjustment to GDP estimates as well as there will be important overall concerns surrounding the trade performance.

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