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45 trade groups warn Trump: Don’t do something commercially meaningless and penalize Americans

    By
    ActionForex.com
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    45 trade groups wrote an open letter to Trump trying to stop him from starting a trade war with China. In a joint open letter: –

    The group urged Trump’s administration to take “measured, commercially meaningful actions consistent with international obligations” and warned Trump not to “penalize the American consumer and jeopardize recent gains in American competitiveness.” It’s clear to the group of businesses what Trump is trying to do regarding tariff on China is not commercially meaningful.

    The group also warned of the “chain reaction of negative consequences” of trade war with China by “provoking” retaliation. And Trump should not respond to unfair Chinese practices and policies by measures that will “harm U.S. companies, workers, farmers, ranchers, consumers, and investors.”

    In particular, it’s listed out in the letter that

    • Tariffs on consumer goods would raise price for consumers and business and “negating gains for American workers from U.S. tax reform.” T
    • Tariffs will also harm American companies that “sell component pieces of final products exported from China.”
    • Also, tariffs would harm community services provides including “health care, education, and emergency responders.
    • Tariffs on product components would “disrupting existing supply chains” and have “negative impact on American jobs”.
    • Tariffs will also depress financial markets.

    Additionally, the group warned that “imposition of unilateral tariffs by the Administration would only serve to split the United States from its allies”.

    Here is a copy of the letter.

    And below is the list of trade groups:

    1. Agriculture Transportation Coalition
    2. Airforwarders Association
    3. Allied for Startups
    4. American Apparel & Footwear Association
    5. AutoCare Association
    6. CAWA Auto Parts
    7. Coalition of New England Companies for Trade
    8. Columbia River Customs & Forwarders
    9. CompTIA
    10. Computer and Communications Industry Association
    11. Consumer Technology Association (CTA)
    12. Customs Brokers and Forwarders Association of Northern California
    13. Developers Alliance
    14. Fashion Accessory Shippers (FASA)
    15. Gemini Shippers Association
    16. Grocery Manufacturers Association
    17. Home Furnishings Association
    18. Information Technology Industry Council (ITI)
    19. International Wood Products Association
    20. Internet Association
    21. Los Angeles Customs Brokers
    22. National Customs Brokers and Forwarders Association of America
    23. National Foreign Trade Council
    24. National Retail Federation
    25. NY/NJ Forwarders and Brokers Association
    26. North American Meat Institute
    27. Outdoor Industry Association
    28. Pacific Northwest Asia Shippers Association
    29. Promotional Products Association International
    30. Retail Industry Leaders Association (RILA)
    31. Snowsports Industries America
    32. Specialty Crop Trade Council
    33. Sports and Fitness Industry
    34. Tea Association of the U.S.A., Inc.
    35. TechNet
    36. Telecommunications Industry Association (TIA)
    37. The APP Association (ACT)
    38. The Pacific Coast Council of Customs Brokers and Freight Forwarders
    39. The Toy Association
    40. Travel Goods Association (TGA)
    41. U.S. Chamber of Commerce
    42. U.S. Council for International Business
    43. U.S. Fashion Industry Association
    44. U.S. Hide, Skin, and Leather Association
    45. Wine and Spirits Shippers Association

    ECB Draghi: Policy to remain patient, persistent and prudent

      By
      ActionForex.com
      -

      ECB President Mario Draghi delivers his speech on “Monetary policy in the euro area” at the ECB Forum on Central Banking today.

      He opened by saying that “the euro area’s economy continues on a growth path and inflation is gradually returning towards our objective.” But recent data created “questions about the durability of the growth outlook”. And, the financial crisis presented policy makers with “new issues and fresh challenges in understanding the wage- and price-setting process.” For now, “ample degree of monetary accommodation” will help lifting inflation towards target. And that will be “maintained even after a gradual winding-down of our net asset purchases.” Draghi emphasized that “this requires monetary policy in the euro area to remain patient, persistent and prudent.”

      Draghi reiterated the decisions made last week on ending the asset purchase program in December, reinvesting the principle payments afterwards, and, keep interest rates unchanged through the summer of 2019. He added that “this enhanced forward guidance clearly signals that we will remain patient in determining the timing of the first rate rise and will take a gradual approach to adjusting policy thereafter.

      Full speech here.

      Euro selloff accelerates as German 10 year bund yield breaks 0.4%

        By
        ActionForex.com
        -

        Euro’s selloff accelerates further as German 10 year bund yield breaks 0.4 handle, reaching as low as 0.389 so far.

        Chart snapshot from MarketWatch

        EUR/JPY reaches as low as 127.14 and moves further away from medium term channel support. Based on current momentum, there now a realistic threat of breaking 38.2% retracement of 109.03 to 137.49 at 126.61. That would carry rather bearish medium term implication. We’ll see how it goes.

        BoJ’s Ueda sees multiple options for target interest rates post-negative rate era

          By
          ActionForex.com
          -

          BoJ Governor Kazuo Ueda noted there are various options for its interest rate targets once it transitions away from negative short-term borrowing costs. However, he emphasized that no decision has been made yet regarding this shift. Ueda reiterated BoJ’s commitment to continuing its monetary easing under Yield Curve Control to support economic activity and foster a cycle of wage growth.

          Speaking to the parliament, Governor Ueda noted the economy is to continue recovering moderately. But there is “extremely high” uncertainty surrounding the outlook. He emphasized, “We have not yet reached a situation in which we can achieve [our] price target sustainably and stably and with sufficient certainty.”

          Regarding shifts in BoJ’s monetary policy, Ueda outlined that once the central bank moves away from its negative interest rate policy, it could consider various options for its interest rate targets. These include continuing to target the interest rate applied to reserves that financial institutions hold with the central bank or reverting to a policy that focuses on the overnight call rate. He clarified, “We have not made a decision yet on which interest rate to target once we end our negative interest rate policy.”

           

          Trump: Rejected EU offer to scrap auto tariffs, said EU is as bad as China

            By
            ActionForex.com
            -

            Trump rejected EU’s offer to scrap auto tariffs on cars if US does the same. He said “it’s not good enough” and added that “Their consumer habits are to buy their cars, not to buy our cars.” He also added that EU is “almost as bad as China, just smaller.”

            European Trade Commissioner Cecilia Malmstrom told the European parliament yesterday that “we are willing to bring down even our car tariffs down to zero … if the U.S. does the same.” Nonetheless Malmstrom also expressed that “we do not agree with their methods of imposing massively billions of tariffs on China, as they have also done with Turkey. We do not share U.S. view that trade wars are good and easy to win.”

            If Trump is going to, as his supporters believe, tear down tariffs and trade barriers, EU’s offer is certainly a step in the right direction. Now it seems Trump is simply using something else as an excuse for not doing it.

            UK Gfk consumer confidence unchanged at -34, no guarantee the fall has ended

              By
              ActionForex.com
              -

              UK Gfk Consumer Confidence was unchanged at -34 in April, hovering just 5 pts above historical low of -39 seen in July 2008.

              Joe Staton, Client Strategy Director says: “Consumer Confidence has stayed steady at the minus -34 points recorded in our first COVID-19 flash of April 6th. It is too early to say whether this has now stabilised after weeks of adjustment to the reality of lockdown life, or whether further falls are to come…

              “Overall, there is no guarantee yet that the fall in consumer confidence has ended, and we are only five points away from the record -39 low seen in July 2008.”

              Full release here.

              US jobless claims dropped to lowest since 1973, Canada GDP missed, USDCAD yawns

                By
                ActionForex.com
                -

                Canadian data are generally disappointingly. GDP contracted -0.1% mom in January versus expectation of 0.1% mom. IPPI rose 0.1% mom in February versus expectation of 0.4% mom. RMPI dropped -0.3% mom versus expectation of 2.8% mom rise.

                US personal income rose 0.5% in February, spending rose 0.2% and both met expectations. Headline CPI accelerated to 1.8% yoy while core PCE also accelerated to 1.6% yoy.

                Initial jobless claims dropped -12k to 215k in the weekended March 254. That’s notably below expectation of 231k. That’s also the lowest level since January 1973.

                Four week moving average of initial claims dropped 0.5k to 224.5k.

                Continuing claims rose 35k to 1.87m in the weekended March 17.

                There’s a bit of spikes on both direction after the releases. But that’s it as USD/CAD quickly settle back into today’s tight range.

                Australian consumer sentiment ticks up to 82, but interest rates concerns linger

                  By
                  ActionForex.com
                  -

                  Australia’s Westpac Consumer Sentiment Index showed a positive move, climbing 2.9% from 79.7 to 82 in October. Despite the uptick, a score of 82 still paints a subdued picture, correlating with a decline in per capita spending.

                  One of the more pressing concerns for consumers remains the prospective upward movement in mortgage interest rates. The post-October RBA decision survey indicated that 63% of consumers anticipate mortgage interest rates to climb in the forthcoming year. This figure marks a substantial rise from 52.3% in September. N

                  Notably, however, these numbers don’t match the heightened concerns recorded when RBA was in an active rate-hiking mode, where readings ranged between 70-80%. Meanwhile, optimism for a rate cut next year has dwindled; only 7% of consumers now hold that expectation, down from 15% the previous month.

                  The upcoming November 7 meeting of RBA is earmarked as a significant event, with a revised set of forecasts to accompany the Statement on Monetary Policy.

                  Westpac shared their viewpoint on the evolving situation: “While the RBA may need to revise its near-term forecasts for headline inflation up, on its own this will probably not be enough to trigger a further rate rise.”

                  The September quarter CPI, slated for release on October 25, is now in sharp focus. Westpac added, “If, however, there are further surprises in the September quarter CPI, due October 25, the next few meetings could be a little more live than the one in October.”

                  Full Australia Westpac Consumer Sentiment release here.

                  Eurozone economic sentiment crashed to 67, but stays above 2009 low

                    By
                    ActionForex.com
                    -

                    Economic sentiment “crashed” in both Eurozone and EU in April. Eurozone Economic Sentiment Indicator dropped -27.2 pts to 67.0. EU ESI dropped -28.8 pts to 65.8. These were the strongest decline in the ESI on record since 1985. The indicators are now far below their long run averages of 100 and very close to the lowest levels registered during the Great Recession in 2009.

                    Industrial confidence dropped -19.2 to -30.4, steepest monthly fall on record, but remained above 2009 low. Services confidence dropped -32.7 pts to record low of -35.0. Consumer confidence dropped -11.1 to -22.7> retail trade confidence dropped -19.7 to -28.3. Employment expectations dropped -30.1 to 63.7.

                    Amongst the largest euro-area economies, the ESI crashed in the Netherlands(-32.6), Spain (-26.0), Germany (-19.9), and France (-16.3),2 while no data could be collected in Italy due to the strict confinement measures.

                    Full release here.

                    BoE Ramsden: Significant headroom to do more QE

                      By
                      ActionForex.com
                      -

                      Deputy Governor Dave Ramsden said in a the Times interview that the BoE ” still got significant headroom to do more QE if we saw a much weaker recovery”. The pace of QE could accelerate is there are signs of market “dysfunction.

                      Ramsden is “confident” that there wouldn’t be more quarterly GDP contractions ahead. But “a key outcome is what happens to the labour market. Some companies are going to go under. Some jobs are going to be lost.”

                      Eurozone economic sentiment dropped to 115.3 in Dec, EU down to 114.5

                        By
                        ActionForex.com
                        -

                        Eurozone Economic Sentiment Indicator dropped -2.3 pts to 115.3 in December. Employment Expectations Indicator dropped -1.6 pts to 114.0. Industry confidence rose from 14.3 to 14.9. Services confidence dropped sharply from 18.3 to 11.2. Consumer confidence dropped from -6.8 to -8.3. Retail trade confidence dropped from 3.7 to 1.1. Construction confidence rose from 9.0 to 10.2.

                        EU ESI dropped -2.1 pts to 114.5. EEI dropped -1.4 pts to 114.2. Amongst the largest EU economies, the ESI rose only in Poland (+0.6). By contrast, confidence worsened in the Netherlands (-4.1), Germany (-2.8), France (-2.1), Italy (-1.6) and Spain (-0.8).

                        Full release here.

                        Germany economy ministry: H2 recovery will be sluggish and take longer

                          By
                          ActionForex.com
                          -

                          Germany’s Economy Ministry said in the monthly report that the economy is in a “deep recession” due to coronavirus pandemic. The “low point” was already reached with the tough shutdown measures in April.

                          Overall economic performance will “decline much more strongly on average” in Q2, comparing to Q1. Recovery in H2 and afterwards will “be  sluggish and take longer”.

                          Full report here.

                          Eurozone economic sentiment had record monthly decline, before most coronavirus containment measures

                            By
                            ActionForex.com
                            -

                            Eurozone Economic Sentiment Indicator dropped to 94.5 in March, down from 103.4. Industrial Confidence dropped form -6.2 to -10.8. Services Confidence dropped from 11.1 to -2.2. Consumer Confidence dropped from -6.6 to -11.6. Retail Trade Confidence dropped from -0.2 to -8.3. Even Construction Confidence dropped from 5.4. to 2.7.

                            The strongest monthly decline in the ESI on record (since 1985) resulted from “slumping confidence among consumers and in all the business sectors”. The collapse was “particularly strong in services and retail trade”. Amongst the largest euro-area economies, the ESI plummeted in Italy (-17.6) and Germany (-9.8), and fell significantly also in France (-4.9), the Netherlands (-4.0), and Spain (-3.4). Importantly, in many countries the vast majority of survey responses were collected before strict containment measures were enacted to combat the spread of the Corona virus.

                            Full release here.

                            US Empire State Manufacturing index dropped to 3.7

                              By
                              ActionForex.com
                              -

                              US Empire State Manufacturing index dropped to 3.7 in March, down from 8.8 and missed expectation of 10. It’s also the third consecutive month of sub-10 reading, suggesting “growth has remained quite a bit slower so far this year than it was for most of 2018.

                              Looking at some details, new orders index dropped -5pts to 3.0, indicating orders grew at a slower pace. Shipments dropped -3 pts to 7.7, indicating modest shipments growth. Employment index rose to 13.8. But average work week turned negative for the firs time since 2016, at -3.4.

                              Full release here.

                              RBA tapers but extends QE, Delta to delay but not derail recovery

                                By
                                ActionForex.com
                                -

                                RBA kept with its tapering plan and announced to lower purchase of government securities at AUD 7B a week. But the program is extended until at least mid-February 2022, from mid November. At the same time, cash target rate is held at 0.10%. Target for April 2024 Australian government bond yield was also kept at 0.10%.

                                The central bank said the economy has been “interrupted by the Delta outbreak and the associated restrictions on activity”. GDP is expected to “decline materially” in Q3 with unemployment rate moving high over coming months. But the setback to economic expansion is “expected to be only temporary”. The Delta outbreak is expected to “delay, but not derail” the recovery. Economy will be growing again in Q4 and back to pre-Delta path in H2 of next year.

                                The decision to “extend” the asset purchases “reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak”. RBA pledged o continue to review on the program. Also, it maintained that the condition for rate hike “will not be met before 2024”.

                                Full statement here.

                                NIESR expects -1.5% fall in UK GDP in Q4

                                  By
                                  ActionForex.com
                                  -

                                  NIESR estimated that UK economy activity fell by -9.3%, a smaller drop than during the full lockdown in Spring. As for Q4, there would be a -1.5% decline in activity, following 9.7% mom growth in December. They now expect GDP at year end to be some -8.5% lower than it was at the end of 2019.

                                  “Today’s ONS data show that the fourth quarter got off to a ponderous start even before the second lockdown in England was imposed. Survey data suggest that although the economic impact of the second lockdown in November was smaller than the first, it does seem more likely than not that the final quarter of the year will show little or no overall growth in GDP with the recovery shuddering to a halt. While the rollout of the vaccine offers some positive momentum, the final act of Brexit is likely to offset that in the early months of 2021.” Rory Macqueen Principal Economist – Macroeconomic Modelling and Forecasting

                                  Full release here.

                                  ECB officials warned of Japanese style vivious cycle of declining inflation expectations

                                    By
                                    ActionForex.com
                                    -

                                    ECB Vice President Luis de Guindos urged that Eurozone shouldn’t for Japan’s footstep that led to persistently low inflation. He said “we have learned from the experience in Japan that it is possible to get caught in a vicious cycle of declining inflation expectations, falling inflation and a binding lower bound on nominal interest rates from which it is difficult to escape.”

                                    Finnish central bank chief Olli Rehn also urged to “take care to avoid the sort of harmful equilibrium that arises from prolonged low inflation and zero interest rates, as this would significantly constrain the capacity for monetary policy to balance the economic cycle.” And, “this would bring about a lengthy shortfall in economic growth with respect to its potential and hinder efforts to boost employment.”

                                    At the same even in Madrid, de Guindos also warned that markets could be under pricing risks of no-deal Brexit. He said “We have not gauged so far the impact that Brexit is having (…) I think we are really underestimating the impact of the present uncertainty and that’s why I have fears, concerns that the impact of a disorderly Brexit would be much higher than the one that they (markets) are discounting now.”

                                    ISM manufacturing dropped to 59.3, but price surged as Trump’s tariffs triggered panic buying

                                      By
                                      ActionForex.com
                                      -

                                      ISM manufacturing index rose dropped to 59.3 in March, down from 60.8 and was slightly below expectation of 60.0. Prices paid component surged to 78.1, up from 74.2, beat expectation of 72.5. Employment component dropped to 57.3, down from 59.7.

                                      Overall, despite slight deterioration in the headline index and employment component, the set of data remained solid. However, there were some concerns expressed regarding the newly announced tariffs. As noted in the “What respondents are saying section…” section of the release:

                                      • “Much concern in the industry regarding the steel and aluminum tariffs recently [imposed]. This is causing panic buying, driving the near-term prices higher and [leading to] inventory shortages for non-contract customers.” (Machinery)
                                      • “New tariffs are causing concern across the supply chain. Full impact will take a few weeks to reveal itself.” (Miscellaneous Manufacturing)
                                      • “Significant price increases in the steel commodity due to 232 [the tariffs]. The price increases will begin to impact our company’s performance.” (Primary Metals)

                                      The release itself also noted that “the Prices Index registered 78.1 percent in March, a 3.9 percentage point increase from the February reading of 74.2 percent, indicating higher raw materials prices for the 25th consecutive month.”

                                      This could be the reason why dollar is trying to have a positive response to the release while stocks extends initial weakness.

                                      Also released in US session, US construction spending rose 0.1% mom in February. Manufacturing PMI was revised down to 55.6 in March. Canada manufacturing PMI rose 0.1 to 55.7 in March.

                                      EUR/USD recovered earlier after drawing support form 1.2283. But such recovery lost momentum after hitting 1.2344. But so far, there is no follow through selling on the dip from 1.2344 yet. Hourly chart suggests that the fall from 1.2475 is going to resume after finishing the recovery from 1.2283. But we’d point to 1.2285 as an important near term support. Hence, it has to be firmly broken to confirm underlying momentum.

                                      UK GDP shrank record -20.4% in Apr, virtually all areas hit

                                        By
                                        ActionForex.com
                                        -

                                        UK GDP contracted -20.4% mom in April, even worse than expectation of -18.7% mom. That’s the worst level on record. Index of services dropped -19.0% mom. Index of production dropped -20.3% mom. Manufacturing dropped -24.3% mom. Construction dropped -40.1% mom. Agriculture dropped -5.5% mom.

                                        In the rolling three months to April, GDP dropped -10.4%. Index of services dropped -0.90%. Index of production dropped -0.5%. Manufacturing dropped -10.5%. Construction dropped -18.2%. Agriculture dropped -2.1%.

                                        Jonathan Athow, Deputy National Statistician for Economic Statistics, said: “April’s fall in GDP is the biggest the UK has ever seen, more than three times larger than last month and almost ten times larger than the steepest pre-covid-19 fall. In April the economy was around 25% smaller than in February. Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall. Manufacturing and construction also saw significant falls, with manufacture of cars and housebuilding particularly badly affected. The UK’s trade with the rest of the world was also badly affected by the pandemic, with large falls in both the import and export of cars, fuels, works of art and clothing.”

                                        Also from UK, industrial production dropped -20.3% mom, -24.4% yoy in April. Manufacturing production dropped -24.3% mom, -28.5% yoy. Goods trade deficit narrowed to GBP -7.5B in April.

                                        Into US session, Sterling tumbles as Brexit talks collapsed, Yen jumps on trade worries

                                          By
                                          ActionForex.com
                                          -

                                          Entering into US session, Sterling is clearly the weakest for today. Selloff in the Pound accelerates after Labour party formally declared collapse of Brexit talks with the government. No one knows what’s next for Brexit, and not even who’ll be leading the government after Prime Minister Theresa May’s Brexit deal is defeated again in June (highly likely). Canadian Dollar followed as the second weakest and then Australian Dollar.

                                          In addition to Brexit uncertainties, sentiments are weighed down by China’s hard stance on trade negotiation with the US. No further talk is scheduled for now and China seems uninterested to resume the talks. Tensions between US and China has turned from bad to worse after Trump’s double assault on Huawei. Chinese stocks closed below 2900 handle at 2882.30 today, down -2.48%. USD/CNH resumed recent rally and hit as high as 6.9448. Major European stocks are in red. German 10-year yield is back below -0.1 at -0.0117. DOW future is down -200 pts for the moment. Yen is currently the strongest one for today.

                                          In Europe, currently:

                                          • FTSE is down -0.55%, despite selloff in Sterling, which suggests FTSE is indeed rather weak.
                                          • DAX is down -1.22%.
                                          • CAC is down -0.76%.
                                          • German 10-year yield is down -0.0265 at -0.117.

                                          Earlier in Asia:

                                          • Nikkei rose 0.89%.
                                          • Hong Kong HSI dropped -1.16%.
                                          • China Shanghai SSE dropped -2.48%.
                                          • Singapore Strait Times dropped -0.77%.
                                          • Japan 10-year JGB yield rose 0.0047 to -0.055.
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