Australian economy grows while Aussie wallets shrink 👜

Apparently Tuesday is the most productive day of the week. 💪🏻

Monday blues have passed and people are finally ready to get sh*t done. So let’s get down to business.

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Trade Of The Day 📈

The Cost Of Bringing Down Inflation 👇🏼

Christine Lagarde doesn’t paint a very pretty picture of the Euro area’s economic growth with her latest speech. 👩🏼‍🎨

Because the Russian war against Ukraine caused an energy crisis, the economic growth has been painfully slow this year.

The government even stepped in to try to help with some financial support programs but most people are still finding it hard to buy a full cart of groceries. 🥗

Lagarde, President of the ECB, says the goal remains to bring inflation back down to the 2% target. But that does not come without a cost.

The ECB will have to tighten up monetary policy and continue to hike interest rates to keep inflation from getting out of control.

Why?

Because inflation is still on the rise sitting at 6.1% as of May. And that may not even be the worst of it.

US Service Sector Thriving.. Sort Of 🤨

Five months of growth looks pretty good on the US service sector. 👀

Even though the actual reading of 50.3 for the Services PMI was lower than the consensus 51.5, any reading above 50 means the economy is growing. 📈

We haven’t seen a contraction in this sector since December of 2022. Not too shabby.

Some more good news:

Business activity is up for the 36th month in a row. This means business is picking up in the US and companies are spending more on things like marketing, advertisement, and sales. 👩🏽‍💼

And the bad:

Employment activity in the service sector is now under 50 (reading 49.2) which means there is less hiring happening. April saw a decrease in the employment of teachers, real-estate agents, accountants, and more. 👨🏻‍🏫

Wednesday News

Here’s what you’re in for:
(All times in EST)

• 10:00 — Canada Can Bank On Some Good News 🏦

  • Event: Bank Of Canada Interest Rate Decision & Statement

  • Major pairs to watch: USD/CAD

• 19:50 — Japan’s GDP ‘Rising’ To The Challenge 💪🏻

  • Event: Japan Gross Domestic Product (QoQ)(Q1)

  • Major pairs to watch: USD/JPY

• 21:30 — Australian Economy Grows While Aussie Wallets Shrink 👜

  • Event: Australia Trade Balance (MoM)(Apr)

  • Major pairs to watch: AUD/USD

Canada Can Bank On Some Good News 🏦

The Bank of Canada makes a decision on interest rates 8 times per year.

The first 3 decisions of 2023? It stayed the same at 4.5%.

The consensus for tomorrow? No change to the 4.5%.

Expect USD/CAD ↑

Now the rate might not be going down BUT after raising it 8 times between March 2022 and February 2023, it looks like they may be giving us Canadians a well-deserved break. 🤷‍♀️

The peak of Canada's inflation rate? Over 8% in June 2022.

But this pause on rate hikes isn’t even the best part.

The BoC says the inflation rate will come down to 3% by the middle of 2023 and meet its 2% target by the end of 2024.

Maybe lettuce won’t always cost $12?

Between now and when Canada meets the inflation target, we might see the rates hike again.

But they seem to have made it clear that things are moving in the right direction. They're slowing the economy down enough to bring inflation down with it.

How does increasing the interest rate actually bring inflation down? 📉

Basically the Bank of Canada is making it more expensive for everyone so that people will buy less stuff. When people buy less, price comes down. 💰👇🏼

Japan’s GDP ‘Rising’ To The Challenge 💪🏻

Last quarter Japan saw a 0.4% increase in their GDP. The prediction for this quarter is yet another increase of 0.5%. 👏🏻

Expect USD/JPY ↓

Remember that Japan’s GDP is the value of all goods and services produced there. If it’s increasing, it means Japan is making more things that people want.

Japan’s GDP actually makes up 2.21% of the world’s economy. Crazy right? 👀

But this shouldn’t come as a total shock seeing they have the world’s largest electronics industry and they hold third place for automobiles. 🚙

Why the sudden increase?

Japan finally lifted those heavy border controls so people started spending more money. That meant businesses could start investing more (+0.9%).

More investments = more production = increase in the value of GDP. 📈

Australian Economy Grows While Aussie Wallets Shrink 👜

Australian Bureau of Statistics is going to report Australia’s trade balance tomorrow.

No idea what that is? Fair enough. 🤟🏼

This value is the difference between exports and imports of Australian goods.

In March, exports totalled 59,299M. Exports tell us how much other countries are demanding Australian goods. 🙋🏽‍♂️

Imports totalled 44,029M. This shows us the demand inside of Australia for things they don’t make themselves. 🛍

The difference? A surplus of 15,269M.

The consensus for April is another surplus of 13,050M.

Expect AUD/USD ↑

Why is a trade surplus good? (More exports than imports)

More exports means a high demand for Australian goods across the globe. This means they can increase the price of those goods and the value of their dollar will go up.

But it can’t be all good news. 😉

A surplus may create more jobs and is good for economic growth buuuut it might also mean that Australians could be looking at higher prices and interest rates.

💡
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