Talking Points
· JPY TANKAN outlook slightly better than expected
· Euro-zone PMI Manufacturing continues to show healthy growth
· US ISM Manufacturing on tap.
The second quarter TANKAN survey reported slightly better than expected with non Manufacturers outlook registering a reading of 21 versus 18 forecast, but the rally in the yen proved fleeting as the pair managed to trade to 114.13 in the aftermath of the news only to grind higher to the 115 level for the rest of the Asian and European sessions. The release removed all doubt that BOJ will have to lift its Zero Interest Rate Policy in the near future, but it did not resolve the question of whether the move will happen in July at next weeks BOJ policy meeting, or will be delayed until August as Japan continues to grapple with the fallout from the Fukui scandal. The FX market appeared to be leaning towards the August timeline with most traders betting that the BOJ may wish to allow the news surrounding Governor Fukuis private finances to die down before embarking on such a radical shift in monetary policy. For the time being governorFukui looks to have weathered the storm of controversy as Japanese political establishment closed ranks behind him. However, public opinion still calls for his resignation and unless the Japanese public loses interest in the matter quickly, governor Fukui financial misadventures will continue to overshadow Japanese economic fundamentals much to the dismay of yen bulls everywhere.
In the Euro-zone, the PMI Manufacturing data showed healthy growth with the combined report printing at 57.7 versus 57.5. The economic boost resultant from the impressive recovery in the manufacturing sector should now be complemented by an upsurge in consumer sentiment and spending as all four semifinal slots in the World Cup are occupied by European teams. While we seriously doubt that this positive economic momentum will translate into a 50bp hike from the ECB, the probability of a 25bp hike by August appears to be a near certainty.
FX Upcoming
| Currency | GMT | EST | Release | Expected | Prior |
| USD | 14:00 | 10:00 | Construction Spending (MoM) (MAY) | 0.2% | -0.1% |
| USD | 14:00 | 10:00 | ISM Manufacturing (JUN) | 55 | 54.4 |
| USD | 14:00 | 10:00 | ISM Prices Paid (JUN) | 74.8 | 77 |
| EUR | 16:00 | 12:00 | Italian New Car Registrations (YoY) (JUN) | | 49.5% |
| EUR | 16:15 | 12:15 | Italian Budget Balance (euros) (JUN) | | -14.7B |
| EUR | 16:15 | 12:15 | Italian Budget Balance Year-to-Date (euros) (JUN) | | -49.0B |
| Currency | GMT | Release | Actual | EST | Previous | Comments |
| AUD | 23:50 | AiG Performance of Manufacturing Index (JUN) | 54.5 | | 48.9 | Improved in June. |
| JPY | 23:50 | Tankan Large Manufacturers Index (2Q) | 21 | 21 | 20 | Beat expectations across the board. |
| JPY | 23:50 | Tankan Large Manufacturing Outlook (2Q) | 22 | 20 | 22 | |
| JPY | 23:50 | Tankan Non-Manufacturing (2Q) | 20 | 19 | 18 | |
| JPY | 23:30 | Tankan Non-Manufacturing Outlook (2Q) | 21 | 18 | 19 | |
| JPY | 23:50 | Tankan All-Industries Capex (2Q) | 11.6% | 9.0% | 2.7% | |
| AUD | 0:00 | TD Securities Inflation (MoM) (JUN) | 0.1% | | 0.3% | Barely higher in June. |
