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Fed Harker wants rate to get above 3.4%, open to higher

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    ActionForex.com
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    Philadelphia Fed President Patrick Harker told CNBC today, “I’d like to see us get to, say, above 3.4% – that was the last median in the SEP (Summary of Economic Projections) – and then maybe sit for a while.”

    “But if the data says we need to keep increasing, we keep increasing. We’ve got to get inflation under control. That is Job One,” he added.

    As for September meet, “whether it’s 50 or 75 I can’t say right now,” he said. But he noted that a 50bps hike is still a “substantial” one.

    GBP/AUD resumes down trend, EUR/AUD breaking down

      By
      ActionForex.com
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      While Dollar is consolidating ahead of Jackson Hole Symposium, Australian Dollar is taking up some buying, in particular against Europeans. The Aussie is apparently given a lift after China unveiled new stimulus package of RMB 300B (around USD 44B). The news also lifted Hong Kong HSI up 3.63 today. On the other hand, Euro and Sterling are feeling heavy as concern over further weaponization of natural gas supply by Russia.

      GBP/AUD’s down trends resumes today by breaking through 1.7022 low. While the rebound from 1.7022 was strong, it was limited well below 1.7649 resistance, as well as 55 day EMA. Near term bearishness is clearly maintained.

      For now, outlook will stay bearish as long as 1.7430 resistance holds, even in case of another strong recovery. Next target is 61.8% projection of 1.9218 to 1.7171 from 1.7649 at 1.6384.

      EUR/AUD is also trying to break through 1.4318 low. Sustained trading below there will confirm resumption of larger down trend. Next target is 1.3624 (2017 low). Outlook will stay bearish as long as 1.4712 resistance holds, in case of recovery.

      US GDP contracted -0.6% annualized in Q2, less than first estimate

        By
        ActionForex.com
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        Based on the second estimate, US GDP contracted at -0.6% annualized rate in Q2, comparing to first estimate of -0.9%, PCE price index and core PCE price index were left unchanged at 7.1% and 4.4% respectively.

        BEA said: “The decrease in real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, and state and local government spending, that were partly offset by increases in exports and consumer spending. Imports, which are a subtraction in the calculation of GDP, increased”.

        Full release here.

        US initial jobless claims dropped to 243k, below expectations

          By
          ActionForex.com
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          US initial jobless claims dropped -2k to 243k in the week ending August 2, below expectation of 256k. Four-week moving average of initial claims rose 1.5k to 247.

          Continuing claims dropped -19k to 1415k in the week ending August 13. Four-week moving average of continuing claims rose 12.5k to 1425k.

          Full release here.

          ECB accounts: A very large number of members supported 50bps hike

            By
            ActionForex.com
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            In the accounts of ECB’s July 20-21 meeting, it’s noted that “a very large number of members” agreed that it was appropriate to hike interest rates by 50bps. The 50bps hike was seen as “warranted in view of the worsening of the inflation outlook since the Governing Council’s June meeting”.

            “Some members” argued in favor of a 25bps hike as that was the “intended move communicated” at the June meeting. Also, “with recession risks looming25bps hike was seen as more in line with a “gradual monetary policy normalization.” It’s also warned that deviation from earlier guidance would “add to the prevailing market uncertainties”. But some also argued that a 50bps hike provided more clarity for market participants.

            It’s also emphasized that the 50bps hike “did not constitute an upward shift in the interest rate path but rather a frontloading of the policy normalisation.” As for September meeting, there was broad support to move to a “meeting-by-meeting approach” to interest rates.

            Full accounts here.

            Germany Ifo Business Climate ticked down to 88.5, trade deteriorates further

              By
              ActionForex.com
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              Germany Ifo Business Climate dropped slightly from 88.7 to 88.5 in August, above expectation of 86.7. Current Assessment index ticked down from 97.7 to 97.5. Expectations Index also edged down from 80.4 to 80.3.

              By sector, manufacturing was unchanged at -6.9. Services rose from 1.0 to 1.3. Trade dropped further from -21.6 to -25.8. Constructions improved from -16.2 to -14.5.

              Ifo said, “uncertainty among the companies remains high, and the German economy as a whole is expected to shrink in the third quarter.”

              For trade, Ifo said that “many enterprises are facing a dilemma: high inflation is dragging down their business, but they can hardly avoid raising prices due to increased costs.”

              Full release here.

              New Zealand retail sales volume down -2.3% qoq in Q2, sales value relatively unchanged

                By
                ActionForex.com
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                New Zealand retail sales volume declined -2.3% qoq in Q2 to NZD 26B, worse than expectation of 1.7% qoq rise. 10 of 15 industries had lower seasonally adjusted sales volumes comparing with Q1.

                Retail sales value was relatively unchanged, up slightly by NZD 1.1m to NZD 29B. 8 of 15 industries had lower seasonally adjusted sales values.

                Full release here.

                BoJ Nakamura: Cannot achieve price target in a sustained, stable fashion yet

                  By
                  ActionForex.com
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                  BoJ board member Toyoaki Nakamura said in a speech that “Japan’s economy is still in the midst of recovering from the pandemic-induced slump.”

                  “Shifting to a monetary tightening stance, at a time when demand remains short of supply, would hurt the economy and act as a big restraint to household and business activity,” he said.

                  “While core consumer inflation may accelerate toward year-end due to rising prices of energy, food and durable goods, such a boost will likely dissipate,” he noted. “Japan is not yet in a situation where it can achieve our price target in a sustained, stable fashion”.

                  US durable goods orders flat in July, ex-transport orders rose 0.3% mom

                    By
                    ActionForex.com
                    -

                    US durable goods orders dropped -0.0% mom to USD 273.5B in July, well below expectation of 0.6% mom rise. Ex-transport orders rose 0.3% mom, above expectation of 0.2% mom. Ex-defense orders rose 1.2% mom. Transportation equipment drove the decrease and dropped -0.7% mom to USD 93.0B.

                    Shipments of manufactured durables goods rose 0.4% mom to USD 270B. Transportation equipment shipments rose 1.1% mom to USD 86.3B.

                     

                    Full release here.

                    ECB Rehn: Digital native form of safe central bank money could enhance stability

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                      ActionForex.com
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                      ECB Governing Council member Olli Rehn said, “a digital euro would give people an additional choice about how to pay and would make it easier to do so in an increasingly digital economy.”

                      “A digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future financial system,” he added.

                      Rehn expected the investigation phase for digital Euro to conclude in October 2023.

                      WTI oil ready for a bounce through 100

                        By
                        ActionForex.com
                        -

                        Oil prices rebounded this week on the prospect of production cut by OPEC+. Saudi Energy Minister Prince Abdulaziz bin Salman was quoted earlier that OPEC+ has the commitment, flexibility, and means to deal with challenges and provide guidance including cutting production at any time and in different forms. However, upside is so far capped as Reuters, based on information from nine OPEC sources, said productions cuts may not be imminent, and might coincide with Iran’s return to the market.

                        Technically, the conditions for a stronger bounce for WTI crude oil are there. Bullish convergence conditions are seen in both 4 hour and daily MACD. A near term falling channel resistance is already broken. More importantly, 86.41 is close enough to an important cluster support at 85.92, with 100% projection of 131.82 to 93.47 from 124.12 at 85.77.

                        Immediate focus is now on 95.91 resistance. Firm break there should confirm near term reversal for 103.84 resistance and possibly above. Also, in case of another fall, strong support is expected from 85.77/92 to contain downside.

                        Fed Kashkari: US economy in a completely unbalanced situation

                          By
                          ActionForex.com
                          -

                          Minneapolis Fed President Neel Kashkari said yesterday that the US economy is in a “completely unbalanced situation” of “maximum employment” and “very high inflation”. He said, “it’s very clear: We need to tighten monetary policy to bring things into balance.”

                          “When inflation is 8% or 9%, we run the risk of unanchoring inflation expectations and leading to very bad outcomes that would cause us to have to be very aggressive — Volcker-esque — to then re-anchor them,” he said.

                          “We needed to err on making sure we are getting inflation and only relax when we see compelling evidence that inflation is well on its way back down to 2%,” he added.

                          US PMI composite output dropped to 45.0, further disconcerting signs

                            By
                            ActionForex.com
                            -

                            US PMI Manufacturing dropped from 52.2. to 51.3 in August, a 25-month low. PMI Services dropped from 47.3 to 44.1, a 27-month low. PMI Composite output dropped from 47.7 to 45.0, a 27-month low.

                            Siân Jones, Senior Economist at S&P Global Market Intelligence said:

                            “August flash PMI data signalled further disconcerting signs for the health of the US private sector. Demand conditions were dampened again, sparked by the impact of interest rate hikes and strong inflationary pressures on customer spending, which weighed on activity. Gathering clouds spread across the private sector as services new orders returned to contractionary territory, mirroring the subdued demand conditions seen at their manufacturing counterparts. Excluding the period between March and May 2020, the fall in total output was the steepest seen since the series began nearly 13 years ago.

                            “Lower new order inflows and continued efforts to rein in spending led to the slowest uptick in employment for almost a year. Reports of challenges finding suitable candidates started to be countered by those companies noting that voluntary leavers would not be replaced with any immediacy due to uncertainty regarding demand over the coming months.

                            “One area of reprieve for firms came in the form of a further softening in inflationary pressures. Input prices and output charges rose at the slowest rates for a year-and-a-half amid reports that some key component costs had fallen. Although pointing to an ongoing movement away from price peaks, increases in costs and charges remained historically robust. At the same time, delivery times lengthened at the slowest pace since October 2020, albeit still sharply, allowing more firms to work through backlogs.”

                            Full release here.

                            ECB Panetta: Slowdown or recession would mitigate inflationary pressures

                              By
                              ActionForex.com
                              -

                              ECB Executive Board Member Fabio Panetta warned in a conference today, “the probability of a recession is increasing. If we will have a significant slowdown or even a recession, this would mitigate inflationary pressures.”

                              “I think that (policy) adjustments are possible but the most recent evolution of the economy should induce us to exercise one of the main features of central bankers which is prudence,” he said.

                              He also added that real rates are “not too far from the estimated neutral level.

                              UK PMI manufacturing dived to 46 in Aug, services ticked down to 52.5

                                By
                                ActionForex.com
                                -

                                UK PMI Manufacturing dropped sharply from 52.1 to 46.0 in August, well below expectation of 51.3. That’s also the lowest level in 27 months. PMI Services ticked down from 52.6 to 52.5, above expectation of 52.0, an 18-month low. PMI Composite dropped from 52.1 to 50.9, an 18-month low.

                                Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence said:

                                “The UK private sector moved closer to stagnation in August, as mild growth of activity across the service sector only just offset a deepening downturn at manufacturers. Waning customer demand amid the weaker economic outlook, and shortages of both staff and inputs, were reported to have hit goods producers hard, with firms registering the quickest drops in output and new work since May 2020.

                                Excluding the initial phase of the pandemic in early-2020, the reduction in manufacturing output was the quickest seen since the start of 2009. Meanwhile, the service sector registered the weakest increase in activity since the recovery began in early 2021.”

                                Full release here.

                                Eurozone PMI composite dropped to 49.2 in Aug, economic contraction in Q3

                                  By
                                  ActionForex.com
                                  -

                                  Eurozone PMI manufacturing dropped from 49.8 to 49.7 in August, above expectation of 49.0, a 26-month low. PMI Services dropped from 51.2 to 50.2, below expectation of 50.5, a 17-month low. PMI Composite dropped from 49.9 to 49.2, an 18-month low.

                                  Andrew Harker, Economics Director at S&P Global Market Intelligence said: “The latest PMI data for the eurozone point to an economy in contraction during the third quarter of the year. Cost of living pressures mean that the recovery in the service sector following the lifting of pandemic restrictions has ebbed away, while manufacturing remained mired in contraction in August, seeing another record accumulation of stocks of finished goods as firms were unable to shift products in a falling demand environment. This glut of inventories suggests little prospect of an improvement in manufacturing production any time soon.”

                                  Full release here.

                                  Germany PMI composite dropped to 47.6, continued weak manufacturing and slowdown in service

                                    By
                                    ActionForex.com
                                    -

                                    Germany PMI Manufacturing recovered from 49.3 to 49.8 in August, above expectation of 48.1.PMI Services dropped from 49.7 to 48.2, below expectation of 49.0, an 18-month low. PMI Composite dropped from 48.1 to 47.6, a 26-month low.

                                    Phil Smith, Economics Associate Director at S&P Global Market Intelligence said: “The PMI data paint a bleak picture of the German economy midway through the third quarter, showing a deepening decline in private sector business activity. Continued weakness in manufacturing is being compounded by a slowdown in the service sector, with surveyed businesses reporting a growing strain on demand from high inflation and increased interest rates.”

                                    Full release here.

                                    France PMI composite dropped to 49.8, entered into contraction

                                      By
                                      ActionForex.com
                                      -

                                      France PMI Manufacturing dropped from 49.5 to 49.0 in August, above expectation of 48.8, a 27-month low. PMI Services dropped from 53.2 to 51.0, below expectation of 53.5, a 16-month low. PMI Composite dropped from 51.7 to 49.8, an 18-month low.

                                      Joe Hayes, Senior Economist at S&P Global Market Intelligence said: “August flash PMI data for France suggest the economy has now entered into contraction for the first time in a year-and-a-half as a sharp manufacturing downturn more than offset only a marginal increase in service sector activity…

                                      “High inflation has squeezed purchasing power among consumers and businesses alike, although we saw further signs to suggest we have passed peak price pressures… The downward trend in the France PMI may well persist now demand for goods and services is falling.”

                                      Full release here.

                                      EUR/CAD downside breakout, 1.2812 projection level next

                                        By
                                        ActionForex.com
                                        -

                                        Following broad-based selloff in Euro, EUR/CAD finally broke out of range this week and it’s now resuming long term down trend. Outlook is clearly bearish with the cross staying well inside falling channel, with recovered capped by falling 55 day EMA.

                                        Next near term target is 61.8% projection of 1.3713 to 1.2970 from 1.3271 at 1.2812. The main question is whether EUR/CAD would accelerate downward further after hitting 1.2812. In that case, the cross could reach 100% projection at 1.2528 and rather quick manner.

                                        There is no clear support level ahead until 2012 low at 1.2127. In any case, for now, outlook will stay bearish as long as 1.3271 resistance holds.

                                         

                                        Japan PMI manufacturing dropped to 51 in Aug, services down to 49.2

                                          By
                                          ActionForex.com
                                          -

                                          Japan PMI Manufacturing dropped from 52.1 to 51.0 in August, below expectation of 51.8. PMI Manufacturing Output dropped from 49.7 to 48.3. That’s also the lowest level in 19 months. PMI Services dropped from 50.3 to 49.2, first contraction since March. PMI Composite dropped from 50.2 to 48.9, first contraction since February.

                                          Usamah Bhatti, Economist at S&P Global Market Intelligence, said: “The latest Flash PMI data showed that Japanese private sector activity declined for the first time since February midway through the third quarter. Both manufacturing and services companies recorded a contraction in output in August, with the former falling at the fastest pace for 11 months.

                                          “August data signalled the second-weakest reading in the composite index so far this year, though the rate of deterioration was only mild. Of concern was the amount of new business received by private sector firms, which reduced for the first time in six months and pointed to further weaknesses to come.”

                                          Full release here.

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