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UK CPI slowed to 10.5% yoy in Dec, core CPI unchanged at 6.3% yoy

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    ActionForex.com
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    UK CPI rose 0.4% mom in December, matched expectations. In the 12 months, CPI slowed from 10.7% yoy to 10.5% yoy slightly below expectation of 10.6% yoy. CPI core was unchanged at 6.3% yoy, below expectation of 6.6% yoy. RPI rose 0.6% mom, 13.4% yoy, below expectation of 1.0% mom, 13.9% yoy.

    ONS said: “The largest downward contribution to the change in both the CPIH and CPI annual inflation rates between November and December 2022 came from transport (particularly motor fuels), clothing and footwear, and recreation and culture, with rising prices in restaurants and hotels, and food and non-alcoholic beverages making the largest partially offsetting upward contributions.”

    Full release here.

    BoJ keeps yield cap unchanged, downgrades growth forecast

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      ActionForex.com
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      BoJ kept the yield curve control unchanged today, disappointing some who bet for a tweak. Short term policy interest rate is held at -0.10%. The central will continue to purchase JGBs, without setting an upper limit, to keep 10-year yield at around 0%. The range 10-year JGB yield allowed to fluctuate is also kept at around plus and minus 0.50%. The decision was made by unanimous vote.

      In the Outlook for Economic Activity and Prices:

      • Forecasts of real GDP growth were downgraded across horizon, with fiscal 2022 down from 2.0% to 1.9%, fiscal 2023 down from 1.9% to 1.7%, fiscal 2024 down from 1.5% to 1.1%.
      • Forecast of CPI core (all item less fresh food) for fiscal 2022 was raised from 2.9% to 3.0%, fiscal 2023 unchanged at 1.6%, and fiscal 2024 raised from 1.6% to 1.8%.
      • Forecast of CPI core-core (all item less fresh food and energy) for fiscal 2022 was raised from 1.8% to 2.1%, fiscal 2023 raised from 1.6% to 1.8%, and fiscal 2024 unchanged at 1.6%.

      Full statement here.

      Full Outlook for Economic Activity and Prices.

      Fed Barkin: You just can’t declare victory too soon

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        ActionForex.com
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        Richmond Fed President Thomas Barkin told Fox Business yesterday that recent inflation reports have been encourage. But the median CPI is “still too high” and, “you just can’t declare victory too soon.”

        “I would want to see inflation compellingly back to our target” before easing up on rate hikes, he said. Meanwhile the terminal rate will be dependent on the “path of inflation”.

        Euro tumbles on report that ECB considering smaller hike in Mar

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          ActionForex.com
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          Euro tumbles broadly after Bloomberg reported, quoting unnamed source, that ECB is pondering slower rate hike after 50bps in February. It noted that “the prospect of a smaller 25-point increase at the following meeting in March is gaining support”.

          EUR/CHF’s break of 0.9953 resistance turned support now raising the chance of at least a deeper correction. For now, 38.2% retracement of 0.9407 to 1.0095 at 0.9832. Reaction from there would reveal whether EUR/CHF could defend its near term bullishness.

          Meanwhile, EUR/GBP is heading back to 0.8768 support. Reaction from there will also reveal whether rebound from 0.8545 has completed at 0.8896 already.

          Canada CPI slowed to 6.3% yoy, core down to 5.3% yoy

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            ActionForex.com
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            Canada CPI slowed from 6.8% yoy to 6.3% yoy in December, matched expectations. Excluding food and energy, CPI Core slowed from 5.4% yoy to 5.3% yoy.

            CPI median dropped from 5.1% yoy to 5.0% yoy, above expectation of 4.9% yoy. CPI trimmed dropped from 5.4% yoy to 5.3% yoy, above expectation of 5.2% yoy. CPI common dropped from 6.8% yoy to 6.6% yoy, matched expectations.

            On a monthly basis, CPI dropped -0.6% mom, largest monthly decline since April 2020. The fall was mostly driven by gasoline prices, which also posted their largest monthly decline since April 2020.

            Full release here.

            Germany ZEW jumped to 16.9, positive again after a year

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              ActionForex.com
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              Germany ZEW Economic Sentiment jumped sharply from -23.3 to 16.9 in January, well above expectation of -15.5. That’s also the first positive reading in a year since February 2022. Current Situation improved from -61.4 to -58.6, below expectation of -57.0.

              Eurozone ZEW Economic Sentiment surged from-23.6 to 16.7, well above expectation of -14.3. Current Situation rose 2.6 pts to -54.8.

              ZEW President Professor Achim Wambach said: “The ZEW Indicator of Economic Sentiment signals a positive outlook again in January. For the first time since February 2022, the month in which the war in Ukraine began, the indicator points to a noticeable improvement in the economic situation over the next six months.

              “The more favourable situation on the energy markets and the German government’s energy price caps have contributed to this in particular. In addition, export conditions for the German economy are improving due to China’s lifting of Covid-restrictions.

              “Accordingly, the earnings expectations of the export-oriented and energy-intensive sectors have gone up significantly. The prospect that the inflation rate will continue to fall has brightened expectations for the consumer-related sectors.”

              Full release here.

              ECB Centeno: The economy surprises quarter after quarter

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                ActionForex.com
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                ECB Governing Council member Mario Centeno said, at a panel at the World Economic Forum, the a recession is not a foregone conclusion.

                The Eurozone economy “has been surprising us quarter after quarter,” he said. “The fourth quarter in Europe will be most likely still positive. Maybe we’ll be surprised also in the first half of the year.”

                Meanwhile, Centeno pledged that ECB will continue to fight inflation.

                UK payrolled employment rose 28k in Dec, unemployment rate unchanged at 3.7% in Nov

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                  ActionForex.com
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                  In December, UK payrolled employment rose 28k or 0.1% mom to 29.9m. That’s a rise of 2.3% yoy or 676k over the 12-month period. ONS also noted that the number employees were rising in line with pre-pandemic trends. Median monthly pay rose 7.7% yoy to GBP 2194. Claimant count rose 19.7k.

                  In the three months November, unemployment rate was at 3.7%, 0.2% points higher than the previous three-month period, but 0.3% below pre-pandemic levels. Employment rate was unchanged at 75.6%. Economic inactivity rate was down -0.1% to 21.5%. Both average earnings including bonus and excluding bonus rose 6.4% 3moy.

                  Full release here.

                  ECB Lane: Interest rates have to be higher under vast majority of scenarios

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                    ActionForex.com
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                    ECB Chief Economist Philip Lane said in an FT interview published today, “we’re not yet at the level of interest rates needed to bring inflation back to 2 per cent in a timely manner”, and “it still requires work”.

                    Under the “vast majority” of the scenarios, “interest rates do have to be higher than they are now”. “Risks are not yet two-sided, and under a wide range of scenarios, it’s still safe to bring interest rates above where they are now,” he said.

                    “The question is how do you get from mid-threes at the end of 2023 to the 2% target in a timely manner,” Lane said. “That’s where interest rate policy is going to be important… to make sure that the last kilometer of returning to target is delivered.”

                    Lane also noted, the self-reinforcing low inflation environment in Eurozone was gotten rid of as a “byproduct” of the inflation shock. He added, “the chronic low-inflation equilibrium we had before the pandemic will return.”

                    China GDP growth slowed to 2.9% yoy in Q4, but beat expectations

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                      ActionForex.com
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                      China’s GDP growth slowed to 2.9% yoy in Q4, down from Q3’s 3.9% yoy but beat expectation of 1.8% yoy. For 2022 as a whole, GDP grew 3.0%, sharply lower than 2021’s 8.4%, but was better than 2020’s 2.2%. That’s still the second worst on record nonetheless.

                      In December, industrial production rose 1.3% yoy, above expectation of 0.3% yoy. Retail sales declined -1.8% yoy, much better than expectation of -9.5% yoy. Fixed asset investment grew 5.1% ytd yoy, above expectation of 5.1%.

                      “The foundation of domestic economic recovery is not solid as the international situation is still complicated and severe while the domestic triple pressure of demand contraction, supply shock and weakening expectations is still looming,” NBS said in a release.

                      Also released, China’s population decreased by -850k in 2022, the first contraction in more than six decades. Birthrate was at 6.77 births per 1000 people, sharply down from 2021’s 7.52 births, and marked the lowest level on record. Death rate rose from 7.18 to 7.37 per 1000 people, highest since 1976.

                      Australia Westpac consumer sentiment rose 5% in Jan

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                        ActionForex.com
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                        Australia Westpac Consumer Sentiment rose 5.0% mom to 84.3 in January, the largest monthly gain since April 2021. It’s also the second straight month of improvement, with combined rise of 8.1%. Current Conditions index rose 2.8% mom while Expectations Index rose 6.3% mom. Unemployment Expectations also improved 8.4% mom.

                        Westpac said: “One likely explanation for the lift in confidence is that January was the first month since April last year that did not see an increase in the RBA cash rate. While that was because there was no RBA Board meeting in the month rather than an explicit decision by the Bank to leave rates unchanged, the break in the tightening cycle looks to have provided some relief.”

                        Regarding RBA rate decision, Westpac expects another 25bps hike on February. It also expects clear message from RBA that the February increase will not be the last in the tightening cycle, because of a lift in annual inflation, strong retail sales growth and ongoing tight labor market.

                        Full release here.

                        NZ NZIER business sentiment hit record low

                          By
                          ActionForex.com
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                          New Zealand NZIER Quarterly Survey of Business Opinion showed, in Q4 on a seasonally adjusted basis, a net 73% of businesses expect general economic conditions to deteriorate over the coming months. That’s the worst level in the survey’s history.

                          A net 13% of businesses reported a decline in their own activity over the past quarter, worst since Q2 2020 during the full impact of the first pandemic lockdown. A net 33% expected decline in activity in the coming quarter.

                          “Firms have also reduced investment plans substantially, particularly when it comes to investment in buildings,” NZIER said. Retail businesses were feeling “very downbeat”, it found.

                          Full release here.

                          BoE Bailey: Labor force shrinkage the major risk to UK inflation

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                            ActionForex.com
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                            BoE Governor Andrew Bailey told a parliamentary committee yesterday that inflation could fall back substantially this year. Still, there are risks from labor shortage and China.

                            “The biggest single reason inflation has risen to that level is the war in Ukraine. It is also the most likely reason that we’re going to see a rapid fall in inflation in the year ahead, because we are not seeing energy prices rising further. In fact, they’re coming down,” he said.

                            “Going forwards, the major risk to inflation coming down in the way that it will is the supply side,” Bailey said. “In this country particularly the question of the shrinkage of the labor force,” which has pushed up wages.

                            “First of all in the economic outlook it think it’s quite likely we will see a negative impact in the short run in China from what’s going on at the moment from the release of the Covid restrictions and the impact that’s having,” Bailey said. “I’m not sure that would be very long lasting.”

                            WEF: 63% chief economists expect global recession in 2023

                              By
                              ActionForex.com
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                              In the Chief Economists Outlook of the World Economic Forum, 63% of survey respondents said a global recession is likely this year, with 18% saying that it’s “extremely likely”.

                              Prospect for growth was also bleak, all respondents expecting weak growth in Europe, (68% very weak and 32% weak). 91% expect weak growth in the US (9% very weak, and 82% weak. Even for China, 48% expect weak growth (10% very weak, 38% weak).

                              Inflation expectations saw significant variation across regions. All respondents expect high inflation in Europe (43% high, 57% very high). Also, all respondents expect high inflation in the US (76% high, 24% very high). But only 53% expect high inflation in China (48% high, 5% very high).

                              Full release here.

                              Canada manufacturing sales flat at CAD 72.3B in Nov

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                                ActionForex.com
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                                Canada manufacturing sales were flat at CAD 72.3B in November, below expectation of 2.3% mom growth. higher sales of durable goods (+1.8%), led by motor vehicles (+12.7%) and fabricated metal products (+2.7%), were offset by lower sales of non-durable goods (-1.7%), led by the chemical (-4.4%) and petroleum and coal product (-2.1%) industries.

                                Full release here.

                                Japan yield curve distortion worsens, Nikkei down

                                  By
                                  ActionForex.com
                                  -

                                  Japanese stocks, bonds and currency market remain rather nervous today, as traders are eyeing BoJ policy decision on Wednesday. The yield curve “distortion”, as described by the central bank, was getting more serious after 8- and 9-year yield surged past 0.6% handle last week. At the same time, 10-year JGB yield, closed at 0.514, is still firmly tied to the 0.5% cap. Both 8- and 9-year yield closed down but stayed above 10-year’s level at 0.624 and 0.632.

                                  As speculation on a YCC tweak to rectify the distortion intensified , Nikkei declined -1.14% to close at 25822.32. Technically speaking, while deeper decline is possibly for the near term, strong support should be seen around 24681.74 to contain downside. The level is close to 55 month EMA, which stands at 24754.15. Nikkei has been continuously supported by the EMA, as well as the long term channel, for a decade, barring the initial two months of the pandemic. But a firm break of 24681.74 will indicate something rather substantial is happening.

                                  Japan PPI up 10.2% yoy in Dec, second highest on record

                                    By
                                    ActionForex.com
                                    -

                                    Japan PPI rose 10.2% yoy in December, accelerated from 9.7% yoy, above expectation of 9.5% yoy. The reading topped 10% handle for the second time in 2022, marking the second-largest gains on record, following the 10.3% yoy jump in September.

                                    For 2022, wholesale prices rose 9.7% on average, hitting a new record high since comparable data became available in 1981. It’s also twice as fast as in 2021 when a 4.6% increase was reported.

                                    Full release here.

                                    AUD/CAD extending near term rally, to target 0.96 next

                                      By
                                      ActionForex.com
                                      -

                                      While risk on-sentiment is supporting commodity currencies in general, Aussie has been outperforming others recently. Reacceleration in Australian consumer inflation as shown in last week’s November monthly CPI data suggests little room for RBA to pause for now. Additionally, there is optimism over China’s reopening, as well as resumption of coal purchases.

                                      AUD/CAD opened the week with solid buying. the development should confirm resumption of whole rise from 0.8596 low. Near term outlook will stay bullish as long as 0.9142 support holds, even in case of retreat. Next target is 61.8% projection of 0.8596 to 0.9328 from 0.9142 at 0.9594.

                                      During the move, AUD/CAD should also take out 0.9514 resistance to confirm completion of the three-wave corrective decline from 0.9991 (2021 high). That would set the stage for further rally through 0.9991 to resume the rise from 0.8058 (2020 low) in the medium term.

                                      Bitcoin pressing resistance after regaining 20k

                                        By
                                        ActionForex.com
                                        -

                                        Bitcoin started the year strongly and regained 20k handle last week. Total market cap also surged past USD 400B level. The move followed overall risk-on sentiment, on expectations that Fed is ready to further slow down the tightening pace. While it’s still early to call for a sustainable trend reversal, the worst looks increasingly likely behind.

                                        Technically, considering bullish convergence condition in daily and week MACD, 15452 should be a medium term bottom at least. Immediate focus is now on 21460 resistance. Firm break there will confirm this case and bring further rise back to 25198 resistance.

                                        Nevertheless, to secure a trend reversal, Bitcoin will need to break through 55 week EMA (now at 25677) in rather decisive manner. Otherwise, it’s probably just setting up the range for some medium term sideway trading instead. So, 25k would be the next level to pay attention to.

                                        NIESR expects 0.1% UK GDP growth in Q4, Q1 risk on the downside

                                          By
                                          ActionForex.com
                                          -

                                          After today’s UK GDP release, NIESR forecasts that GDP in December will fall relative to November. But overall, service-driven GDP growth of 0.1% in Q4 is estimated.

                                          Paula Bejarano Carbo, Associate Economist, NIESR, said: “Given that PMIs for services, manufacturing and construction all posted below the neutral 50 for December, we expect to see a slight fall in GDP in December relative to November; but this means a rise in quarterly GDP, possibly a sign that households are enjoying a last hurrah before they tighten their belts in 2023.

                                          ” Looking towards the first quarter of 2023, the risks to GDP seem to remain on the downside, driven by anaemic growth in the major sectors, fragile consumer and business confidence and a widespread fall in real incomes.”

                                          Full release here.

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