Swiss KOF Economic Barometer dropped from 103.0 to 96.8 in May, below expectation of 102.3. The indicator is now below its long-term average. KOF said, “the Swiss economy is thus likely to develop moderately over the next few months.”
The decline was “driven by indicator bundles of almost all branches of the economy”, except financial and insurance services sector, and foreign demand.
BoJ Governor Haruhiko Kuroda told the parliament today, “I don’t think the BOJ’s monetary policy was the factor behind a rapid yen weakening. The recent yen weakening may have been driven by an abnormal situation where oil prices topped $130 per barrel.”
He also said that the rapid depreciation of Yen was “undesirable”. But the situation was improving with Dollar easing back to around 127 Yen.
Meanwhile, Kuroda also repeated the pledge to maintain powerful monetary easing to help the economy from recovering.
RBNZ chief economist Paul Conway said today that 50bps rate hikes are the way forward, and he’s confident of soft landing as the labor market is strong.
“75 wasn’t seriously on the table because we are pretty convinced that we can get to where we need to get with 50-point increments,” he said. Also, the central bank was “signaling there’s probably some more 50 points coming over the next little while.”
On the economy, Conway said “it’s difficult to engineer a soft landing — typically a significant reduction in inflation is accompanied by negative economic growth — but there’s reasons to believe New Zealand is well placed to pull it off this time around.”
“The labor market is strong and that’s the underlying reason why the New Zealand economy is well placed to weather the storm,” he added.
US personal income rose 0.5% mom, or USD 89.3B, in April, below expectation of 0.6% mom. Personal spending rose 0.9% mom, or USD 152.3B, above expectation of 0.7% mom.
Headline PCE price index slowed from 6.6% yoy to 6.3% yoy, below expectation of 6.6% yoy. Core PCE price index slowed from 5.2% yoy to 4.9% yoy, matched expectations. Energy prices rose 30.4% yoy while food prices rose 10.0% yoy.
In a Der Spiegel interview, Bundesbank President Joachim Nagel said, “in our June meeting we must send a clear signal where we’re going. From my current perspective, we must then make the first rates move in July and have others follow in the second half of the year.”
Earlier this week, ECB President Christine Lagarde has already indicated, “we’re moving (deposit rate) very likely into positive territory at the end of the third quarter… When you’re out of negative (rates) you can be at zero, you can be slightly above zero. This is something that we will determine on the basis of our projections and … forward guidance.”
Australia retail sales rose 0.9% mom in April, slightly below expectation of 1.0% mom. For the 12-month period, sales rose 9.6% yoy.
New South Wales was the only state or territory to record a fall, down -0.3%. Queensland had the largest rise in retail turnover, up 1.6%. Turnover also rose in Victoria (1.1%), Western Australia (2.2 %), South Australia (1.4%), Tasmania (2.0%), the Australian Capital Territory (0.5%) and the Northern Territory (0.7%).
ABS said: “The strength in retail turnover is being driven by spending across the food industries. High food prices have combined with increased household spending over the April holiday period as more people are travelling, dining out and holding family gatherings.
BoJ Governor Haruhiko Kuroda told the parliament today that core inflation (all items excluding fresh food) is “likely to remain around 2% for about 12 months”, unless energy prices drop sharply.
However, he emphasized that “prices won’t rise sustainably, stably unless accompanied by wage hikes.” That’s seen as in indication that recent rise in inflation is not enough to lead to exit of the ultra-loose monetary policy.
Also from Japan, Tokyo CPI core was unchanged at 1.9% yoy in May, below expectation of 2.0% yoy.
US initial jobless claims dropped -8k to 210k in the week ending May 21, matched expectations. Four-week moving average of initial claims rose 7k to 207k.
Continuing claims rose 31k to 1346k in the week ending May 14. Four-week moving average of continuing claims dropped -14k to 1348k, lowest since January 17, 1970 when it was 1340k.
Canada retail sales was flat mom in March, worse than expectation of 1.5% mom rise. Sales were up in 10 of 11 subsectors, led by gasoline (up 7.4%). However, sales at motor vehicle and parts dealers (-6.4%) erased the gains observed in the remaining subsectors.
For Q1 as a whole, sales were up 3.0%, largest quarterly rise since Q3 of 2020. Preliminary data indicates sales rose 0.8% mom in April.
Yuan’s decline today suggests that the near term recovery is already completed and there’s risk of more downside. The selloff came after Chinese Premier Li Keqiang held a rare high-profile meeting yesterday on measures to support the economy. That’s is seen as a sign that the government is in deep worry about the impact of the extend tough pandemic lockdowns in many majors city, including Shanghai.
USD/CNH’s pull back from 6.8372 has likely completed at 0.6477, just ahead of 38.2% retracement of 6.3057 to 6.8372 at 6.6342. Strong rebound should be seen to 6.8372 and possibly above. The key resistance, however, still lies 61.8% retracement of 7.1961 to 6.3057 at 6.8560. USD/CNH could still be rejection by this fibonacci level at the second attempt.
BoJ Governor Haruhiko Kuroda reiterated to the parliament today that ultra-loose monetary policy must be maintained for now. Consumer inflation is still expected to slow next year and beyond, after spiking above 2% target this year, only because of surging energy prices.
Nevertheless, Kuroda also noted when the right time comes, BoJ will plan an exit from easy policy. “The key would be how to raise interest rates and scale back the BOJ’s expanded balance sheet,” he said. “The BOJ can combine various means and ensure markets remain stable in executing a smooth exit from easy policy. I must add, however, that it won’t be easy,” he said.
Regarding exchange rate depreciation, Kuroda said Fed’s rate hike may not necessarily weaken the Yen, if they also shoot down stock prices.
Prime Minister Fumio Kishida said in the same parliament session, “sharp yen moves are undesirable. While a weak yen benefits exports and firms with overseas assets, it hurts households and some businesses via higher costs.”
RBNZ Governor Adrian Orr told a parliamentary committee today, “the single biggest risk to this nation at the moment is enabling current high CPI inflation to become embedded in future ongoing inflation expectation.”
Orr said that a recession is not projected for New Zealand, even though he cannot rule it out. Challenges to growth were coming through significant downgrades to global growth, particularly China.
In the minutes of the May 3-4 FOMC minutes, Fed said, “most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings”. That is in-line with market expectations, and other communications from Fed officials, that the plan is set for 50bps hike per meeting for June and July at least.
Also, it’s noted, “at present, participants judged that it was important to move expeditiously to a more neutral monetary policy stance. They also noted that a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”
Gold dips mildly after FOMC minutes, as recovery from 1786.65 lost momentum. For now, further rise could still be as long as 1833.22 minor support holds. Above 1869.46 will resume the rebound to channel resistance a around 1926. However, break of 1833.22 should resume the whole fall from 2070.06 high through 1786.65.
Overall, there is no change in the view that fall from 2070.06 is the third leg of the consolidation pattern from 2074.84. Deeper decline would be seen as the recovery completes, towards 1682.60 support.
SNB Chairman Thomas Jordan said in an interview, “it’s a new situation, for the first time since 2008, we are seeing monetary policy moving toward tightening in most currency areas.”
“We are moving into an unpleasant situation for monetary policy: inflation is already high globally and is even rising in many countries, while at the same time economic activity is weakening worldwide,” he said.
SNB will next meet on June 16. “We will, of course, analyze and take into account the impact of the sharp rise in global inflation on Switzerland,” he said.
US durable goods orders rose 0.4% mom to USD 265.3B in April, below expectation of 0.6% mom. Ex-transport orders rose 0.3% mom, below expectation of 0.6% mom. Ex-defense orders rose 0.3% mom. Transportation equipment, rose 0.6% mom to USD 86.7B.
ECB Executive Board member Fabio Panetta said in a speech, “the very shocks that have led to a surge in inflation (in Eurozone) are also depressing output”. Hence, “the inflation path is starting from a much higher point but the medium-term inflation outlook is characterised by high uncertainty.” Policy normalization needs to be “clearly defined”.
Panetta explained that normalization does not mean moving to a “neutral” policy stance. it shouldn’t be assessed against “unobservable reference points” such as neutral rate. And, it “does not imply adjusting unconventional instruments more rapidly than conventional ones”.
Normalization is “a process of gradually reducing that stimulus in a way that firmly anchors the inflation path at 2% over the medium term”, he said.
Germany Gfk consumer confidence for June rose slightly from -26.6 to -26.0, worse than expectation of -25.6. In May, economic expectations rose from -16.4 to -9.3. Income expectations rose from -31.3 to -23.7. Propensity to buy dropped from -10.6 to -11.1.
“Although this means that the consumer climate has improved slightly, consumer sentiment is still at an all-time low,” explains Rolf Bürkl, GfK consumer expert. “Despite further easing of pandemic-related restrictions, the war in Ukraine and especially high inflation are weighing heavily on consumer sentiment.”
In May’s Monthly Economic Report, Japan’s government maintained that the economy “shows movement of picking up”. Private consumption, business investment and industrial production have “shown movement of picking up”. Exports were still “almost flat”.
Employment assessment was upgrade slightly to “shows movement of picking up” rather than just in “some components. Consumer prices “have been rising recently”, with “moderately” dropped.
The government also warned that “full attention should be given to the downside risks due to supply-side constraints, rising raw material prices and fluctuations in the financial and capital markets while there are concerns regarding the effects of the re-spread of the Novel Coronavirus in China and lengthening the state of affairs of Ukraine”.
NZD/USD rises slightly after RBNZ rate hike, as rebound from 0.6215 short term bottom extends. Immediate focus is now on 0.6528 cluster resistance (38.2% retracement of 0.7033 to 0.6215 at 0.6527).
Sustained break of 0.6527/8 will raise the chance that whole corrective pattern from 0.7463 has completed at 0.6215. That came after drawing support from 61.8% retracement of 0.5467 to 0.7463 at 0.6229. In this case, further rally would be seen to 61.8% retracement of 0.7033 to 0.6215 at 0.6721.
However, rejection by 0.6527/8 will retain near term bearishness. Break of 0.6366 minor support will bring retest of 0.6215 low.
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for over a decade. Empowering the individual traders was, is, and will always be our motto going forward.
Contact us: contact@actionforex.com
© ActionForex.com © 2024 All rights reserved.
Eurozone economic sentiment ticked up to 105 in May, EU down to 104.1
Eurozone Economic Sentiment Indicator ticked up from 104.9 to 105.0 in May. Employment Expectations Indicator rose from 112.6 to 112.9. Industrial confidence dropped from 7.7 to 6.3. Services confidence rose from 13.6 to 14.0. Consumer confidence rose from -22.0 to -21.1. Retail trade confidence dropped from -3.9 to -4.0. Construction confidence rose from 7.0 to 7.2.
EU Economic Sentiment dropped from 104.6 to 104.1. Amongst the largest EU economies, the ESI rose markedly in Spain (+4.1) and, to a lesser extent, in France (+1.5) and Italy (+0.8), while it remained
Full release here.