FXTRADING Economic Data Summary (Asia-Pacific | 07/21)

Falling Energy Prices Ease Inflationary Pressure in Canada

Canada's annual Consumer Price Index (CPI) slowed to 2.8% in June from 3.2% in May, coming in below the market expectation of 2.9%. On a monthly basis, CPI declined 0.4%, marking the largest monthly drop since December 2024. The primary driver behind the easing in headline inflation was the energy sector, with gasoline prices falling 10.2% month-on-month. Although gasoline prices remained higher than a year earlier, the pace of annual growth slowed significantly, exerting notable downward pressure on overall inflation.

Core inflation also showed further improvement. The CPI median eased from 2.1% to 1.9%, while the CPI trim measure declined from 2.0% to 1.8%, both coming in below market expectations. Combined core CPI also edged down from 2.7% to 2.6%. Excluding gasoline, headline CPI remained at 2.2%, suggesting that energy continues to be the key driver of short-term inflation fluctuations. FXTRADING believes that with both headline and core inflation moving lower, the Bank of Canada has greater room to maintain a wait-and-see approach in the near term. However, geopolitical tensions in the Middle East could still push global oil prices higher, making energy prices a key variable for Canada's inflation outlook going forward.

Cost Pressures Continue to Ease for Eurozone Businesses

The latest European Central Bank survey showed that 42% of firms reported higher bank lending rates, up from 26% in the previous quarter. At the same time, fees, commissions, and collateral requirements continued to increase to varying degrees, although non-interest financing costs and collateral requirements have moderated compared with earlier periods. Overall financing conditions have not deteriorated significantly.

From a business perspective, demand for loans increased only modestly, while banks' overall willingness to lend remained broadly stable. However, financing conditions improved for large companies, whereas small and medium-sized enterprises continued to face tighter access to credit.FXTRADING believes that the ECB's restrictive monetary policy continues to produce the intended effects, keeping financing conditions tight while gradually easing inflationary pressures. This supports the ECB's data-dependent approach and its cautious monetary policy stance.

New Zealand's Imports and Exports Continue to Expand

New Zealand's goods trade surplus narrowed to NZD 23 million in June from a revised NZD 577 million in May. However, the decline was mainly due to imports growing slightly faster than exports rather than any weakness in export performance. Data showed that exports rose 25% year-on-year to NZD 8.1 billion, while imports also increased 28% year-on-year to NZD 8.1 billion, keeping overall trade activity at a high level.

Looking at the trade composition, exports to the United States surged 43%, driven mainly by strong demand for meat and dairy products. Exports to Australia, the European Union, and Japan also recorded solid growth. On the import side, purchases from the European Union, Australia, and South Korea increased significantly, with imports of machinery, vehicles, and petroleum products rising notably, reflecting continued business investment and stable domestic demand. FXTRADING believes that although the trade surplus narrowed, New Zealand's trade fundamentals remain healthy. Stable export demand and rising imports both indicate resilient economic activity, with overall trade continuing to support economic growth.

Lower Energy Prices Improve U.S. Consumer Sentiment

The preliminary University of Michigan Consumer Sentiment Index for July rose from 49.5 to 54.4, reaching its highest level since February. Lower gasoline prices were a key factor behind the improvement in consumer confidence, with buying conditions for durable goods and expectations for business conditions over the next year both improving by around 20%. Nevertheless, overall consumer sentiment remains well below the level seen a year ago, indicating that elevated prices continue to weigh on household purchasing power.

Meanwhile, consumer inflation expectations moderated. One-year inflation expectations declined from 4.6% to 4.2%, while long-term inflation expectations remained unchanged at 3.3%. However, most survey responses were collected before the United States resumed operations against Iran and before oil prices rebounded. FXTRADING believes that lower energy prices have provided a short-term boost to household sentiment, helping lift consumer confidence to a five-month high. However, inflation expectations remaining above historical norms suggest that consumers are still cautious about inflation returning to the Federal Reserve's target.