1. RBA Rate Decision
2. Euro-Zone PMI Services
3. Euro-Zone Retail Sales
4. US Factory Orders
RBA Rate Decision (23:30 GMT, 19:30 EST)
Consensus: 5.75%
Previous: 5.75%
Outlook: The Reserve Bank of Australia is expected to hold interest rates steady following their policy meeting later today, as recent economic data has provided no clear thrust for an increase. Australia remains at the high end of world-wide central bank interest rates, and at 5.75%, has the second-highest rate among the majors, behind only New Zealand. Economic growth gauges have offered mixed sentiment. May housing approvals rose were down 11.7% year over year, and many economists are forecasting a housing drop in the second half of 2006. Also, retail sales for the same month contracted 0.3%, putting a damper on second quarter reads. However, on a positive note, the Australian jobless rate is at a 30-year low at 4.9% and wages grew 4% annually in the first quarter, which is promising for both growth and medium-term inflation. First quarter inflation was at the top of the target range of 2% - 3% and numbers set to be released later this month could hold the key to future decisions. While most analysts are forecasting a rise to 6.00% by the end of 2006, they say the central bank will most likely wait to see the full effect of May's hike before taking further action.
Previous: Interest rates in Australia went unchanged at 5.75% in June following May's unexpected 25 basis point hike, which brought borrowing costs up for the first time in 14 months and to the highest level in five years. The pause in June was expected as retail sales continue to cool. Nationwide retail sales were down 0.3% in May due to regional disparity. While Western Australia and Queensland saw stable retail sales, New South Wales and Victoria saw declines of 0.5% and 0.9%, respectively. May's interest rate rise and high oil prices have contributed to the decline in the southeast. The RBA will be closely monitoring the effects of higher lending rates on consumer and business spending going into the second half of the year.
Euro-Zone PMI Services (JUN) (8:00 GMT, 4:00 EST)
Consensus: 59.0
Previous: 58.7
Outlook: The Euro-Zone PMI services survey for June is expected to post yet another rise, furthering the nearly six year high hit in May. While a above 50 signals growth in the sector, the consensus for last month stands well in the inflationary zone with a 59.0 read. European economic growth is forecast at 2.2% for 2006, up from 1.4% in 2005. The positive reading in the services survey bodes well for sustained growth, as services account for approximately one third of Europe's $10 trillion output. A encouraging turn in this indicator could be an additional signal to the ECB that higher lending rates are tolerable in the consumer arena as it has been in the manufacturing. Released earlier this week, the survey of Euro-zone factory activity rose to a greater than expected 57.7.
Previous: The European PMI services survey was slightly stronger than expected in May, despite sluggish German data. The breakdown put Italian PMI services at 61.8 and French PMI services at 60.6, both ahead of expectations and the previous month. PMI in Europe's largest economy, Germany, fell back to 56.7 against 57.3 in April, pulling the overall index slightly lower. The expansionary numbers came despite falling consumer confidence and rising energy prices, and could bring those numbers back up in coming months.
Euro-Zone Retail Sales (MoM) (MAY) (9:00 GMT, 5:00 EST)
Consensus: 0.2%
Previous: 1.4%
Outlook: After the 1.4% surge in April, European retail sales growth is expected to post a more moderate 0.2% gain. German retail data for May posted a 2.2% month over month drop and the sluggishness of the country is likely to act as a strong drag on the overall Euro-zone average. As noted below, the 3-month adjusted growth showed only a 0.1% increase and April's surge can be seen as corrective rather than the beginning of a new strong upward trend. However, World Cup sales should boost future Euro-zone retail sales and the next several months could see significantly skewed data.
Previous: April Euro-zone retail sales surprised to the upside, posting the largest monthly increase in six years and a monster 2.8% year over year surge. This reading followed two months of decline and reveals favorable conditions heading into the World Cup. Food, drink and tobacco increased by 1.1% while sales of non-food products jumped 1.5%. Germany helped lead the increase, posting 2.8% growth, behind only the much smaller economies of Luxembourg and Slovenia. Retail PMI rose from 54.6 to 56.3 for May, which bodes well for sustainable future growth. Despite the strong numbers, drops in February and March have put yearly growth at 0.1%.
US Factory Orders (MAY) (14:00 GMT, 10:00 EST)
Consensus: 0.1%
Previous: -1.8%
Outlook: US May factory orders are expected to increase 0.1% after April's1.8% decline, while shipments are predicted to post a 1.9% increase. The indicator follows May durable goods, which printed a 0.3% drop in orders and a 2.6% surge in shipments. Additionally, the ISM manufacturing index fell to 53.8 from 54.4, which, although expansionary, could be the beginning of a slowdown for the national figure. Furthermore, May industrial production fell 0.1%, which could foretell a slack in demand. The number is a good indicator to support 10% real growth in equipment for the second quarter after a 14.8% growth rate in the first quarter.
Previous: US factory orders has historically been a very volatile, and a look at the numbers for 2006 provides a glimpse into the indicator. January saw a 2.7% decline, followed by a 0.1% boost in February, then a 4.0% surge, and finally a 1.8% drop in April. The volatility of the indicator and its release after durable goods results in limited impact on trading, although surprises significantly diverging from the markets consensus tend to provide short term trading impetus for the dollar.
