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China industrial production slowed to 4.8%, lowest in 17 year, other data missed too

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    ActionForex.com
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    In July, industrial production grew merely 4.8% yoy, down from 6.3% yoy and missed expectation of 6.0% yoy. It’s also the slowest growth rate in more than 17 years. Retail sales grew 7.6% yoy, down from 9.8% yoy and missed expectation of 8.6% yoy. Fixed assets investment ex rural grew 5.7% yoy, down from 5.8% yoy and missed expectation of 5.9% yoy. Surveyed unemployment rate rose from 5.1% to 5.3%.

    The National Bureau of Statistics of China insisted in a statement that the national economy performed “within the reasonable range” and “sustained generally stable growth while making further progress.” NBS spokesmen Liu Aihua also said the impact of the Sino-U.S. trade war on China’s economy is controllable

    USD/CNH dropped sharply yesterday as Yuan rebounded on news of delay in some US tariffs. But the Yuan quickly lost momentum on today’s big data misses. A short term top was formed after USD/CNH hit 61.8% projection of 6.235e to 6.9800 from 6.6699 at 7.1301, As long as 6.9620 resistance turned support holds, we’d expect recent uptrend to resume sooner or later. Break of 7.1394 will target 100% projection at 0.7414.

    BoE announces gilt operation to restore orderly market conditions

      By
      ActionForex.com
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      BoE announced today to carry out temporary purchases of long-dated UK government bonds, to “restore orderly market conditions”. It warned that the significant repricing of UK and global financial assets “has become more significant in the past day”, particularly affecting long-dated government debt. Continuing or worsening dysfunction would be a “material risk” to financial stability.

      The purchases will be carried out on “whatever scale is necessary” to effect this outcome. However, they will be “strictly time limited” with auctions taking place from today until October 14.

      BoE also reiterated that a full assessment of the government’s mini budget will be done at its “next scheduled meeting”. BoE “will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit.”

      Full statement here.

      GBP/USD was lifted briefly after the announcement, and turned south quickly.

      ECB SPF: Economists downgrade eurozone growth and inflation forecasts for 2019 and 2020

        By
        ActionForex.com
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        In the latest ECB survey for Q2, professional forecasters revised down growth, inflation and core inflation forecasts for both 2019 and 2020. Inflation are projected to be below ECB’s 2% target over the whole forecast horizon. Also, the reported noted that “probability distributions continued to indicate relatively high uncertainty around expected inflation in two years’ time.”

        On growth, “respondents considered the current level of uncertainty to be very high and to be having an economic impact, mainly via companies’ investment decisions.” Also “risks to the forecasts for real GDP growth remained to the downside.” The most cited downside risks was “potential impact of a hard Brexit. Many respondents refer to “further escalation of trade conflict between US and China, an the apparent slowdown in China”. “Very few”mentioned upside risks.

        HICP inflation forecasts (previous at Q1 2019):

        • 2019 at 1.4% (down from 1.5%)
        • 2020 at 1.5% (down from 1.6%)
        • 2021 at 1.6% (down from 1.7%)
        • Longer term at 1.8% (unchanged)

        HICP core inflation forecast:

        • 2019 at 1.2% (down from 1.3%)
        • 2020 at 1.4% (down from 1.5%)
        • 2021 at 1.6% (unchanged)
        • Longer term at 1.7% (unchanged)

        GDP growth forecast:

        • 2019 at 1.2% (down from 1.5%)
        • 2020 at 1.4% (down from 1.5%)
        • 2021 at 1.4% (unchanged)
        • Longer term at 1.4% (down from 1.5%).

        DOW approaching breakout point

          By
          ActionForex.com
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          DOW opens mildly higher today. It’s staying in converging triangle pattern. And should be approaching a breakout point. Levels to watch are 24668.83 and 25449.15.

          RBA Debelle: Markets underpriced risks of global tightening

            By
            ActionForex.com
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            RBA Deputy Governor Guy Debelle:-

            • “Equity prices embody a view of the future that robust growth can continue without generating a material increase in inflation.”
            • “There is little priced in for the risk that this may not turn out to be true.”
            • Market volatility in February, was just “a small example of what could happen following a larger and more sustained shift upwards in the rate structure.”
            • He admitted before wrong in predicting higher volatility before, but added “I think there is a higher probability of being proven correct this time.”

            US update: Yen surges as stocks tumble on 3M warning, DOW risking near term reversal

              By
              ActionForex.com
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              Yen surges broadly while Dollar is under some pressure as US stocks are in steep selloff. Industrial giant 3M is the key driver in the markets as it slashed 2019 full-year guidance and announce 2000 job cuts. It’s more than enough to offset the lift by Microsoft, which reported healthy quarterly results yesterday.

              At the time of writing, DOW is already down -253 pts, or 0.95%. S&P 500 is down -0.40%. NASDAQ made new record high at 8151.84 but quickly retreated and is down -0.27%.

              We’d noted before that we’re not convinced that US stocks are ready to resume long term up trend. Risk of reversal, at least for near term, is high with S&P 500 and NASDAQ close to record highs. Break of 2891.90 support in S&P 500 will bring pull back to 55 day EMA (now at 2825.33). Similarly, break of 7950.97 in NASDAQ will bring pull back to 55 day EMA (now at 7710.88.

              DOW has been the under performer comparing with the other two major indices. With today’s gap down, focus will be on 26070.83. Break will be the first sign that rise from 21712.53 has completed, ahead of 26951.81 record high, on bearish divergence condition in daily MACD. Deeper fall should then be seen, at least, to 38.2% retracement of 21712.53 to 26695.96 at 24792.29. Such development would drag down USD/JPY, as well as other Yen crosses. But we wouldn’t expect it to prompt deep selling in Dollar elsewhere.

              Gold and Silver bounded in range, awaiting Dollar-driven breakout

                By
                ActionForex.com
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                Both Gold and Silver are currently still caught in near-term consolidations despite the rally late last week. Both metals have the potential to extend their recent gains, but a more pronounced decline in Dollar may be necessary to provide the needed momentum.

                As for Gold, further rally is expected as long as 2470.72 support holds. Firm break of 2531.57 will resume the long term up trend and extend the record run. Next target is 61.8% projection of 1984.05 to 2449.83 from 2293.45 at 2581.30. However, break of 2470.72 will risk deeper pull back to 55 D EMA (now at 2412.87) first.

                While Silver has been lagging Gold in its run, there is prospect of a catch up ahead. Corrective pattern from 32.50 has likely completed with three waves down to 26.44, after defending 26.12 resistance turned support. For now, further rise is in favor as long as 28.76 support holds. Break of 29.94 will target 31.73 resistance. Decisive break there will solidify this view and target 32.50 and above. However, break of 28.76 will dampen this immediate bullish case.

                Fed Williams: Growth to slow somewhat in Q4 and early next year

                  By
                  ActionForex.com
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                  New York Fed President John Williams warned that “the very large rise in COVID cases recently clearly puts a question market on the ability of the economy to weather this period.” Thus, he’d “expect the growth in the fourth quarter, and maybe into early next year to slow somewhat.”

                  Williams also noted that the economy is still in a extraordinary situation that needs fiscal support. “The reason the economy is still going is because we know people still have some of the stimulus checks and unemployment checks,” he said. “Those saved benefits are helping people pay rent and put food on the table.”

                  BoE Saunders: Rates may need to go up a little faster

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                    ActionForex.com
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                    BoE policymaker Michael Saunders warned the markets that their the central bank’s tightening path could be faster then they expected. Saunders is known hawk that started voting for a hike since March meeting. He refers to market pricing of a little bit more than one hike over the next twelve months, and said “if the economy plays out as I expect, it may be that rates need to go up a little faster than that.”

                    He also laid out his expectations for the developments in UK. On the condition that “Brexit unfolding in sort of a smooth and gradual way”, “the economy will continue to grow at around the pace we have seen over the last couple of years … (I) expect the jobless rate to fall a little further; and pay growth will pick up a bit.”

                    Against that background, Saunders believed that “rates might need to rise a little faster”. Still he emphasized that “the general picture is still limited and gradual, not too far and not too fast.”

                    DUP confirms it won’t back May’s Brexit deal

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                      ActionForex.com
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                      DUP party leader Arlene Foster tweeted that they won’t back May’s Brexit deal in today’s meaningful vote. DUP said in a statement that “sufficient progress has not be achieved” and May just made “limited progress” with the EU.

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                      Swiss GDP contracted -2.6% in Q1, worse than expectation

                        By
                        ActionForex.com
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                        Swiss GDP contracted -2.6% qoq in Q1, worse than expectation of -2.2% qoq. “Due to the coronavirus pandemic and the measures to contain it, economic activity in March was severely restricted. The international economic slump also slowed down exports.”

                        By production approach, manufacturing dropped -1.3% qoq. Construction dropped -4.2% qoq. Trade dropped -4.4%. Accommodation and food dropped -23.4% qoq. Business services dropped -1.9% qoq. Health and social activities dropped -3.9% qoq. Arts, entertainment and recreation dropped -5.4% qoq. On the other hand, finance and insurance rose 1.5% qoq. Public administration rose 0.8% qoq.

                        By expenditure approach, private consumption dropped -3.5% qoq. Equipment and software investment dropped -4.0% qoq. Construction investment dropped -0.4% qoq. Export of services dropped -4.4% qoq. Import of goods dropped -1.1% qoq while imports of services dropped -1.2% qoq. On the other and, government consumption rose 0.7% qoq. Exports of goods rose 3.4% qoq.

                        Full release here.

                        BoE Broadbent: The appropriate policy response to current inflation is nothing

                          By
                          ActionForex.com
                          -

                          BoE Deputy Governor Ben Broadbent said in a speech, “most of the overshoot relative to target in the latest CPI numbers… reflects unusually strong inflation in goods prices”. That would also be true of the “larger overshoot we’re going to see towards the end of this year”. “If this was only a story about global goods prices,” he added, then the appropriate policy response to the current inflation would be “nothing”.

                          Also, “while we know it’s going to go further over the next few months, I’m not convinced that the current inflation in retail goods prices should in and of itself mean higher inflation 18-24 months ahead, the horizon more relevant for monetary policy,” he added.

                          Full speech here.

                          Canada GDP grew 0.8% mom in Sep, still -5% below pre-pandemic level

                            By
                            ActionForex.com
                            -

                            Canada GDP grew 0.8% mom in September, slightly below expectation of 0.9% mom. That’s, nonetheless, still the fifth consecutive monthly increase. Overall total economic activity was also still -5% below February’s pre-pandemic level. Both goods-producing (0.7%) and services-producing (0.8%) industries were up as 16 of 20 industrial sectors posted increases in September.

                            Looking ahead, preliminary information indicates just around 0.2% increase in real GDP for October.

                            Full release here.

                            Germany GDP grew 0.2% qoq in Q1, Ukraine war weighs on short-term development

                              By
                              ActionForex.com
                              -

                              Germany GDP grew 0.2% qoq in Q1, matched expectations. On the same quarter a year earlier, GDP grew 3.7% yoy. The growth was mainly due to higher capital formation, whereas the balance of exports and imports had a downward effect on economic growth. The economic consequences of the war in Ukraine have had a growing impact on the short-term economic development since late February.

                              Full release here.

                              NZ BNZ services plummets to 47.5, signaling over 2% GDP contraction

                                By
                                ActionForex.com
                                -

                                New Zealand’s service sector saw a significant downturn in March, as evidenced by BusinessNZ Performance of Services Index, which fell sharply from 52.6 to 47.5. This decline places the index back in contraction territory, and well below its long-term average of 53.4.

                                The components of the PSI painted a concerning picture: activity and sales saw a steep decline from 52.4 to 44.8. While employment showed a slight improvement, rising marginally from 49.4 to 50.1, new orders and business fell significantly from 55.5 to 48.3. Stocks and inventories also dropped from 52.2 to 46.9, and supplier deliveries was stagnant at 48.7.

                                Business sentiment mirrored these negative trends, with proportion of negative comments rising sharply to 63.0% in March, up from 57.3% in February and 53.0% in January. Respondents frequently cited ongoing recession and persistent inflationary pressures, including rising costs of living, as key factors impacting their operations.

                                BNZ Senior Economist Doug Steel stated, “Combining today’s weak PSI activity with last week’s similarly weak PMI activity, yields a composite reading that would be consistent with GDP falling by more than 2% compared to year-earlier levels. That is much weaker than what folk are forecasting.”

                                Full NZ BNZ PSI release here.

                                Japan business conditions deteriorated sharply in Q1, no material improvement expected in Q2

                                  By
                                  ActionForex.com
                                  -

                                  According to the Ministry of Finance’s latest survey, business conditions in Japan deteriorated drastically in Q1. The Large manufacturing business survey index (BSI) tumbled from 21.6 to 1.6. Large non-manufacturing BSI turned negative from 6.7 to -7.4. Large all industries BSI also turned negative from 11.6 to -4.5.

                                  Outlook is for Q2 is not expected to improve much, with large manufacturing, large non-manufacturing and large all industries at 2.5. Some improvements could be seen in Q3, with large manufacturing outlook at 9.3, but still way off Q4’s number. Large non-manufacturing Q3 outlook rose to 6.0. Large all industries Q3 outlook rose to 7.1.

                                  Full release here.

                                  US PCE inflation rose to 6.4% yoy, core PCE rose to 5.4% yoy

                                    By
                                    ActionForex.com
                                    -

                                    US personal income rose 0.5% mom or USD 101.5B in February, matched expectations. Spending rose 0.2% or USD 34.9B, below expectation of 0.6% mom.

                                    The PCE price index for February increased 6.4% yoy, up from January’s 6.0% yoy, but missed expectation of 6.7% yoy. The increase reflected rise in both goods and services. Excluding food and energy, core PCE price index was at 5.4% yoy, up from January’s 5.2% yoy, slightly below expectation of 5.5% yoy. Energy prices rose 25.7% yoy while food prices rose 8.0% yoy.

                                    Full release here.

                                    US initial jobless claims dropped back to 225k

                                      By
                                      ActionForex.com
                                      -

                                      US initial jobless claims dropped -16k to 225k in the week ending November 26, below expectation of 245k. Four-week moving average of initial claims rose 2k to 229k.

                                      Continuing claims rose 57k to 1608k in the week ending November 19. Four-week moving average of continuing claims rose 30k to 1539k.

                                      Full release here.

                                      UK PMI construction rose to 45.3, upcoming election sends a chill breeze

                                        By
                                        ActionForex.com
                                        -

                                        UK PMI Construction improved to 45.3 in November, up from 44.2 and beat expectation of 44.5. Markit said that output fell in all three broad categories of construction. There was sharp drop in new work. Also, staffing levels decreased for the eighth month in a row.

                                        Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey:

                                        “UK construction output fell again in November as Brexit uncertainty and the forthcoming General Election continued to send a chill breeze across the sector. The speed of the downturn in construction work eased a little since October, but the survey continues to signal a notable drop-off in business conditions compared with the first half of 2019.

                                        “Greater hesitancy among clients led to a decline in overall new work for the eighth consecutive month during November. Construction companies reported a particularly sharp fall in demand for commercial projects amid a greater squeeze from domestic political uncertainty and delayed investment decisions.

                                        “House building has been the most resilient category of construction output in 2019. However, it remains a concern that overall volumes of residential building work have dropped in each month since June, which is the longest phase of decline since the start of 2013.

                                        “Greater spending on transportation and energy projects had been expected to help boost infrastructure work this year and next, but survey respondents indicated a sustained soft patch for overall civil engineering activity in November. Some construction companies reaffirmed their concern about the delivery of road and rail projects, with delays to contract awards acting as an additional headwind to growth projections for 2020.”

                                        Full release here.

                                        RBA Debelle: 2% is the focal point for wage outcomes now

                                          By
                                          ActionForex.com
                                          -

                                          RBA Deputy Governor Guy Debelle delivered a speech titled “The Outlook for the Australian Economy” at the CFO Forum in Sydney today, where he talked about wages.

                                          He noted that “the experience of other countries with labour markets closer to full capacity than Australia’s is that wages growth may remain lower than historical experience would suggest.”

                                          Currently in Australia “2% seems to have become the focal point for wage outcomes, compared with 3–4% in the past.” Even so, “”there is a risk that it may take a lower unemployment rate than we currently expect to generate a sustained move higher than the 2% focal point evident in many wage outcomes today”.

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