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Swiss CPI slows to 1.4%, import prices turn negative

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    ActionForex.com
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    Swiss CPI fell -0.2 mom in November, below expectation of -0.1% mom. Core CPI (excluding fresh and seasonal products, energy and fuel), was flat at 0.0% mom. Domestic products prices was flat at 0.0% mom. Imported product prices fell -1.1% mom.

    Annually, CPI slowed from 1.7% yoy to 1.4% yoy, below expectation of 1.6% yoy. Core CPI slowed from 1.5% yoy to 1.4% yoy. Domestic products prices slowed from 2.2% yoy to 2.1% yoy. Imported product prices turned negative from 0.4% yoy to -0.6% yoy.

    Full Swiss CPI release here.

    Gold recovery capped by 1238 resistance, more downside still in favor in near term

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      ActionForex.com
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      Gold turned sideway after hitting 1211.65 last week. There seems to be some support from 1205.20 support level, which is close to 1200 psychological level. Oversold condition, as seen in daily MACD was also limiting downside momentum.

      However, the recovery is so far limited below 1238.00 support turned resistance. Hence, there is no confirmation of near term bottoming yet. We’re viewing the fall from 1365.24 as a leg in the pattern from 2015 low at 1046.54. And further fall would be seen to 61.8% retracement of 1046.54 to 1375.15 at 1172.06 and possibly below.

      Nonetheless, break of 1238.00 resistance will likely bring stronger rebound back to 55 day EMA (now at 1267.53) before staging another fall.

      UK GDP grew 0.3% in July, but flat in the three months

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        ActionForex.com
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        UK GDP grew 0.3% mom in July, well above expectation of 0.1% mom. However, for the three months to July, GDP was flat, following -0.2% from April to June. Looking at the details for the three months to July, Index of services rose 0.13%. Index of production dropped -0.07%. Index of construction dropped -0.05%.

        Head of GDP Rob Kent-Smith said: “GDP growth was flat in the latest three months, with falls in construction and manufacturing. While the largest part of the economy, services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019. The trade deficit narrowed due to falling imports, particularly unspecified goods (including non-monetary gold), chemicals and road vehicles in the three months to July.”

         

        Also from UK, industrial production came in at 0.1% mom, -0.9% yoy in July versus expectation f0.0% mom, -1.0% yoy. Manufacturing production was at 0.3% mom, -0.6% yoy versus expectation of 0.0% mom, -1.0% yoy. Visible trade deficit widened slightly to GBP-9.1B, smaller than expectation of -9.6B.

        US U of Michigan consumer sentiment surged to 72.6, inflation expectation ticked up

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          ActionForex.com
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          US U of Michigan Consumer Sentiment index jumped from 64.4 to 72.6 in July, well above expectation of 65.5, that’s also the highest level since September 2021. Current Economic Conditions rose from 69.0 to 77.5. Consumer Expectations Index also surged from 61.5 to 69.4.

          “As seen in the chart, sentiment is now about halfway between the all-time historic low of 50 from June 2022 and the February 2020 pre-pandemic reading of 101.”

          Year-ahead inflation expected inched up from 3.3% to 3.4%. Long-run inflation expectation was virtually unchanged at 3.1%.

          Full U of Michigan consumer sentiment release here.

          RBNZ to stand pat this week, likely throughout 2018 too

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            ActionForex.com
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            RBNZ is expected to keep the official cash rate unchanged at 1.75%.

            According to a Reuters poll, all 16 economists surveyed expected RBNZ to stand pat this week. 14 economists expected RBNZ to hold throughout 2018. 8 forecasts RBNZ to hike by the end of Q3 2019.

            Sluggish inflation is a key factor giving RBNZ room for not acting. CPI slowed deeply to 1.1% yoy in Q1, sitting near the lower end of the target band.

            RBNZ Governor Adrian Orr also said after the release that “very benign inflation going forward without doubt, as we’ve forecast.”

            He added that “what really matters is the confidence and expectation and belief that we are aiming for that midpoint of 2 percent all of the time.” And he pledged that “we are doggedly determined to aim for two percent, but the accuracy around…that is very limited.”

             

            CAD/JPY and AUD/JPY resume corrective decline

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              ActionForex.com
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              Following the pullback in US stocks overnight, Yen crosses are trading generally lower. In particular, CAD/JPY resumed the decline from 93.00 by breaking through 90.40 temporary low. Judging from the development in Yen pairs elsewhere, there is prospect of deeper decline even if such fall is still a corrective more.

              For now, further decline is expected in CAD/JPY as long as 91.58 minor resistance holds. 38.2% retracement of 84.65 to 93.00 at 89.81 might provide some initial support. But firm break there will bring deeper fall to 61.8% retracement at 87.83.

              Development in AUD/JPY is slightly more bearish, as 55 day EMA and 38.2% retracement of 77.88 to 86.24 at 83.04 are both taken out. Fall from 86.24 has just resumed. Deeper decline is expected as long as 84.14 resistance holds, for 61.8% retracement at 81.07 and possibly below.

              AUD/CAD recovering, head and shoulder in the making?

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                ActionForex.com
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                AUD/CAD is one of the top movers today, riding on Aussie’s broad based recovery. Immediate focus is on 55 4H EMA (now at 0.8191). Sustained trading above there will indicate that the pull back from 0.9054 has completed at 0.8859, and bring stronger rise back to 0.9054 resistance.

                While it’s still a bit early, it’s worth to point out that AUD/CAD could be forming a head and shoulder bottom pattern (ls: 0.8781; h: 0.8741; rs: 0.8859). Decisive break of 0.9054 cluster resistance (38.2% retracement of 0.9545 to 0.8741 at 0.9048) will be a strong signal of bullish reversal. That would set the stage for further rise to 61.8% retracement at 0.9238 next.

                Canada unemployment dropped to 5.4%, lowest since 1976, USD/CAD dives

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                  ActionForex.com
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                  Canada employment grew 27.7k in May, well above expectation of -5.5k contraction. Unemployment dropped to 5.4%, well below expectation of 5.7%. That’s the lowest level since record began in 1976.

                  USD/CAD dives sharply after the release and breaks medium term channel support decisively. The development now suggests medium term bearish reversal and focus will be on 1.3068 support for confirmation.

                  North Korea warns US of nuclear-to-nuclear showdown

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                    ActionForex.com
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                    Right now, whether the scheduled meeting between North Korean leader Kim Jong-un and Trump on June 12 in Singapore remains uncertain. North Korean Vice Foreign Minister Choe Son-Hui issued a strong statement today in response to US Vice President Mike Pence’s recent comments. Choe slammed Pence’s unbridled and impudent remarks” that threatens if “if Kim Jong-un doesn’t make a deal”, North Korea could end up like Libya.

                    Choe added that “we will neither beg the US for dialogue nor take the trouble to persuade them if they do not want to sit together with us.” And she warned, “whether the US will meet us at a meeting room or encounter us at nuclear-to-nuclear showdown is entirely dependent upon the decision … of the US.”

                    She went further and said “we can also make the US taste an appalling tragedy it has neither experienced nor even imagined up to now.” And, “as a person involved in the US affairs, I cannot suppress my surprise at such ignorant and stupid remarks gushing out from the mouth of the US vice-president,”

                    Earlier on Wednesday, Trump said “it could very well happen. Whatever it is, we’ll know next week about Singapore. And if we go, I think it will be a great thing for North Korea.”

                    North Korea infuriated by Bolton, threatens to cancel Trump-Kim summit

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                      ActionForex.com
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                      North Korea threatened to cancel Trump-Kim summit after they’re infuriated by comments from Trump’s national security adviser John Bolton that North Korea could follow a Libyan model of nuclear disarmament. The meeting is scheduled to be on June 12.

                      North Korea’s vice-foreign minister Kim Kye-gwan used strong words in a statement carried by the state news agency KCNA. He condemned that Bolton’s suggestion was “not an expression of intention to address the issue through dialogue”. And, “it is essentially a manifestation of awfully sinister move to impose on our dignified state the destiny of Libya or Iraq which had been collapsed due to yielding the whole of their countries to big powers.”

                      Kim went further and warned that if the US “corners us and unilaterally demands we give up nuclear weapons we will no longer have an interest in talks and will have to reconsider whether we will accept the upcoming DPRK-US summit”. And, “if President Trump follows in the footsteps of his predecessors, he will be recorded as more tragic and unsuccessful president than his predecessors, far from his initial ambition to make unprecedented success.”

                      WTI oil dips below 70 as Omicron spreads quickly

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                        ActionForex.com
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                        Oil prices dip today on concern that the rapid spread of Omicron would push more countries back into restrictions, and hurt demand at least in the near future. That’s also in-line with overall risk-off sentiment in the markets.

                        WTI’s recovery from 62.90 was choked off after hitting 73.66 and it’s back below 69. For now, unless there will be any disastrous development, we’re seeing price actions from 85.92 high as development into a sideway consolidation pattern, in form a a three-wave flat, or a five-wave triangle. The range should be set inside 61.90/85.92.

                        In other words, we’re not expecting a break of 61.90 support even in case of further selloff. Break of 73.66 resistance will extend the rebound from 62.90. And even in this case, we’re not expecting a break of 85.92 high too.

                        Dollar rebounds as Fed will discuss wrapping up tapering sooner

                          By
                          ActionForex.com
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                          Dollar rebounds strongly after surprising hawkish comments from Fed Chair Jerome Powell. In a hearing with the Senate Banking Committee, he said, “At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner.’ He added, “I expect that we will discuss that at our upcoming meeting.”

                          “The word transitory has different meanings for different people. To many it carries a sense of short-lived. We tend to use it to mean that it won’t leave a permanent mark in the form of higher inflation,” Powell said. “I think it’s probably a good time to retire that word and try to explain more clearly what we mean.”

                          EUR/USD tumbles sharply on the news, after breaching 1.1373 resistance very briefly. Attention is now on whether selling would gather momentum to push it through 1.1182 to resume the larger down trend from 1.2348.

                          China PMI composite dropped to 50.1, triple pressures of contracting demand, supply shocks and weakening expectations

                            By
                            ActionForex.com
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                            China PMI Services dropped from 53.1 to 51.4 in January, above expectation of 50.5. PMI Composite dropped from 53.0 to 50.1.

                            Wang Zhe, Senior Economist at Caixin Insight Group said: “To sum up, both the manufacturing and services sectors weakened in January. Activity in the manufacturing sector shrank. Domestic demand was subdued, and overseas demand largely declined. The labor market remained under pressure. The gauges for input and output prices were stable, while the high prices of some raw materials remained a concern. The level of optimism among service enterprises declined.

                            “In December and January, the resurgence of Covid-19 in several regions such as Xi’an and Beijing forced local governments to tighten epidemic control measures, which restricted production, transportation and sales of goods. It has become more evident that China’s economy is straining under the triple pressures of contracting demand, supply shocks and weakening expectations.”

                            Full release here.

                            Australian employment grew 0.5k, unemployment rate unchanged at 5.2%

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                              ActionForex.com
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                              Australia employment grew just 0.5k in June, below expectation of 9.1k. Full-time jobs increased 21.1k while part-time jobs decreased -20.6k. Unemployment rate was unchanged at 5.2% with participation rate steady at 66.0%.

                              ABS Chief Economist Bruce Hockman said, “Australia’s participation rate was at 66 per cent in June 2019, which means nearly two of every three people are currently participating in the labour market. The participation rate for 15 to 64 year olds was even higher and closer to four out of every five people.”

                              Full release here.

                              AUD/USD recovers strongly today despite the job data miss. With 0.6983 minor support intact, further rise is mildly in favor. Break of 0.7047 resistance will resume the rebound from 0.6831 to 61.8% retracement of 0.7295 to 0.6831 at 0.7118.

                              UK GDP grew 0.5% mom in Oct, driven by services

                                By
                                ActionForex.com
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                                UK GDP grew 0.5% mom in October, better than expectation of 0.4% mom. Services grew 0.6% mom and was the main driver of growth in GDP. Production was broadly flat for the month. Construction grew 0.8% mom. GDP is estimated to be 0.4% above is pre-coronavirus levels in February 2020.

                                In the three months to October, compared with the three months to July, GDP contracted -0.3%. Services was down -0.1%. Production dropped -1.7%. Construction rose 1.1%.

                                Full GDP released here.

                                Also released, industrial production came in at 0.0% mom, -2.4% yoy, versus expectation of -0.3% mom, -4.2% yoy. Manufacturing was at 0.7% mom, -4.6% yoy, versus expectation of -0.1% mom, -6.3% yoy. Goods trade deficit narrowed to GBP -14.5B, versus expectation of GBP -15.0B.

                                Eurozone PMI services finalized at 47.9, Q3 GDP to contract -0.1%

                                  By
                                  ActionForex.com
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                                  Eurozone is grappling with weakening economic indicators, as PMI Services for August (final) slipped to a 30-month low of 47.9, down from July’s reading of 50.9. Composite PMI, which combines services and manufacturing data, also sank to a 33-month low of 46.7, down from July’s 48.6.

                                  The fall in PMI scores was particularly evident in Germany (44.6) and France (46.0), which reported 39-month and 33-month lows, respectively. On the other hand, Ireland managed to score a 4-month high of 52.6, showing some resilience amid the general downturn.

                                  Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, provided a sobering analysis. “The disappointing numbers contributed to a downward revision of our GDP nowcast, which stands now at -0.1% for the third quarter,” he said. According to de la Rubia, the services sector, a stabilizer for Eurozone economy, has turned into a “drag”.

                                  Furthermore, he noted that input price increases have surprisingly accelerated, questioning the outlook for rapidly decreasing inflation. Employers are also becoming cautious about expanding their workforces, hinting that job cuts could be on the horizon.

                                  Full Eurozone PMI services release here.

                                  BoE to stand pat and discuss negative rates, some previews

                                    By
                                    ActionForex.com
                                    -

                                    BoE is widely expected to keep monetary policy unchanged today, with Bank rate held at 0.1% and asset purchase target at GBP 895B. New economic projections will also be released. But the major focus will be on rhetorics regarding negative interest rates.

                                    Governor Andrew Bailey has recently noted that it might be premature to implement negative rates. For instance he suggested that there are “lots of issues” with negative rates and policymakers have “not actually discussed” the issue yet. Chief Economist Andy Haldane expected the economy to recover at “a rate of knots” from Q2. Brexit risks were also cleared. The hurdle for the divided committee to reach a consensus on using negative rates seem too high.

                                    Here are some BoE previews:

                                    Sterling’s rally has been losing much momentum ahead of BoE rate decision, even against the weak Euro. We’ll see if more sell-on-news movement would happen after BoE affirms its stance on negative rates. In particular, break of 0.8917 minor resistance in EUR/GBP confirm short term bottoming and bring stronger rebound, probably dragging Sterling down elsewhere too.

                                    Bundesbank report warns of German economy’s vulnerability to China’s economic woes

                                      By
                                      ActionForex.com
                                      -

                                      In its latest monthly report, Bundesbank issued a cautionary message about China’s current economic struggles and their potential impact on Germany. The report notes that China is grappling with “significant economic problems,” and the relationship between China and Western industrial nations has “noticeably deteriorated recently.” Such geopolitical risks, if they materialize, could have severe repercussions for the German economy.

                                      The Bundesbank essay posits that “an economic crisis in China of the kind that has occurred in other countries in the past following a correction of excessive credit growth would probably be bearable for the German economy.” However, the impact would not be negligible, with projections indicating that Germany’s real GDP could be -0.7% lower in the first year of a potential crisis in China, and then -1% in the second year.

                                      The report also highlights a more severe scenario: “However, an abrupt decoupling, for example as a result of a geopolitical crisis, would have a significantly greater impact on German industry in particular.” In such an event, German companies with direct involvement in China could face considerable losses in sales and profit. Industries like automotive, mechanical engineering, electronics, and electrical engineering are particularly reliant on Chinese demand.

                                      Moreover, Bundesbank emphasizes the broader risks associated with the close economic ties between Germany and China: “the close real economic ties between Germany and China also pose considerable risks for the German financial system.”

                                       

                                      Full Bundesbank release here.

                                      US coronavirus cases surged pass China, DOW snapped strongest 3-day gains since 1931

                                        By
                                        ActionForex.com
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                                        Strong rebound in US stocks continued overnight with DOW wrapped up its strongest three-day rally since 1931. At the same time number of confirmed coronavirus cases in the US surged through China, and Italy, as the pandemic worsens. Total infections now reached 85,594, versus 81,340 as “reported” in China and 80,589 in Italy. Coronavirus deaths in the US hit 1,300, relatively low comparing to Italy’s 8,215, Spain’s 4,365 and China’s “reported” death of 3,292.

                                        New York state is hardest hit with 38,977 infections and 466 deaths. New Jersey (6,876), California (4,044), Washington(3,207) and Michigan (2,856) are quite far behind. New York Governor Andrew Cuomo warned, “any scenario that is realistic will overwhelm the capacity of the healthcare system.” The projected shortfall in ventilators is “astronomical” according to Cuomo.

                                        DOW rose 1351.62 pts or 6.38% to close at 22552.17. Corrective target of 38.2% retracement of 29568.57 to 18213.65 at 22551.22 is met already. Upside momentum is starting to diminish as seen in hourly MACD. But there is no sign of topping yet. Thus, further rally could still be seen into early part of next week.

                                        However, we’d expect the correction to complete anywhere between 22551 and 61.8% retracement at 25230.99. Break of 55 hour MACD would likely indicate completion of the rebound and bring retest of 18213.65 low.

                                        Fed hikes federal funds rate to 1.75-2.00%, full statement

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                                          ActionForex.com
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                                          FOMC raised federal funds rate to 1.75-2.00% as widely expected. Statement below.

                                          Federal Reserve Issues FOMC Statement

                                          Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

                                          Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

                                          In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

                                          In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

                                          Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.

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