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US PCE inflation slows to 2.5% in Jun, but core PCE unchanged at 2.6%

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    ActionForex.com
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    US PCE price index rose 0.1% mom in June, matched expectations. Core CPI (excluding food and energy) rose 0.2% mom, matched expectations. Prices for goods decreased -0.2% mom and prices for services increased 0.2% mom. Food prices increased 0.1% mom and energy prices decreased -2.1% mom.

    From the same month one year ago, PCE price index growth slowed from 2.6% yoy to 2.5% yoy, matched expectations. However, core PCE price index was unchanged at 2.6% yoy, above expectation of 2.5% yoy. Prices for goods decreased -0.2% yoy and prices for services increased 3.9% yoy. Food prices increased 1.4% yoy and energy prices increased 2.0% yoy.

    Personal income rose 0.2% mom or USD 50.4B, below expectation of 0.4% mom. Personal spending rose 0.3% mom or USD 57.6B, matched expectations.

    Full US Personal Income and Outlays release here.

    ECB consumer survey: Inflation expectations steady, economic growth outlook deteriorates

      By
      ActionForex.com
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      The latest ECB Consumer Expectations Survey results revealed stable inflation expectations but a more negative outlook for economic growth.

      Median inflation expectations for the next 12 months remained unchanged at 2.8%, holding at their lowest level since September 2021. Similarly, inflation expectations for three years ahead stayed steady at 2.3%.

      However, economic growth projections have taken a downturn. Expectations for growth over the next 12 months worsened, with the median forecast dropping to -0.9%, compared to -0.8% in May.

      On a positive note, expectations for the unemployment rate in 12 months’ time decreased slightly to 10.6% from 10.7% in May, marking the lowest level since the series began.

      ECB Consumer Expectations Survey release here.

      Tokyo CPI core rises, but core-core falls; BoJ rate hike uncertainty persists

        By
        ActionForex.com
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        Japan’s Tokyo CPI core (excluding food) increased from 2.1% yoy to 2.2% yoy in July, aligning with market expectations. This marks the third consecutive month of re-acceleration following a dip to 1.6% yoy in April. The primary driver of this uptick was energy prices, with electricity costs soaring by 19.7% yoy due to the termination of government utility subsidies.

        However, other inflation measures showed a slowdown. CPI core-core (excluding food and energy) dropped from 1.8% yoy to 1.5% yoy. Additionally, services inflation decreased from 0.9% yoy to 0.5% yoy, while headline CPI fell slightly from 2.3% yoy to 2.2% yoy.

        The increase in core inflation maintains the possibility of a BoJ rate hike next week. However, the current data is not sufficiently conclusive to confirm this outcome. Swap markets indicate a 38% probability of a 15bps hike. A Bloomberg survey reveals that 30% of BoJ watchers anticipate a hike, with 90% viewing it as a potential risk.

        US initial jobless claims falls to 235k vs exp 238k

          By
          ActionForex.com
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          US initial jobless claims fell -10k to 235k in the week ending July 20, slightly below expectation of 238k. Four-week moving average of initial claims was relatively unchanged at 236k.

          Continuing claims fell -9k to 1851k in the week ending July 13. Four-week moving average of continuing claims rose 5k to 1854k, highest since December 4, 2021.

          Full US jobless claims release here.

          US durable goods orders falls -6.6% mom, but ex-transport orders up 0.4% mom

            By
            ActionForex.com
            -

            US durable goods orders fell sharply by -6.6% mom to USD 264.5 in June, much worse than expectation of 0.4% mom rise. However, ex-transportation orders rose 0.5% mom to USD 188.7B, above expectation of 0.2% mom. Ex-defense orders fell -7.0% mom to USD 247.6B. Transportation equipment drove the headline contraction and fell -20.5% mom to USD 75.8B.

            Full US durable goods orders release here.

            US Q2 GDP grows 2.8% annualized, inflation pressures ease

              By
              ActionForex.com
              -

              The advance estimate of US GDP growth in Q2 2024 showed a robust 2.8% annualized increase, significantly exceeding the anticipated 2.0% and doubling Q1’s pace of 1.4%.

              This stronger-than-expected growth was driven by rises in consumer spending, private inventory investment, and nonresidential fixed investment. Notably, imports also increased, which are subtracted in the GDP calculation.

              On the inflation front, GDP price index slowed from 3.1% to 2.3%, falling below the expected 2.6%. PCE price index also eased from 3.4% to 2.6%, and core PCE price index saw a notable decrease from 3.7% to 2.9%.

              The sharp uptick in GDP growth, coupled with cooling inflation metrics, presents an optimistic economic outlook. Deceleration in price indexes suggests easing inflationary pressures, which would support rate cut by Fed in the coming months.

              Full US Q2 GDP advance release here.

              German Ifo falls to 87, economy stuck in crisis

                By
                ActionForex.com
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                Germany’s Ifo Business Climate Index fell from 88.6 to 87.0 in July, missing expectations of 89.0. Current Assessment Index also dropped from 88.3 to 87.1, below the anticipated 88.5. Additionally, Expectations Index declined from 88.8 to 86.9, underperforming the forecast of 89.0.

                Sector-wise, manufacturing index plunged from -9.3 to -14.1, indicating significant dissatisfaction among manufacturers. Services sector saw a decline from 4.2 to 0.7, while the trade sector fell from -23.6 to -27.8. Construction also showed a decrease, moving from -25.2 to -26.0.

                Ifo noted that sentiment has “declined considerably,” with companies expressing growing dissatisfaction with the current business situation. The level of skepticism regarding the coming months has increased notably. The German economy, as described by Ifo, is currently “stuck in crisis.”

                Full German Ifo release here.

                Japanese government notes export stagnation as global risks mount

                  By
                  ActionForex.com
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                  Japan’s government maintained its economic assessment but noted a more pessimistic outlook for exports due to weakening demand from China.

                  According to the Cabinet Office’s Monthly Economic Report, the Japanese economy is recovering at a “moderate pace,” though it has recently “appeared to be pausing.” The assessment of exports was downgraded from “appearing to be pausing for picking up” to “almost flat,” reflecting the impact of slowing Chinese demand.

                  In the short term, the economy is expected to continue its moderate recovery, supported by an “improving employment and income situation.” However, several risks threaten this outlook. These include the slowdown in global economies, high-interest rates in the US and Europe, and the “lingering stagnation of the real estate market in China.”

                  The report also highlighted the need to monitor price increases, geopolitical tensions in the Middle East, and fluctuations in financial and capital markets.

                  Full Japan’s Monthly Economic Report here.

                  Tech Woes and Election Jitters Trigger Steep US Stock Sell-Off

                    By
                    ActionForex.com
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                    US stocks took a steep dive overnight, with S&P 500 and NASDAQ Composite suffering their worst sessions since 2022, down -2.31% and -3.64% respectively. The sell-off was triggered by disappointing earnings reports from tech giants Alphabet and Tesla. Alphabet’s shares fell -5%, marking their biggest one-day drop since January 31, while Tesla plummeted -2.3%, its worst performance since 2020.

                    Beyond earnings, the market’s unease is likely compounded by the approaching US presidential election in November. With Joe Biden stepping out of the race and Kamala Harris stepping in, Donald Trump’s lead appeared to have narrowed significantly, and political uncertainty is looming large. Investors seem to be moving to lock in profits after the strong record run since last November, bracing for volatility in the lead-up to the election. This could signal a correction period, with the market possibly experiencing downward pressure for the next few months.

                    Technically, NASDAQ’s break of 55 D EMA (now at 17465.33) argues that it might at least be correcting the up trend from 12543.85. Risk is now on the downside as long as 18128.38 resistance holds. NASDAQ could falls to 38.2% retracement of 12543.85 to 18671.06 at 16330.46 before finding strong support to set the range for consolidations.

                    As for S&P 500, risk will stay on the downside as long as 5585.34 resistance holds. Decisive break of 55 D EMA (now at 5418.40) will align the outlook with NASDAQ. Deeper fall would be then be seen in S&P 500 to 38.2% retracement of 4103.78 to 5669.67 at 5071.50, before forming a base to set the range for medium term consolidations.

                     

                    US PMI composite rises to 27-mth high on strong services, Goldilocks scenario

                      By
                      ActionForex.com
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                      US PMI Manufacturing fell from 51.6 to 49.5 in July, a 7-month low. PMI Services jumped from 55.3 to 56.0, a 28-month high. PMI Composite rose from 54.8 to 55.0, a 27-month high.

                      Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

                      “The flash PMI data signal a ‘Goldilocks’ scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates.

                      “Output across manufacturing and services is expanding at the strongest rate for over two years in July, the survey data indicative of GDP rising at an annualized rate of 2.5% after a 2.0% gain was signaled for the second quarter.

                      “The rate of increase of average prices charged for goods and services has meanwhile slowed further, dropping to a level consistent with the Fed’s 2% target.

                      “The good news is qualified, however, with both the growth and inflation pictures containing some worrying elements to monitor in the coming months.

                      “From the output perspective, growth has become worryingly skewed, with manufacturing slipping back into contraction as the service sector gains further strength. Some of the production decline was linked to staff shortages, so could prove temporary – something which is supported by the sector reporting improved confidence about future growth prospects. However, both manufacturers and service providers are reporting heightened uncertainty around the election, which is dampening investment and hiring.

                      “In terms of inflation, the July survey saw input costs rise at an increased rate, linked to rising raw material, shipping and labour costs. These higher costs could feed through to higher selling prices if sustained, or cause a squeeze on margins.”

                      Full US PMI release here.

                      BoC cuts rate to 4.50%, downgrades 2024 GDP forecasts

                        By
                        ActionForex.com
                        -

                        BoC cuts overnight rate by 25bps to 4.50% as widely expected. The Governing Council is carefully assessing the “opposing forces” on inflation, where excess supply is lowering inflationary pressures, but shelter and some services are holding inflation up. Future monetary policy decisions will be guided by incoming inflation and the assessment on the inflation outlook.

                        In the new economic forecasts, annual GDP growth is projected to be at 1.2% in 2024 (downgraded from 1.5%), 2.1% in 2025 (downgraded from 2.2%), and 2.4% in 2026 (upgraded from 1.9%.

                        CPI inflation is projected to be at 2.6% in 2024 (unchanged), 2.4% in 2025 (upgraded from 2.2%) and then 2.0% in 2026 (downgraded from 2.1%).

                        Full BoC statement here.

                        US goods exports rises 5.7% yoy, imports rises 6.9% yoy

                          By
                          ActionForex.com
                          -

                          US goods exports rose 5.7% yoy to 172.32B in June. Goods imports rose 6.9% yoy to USD 269.16B. Trade balance reported USD -96.84B, versus expectation of USD -98.0B.

                          Wholesale inventories rose 0.2% mom to USD 903.3B. Retail inventories rose 0.7% mom to USD 802.1B.

                          Full US goods trade balance release here.

                          UK manufacturing PMI hits 24-month high, encouraging start to H2

                            By
                            ActionForex.com
                            -

                            UK PMI data for July reveals a promising start to the second half of the year. PMI Manufacturing rose to 51.8, exceeding expectations of 51.1 and marking a 24-month high. PMI Services also increased slightly from 52.1 to 52.4, though just below the forecast of 52.5. The overall PMI Composite index improved from 52.3 to 52.7.

                            Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted, “The flash PMI survey data for July signal an ‘encouraging start’ to the second half of the year, with output, order books, and employment all growing at faster rates amid rebounding business confidence, while price pressures moderated.”

                            Post-election business sentiment has surged, with increased demand and hiring in both manufacturing and services sectors. Despite the slowest price rise in three and a half years, suggesting potential for a summer rate cut, caution remains.

                            “Policymakers will likely take a cautious approach to loosening policy amid signs of inflationary pressures pivoting away from services towards manufacturing, where Red Sea shipping delays and higher freight prices are adding to costs again,” Williamson added. The renewed hiring trend could also sustain wage pressures, keeping inflation somewhat persistent.

                            Full UK PMI release here.

                            Eurozone PMI composite hits 5-month low at 50.1, ECB’s post-September rate cut path uncertain

                              By
                              ActionForex.com
                              -

                              Economic activity in Eurozone weakened in July, with PMI Manufacturing dipping from 45.8 to 45.6, a seven-month low, and missing expectations of 46.3. PMI Services also declined from 52.8 to 51.9, below the anticipated 52.9, marking a four-month low. Consequently, PMI Composite fell from 50.9 to 50.1, a five-month low.

                              Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that the Eurozone economy “barely moved” in July. He highlighted that the manufacturing sector “deteriorated significantly,” offsetting “moderate growth” in the services sector.

                              While current growth data might justify a September rate cut by ECB, inflation data complicates this decision. De la Rubia noted that input prices in the services sector rose faster, and selling prices remained steady. Manufacturing input prices, which had fallen for over a year, have increased for two consecutive months. Output prices only marginally decreased.

                              De la Rubia added “Our conclusion is that while a September rate cut will most probably be exercised, it will be much trickier to follow this path in the months thereafter, unless the downturn morphs into a deep recession.”

                              Full Eurozone PMI release here.

                              German Gfk consumer sentiment improves to -18.4, driven by income expectations

                                By
                                ActionForex.com
                                -

                                Germany’s Gfk Consumer Sentiment for August rose to -18.4, surpassing expectations of -21.1, and marking an improvement from July’s -21.6.

                                In July, economic expectations jumped from 2.5 to 9.8, and income expectations surged from 8.2 to 19.7, reaching their highest level since October 2021. Willingness to buy also improved, rising from -13.0 to -8.4, while willingness to save slightly decreased from 8.2 to 8.0.

                                Rolf Buerkl, consumer expert at NIM, attributed this upswing primarily to Germans’ increased income expectations. He also noted that the euphoria from the European Football Championship likely contributed to the positive sentiment.

                                However, Buerkl cautioned that it remains to be seen whether this effect is sustainable or just a “short-term flare-up.” He warned that if this good mood fades quickly, the path out of low consumption could be “long and demanding.”

                                Full German Gfk consumer sentiment release here.

                                BoC to cut rates again; USD/CAD set for further gains

                                  By
                                  ActionForex.com
                                  -

                                  BoC is widely anticipated to cut its interest rate by 25bps to 4.50% today, the second reduction in a row. This expectation is strongly backed by financial markets, which are pricing in nearly a 93% probability. While the decision itself seems almost certain, the market’s attention will be on BoC’s guidance regarding the pace of future monetary easing.

                                  A recent Reuters survey sheds light on the expected path of rate cuts. Out of 30 economists surveyed, 16 foresee two additional rate cuts this year, likely in October and December, which would bring the rate down to 4.00%. Ten economists predict just one more cut to 4.25%, while four expect a total of three additional cuts, taking the rate to 3.75%.

                                  USD/CAD has been surging this week, driven in part by the broad selloff in commodity currencies, including Loonie. Additionally, there is backdrop of expectations that Fed will cut rates twice this year. Additionally, the potential return of Donald Trump to US presidency raises prospects of slower policy easing next year. In contrast, BoC is anticipated to ease policy more quick and deeper than Fed, while it has already commenced its cycle of rate cuts.

                                  Technically, USD/CAD’s break of 1.3790 resistance solidify the case that consolidation from 1.3845 has completed with three waves down to 1.3588. Retest of 1.3845 high should be seen next. Firm break there will resume whole rally from 1.3176 and target 61.8% projection of 1.3176 to 1.3845 from 1.3588 at 1.4025.

                                  Japan’s PMI services surges to 53.9 while manufacturing back in contraction

                                    By
                                    ActionForex.com
                                    -

                                    Japan’s PMI Manufacturing declined from 50.0 to 49.2, underperforming against expectations of 50.5, indicating contraction. In contrast, PMI Services experienced a robust increase, rising sharply from 49.4 to 53.9, signaling a strong expansion and the highest activity level in three months. PMI Composite also rose from 49.7 to 52.6.

                                    Usama Bhatti, Economist at S&P Global Market Intelligence, stating the reading was “indicative of solid growth,” driven primarily by the services sector. Manufacturing saw a “renewed reduction in output,” though the decline was marginal.

                                    Additionally, the PMI report highlighted increasing operational challenges, with a “renewed increase in capacity pressures” across the private sector. For the first time in three months, there was a rise in the level of outstanding business, suggesting that firms are facing more backlog in their operations.

                                    The report also underscored persistent cost pressures, particularly in manufacturing, where input prices rose sharply, marking the steepest increase since April 2023.

                                    Full Japan PMI release here.

                                    Australia’s PMI composite dips to 50.8, no major slowdown with continued inflation pressures

                                      By
                                      ActionForex.com
                                      -

                                      Australia’s PMI Manufacturing saw a marginal improvement in July, rising slightly from 47.2 to 47.4. Conversely, PMI Services dropped to a six-month low, moving from 51.2 to 50.8. PMI Composite also decreased from 50.7 to 50.2, the lowest in six months.

                                      Warren Hogan, Chief Economic Advisor at Judo Bank, highlighted that despite a further moderation in the composite output index, “there are no signs of a significant slowdown in Australian business activity in 2024.” He noted that while manufacturing continues to struggle, services sector is still experiencing better activity compared to the end of 2023.

                                      Hogan also mentioned that the impact of recent tax cuts and cost-of-living support measures has yet to fully manifest in the business conditions and should positively affect consumer spending in future months. Insights from the upcoming final PMIs for July and the reports for August are expected to provide a clearer picture of these effects.

                                      Despite softer activity levels, inflation pressures have not eased significantly. The services sector saw a notable increase in input costs, which rose four points to 63.3—the highest since November 2023. In contrast, manufacturing input costs rose only slightly and are near their lowest in four years. The composite output price index nudged up to 54.1 in July, indicating a small increase but suggesting that inflation is likely stabilizing around an annualized rate of 4% as of mid-2024.

                                      Full Australia PMI release here.

                                      ECB’s de Guindos: Sep economic projections key for policy reassessment

                                        By
                                        ActionForex.com
                                        -

                                        In an interview with Spanish news agency Europa Press, ECB Vice President Luis de Guindos emphasized the significance of new macroeconomic projections in September, together with another two months of data on inflation and underlying inflation. These projections and data will help ECB reassess its monetary policy stance more effectively.

                                        De Guindos stressed the importance of having more confidence that inflation will reach ECB’s target of 2% by the end of 2025, calling it the “key question.” He acknowledged the high level of uncertainty, stating that ECB must be “prudent” when making decisions.

                                        He predicted that inflation will remain “around current levels until the end of the year” and observed that all measures of underlying inflation are declining. He added, “The disinflation process will continue from the start of next year.”

                                        De Guindos also pointed out that wages are “starting to slow down,” and firms expect wage increases to moderate, particularly from 2025 onward. This moderation in wage increases is expected to lead to a reduction in services inflation, helping ECB achieve its 2% inflation target by the end of next year.

                                        AUD/CAD struggles as impact of interest rate policies sidestepped

                                          By
                                          ActionForex.com
                                          -

                                          Australian Dollar continues to face significant headwinds, largely due to ongoing worries about the Chinese economy—the most significant trading partner. Despite the possibility of RBA raising interest rates while other global central banks are adopting easing policies, this potential policy divergence is currently providing little support for the Aussie. Market focus has shifted away from these interest rate considerations, at last for the time being.

                                          Recent developments, including China’s Third Plenum last week, have left investors disappointed due to the lack of substantial measures announced to revitalize the slowing Chinese economy, currently grappling with deflation risks and a troubled housing market. The People’s Bank of China’s unexpected rate cut yesterday, although aimed at addressing these issues, was perceived as too modest to make a significant impact.

                                          Adding to the complexity is the uncertainty surrounding the upcoming US presidential election. Overnight reactions in the US stock market to Joe Biden’s withdrawal from the presidential race—and Kamala Harris stepping in as the Democratic candidate—were initially positive. However, the realistic possibility of Donald Trump securing a victory poses concerns, particularly regarding his trade tariff policies, which could exacerbate the economic slowdown in China

                                          AUD/CAD’s decline starkly illustrates that interest rate policies are not the primary driver for the Aussie at this time. With BoC’s anticipated rate cut this week and uncertainty over whether RBA might hike rates again, the currency pair should theoretically have more room to rally. But the cross has indeed turned south.

                                          Technically, considering bearish divergence condition in D MACD, a medium term top could have been formed at 0.9262, just ahead of 100% projection of 0.8562 to 0.9063 from 0.8779 at 0.9280. Near term focus is on 55 D EMA (now at 0.9108). Decisive break there would at least send AUD/CAD to 38.2% retracement of 0.8562 to 0.9262 at 0.8995, with risk of further fall to channel support (now at 0.8872).

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