BoJ ends YCC and negative rates as they have fulfilled their roles

    In a landmark decision that marks a significant shift in Japan’s monetary policy, BoJ announced the termination of its Yield Curve Control framework and negative interest rate policy, signifying that these measures “have fulfilled their roles.”

    This pivotal move is underpinned by BoJ’s assessment that a “virtuous cycle between wages and prices” has come in sight and that the long-standing 2% inflation target is on track to be “achieved in a sustainable and stable manner.”

    Setting the overnight call rate to a range of 0-0.1%, the decision was reached with a majority vote of 7-2.

    BoJ will continue its purchase of JGBs at “broadly the same amount as before,” ensuring a measure of stability in the bond market. This part of the decision was made with an 8-1 vote. Meanwhile, BoJ has pledged to “respond nimbly” in the event of a rapid rise in long-term interest rates

    Additionally, BoJ has outlined plans to discontinue the purchase of ETFs and J-REITs, while the procurement of commercial paper and corporate bonds will be gradually reduced, aiming for discontinuation within approximately one year.

    Full BoJ statement here.

    RBA stands pat, not ruling anything in or out

      RBA has opted to maintain cash rate target unchanged at 4.35% today, aligning with broad market expectations. The central bank’s stance reflects a cautious approach, emphasizing the prevailing uncertainty in both the global and domestic economic environments. RBA’s declaration that the path of interest rates remains “uncertain” and that it is “not ruling anything in or out” underscores a flexible policy outlook, leaving the door open for rate adjustments in the future, including the possibility of further hikes.

      On the inflation front, RBA acknowledges a moderating trend, consistent with its latest forecasts. This moderation is attributed primarily to slowdown in goods inflation. However, services inflation remains stubbornly high, and ism ode rating at a slower pace. Wages growth, a critical factor in the inflation equation, appears to have peaked.

      Addressing the economic outlook, RBA paints a picture of significant uncertainty. Internationally, questions loom over China’s economic outlook and the broader impacts of geopolitical conflicts in Ukraine and the Middle East. Domestically, uncertainties pertain to the lag effects of monetary policy adjustments, firms’ pricing decisions, wages dynamics, and household consumption patterns.

      Full RBA statement here.

      Eurozone CPI finalized at 2.6% in Feb, core CPI at 3.1%

        Eurozone CPI was finalized at 2.6% yoy in February, down from 2.8% yoy in January. CPI core (excluding energy, food, alcohol & tobacco) was finalized at 3.1% yoy, down from prior month’s 3.3% yoy.

        The highest contribution to the annual Eurozone inflation rate came from services (+1.73 percentage points, pp), followed by food, alcohol & tobacco (+0.79 pp), non-energy industrial goods (+0.42 pp) and energy (-0.36 pp).

        EU CPI was finalized at 2.8% yoy. The lowest annual rates were registered in Latvia, Denmark (both 0.6%) and Italy (0.8%). The highest annual rates were recorded in Romania (7.1%), Croatia (4.8%) and Estonia (4.4%). Compared with January, annual inflation fell in twenty Member States, remained stable in five and rose in two.

        Full Eurozone CPI final release here.

        China’s industrial production expand 7% yoy, retail sales up 5.5% yoy

          China’s industrial production grew 7.0% yoy in the January-February period , above expectation of 5.3% yoy During the same period, retail sales rose 5.5% yoy, below expectation 5.6% yoy.

          Fixed asset investment rose 4.2% yoy, above expectation of 3.2% yoy. Investment into real estate fell by -9% yoy. Investment in infrastructure rose by 6.3% yoy while that in manufacturing increased by 9.4% yoy.

          “The economy kept rebounding and improving in January and February with various policies taking effect. But we also need to see that the external environment is increasingly complex, grim and uncertain, and the problem of insufficient domestic demand still remains. The foundation for the economy’s rebound needs to be further solidified,” NBS said.

          NZ BNZ services rises to 53.0, signs of early and strong growth emerge

            New Zealand’s BusinessNZ Performance of Services Index climbed from 52.2 to 53.0 in February, marking its highest point since March 2023.

            A closer examination of the index’s components reveals a generally positive picture. Activity and sales maintained steady pace, inching slightly up from 53.0 to 53.1. Employment saw modest increase, moving closer to the expansionary threshold by rising from 48.3 to 49.1. Notably, new orders and business surged significantly from 52.4 to 56.0, the highest level recorded since December 2022.

            The feedback from businesses highlighted persistent concerns, with the proportion of negative comments standing at 57.3% in February, a slight improvement from December’s 58.7% but an increase from January’s 53.0%. Businesses continue to identify the cost of living as the primary factor influencing activity, alongside the difficulties posed by the overall economic conditions.

            BNZ’s Head of Research Stephen Toplis said that “when we combine the PMI and PSI together to get an indicator of activity, there is a strong suggestion of growth returning later this year. The turnaround occurs a little stronger and earlier than we are forecasting but, whatever the case, it is a heartening sign”.

            Full NZ BNZ PSI release here.

            US Empire state manufacturing dives to -20.9, activity falls significantly

              US Empire State Manufacturing Index fell sharply from -2.4 to -20.9 in March, well below expectation of -6.5. Looking at some details, new orders fell from -6.3 to -17.2. Shipments fell from 2.8 to -6.9. Prices paid fell from 33.0 to -28.7. Prices received ticked up from 17.0 to 17.8. Number of employments fell from -0.2 to -7.1. Average workweek fell from -4.7 to -10.4.

              Richard Deitz, Economic Research Advisor at the New York Fed said: “Manufacturing activity fell significantly in New York State in March, with a decline in new orders pointing to softening demand. Labor market conditions remained weak as both employment and hours worked decreased.”

              Full US Empire State Manufacturing release here.

              Japan’s Shunto negotiations yield 5.28% pay rise, a 33-Year High

                Japan’s annual labor negotiations, known colloquially as “Shunto” or the “spring wage offensive,” have culminated in a remarkable outcome this year, with major firms agreeing to a pay increase of 5.28%—the highest in 33 years.

                This significant hike, announced by the country’s largest trade union group Rengo, surpasses the previous year’s increase of 3.80%. With wage talks for smaller companies anticipated to wrap up by the end of March, this development is a critical one in the context of monetary policy considerations by BoJ.

                This wage growth is likely to be viewed positively by BoJ officials, who are widely expected to be on the verge of ending the long-standing negative interest rate policy. However, the exact timing of such a policy shift, whether it could be announced as soon as next week’s meeting or delayed until April, remains a matter of speculation.

                A recent Reuters poll conducted between March 11 and 14 showed that out of 34 economists surveyed, only 12 anticipate a rate hike in the upcoming week. The majority, 21 out of 34, foresee such a move in April.

                Those in favor of an April decision point to BoJ’s access to more comprehensive information by then, including results from Tankan survey, insights from branch managers, and a new set of economic projections.

                Yet, history has shown that BoJ has a penchant for surprising the markets. This unpredictability serves as a reminder to never rule out the possibility of a sooner move.

                US treasury yields leap as markets question Fed’s easing path

                  US Treasury yields surged overnight and pulled Dollar higher, in reaction to February’s stronger than expected PPI data. Despite prevailing expectations for the Fed to initiate rate cuts in June, the persistence of “sticky” inflation has led a reassessment of the loosening path throughout the year.

                  Currently, Fed fund futures reflect diminished confidence, with the likelihood of three rate cuts by year-end, from current 5.25-5.50% down to 4.25-4.50%, falling below 70%. Some market participants appears to be speculating on a less dovish stance in Fed’s updated dot plot, set to be unveiled next week.

                  Technically, 10-year yield’s strong rise overnight suggests that corrective rebound from 3.785 is still in progress. Break of 4.354 is possible. But for now, strong resistance is expected between 4.391 ad 4.534 (50% and 61.8% retracement of 4.997 to 3.785) to limit upside to complete the rebound.

                  NZ BNZ manufacturing climbs to 49.3, a glimmer of hope in ongoing recession

                    New Zealand BusinessNZ Performance of Manufacturing Index rose from 47.5 to 49.3 , marking the highest point in a year. However, the sub-50 reading indicates that the sector remains in contraction for the twelfth consecutive month.

                    A closer examination of the components reveals a mixed bag of progress and setbacks. Production saw a significant leap from 42.9 to 49.1, reaching its peak since January 2023. Contrarily, employment edged down to the breakeven point of 50.0 from 51.3. New orders continued to struggle, remaining unchanged at 47.8 and indicating contraction for the ninth month in a row, reflecting the ongoing difficulty in securing new business. Finished stocks and deliveries both saw improvements, with deliveries crossing into expansion territory at 51.4, the highest since March 2023.

                    Despite these developments, the sector’s sentiment remains cautious, with 62% of comments being negative in February, marginally less pessimistic than January’s 63.2% but more so than December’s 61%. The primary concerns among respondents were a lack of orders, both domestically and internationally, and a general slowdown in the economy.

                    Stephen Toplis, BNZ’s Head of Research acknowledged that while New Zealand’s manufacturing sector “is still in recession”, the latest PMI data signals “there is light at the end of the tunnel”. The proximity of the PMI to the “breakeven” threshold and the positive differential between new orders and inventory suggest an upcoming increase in production.

                    Full NZ BNZ PMI release here.

                    US initial jobless claims falls to 209k vs exp 218k

                      US initial jobless claims fell -1k to 209k in the week ending March 9, below expectation of 218k. Four-week moving average of initial claims fell -500 to 208k.

                      Continuing claims rose 17k to 1811k in the week ending March 2. Four-week moving average of continuing claims rose 2k to 1799k.

                      Full US jobless claims release here.

                      US PPI up 0.6% mom, 1.6% yoy in Feb

                        US PPI rose 0.6% mom in February above expectation of 0.3% mom. PPI goods rose 1.2% while PPI services rose 0.3% mom. PPI ex-food, energy and trade services rose 0.4% mom.

                        For the 12-month period, PPI rose 1.6% yoy, above expectation of 1.1% yoy. That’s the highest level since September 2023. PPI ex-food, energy and trade services rose 2.8% yoy.

                        Full US PPI release here.

                        US retail sales rises 0.6% mom in Feb, ex-auto sales up 0.3% mom

                          US retail sales grew 0.6% mom to USD 700.7B in February, above expectation of 0.5% mom. Ex-auto sales rose 0.3% mom to USD 566.8B, below expecetation of 0.4% mom. Ex-gasoline sales rose 0.6% mom to USD 647.7B. Ex-auto & gasoline sales rose 0.3% mom to USD 513.7B.

                          In the three months to February, sales were up 2.1% from the same period a year ago.

                          Full US retail sales release here.

                          ECB’s Knot pencils in for Jun rate cut, eyes Sep and Dec meetings too

                            ECB Governing Council member Klaas Knot told reporter today that he has “pencilled in June for a first rate cut”. After that, Know said the subsequent path would be “data-dependent”.

                            Highlighting the significance of ECB’s meetings in September and December, which will include new economic projections, Knot positions these gatherings as crucial junctures for assessing and adjusting the bank’s monetary policy strategy.

                            Moreover, Knot opens the door for action outside the traditional schedule of projection-inclusive meetings. “But if incoming data tells us we can do more, the interim meetings should also be available,” he stated.

                            ECB’s Stournaras advocates two rate cuts by summer break, four throughout the year

                              ECB Governing Council member Yannis Stournara, a known dove, proposed two rate reductions “before the summer break” and a total of four throughout the year. This strategy, he argues, is essential to ensure that ECB’s monetary policy “does not become too restrictive” in the face of current economic challenges.

                              In an interview, Stournaras emphasizes the urgency of beginning these rate cuts soon, but not in April, as there will be “only little new information” available before then.

                              The rationale behind Stournaras’s push for rate cuts stems from his observations on Eurozone’s economy is “much weaker than expected,” with risks skewed to the downside. Meanwhile, inflation, although significantly reduced, presents a balanced risk profile.

                              Addressing concerns about risk of “wage-price spiral,” Stournaras argued that wages are merely “catching up, not leading inflation.” He also highlights the moderating trend in nominal wage growth and the capacity of profits to absorb part of the pay increases, suggesting that fears of a wage-driven inflationary loop may be overstated.

                              Looking ahead, Stournaras envisions the deposit rate gradually decreasing to 2% by the end of 2025 or the beginning of 2026. However, he draws a line at this level, suggesting that rates should not fall below the pre-pandemic levels of 2%.

                              Ethereum’s momentum wanes, Bitcoin’s consolidation due soon

                                Ethereum’s rally appears to be losing momentum as seen in D MACD, after accelerating to as high as 4092.5. Overbought consolidation in D RSI is probably limiting it at 161.8% projection of 1519.1 to 2715.0 from 2164.0 at 4098.6. Break of 3726.8 support will confirm short term topping, and bring correction to 38.2% retracement of 2164.0 to 4092.5 at 3355.8, and then set the range for sideway consolidations.

                                As for Bitcoin, there might still be room to extend the record run, but upside potential is limited for the near term, as some consolidations should be due after the strong rally. Upside should be limited by 161.8% projection of 24896 to 49020 from 38496 at 77528. Meanwhile, break of 67095 support will indicate that a short term top is already formed, and deeper pull back could be seen next to start a consolidation phase.

                                Silver targeting key resistance zone at 26 as momentum picks up

                                  While Gold’s rally stalled after hitting new record high last week, Silver is picking up momentum. Given that Silver has been clearly lagging Gold this year, there is room for Silver to catch up and outperform in Q2.

                                  Fundamentally, both Gold and Silver as precious metal would benefit from policy loosening of major global central banks. But as additionally as an industrial metal, Silver could be benefited more with global growth and industrial demands pick up.

                                  Yet, technically, Silver has to overcome key resistance level around 26 first. For now, near term outlook will stay bullish as long as 23.99 support holds. It’s possible that consolidation pattern from 26.12 has completed with three waves to 21.92 already.

                                  Decisive break of 26.12 will confirm resumption of whole rise from 17.54 (2022 low). In this case, the near medium term target will be 61.8% projection of 17.54 to 26.12 from 21.92 at 27.22. Firm break there will pave the way for new record high above 30 later in the year.

                                  Nevertheless, rejection by 25.91/26.12 resistance zone, or break of 23.99 support, will delay the bullish case and extend the consolidation from 26.12 with another falling leg instead.

                                  NIESR forecasts 0.3% UK GDP growth in Q1

                                    NIESR forecast UK GDP to grow by 0.3% in Q1, aligns with a pattern of “low, but stable economic growth,” suggesting a potential “turning point” for the nation after slipping into a technical recession in the latter half of 2023.

                                    The forecast comes with a critical analysis of UK’s economic stagnation, emphasizing the necessity for “structural changes” to break free from the so-called low-growth trap. The institute’s recommendation underscores the importance of bolstering public investment, particularly in pivotal areas such as infrastructure, education, and health.

                                    Full NIESR release here.

                                    Eurozone industrial production falls -3.2% mom in Jan, EU down -2.1% mom

                                      Eurozone industrial production fell -3.2% mom in January, much worse than expectation of -1.0% mom. Production increased by 2.6% for intermediate goods, increased by 0.5% for energy, decreased by -14.5% for capital goods, decreased by -1.2% for durable consumer goods, decreased by -0.3% for non-durable consumer goods.

                                      EU industrial production fell -2.1% mom. Among Member States for which data are available, the largest monthly decreases were recorded in Ireland (-29.0%), Malta (-9.4%) and Estonia (-6.6%). The highest increases were observed in Poland (+13.3%), Slovenia (+10.6%) and Lithuania (+7.2%).

                                      Full Eurozone industrial production release here.

                                      ECB’s Kazaks: Inflation dragon nearly defeated, rate cuts on horizon

                                        ECB Governing Council member Martins Kazaks likened the fight against inflation to battling a dragon, stating in a blog post, “The dragon of inflation is pinned to the ground, a little more and it will be defeated.” This vivid metaphor reflects a growing confidence within ECB that the persistent inflationary pressures which have challenged Eurozone economy are finally coming under control.

                                        Kazaks further suggested that “if the economy roughly follows” the bank’s forecasts, “then the decision to start reducing interest rates could be made within the next few meetings.”

                                        Kazaks also acknowledged the delicate balance the ECB has had to maintain: the risk of premature rate cuts that could reignite inflation versus the risk of delaying rate reductions too long. However, he noted that these risks are now beginning to “level out,” there is “no need to delay the rate reduction too much”

                                        Complementing Kazaks’s insights, ECB Governing Council member Francois Villeroy de Galhau told France Info radio, “We will probably cut rates in spring, and spring in Europe is from April to June 21.”

                                        “It’s perhaps more probable in June — we are very pragmatic and will see depending on the data,” Villeroy added.

                                        UK GDP grows 0.2% mom in Jan, matches expectations

                                          UK GDP expanded by 0.2% mom in January, matched expectations. Services was up 0.2% mom, and was the largest contributor to growth. Production fell -0.2% mom while construction grew 1.1% mom.

                                          In the three months to January, GDP has fallen by -0.1% 3mo3m. Services was flat. Production fell -0.2% 3mo3m. Construction fell -0.9% 3mo3m.

                                          Full UK GDP release here.