The World Overall One Financial | Andrei Wogen| finance.wogen@gmail.com|For the Week of: 06/07

Last Week in ReviewEUR The ECB left rates and their QE program in tact last week as widely expected while on the economic front a mixed to dovish message was heard from President Draghi. On the one hand the ECB raised its inflation forecast for this year though for 2016 and 2017 their forecasts were unchanged and growth forecasts were unchanged for this year through 2017. Draghi also said that while domestic demand and overall growth is gaining momentum risks are still to the downside overall. As for the ECBs QE program, while the Bank is committed to continuing QE until at least September of next year (or until their 2% inflation target is sustainably reached) they currently seen no reason to increase at this time and they are looking through the current volatility that has been seen in the bond markets around the world. As for data last week, inflation is improving some as shown by data released last week for the Euro Zone and Germany though the manufacturing industry remains mixed as PMI data showed a mixed picture with Germany in particular, looking weaker. As for overall growth, the second reading of Q1 GDP

AUD First quarter GDP came in better than expected though the internals showed a good bout of weakness. Domestic demand, incomes and nominal GDP were all weak and terms of trade continues to decline. Consumers and businesses were also weaker and even government revenue collections were weaker for the first quarter. The only two real positive things that helped lift the GDP number were better exports and a build in inventories. Overall though it would seem that the Australia economy continues to weaken. Second quarter growth isnt looking so good either as last week Retail sales data came in flat month-over-month and the Australias trade deficit widened to the biggest on record. All this weakness is just more confirmation that the RBA will need to ease further. I am expecting though that they will want to wait until later this year.

INR Indias central bank cut its main interest rate by 25bps for a third time this year in order to help boost investment and credit. This rate cut was meant as a front-loaded cut and the RBI Gov. Rajan appealed to commercial banks to continue to pass through the cuts in rates and also appealed to the government to keep inflation expectations in tact through good management of food price policies in particular. The main concern though and which prompted the RBI to cut rates last week is the current low investment environment that continues to be present in India. Now the Bank says it will wait for more data to see how the rate cut has affected things before moving again.

PLN The Polish Central Bank maintained its interest rate last week as it said that the current economic recovery that is going on in Poland

right now, mostly due to the recovery being seen in the Euro Zone right now, will reduce the risk of inflation remaining below the Banks target. However the Bank also warned that inflation will likely stay negative for some time yet. The overall economy too, though improving some, still suffers from weak demand and a continuing negative output gap. On the whole then, while the Bank left rates on hold this meeting, their overall tone on the economy and inflation remains quite dovish though dont expect any more easing from the Bank. When the Bank cut rates last, in March of this year, they said that that was the last easing measure it would do, despite their dovish forecasts for inflation. We shall see..

BRL Brazils central bank raised their interest rate by 50bps to 13.75%. This puts the total amount of rate hikes that the Brazilian central bank has done since embarking on its tightening cycle last April 2014. This rise in rates was done due t the macroeconomic scenario and the outlook for inflation. The decision was unanimous in its decision. Inflation continues to be a problem in Brazil especially due to government price hikes which has spilled into slower economic growth overall. Couple this with continued political turmoil, the outlook for Brazil remains bleak.

MXN The Mexican central bank held rates steady despite lowering their inflation forecasts. The Banks inflation expectations for 2015 and 2016 were reduced to below the Banks 3% target. Reductions in the prices of energy and telecommunications have help contribute to the lower inflation. A lower Peso, pushed lower along with other emerging market currencies due mostly to US Fed rate hike expectants pushing the US Dollar up, has caused inflation as expected by the bank but not enough to keep inflation expectations from being lowered. But if a lower Peso does continue to occur, this could increase inflation expectations and therefore higher rates could be in order in the coming months. As for the economy, Mexico continues to improve gradually with the employment sector continuing to improve which has helped consumption improve in turn.

What to Watch this WeekUSD The only real important data this week will be retail sales data for May being released on Thursday. Overall, consumer consumption in the US has been weak lately and so, as with last months data an improvement will be looked for in the data and will be an encouraging sign for the Fed too.

AUD The monthly employment data from Australia will be in focus for the Aussie markets. Employment in Australia continues to remain rather mixed but overall is weakening as the mining industry continues to wind down and the rest of the economy is having trouble picking up the slack. Improvement in the employment sector will be one of the keys to whether the RBA will have to ease further later this year or not. Speaking of the RBA, the other key event this week will be a speech that will be given by RBA Gov. Stevens at the Economic Society of Australia in Melbourne. So the economy will be a topic and given the RBAs

recent actions in cutting rates and in their dovish tone, focus will be on what he has to say especially in terms of monetary policy if that is talked about at all. The other data of interest this week will be business confidence which has been weakening as of late pointing to continued weakness in the business sector. This weakness in the business sector was seen last week as CAPEX numbers for the first quarter came in lower than expected.

NZD This week the main focus for the Kiwi and New Zealand financial markets will be the RBNZs monetary policy meeting and decision. The question is, after raising rates three times last year, will the Bank cut rates now instead. Overall economic conditions, including inflation, have been weakening quite a bit since late last year and more and more calls for a rate cut have been coming. This would be a pretty big turn around for the Bank but given the current environment in New Zealand, economically speaking, a rate cut can not be out of the question. If they do cut rates, focus will be on what the Bank expects going forward, whether a cut in rates will be seen as the beginning of a rate cutting cycle or whether it will be more of a one-off event at least for the time being. Also, focus will be on the Banks general assessment of the New Zealand economy and inflation prospects going forward.

CNY Inflation data for the month of May will be the main data out of China this week and a lower number I suspect will help revive and reinforce the recent huge uptrend that has been seen in China stocks as of late. Other data of focus will be industrial production and retail sales data which will be important given the overall weakness that persists in the Chinese economy.

JPY The second reading of first quarter GDP will be in focus for Japanese markets this week. The first reading looked pretty good actually as both annualized and quarterly readings came in above expectations. Therefore, any improvement in the data will be a good sign for the Japanese economy which continues to remain weak overall. However there has been some improvements recently which have helped push back the need for any more BoJ easing. At least for now. It would seem that the whole world had a pretty good first quarter in terms of growth, it is the second quarter which is looking like it will be weaker and so this is where the focus is right now, including for Japan.

EUR Greece. Yes, this small nation continues to be a big story for the markets right now as the government continues to push back on demands for reforms by the Troika in order to unlock more funding. The government also continues to do everything it can to NOT pay the IMF or anyone else for that matter, with news towards the end of last week that they will be bundling payments to the IMF which would hold off any payments to the IMF till the end of June this year. They also did not pay their June 5th payment to the IMF. On the whole, things still remain fragile and in the end there will be losses for more than just Greece. The lenders too will likely have to budge, especially if parties like Germany really do indeed want Greece to stay in the Euro Zone. That is the real question though.does the Troika really want Greece to stay in the Euro Zone and does Greece really want to stay in the Euro Zone? The latter question seems to be a yes if looking at the people for the answer but not so much so if looking at the government and this was proved in a small way last week as news surfaced that the Greek government is looking to hold snap elections if their Creditors do not budge. As for the Troika though, I am not sure if even they know the

answer to that question yet but in the next couple of weeks I think things will (finally) be made more clear for both sides.

USD No matter which way you slice it, the May jobs report last week as better than expected overall and shows a pretty strong jobs market in the US. The Non-Farm Payrolls number came in better than expected and wages came in better as well and so some good signs of the strength that exists in the US jobs market right now. The one part of the overall jobs report that was a little worse than expected was the unemployment rate which ticked a little higher. However this is not a concern as a tick higher in the jobless rate with such a large gain in overall jobs is very likely an indication that more people are getting into the jobs market to look for jobs. A good sign therefore going forward for both the jobs market and overall US economy but also in terms of Fed rate hikes. The US Dollar continued its bull run on the jobs report release as the market increased its rate hike expectations, this time putting September as the next possible date for a rate hike.

CAD The Canadian jobs market also showed some improvement as data released last week showed a larger than expected gain in jobs for the month of May. The participation rate also ticked higher as did wages. Both good signs and a positive indication of the overall Canadian economy especially given last weeks dismal GDP report. One note of caution though on the jobs report is that this tends to be a very volatile report and so while the jobs market looks pretty good this month caution should be given for next months data.

Overall Sentiment IndicatorAsset Overall Sentiment Strength Rating

US Dollar Positive

Euro Positive

Pound Positive

Canada Dollar Positive

Australian Dollar Positive

Japanese Yen Negative

New Zealand Dollar Neutral

Economic Calendar Region Event/Data Expected Date Time (EST)

Japan Q1 GDP Annualized 2.4 06/07 7:50pm

Japan Q1 GDP q/q 0.8 06/07 7:50pm

China Trade Balance 44.95B 06/07 n/a

Germany Trade Balance 19.4B 06/08 2am

Germany Industrial Production y/y 06/08 2am

China CPI y/y 1.3 06/08 9:30pm

China Producer Price Index y/y -4.5 06/08 9:30pm

Australia Investment Lending for Homes 06/08 9:30pm

United Kingdom BoE Inflation Report Hearings 06/09 5am

Australia Westpac Consumer Confidence 06/09 8:30pm

Australia RBA Gov. Stevens Speech 06/09 10:50pm

United Kingdom NIESR GDP Estimate (May) 06/10 10am

New Zealand RBNZ Interest Rate Decision 3.5 06/10 5pm

New Zealand RBNZ Press Conference and Monetary Policy Statement 06/10 5pm

Australia Employment Change 11K 06/10 9:30pm

Australia Full Time Employment 06/10 9:30pm

Australia Employment Rate 6.2% 06/10 9:30pm

China Retail Sales 10.1% 06/11 1:30am

China Industrial Production 6% 06/11 1:30am

United States Retail Sales ex. Autos 06/11 8:30am

United States Retail Sales Control m/m 0.5% 06/11 8:30am

United States UoM Consumer Sentiment 91.5 06/12 10am