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Eurozone unemployment rate unchanged at 8.5%, lowest since December 2008

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    ActionForex.com
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    Eurozone (EA19) unemployment rate was unchanged at 8.5% in March, staying at the lowest level since December 2008.

    EU28 unemployment rate was unchanged at 7.1%, staying at lowest level since September 2008.

    Among the member states, Czech Republic (2.2%), Malta (3.3%) and Germany (3.4%) recorded lowest unemployment rate.

    Greece (20.6% in January 2018) and Spain (16.1%) recorded highest unemployment rate.

    Full release here

    China production, retail sales, investment all missed expectations

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      ActionForex.com
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      The batch of October economic data released from China today is way below expectations. Industrial production growth slowed to 4.7% yoy, below expectation of 5.5% yoy. Fixed asset investment slowed to 5.2% ytd yoy, below expectation of 5.4%. That’s also the worst January-October growth since record began in 1996. Retail sales grew 7.2% yoy, missed expectation of 7.8% yoy, matching the more than 16 year low hit in April.

      The chance of a recovery in growth momentum hinges on the results of the trade negotiations with US. Tariff rollbacks would be the key for the “easier” phase one deal. Without removing some of the imposed tariffs, in particular the September ones, the deal would be rather meaningless to the real Chinese economy. Of course, the biggest challenges come in the second phase of negotiations when core and fundamental issues, like subsidies to state-owned enterprises, would be addressed.

      The Hong Kong HSI drops sharply today in response to the poor Chinese data. It’s also following the steep selloff this week as unrest in the city escalates abruptly. Current development affirms our view that corrective rebound from 24899.93 has completed with three waves up to 27894.56. Deeper fall should be seen back to retest 24899.93 low next.

      Australia CPI jumped to 7.3% yoy in Q3, highest since 1990

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        ActionForex.com
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        Australia CPI rose 1.8% qoq in Q3, above expectation of 1.5% qoq. Annual rate accelerated from 6.1% yoy to 7.3% yoy, above expectation of 6.9% yoy. That’s the highest annual rise since 1990. Trimmed mean CPI, which excludes large price rises and falls, accelerated from 4.9% yoy to 6.1% yoy, highest since the data first published in 2003.

        For the quarter, the most significant contributors to the rise were new dwellings (+3.7%), gas (+10.9%) and furniture (+6.6%). Annually, new dwellings (+20.7%) and automotive fuel (+18.0%) were the most significant contributors.

        Full release here.

        ECB President Lagarde press conference live stream

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          Full introductory statement here.

          UK retail sales dropped -0.8%, ex-fuel sales dropped -0.6%

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            ActionForex.com
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            UK retail sales contracted sharply in December. Headline sales dropped -0.8% mom versus expectation of 0.8% rise. Ex-fuel sales dropped -0.6% mom versus expectation of 0.5% rise. “Anecdotal evidence from a number of stores stated that goods did not sell as well as expected,” the ONS said.

            In the three months to December, both the amount spent and quantity bought decline, by -0.9% and -1.0% respectively. More importantly, from three-month to three-month respectively, sales hasn’t grown since October.

            Full release here.

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

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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.

              BoE Saunders to put high weight or job data to judge level of spare capacity

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                BoE MPC member Michael Saunders said the “elevated unemployment” is a sign that UK still has “too much spare capacity” and that would “push inflation below target”. That could cause a “slow, incomplete recovery”. Additionally, there are risks of “household caution overspending”, and “fears of unemployment”.

                Saunders added, “I will continue to put high weight on labour market data in judging whether spare capacity in the economy has been used up, and hence whether we are on track to return inflation sustainably to target in line with our remit.”

                Canada CPI accelerated ot 8.1% yoy, 7 of 9 major components up 3% or more

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                  ActionForex.com
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                  Canada CPI accelerated from 7.7% yoy to 8.1% yoy in June, missing expectation of 8.8% yoy. Excluding gasoline, CPI accelerated from 6.3% yoy to 6.5% yoy. That’s still the highest level since January 1983. Statistics Canada said the acceleration was mainly due to higher prices for gasoline, however, price increases remained broad-based with seven of eight major components rising by 3% or more.

                  CPI common rose from 4.5% yoy to 4.6% yoy, above expectation of 4.2% yoy. CPI median was unchanged at 4.9% yoy, below expectation of 5.1% yoy. CPI trimmed was unchanged at 5.5% yoy, below expectation of 5.6% yoy.

                  Full release here.

                  EU to agree on unified, strong position against US unilateralism

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                    According to a draft text seen by Reuters, EU finance ministers are going to agree on Friday a unified, strong position against US unilateralism.

                    The text noted that the EU “promotes international cooperation to modernize the WTO,” and “rejects WTO-inconsistent unilateral measures by others.”

                    It added, “in this respect, we regret the recent U.S. decisions to impose import tariffs, which leave the EU no choice but to react in an adequate, proportionate and reasonable manner in full respect of WTO rules.”

                    Eurozone PPI rose 1.1% om, 4.3% yoy in March, EU at 1.2% mom, 4.5% yoy

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                      ActionForex.com
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                      Eurozone PPI rose 1.1% mom, 4.3% yoy in March, above expectation of 0.9% mom, 4.0% yoy. For the month, Industrial producer prices increased by 2.0% in the energy sector, by 1.3% for intermediate goods, by 0.8% for non-durable consumer goods, by 0.3% for capital goods and by 0.2% for durable consumer goods. Prices in total industry excluding energy increased by 0.9%.

                      EU PPI rose 1.2% mom, 4.5% yoy. For the month, The highest increases in industrial producer prices were recorded in Ireland (+7.9%), Spain (+2.5%) and Portugal (+2.3%), while the only decrease was observed in Estonia (-1.6%).

                      Full release here.

                      Knot: ECB frontloads asset purchases as counterweight to yield rise

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                        ECB Governing Council member Klass Knot said that a “major part” of recent rise in Eurozone treasury yields was due to improvement growth in inflation outlook of the bloc. But still, the rest was an unwarranted response to the surge in US yields.

                        Hence, “we thought it would be wise to frontload part of our purchases, as a counterweight in the coming months”. Knot referred to ECB’s decision to significantly increase the pace of the pandemic emergency purchase program in Q2.

                        “But as soon as the improvements that we expect materialise, that reason of course will disappear,” he added.

                        ECB Knot: we only have one problem on our plate – inflation

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                          ECB governing council member Klaas Knot told Dutch radio BNR today, “We expect inflation to keep rising in the coming months, so that means we only have one problem on our plate: inflation. And that will mean that we will have to slow economic growth at least a bit to reduce inflation”.

                          Another Governing Council member Peter Kazimir said , “Inflation remains unacceptably high. The priority now is to vigorously continue the normalization of monetary policy.” While not commenting on the terminal rate of the current cycle, he said that ECB was still “quite far” from neutral rate.

                          Francois Villeroy de Galhau said, the central bank must be “orderly and determined” with rate hike. He expects inflation to stay high next year and come back to 2% target by 2024.

                          Businesses respond to UK PM May: Fundamentals have not changed and the stasis continues

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                            In response to May’s statement on Brexit yesterday, CBI director general Carolyn Fairbairn said ” the government’s move to consult more widely is welcome, as is the commitment to scrap the settled status charge for EU citizens”. But she criticized that “the fundamentals have not changed” as “Parliament remains in deadlock while the slope to a cliff edge steepens.” She urged that “government should accept that no-deal in March 2019 must be off the table”.

                            Allie Renison, head of Europe and trade policy at the Institute of Directors also complained “the stasis continues”. She also noted that “two-thirds of our members say that leaving without a deal would be negative for their businesses and nearly 80% made clear they don’t want to see it happen.” And, “we desperately need politicians to get serious about finding a way forward.”

                            BoE Bailey: Market’s rate cut outlook not unreasonable, yet unendorsed

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                              In a session with the Treasury Select Committee today, BoE Governor Andrew Bailey acknowledged that It’s “not unreasonable” for the market to think about reductions in interest rates this year

                              However, he was quick to qualify this by stating that MPC “do not endorse the market curve” forecasting such cuts, adding that “we are not making a prediction of when or by how much” BoE cuts interest rates.

                              Bailey pointed to “encouraging signs” in key economic indicators, but stressed the importance of “sustained progress” in tackling inflation.

                              Addressing recent data indicating the UK’s entry into a technical recession in the latter half of the previous year, Bailey downplayed its impact, describing the downturn as “very weak” and pointing to “distinct signs of an upturn.”

                              BoE Haldane: A decisive corner is about to be turned

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                                ActionForex.com
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                                In Daily Mail article, BoE chief economist Andy Haldane said the “rapid rollout of the vaccination programme” means “a decisive corner is about to be turned for the economy too, with enormous amounts of pent-up financial energy waiting to be released, like a coiled spring.”

                                “People are not just desperate to get their social lives back, but also to catch up on the social lives they have lost over the past 12 months,” he expected.

                                “So come the Spring, we can expect the UK economy to be firing on all three cylinders – households, companies and government,” he added. “A year from now annual growth could be in double-digits and inflation back on target.”

                                “As its energies are released, the recovery should be one to remember after a year to forget.”

                                Full article by Haldane here.

                                ECB Lane: Gradualism is an important consideration in thinking about normalization

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                                  ECB Chief Economist Philip Lane said in a speech, “in thinking about the normalization process, gradualism is an important consideration.” There are two basic reasons that make the timeline of completing normalization “intrinsically uncertain”.

                                  Firstly, ” the feedback loop between various steps in the policy normalisation process and inflation dynamics needs to be incorporated into the monetary policy decision process”.

                                  Secondly, “high uncertainty about the economic impact of the war in Ukraine, the energy shock and the post-pandemic recovery suggests that it is unlikely that the economy will quickly settle into a new steady-state equilibrium.”

                                  Lane reiterated that the calibration of policies will “will remain data-dependent and reflect our evolving assessment of the outlook”

                                  Full speech here.

                                  Fed Barkin: Economic numbers strong, but business sentiment weakened considerably

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                                    ActionForex.com
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                                    In a prepared speech, Richmond Fed President Thomas Barkin said ” as we enter 2019, I hear a lot of concern” regarding growth. Such concerns were driven by “trade, international economies or politics.” And some were “market driven, as volatility has increased and the yield curve has narrowed.”

                                    Also, he noted that “some companies are still feeling hungover from the Great Recession” and that’s a real issue. That is, “as the economy’s numbers look strong but business sentiment has weakened considerably.”

                                    Barking concluded that “the United States faces a slower growth trend that isn’t in any of our interests. Changing the slope is doable via initiatives to expand the workforce and boost productivity growth.”

                                    Full speech here.

                                    ECB stands pat, issues new forward guidance

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                                      ActionForex.com
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                                      ECB keeps interest rate unchanged today, with main refinancing rate, marginal lending facility rate, and deposit facility rate at 0.0)%, 0.25%, and -0.50% respectively. Net purchase under APP will continue at monthly pace of EUR 20B. The EUR 1850PEPP will continue “until at least the end of March 2022”. Purchase pace remain at “significantly higher pace” than during first months of the year.

                                      Also, ECB now expects key interest rates to ” remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term.” It added that this may also imply “a transitory period in which inflation is moderately above target.”

                                      Full statement here.

                                      DOW closed up 0.14% after 619pt swing, yield curve flattens further

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                                        ActionForex.com
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                                        US stocks staged a strong reversal overnight again. DOW initially dropped to as low as 23881.47 but closed up 0.14% t0 24423.26. The daily range was as large as 619 pts. S&P 500 dropped to 2583.23 but closed up 0.18% at 2637.72. NASDAQ was indeed the star performer, dipping to 6878.98 but closed up 0.74% at 7020.52. Tech stocks are seen as saving markets with Apple gained 0.66%, Qualcomm gained 2.23%, Facebook gained 3.22%.

                                        Treasury yield curve continued to flatten with 5-year yield up 0.13 to 2.709. 10-year yield closed up 0.006 at 2.856. 30-year yield dropped -0.014 to 3.129. Yield curve remains inverted between 3-year (2.738) and 5-year (2.709).

                                        In the currency markets, Sterling remains the weakest one for the week as UK Prime Minister Theresa May conceded and called off Tuesday’s Brexit parliamentary vote. Canadian Dollar is the second weakest. New Zealand Dollar, Australian Dollar and Swiss Franc are the strongest ones.

                                        For today, Dollar turns softer, but Canadian stays weak. Aussie is staying firm for now, while Yen is trying to rally.

                                        NZD/USD and NZD/JPY surges, RBNZ not too concerned with strong Kiwi

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                                          ActionForex.com
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                                          New Zealand Dollar surged after RBNZ rate decision, as the central bank didn’t sound particularly concerned about recent surge in exchange rate. “The gains from higher export commodity prices have been somewhat offset by the stronger New Zealand dollar” was the only thing that mentioned.

                                          In the key baseline scenario variables, RBNZ raised the trade weighed index of NZD significantly from 71.5 to 74.9, throughout the forecast horizon. CPI inflation variables were raised at the same time while GDP growth variables were kept largely unchanged. The table suggests that NZD’s strength hasn’t altered RBNZ’s outlook much, and the central bank should still be comfortable with it.

                                          NZD/USD surges to as high as 0.7382 so far today. Outlook will stay bullish as long a s0.7280 support holds. Current up trend from 0.5469 is on track to 61.8% projection of 0.6589 to 0.7314 from 0.7156 at 07604.

                                          NZD/JPY also extends recent rally and hits as high as 77.81 so far. Daily MACD suggests that it’s now in re-acceleration mode. Outlook will remain bullish as long as 76.77 support holds. Up trend from 59.49 should target 161.8% projection of 63.45 to 71.66 from 68.86 at 82.14 next.

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