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China agreed to continue trade negotiation with US, but warned of underestimating its determination

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    ActionForex.com
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    China indicated that it has agreed to continue negotiation with the US even though both sides have raised tariffs on either other imports. Chinese Foreign Ministry spokesman Geng Shuang said in a regular press briefing “my understanding is that China and the United States have agreed to continue pursuing relevant discussions.” But no detail was given on the way forward. Geng just said “as for how they are pursued, I think that hinges upon further consultations between the two sides.”

    Additionally, Geng warned “we hope that the U.S. side does not misjudge the situation and not underestimate China’s determination and will to safeguard its interests.” China also typically denied any accusation of their backtracking. Geng said “you absolutely can’t put the hat on China of reversing positions and going back on one’s promises.”

    Into US session: Sterling strongest as buying emerge, AUD and NZD weakest

      By
      ActionForex.com
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      Entering into US session, Sterling is trading as the strongest one as supported by slightly stronger than expected wage growth. There could be some buying on expectation for the parliament to take over control on Brexit at a later stage, thus avoiding no-deal scenario. Technically, EUR/GBP’s break of 0.8728 minor support, which signals completion of rebound form 0.8617, also helps the pound elsewhere.

      Swiss and Dollar follow as the second and third strongest as risk markets turn mixed. Eyes will be on US-China trade negotiations which will resume today. Ministerial meetings will start Thursday, working towards a trade MOU. On the other hand, New Zealand and Australian Dollar are the weakest ones today. Aussie is additionally weighed down by RBA minutes which showed much concerns on housing slump. Euro is the third weakest as German ZEW suggests there is no turnaround in the economy in first half at least.

      In Europe, currently:

      • FTSE is down -0.73%.
      • DAX is down -0.22%.
      • CAC is down -0.44%.
      • German 10-year yield is down -0.011 at 0.105.

      Earlier in Asia:

      • Nikkei rose 0.10%.
      • Hong Kong HSI dropped -0.42%.
      • China Shanghai SSE rose 0.05%.
      • Singapore Strait Times dropped -0.19%.
      • Japan 10-year JGB yield dropped -0.0104 to 0.031.

      China MOFCOM: US trade friction has limited impact, but 2019 more adverse and complex

        By
        ActionForex.com
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        The Chinese Ministry of Commerce released Fall 2018 “China Foreign Trade Situation Report” today. In a statement, MOFCOM noted that China’s foreign trade maintained a “stable and good trend” and in 2018 up to Q3. And, the current US-China trade friction has “limited impact” on China’s foreign trade.

        MOFCOM also noted that current international demand is “relatively stable”. Domestic demand is “growing steadily”. And conditions exist for steady growth in foreign trade. Nonetheless, with higher base effect, Q4’s import and export growth could be dragged down.

        Additionally, MOFCOM also said 2019 trade development will be “more adverse and complex”. It noted increasing downside risks in the world economy and protectionism. The report urged measures like reducing burden on bother import and export businesses, and real implementation of trade policies.

        Full release in Simplified Chinese.

        ECB to deliver coronavirus response package as pandemic worsens

          By
          ActionForex.com
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          ECB rate decision is a major focus today and expectation is high for the central bank, to follow global peers, to deliver stimulus measures to ease coronavirus impact. Europe is in no doubt on fire now, with 12,462 coronavirus cases and 827 deaths in Italy. Prime Minister Giuseppe Conte tighten up country wide lockdown on Wednesday, closing all shops except supermarkets, food stores and chemists. He still sounded cautious as “we will only be able to see the effects of this great effort in a couple of weeks.”

          Situation in other European countries are also worsening, with 2,821 cases and 48 deaths in France, 2,277 cases and 55 deaths in Spain, 1,966 cases and 3 deaths in Germany, 652 cases and 4 deaths in Switzerland, 629 cases in Norway, 514 cases in Denmark, 503 cases and 5 deaths in the Netherlands, 500 cases and 1 death in Sweden, 314 cases and 3 deaths in Belgium, 246 cases in Austria. The outbreak is already a serious blow to the domestic economy as well as a serious threat on production with supply chain disruptions. Also, tightening of financial conditions is worsening and broadening.

          At this point, it’s unsure what more the ECB could do and how effect the new measures could be, given that interest rate already negative for long time and asset purchase restarted last year. ECB might opt for another -10bps cut in deposit rate and ramp up to QE to EUR 40B per month. There might also be targeted funding operations for banks.

          Here are some suggested previews:

          Australia NAB business confidence rose to 10, but conditions dropped to 7

            By
            ActionForex.com
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            Australia NAB business confidence rose from 5 to 10 in January. However, business conditions dropped from 16 to 7. Looking at some details, trading conditions dropped from 22 to 11. Profitability condition dropped from 13 to 9. Employment condition also dropped from 10 to 3.

            “Business started the year on a more optimistic note, even as conditions eased from the strength we saw in December. Importantly, employment conditions remain in positive territory – so overall businesses are still expanding their workforce,” said Alan Oster, NAB Group Chief Economist. “The decline in conditions was broad-based across industries, except for a small improvement in recreation & personal services, which continues to make small gains as restrictions ease.”

            Full release here.

            Dollar index broad medium term trend line resistance, pressing 91

              By
              ActionForex.com
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              Dollar index finally broke the medium falling trend line resistance after yesterday’s solid rally. And focus is now on 91.01 support turned resistance. Firm break there will then be another sign of medium term reversal.

              That is, the down trend from 103.82 has completed at 88.25, after hitting 50% retracement of 72.69 to 103.82, on bullish convergence condition in weekly MACD. Next hurdle will be 55 week EMA (now at 92.93). But we’d expect the rally to extend to 38.2% retracement of 103.82 to 88.25 at 94.19 at least. Ideally, is should be accompanied by a solid break of 3% in 10 year yield.

              Fed Evans: Monetary policy is about where it can be

                By
                ActionForex.com
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                Chicago Fed President Charles Evans said “monetary policy is about where it can be”. Further monetary easing would only be effective once the situation of coronavirus pandemic is cleared. “At the moment, it’s really fiscal policy that needs to be addressing this.”

                “Fiscal policy is really fundamental for getting us going,” he added. “The ball is in Congress’ court.” “It’s very important that something be done. If we go very long without somehow addressing the reduction and evaporation of that support, I think it’s going to show up in lower aggregate demand, and that would be very costly for the economy.”

                Fed signals three rate cuts in 2024, policy easing on discussion table

                  By
                  ActionForex.com
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                  US stocks surged, with DOW hitting new record, while treasury yields and the Dollar tumbled following Fed’s decision to leave interest rates unchanged at 5.25-5.50%. This decision, widely anticipated by the markets, was overshadowed by the Fed’s indication of potential rate cuts in 2024. Fed suggested that three 25 bps cuts could be implemented next year, to bring federal funds rate back to 4.50-4.75%.

                  Fed Chair Jerome Powell, in the post-meeting press conference, acknowledged the emerging discussion within about reducing policy restraint. Powell stated, “The question of when it will be appropriate to begin dialing back the amount of policy restraint in place begins to come into view, and is clearly a topic of discussion out in the world and also of discussion for us at our meeting today.” He further noted the general expectation that this issue will be a key focus for Fed going forward.

                  The new economic projections present a detailed outlook. The median forecasts indicate that federal funds rate will decrease from the current 5.4% to 4.6% in 2024, further reducing to 3.6% in 2025, and eventually to 2.9% in 2026. The longer-run federal funds rate is held steady at 2.50%. The central tendency for 2024 is at 4.4-4.9%, suggesting a relatively narrow range, and stable rate expectation.

                  The projections for GDP growth show a slowdown from 2.6% in 2023 to 1.4% in 2024, followed by a rebound to 1.8% in 2025 and 1.9% in 2026. The unemployment rate is expected to increase from 3.8% in 2023 to 4.1% in 2024 and then stabilize at this level through 2026.

                  Regarding inflation, headline PCE inflation is forecasted to decrease from 2023’s 2.8% to 2.4% in 2024, 2.1% in 2025, and 2.0% in 2026. Similarly, core PCE inflation is projected to slow down from 3.2% in 2023 to 2.4% in 2024, and then to 2.2% in 2025 and 2.0% in 2026.

                  Some FOMC reviews here.

                  UK CPI accelerated to 5.4% yoy in Dec, core CPI rose to 4.2% yoy

                    By
                    ActionForex.com
                    -

                    UK CPI accelerated to 5.4% yoy in December, up from 5.1%, above expectation of 5.2% yoy. This is the highest reading since record began in 1997. CPI core rose to 4.2% yoy, up from 4.0% yoy, above expectation of 4.0% yoy.

                    Also released, PPI input came in at -0.2% mom, 13.5% yoy, versus expectation of 0.7% mom, 13.7% yoy. PPI output was at 0.3% mom, 0.6% yoy, versus expectation of 0.6% mom, 9.4% yoy. PPI output core was at 0.5% mom, 8.7% yoy, versus expectation of 0.8% mom, 8.6% yoy.

                    Full CPI release here.

                    US PMI manufacturing hit 20-mth high, but services edged lower

                      By
                      ActionForex.com
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                      US PMI Manufacturing rose to 53.5 in September, up from 53.1, hitting a 20-month high. However, PMI services dropped slightly to 54.6, down form 55.0. PMI Composite also dropped slightly to 54.4, down from 54.6.

                      Chris Williamson, Chief Business Economist at IHS Markit, said:

                      “US businesses reported a solid end to the third quarter, with demand growing at a steepening rate to fuel a further recovery of output and employment.

                      “The survey data therefore add to signs that the economy will have enjoyed a solid rebound in the third quarter after the second quarter slump.

                      “The question now turns to whether the economy’s strong performance can be sustained into the fourth quarter. Covid-19 infection rates remain a major concern and social distancing measures continue to act as a dampener on the overall pace of expansion, notably in consumer-facing services. Uncertainty regarding the presidential election has also intensified, cooling business optimism about the year ahead. Risks therefore seem tilted to the downside for the coming months, as businesses await clarity with respect to both the path of the pandemic and the election.”

                      Full release here.

                      Japan PMI manufacturing ticked up to 49.7, services rose to 54.3

                        By
                        ActionForex.com
                        -

                        In August, Japan’s Service PMI climbed from 53.8 to 54.3, while the Manufacturing PMI saw a slight increase from 49.6 to 49.7, just above anticipated figures. Composite PMI also edged up from 52.2 to 52.6.

                        Andrew Harker, from S&P Global Market Intelligence, pointed out the robust performance of the service sector, driven by consistent new order growth. In contrast, manufacturing only marginally rebounded but remained below the growth threshold.

                        Despite the overall rise in new orders, manufacturing employment remained flat, ending its 28-month growth streak. Additionally, heightened oil prices impacted both sectors, causing the steepest rise in input costs in four months. Notably, business confidence dwindled in both domains due to longer-term economic uncertainties.

                        Full Japan PMI release here.

                        Eurozone’s PPI at 0.5% mom, -12.4% yoy in Sep

                          By
                          ActionForex.com
                          -

                          Eurozone PPI came in at 0.5% mom, -12.4% yoy in September, versus expectation of 0.3% mom, -12.5% yoy. For the month, Industrial producer prices increased by 2.2% in the energy sector, while prices remained stable for capital goods and for durable consumer goods, and prices decreased by 0.2% for both intermediate goods and non-durable consumer goods. Prices in total industry excluding energy decreased by 0.1%.

                          EU PPI came in at -0.6% mom, -11.2% yoy. The biggest monthly increases in industrial producer prices were observed in Luxembourg (+28.5%), Romania (+2.6%) and Bulgaria (+2.1%), while the largest decreases were recorded in Finland (-0.9%), Cyprus and Poland (both -0.3%) and Germany (-0.2%).

                          Full Eurozone PPI release here.

                          FOMC preview: All about dot plots and 5%

                            By
                            ActionForex.com
                            -

                            Fed is widely expected to slow down the pace of rate hike today, and raise federal funds rate by 50bps to 4.25-4.50%. The main focus is on the new economic projections in particular the dot plots. Questions are where the terminal rate of the current cycle would be, and how long would rate stay there.

                            Yesterday’s CPI report showed further evidence that inflation is cooling, rather than plateauing, and in a quicker manner than expected. Currently markets are expecting Fed to make two more 25bps rate hikes in Q1. That would eventually bring interest rate to 4.75-5.00% range, keep it below the 5% psychological level.

                            Here are some previews:

                            Yesterday’s post-CPI reactions in the markets were clearly indecisive. S&P 500 spiked higher to 4100.96 but that pared back much of the gains to close just 0.73% higher at 4019.65. Today’s reactions could be bearish if Fed’s dot plots indicate that interest way will peak above 5%. Break of 3906.54 support will trigger near term bearish reversal in SPX. Nevertheless, another rally through yesterday’s high should push SPX further towards 4325.58 resistance and end the year on a high note.

                            Dollar gets no support from hawkish FOMC minutes, Dollar index breakout yet to occur

                              By
                              ActionForex.com
                              -

                              The minutes of the March FOMC meeting revealed nothing surprising. Almost all policymakers supported a rate hike even though there were a couple of them pointed to benefits of waiting a bit longer. All policymakers expected inflation to rise in the coming months, showing receding worry on the inflation outlook. Nonetheless, the pick-up in inflation is not enough to alter the projected rate path yet. Regarding the economy, it’s a consensus view that outlook has strengthened in recent month. Meanwhile, a strong majority of the members viewed escalation in trade tension and retaliation by other countries as downside risks for the economy.

                              The minutes are seen as hawkish in general, but not more hawkish than expected.

                              After the minutes, pricing of a June hike is little changed. Fed fund futures are pointing to over 95% chance of a June hike.

                              Little change in USD’s performance too. It’s staying as the weakest one for the week.

                              While dollar index weakened notably this week, it’s still staying in range above 88.25. We’d maintain that as it’s close to medium term trend line resistance, breakout is imminent. But probably a little more time is needed for selling to gather momentum.

                              Australia NAB quarter business conditions resilient, but confidence clearly negative

                                By
                                ActionForex.com
                                -

                                Australia NAB Quarterly Business Confidence dropped from -1 to -4 in Q1. Current Business Conditions fell from 20 to 16. Business Conditions for the next three months decreased from 22 to 19. But Business Conditions for the next 12 months rose from 18 to 20.

                                “Consistent with our monthly business survey, today’s release confirms business conditions remained resilient through the first quarter of 2023 at levels well above average,” said NAB Chief Economist Alan Oster. “This strength remains broad based and leading indicators are also holding up, although business confidence is now clearly negative.”

                                Full NAB Quarterly Business Confidence release here.

                                US crude oil inventories rose 3.1m barrels, WTI dives

                                  By
                                  ActionForex.com
                                  -

                                  US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve), rose 3.1m barrels in the week ending September 27. That’s notably above expectation of 2.0m barrels. At 422.6m barrels, U.S. crude oil inventories are at the five year average for this time of year.

                                  WTI crude drops to as low as 52.47 so far as fall from 63.04 extends. Deeper decline is expected as long as 56.63 resistance holds, to 50.43 support next. However, that would be close to 61.8% retracement of 42.05 to 66.49 at 51.38, as well as 50 psychological level. For now, we’re not expecting a break there.

                                  Into US session: Euro weakest, talks on trade talks lift sentiments again

                                    By
                                    ActionForex.com
                                    -

                                    Entering into US session, Euro is trading as the lowest one for today, followed by Swiss Franc, in relatively mixed markets. New Zealand Dollar is the strongest one while Australian Dollar recovers much of yesterday’s losses. But for now, pre-weekend recovery in Sterling put it into second place. But movements in the currency markets are relatively limited. Thus, the picture could have a drastic change at close.

                                    US-China trade negotiations were the main focus of the day. Words from both sides were positive, but without much substance. China’s Xinhua news agency said the delegations discussed topics including technology transfers, intellectual property protection, non-tariff barriers, services, agriculture and the trade balance. And both countries reached consensus is principle on a number of issues. They’re working towards a memorandum of understanding on trade and economic issues.

                                    White House spokesperson Sarah Sanders confirmed that trade talks with China will continue in Washington next week. She said “The United States looks forward to these further talks and hopes to see additional progress.” And,  “Both sides will continue working on all outstanding issues in advance of the March 1, 2019, deadline for an increase in the 10 percent tariff on certain imported Chinese goods.”

                                    US Trade Representative Robert Lighthizer said “we feel we have made headway on very, very important and difficult issues. We have additional work to do but we are hopeful,” Treasury Secretary Steven Mnuchin tweeted “Productive meetings with China’s Vice Premier Liu He and @USTradeRep Amb. Lighthizer”, without any elaboration.

                                    But the development so far seems to be enough to lift sentiments slightly. DOW futures in currently up 76 pts.

                                    In Europe:

                                    • FTSE is up 0.55%.
                                    • DAX is up 1.39%.
                                    • CAC Is up 1.44%.
                                    • German 10-year yield is down -0.0032 at 0.104, holding on to 0.1 handle.

                                    Earlier in Asia:

                                    • Nikkei dropped -1.13%.
                                    • Hong Kong HSI dropped -1.87%.
                                    • China Shanghai SSE dropped -1.37%.
                                    • Singapore Strait Times dropped -0.41%.
                                    • Japan 10-year JGB yield dropped -0.0114 to -0.022, staying negative.

                                    European Commission: Economic sentiment weakend in all the five largest euro-area economies

                                      By
                                      ActionForex.com
                                      -

                                      Eurozone confidence indciators generally deteriorated in March.

                                      The European commission noted in the release:

                                      Euro area developments

                                      In March, the Economic Sentiment Indicator (ESI) decreased markedly in both the euro area (by 1.6 points to 112.6) and the EU (by 1.9 points to 112.5).1 While this is the third consecutive drop, the indicators remain at elevated levels.

                                      The deterioration of euro-area sentiment resulted from drops in industry, services and retail trade. Confidence among consumers remained unchanged, while it increased among construction managers. The ESI weakened in all the five largest euro-area economies; significantly so in Germany (-2.4), Italy (-1.8) and Spain (-1.2) and, less so, in the Netherlands (-0.5) and France (-0.4).

                                      EU developments

                                      The marginally stronger decrease of the headline indicator for the EU (-1.9) was mainly due to the marked deterioration of sentiment in the largest non-euro area EU economies, the UK (-4.2), and Poland (-2.0). In line with the euro area, confidence deteriorated strongly in industry, services, and retail trade, while it increased slightly in the construction sector and remained unchanged among consumers. The fall in EU confidence in the financial services sector was slightly less pronounced than in the euro area.

                                      By contrast to the euro area, EU managers’ employment expectations improved in retail trade, while they remained broadly stable in services. Price expectations differed from the euro area mainly in retail trade, where they decreased markedly.

                                      Full release here.

                                      USTR Lighthizer singles out automobiles, agriculture and services for trade talk with Japan

                                        By
                                        ActionForex.com
                                        -

                                        The US Trade Representative Robert Lighthizer issued a statement notifying the Congress on the intentions of negotiation three separate trade agreements with Japan, the EU and the UK. Three separate letters were also sent to the Congress covering the relationships. He repeated in the letters that the aim aim in negotiations is to “address both tariff and non-tariff barriers to achieve fairer and more balanced trade”. And the USTR are “committed to concluding these negotiations with timely and substantive results for US consumers, businesses, farmers, ranchers and workers”.

                                        On Japan, Lighthizer criticized that exporters in automobiles, agriculture and services have been “challenged by multiple tariff and non-tariff barriers for decades”. And that lead to “chronic US trade imbalances with Japan”, at USD 68.9B in 2017. Also, Japan “is an important but still too often underperforming market for U.S. exporters of goods,”

                                        On EU, Lighthizer said the economic relationship is the “largest and most complex” in the world. He also said exporters faced “multiple tariff and non-tariff barriers for decade” without naming the sectors like with Japan.

                                        With the UK, Lighthizer said there is “broad and deep trade and investment relationship”. UK cannot negotiate the trade agreements yet until after Brexit, a Trade and Investment Working Group was already launched to provide the ground work for an FTA.

                                        USTR statement here. Letters to Congress on Japan, EU and UK.

                                        Japan Chief Cabinet Secretary Yoshihide Suga said “It will not be an easy negotiation … But we would like to proceed with talks in line with our stance that we will push where necessary and defend our position where necessary, in a way that protects our national interests.”

                                        Gold breached 1900, but struggles to stay above again

                                          By
                                          ActionForex.com
                                          -

                                          Gold’s rebound from 1855.30 resumed overnight and edged higher to 1903.19. But for now, it struggles to stay above 1900 handle again and retreated. Upside momentum is also a bit unconvincing. While further rise is in favor as long as 1881.37 minor support holds, current momentum doesn’t warrant a firm break of 1916.30 high yet.

                                          Instead, it looks like consolidation pattern from 1916.30 is going to extending with one more falling leg before completion. Break of 1881.37 will bring another fall back towards 1855.30 support to continue the consolidation pattern. Up trend would resume at a later stage.

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