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UK PMI services finalized at 58.9, twin headwinds of costs and war

    By
    ActionForex.com
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    UK PMI Services was finalized at 58.9 in April, down from March’s 62.6. S&P Global noted that input cost inflation hit fresh record high. Activity and new business continued to rise, but a reduced rates. Business confidence was lowest in a year-and-a-half. PMI Composite was finalized at 58.2, down from March’s 60.9.

    Andrew Harker, Economics Director at S&P Global: “The twin headwinds of the cost of living crisis and the war in Ukraine started to bite on the UK service sector during April, as evidenced by a sharp slowdown in new order growth to the lowest in the year so far. Worryingly, companies seem to be expecting impacts to be prolonged, with business confidence dropping to the lowest in a year-and-a-half.”

    Full release here.

    BoE to hike another 25ps, a look at bearish GBP/AUD

      By
      ActionForex.com
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      BoE is widely expected to continue with its tightening cycle, and raise Bank rate by 25bps to 1.00% today. Focus is firstly on the voting, on the whether any hawks would push for faster pace of hikes. Secondly, BoE might make a decision to actively shrink its balance sheet. Thirdly the new economic projections will also be scrutinized for the policy path and economic outlook.

      Here are some previews:

      GBP/AUD is a pair to watch for the near term, considering the possible return of risk-on sentiment too. The corrective recovery from 1.7171 might have completed at 1.7884, after failing to break through 55 day EMA. That is, medium term down trend might be ready to resume.

      For the near term, deeper decline is in favor to retest 1.7171 support first. Firm break there will confirm this bearish case, and target 61.8% projection of 1.9218 to 1.7171 from 1.7884 at 1.6619. In any case, outlook will stay bearish as long as 1.7884 resistance holds.

      China Caixin PMI services dropped to 36.2 in Apr, PMI composite down to 37.2

        By
        ActionForex.com
        -

        China Caixin PMI Services dropped from 42.0 to 36.2 in April, below expectation of 40.9. That’s the second straight month of steep decline, and the worst reading since February 2020. Caixin said decline in new business gathered pace but employment fell only slightly. PMI Composite dropped from 43.9 to 37.2, also the worst since the onset of the pandemic.

        Wang Zhe, Senior Economist at Caixin Insight Group said: “Overall, in April, local Covid outbreaks continued and activity in the manufacturing and service sectors continued to contract, with services shrinking more. Demand was under pressure, external demand deteriorated, supply shrank, supply chains were disrupted, delivery times were prolonged, backlogs of work grew, workers found it difficult to return to their jobs, inflationary pressures lingered, and market confidence remained below the long-term average.”

        Full release here.

        DOW jumped 2.8% as Fed Powell ruled out 75bps hike

          By
          ActionForex.com
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          US stocks staged a strong rebound overnight after Fed Chair Jerome Powell ruled out a 75bps hike. In the post-meeting press conference, he clearly said in a rare fashion, “a 75 basis point increase is not something that the committee is actively considering.” Traders were swift in adjusting their expectations. Just a day ago, markets were pricing in 99% chance of a 75bps hike in June.

          DOW closed up 932.27 pts or 2.81% at 34061.06. Immediate focus is now back on 55 day EMA (at 34276.20). A weekly close above this level will set the base for further rally back to 35492.22 resistance in the near term. Break there will bring retest of 36952.65 high. Overall, while corrective pattern from 36952.65 could still extend for while. The range should have been set in this case.

          FOMC press conference live stream

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            ActionForex.com
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            Fed hikes by 50bps, starts balance sheet runoff, highly attentive to inflations risks

              By
              ActionForex.com
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              Fed raises interest rate target by 50bps to 0.75% to 1.00% as expected. It also announced to start the balance sheet runoff, by USD 95B as expected (USD 60B treasuries and USD 35B MBS). The decision was by unanimous vote.

              The FOMC is “highly attentive to inflations risks”. The accompany statement noted that the implications of  invasion of Ukraine by Russia for US economy are “highly uncertain”. ” The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity.” Meanwhile, lockdowns in China are “likely to exacerbate supply chain disruptions”

              Fed pledged to “adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals”.

              Full statement here.

              US ISM services dropped to 57.1 in Apr, prices at all-time high

                By
                ActionForex.com
                -

                US ISM Services PMI dropped from 58.3 to 57.1 in April, below expectation of 59.0. Looking at some details, business activity/production rose from 55.5 to 59.1. New orders dropped from 60.1 to 54.6. Employment dropped from 54.0 to 49.5. Prices rose from 83.8 to 84.6, an all-time high.

                ISM said: “There was a pullback in the composite index, mostly due to the restricted labor pool (impacting the Employment Index) and the slowing of new orders growth. Business activity remains strong; however, high inflation, capacity constraints and logistical challenges are impediments, and the Russia-Ukraine war continues to affect material costs, most notably of fuel and chemicals.”

                Full release here.

                US goods and services trade deficit widened to USD 109.8B in Mar

                  By
                  ActionForex.com
                  -

                  US goods and services exports rose 5.6% mom to USD 241.7B in March. Imports rose 10.3% mom to USD 351.5B. Trade deficit widened from USD 89.2B to USD 109.8B, larger than expectation of USD 106.6B.

                  Deficit with China increased USD 7.4B to USD 48.6B. Deficit with Canada increased USD 3.7B to USD 10.3B in March. Deficit with the European Union decreased USD 1.3B to USD 15.6 B.

                  Full release here.

                   

                  US ADP jobs grew 247k only, recovery showed signs of slowing

                    By
                    ActionForex.com
                    -

                    US ADP private employment grew 247k only in April, well below expectation of 370k. By company size, small businesses lost -120k jobs. Medium businesses added 46k jobs. Large businesses added 321k jobs. By sector goods-producing jobs grew 46k. Service-providing jobs grew 202k.

                    “In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said Nela Richardson, chief economist, ADP. “While hiring demand remains strong, labor supply shortages caused job gains to soften for both goods producers and services providers. As the labor market tightens, small companies, with fewer than 50 employees, struggle with competition for wages amid increased costs.”

                    Full release here.

                    Eurozone retail sales dropped -0.4% mom in Mar, EU down -0.2% mom

                      By
                      ActionForex.com
                      -

                      Eurozone retail sales dropped -0.4% mom in March, worse than expectation of -0.2% mom. Volume of retail trade decreased by -2.9% for automotive fuels, and by -1.2% for non-food products, while it increased by 0.8% for food, drinks and tobacco.

                      Retail sales contracted -0.2% mom in EU. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in Spain (-4.0%), Luxembourg (-3.3%) and France (-1.9%). The highest increases were observed in Slovenia (+11.4%), Latvia (+11.1%), and Hungary (+7.3%).

                      Full release here.

                      Eurozone PMI composite finalized at 55.8, surprisingly resilience in face of war

                        By
                        ActionForex.com
                        -

                        Eurozone PMI Services was finalized at 57.7 in April, up from March’s 55.6, an 8-month high. PMI Composite was finalized at 55.8, up from March’s 54.9, a 7-month high.

                        Looking at some member states, France PMI composite was finalized at 57.6, a 51-month high. Spain rose to 55.7, 2-month high. Italy rose to 54.5, 4-month high. Germany, however, dropped to 54.3, 3-month low.

                        Chris Williamson, Chief Business Economist at S&P Global said:

                        “The eurozone economy has shown surprising resilience in the face of the Ukraine-Russia war, thanks to a renewed burst of service sector activity as virus containment measures were relaxed further during April. The survey data are consistent with GDP rising at a quarterly rate of around 0.7% at the start of the second quarter after signalling a 0.4% rise in the first quarter.

                        “Unfortunately the acceleration of output growth seen during the month was accompanied by a further surge in costs, which fed through to a record rise in average prices charged for goods and services.

                        “The combination of the stronger growth profile for the second quarter and a persistent acceleration of inflation signalled by the surveys will add to speculation that the ECB could start raising interest rates as soon as its July meeting.

                        “However, downside growth risks have increased, meaning policymakers could take a more cautious approach to tightening policy. Manufacturing growth has almost stalled, led by falling production in Germany, due to the new supply chain shocks and uncertainty caused by Russia’s invasion of Ukraine. It also remains unclear as to whether the service sector can sustain its current growth once the initial rebound from the reopening of the economy fades, especially given the soaring cost of living. Hopes of the economy being buoyed by pent-up demand may be confounded if spending power is eroded by inflation and risk aversion sets in, encouraging saving. The data flow as we head into the summer will therefore likely prove pivotal to policymakers in their assessment of whether the eurozone’s economic resilience can prove enduring.”

                        Full release here.

                        Fed to hike 50bps today, but what next? Some previews

                          By
                          ActionForex.com
                          -

                          Fed is widely expected to raise federal funds rate by 50bps to 0.75-1.00% today. With markets pricing in 99.1% chance of that, there is no reason for Fed to rock the boat. Also, Fed is expected to announce the plan for runoff of its USD 9T balance sheeting, at a pace of roughly USD 95B per month (USD 60B in treasuries and USD 35B in MBS). That would be twice the speed of its quantitative tightening back in 2017.

                          Still, the main question is what next. Fed fund futures are currently pricing in 99.1% chance of another front-loading move in June to 1.50-1.75%. That is, a 75bps hike is near fully priced in for the next meeting. Markets would be eager to get some hints from Chair Jerome Powell on such expectations. But then, Powell is unlikely to give anything concrete.

                          Here are some previews on FOMC:

                          In term of market reactions, the first two to note is whether EUR/USD would break through 1.0470 support to resume larger down trend. Second, attention is on whether 10-year yield would power through 3% handle.

                          Also, if Dollar is going to power up, Gold might re-accelerate downwards to 100% projection of 2070.06 to 1889.79 from 1998.23 at 1817.86, or even through it. Development in Gold would be used to confirm the underlying strength in Dollar.

                          Australia retail sales rose 1.6% mom to new record in Mar

                            By
                            ActionForex.com
                            -

                            Australia retail sales rose 1.6% mom to new record AUD 33.6B in March, well above expectation of 0.5% mom. Over the 12-month period, sales rose 9.4% yoy.

                            Director of Quarterly Economy Wide Statistics, Ben James, said the result was up 0.8% on the previous record level set in November 2021. This follows a 1.8% rise in February 2022, a 1.6% rise in January 2022 and a fall of -4.1% in December 2021.

                            “Rising prices, combined with the continued easing of restrictions across the country has led to rises in turnover in all three months of the March quarter.

                            Full release here.

                            NZ unemployment rate unchanged at 3.2%, high wage inflation

                              By
                              ActionForex.com
                              -

                              New Zealand employment rose 0.1% qoq in Q1, matched expectations. However, total actual weekly hours worked dropped slightly by -0.2%. Unemployment rate was unchanged at 3.2%, slightly above expectation of 3.1%. Participation rate dropped -0.1% to 70.9%.

                              Labor cost index rose 0.7% qoq, matched expectations. All sectors wage inflation rose 0.8% qoq. Annual rate jumped from 2.6% to 3.0%. “Wage inflation is at its highest level since the March 2009 quarter,” business prices delivery manager Bryan Downes said.

                              Full release here.

                              ECB Schnabel: Rate increase in July is possible

                                By
                                ActionForex.com
                                -

                                In an interview, ECB Executive Board member Isabel Schnabel “a rate increase in July is possible in my view.” But she added, “We of course have to wait and see how the data evolve up to the time of the decision. The first interest rate hike will in any case not take place until after the end of net asset purchases; we have committed to that.”

                                Schnabel also noted that energy is “not the only factor” for the current high inflation. Core inflation also “climbed strongly to 3.5%”. So, “we are seeing that inflationary pressures are becoming more broad-based.”

                                “There can be no doubt that we will see higher wage demands if inflation remains so high over a prolonged period. We need to prevent high inflation from becoming entrenched in expectations. Talking is no longer enough, we need to act,” she said.

                                Full interview here.

                                Eurozone PPI rose 5.3% mom, 36.8% yoy in Mar

                                  By
                                  ActionForex.com
                                  -

                                  Eurozone PPI rose 5.3% mom, 36.8% yoy in March, above expectation of 4.9% mom, 36.3% yoy. For the month, industrial producer prices increased by 11.1% in the energy sector, by 2.8% for intermediate goods, by 2.4% for non-durable consumer goods and by 0.8% for capital goods and durable consumer goods. Prices in total industry excluding energy increased by 2.1%.

                                  EU PPI rose 4.% mom, 36.5% yoy. The highest monthly increases in industrial producer prices were recorded in Ireland (+36.1%), Greece (+8.8%) and Portugal (+8.4%). The only decrease was observed in Slovakia (-1.1%) while in Malta the industrial producer prices remained unchanged.

                                  Full release here.

                                  Eurozone unemployment rate dropped to 6.8% in Mar, EU dropped to 6.2%

                                    By
                                    ActionForex.com
                                    -

                                    Eurozone unemployment rate dropped from 6.9% to 6.8% in March, matched expectations. EU unemployment rate dropped from 6.3% to 6.2%.

                                    Eurostat estimates that 13.374m men and women in EU, of whom 11.274m in Eurozone, were unemployed. Compared with February, the number of persons unemployed decreased by -85k in EU and by -76k in Eurozone .

                                    Full release here.

                                    UK PMI manufacturing finalized at 55.8, failed to mask the continued headwinds

                                      By
                                      ActionForex.com
                                      -

                                      UK PMI Manufacturing was finalized at 55.8 in April, up slightly from march’s 55.2. S&P Global said production growth improved slightly. New orders rose at slower pace as new export business retreated. Selling prices rose at record pace as cost inflation accelerated.

                                      Rob Dobson, Director at S&P Global, said: “The improved expansion of output at manufacturers, while positive in itself, failed to mask the continued headwinds buffeting the sector… Manufacturers and their clients are struggling as lockdowns in China and the Ukraine war exacerbate stretched global supply chains, the inflationary picture worsens and geopolitical tensions rise. Specific to the UK, Brexit represents an additional headwind…

                                      “Business optimism has fallen to a 16-month low as companies become more cautious about the future outlook… The inflationary situation is getting increasingly fraught. Input costs rose to the second-greatest extent in the 30-year survey history, leading to a record increase in factory gate selling prices.”

                                      Full release here.

                                      AUD/NZD breaches 2020 high after RBA rate hike

                                        By
                                        ActionForex.com
                                        -

                                        AUD/NZD rises sharply after the larger than expected rate hike by RBA, and breach a key resistance level at 1.1042 (2020 high). Decisive break of this level would be a significant medium term development and should confirm resumption of whole up trend from 0.9992 (2020 low). That should set the stage for further rise to 100% projection of 0.9992 to 1.1042 from 1.0278 at 1.1328, which is slightly above 1.1289 (2017 high). In any case, outlook will stay bullish as long as 1.0822 support holds.

                                        RBA hikes by 25bps to 0.35%, more to come

                                          By
                                          ActionForex.com
                                          -

                                          RBA raises cash rate target by 25bps to 0.35% today, larger than expectation of 15bps to 0.25%. The interest rate on Exchange Settlement balances is also lifted by 25bps to 0.25%. In the forward guidance, RBA said it’s committed to “ensure that inflation in Australia returns to target over time”. That will “require a further lift in interest rates over the period ahead”.

                                          In the accompanying statement, RBA said the economy has “proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected” while “wages growth is picking up”. It’s appropriate to start the process of normalizing monetary conditions.”

                                          Unemployment rate is expected to decline to around 3.5% by early 2023, hitting the lowest level in almost 50 years. GDP is projected to grow by 4.25% over 2022 and 2% over 2023. Headline expected to rise further from current 5.1% to 5% this year. Underlying inflation is also expected to rise from current 3.7% to 4.75%. By mid-2024, headlines and underlying inflation are projected to have moderated back to around 3%, with assumption of further rate hikes.

                                          Full statement here.

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