UK Rightmove Housing Prices (JUN) (23:01 GMT; 19:01 EST)
                             (MoM)                    (YoY)
Consensus:         0.8%                      6.5%
Previous:             2.0%                       5.9%

Outlook: This month’s Rightmove Survey is expected to show a slowdown in British housing prices, what would be the first such decline in housing reads in the past two weeks. This most recent residential survey is expected to show a moderated 0.8% pace of growth, indicating the first draw on prices, which have seen almost continual expansion for the past year. Since the final three months of last year, a revitalization in the sector had been instigated by the Bank of England’s decision to cut the nation’s high overnight lending rate to 4.50%, which in turn makes mortgages more affordable.  Keeping the trend going has been the rhetoric from the MPC that that has been mum on when rates could go higher. Some of the growth in housing prices is likely attributable to Britain’s general inflation, which increased by a higher than expected 0.5% last month. If the BoE raises interest rates, as Chancellor Mervyn King hinted last Wednesday, housing prices. It is not surprising, then, that economists are predicting slowing prices in this market that is most sensitive to interest rates. 

Previous: April’s Rightmove housing prices increase was the fourth consecutive month of growth as the BoE maintained static interest rates. Partially responsible, consumer spending, which grew at an impressive 4% annual rate, trickled down to the housing market, with housing prices growing at their fastest pace since April 2005.  Inflation was raising prices of all goods, as well, with an unimpressive pace of growth at that time.  However, experts recognized that such a pace was likely impossible to sustain, as the potential interest rate hike by the end of the year increases and the sentiment takes its toll on housing by wearing down demand and tempering prices.

Japanese Nationwide Department Sales(YoY) (MAY) (05:30 GMT; 01:30 EST)

Consensus:                 n/a
Previous:                    -0.6%

Outlook: May numbers for Japan’s nationwide department sales, due Monday, will monitor the pace at which consumers continue to supply inflation to the economy through their purchases.  Despite high oil prices taking a bite out of consumers’ disposable income, some still expect some growth in May’s figure as unemployment is currently at a seven year low, and confidence reads remain high. Other sectors of the economy have been filling in for slow consumer spending.  Corporate spending has been on the rise, aided by 0% interest rates that lower the cost of doing business in the country. In addition, Japanese manufacturing has expanded very quickly, with machine orders rising over 10% last month and producers anticipating continued rising demand. A small dip in consumer spending, which is all that these past few months appear to be, is unlikely to seriously hurt the strong pace of Japanese GDP.  However, should energy prices continue to rise to the levels we have seen in recent months, Japan, as a huge importer of oil, could see a crimp in domestic consumption and therefore one leg of unproven price growth.

Previous: April’s department store sales fell by 0.6% on the year, the largest decline in seven months, as retail sales fell by 0.8%. With concerns present about domestic demand, Japanese officials were quick to assert that this month’s miserable data was not an accurate picture of their economy.  The said their belief was that the drop in sales was precipitated by bad weather in Japan that kept shoppers home. A contributing factor to the drop, however, was just as likely the price of oil, which spiked to record levels in April and left consumers with less money to spend on other goods. However, strong wage growth was expected to help strengthen domestic demand and ensure that April’s weak numbers were merely a blip on the radar screen.

Swiss Industrial Production (1Q) (07:15 GMT; 03:15 EST)
                                              (QoQ)                     (YoY)
Consensus:                        -3.8%                      7.0%
Previous:                              6.9%                       3.9%
 
Outlook:  Industrial Production in Switzerland is expected to advance by 7 percent annually, for the biggest gain in six years, even as the SNB continues to raise rates.  Industrial production measures the total output of all factories, mines and utilities.  As the indicator is often a leader for economic cycles, it may act as a key figure for the central bank come its September meeting.  Like the rise in industrial production, the SNB’s recent rate hike to 1.50 percent is a product of the recent strength from corporate profits, low unemployment and consumer confidence.  While industrial production for the Swiss may be generous on the annualized read, quarterly expectations are reserved with soaring energy prices sabotaging the effects of rising global demand.  Some economists fear that consistently high commodity prices and incessantly rising international lending rates will continue to gouge at factory activity.  Should Swiss exports become suspect, the nation’s dependency on exports would become very apparent and factory activity could grind down.

Previous:  Swiss Industrial Production extended its rise in the fourth quarter as the economy grew at its fastest annual pace in nearly five years.  Production rose 6.8 percent from the third quarter to beat expectations of 6.5 percent increase and a 3.9 percent growth pace the previous period.  These numbers came out shortly after the Swiss National Bank’s second interest rate increase to 1.25 percent (now 1.5 percent) that reflected economic growth well.  Strong exports in the fourth quarter, which have fueled expansion, were reported to be the main attribute to the strong production.  Said growth is being enjoyed by the domestic economy, as companies’ sales and new orders also rose in the third quarter of last year, giving the SNB confidence that export growth will rise again in 2006. 

Canadian International Securities Transactions (APR) (12:30 GMT; 08:30 EST)
 
Consensus:                          C$3.000B            
Previous:                              C$3.325B
 
Outlook:  Net foreign investment in Canadian securities is expected to slow to a C$3 billion surplus in April.  Recently Canadian assets have garnered heavy affection, as they are often associated with the strong economy and commodities. Enthusiasm for Canadian bonds however, which has been stoked by an aggressive BoC rate policy, may be waning as the Fed boasts heady competition.  Jobless claims and consumer sentiment in the US came in better than expected, which should make the Fed’s decision a lot easier to get tough on inflation.  Better U.S. returns will divert a lot of potential Canadian capital as US treasuries offer higher yields and equities had outperformed its neighbor’s.  The S&P/TSX, which tracks Canadian equity, reached multi-year highs in mid April but began its 12.7 percent decline later as commodity prices softened. 

Previous:  The Canadian economy was able to sell C$3.325 billion ($3.01 billion) to foreigners in March, led by their high-yielding bonds during a global flight to safety.  This produced the largest securities transactions since October of 2005 as the Canadian economy steams ahead, making for better investments with higher returns.  International investors purchased a net C$2.74 billion in Canadian bonds, which largely offset their reduction in these holdings from the previous month.  Purchases in new issues, calculated by new issues less retirements was $2.5 billion, for the highest level since May of 2005.  From the Canadian investor’s point of view, they purchased a record $9.2 billion in foreign securities.  This was seen as positive for Canada as they used a bit of the excess oil-cash to diversify their wealth away from oil.

Richard Lee is a Currency Strategist at FXCM.