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BoC poised for third straight rate cut and stays dovish

    By
    ActionForex
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    BoC is widely expected to cut interest rates for the third consecutive meeting today, lowering the policy rate by 25bps to 4.25%. With inflation at a 40-month low of 2.5% and trending toward the 2% target, coupled with ongoing weakness in the labor market, further easing is anticipated. As a result, BoC is likely to maintain a dovish stance in its statement.

    A recent Reuters poll shows that 70% of economists expect additional rate cuts in October and December, with the rate reaching 3.75% by year-end. Seven economists predict the rate will be 4.00%, while only one expects a drop to 3.50%.

    CAD/JPY saw a notable decline after briefly rising to 109.03 earlier this week. A couple of factors could be in force today. BoC’s decision and statement, overall risk sentiment, and the risks for further declines in oil prices could all impact the pair’s next move.

    Technically, rebound from 101.63 is still in favor to continue as long as 106.21 support holds. Above 109.03 will target 61.8% retracement of 118.85 to 101.63 at 112.27. However, firm break of 106.21 will argue that the rebound has completed and bring deeper fall back to retest 101.63 low.

    China’s Caixin PMI services falls to 51.6, composite unchanged at 51.2

      By
      ActionForex
      -

      China’s Caixin PMI Services fell to 51.6 in August, down from 52.1 in July and below expectations of 52.2. While this marked the continuation of an expansion that began in January 2023, the rate of growth is among the slowest seen this year. PMI Composite remained steady at 51.2, indicating ten consecutive months of expansion.

      According to Wang Zhe, Senior Economist at Caixin Insight Group, the services sector experienced a slight slowdown in supply and demand growth, in contrast to a recovery in manufacturing. One key concern was the services sector’s shrinking labor market, which pulled the composite employment indicator below the 50.0 mark, signaling a marginal contraction in employment.

      On the pricing front, while input costs increased in both sectors, prices charged by manufacturers and service providers fell, adding pressure to business profitability. This combination of slower services growth and declining prices suggests increasing challenges for Chinese businesses as they contend with rising costs and shrinking profit margins.

      Full Caixin PMI Services release here.

      Australia’s GDP grows 0.2% qoq in Q2, per capita down for sixth quarter

        By
        ActionForex
        -

        Australia’s GDP grew by 0.2% qoq in Q2, aligning with market expectations. However, GDP per capita declined for the sixth consecutive quarter, falling by -0.4% qoq. For the 2023-24 financial year, the economy expanded by 1.5%.

        Katherine Keenan, head of national accounts at the Australian Bureau of Statistics, noted, “The Australian economy grew for the eleventh consecutive quarter, although growth slowed over the 2023-24 financial year.”

        Keenan also pointed out that excluding the pandemic period, annual financial year growth was the lowest since 1991-92, a year marked by the recovery from the 1991 recession.

        Full Australia Q2 GDP release here.

        Japan’s PMI services finalized at 53.7, expansion continues

          By
          ActionForex
          -

          Japan’s services sector continued its expansion in August, with PMI Services index finalized at 53.7, unchanged from July’s figure. This marks the 23rd month of growth out of the past 24. PMI Composite, which includes both services and manufacturing, rose to 52.9 from 52.5 in July, reflecting the strongest overall growth since May 2023.

          The services sector showed solid performance, while manufacturing output posted its most significant increase since May 2022. According to Usamah Bhatti, economist at S&P Global Market Intelligence, August saw ongoing growth in activity, new business, and employment in the service sector. However, the pace of employment growth and business optimism slowed to seven- and 19-month lows, respectively.

          Full Japan PMI services final release here.

          US ISM manufacturing rises to 47.2 in Aug, misses expectations

            By
            ActionForex
            -

            US ISM Manufacturing PMI rose from 46.8 to 47.2 in August, below expectation of 47.8,, indicates a fifth consecutive month of contraction.

            Looking at some details,, new orders fell from 47.4 to 44.6. Production fell from 45.9 to 44.8. But employment rose from 43.4 to 46.0. Prices also rose from 52.9 to 54.0.

            ISM said: “The past relationship between the Manufacturing PMI® and the overall economy indicates that the August reading (47.2 percent) corresponds to a change of plus-1.3 percent in real gross domestic product (GDP) on an annualized basis.”

            Full US ISM manufacturing release here.

            BoJ’s Ueda reaffirms commitment to further rate hikes if economic conditions allow

              By
              ActionForex
              -

              BoJ Governor Kazuo Ueda reiterated today that the central bank could continue raising interest rates if the economy and inflation develop as expected.

              In a document presented to a government panel led by Prime Minister Fumio Kishida, Ueda highlighted that, despite the July rate hike, the economy are still solidly supported by current monetary policy, as rates are still significantly negative.

              Additionally, members of the government panel, including business leader Masakazu Tokura, submitted a proposal urging careful management of macroeconomic policies, especially in light of the recent market turbulence. This highlights the importance of coordination between BOJ and the government to maintain economic stability as BoJ navigates its gradual shift towards higher interest rates.

              Swiss GDP grows 0.7% qoq in Q2, above exp 0.6% qoq

                By
                ActionForex
                -

                Switzerland’s GDP grew by 0.7% qoq in Q2, exceeding expectations of 0.6% qoq and marking an improvement from Q1’s 0.5% qoq growth. When adjusted for sporting events, GDP still showed solid growth at 0.5% qoq, up from the previous quarter’s 0.3% qoq.

                This stronger-than-expected performance was largely driven by significant expansion in the chemical and pharmaceutical industries, which played a key role in lifting the overall economic output. However, growth across other sectors was uneven, reflecting underlying weaknesses in domestic demand.

                Full Swiss GDP release here.

                Swiss CPI slows to 1.1% yoy in Aug, vs exp 1.2% yoy

                  By
                  ActionForex
                  -

                  Swiss CPI was flat mom in August, below expectation of 0.1% mom rise. Core CPI (excluding fresh and seasonal products, energy and fuel) rose 0.1% mom. Domestic products prices was flat while imported products prices fell -0.1% mom.

                  For the 12-month people, CPI slowed from 1.3% yoy to 1.1% yoy, below expectation of 1.2% yoy. Core CPI was unchanged at.10% yoy. Domestic product prices was unchanged at 2.0% yoy. Imported price prices fell from -1.0% yoy to -1.9% yoy.

                  Full Swiss CPI release here.

                  NZIER expects Oct RBNZ rate cut, further easing hinges on demand recovery

                    By
                    ActionForex
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                    The New Zealand Institute of Economic Research indicated today that it expects RBNZ to implement another interest rate cut during its October meeting. This follows RBNZ’s decision in August to bring forward its easing cycle in response to “deterioration in economic outlook.” However, NZIER notes that the pace of further easing remains highly uncertain, with a potential pause in November depending on how quickly demand recovers.

                    Weaker demand has become a significant concern for businesses, with 61% of firms identifying it as the primary constraint on their operations. This declining demand is also having an impact on the labor market, where there is now more slack as companies reduce hiring in response to the softer economic environment.

                    Looking ahead, NZIER forecasts GDP growth to remain subdued over the next year, contributing to further decline in inflation. The institute predicts that annual CPI inflation will fall back within RBNZ’s target band by the end of this year, which underpins its expectation for another Official OCR cut in October.

                    However, the uncertainty surrounding the economic recovery suggests that any further rate cuts after October will be closely tied to the extent of demand recovery, with the November meeting likely to be a key decision point.

                    Full NZIER release here.

                    New Zealand’s terms of trade improve in Q2 despite decline in export volumes

                      By
                      ActionForex
                      -

                      New Zealand’s terms of trade saw a solid improvement in the second quarter of 2024, rising by 2.0%. This increase was driven by a 5.2% rise in export prices, which outpaced the 3.1% increase in import prices. However, the value of exports decreased by -1.5% to NZD 16.6 billion, largely due to a -4.3% drop in export volumes, even as higher prices provided some support.

                      Dairy products played a significant role in the export dynamics, with prices rising by 8.0%. Despite this, dairy export volumes fell sharply by -10%, leading to an 8-.0% decline in the overall value of dairy exports. The meat sector, on the other hand, performed better, with prices rising by 7.3%, volumes increasing by 4.1%, and the total value of meat exports up by 6.5%.

                      On the import side, the total value rose by 4.0% to NZD 18.9B, supported by a 3.2% increase in import volumes. Petroleum and petroleum products were notable contributors, with prices up by 4.0%. However, petroleum volumes declined by -8.0%, leading to a -4.4% decrease in the overall value of these imports.

                      Full New Zealand terms of trade release here.

                      UK PMI manufacturing finalized at 26-month high, strong domestic demand but export challenges persist

                        By
                        ActionForex
                        -

                        UK PMI Manufacturing was finalized at 52.5 in August, up from July’s 52.1, and 26-month high. Growth was broad-based across sectors, with strong domestic demand driving new contract wins. This domestic strength helped offset the continued decline in export orders, which have been falling steadily since early 2022.

                        Rob Dobson, Director at S&P Global Market Intelligence, noted that manufacturing remained a “positive contributor” to the UK economy, with solid growth in output, new orders, and the strongest job creation in over two years. The investment goods sector led the upturn.

                        However, the sector faces ongoing challenges in exports, with weaker demand from Europe and China, along with issues like freight delays, high shipping costs, and political uncertainty, hampering overseas sales.

                        These challenges are also disrupting supply chains, leading to longer delivery times and driving up input costs, which saw another sharp increase in August.

                        Full UK PMI manufacturing final release here.

                        Eurozone PMI manufacturing finalized at 45.8, decline persists with rising prices adding pressure on ECB

                          By
                          ActionForex
                          -

                          Eurozone’s manufacturing sector remains entrenched in contraction, with PMI Manufacturing index finalized at 45.8 in August, unchanged from July’s reading. This marks the third consecutive month of significant decline, indicating that the sector is still mired in a prolonged downturn. Despite a continued drop in new orders, both domestic and international, goods prices have risen for the first time since April 2023, adding to the growing challenges faced by ECB.

                          Country-specific PMI data reveals mixed performance. Greece led the pack with a PMI of 52.9, although this marked an eight-month low. Spain and Ireland managed to stay slightly above the neutral 50.0 mark, with readings of 50.5 and 50.4, respectively, but both hit multi-month lows. On the other hand, Italy’s PMI improved to 49.4, its highest in five months, although it remains in contraction. France reported a 7-month low of 43.9 while Germany recorded a PMI of 42.4, a 5-month low.

                          Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted the worsening conditions, stating, “Things are going downhill, and fast.” The manufacturing sector has now been in recession for a grueling 26 months, with no immediate signs of recovery. The persistent decline in new orders has dashed hopes of a near-term rebound, while the recent uptick in input prices since June suggests that the deflationary phase in the goods sector may be ending.

                          For the first time since April 2023, selling prices in the manufacturing sector have risen, driven by increases in countries like France, the Netherlands, Greece, and Italy. This development could complicate ECB’s efforts to control inflation, as the central bank has been relying on falling manufacturing prices to offset persistent inflationary pressures in the services sector.

                          Full Eurozone PMI manufacturing final release here.

                          China’s Caxin PMI manufacturing rises to 50.4, modest return to expansion

                            By
                            ActionForex
                            -

                            China’s Caixin PMI Manufacturing rose slightly in August, reaching 50.4 from July’s 49.8, signaling a modest return to expansion. The improvement reflects faster output growth and stabilization in employment after an 11-month decline. Meanwhile, average selling prices and input costs continued to decline, indicating ongoing deflationary pressures within the sector.

                            Wang Zhe, Senior Economist at Caixin Insight Group, noted that while PMI manufacturing returned to expansionary territory, the growth remains “limited”. He highlighted the significant challenges China faces in stabilizing its economic growth, particularly given the government’s ambitious annual targets. Key issues include weak domestic demand, uncertainties in external demand, and low market optimism, all of which could hinder sustained growth.

                            In contrast, the official NBS data released over the weekend painted a more subdued picture. NBS PMI Manufacturing fell from 49.5 to 49.1 in August, indicating a deeper contraction in the sector. While PMI Non-Manufacturing ticked up slightly from 50.1 to 50.3, the PMI Composite dropped for the fifth consecutive month, landing at 50.1—the lowest since December 2022.

                            NBS statistician Zhao Qinghe attributed the decline in manufacturing to several factors, including extreme weather, off-season production in certain industries, insufficient demand, and fluctuations in commodity prices.

                            Full China Caixin PMI manufacturing release here.

                            Japan’s PMI manufacturing finalized at 49.8, close to stabilization amid rising cost burdens

                              By
                              ActionForex
                              -

                              Japan’s Manufacturing PMI for August was finalized at 49.8, showing a slight improvement from July’s 49.1, but still indicating a marginal contraction. S&P Global noted that the sector is moving closer to stabilization, with a renewed rise in production. This marks the first increase in purchasing activity in two years.

                              According to Usamah Bhatti at S&P Global Market Intelligence, the latest figures paint a “mixed picture” as the sector hovers near stabilization. The renewed rise in production and a softer decline in new orders have encouraged firms to increase staffing levels, while the pace of destocking has slowed. Additionally, there have been signs of improved supplier performance, particularly in the availability of inputs like electrical components.

                              However, the data also pointed to significant cost pressures, with the strongest rise in input costs since April 2023. Despite this, companies have been reluctant to pass these higher costs onto customers fully, leading to the slowest rate of charge inflation since mid-2021.

                              Full Japan’s PMI manufacturing final release here.

                              Canada’s GDP grows 0.5% qoq in Q2, flat in June

                                By
                                ActionForex
                                -

                                Canada’s economy posted growth of 0.5% qoq in Q2, slightly up from the 0.4% seen in Q1. This growth was driven by higher government consumption, increased business investment in engineering structures and machinery, and a rise in household spending on services. However, these gains were somewhat offset by declines in exports, residential construction, and household spending on goods. Notably, on a per capita basis, GDP declined by -0.1% in the second quarter, marking the fifth consecutive quarterly decline.

                                For June, GDP remained essentially flat, failing to meet expectations of a 0.1% mom increase. Goods-producing industries contracted by -0.4%, the largest decline since December 2023, with manufacturing and construction being the primary drags. In contrast, services-producing industries saw a modest 0.1% increase, continuing their growth streak for the third month in a row. Overall, 12 out of 20 sectors experienced expansion.

                                Advance information suggests that real GDP by industry remained unchanged in July. Declines in construction, mining, quarrying, and oil and gas extraction sectors were balanced by gains in finance, insurance, and retail trade, signaling a mixed economic outlook.

                                Full Canada’s GDP release here.

                                US PCE core unchanged at 2.6% yoy, vs exp 2.7% yoy

                                  By
                                  ActionForex
                                  -

                                  US personal income rose 0.3% mom or USD 75.1B in July, above expectation of 0.2% mom. Spending rose 0.5% mom or USD 103.8b, matched expectations.

                                  PCE price index rose 0.2% mom, while core PCE (excluding food and energy)rose 0.2% mom, both matched expectations. Prices for goods decreased by less than -0.1% and prices for services increased 0.2%. Food prices increased 0.2% and energy prices increased by less than 0.1%.

                                  From the same month one year ago, PCE price index rose 2.5% yoy, unchanged from June’s reading, below expectation of 2.6% yoy Core PCE price index rose 2.6% yoy, unchanged from June’s reading, below expectation of 2.7% yoy. Prices for goods decreased by less than -0.1% and prices for services increased 3.7%. Food prices increased 1.4% and energy prices increased 1.9% .

                                  Full US personal income and outlays release here.

                                  Eurozone CPI falls to 2.2%, core down to 2.8%, services up to 4.2%

                                    By
                                    ActionForex
                                    -

                                    Eurozone CPI slowed from 2.6% yoy to 2.2% in August. CPI core (ex-energy, food, alcohol & tobacco) ticked down from 2.9% yoy to 2.8% yoy. Both matched expectations.

                                    Looking at the main components , services is expected to have the highest annual rate in August (4.2%, compared with 4.0% in July), followed by food, alcohol & tobacco (2.4%, compared with 2.3% in July), non-energy industrial goods (0.4%, compared with 0.7% in July) and energy (-3.0%, compared with 1.2% in July).

                                    Full Eurozone CPI flash release here.

                                    ECB’s Schnabel: Rate cuts can’t be mechanical amid stubborn domestic inflation

                                      By
                                      ActionForex
                                      -

                                      In a speech today, ECB Executive Board member Isabel Schnabel addressed the recent declines in inflation across parts of the Eurozone, describing them as “welcome developments.” However, she cautioned that the “current level of headline inflation understates the challenges monetary policy is still facing.”

                                      Schnabel highlighted that domestic inflation remains elevated at 4.4%, driven largely by “persistent price pressures in the services sector,” where disinflation has stalled since last November. She pointed out that the continued high inflation momentum, particularly the annualized three-month-on-three-month change, indicates that services prices are still rising at a significant pace of almost 5%.

                                      Schnabel noted that while incoming data broadly supports ECB’s baseline outlook, caution is needed as policy rates approach the upper band of the neutral rate, “the less certain we are how restrictive our policy is”

                                      The pace of policy easing, she emphasized, “cannot be mechanical” and must be guided by data and analysis to ensure that monetary policy does not itself become a factor hindering disinflation.

                                      Full speech of ECB’s Schnabel here.

                                      Swiss KOF rises to 101.6, signaling hesitant economic recovery

                                        By
                                        ActionForex
                                        -

                                        Swiss KOF Economic Barometer edged up to 101.6 in August, slightly above expectations of 100.6, signaling a modest improvement in economic activity. The indicator remains just above its medium-term average, suggesting that Swiss economy is on what KOF describes as a “hesitant recovery path.”

                                        The upward movement in the Barometer was driven primarily by gains in the other services sector, consumer demand, and construction industry. Additionally, the manufacturing and hospitality sectors saw modest improvements.

                                        Meanwhile, the indicators for foreign demand remained nearly stable, while the financial and insurance services sector faced a slight decline.

                                        Full Swiss KOF release here.

                                        Australia’s retail sales stagnate in Jul as spending momentum stalls

                                          By
                                          ActionForex
                                          -

                                          Australia’s retail sales turnover for July showed no growth on a monthly basis, falling short of the expected 0.2% mom increase. This flat result comes after consecutive 0.5% mom increases in both June and May, driven by mid-year sales events.

                                          According to Ben Dorber, head of retail statistics at the Australian Bureau of Statistics, “After rises in the past two months boosted by mid-year sales activity, the higher level of retail turnover was maintained in July.”

                                          However, the detailed breakdown reveals a mixed picture across industries, with most sectors either seeing declines or remaining flat. The only industry to post an increase was food retailing, which managed a modest 0.2% rise.

                                          Full Australia retail sales release here.

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