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Oil prices lifted by AbuDhabi supply cuts, but WTI still struggling around 43

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    ActionForex.com
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    Oil prices rise mildly today as lifted by Abu Dhabi’s supply cuts. The National Oil Company told its customers today that October supplies will be reduced by -30%, deeper than than -5% cut in September. That was directed by UAE government to meet the commitment on recent OPEC+ agreement.

    WTI crude oil is back above 43 for the moment. But it’s still struggling to find follow through buying to take out 43.38 resistance decisively. Such level is also close to 55 week EMA (now at 43.87). Sustained break of this EMA would carry larger bullish implications for 65.38 resistance next. Nevertheless, rejection by this EMA would at least bring a correction to 38.58 support.

    NZD/USD and NZD/JPY dip after RBNZ, eyeing near term support

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      NZD/USD dips notably after RBNZ decided to expand the asset purchase program. Focus is now back on 0.5994 support. Firm break there will suggest that corrective rebound from 0.5469 has completed. Bias will be turned back to the downside for retesting this low. Even in case of another rise, considering bearish divergence condition in 4 hour MACD, upside should be limited by 61.8% retracement of 0.6755 to 0.5469 at 0.6264.

      NZD/JPY also carries a similar picture. Focus is now on 63.55 support. Break will suggest that corrective rebound from 59.49 has completed. Further fall should then be seen to retest this low. In case of another rise, considering bearish divergence condition in 4 hour MACD, upside should be limited by 61.8% retracement of 73.53 to 59.49 at 68.16.

      BoC likely a non-event, CAD/JPY retreats but outlook stays bullish

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        BoC is generally expected to keep monetary policy unchanged today. Overnight rate will be held at effective lower bound of 0.25%. The size of asset purchases will also stay unchanged at CAD4B per week. There will be no press conference and updated economic projections will not be released until April. So, today’s announce is more likely a non-event than not.

        Nevertheless, the central bank should acknowledge the better-than-expected developments since the January meeting. There have been increasing speculations that the central bank will reduce the size to CAD3B per week at the April meeting. We will see if there will be hints of such as move in the policy statement.

        Some BoC previews:

        Canadian Dollar is currently trading as the strongest for the month, partly helped by strong rally in oil price. CAD/JPY retreated mildly after hitting 86.35 earlier this week. Some consolidations would likely be seen first but overall outlook will stay bullish as long as 83.59 support holds. We’d expect the up trend form 73.80 to extend to 161.8% projection of 74.76 to 81.91 from 77.91 at 89.47 down the road.

        EU Malmstrom urges US to do an industrial trade agreement to rebuild trust first

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          ActionForex.com
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          EU Trade Commissioner Cecilia Malmstrom said she had productive meetings with US Trade Representative Robert Lighthizer in Washington this week. She noted that both sides have agreed on a problem as “China is dumping the market, China is subsidizing their industry, this creates global distortions”.

          However, there was obvious disagreement in the solution. Malmstrom complained that “the solution to these problems is not imposing tariffs on the European Union. Why is that so hard to understand?” And, she added “if you want an ally and partner, this is not the way to go about it.”

          She emphasized that “we should work on common threats and common challenges and not impose tariffs on each other.” If US imposes auto tariffs to EU cars, Malmstrom pledged to, “with a very heavy heart”, retaliate against EUR 20b US imports.

          On EU-US trade agreement, Malmstrom noted there is “no support” for a full comprehensive trade agreement in the EU right now. She reiterated EU’s stance that “if we start with industrial goods, which is much less complicated, and which will be beneficial from both sides, we maybe can rebuild that trust and then maybe we’ll see later” about agriculture”.

          US durable goods orders rose 2.4%, but ex-transport orders dropped -0.1%

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            US durable goods orders rose 2.4% to USD 245.5B in December, way above expectation of 1.2%. However, ex-transport orders dropped -0.1%, missed expectation of 0.4%. Ex-defense orders dropped -2.5%.

            Full release here.

            Canada CPI slowed to 1.9%, but stays firm with labor market strength

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              Canada CPI slowed to 1.90% yoy in August, down fro 2.0% yoy and missed expectation of 2.0%. Nevertheless, Statistics Canada noted: The CPI has grown by 1.9% or more on a year-over-year basis for six consecutive months, after reaching a low of 1.4% in January of this year. The broad-based gains in the CPI over the past two quarters have coincided with strength in Canadian labour market conditions.:

              CPI Core Common slowed to 1.8% yoy, down from 1.9% yoy and missed expectation of 1.9% yoy. CPI Core Media was unchanged at 2.1% yoy, matched expectations. CPI Core Trim was also unchanged at 2.1% yoy, matched expectations.

              Full release here.

              Bundesbank Weidmann: ECB should consider only purchasing climate compliant securities

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                ActionForex.com
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                Bundesbank President Jens Weidmann urged a Financial Times article that the Eurosystem should consider “only purchasing securities or accepting them as collateral for monetary policy purposes if their issuers meet certain climate-related reporting obligations”.

                Additionally, central banks should only use credit ratings from agencies that that appropriately include climate-related financial risks.

                Weidmman also said governments should do their part on climate, by raising taxes on carbon, or using “cap and trade” schemes. It is not the task of the Eurosystem to penalize or promote certain industries, Weidmann added.

                US NFP grows 199k, unemployment rate down to 3.7%

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                  US Non-Farm Payroll employment grew 199k in November, slightly above expectation of 190k. That was below the average monthly gain of 240k over the prior 12 months.

                  Unemployment rate fell from 3.9% to 3.7%, below expectation of 3.9%. Participation rate rose 0.1% to 62.8%.

                  Average hourly earnings rose 0.4% mom, above expectation of 0.3% mom. Over the past 12 months, average hourly earnings rose 4.0% yoy. Average workweek for all employments edged up by 0.1 hour to 34.4 hours.

                  Full US non-farm payroll release here.

                  China PMI manufacturing dropped to 49.2, new export orders hit decade low

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                    ActionForex.com
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                    The official China PMI manufacturing dropped to 49.2 in February, down from 49.5 and missed expectation of 49.5. That’s the third straight month of sub-50 reading. Looking at the details new export orders index dropped -1.7 to 45.2, its lowest level in 10 years, suggesting trade war with the US continues to have an impact on exports. Production dropped -1.4 to 49.5. Employment dropped -0.3 to 47.5. PMI services dropped to 54.3, down from 54.7, missed expectation of 54.5.

                    However, analyst Zhang Liqun tried to talk down the deterioration in the statement. He noted that the decline in PMI was mainly due to Lunar New Year factor. He pointed to the significant decline in the production, the purchase volume, and the raw material inventory as indications.

                    Also from Asia, Japan industrial production dropped -3.7% mom in January versus expectation of -2.5% yoy. Japan retail sales rose 0.6% yoy in January, below expectation of 1.5% yoy.

                    German Merkel wants EU-US trade deal asap

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                      US President Donald Trump indicated that he and German Chancellor Angela Merkel discussed a trade deal with the EU. Also at G7, Merkel said she wants EU to reach a trade agreement with US as quickly as possible,

                      Merkel said, “we want to talk now about the EU and the United States having deeper talks as quickly as possible… We have a great interest in our trade being intensified. I think we can find solutions… Germany, within the framework of the EU, is working hard on this.”

                      US & Japan reach trade deal, but auto tariffs to be reconfirmed

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                        ActionForex.com
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                        US President Donald Trump indicated in a letter to Congress that he’s entering in to a trade deal with Japan in the “coming weeks”. There will be agreements on trade tariffs and digital trade that could allow him to make reciprocal tariff reductions by proclamation. No Congress approval would be needed.

                        For now, it’s unclear whether there is agreement for avoiding so-called Section 232 national security tariffs on Japanese autos. Japan’s Foreign Minister Toshimitsu Motegi said a a regular news conference that “at the finishing stage, we plan to reconfirm that 232 won’t be imposed.” Finance Minister Taro Aso also indicated the deal won’t contain any provision on currencies.

                        US ADP jobs grows 103k, pay rise slows further

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                          ActionForex.com
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                          US ADP private sector employment grew 103k in November, below expectation of 120k. By sector, goods-producing jobs fell -14k while service-providing jobs rose 117k. By establishment size, small companies added 6k jobs, medium companies added 68k, large companies added 33k.

                          Job-stays saw a 5.6% yoy pay increase, down from 5.7% yoy, and the slowest since September 2021. Job-changes saw a 8.3% yoy pay rise, down from 8.4% yoy, slowest since June 2021.

                          “Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said Nela Richardson, chief economist, ADP. “But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024.”

                          Full US ADP release here.

                          Today’s top mover: EUR/AUD in corrective retreat, further rise expected for near term

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                            ActionForex.com
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                            At the time of writing, EUR/AUD is the biggest mover for today, down -97 pips or -0.61%. The selloff is partly due to Aussie’s strength on US-China trade optimism. It also lifts US stocks and to a lesser extend Dollar. Focus is back on Euro as Italy might submit revised budget to EU in the next 24-48 hours. Also, traders seem to be repositioning themselves, guarding against dovish ECB press conference on Thursday.

                            Nevertheless, the fall from 1.5887 is seen as a corrective pull back for now. The cross just had a strong rebound ahead of 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313). The development argues that price actions from 1.6357 medium term top are developing into sideway consolidation, rather than a deep correction.

                            Hence, we’d expect rise from 1.5346 to extend into 1.5984/6357 resistance zone at least, before completion. So current retreat from 1.5887 should be contained by 1.5596 minor support to bring another rise. Nevertheless, break of 1.5596 will dampen this view and turn focus back to 1.5271/5313 zone.

                            US initial jobless claims dropped to 212k, Philly Fed business outlook hit 21-month low

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                              ActionForex.com
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                              US initial jobless claims dropped -2k to 212k in the week ended August 11, slightly below expectation of 215k. Four-week moving average of initial claims rose 1k to 215.5k. Continuing claims dropped -38k to 1.721m in the week ended August 4. Four-week moving average dropped -8k to 1.7385m.

                              Full release here.

                              Philadelphia Fed Business Outlook Current Activity indicator dropped sharply to 11.9 in August, down from 25.7 and missed expectation of 22.3. It’s also the lowest reading in 21 months. Nonetheless, the Six-Month Forecast indicator rose to 38.8, up from 29.0.

                              Full release here.

                              Also from the US, housing starts rose to 1.17m in July, building permits rose to 1.29m. From Canada, manufacturing sales rose 1.0% mom in June.

                              German ZEW surges to 31.7 on ECB rate cut anticipation

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                                ActionForex.com
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                                German ZEW Economic Sentiment rose sharply from 19.9 to 31.7 in March , well above expectation of 21.0. Current Situation Index ticked up slightly from -81.7 to -80.5, below expectation of -80.0.

                                Eurozone ZEW Economic Sentiment rose from 25.0 to 33.5, above expectation of 25.4. Current Situation Index fell -1.4 pts to -54.8.

                                ZEW President Professor Achim Wambach highlighted the “significantly improving” economic expectations for Germany. A key factor contributing to this optimism appears to be the widespread anticipation of an interest rate cut by ECB “in the next six months”, as expected by over 80% of survey participants.

                                Additionally, Wambach pointed out that the German export sector stands to benefit from “increased economic expectations for China “and the anticipated depreciation of Dollar against Euro.

                                Despite these positive developments in sentiment, Wambach cautioned that the assessment of the current economic situation remains at a very low level. “This development somewhat diminishes the increased economic expectations,” he added.

                                Full German ZEW release here.

                                Fed Mester: We’re not in a recession, have more work to do on inflation

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                                  ActionForex.com
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                                  Cleveland Fed President Loretta Mester said in a Washington Post interview yesterday, “I don’t believe we’re in a recession… We don’t have a slowdown in labor markets, and that’s two key factors that go into calling a recession.”

                                  “Our policy has been to raise interest rates in order to cool down the demand side of the economy…. but certainly it hasn’t slowed enough, (a), to call it a recession; and (b), to even see that moderation in demand showing through yet to a moderation and a cooling-off of price increases and inflation,” she added.

                                  “We have more work to do because we have not seen that turn in inflation. It’s got to be a sustained several months of evidence that inflation has first peaked – we haven’t even seen that yet – and that it’s moving down,” she also noted.

                                  Full interview here.

                                  BoJ Kuroda: It’s still possible to achieve 2% inflation target

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                                    BoJ Governor Haruhiko Kuroda reiterated to the parliament today that there is no need to change the 2% inflation target. He expected inflation to be negative for now due to the impacts of the pandemic. But consumer prices will “rebound thereafter, gradually accelerate the pace of increase.” “It will take time, but it’s still possible to achieve our 2% inflation target,” he said.

                                    Kuroda also said he hoped to deepen the debate with global central bankers on the role of monetary policy in addressing climate change. “There are many factors we need to take into account, such as how this will affect distribution of resources,” he said. “We hope to deepen debate in international meetings. I’m not saying we won’t think about possibilities at all.”

                                    Eurozone PMI manufacturing finalized at 58.7 in Jan, weathering Omicron better than prior waves

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                                      ActionForex.com
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                                      Eurozone PMI Manufacturing was finalized at 58.7 in January, up from December’s 58.0. Markit said there were faster expansion in output and new orders. Employment growth improved to five-month high. Also, supplier performance had the least marked deterioration for a year.

                                      Looking at some member states, Germany PMI manufacturing improved to 59.8, five month high. But Italy dropped to 11-month low at 58.3. France also dropped to 3-month low at 55.5. Overall readings were still strong with Austria at 61.5, the Netherlands at 60.1, Ireland at 59.4, Greece at 57.9 and Spain at 56.2.

                                      Chris Williamson, Chief Business Economist at IHS Markit said: “Eurozone manufacturers appear to be weathering the Omicron storm better than prior COVID-19 waves so far, with firms reporting the largest production and order book improvements for four months in January. Prospects have also brightened, with a further easing in the number of supply chain delays playing a key role in prompting producers to revise up their expectations for growth in the coming year to the highest since last June…

                                      “Escalating tensions surrounding Ukraine, the energy price crisis and prospect of global central bank policy tightening meanwhile create additional headwinds to the outlook, which suggest that – although the global supply crunch may be easing – demand conditions may be less supportive to manufacturers in coming months.”

                                      Full release here.

                                      Sterling mildly lower as UK seeks another Brexit extension

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                                        ActionForex.com
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                                        Sterling opens the week mildly lower but loss is so far very limited. The House of Commons voted on Saturday to withhold the decision on UK Prime Minister Boris Johnson’s Brexit instead. Instead, MPs forced Johnson to seek another three-month extension from EU first. While initially refused, Johnson eventually sent a delay request to EU, without signing it.

                                        At this point, it’s generally viewed that UK is still on track for orderly Brexit, just deferred. The vote on the Withdrawal Agreement Bill could still be held on Tuesday, after Johnson makes another attempt on Monday to get Parliament to sign off on the principle of his deal. And, if Johnson wins, the extension request could be withdrawn and Brexit will happen on October 31.

                                        The Times of London reported that EU is ready to approve a three-month flexible extensions. UK could leave EU earlier if the Parliament could ratify a deal. Or, Germany could push for a longer extension, pushing the deadline well into June 2020, if the UK government meets are serious obstacles.

                                        The UK government activated the so-called “Operation Yellowhammer” on Sunday, entering the “final, most intensive stage” of disorderly Brexit preparation. Quoted by Bloomberg, a government official said, “with less than two weeks until 31 October, hundreds of civil servants will from today move to work on these operational matters.”

                                        Australia’s Westpac leading index ticks up, but below-par growth set to persist

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                                          Australia’s Westpac Leading Index figures reveals that growth rate has shown a marginal uptick, moving from -0.67% to -0.60% in July. But alarmingly, this marks the twelfth consecutive month in red, representing the longest stretch of such negative prints in a span of seven years, barring the COVID-affected period.

                                          The subdued, below-par growth momentum witnessed throughout 2023 seems set to persist into the subsequent year. Westpac predicts deceleration in GDP growth to a mere 1% for the current year. Any potential rebound is anticipated to be minimal, with projections indicating a slight rise to 1.4% annually in 2024 – with the bulk of this growth concentrated towards the year-end.

                                          Regarding RBA meeting on September 5, Westpac sets its expectations clear. The institution foresees cash rate remaining stable at 4.10%, denoting the zenith of this current tightening phase.

                                          Referring the recent remarks of RBA Governor before the House of Representatives Standing Committee on Economics, the note emphasized, “Policy is now in a ‘calibration’ phase with small adjustments still possible if the data starts to show clear risks of a slower return to low inflation.”

                                          Nevertheless, given the evident frailty in growth momentum – as underscored by the most recent Leading Index update – coupled with the broader dynamics of price and wage inflation aligning with RBA’s forecasts, “the threshold for additional tightening is high and unlikely to be met.”

                                          Full Australia Westpac leading index release here.

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