Wed, Feb 19, 2020 @ 07:48 GMT

Swiss KOF dropped to 94.4, economy developing rather sluggishly

    Swiss KOF Economic Barometer dropped to 94.4 in May, down from 96.2 and missed expectation of 96.2. The reading dived further below its long-term average. KOF noted “Swiss economy is developing rather sluggishly.” And, majority of sets of indicators are tending downwards.

    The indicators for banking and insurance, consumption and foreign demand have developed negatively. The prospects for accommodation and food service activities and the other service providers have become gloomier. In the manufacturing sector, the outlook hardly changed compared to the previous month. For the construction sector, the outlook has improved.

    Full release here.

    - advertisement -

    BoE Ramsden: Most financial stability risks from no-deal Brexit mitigated

      BoE Deputy Governor Dave Ramsden said in case of a smooth Brexit with transition, the MPC expected UK growth to pick up, leading to excess demand and building domestic inflationary pressure. In such case, further monetary tightening is appropriate. Ramsden’s GDP growth expectation was “a little more pessimistic”. However, he also saw “downside risks to productivity, while he’s also “less optimistic on investment recovery”. Thus, his overall view on monetary policy was broadly in line with the MPC.

      Ramsden noted that the “biggest risk to the UK economy and UK financial stability, remains that of a Brexit outcome of no deal and no transition.” But he emphasized that “most risks to financial stability that could arise have been mitigated”, even though “a no deal, no transition Brexit could still be expected to bring significant market volatility, as well as economic instability.”

      Ramsden’s full speech here.

      - advertisement -

      WTI oil gaps down, targeting 50.64 key support

        WTI crude oil gaps down as the week starts and hits as low as 52.10 so far. Further fall is expected as long as 55.89 resistance holds. However, overall outlook is unchanged. Current decline from 65.38 is seen as the third leg of the consolidation pattern from 66.49. We’d expect strong support from 50.64, which is close to 61.8% retracement of 42.05 to 66.49 at 51.38, to bring rebound. Break of 55.89 will indicate short term bottoming. However, sustained break of 50.64 will invalidate our view and open up the case for a test on 42.05 low.

        - advertisement -

        WTI oil tumbles on surprised inventory build, heading to 57 fibonacci level

          WTI crude oil drops sharply today as crude inventory unexpectedly rose 4.74M barrels in the week ending May 17, versus expectation of -1.2M barrels decline. Current development suggests that recovery from 60.03 has completed at 63.90 already. And the fall from 66.49 might be ready to resume.

          Deeper decline should be seen to 60.03 first. Break will confirm this bearish case and target 100% projection of 66.49 to 60.03 from 63.90 at 57.44.

          Nevertheless, fall from 66.49 is seen as a corrective move so far. Downside should be contained by 38.2% retracement of 42.05 to 66.49 at 57.15 to bring rebound.

          - advertisement -

          ISM non-manufacturing jumped to 61.6, all time high since 2008

            ISM non-manufacturing composite rose to 61.6 in September, up from 58.5 and beat expectation of 58.3. That’s also an all-time high since inception of the composite index in 2008. Employment index jumped notably by 5.7 to 62.4. ISM also noted in the release that “17 non-manufacturing industries reported growth” and, “respondents remain positive about business conditions and the current and future economy.”

            Full release here.

            - advertisement -

            AUDUSD spikes lower after Australia CPI miss, but quickly recovered

              Australia CPI was unchanged at 1.9% yoy in Q1, below expectation of 2.0%. RBA trimmed mean CPI rose to 1.9% yoy, up from 1.8% yoy and beat expectation of 1.8% yoy. RBA weighted median CPI was unchanged at 2.0% yoy, beat expectation of 1.9% yoy.

              The Australian Bureau of Statistics noted in the  release that “while the annual CPI rose 1.9 per cent, most East Coast cities have continued to experience annual inflation above 2.0 per cent, due in part to the strength in prices related to Housing and Food. Softer economic conditions in Darwin and Perth have resulted in annual inflation remaining subdued at 1.1 and 0.9 per cent respectively.”

              AUD/USD spiked lower to 0.7576 after the release but quickly recovered. Firstly, the decline is a bit stretched after AUD/USD fell for three days. Secondly, the CPI data just affirmed the case that RBA is in no rush to raise interest rate. For now, AUD/USD is on track for 0.7500 key support level in near term.

              - advertisement -

              BoJ said to downgrade inflation forecast in upcoming July meeting

                The Nikkei Review reported earlier this week that BoJ will likely lower inflation forecast at the upcoming quarterly Outlook for Economic Activity and Prices. The new projections will be published after July 30-31 meeting.

                Back in April, BoJ projected inflation to hit 1.3% in fiscal 2018 and 1.8% for fiscal 2019. In the upcoming projections, BoJ could lower than to 1.0% in fiscal 2018 and 1.5% in fiscal 2019. That will bring the figures in-line with forecasters surveyed by Japan Center for Economic Research, which expected 0.94% inflation in fiscal 2018.

                BoJ scrapped its “timeline” of hitting 2% inflation target around fiscal 2019, back in the April statement. But it’s been clarified multiple times by BoJ communications that the “timeline” was merely a projection, not a target.

                - advertisement -

                Asian stocks tumble on concern of coronavirus outbreak in China

                  Asian stocks tumble broadly today on concern of an outbreak of a coronavirus in China, as well as other countries in the region. China’s National Health Commission already confirmed that the virus which causes a type of pneumonia, can pass from person-to-person. That couldn’t come at the worst time as massive number of people are expected to travel within China before Lunar New Year.

                  According to a report by London Imperial College’s MRC Centre for Global Infectious Disease Analysis, it’s estimated that there were already over 1700 cases in Wuhan city by January 12. Such estimate was not commented by the Chinese authorities yet. But there were already cases reported by Thailand, Japan and South Korea, involving people from from Wuhan or who recently visited the city.

                  The virus is believed to be in the same family of Severe Acute Respiratory Syndrome (SARS), which killed nearly 800 people during an outbreak in 2003, starting in China and spread to Hong Kong. The World Health Organization (WHO) said yesterday that the primary source of the outbreak appeared to be an animal and some “limited human-to-human transmission” occurred between close contacts. WHO also called for an emergence committee on Wednesday to assess the situation.

                  Hong Kong HSI is gaps lower today and is currently down more than -2%. Technically, a short term top is formed at 29174.92 and deeper pull back could be seen. Initial support is expected at around 55 day EMA (now at 27708). Rebound from 24899.93 could still extend higher. However, sustained break of the EMA would turn outlook bearish and HSI could head back towards 24899.93 support in that case.

                  - advertisement -

                  USD jumps ahead of US session, EUR/USD breaks yesterday’s low

                    Dollar rally picks up momentum again in enter into US session. In particular EUR/USD has now taken out yesterday’s low at 1.2181 to resume recent fall to 1.2154 support.

                    As seen in the D heat map, only GBP/USD’s is holding above yesterday’s low for now. NZD, AUD, CHF and CAD are trading as the weakest ones.

                    Action bias table also shows overwhelming momentum.

                    Let’s see how far USD can go in a day with no important economic data featured.

                    - advertisement -

                    RBNZ Hawkesby: Next rate move depends on global environment

                      RBNZ Assistant Governor Christian Hawkesby said in an interview that, after yesterday’s 50bps rate cut, “we’ve got a more balanced outlook for the OCR now”. However, he added, “even within those projections there’s some probability in there that we will need to reduce the OCR from where it is at the moment.”

                      Hawkesby explained that markets have already priced in a smaller 25bps before yesterday’s announce. And the New Zealand Dollar faced downward pressure after the decision, which could give an extra boost to exports. He added “it’s all part of the story of us getting back to our targets.” He hoped that the larger cut could help avoid further policy easing. But RBNA is “complete” open to use negative interest rates and other unconventional tools if necessary.

                      The main consideration for any next move is on global outlook. He said, “the obvious one is the global environment where we feel like the risks are tilted to the downside, and that was one of the factors that prompted us to ease with the 50 basis points this time around.”

                      - advertisement -

                      WTI hits 51.38 fib level as oil inventories rose 6.8M barrels

                        WTI crude oil drops sharply as US commercial crude oil inventories surprisingly rose 6.8M barrels in the week ending May 31. That’s way above expectation of -1.7M barrels decline. Now at 483.3M barrels, US crude oil inventories are about 6% above five year average for this time of the year.

                        WTI’s fall from 66.49 resumes and hits as low as 51.25. It’s now pressing 61.8% retracement of 42.05 to 66.49 at 51.38. Further decline will now remain in favor as long as 54.61 minor resistance holds. Sustained break of 51.38 could pave the way to retest 42.05 low.

                        - advertisement -

                        USD/CHF forming head and shoulder bottom

                          USD/CHF is a pair to watch for the rest of US session as it’s pressing 0.9490 resitsance. Break there will complete a head and shoulder bottom pattern. LS: 0.9254, H: 0.9186, RS: 0.9337. In that case, further rise would be seen to 100% projection of 0.9186 to 0.9490 from 0.9337 at 0.9464. And as USD/CHF could have reversed its down trend, there would be prospect of a test on 0.9977 further down the road. But agian, that’s subject to a solid break of 0.9490 first.

                          - advertisement -

                          USTR proposes tariffs on additional USD 4B of EU products

                            Just days after agreeing to stop tariff escalation with China, US is now turning to EU. The US Trade Representative proposed tariffs on additional EU imports, as countermeasures to harm caused by EU aircraft subsidies. A “supplemental list” of 89 subheadings with approximate trade value of USD 4B was proposed. The list includes olives, Italian cheese and Scotch whiskey, etc.

                            That’s additional to the USD 21B in EU imports published on April 12. A hearing will be held on the proposed additional products on August 5. But US could immediately impose increased duties on the products included in the initial list, if the WTO arbitrator issues a decision before the public comment period ends.

                            Full USTR statement here.

                            - advertisement -

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

                              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

                              - advertisement -

                              US initial jobless claims rose 2k to 205k

                                US initial jobless claims rose 2k to 205k in the week ending February 8, better than expectation of 210k. Four-week moving average of initial claims was unchanged at 212k.

                                Continuing claims dropped -61k to 1.698m in the week ending February 1. Four-week moving average of continuing claims dropped -17.5k to 1.727m.

                                Full release here.

                                - advertisement -

                                NAB pushed forecast of first RBA hike away to May 2019

                                  The National Australia Bank finally gave up on their forecast of an RBA rate hike within 2018. Their expectation on the next move is now pushed from November to May 2019. The change put them back in line with market pricing, as well as with other major bank forecasters.

                                  RBA chief economist Alan Oster noted that the “change reflects the fact there is no sign yet of stronger wages growth and unemployment has been stuck around 5.5% for the best part of a year.” Also, he added that once the tightening cycle starts “further rate increases will be very gradual”. And after the first move in May 2019, the next move will be “not until November 2019”.

                                  Oster also noted that the economy is still expected to strengthen and lead to falling unemployment. And that should “eventually translate into stronger wages growth and give the RBA confidence that inflation will track back to its 2.5% target”. However, there is “considerable uncertainty around the timing at which wages growth will strengthen”.

                                  - advertisement -

                                  Eurozone Sentix investor confidence dropped to -5.8, lowest since 2014, Germany even worse

                                    Eurozone Sentix Economic Index dropped to -5.8 in June, down from -3.3 and missed expectation of 0.2. It’s also the lowest level since November 2014. Current Situation Index dropped from 6.0 to 1.8, lowest since February 2015. Expectations Index also dropped from -12.3 to -13.0, lowest since February 2019.

                                    Sentix noted that after the supposed de-escalation signals in US-China trade war at G20, there was “great hope that the downward trend in the economy could be stopped”. But, investors are “not blinded by the rising share prices” as expectations show no upward reaction to the news. It warned, “without resilient negotiation results, it will be difficult for investors worldwide to develop a different perspective.”

                                    For Germany, Overall Economic Index dropped from -0.7 to -4.8, lowest since November 2009. Current Situation Index dropped from 13.5 to 7.0, lowest since April 2010. Expectations Index dropped from -14.0 to -16.0, lowest since February 2019.

                                    Sentix said “things are even worse for the German economy”. “The high dependence on exports and the Chinese sales market is increasingly becoming a burden and the customs dispute hovers like a sword of Damocles over the former model boy of the Euro region.” Also, the automotive industry is “simply not emerging from the crisis”.

                                    Full release here.

                                    - advertisement -

                                    Lagarde approved by European Parliament as next ECB President

                                      European Parliament approved appointment of IMF managing director Christine Lagarde as next ECB president. The motion was voted for by 394 to 206, with 49 abstentions. Lagarde should take over the job from Mario Draghi from November 1.

                                      Luxemburger Yves Mersch was also voted by the parliament to become the next Vice President of the supervision arm, by 379 to 230 votes, with 69 abstentions.

                                      - advertisement -

                                      CAD and USD lifted by NAFTA news

                                        Both CAD and USD seem to be lifted by news regarding NAFTA as American traders get up in the morning. Bloomberg reported, citing unnamed sources, that Trump is pushing for a preliminary NAFTA deal to be announced next week. That would likely happen at the Summit of the Americas in Peru on April 13.

                                        For now the story is not verified by other media yet. But it’s believed that Mexican Economy Minister Ildefonso Guajardo will meet with US Trade Representative Robert Lighthizer on Wednesday. Canadian Foreign Minister Chrystia Freeland will also meet Lighthizer on Thursday. White House trade advisor Peter Navarro also said on Monday that it’s realistic to wrap up NAFTA in two weeks.

                                        In any case, we’ll likely have something more concrete in the coming days.

                                        - advertisement -

                                        GBP/CHF resuming medium term up trend quietly as traders focus on trade war

                                          NZD and AUD are trading among the strongest ones today, with the help of recovery in US stocks. While DOW did suffer at initial trading, there ain’t no crash. CAD, however doesn’t share the same fortune as markets are back in concern over NAFTA renegotiation. CHF follows as the second weakest one.

                                          A quick glance at the action bias tables for each currency reveals that CHF is trading with rather broad based downside bias.

                                          GBP/CHF is a clear example with upside Action Bias across time frames. The patterns suggests that it has just finished a near term consolidation and is ready for further rally.

                                          GBP/CHF has indeed taken out 1.3194 key near term resistance today and is resuming the medium term up trend. Next target will now be 61.8% projection of 1.2219 to 1.3419 from 1.2861 at 1.3647.

                                          - advertisement -
                                          - advertisement -