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Action Insight: Special Reports

Action Insight is the most popular section of the site, read by traders around the world. Our team of analysts work around the clock, analyzing the markets from technical and fundamental perspectives in providing the reports in this section to you.



Japan: Weak Data Should Pressure BOJ To Ease Further Print E-mail
Special Reports | Written by ActionForex.com | Sep 30 16 06:00 GMT
The latest set of macroeconomic data in Japan has dented hopes of recovery in the world’s third largest economy. Look at inflation, nationwide core CPI (ex. fresh food) stayed unchanged at -0.5% y/y in August, compared with consensus of -0.4%. Although the negative contribution from energy prices eased, weakness was picked up by core food, hotel charges, household durables and recreational durables. The core CPI (ex energy) slipped -0.1percentage point to +0.4% for the month while, the core-core inflation (ex. Food and energy) decelerated to +0.2% from +0.3% in July. Worse still, the September Tokyo core-core CPI (ex. food and energy), slipping -0.2 percentage point to -0.1% y/y, turned negative for the first time since October 2013. Meanwhile, Tokyo’s core CPI (ex. fresh food) contracted -0.5% y/y in September, compared with -0.4% both in consensus and in August. Weaknesses in the leading Tokyo CPIs suggest nationwide inflation should decline further in September.
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US Presidential Election: A Close Race Print E-mail
Special Reports | Written by ActionForex.com | Sep 28 16 07:27 GMT
With just 6 weeks until the election day, the presidential battle is still too close to call. Recent polling results suggest that Hillary Clinton is leading Donald Trump by 2-3 percentage points. Regarding the first US presidential debate held on September 26, CNN's survey showed 62% of the viewers thought Clinton performed better and 27% favored Trump, while Time's survey showed only 40% favored Clinton, compared with Trump's 60%. Two more debates to go for presidential candidates and things can change! After all, this would undoubtedly be a highly competitive race as 270 electoral college votes are needed for the presidency. Financial markets have priced in a higher chance of a Clinton White House in 2017, with the Congress remaining divided (slim Democratic majority in the Senate and a slim Republican majority in the House). We try to analyze the impacts of the presidential election result, assuming the base case above. In short, Clinton's victory would likely bring less policy uncertainty. Deficit is expected to increase in either case as both candidates advocated increasing expenditure in the first few years of their presidency, but the size of increase would be different. A more vocal Trump on the Fed suggests his victory would raise the uncertainty of US monetary policy. A divided Congress would make implementation of structural reforms extremely difficult but some deadline-oriented legislation, such as the renewal of the debt ceiling in March, would eventually be passed. While not our base case, the situation would be more disastrous if the White House and Senate are split.
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RBNZ Kept Rates Unchanged, Door Remains Open For November Cut Print E-mail
Special Reports | Written by ActionForex.com | Sep 22 16 04:18 GMT
RBNZ left the OCR unchanged at 2% in September but reaffirmed the dovish tone in the post-meeting statement, signaling a cut in November is still on. The central bank warned that the excessive housing price inflation is posing concerns for financial stability. Yet, it added that recent macro-prudential measures are taking their effects. Despite recent improvement in exports, RBNZ continued to warn over kiwi’s appreciation, noting that 'a decline in the exchange rate is needed'
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Fed Keeps Powder Dry, In Face Of A More Divided Committee Print E-mail
Special Reports | Written by ActionForex.com | Sep 22 16 03:38 GMT
As we and most market participants had expected, the Fed left its policy rate unchanged at 0.5% in September. The accompanying statement unveiled a more divided committee with 3 members voting for a rate hike while another 3 lowered their 2016 dot to support no rate hike this year. The Fed delivered a more hawkish message, both in the statement and in Chair Yellen’s speech at the press conference, expressing confidence in the economy. We note 2 major changes in the statement language. First, the members acknowledged that near-term risks to the economic outlook 'appear roughly balanced'. Second, the Committee 'judges that the case for an increase in the federal funds rate has strengthened'. We see both strongly signal that the Fed is planning for a rate hike in the coming meetings. Despite being increasingly hawkish, the Fed has pushed down the path of interest rates over the medium term. Besides signaling only one rate hike this year, the median expectation for 2017 has dropped to 2 hikes from 3 hikes previously, whilst maintaining 3 hikes in both 2018 and 2019.
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BOJ Shifts Policy Framework To Nominal Yield Curve Targeting Print E-mail
Special Reports | Written by ActionForex.com | Sep 21 16 09:52 GMT
BOJ introduces a new policy framework, the 'QQE with Yield Curve Control', in order to achieve the inflation target of +2%. The framework consists of two major components: 'yield curve control' and 'inflation-overshooting commitment'. For the first component, BOJ would control short-term and long-term interest rates, while, for the second one, BOJ commits to expanding the monetary base until the year-on-year rate of increase in the observed CPI exceeds +2%, and stays above it in a stable manner. BOJ refrained from cutting the policy rate further from the current -0.1% and left the annual pace of increase in the amount outstanding of its JGB holdings at about 80 trillion yen. The policy change indicates that BOJ has shifted from 'monetary base' targeting to 'nominal yield curve' targeting.
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RBA Minutes Signal Further Easing This Year Less Likely Print E-mail
Special Reports | Written by ActionForex.com | Sep 20 16 06:08 GMT
RBA's minutes for the September meeting indicated that the central bank was content with the current monetary policy stance, with the cash rate at 1.5%. Policymakers acknowledged that the economy has been growing in line with potential. The members 'observed that the data for the international and domestic economies over the past month had been broadly consistent with the forecasts'. Moreover, 'forward-looking indicators had been consistent with only a slight change in the unemployment rate in coming months. Domestic cost pressures, including wage growth, had remained low and were expected to remain so for some time'. AUDUSD rose to an intraday high of 0.7553 following release of the minutes before retreat.
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BOE Leaves the Door for Further Rate Cut in November Print E-mail
Special Reports | Written by ActionForex.com | Sep 15 16 14:52 GMT
BOE voted unanimously to keep the Bank rate at 0.25% and the asset purchase program at 435B pound. This had been widely anticipated as the central bank in August trimmed the policy rate by -25 bps and expanded the asset purchase program by +70B, of which 60B pound is for the purchases of government bonds over 6 months and 10B pound for sterling non-financial investment-grade corporate bonds purchases over 18 months. Recent data suggest that UK's economy has been expanding at a slightly faster pace than previously expected. Policymakers also acknowledged that the stimulus measures added last month have been effective so far. They, however, left the door open to another rate cut in November. UK's FTSE index and GBPUSD climbed higher after the announcement.
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SNB Left Policy Rates Unchanged, Reaffirmed FX Intervention To Prevent CHF Appreciation Print E-mail
Special Reports | Written by ActionForex.com | Sep 15 16 11:08 GMT
As widely anticipated, SNB left its monetary policy unchanged in September, keeping the sight deposit rate unchanged at -0.75% and the target for the three-month Libor at between -1.25% and -0.25%. While there's no press conference, it is unveiled in the post-meeting statement that the central bank acted in response to the Brexit shock. It reiterated the pledge to 'remain active in the foreign exchange market, as necessary'. On the economic outlook, the staff revised lower the inflation forecasts, expecting inflation to rise above +1% by 1Q19, compared with June's projection of 3Q18.
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China's Data Show Improvement, Likely Driven By Temporary Factors Print E-mail
Special Reports | Written by ActionForex.com | Sep 13 16 06:50 GMT
Latest Chinese macroeconomic data show improvement in the country's economic outlook. Industrial production (IP) grew +6.3% y/y in August, beating expectations of +6.2% and July's +6%. The uptick was in line with the rebound in the August PMI reading and despite closure of some factories prior to the G20 meeting in Hangzhou. Two of the bright spots were manufacturing activities and electric vehicle production. Growth in the former was driven by the increase in demand for tech goods, especially in the US. Higher imports of tech components, indicated in last week's trade data, signal further rise in production of electronics. The strong growth in electric vehicle production was driven government subsidies.
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ECB Disappoints, Keeping Rates and QE Unchanged Print E-mail
Special Reports | Written by ActionForex.com | Sep 09 16 06:26 GMT
ECB the left policy rates unchanged with the main refi rate, the interest rates on the marginal lending facility and the deposit facility staying at 0%, 0.25% and -0.40%, respectively. QE, the asset purchases program, also stayed at 80B euro per month until the end of March 2017, or beyond. We had expected ECB to extend the duration of the program and broaden the asset categories it would consider buying. President Mario Draghi kept the door open for further stimulus and suggested that the Governing Council has tasked the relevant committees to 'evaluate the options that ensure a smooth implementation of our purchase program' and would 'act by using all the instruments available within our mandate', if warranted.
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ECB Disappoints, Keeping Rates and QE Unchanged Print E-mail
Special Reports | Written by ActionForex.com | Sep 09 16 05:24 GMT
ECB the left policy rates unchanged with the main refi rate, the interest rates on the marginal lending facility and the deposit facility staying at 0%, 0.25% and -0.40%, respectively. QE, the asset purchases program, also stayed at 80B euro per month until the end of March 2017, or beyond. We had expected ECB to extend the duration of the program and broaden the asset categories it would consider buying. President Mario Draghi kept the door open for further stimulus and suggested that the Governing Council has tasked the relevant committees to "evaluate the options that ensure a smooth implementation of our purchase program" and would "act by using all the instruments available within our mandate", if warranted.
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BOC Left Rates Unchanged, Inflation Risks Tilted To Downside Print E-mail
Special Reports | Written by ActionForex.com | Sep 08 16 07:13 GMT
Bank of Canada left the policy rate unchanged at 0.5%. This came in widely anticipated. While the nominal rate stands above that of the Fed, the ECB and the BOE, the inflation adjusted real rate had been staying in negative territory, at around -1% on average. Therefore, we would regard the monetary policy remains highly stimulative. Despite weakness in the second quarter, BOC 'still projects a substantial rebound' in the second half of the year.
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RBA On Hold, Less Dovish On Outlook Print E-mail
Special Reports | Written by ActionForex.com | Sep 06 16 06:18 GMT
RBA has just announced to keep the cash rate unchanged at 1.5%, following a 25-bps reduction in August. Policymakers delivered a less dovish message in the post-meeting statement. Little change has been made in both global and domestic economic assessment, reaffirming continuation of growth while a more obvious change in assessment was about Australia’s housing market. Australia dollar climbed higher against US dollar following the announcement. The chance for further rate cut this year has diminished.
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China's PMI Indicates Manufacturing Activities in Expansion Print E-mail
Special Reports | Written by ActionForex.com | Sep 01 16 11:34 GMT
The latest set of PMI data in China signaled improvement in the country's economic outlook. The official manufacturing PMI released by NBS picked up to 50.4 in August from 49.9 a month ago. This indicates that the sector returned to expansion for the first time since October 2014. The services PMI slid -0.4 point to 53.5 for the month but stayed firmly in the expansionary territory. Looking into the details, new orders for manufacturing products soared +0.9 point to 51.3. This was partly driven by the recovery following the heavy flood in July and is unlikely recur in the coming months. New export orders increased +0.7 point to 49.7.
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USD Index Stays Undervalued, Despite Soaring Rate Hike Hopes Print E-mail
Special Reports | Written by ActionForex.com | Aug 29 16 11:30 GMT
Fed Chair Janet Yellen's speech last Friday lifted speculations of additional policy rate hike later this year. Last Friday, CME's 30-day Fed funds futures priced in 33% chance of a hike in September, up from 21% before the speech. The chance of a hike in December soared to 59%, up from 51.8% Thursday. Yellen has turned more upbeat on the Fed's monetary policy outlook, mainly driven by stronger employment situation and household spending. As she indicated, "in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook".
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Deepening Deflation Adds Pressure To Further BOJ Action Print E-mail
Special Reports | Written by ActionForex.com | Aug 26 16 10:38 GMT
Japan's deflation persisted for a fifth month in July. Core CPI (excluding fresh food) worsened to -0.5% y/y in July to -0.4% a month ago. Core CPI (excluding food and energy) narrowed to +0.3% y/y from +0.5% in June while core CPI (excluding fresh food and energy), a barometer that BOJ prefers, also narrowed to +0.5% y/y in July from +0.7% in the prior month. Looking at leading indicators, Tokyo's core CPI deflation stayed at -0.4% y/y in August while the core CPI (excluding food and energy) softened to +0.1% y/y this month, from +0.2% in July. As the deflation trend continues, BOJ is under pressure to add further stimuli imminently. Lower energy cost is the key driver of deflation. As we can see, inflation excluding energy remained in the positive territory. That said, downward price pressure is broadly based with food, household goods and clothing prices declining. Elevated Japanese yen has been restraining domestic demand.
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Rally in LIBOR Due to Regulatory Change... to Continue as Rate Hike Hopes Increase Print E-mail
Special Reports | Written by ActionForex.com | Aug 25 16 13:31 GMT
The 3-month USD LIBOR has been surging recently, rising to a 7-year high of 0.83 earlier this week. The move is mainly due to SEC's regulatory change aiming at making money-market funds safer, increasing transparency and containing the fallout that could result from many investors cashing out at once. As the effective date (October 14) of the new regulations approaches, supply of US dollar shrinks as investors flee the US$2.7 trillion US money market funds which buy short-term corporate and municipal debts. They are shifting a large amount of their holdings out of prime and municipal funds and into government funds.
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RBNZ Affirms Further Easing Would Not Be Aggressive Print E-mail
Special Reports | Written by ActionForex.com | Aug 23 16 05:53 GMT
RBNZ published a speech, titled 'Monetary policy faces challenges in turbulent times', written by Governor Graeme Wheeler but delivered by Assistant Governor John McDermott to the Otago Chamber of Commerce, earlier today. The key message is that the central bank does 'not believe that the outlook and balance of risks warrants a position of no policy change, nor a position of rapid easing'. We retain the view of another cut of -25 bps in November, and probably one more in 1H17.
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ECB Cautioned over Heightened Uncertainty after Brexit Print E-mail
Special Reports | Written by ActionForex.com | Aug 18 16 14:17 GMT
In its account of the monetary policy meeting in July, ECB warned that uncertainty has increased since UK voted to leave EU on June 23. The central bank believed that this "could affect the global economy in deeper and less predictable ways than through the direct trade channel". Yet policymakers believed it was prudent to spend more to gauge its impacts and as a result left the deposit rate unchanged at -0.4% and the main refinancing rate at 0%. ECB also maintained the asset purchase of 80B euro per month until March 2017 or beyond, if necessary.
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FOMC Minutes Unveiled Divided Views Over Next Rate Hike Print E-mail
Special Reports | Written by ActionForex.com | Aug 18 16 04:37 GMT
The FOMC minutes for the July meeting unveiled that members were divided over the monetary policy outlook. While a 'couple' of members called for an immediate rate hike, others preferred to see economic and inflation grow more sustainably. Bear in mind, however, that, the meeting was held before the strong August employment report and 2Q16 GDP data were released. Policymakers’ judgments were mainly based on the June employment report (which was strong, though), a number of 2Q16 macroeconomic data as well as the immediate aftermath of the EU referendum. Bets on a December rate hike dropped modestly after the minutes.
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