Daily Forex Fundamental Overview

Fundamental Analysis

Key highlights of the week ended August 19

Euro Zone

Consumer prices in the Euro zone rose slightly on an annual basis in July, official data showed on Thursday. According to final estimates from Eurostat, the Consumer Price Index (CPI) in the region grew 0.2% year-over-year on a non-seasonally adjusted basis last month, up from the 0.1% hike seen in the preceding month and in line with analysts' expectations. On a monthly basis, consumer prices in the 19-nation currency bloc fell 0.6% in July, following the previous month's 0.2% gain and falling behind the 0.4% drop forecast. Meanwhile, so-called core inflation, excluding alcohol, tobacco, food and energy, jumped 0.9% on a yearly basis in the same month, unchanged from last month's reading and in line with market expectations. Energy prices fell 6.7% on an annual basis and 1.0% on a monthly basis, whereas prices for services, the largest component of the bloc's economy, increased 1.2% year-over-year. Back in June, the annual rate of inflation in the Euro zone rose 0.1% for the first time since January.

UK

The number of people filing for unemployment benefits in Britain dropped unexpectedly in the seventh month of the year, official data revealed on Wednesday. According to the Office for National Statistics (ONS), claims for state unemployment benefits slipped 8,600 in July, whereas the preceding month's gain was revised up to 900 from the initially reported increase of 400. Market analysts pencilled in a rise of 5,200 in the reported month. In the meantime, the UK unemployment rate came in at 4.9% in three month to June, in line with the previous month's figure and analysts' expectations. Furthermore, average weekly earnings rose 2.4% including bonuses in June, surpassing last month's 2.3% increase, but missing the 2.5% market forecast. Excluding bonuses, weekly earnings grew 2.3% in the same month, while markets anticipated the reading to remain unchanged at 2.2% in June. Once the report was released, the British Pound jumped against the Euro, but gave up all those gains shortly.

Japan

Japanese economic growth slowed down in April-June period after a notable growth during the previous quarter mainly due to the weak exports and capital expenditure, adding even more pressure on premier Shinzo Abe to add some more policies that can produce more sustainable growth. On an annualized basis, GDP advanced 0.2%, slowing dramatically from the 1.9% jump in the first three months of the year. Meanwhile, many economists had expected an annualized increase of 0.7% and a quarterly rise of 0.2%. The economy, in turn, rose 0.5% rate in the January-March quarter. Moreover, consumer demand, which constitute for nearly two-thirds of business activity, added only 0.2%. In order to fight the stagnation if Japanese economy, Prime Minister Shinzo Abe recently proposed ¥28 trillion ($267 billion) in spending initiatives meant to push consumers and businesses to spend more money and support the stalling recovery.

EUR

"The figures for the second quarter are somewhat above expectations and underline the relatively robust economic trend in Germany".

- Stephan Kohns, Bundesbank Deputy

German producer prices grew faster than expected last month, official data revealed on Friday. According to the German Federal Statistics Office (Destatis), the Producer Price Index (PPI) rose 0.2% month-over-month a non-seasonally adjusted basis in July, compared to the 0.4% hike see in the previous month, whereas market analysts anticipated the indicator to come in at 0.1% in the reported month. On an annual basis, producer prices dropped 2.0% in the seventh month of the year, following June's 2.2% fall, while economic desks expected the PPI to fall 2.1% year-over-year in July. In the meantime, energy prices fell 6.2%, whereas durable consumer goods jumped 1.2% and intermediate consumer goods slipped 1.8% in the same month. The data provided evidence that the Euro zone's largest economy recovered slightly from the deflationary pressure. Nevertheless, analysts remain cautions, arguing that there is a strong deflationary pressure coming from the latest sharp increase in the value of the Euro against the British Pound, driven by Britain's decision to leave the European Union.

In contrast with the Consumer Price Index (CPI), the PPI measures prices changes at the manufacturing and wholesale level and looks at three areas of production: industry-based, commodity-based and commodity-based final demand-intermediate demand.

CAD

"It just suggests that maybe the Canadian consumer is growing a bit tired of carrying the burden of growth. And we don't really have a lot of other things that are supporting growth right now if the Canadian consumer steps back".

- David Watt, HSBC

Canadian consumer prices grew less than expected in July, fresh data revealed on Friday. According to Statistics Canada, the central bank's core Consumer Price Index (CPI) came in at 0.0% on a monthly basis and at 2.1% on an annual basis in July, in line with analysts' expectations and the preceding month's readings. Overall, Canada's consumer prices dropped 0.2% month-over-month in the seventh month of the year, compared to the 0.2% hike seen in June, while economic desks expected the indictor to come in at 0.0% in the reported month. Year-over-year, inflation rose 1.3% in July, whereas markets anticipated the inflation rate to remain unchanged at 1.5%. The fall in the overall CPI was mainly driven by lower energy prices, as gasoline prices declined 14% in July from a year earlier, following the previous month's drop of 8.5%. Other data released by Statistics Canada showed a surprise fall in Canada's retail sales. The total value of sales at the retail level in Canada, excluding automobiles dropped 0.8% on a monthly basis in June, compared to May's downwardly revised 0.8% gain. Overall, retail sales decreased 0.1% in the first month of summer, following the preceding month's downwardly revised reading of 0.0%. The volume of sales declined in 7 of 11 categories, accounting for 54% of the industry. Meanwhile, analysts expected Canada's core retail sales and overall retail sales to grow 0.4% and 0.7% in June, respectively.

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