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Oct 11 22, 14:46 GMT

In a speech, ECB Chief Economist Philip Lane said that monetary is “always decided under conditions on uncertainty”, both about “inflation dynamics” and the “channels connecting medium-term inflation to our monetary policy instruments”. This uncertainty is “mitigated to some extent by taking a meeting-by-meeting”.

The “considerable lags” between monetary policy actions and their impact on inflation outcomes imply that much of the near-term attention in assessing monetary policy actions focuses on the transmission to financial conditions.

Also, “in the absence of further shocks, the profile of euro area inflation over the next 12 to 18 months will be primarily driven by the fading impact of past supply shocks and the deceleration in demand that is signalled by the latest confidence indicators.” The role of monetary policy is to ensure that the “residual” inflation dynamic returns to target in a timely manner.

Japan foreign currency deposits up 8.3% since start of the year

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Oct 11 22, 11:35 GMT

Accord to latest BoJ data, foreign currency deposits at domestic banks rose the JPY 26.58T at the end of August, up 8.3% since the start of 2022. The increase in despoits in the eight month period was also the highest since 2015.

The surge could partly be explained by Yen’s depreciation. Yet, the flow into foreign currencies could also be seen as a factor contributing to the persistent decline in Yen’s exchange rate.

UK payrolled employment rose 69k in Sep, unemployment rate dropped to 3.5% in Aug

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Oct 11 22, 06:13 GMT

UK payrolled employment rose 69k in September, or 0.2% mom, to 29.7m. Total growth over the 12-month period was 714k. Median monthly pay rose 6.3% yoy to GBP 2131.

In the three-month period to August, unemployment rate dropped to 3.5%, down -0.3% from the previous three-month period. Employment rate also dropped -0.3% to 75.5%. Economic inactivity rate rose 0.6% to 21.7%. Totally weekly hours dropped -0.4% to 1046m.

Average earnings excluding bonus rose 5.4% 3moy in August, up from 5.2%. Average earnings including bonus rose 6.0% 3moy, up from 5.5% 3moy.

Australia NAB business conditions rose to 25, confidence dropped to 5

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Oct 11 22, 03:50 GMT

Australia NAB Business Confidence dropped from 10 to 5 in September. Business Conditions rose from 22 to 25. Trading conditions rose from 29 to 38. Profitability conditions was unchanged at 19. Employment conditions dropped from 17 to 16.

“Conditions are now higher than their pre-COVID peak, which shows just how strong demand is at present,” said NAB Chief Economist Alan Oster. “The current level of conditions are only exceeded by the post-lockdown surge in early 2021. Clearly, consumers are still finding a way to keep spending, with the very strong labour market, savings buffers and a broader post-pandemic recovery all playing a role.”

“Confidence eased in the month but is still around the long-run average in the history of the survey,” said Oster. “The confidence index has been volatile recently but is clearly a little lower than it was early in the year when the passing of the Omicron wave was providing a strong reason for optimism. Still, businesses are far from pessimistic.”

Australia Westpac consumer sentiment dropped to 83.7, RBA averted a much bigger fall

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Oct 11 22, 03:45 GMT

Australia Westpac Consumer Sentiment Index dropped -0.9% mom to 83.7 in October. Westpac said the index remains in “deeply pessimistic territory”, at a level comparable to the lows “briefly reached during the pandemic”, and during the Global Financial Crisis.

It added RBA’s smaller than expected 25bps rate hike “averted a much bigger fall” in sentiment. Sentiment amongst those sampled before the RBA decision showed a “depressing” 77.4 index read. But the post RBA “relief rebound” is “unlikely to be repeated in future months”.

Westpac expects four more consecutive 25bps rate hikes at RBA’s November, December, February and March meetings.

Japan Suzuki: Will take appropriate action on excessive Yen moves

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Oct 11 22, 03:36 GMT

Japanese Finance Minister Shunichi Suzuki reiterated today, “we will take appropriate action if there are any excessive moves” in Yen’s exchange rate. The comment came as Yen threatens to decline further towards the lowest level since 1998 again.

Suzuki also said, Japan is closely watching current FX moves with a “strong sene of urgency”. He planned to explain the stance on intervention at G20 meeting. He said that Japan have gained “certain understanding” from the US regarding intervention.

Fed Brainard: Monetary policy will be restrictive for some time

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Oct 11 22, 03:24 GMT

Fed Vice Chair Lael Brainard said in a speech, “monetary policy will be restrictive for some time to ensure that inflation moves back to target over time.”

“It will take time for the cumulative effect of tighter monetary policy to work through the economy broadly and to bring inflation down.”

“In light of elevated global economic and financial uncertainty, moving forward deliberately and in a data-dependent manner will enable us to learn how economic activity, employment, and inflation are adjusting to cumulative tightening in order to inform our assessments of the path of the policy rate.” She said.

Fed Evans sees interest rate above 4.5% early next year

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Oct 10 22, 13:24 GMT

Chicago Fed President Charles Evans said, “we can bring inflation down relatively quickly while also avoiding a recession.” He pointed to Fed’s projections that unemployment rate will rise form current 3.5% to 4.4% by the end of next year. Core inflation will dropped from August’s 6.2 to 2.8% then.

That’s a “pretty good looking soft landing,” he said. “While this does represent a noticeably softer labor market when compared with today’s, these certainly are not recession-like numbers.”

Evans saw federal funds rising to “a bit above 4.5%” early next year, then “remaining at this level for some time.”

ECB Villeroy: Takes 2 to 3 years to bring inflation back to target

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Oct 10 22, 08:47 GMT

ECB Governing Council member Francois Villeroy de Galhau said the central bank is engaged in bringing down inflation to 2% target in “two to three years” time. “It is a very strong signal the central bank sends to all economic players that we will bring down inflation to the target”, he said.

Another Governing Council member Mario Centeno said, “normalization of monetary policy is absolutely necessary and desired.” But he added, that “policy normalization must be gradual… A policymaker cannot become a factor of instability”.

Eurozone Sentix dropped to -38.3, Germany in catastrophic state

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Oct 10 22, 08:41 GMT

Eurozone Sentix investor confidence dropped from -31.8 to -38.3 in October, lowest since May 2020. Current situation index dropped from -26.5 to -35.3, worst since August 2020. Expectations index dropped from -37.0 to -41.0, lowest since December 2008.

Sentix said: “The ongoing uncertainties about the gas and energy situation in winter have not diminished due to the attack on the Nordstream pipelines. In addition to the economic worries, there is now also an increasing probability of an escalation of the military conflict in Ukraine.”

Germany investor confidence dropped from -29.9 to -37.4, lowest since March 2009. Current situation index dropped from -23.5 to -33.5, lowest since July 2020. Expectations index dropped from -36.0 to -41.3, an all-time low. Sentix said the data signaled a “catastrophic state of the economic condition” in Germany.

AUD/JPY downside breakout, targets 90

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Oct 10 22, 05:58 GMT

Australian Dollar falls broadly in Asian session, after release of poor service sector data, and on the back of risk aversion. AUD/JPY’s break of 92.11 temporary low confirms down resumption of decline from 99.32. Near term outlook will stay bearish as long as 94.52 resistance holds, even in case of recovery. Next target is 90.51 support first.

For now, it’s unsure whether fall from 99.32 is corrective the up trend from 78.77 only, or that from 59.85. Reaction to 55 week EMA (now at 89.60) should reveal which case it is. In the bearish case, AUD/JPY could fall further to 38.2% retracement of 59.85 to 99.32 at 84.24 before bottoming.

Australia AiG services dropped to contraction at 48

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Oct 10 22, 03:48 GMT

Australia AiG Performance of Services Index dropped sharply by -5.3 pts to 48.0 in September, back in contraction. Looking at some details, sales tumbled by -10.1 to 41.8. Employment edged down by -0.6 to 52.6. New orders dropped -7.1 to 50.2. Input prices rose 4.7 to 73.4. Selling prices dropped -2.9 to 58.3. Average wages dropped -1.7 to 65.9.

Innes Willox, Chief Executive of Ai Group, said: “The increasingly uncertain economic environment is dragging on service industries. The sector has fallen into contraction in September, and all services activity indicators have worsened in the last month. Low consumer and business confidence – following repeated interest rate rises and persistent inflation – were major factors in this decline. The indicators for sales, new orders, and selling prices all fell, while input prices continued their upward march adding to inflationary pressures.

US NFP grew 263k in Sep, unemployment rate dropped to 3.5%

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Oct 07 22, 12:39 GMT

US non-farm payroll employment grew 263k in September, just slightly below expectation of 265k. Monthly job growth has averaged 420k in 2022, comparing with 562k in 2021.

Unemployment rate rose dropped from 3.7% to 3.5%, below expectation of 3.7%. Labor force participation rate dropped from 62.4% to 62.3%.

Average hourly earnings rose 0.3% mom, matched expectations.

BoE Ramsden: The central question is how forceful we need to be

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Oct 07 22, 11:31 GMT

BoE Deputy Governor Dave Ramsden said in a speech that before the November MPC meeting, policymakers will be seeking answers to “a range of questions” to assess how quickly inflation will return to target.

For him, the questions include: “is there any evidence that the tight labour market is easing; what is the revised outlook for demand in view of the Government’s fiscal announcements; are domestically generated inflation pressures consistent with returning inflation to the 2 per cent target; and what do financial market developments tell us.”

Meanwhile, the “central question” for all MPC members is “how forceful do we need to be, to ensure inflation does return sustainably to the 2% target”.

ECB survey shows inflation expectations might have peaked

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Oct 07 22, 11:12 GMT

According to ECB’s Consumer Expectations Survey (CES) in August, inflation expectations were largely unchanged comparing with July. Nevertheless, mean inflation expectations for the 12 month ahead dropped slightly, and could have peaked. Growth expectations also improved.

On inflation:

Mean expectations for 12 months ahead dropped from 7.1% to 6.9 (compares to 6.6% in June).
Median expectations for 12 months ahead was unchanged at 5.0%.
Mean expectations for 3 years ahead was unchanged at 4.7%.
Median expectations for 3 years ahead was unchanged at 3.0%.

On growth:

Mean growth expectations for next 12 months improved from -1.9% to -1.7%.
Median growth expectations for next 12 months improved from -0.1% to 0.0%.

US and Canada employment awaited, USD/CAD ready for breakout

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Oct 07 22, 03:52 GMT

Focus turns to employment data from US and Canada today. US non-farm payroll report is expected to show 265k growth in September. Unemployment rate is expected to be unchanged at 3.7%. Average hourly earnings is expected to rise 0.3% mom in September.

Looking at related data, ISM manufacturing employment dropped from 54.2 to 48.7, back into contraction region. But ISM services employment rose from 50.2 to 53.0. ADP private employment grew a solid 208k, up from prior month’s 185k. Four-week moving average of initial claims dropped notably from 246k to 207.

Overall, the headline print and unemployment rate are unlikely to deviate much from expectations. The surprise factor is probably in wage growth.

Meanwhile, from Canada, employment is expected to rebound and grow 22.5k in September, with unemployment rate unchanged at 5.4%.

USD/CAD’s pull back from 1.3832 might have completed at 1.3501, after hitting 38.2% retracement of 1.2952 to 1.3832. An upside breakout looks ready after the above mentioned event risks are cleared. Nevertheless, even in case of another fall to extend the corrective pattern, downside should be contained by 1.3501.

Fed Waller and Mester not seeing case for slower rate hike

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Oct 07 22, 03:19 GMT

Fed Governor Christopher Waller said in a speech yesterday, “Inflation is far from the FOMC’s goal and not likely to fall quickly. This is not the inflation outcome I am looking for to support a slower pace of rate hikes or a lower terminal policy rate”

Separately, Cleveland Fed President Loretta Mester echoed and said, “We have to bring interest rates up to a level that will get inflation on that 2% path, and I have not seen the compelling evidence that I need to see that would suggest that we could start reducing the pace at which we’re going,”

Chicago Fed President Charles Evans said, “We have to look at the momentum in sort of that central component of inflation, and that’s really the part that I believe has most of my colleagues and myself nervous about.” Be he declined to comment on whether Fed would continue with 75bps hike and noted, we “will have a discussion about that.”

BoC Macklem: Simply put, there is more to be done

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Oct 07 22, 03:09 GMT

BoC Governor Tiff Macklem said in a speech yesterday, “We know we are still a long way from the 2% (inflation) target. We know it will take some time to get there. We also know there could be setbacks along the way, and we can’t afford to let high inflation become entrenched.”

“Simply put, there is more to be done. We will need additional information before we consider moving to a more finely balanced decision-by-decision approach,” he noted.

“We can’t control global developments. But we can use monetary policy to influence the balance between demand and supply in the Canadian economy and therefore ease domestic inflationary pressures over time,” Macklem also said.

Fed Kashkari: We’re quite a ways away from a pause

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