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Canada CPI slowed to 6.8% yoy, but accelerated excluding food and energy

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    Canada CPI slowed from 6.9% yoy to 6.8% yoy in November. Excluding food and energy, CPI accelerated from 5.3% yoy to 5.4% yoy. On a monthly basis, CPI rose 0.1% mom, much slower than October’s 0.7% mom.

    CPI median accelerated from 4.9% yoy to 5.0% yoy. CPI trimmed was unchanged at 5.3% yoy. CPI common, accelerated sharply from 6.3% yoy to 6.7% yoy.

    Full release here.

    Germany Gfk consumer sentiment rose to -37.8, slowly working its way out of depression

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      Germany Gfk Consumer Sentiment for January improved from -40.1 to -37.8. In December, economic expectations rose from 17.9 to -10.3. Income expectations rose from -54.3 to -43.4. Propensity to buy rose form -18.6 to -16.3.

      “The third increase in a row indicates that consumer sentiment is slowly working its way out of the depression. The light at the end of the tunnel is getting a little brighter”, explains GfK consumer expert Rolf Bürkl.

      “The measures taken by the federal government to mitigate skyrocketing energy costs are apparently having an effect. However, it is still too soon to give the all-clear. The recovery of the consumer sentiment, as we are currently experiencing, is still on shaky ground. For example, if the geopolitical situation were to worsen again, leading to significantly higher energy prices, the light at the end of the tunnel would very quickly become dimmer again or even go out altogether.”

      Full release here.

      Australia leading index consistent with below trend growth well into 2023

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        Australia Westpac-MI leading index dropped from -0.84% to -0.92% in November. Growth rate was, thus, in negative territory for the fourth consecutive month. The data is consistent with below trend growth well into 2023. Drivers of weakness are the RBA interest rate and commodity prices.

        Westpac expects another 25bps rate hike by RBA in February, “give the outlook for wages; inflation and economic growth”. It expects wages and inflation challenges to persist through early months of 2023, requiring “further increase of 25bps in both March and May.

        Full release here.

        IMF: BoJ YCC adjustment a sensible step

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          Ranil Salgado, the IMF’s mission chief to Japan, said that “with uncertainty around the inflation outlook, the Bank of Japan’s adjustment of yield curve control settings is a sensible step including given concerns about bond market functioning.”

          “Providing clearer communications on the conditions for adjusting the monetary policy framework would help anchor market expectations and strengthen the credibility of the Bank of Japan’s commitment to achieve its inflation target,” he said.

          BoJ announced to raise the cap on 10-year JGB yield from 0.25% to 0.50% yesterday, to ” correct distortions in the yield curve”.

          Canada retail sales rose 1.4% mom in Oct, but volume was unchanged

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            Canada retail sales rose 1.4% mom to CAD 62.0B in October, below expectation of 1.5% mom, and the largest in crease in five month. Sales were up in 6 out of 11 subsectors, representing 84.4% of retail trade. Growth was led by higher sales at gasoline stations (+6.8%) and food and beverage stores (+2.2%). Excluding gasoline stations and motor vehicle and parts, sales rose 0.9%.

            In volume terms, retail sales were unchanged for the month.

            Based on advance estimate, sales decreased -0.5% mom in November.

            Full release here.

            BoJ Kuroda: Yield cap raised to correction distortions in yield curve

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              BoJ Governor Haruhiko Kuroda said in the post meeting press conference, “Overseas market volatility has heightened from around spring … While we have kept the 10-year bond yield from exceeding the 0.25% cap, this has caused some distortions in the shape of the yield curve. We, therefore, decided that now was the appropriate timing to correct such distortions and enhance market functions.” That’s led to the decision today to raise the cap from 0.25% to 0.50%.

              “Consumer inflation has hit 3.6% mainly through rising import costs from a weak yen. Furthermore, inflation expectations are heightening. This is pushing down real interest rates and enhancing the stimulus effect on the economy. As such, while we’ve (widened the band) to correct distortions in the yield curve, the move won’t diminish the effect of YCC,” he added.

              But Kuroda also indicated, “I don’t think we need to review YCC or quantitative easing for the time being.” “It’s premature to debate specifics on changing the monetary policy framework or an exit from easy policy. When achievement of our target comes into sight, the BOJ’s policy board will hold discussions on an exit strategy and offer communication to markets,” he said.

              NZ ANZ business confidence fell to fresh record low

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                New Zealand ANZ business confidence declined from -57.1 to -70.2 in December, a new record low. Looking at some details, own activity outlook fell from -13.7 to -25.6. Export intentions dropped form -5.4 to -10.0. Investment intentions dropped form -8.1 to -20.5. Employment intentions dropped from -4.0 to -16.3. Pricing intentions rose from 58.5 to 59.1. Cost expectations declined form 88.7 to 84.4. Inflation expectations dropped from 6.39 to 6.23.

                ANZ said: “The fall in business confidence is certainly dramatic, but while it’s at a fresh record low, it would be incorrect to read this as an indication that any recession is likely to be unusually severe. Rather, it’s unusually widely anticipated. It’s a situation unprecedented in recent decades for a central bank to admit it is deliberately engineering a recession.”

                Full release here.

                RBA considered 50bps, 25bps, and no change at Dec meeting

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                  Minutes of RBA’s December 6 meeting indicates that the board has considered three interest rate options of a 50bps hike, a 25bps hike, and no change.

                  The argument for a 50bps increase stemmed from inflation remains “too high”, and there were factors support a “more pre-emptive action”. For a 25bps increase, the board acknowledged there had bee already a “significant cumulative increase” in interest rates and they would “begin to have more of an effect through the course of 2023″. The arguments for now chance placed”further emphasis of the lagged effect” of prior rate increases.

                  Board members eventually decided that the case for 25bps increase was the”strongest one”, as further hike was “likely to be necessary”. Members also noted the “importance of acting consistently”.

                  The minutes also reiterated that “the Board expects to increase interest rates further over the period ahead, but it is not on a pre-set path. Members noted that the size and timing of future interest rate increases would continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.”

                  Full minutes here.

                  AUD/JPY and CAD/JPY downside breakout after BoJ surprise

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                    Yen surges broadly today after BoJ surprisingly raise 10-year yield cap from 0.25% to 0.50%. AUD/JPY finally breaks through 90.81 support decisively to resume the decline from 99.32. The strong break of a near term channel also indicates downside acceleration. Next near term target is 100% projection of 99.32 to 90.81 from 95.73 at 87.22

                    From a longer term point of view, the break of 55 week EMA and the channel support also affirms the case that AUD/JPY is corrective whole up trend from 2020 low at 59.85. Such decline from 99.32 would target 38.2% retracement of 59.85 to 99.32 at 84.24 before forming a bottom.

                    CAD/JPY also broke out of a near term expanding triangle to resume the whole fall from 110.87. Near term target of 200% projection of 110.87 to 104.55 from 110.33 at 97.69 is already met. Such decline is seen the correcting the up trend from 2020 low at 73.80. The question now is whether support from 38.2% retracement of 73.80 to 110.87 at 96.70 is strong enough to contain downside. If now, CAD/JPY accelerate further to 261.8% projection at 93.78.

                    BoJ tweaks YCC to allow 10-yr yield to rise to 0.50%

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                      BoJ surprises the markets today by widening the band of 10-year JGB yield from 0.25% to 0.50% today. At the same time, short term policy rate is kept unchanged at -0.10% as expected.

                      Under the yield curve control framework, the central bank will still continue to purchases JGBs without an upper limit to keep 10-year yield at around 0%. But now, the bank will offer to purchase 10-year JGB yields at 0.50% every business day through fixed-rate operations, effectively allowing 10-year yield to rise towards 0.50% level.

                      Full statement here.

                      ECB de Guindos: I absolutely honest don’t know rate hikes will continue until when

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                        ECB Vice-President Luis de Guindos said today, “there will be more interest rate hikes, until when, I don’t know. I am absolutely honest, I don’t know.” He added that the central bank was committed to bring inflation down to its 2% target.

                        Separately, Governing Council member Gediminas Simkus said, “there will undoubtedly be a 50 bps increase in February.”

                        Germany Ifo rose to 88.6, entering holiday with a sense of hope

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                          ActionForex.com
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                          Germany Ifo Business Climate rose from 86.4 to 88.6 in December, above expectation of 87.2. Current Situation Index rose from 93.2 to 94.4, above expectation of 93.5. Expectations Index rose from 80.2 to 83.2, above expectation of 82.0.

                          By sector, manufacturing rose from -11.5 to -5.6. Services rose from -5.3 to -1.2. Trade rose from -26.9 to -20.0. Construction, however, dropped from -21.5 to -22.2.

                          Ifo said: “Sentiment in the German economy has brightened considerably. The ifo Business Climate Index rose to 88.6 points in December, up from 86.4 points (seasonally adjusted) in November. Companies assessed their current situation as better again. This comes on the heels of six consecutive falls in the indicator for the current situation. Expectations also improved noticeably. German business is entering the holiday season with a sense of hope.”

                          Full release here.

                          NZ BNZ performance of services dropped to 53.7

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                            New Zealand BusinessNZ Performance of Services Index declined from 57.1 to 53.7 in November, still above long-term average of 53.6. Looking at some details, activity/sales dropped from 61.0 to 58.1. Employment tumbled from 57.1 to 51.8. New orders/business declined from 59.6 to 57.3. Stocks/inventories fell from 56.1 to 55.0. Supplier deliveries fell from 52.0 to 47.3.

                            BusinessNZ chief executive Kirk Hope said: “With its sister survey the PMI again showing contraction in November and economic headwinds approaching, the easing of expansion in activity is not unexpected. Also, with the Global PSI result of 48.1 at a 29-month low, it will be a tall order for the New Zealand services sector to continue the overall trends experienced during the second half of 2022”.

                            BNZ Senior Economist Craig Ebert said that “November’s PSI proved, for the third month running, to be an important counterpoint to the weakening PMI. It looks as though the services industries – just like they did in Q3 – will more than make up for any weakness in manufacturing in Q4, such that GDP for that quarter manages an expansion”.

                            Full release here.

                            Eurozone CPI finalized at 10.1% yoy in Nov, core CPI at 5.0% yoy

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                              Eurozone CPI was finalized at 10.1% yoy in November, down from October’s 10.6% yoy. CPI core was finalized at 5.0%, unchanged from prior month’s reading. The highest contribution came from energy (+3.82%), followed by food, alcohol & tobacco (+2.84%), services (+1.76%) and non-energy industrial goods (+1.63%).

                              EU CPI was finalized at 11.1% mom, down from October’s 11.5% yoy. The lowest annual rates were registered in Spain (6.7%), France (7.1%) and Malta (7.2%). The highest annual rates were recorded in Hungary (23.1%), Latvia (21.7%), Estonia and Lithuania (both 21.4%). Compared with October, annual inflation fell in sixteen Member States, remained stable in three and rose in eight.

                              Full release here.

                              ECB Rehn: More 50bps hike at least as far as I see in Feb and Mar

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                                ECB Governing Council member Olli Rehn said, “we will stay the course as President (Christine) Lagarde yesterday indicated and this will likely mean 50 basis point rate hikes in the coming meetings, at least as far as I see in February, and March.”

                                Another Governing Council member Robert Holzmann said the signal that more 50bps rate hikes are coming was “a toughly hawkish statement that for me is equivalent to the 75”. He added that ECB could “go deep into restrictive territory if needed”.

                                ECB Villeroy: The match is over in fighting inflation

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                                  ActionForex.com
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                                  ECB Governing Council member Francois Villeroy de Galhau told BFM Business radio that “the match is not over” in fighting inflation, adding that rate hikes remain the main tool.

                                  Regarding the quantitative tightening on the APP by EUR 15B per month from March, he said, “we will re-examine it in June and we will probably increase the reduction starting in July,”

                                  “The European economy is more resilient than we feared even a few weeks ago,” he said. “There will be a strong slowdown in 2023. We will escape what certain people call a hard landing. We will have a rather significant rebound in 2024 and 2025.”

                                  UK PMI manufacturing fell to 44.7, services recovery to 50.0

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                                    UK PMI Manufacturing dropped from 46.5 to 44.7 in December, a 31-month low. PMI Services rose from 48.8 to 50.0. PMI Composite rose from 48.2 to 49.0.

                                    Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “The December data add to the likelihood that the UK is in recession, with the PMI indicating a 0.3% GDP contraction in the fourth quarter after the 0.2% decline seen in the three months to September.

                                    “For now, the downturn looks to be relatively mild, and the easing in the rate of decline in December is encouraging news, as is the further marked cooling of inflationary pressures. However, the fact that the downturn has moderated compared to the turmoil created in the immediate aftermath of the botched “mini budget”, most notably in financial services, is no real cause for cheer. It is especially worrying to see business confidence and order book indicators remain so low by historical standards, with both of these key gauges signalling heightened degrees of economic stress.

                                    “Hence it’s no surprise to see that businesses are battening down the hatches, most notably by reducing headcounts, in a sign that the downturn not only has further to run but could yet accelerate again, especially given December’s further hike to interest rates.”

                                    Full release here.

                                    Eurozone PMI composite rose to 48.8, consistent with -0.2% GDP contraction in Q4

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                                      ActionForex.com
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                                      Eurozone PMI Manufacturing rose from 47.1 to 47.8 in December. PMI Services rose from 48.5 to 49.1. PMI Composite rose from 47.8 to 48.8. Still, the downside extended into its sixth successive month, even though rate of decline moderated.

                                      Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “While the further fall in business activity in December signals a strong possibility of recession, the survey also hints that any downturn will be milder than thought likely a few months ago. The data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just less than 0.2%, and forward-looking indicators are currently boding well for the rate of decline to ease further in the first quarter.”

                                      Full release here.

                                      Bundesbank expects no severe economic slump in Germany

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                                        ActionForex.com
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                                        Bundesbank projects that the German economy will contract -0.5% in 2023, then grow by 1.7% in 2024 and 1.4% in 2025. President Joachim Nagel said, “Economic output is likely to shrink initially, but we expect a gradual recovery from the second half of 2023…  Compared to the June projection, the rate of change of GDP for 2023 has been revised significantly downwards.”

                                        HICP inflation is projected to decline to 7.2% in 2023, then to 4.1% in 2024, and 2.8% in 2025. HICP excluding energy and food is expected to increase slightly to 4.3% in 2023, then gradually decline to 2.9% in 2024 and 2.6% in 2025. .

                                        Full release here.

                                        UK retail sales volumes down -0.4% mom in Nov, values up 0.5% mom

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                                          ActionForex.com
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                                          In November, UK retail sales volumes declined -0.4% mom, much worse than expectation of 0.3% mom rise. Ex-fuel sales dropped -0.3% mom, worse than expectation of 0.3% mom. Fuel sales volumes declined -1.7% mom.

                                          In value term, retail sales rose 0.5% mom while ex-fuel sales rose 0.1% mom.

                                          Full release here.

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