Survation: Conservative lead over Labour rose back to 14pts

    According to the latest poll by Survation for ITV’s Good Morning Britain, the Conservative has widened their lead over Labour for the upcoming elections on Thursday. Headline voting intention for Conservative rose 2 pts to 45% while that for Labour dropped -2 pts to 31%, diving Conservative a 14pts lead, up from 9pts a week ago. Nevertheless, the lead was just back to the level on November 18, at 14 pts, when Conservative had 42% and Labour 28%.

    Brexit remains the number one issue for the vote decision for 32% of all voters, 50% current Conservative voters and 15% current Labour voters. More Labour voters are concerned with NHS as the number one issue at 26%, comparing to Conservative’s 3% and overall 14%.

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    Full release here.

    Gold breaks key resistance as up trend resumes finally

      Gold finally resumes recent up trend by breaking through 1346.71 resistance decisively and reaches as high as 1358.16 so far. Further rise should now be seen to 61.8% projection of 1160.17 to 1346.71 from 1266.26 at 1381.54 next. And in any case, near term outlook will remain bullish as long as 1319.95 support holds, in case of retreat.

      More importantly, upside re-acceleration is seen in weekly MACD after drawing support from 55 week EMA. The development is rather medium term bullish. Rise from 1160.17 could indeed be resuming whole rise from 1046.37 (2015 low) as consolidation from 1375.17 completed with three waves to 1160.17. That is, we’d likely see decisive break of 38.2% retracement of 1920.70 (2011 high) to 1046.37 (2015 low) at 1380.36 finally. In that case, further rise should be seen to 61.8% retracement at 1586.70 in medium to long term.

      US consumer confidence rose to 133.4, highest since October 2000

        US conference board consumer confidence jumped to 133.4 in August, up from 127.9 and beat expectation of 127.0. That’s also the highest reading since October 2000.

        Lynn Franco, Director of Economic Indicators at The Conference Board said “Consumers’ assessment of current business and labor market conditions improved further. Expectations, which had declined in June and July, bounced back in August and continue to suggest solid economic growth for the remainder of 2018. Overall, these historically high confidence levels should continue to support healthy consumer spending in the near-term.”

        Full release here.

        WTI oil staying near-term bearish, anticipating delayed OPEC+ decisions

          In the current oil market, stability reigns as prices stay in the near-term range, with all eyes on the impending delayed OPEC+ meeting scheduled for Thursday. There’s growing consensus, as per news reports in the past two days, that a compromise on 2024 output levels is within reach. However, it seems the most probable outcome will just be continuation of existing production cuts, rather than any new, drastic changes.

          This outlook, predominantly unaltered barring any unexpected deepening of cuts, steers towards bearish sentiment for oil prices in the near term. A key factor influencing this view is rising inventory levels in US. Concurrently, economic growth in China, a major player in global oil demand, remains tepid. While there have been some positive signs in China, they are not robust enough to shift the demand dynamics significantly.

          Another critical element in this equation is Saudi Arabia’s decision regarding its additional voluntary cut of 1 million barrels per day, which is nearing its expiry at the end of December.

          From a technical standpoint, near term outlook in WTI crude oil stays bearish with 79.98 resistance holds. Current fall from 95.50 if expected to extend through 72.56 to 63.37/66.94 support zone. But strong support would likely be seen to to bring rebound. Overall, range trading should continue for the medium term above 63.67, barring another significant developments.

          German ZEW jumped to 84.4, highest in two decades

            Germany ZEW Economic Sentiment jumped to 84.4 in May, up from 70.7, well above expectation of 71.0. That’s the highest level since in two decades since 2000. Germany Current Situation index improved to -40.1, from -48.8, above expectation of -42.6. Eurozone Economic Sentiment rose to 84.0, up from 66.3, above expectation of 71.2. Eurozone Current Situation rose 14.1 pts to -51.4.

            “The slowing down of the third COVID-19 wave has made financial market experts even more optimistic. The ZEW Indicator of Economic Sentiment in the May survey has reached its highest level in more than 20 years. The assessment of the economic situation has also improved noticeably. The experts expect a significant economic upswing in the coming six months. The economic outlook for the euro area and the United States has improved considerably as well,” comments ZEW President Professor Achim Wambach on current expectations.

            Full release here.

            Fed’s Bowman flags energy as potential setback to disinflation progress; advocates more hike

              Fed Michelle Bowman has made her hawkish stance clear on the pressing issue of inflation that continues to grip the US economy. In a speech today, Bowman emphasized the persistence of inflationary pressures, signaling the need for a more restrictive monetary policy to anchor inflation back to the Fed’s 2% target.

              “Inflation continues to be too high, and I expect it will likely be appropriate for the Committee to raise rates further and hold them at a restrictive level for some time to return inflation to our 2 percent goal in a timely way,” Bowman stated.

              Bowman pointed to the latest inflation reading based on the PCE index, noting a rise in overall inflation driven, in part, by escalating oil prices. “I see a continued risk that high energy prices could reverse some of the progress we have seen on inflation in recent months,” she warned.

              Also, Bowman cited the Summary of Economic Projections released during the September FOMC meeting, where “the median participant expects inflation to stay above 2 percent at least until the end of 2025.” This expectation of prolonged inflationary pressures aligns with Bowman’s perspective that “further policy tightening” will be instrumental in steering inflation back towards target.

              Full speech of Fed Bowman here.

              ECB de Guindos: If inflation expectations start to de-anchor, we will act

                ECB Vice President Luis de Guindos said today that the centra bank foresees “lingering softness” n the near term, due to geopolitical factors and trade tensions. Both are weighing on exports and manufacturing in Eurozone economy.

                He emphasized that “if we see that inflation expectations start to de-anchor, we will act.” ECB has a “wide range of instruments available”, including forward guidance, TLTRO and QE is one of them. And, “a combination of actions” could be used to restore inflation.

                De Guindos’ comments echoed President Mario Draghi’s yesterday. Draghi said, “in the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required.”

                Fed Kaplan: It’s wise to act boldly on coronavirus epidemic

                  Dallas Fed President Robert Kaplan hailed Fed’s emergency rate cut this week to counter the impact of coronavirus epidemic. He told Chicago Council on Global Affairs “it’s wise to act sooner, more boldly, and it increases the likelihood that we’ll need to use less policy ammunition” later on.

                  Separately, he told Bloomberg, “a week is an eternity”, regarding what Fed would do in the upcoming March meeting. “I am going to be watching very, very carefully the path of diagnosed cases,” Kaplan said. “We’re just going to have to see what the actual developments are over the next 10 days, two weeks. That will be a key factor, yes, I will be using to judge what’s appropriate and whether we can wait longer.”

                  Minneapolis Fed President Neel Kashkari also said it was “prudent” for Fed’s -50bps rate cut. He added, “this was insurance that we took out because nobody knows how bad the virus is going to be. If everybody pulls back at the same time, that in itself can lead to a recession,” he added.

                  US-China trade talks concluded after a “good few days”

                    US and China delegations ended the prolonged three-day trade negotiation meeting in Beijing with some positive signs. Ted McKinney, U.S. Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs, said there were a “good few days” in China, and the meeting “went just fine”. He added that “It’s been a good one for us.”

                    Chinese Foreign Ministry spokesman Lu Kang said “extending the consultations shows that the two sides were indeed very serious in conducting the consultations.”

                    Trump puts human rights in Hong Kong as precondition to China trade deal

                      US President Donald Trump appeared to be putting human rights condition in Hong Kong as a prerequisite of a trade deal with China. He tweeted that “Of course China wants to make a deal. Let them work humanely with Hong Kong first!” Trump repeated his usual praise of Chinese President Xi Jinping as a “great leader”, and a good man in a “tough business. He even said he has “ZERO doubt” Xi wanted to “quickly and humanely” solve the Hong Kong problem. And he even called Xi for a “personal meeting” on the issue.

                      Trump’s comment came after State Department spokeswoman said US was “deeply concerned” about reports of paramilitary movements along the Hong Kong border. Additionally, she urged the Hong Kong government to respect “freedoms of speech and peaceful assembly”. She also noted that recent protests reflected “broad and legitimate concerns about the erosion of Hong Kong’s autonomy.” Further, “the continued erosion of Hong Kong’s autonomy puts at risk its long-established special status in international affairs,” she said.

                      US House Speaker Nancy Pelosi also issued a statement earlier this week, warning: “The escalating violence and use of force perpetrated against the Hong Kong protestors is extremely alarming. The pro-Beijing Chief Executive and the Hong Kong police forces must immediately cease the aggression and abuse being perpetrated against their own people.

                      UN Human Rights Office also said in a statement that there were “credible evidence of law enforcement officials employing less-lethal weapons in ways that are prohibited by international norms and standards” in handing the protests in Hong Kong that lasted for more than two months. For example, “officials can be seen firing tear gas canisters into crowded, enclosed areas and directly at individual protesters on multiple occasions, creating a considerable risk of death or serious injury.”. UNHR also urged the Hong Kong Government to ensure “response by law enforcement officials to any violence that may take place is proportionate and in conformity with international standards on the use of force, including the principles of necessity and proportionality.”

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                      Australia CPI dropped -1.9% qoq in Q2, biggest fall in 72 year of history

                        Australia CPI plunged -1.9% qoq in Q2, slightly above expectation of -2.0% qoq. That’s still the largest quarterly fall in the 72 year history of the data. Annually, CPI turned negative to -0.3% yoy, down from Q1’s 2.2% yoy. It’s only the third time annual inflation turned negative since 1949. The previous times were in 1962 and 1997-98.”

                        Nevertheless, the quarterly decline was mainly the result of free child care (-95%), a significant fall in fuel price (-19.3%) and a fall in pre-school and primary education (-16.2%). Excluding these three components, the CPI would have risen 0.1% qoq in Q2.

                        Full release here.

                        Considerable gaps remain in the most difficult areas after Brexit talks

                          Another round of Brexit negotiations have completed in London and there appeared to be no significant progress. UK chief negotiator David Frost said “considerable gaps remain in the most difficult areas. That is, the so-called level playing field and on fisheries.” “Early understanding on the principles underlying any agreement” wouldn’t be reached within this month.

                          But Frost added: “Despite all the difficulties, on the basis of the work we have done in July, my assessment is that agreement can still be reached in September, and that we should continue to negotiate with this aim in mind.”

                          EU chief negotiator Michel Barnier said: “By its current refusal to commit to conditions of open and fair competition and to a balanced agreement on fisheries, the UK makes a trade agreement – at this point – unlikely.”

                          Gold’s corrective rally in progress for 1286.6

                            Gold’s rebound from 1238.00 continues today and hits as high as 1265.40 so far. With a short term bottomed formed ahead of 1236.66 key support could be seen. Gold should now target 38.2% retracement of 1365.24 to 1238.00 at 1286.60. That would still be reasonably close to 55 day EMA (now at 1286.23) when they meet. For now we’re only seeing the rebound from 1238.00 as a corrective pattern. Hence, we’d expect strong resistance from 1286.60 to limit upside. The fall from 1365.24 is expected to resume later through 1238.00, when Dollar regains strength.

                            BoE to hike 50bps, GBP/CHF ready for breakout?

                              BoE is expected raise interest rate by 50bps to 1.75% today. That would be the largest rate hike since 1995, while interest rate will then be at the highest level since 2008. The voting will again be a focus and the new economic projections will be scrutinized too. Back in June BoE said inflation is expected to rise to slightly above 11% in October while GDP was weaker than anticipated at the May report. The change in outlook would be reflected in the new economic projections.

                              Here are some previews on BoE:

                              GBP/CHF turned into range trading after hitting 1.1525 in late June. There is risk of sell-on-fact in Sterling after BoE which prompt a downside breakout. But anyway, outlook will stay bearish as long as 1.1774 resistance holds, even in case of a rebound. Current down trend is still expected to resume towards 1.1107 low, which is close to 161.8% projection of 1.3070 to 1.2134 from 1.2598 at 1.1084 next, in the medium term.

                              ECB de Guindos: Will discuss balance sheet reduction in December

                                ECB Vice President Luis de Guindos said, “we will discuss about the reduction of our balance sheet,” at December meeting.

                                “I think this is important in terms of both to reduce the excess liquidity that we see in the marketplace, and secondly as well to alleviate the situation of scarcity of collateral,” he added.

                                De Guindos also noted, “it’s very difficult to have financial stability without price stability,” adding that “the main risk now for financial stability, for growth, is to have inflation at very high levels.”

                                US-Mexico migration meeting ended with insufficient progress, double downgrade for Mexico

                                  The high-level meeting between US and Mexico on migration ended with insufficient progress. Trump tweeted that “Progress is being made, but not nearly enough!” He threatened again “If no agreement is reached, Tariffs at the 5% level will begin on Monday, with monthly increases as per schedule. The higher the Tariffs go, the higher the number of companies that will move back to the USA!”

                                  Vice President Mike Pence, who chaired the meeting including Secretary of State Michael Pompeo and Mexican Foreign Minister Marcelo Ebrard, also echoed Trump’s comments. He tweeted “Progress was made but as @POTUS said “not nearly enough.” @SecPompe, @DHSMcAleenan, & I made clear: Mexico must do more to address the urgent crisis at our Southern Border.”

                                  Ebrard said after the meeting that there was no discussions on tariffs. “The dialogue was focused on migration flows and what Mexico is doing or is proposing to the United States, our concern about the Central American situation.” He noted “what the US government is looking for are measures in the short-term and medium-term”. Instead, Mexico is promoting long term fix involving a development deal for Central America which would eventually slow migration.

                                  Meeting will continue on Thursday and if no agreement is made, US will starting imposing 5% tariffs on all Mexican imports on June 10. That rate would “gradually” go up to 25% on October 1.

                                  Fitch cut Mexico’s rating from BBB+ to BBB and cited that “growth continues to underperform, and downside risks are magnified by threats by U.S. President Trump.” Moody’s downgraded Mexico’s outlook from stable to negative and noted “further evidence that medium-term growth is in decline, whether as a result of policies that actively undermine growth or because of continued policy unpredictability, would put downward pressure.”

                                  USD/MXN has a rough ride but is generally kept inside this week’s range.

                                  Eurozone Sentix investor confidence rose to 15.2, lack of sustainable new growth drivers

                                    Eurozone Sentix Investor Confidence rose from 14.9 to 15.2 in February, above expectation of 15.2. Current situation index rose from 16.3 to 19.3. Expectations index rose from 13.5 to 14.0, highest since July.

                                    Sentix said: “The economic situation in Euroland is stable in February 2022. The situation and expectations of the more than 1,200 investors surveyed by sentix signal a slight improvement. Thus, our assumption that we are in a “mid-cycle slowdown”, i.e. a growth moderation in the middle of an economic cycle, which we have been expressing here for months, remains unchanged. However, this phase of moderation is not yet complete. There is a lack of sustainable new growth drivers. Above all, there is a lack of impetus from the international economy.”

                                    Full release here.

                                    China CPI fell for first time since 2009, USD/CNH to break 6.5 psychological support

                                      China’s CPI dropped -0.5% yoy in November, well below expectation of 0.0% yoy. That’s also the first annual decline in more than a decade since October 2009. Though, it’s driven by one off factor as pork supply improved from the disruption African swine fever. At the same time, demand remained solid despite Wuhan coronavirus outbreak. PPI decline slowed to -1.5% yoy, versus expectation of -1.8% yoy.

                                      Offshore Chinese Yuan’s up trend against dollar resumes today, with USD/CNH now pressing 6.5 handle. Near term outlook stays bearish as long as 6.5968 resistance holds. Next target is 61.8% retracement of 6.0153 (2014 low) to 7.1953 at 6.4661. Strong support is expected from there to bring a sustainable rebound, based on pure technical perspective.

                                      Though, recent decline in USD/CNH is seen as more as an indication of general weakness in Dollar against Asian majors. Sustained break of 6.4661 could signal acceleration in the flows, which might spread to selling in the greenback elsewhere.

                                      New Zealand BuinessNZ PMI jumped to 52.6, new orders and production put manufacturing back on track

                                        New Zealand BusinessNZ Performance of Manufacturing Index improved drastically to 52.6 in October, up from 48.8. It’s now back in expansion after three months of contraction from July to September. Production rose notably from 46.6 to 52.6. New Orders also jumped from 50.9 to 56.2. But Employment stayed sluggish, up from 50.1 to 50.2.

                                        BusinessNZ’s executive director for manufacturing Catherine Beard said: “After a five month period of both lacklustre and negative growth, the pick-up in both new orders and production put the sector back on track.  If the remaining two months for 2019 are to keep up the momentum, it is important these key sub-indexes remain positive to finish the year on a more upbeat note.

                                        However, BNZ Senior Economist, Doug Steel said that “the October PMI is hardly what you would call strong. But it is certainly much better than the previous three months where the index languished below 50 which indicated a sector going backwards”.

                                         

                                        Full release here.

                                        UK PMI manufacturing rose to 54.4, revival remains in some doubt

                                          UK PMI manufacturing rose 0.1 to 54.4 in June, above expectation of 53.5. Markit noted that output growth slowed from May’s give month high. Meanwhile, input cost inflation picked up, leading to increased selling prices.

                                          Rob Dobson, Director at IHS Markit, which compiles the survey:

                                          “The UK manufacturing sector ended the second quarter on a subdued footing. The turnaround in performance since the start the year has been remarkable, with impressive growth rates late last year turning into some of the weakest rates of expansion seen over the past two years in recent months.

                                          “The slowdown in new order growth since earlier in the year has also left manufacturers increasingly reliant on backlogs of work and inventory building to maintain higher output. This is a position that cannot be sustained far beyond the immediate horizon. The trend in demand will need to stage a much firmer rebound if a further slowdown in output growth is to be avoided.

                                          “How likely such a revival is remains in some doubt, with the June survey also seeing business optimism drop to a seven-month low amid rising concerns about possible trade tariffs, the exchange rate and Brexit uncertainty. Ongoing supply-chain disruptions, including raw material shortages, and signs of a renewed upswing in input price inflation may also jeopardise stronger manufacturing growth. With industry potentially stuck in the doldrums, the UK economy will need to look to other sectors if GDP growth is to match expectations in the latter half of the year.”

                                          Full UK PMI Manufacturing release.