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Australia NAB business confidence rose to -1, but decline in employment a concern

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    ActionForex.com
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    Australia NAB business confidence rose from -2 to -1 in January. Business conditions were unchanged at 3. Looking at some details, Trading conditions dropped from 6 to 5. Profitability conditions rose from 1 to 2. But employment conditions dropped sharply from 4 to 1.

    Alan Oster, NAB Group Chief Economist warned: “The concern this month is the decline in employment. It is now below average and a worry given the labour market has been a bright spot in the economic data. That said, there is a risk that ongoing weakness in business activity sees a pull-back in hiring intentions”.

    Full release here.

    ECB Knot: Market expectations and ECB policy actions converged into a “sweet spot”

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      ActionForex.com
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      ECB Governing Council member,  Dutch central bank Governor Klaas Knot talked about monetary policy as he  presented his bank’s annual report in Amsterdam today. He said:

      • “The top priority is to normalize monetary policy and strengthen the economic and monetary union,”
      • “This is now a widely-shared realization, certainly also in the financial markets.”
      • “If you look at the market expectations of our policy action, I would say they have more or less converged at what I call a sweet spot,”
      • “There is a fair degree of consensus around these expectations.”
      • “I would say the likelihood of us erring on the side of being too cautious is a bit larger than for us being too bold,”
      • “All in all, undoing these unorthodox, unconventional instruments could easily last for most of a decade.”

      Regarding trade relationship with the US, he said:

      • “The question is if Europe will come with countermeasures which could make us slip into a trade war,”
      • “But don’t be mistaken, if the U.S. were to implement trade restrictions on say steel, it will be the American consumer paying the price.”

      EU: China tops the list of trade and investment barriers

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        ActionForex.com
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        In a report released today, European Commission said, in 2018, China had the highest stock of recorded barriers, with 37 obstacles hindering EU export and investment opportunities. Russia was a close second with 34 barriers in place. India (25), Indonesia (25) and US (23) followed. On new barriers, Algeria and India topped with five new measures. US and China followed with four new measures each.

        Commissioner for Trade Cecilia Malmström said: “In the complex context we have today with a growing number of trade tensions and protectionist measures, the EU must keep defending the interests of its companies in the global markets. Making sure that the existing rules are respected is of utmost importance. Thanks to our successful interventions, 123 barriers hindering EU exports opportunities have been removed since I took office in late 2014. Working on specific problems reported by our companies we manage to deliver economic benefits equivalent in value to those brought by the EU’s trade agreements. Those efforts certainly must continue.”

        Full report here.

        ECB’s Lagarde: Current rates will bring inflation to target by 2025 end

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          ActionForex.com
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          ECB President Christine Lagarde, in her address to a European Parliament committee, expressed confidence in the current policy rates, emphasizing their effectiveness in steering inflation back towards the intended target.

          “Based on our latest assessment,” Lagarde mentioned, “we consider that our policy rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.”

          Lagarde also highlighted the headwinds faced by the euro area’s economy. After broadly stagnating during the first half of 2023, the economy has demonstrated signs of weakening further in the third quarter. This is particularly concerning given the previously resilient services sector, which is also starting to display weakness.

          Lagarde elaborated, “The services sector, which had been resilient until recently, is now also weakening,” noting that “job creation in the services sector is moderating and overall momentum is slowing.”

          Domestic price pressures, however, continue to remain formidable. A surge in holiday and travel spending combined with substantial wage growth is holding up services inflation.

          Nevertheless, according to staff projections, “inflationary pressures are expected to moderate and that inflation is set to reach our target by the end of 2025.”

          Full remarks of ECB Lagarde here.

          64% UK Conservatives prefer no-deal Brexit to May’s deal

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            ActionForex.com
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            According to a survey by YouGov funded by Economic and Social Research Council, many more Conservative Party members opposed to Prime Minister Theresa May’s Brexit deal than supported it.

            The survey was conducted Dec 17-22, on 1215 Tories. 59% percent opposed May’s deal while only 38% were in favor. If there is another referendum, 64% would opt for no-deal Brexit while 29% would pick May’s agreement.

            Only 11% thought the Irish backstop made sense. 23% thought it’s a bad idea but worth to be included to secure the deal. 40% rejected the backstop arrangement.

            MOFCOM: China-US trade talks enhanced mutual understanding and laid foundation for resolving mutual concerns

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              ActionForex.com
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              In a relatively brief statement, the Chinese Ministry of Commerce said the trade talks with the US this week were extensive and laid down the foundation for resolving trade friction between the countries.

              The MOFCOM statement said “The two sides actively implemented the important consensus of the two heads of state and conducted extensive, in-depth and meticulous exchanges on trade issues and structural issues of common concern, which enhanced mutual understanding and laid the foundation for resolving mutual concerns. Both parties agreed to continue to maintain close contact.”

              Full statement in simplified Chinese.

              EUR and GBP builds upside momentum, Yen retreats on stablizing market sentiments

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                ActionForex.com
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                Yen clearly weakens broadly today with stabilizing market sentiments. Fear of trade war seems to fade mildly on report that the US and China are now in dialogue. At the time of writing, FTSE is trading up 0.3%, DAX up 0.5% and CAC up 0.3%. US futures also point to triple digit gain at open, as markets digest Friday’s steep loss.

                Euro and Sterling both showing extra strength entering into US session. Both EUR/USD and GBP/USD surges through last week’s high.

                Meanwhile, for now, both NZD/JPY and GBP/JPY are having more than 1% gain for today.

                US 10-, 30-yr yield jumped on Fed Powell

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                  ActionForex.com
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                  US treasury yields jumped sharply overnight after Fed Chair Jerome Powell announced that adoption of “average inflation targeting”. That goes beyond the “symmetric” targeting, and allows inflation to overshoot to average out at 2% over time. While there was some initial jitters after Powell noted the overshoot would be “moderate”, traders eventually made up their mind in pushing yields higher.

                  10-year yield rose 0.059 to close at 0.746, resuming the rebound form 0.504. The notable support from 55 day EMA is a positive development for TNX. It should now be on track to take on June’s resistance at 0.957. Technically, firm break there would confirm completion of the whole consolidation pattern from 1.266. But we do not envisage this for the near term.

                  Similarly, 30-year yield closed up 0.094 at 1.500. Rebound from 1.165 has resumed after drawing support form 55 day EMA. Further rise should be seen to 1.761 resistance next. Firm break there will confirm completion of the consolidation pattern from 1.940.

                  Gold breaches 1315 as rebound accelerates, heading back to 1346.7 resistance

                    By
                    ActionForex.com
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                    Gold’s strong rally since last week firstly suggests resumption of rebound from 1266.26. More importantly, it argues that corrective fall from 1346.71 has completed at 1266.26 already. Further rise is now in favor back to retest 1346.71 first.

                    The strong support from 55 week EMA is taken as a rather bullish signal. It’s also raising the change that gold would finally overcome long term fibonacci resistance of 38.2% retracement of 1920.70 (2011 high) to 1046.37 (2015 low) at 1380.36. If that happens, it could also markets bearish reversal in Dollar for medium term term. But of course, gold has to take out above mentioned 1346.71 near term resistance first. Let’s see how it goes.

                    Time for a rebound? A look at DOW, S&P 500 and NASDAQ after another day of selloff

                      By
                      ActionForex.com
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                      The recovery attempt in the US stock markets failed overnight. DOW lost another -545.91 pts or -2.13% to close at 25052.83. S&P 500 dropped -57.31 pts or -2.06% to 2728.37. NASDAQ fell -92.99 pts or -1.25% to 7329.06.

                      DOW move further away from 55 day EMA affirms the case that it’s in medium term correction. That is, fall from 26951.81 is corrective the up trend from 15450.56, in a less bearish case. Eventually, it might decline to 38.2% retracement of 15450.56 to 26951.81 at 22558.33 before forming a real bottoming. Nonetheless, the next line of defense come is between 23997.21 structural support and 55 week EMA (now at 24512.04). Some interim support could be seen there. But looks like there’s some more downside for the near term.

                      However, S&P 500 is already in proximity to equivalent support zone. That is, 2691.99 structure support and 55 week EMA (now at 2713.94).

                      NASDAQ is well above equivalent structure support at 6926.97. But it’s already pressing 55 week EMA (now at 7306.12).

                      So, the conditions are starting to be in place for an interim rebound, before weekly close or next week. (Well admittedly, it actually sounds rather trivial after the steep losses this week, stocks are ready for short covering recovery.)

                       

                      WTO: Global trade to fall by 13-32% this year on coronavirus pandemic

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                        ActionForex.com
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                        WTO said that world trade is expected fall by between -13% and -32% in 2020 as coronavirus pandemic disrupts normal economic activity and life. While the ere “wide range of possibilities”, the decline will “likely exceed” the trade slump on the 2008-09 global financial crisis.

                        Nearly all regions will suffer double-digit declines in trade volumes in 2020, with exports from North America and Asia hit hardest. Under the optimistic scenario, the recovery will be strong enough to bring trade close to its pre-pandemic trend. The pessimistic scenario only envisages a partial recovery.

                        Full release here.

                        Fed Daly prefers measured approach after March hike

                          By
                          ActionForex.com
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                          San Francisco Fed President Mary Daly told CBS on Sunday, “it is obvious that we need to pull some of the accommodation out of the economy”. However, “history tells us with Fed policy that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability that we’re trying to achieve,” she warned.

                          “What I would favor is moving in March and then watching, measuring, being very careful about what we see ahead of us — and then taking the next interest rate increase when it seems the best place to do that. And that could be in the next meeting or it could be a meeting away,” Daly said.

                          Canada in deflation with CPI at -0.2% in April

                            By
                            ActionForex.com
                            -

                            Canada CPI turned negative in April, dropped to -0.2% yoy, down from March’s 0.9% yoy. That’s also slightly below expectation of -0.1% yoy. The decline was mainly due to fall in energy prices as a result of coronavirus pandemic.

                            CPI common slowed slightly by -01.% to 1.6% yoy, below expectation of 1.7% yoy. CPI median, was unchanged at 2.0% yoy, above expectation of 1.9% yoy. CPI trimmed was unchanged at 1.8% yoy, matched expectations.

                            Also from Canada, whole sale sales dropped -2.2% mom in March, better than expectation of -4.5% mom.

                            Japan Suzuki: Will take appropriate action on excessive Yen moves

                              By
                              ActionForex.com
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                              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.

                              US core inflation accelerated to 2.3%, Canada GDP beat expectations

                                By
                                ActionForex.com
                                -

                                Inflation data released from the US are rather solid. Headline PCE accelerated to 2.3% yoy in May, up from 2.0% yoy and beat expectation of 2.0% yoy. Core PCE also jumped to 2.0% yoy, up from 1.8% yoy and beat expectation of 1.8% yoy. Personal income rose 0.4% in May, matched expectation. Personal spending, though rose 0.2%, below expectation of 0.4%.

                                The data support Fed’s projection of two more rate hike this year, in September and December.

                                Canada GDP rose 0.1% mom in April, above expectation of 0.0% mom. IPPI rose 1.0% mom in May while RMPI rose 3.8% mom.

                                BoC Governor Stephen Poloz has made himself very clear this week. Economic models suggested that there should be a rate hike soon. But models are just part of the equation for the decision. Trade tensions and impacts of higher interest rates on household are factors to consider too. To us, it’s 50/50 for BoC to hike in July.

                                UK CBI: Optimism of SME manufacturers worst since Brexit referendum

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                                  ActionForex.com
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                                  According to a CBI survey, business optimism amongst SME manufacturing firms deteriorated in the three months to October, at the fastest pace since July 2016, around the time of Brexit referendum. Business sentiment dropped to -32 in the three months to October. 64% of respondents cited cited political/economic conditions abroad as likely to limit export orders – a survey record high.

                                  Alpesh Paleja, CBI Lead Economist, said: “Activity among SME manufacturers remains listless. Firms are caught between the perfect storm of perennial Brexit uncertainty at home, and sluggish growth in the global economy. As well as hitting output, orders and hiring, these issues are depressing investment plans across the board.

                                  “As a first step to lifting the malaise, the next government must get behind business to deliver on a Brexit deal, particularly one that unlocks a smooth transition period. Then the real heavy lifting can begin on forging a future relationship with our biggest trading partner. Ending political uncertainty will enable a renewed focus on domestic priorities, which is critical for the economy’s longer-term growth.”

                                  Full release here.

                                  SECO downgrades Swiss 2021 GDP forecast to 3.2%

                                    By
                                    ActionForex.com
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                                    SECO downgraded Swiss GDP growth forecast to 3.2% in 2021, comparing to June forecast of 3.6%. Growth is projected to further accelerate to 3.4% in 2022. It added that “the economic recovery is set to continue as expected, though growth is initially less dynamic than forecast previously.” Nevertheless, “economic activity is likely to have exceeded pre-crisis levels during the summer.”

                                    SECO added, “highly exposed sectors such as international tourism are likely to emerge from the crisis more hesitantly”. But, “provided that severely restrictive measures such as business lockdowns are not imposed in the coming months, the economic recovery should continue uninterrupted.”

                                    Full release here.

                                    RBA stands pat and pledged not to raise interest rate until progress is made

                                      By
                                      ActionForex.com
                                      -

                                      RBA kept monetary policy unchanged as widely expected. The cash rate is held at 0.25% and target of 3-year AGS yield at 0.25% too. The central bank also pledged to maintain the accommodative approach for “as long as it is required”. Also, “the Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.”

                                      RBA also said the employment conditions have “stabilised” recently and the economic downturn has been “less severe than earlier expected”. However, the “nature and speed” of economic recovery remains “highly uncertain”. Uncertainty is also ‘affecting consumption and investment plans”. The pandemic is prompting many firms to “reconsider their business models”.

                                      Full statement here.

                                      Eurozone retail sales flat in April, EU up 0.1% mom

                                        By
                                        ActionForex.com
                                        -

                                        Eurozone retail sales was unchanged for the month in April, below expectation of 0.2% mom. Volume of retail trade increased by 0.5% mom for non-food products, while it decreased by -0.5% mom for food, drinks and tobacco and by -2.3% mom for automotive fuels.

                                        EU retail sales rose 0.1% mom. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in the Croatia (+3.4%), Luxembourg (+3.3%) and Sweden (+3.1%). The largest decreases were observed in Slovakia (-5.8%), Romania (-3.7%) and Slovenia (-2.4%).

                                        Full Eurozone and EU retail sales release here.

                                        UK Johnson to set out Brexit negotiation approach as EU dropped call for intensification of talks

                                          By
                                          ActionForex.com
                                          -

                                          EU leaders concluded in the summit to give a further “two to three weeks” for negotiations with UK on post Brexit relationship. But they also demand the UK to make the necessary moves to make an agreement possible”. The final communique also asked chief negotiator, Michel Barnier, to “continue negotiations in the coming weeks”, dropping the call for “intensification” of talks as included in an earlier draft.

                                          “We’re available, we shall remain available until the last possible day,” Barnier said. “The negotiations aren’t over – we want to give these negotiations every chance to be successful. I shall say to David Frost we’re prepared to speed up negotiations in the next few days.”

                                          UK’s chief negotiator, David Frost, tweeted: “Disappointed by the conclusions on UK/EU negotiations. Surprised EU is no longer committed to working ‘intensively’ to reach a future partnership as agreed with [the European commission president, Ursula von der Leyen] on 3 October…. Also surprised by suggestion that to get an agreement all future moves must come from UK. It’s an unusual approach to conducting a negotiation.”

                                          Frost also tweeted: “Boris Johnson will set out UK reactions and approach tomorrow (Friday) in the light of his statement of 7 September.”

                                           

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