Daily Analysis - 21/06/2016
The meeting minutes from the RBA's June meeting showed that low inflation allowed policy makers to keep interest rates at record lows. Short term measure of inflation expectations remained below average, while long term inflation expectations continued to slip. Despite a large decline in business investment, the RBA minutes said that overall growth continues to expand moderately.
Japan posted a trade deficit of 40.7 billion yen in May, data from the Ministry of Finance showed on Monday. The trade deficit was lower than forecasts which projected a surplus of 70 billion yen. Exports fell -11.30% on a year over year basis, missing forecasts and extending the declines of -10.10% from April. Exports to Asia were down -13.00% on the year while exports to China fell -14.90%. Imports were also weaker falling at an annual pace of -13.80%.
German PPI accelerated in May on a monthly basis, up 0.40% on increased energy prices, data from the Federal Statistics Office showed on Monday. While monthly PPI increased, producer prices were still lower by -2.70% on a year over year basis. Excluding energy prices, German PPI increased 0.20% on the month but remained weak yearly, falling -0.80% on a year over year basis. Energy prices remained the key driver in the PPI for May, rising 0.70% from April but on a yearly basis, energy prices in Germany remained 8.00% lower on the year.
Wholesale sales in Canada edged higher in April for the first time in three months, rising 0.10% from March. This was slightly below forecasts of a 0.20% increase, data from Statistics Canada showed on Monday. Inventories declined 0.30% to 72.16 billion in April. The miscellaneous subsector posted the largest gains in terms of dollar value, rising 5.20% in April with the remainder accounting for nearly 12.60%. Sales in the food, beverage and tobacco subsector were up 0.70% on the month, reversing the declines from the past two months.
The US Federal Reserve’s President Janet Yellen will be testifying to the US congress today at 14:00 GMT. Coming off last week's monetary policy decision to leave interest rates unchanged, Yellen's testimony will be closely watched for further clues to interest rate hikes. On Friday, another Fed member, Bullard said that he expects to see only one rate hike in 2016, echoing other dovish sentiments. However, more than 9 FOMC members still expect to see two rate hikes this year. It is widely accepted that the weak jobs report in May and the UK referendum vote were the reasons for the Fed to hold back from hiking rates at its meeting in June.
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