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Fed hikes 75bps, rate to reach 4.4% by year end

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    ActionForex.com
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    Fed raises interest rate by 75bps to 3.00-3.25% as widely expected, by unanimous vote. In the accompanying statement, Fed said job gains have been “robust” with unemployment rate “remained low”. Inflation remains “elevated”. FOMC would be ” prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”

    In the new economic projections, Fed projects (median) interest rates to reach 4.4% in 2022, 4.6% in 2023, before falling back to 3.9% in 2024, and then 2.9% in 2025. GDP growth is projected to be at 0.2% in 2022, 1.2% in 2023, 1.7% in 2024, and then 1.8% in 2025. Unemployment rate is projected to be at 3.8% in 2022, 4.4% in 2023, 4.4% in 2024, and then 4.3% in 2025. Core PCE inflation is projected to be at 4.5% in 2022, 3.1% in 2023, 2.3% in 2024, and then 2.1% in 2025.

    Full statement here.

    Full projection here.

    BoE Broadbent: Transitory never meant inflation effects gone in even 12 months

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      ActionForex.com
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      BoE Deputy Governor Ben Broadbent reiterated in a speech that “it takes time for policy to work”. “A change in interest rates has its peak impact on inflation only after a significant delay – probably eighteen months or more”.

      When global central bankers used the word “transitory” in describing current surge in inflation, “they do not mean (and never meant) that these effects will be gone in one, two or even twelve months”.

      “The relevant question is whether the global factors currently pushing up on goods prices are still there by the time a policy decision taken today could have any significant effect of its own,” he added.

      “What is their prospective contribution to inflation in eighteen, twenty-four months and beyond? This is the horizon that matters for policy and against which the word ‘transitory’ should be measured.”

      Full speech here.

      Germany PMI composite jumped to 54.3, surprisingly resilient performance

        By
        ActionForex.com
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        Germany PMI Manufacturing rose from 57.4 to 60.5 in January, above expectation of 57.0, a 5-month high. PMI Services also rose from 48.7 to 52.2, above expectation of 48.0. PMI Composite rose form 49.9 to 54.3, a 4-month high.

        Phil Smith, Economics Associate Director, at IHS Markit said: “January’s flash PMI numbers came in comfortably above consensus to show a surprisingly resilient performance from the German economy at the start of the year… Manufacturing is expected to stage a recovery in 2022 as supply bottlenecks ease… January’s services numbers, showing activity recovering slightly after the decline at the end of last year, were another positive surprise… Still, rising costs remain a concern for businesses, with the survey data showing that input prices are continuing to rise sharply and on multiple fronts.”

        Full release here.

        Gold completes head and shoulder top, how low will it go?

          By
          ActionForex.com
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          Gold’s decline from 2009.26 continued today and the break of 1969.67 support completed a head and shoulder top pattern (ls: 1997.00, h: 2009.26, rs: 2003.90). The development suggests that it’s already in correction to the whole rally from 1810.26. Further decline should be seen towards 38.2% retracement of 1810.26 to 2009.26 at 1933.24.

          Overall outlook is unchanged that correction from 2062.95 has completed with three waves down to 1810.26. Hence, strong support should be seen from 1933.24, which is close to 55 D EMA (now at 1933.62), to contained downside. Another rally through 2009.26 to retest 2062.95 high should be seen sooner rather than later.

          However, sustained break of 1933 support zone, will dampen this above bullish view, and open up deeper fall 61.8% retracement at 1886.27, and possibly below.

          RBNZ Robbers: We’re progressing the work for additional instruments

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            ActionForex.com
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            RBNZ Assistant Governor Simone Robbers said in a speech that the central bank recognized the “possible need for further monetary stimulus”. Thus, they’re “progressing” the work to deploy additional instruments, including Funding for Lending Programme (FLP), a negative OCR, and purchases of foreign assets.

            She also noted there is still a “high degree of uncertainty around the economic outlook”. It is ” possible that bank resilience will be tested in the coming months as loan losses rise materially from current low levels”. She also urged financial institutions to play a role here and they should be “reassessing how they are supporting the recovery and best serving their customers”

            Full speech here.

            ECB to end net PEPP purchases in March, temporarily raise APP purchases in Q2 and Q3

              By
              ActionForex.com
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              ECB announced to “discontinue”net asset purchases under the pandemic emergency purchase programme (PEPP) at the end of March 2022. Reinvestment horizon for PEPP will be extended until at least the end of 2024.

              Monthly net asset purchases under the original asset purchase programme (APP) will be doubled to EUR 40B in Q2, then slow to EUR 30B in Q3, and back to EUR 20B in Q4 for “as long as necessary”.

              Meanwhile, main refinancing rate, marginal lending facility rate and deposit facility rate were held unchanged at 0.00%, 0.25%, and -0.50% respectively. Forward guidance is maintained that there will be a “transitory period in which inflation is moderately above target.”

              Full statement here.

              HK HSI dives as Yellen visit China amid rising US-China tensions

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                ActionForex.com
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                Hong Kong HSI is taking a hit today as it gapped down at open and further sell-offs materialized during the initial part of Asian trading session. This market movement mirrors intensifying investor concerns as US Treasury Secretary Janet Yellen starts a four-day visit to China. While the intention behind Yellen’s visit is to de-escalate potential conflicts between these two economic behemoths, atmosphere has notably soured this week.

                Earlier in the week, China struck a discordant note by announcing fresh restrictions on export of several critical minerals used in manufacture of semiconductors and solar panels. This move appears to be a tit-for-tat response to the tech export limitations that the US has imposed on China, limiting the sale of advanced computer chips. Further adding to the apprehension, US government is reported to be contemplating additional measures to restrict China’s access to US-based cloud computing services.

                On a separate front, China delivered another blow to international diplomatic relations when it abruptly canceled a visit by European Union foreign policy chief Josep Borrell, scheduled for next week, according to an EU spokesperson. The Chinese authorities have not yet disclosed the reasons behind this unexpected cancellation.

                From a technical perspective, today’s market turbulence in Hong Kong, marked by a gap down followed by a sharp drop, appears to validate rejection by 55 D EMA (now at 19428.57). Fall from 20155.92 is likely to be another chapter in the overall descent from 22700.85. As decline progresses, a drop below 18044.85 low is expected. However, substantial support is still expected from 61.8% retracement of 14597.31 to 22700.85 at 17692.86, and this could potentially spur a reversal. Let’s see how it goes.

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

                  By
                  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.

                  Gold hits record against Aussie, breaks 2000 against Dollar

                    By
                    ActionForex.com
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                    Gold breaks above 2000 handle against US Dollar today, and even hit a new record high surpasses 3000 handle against Australian Dollar . Risk selloff picks up momentum as European investors start to react to weekend’s news about UBS takeover of the troubled Credit Suisse. Apparently, the announcement did little to calm investors’ nerve.

                    For XAU/AUD, it broke through 2873.61 record high (made in 2020) last week and the up trend continues today. For now, near term outlook will stay bullish as long as 2871.30 support holds. Immediate focus is on 100% projection of 2438.01 to 2795.89 from 2648.89 at 3006.77. Sustained break there could prompt further upside acceleration to 161.8% projection at 3227.93. That level is close to long term level of 61.8% projection of 1604.40 to 2873.61 from 2438.01 at 3222.38.

                    Meanwhile XAU/USD’s rise from 1614.60 is on track to 61.8% projection of 1614.60 to 1959.47 from 1804.48 at 2017.60. A firm break through this level will pave the way for a retest of the 2074.84 record high. In any case, outlook in XAU/USD will remain bullish as long as 1936.15 resistance turned support holds. The long-term uptrend could also be set to resume, potentially reaching 61.8% projection of 1160.17 to 2074.85 from 1614.60 at 2179.86.

                     

                    German Ifo rose to 99.6, resilient economy except manufacturing

                      By
                      ActionForex.com
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                      Germany Ifo Business Climate improved to 99.6 in March, up from 98.7 and beat expectation of 98.5. That’s also the first increase following six declines in a row. Current Assessment rose 0.2 to 103.8, beat expectation of 102.9. Expectations gauge also rose to 95.6, versus consensus of 94.0.

                      Looking at the details, manufacturing dropped from 9.1 to 6.6, seventh decline in a row. But services rose from 21.3 to 26.0. Trade rose from 4.9 to 8.2. Construction rose from 18.0 to 20.3.

                      Ifo President Clemens Fuest noted “sentiment among German business leaders has improved somewhat”. And “companies are somewhat more satisfied with their current business situation, and they are decidedly more optimistic regarding business in the coming six months.” He added “the German economy is showing resilience.”

                      Ifo economist Klaus Wohlrabe said, “Brexit uncertainty is particularly hitting the industrial sector. The other sectors don’t appear to be affected” .

                      Full release here.

                      Eurozone Sentix dropped to -10, coronavirus containment has negative impacts on recovery

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                        ActionForex.com
                        -

                        Eurozone Sentix Investor Confidence dropped to -10.0 in November, down from -8.3, but beat expectation of -14.0. Current Situation Index, ticked down from -32.0 to -32.3. But Expectations Index dropped form 18.8 to 15.3, hitting the lowest since May.

                        Sentix said, the coronavirus containment measures taken by European governments are “not only a human burden for citizens”, but also have a “negative impact on the economic recovery process”. The so-called “lockdown light” has so far had little effect on investors’ assessment of the situation. The decline in expectation could be worst if not for better international situation. Also, ECB’s further easing may also had a positive effect on inventors.

                        Full release here.

                        Gold bounded in range, more upside still in favor through 1214

                          By
                          ActionForex.com
                          -

                          Gold continues to gyrate in range of 1187.58/1214.30. More sideway trading could still be seen. But as long as 1187.58 minor support holds, rebound form 1160.36 is in favor to extend higher. Break of 1214.30 will 38.2% retracement of 1365.24 to 1160.36 at 1238.62.

                          For now, such rebound from 1160.36 is seen as a corrective move. Hence, we’d expect strong resistance from 1238.62 to limit upside. On the downside, break of 1187.58 will suggest that the rebound is completed and bring retest of 1160.36 low.

                          German ZEW rose to 61.8, despite uncertainty about further course of lockdown

                            By
                            ActionForex.com
                            -

                            German ZEW economic sentiment rose to 61.8 in January, up from 55.0, above expectation of 60.0. Current situation index edged up to -66.4, from -66.5, above expectation of -68.0. Eurozone economic sentiment rose to 58.3, up from 54.4, above expectation of 45.5. Eurozone current situation dropped -3.2 pts to -78.9.

                            “Despite the uncertainty about the further course of the lockdown, the economic outlook for the German economy has improved slightly. The results of the ZEW Financial Market Survey in January show that export expectations in particular have risen significantly,” comments ZEW President Professor Achim Wambach.

                            Full release here.

                            NASDAQ extends rebound as focus turns to NFP

                              By
                              ActionForex.com
                              -

                              US non-farm payroll employment is the main focus for today. The US economy is expected to add 325k jobs in May. Unemployment rate is expected to drop from 3.6% to 3.5%. Average hourly earnings are expected to rise another 0.4% mom. Looking at related data, ADP private jobs grew just 128k, well below expectations. ISM manufacturing employment dropped into contraction reading of 49.6. Four-week moving average of initial claims also rose notably from 188k to 206k. There is risk of downside surprise in the heading NFP number today. But wages growth would be the one that matters more.

                              US stocks are trying to extend rebound this week, even though some Fed officials tried to talk down the prospect of a September pause in tightening. NASDAQ’s rebound form 11035.68 is in progress for 55 day EMA (now at 12610.13). Sustained break there will raise the chance that whole fall from 16212.22 has completed in form of a three wave correction. Stronger rally would then be seen back towards trendline resistance at around 13800 later in the month. Such development would cap rally attempts in the greenback.

                              US ADP jobs grew 125k, slowdown most pronounced at manufacturers and small companies

                                By
                                ActionForex.com
                                -

                                US ADP report showed private sector employment grew 125k in October, slightly below expectation of 132k. Prior month’s figure was revised sharply down from 135k to 93k. Looking at the details, small business jobs added 17k, medium business 64k, large business 44k. By sector, goods-producing jobs dropped -13k while service-providing jobs rose 138k.

                                “While job growth continues to soften, there are certain segments of the labor market that remain strong,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “The goods producing sector showed weakness; however, the healthcare industry and midsized companies had solid gains.”

                                Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth has throttled way back over the past year. The job slowdown is most pronounced at manufacturers and small companies. If hiring weakens any further, unemployment will begin to rise.”

                                Full release here.

                                US-Canada trade talk resumed, making good progress

                                  By
                                  ActionForex.com
                                  -

                                  Canadian Foreign Affairs Minister Chrystia Freeland returned to the table with US Trade Representative Robert Lighthizer yesterday. She said the talks were constructive and they’re “making good progress”. She added that “we continue to get a deeper and deeper understanding of the concerns on both sides.” But Freeland declined to comment on how close the two sides were. The negotiation is still work in progress as Freeland’s team have sent the US “a number of issues to work on and they will report back to us in the morning (Thursday), and we will then continue our negotiations.”

                                  Trump continued his bluff as he told reporters that if the talk doesn’t work out, “that’s going to be fine for the country, for our country.” However, “It won’t be fine for Canada”. He also reiterated that the US has a “very strong position” in the negotiation. At the same time, Canada and other countries “have been taking advantage of the United States for many years.”

                                  Canadian Prime Minister Justin Trudeau reiterated his firm stance on the Chapter 19 dispute resolution mechanism, that was seen as a “red line” Trump. Trudeau emphasized that “We need to keep the Chapter 19 dispute resolution because that ensures that the rules are actually followed. And we know we have a president who doesn’t always follow the rules as they’re laid out.”

                                  Fed’s Goolsbee on monetary policy: Pull out the turkey early for residual heat

                                    By
                                    ActionForex.com
                                    -

                                    Chicago Fed President Austan Goolsbee, in an interview with Marketplace overnight, expressed concerns about the risks of maintaining high interest rates for an extended period. Goolsbee emphasized the importance of adjusting the level of restrictiveness in monetary policy as the economy moves closer to inflation target.

                                    He likened this to cooking a turkey, suggesting that just as a turkey should be removed from the oven before it’s fully done to account for “residual heat”, similarly, monetary policy should be eased before inflation hits the target to prevent overshooting.

                                    Goolsbee noted that “once you believe that you are on the path to get inflation to target, then the amount of restrictiveness that you need to apply needs to be less.”

                                    Additionally, Goolsbee highlighted the progress made in controlling inflation, particularly outside the food sector. He pointed out that inflation has been coming down, and although it hasn’t reached the target level yet, 2023 is on track to see the largest drop in the inflation rate in 71 years.

                                    Eurozone CPI unchanged at 0.9% yoy in Feb, core CPI slowed to 1.1% yoy

                                      By
                                      ActionForex.com
                                      -

                                      Eurozone CPI was unchanged at 0.9% yoy in February, below expectation of 1.0% yoy. CPI core slowed to 1.1% yoy, down from 1.4% yoy, matched expectations.

                                      Looking at the main components, food, alcohol & tobacco is expected to have the highest annual rate in February (1.4%, compared with 1.5% in January), followed by services (1.2%, compared with 1.4% in January), non-energy industrial goods (1.0%, compared with 1.5% in January) and energy (-1.7%, compared with -4.2% in January).

                                      Full release here.

                                      Gold may lose momentum above 2100 despite strong rally

                                        By
                                        ActionForex.com
                                        -

                                        Gold accelerated sharply higher last week, propelled in part by the significant decline in US treasury yields on Friday. Technically, the key question now is whether the bounce from 1972.86 signifies the commencement of long-term uptrend resumption, or merely constitutes the second leg of the medium term corrective pattern from 2134.97.

                                        For now, favor is mildly on the latter case. Hence, while further rally is likely through 100% projection of 1972.86 to 2088.24 from 1984.05 at 2099.43, Gold should start to lose upside momentum above there, and top below 2134.97.

                                        Nevertheless, further upside acceleration above 2099.43, or around 2100 in short, would argue that Gold is already ready to resume the long term up trend.

                                        Eurozone Sentix dropped to -7, worst fall in expectations than pandemic

                                          By
                                          ActionForex.com
                                          -

                                          Eurozone Sentix Investor Confidence dropped sharply from 16.6 to -7.0 in March, well below expectation of 5.1. That;s also the lowest level since November 2020. Current Situation index dropped from 19.3 to 7.8, lowest since May 2021. Expectations index dropped from 14.0 to -20.8, lowest since August 2012.

                                          Sentix said: “The first economic indication after the Russian invasion of Ukraine has it all: The economy in Euroland collapses dramatically in the month of March! The assessment of the economic situation decreased by 11.5 points and the expectations decreased by 34.75 points, which is more than ever before in the history of sentix. Even the Corona pandemic or the banking crisis had not led to such a sharp drop in the future outlook!”

                                          Full release here.

                                           

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