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France PMI manufacturing fell to 41-mth low, services stay in contraction

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    ActionForex.com
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    France PMI Manufacturing fell from 44.2 to 42.6 in October, hitting a 41-month low. PMI Services improved from 44.4 to 46.1, a 3-month high. PMI Composite rose from 44.1 to 45.3, a 2-month high.

    Norman Liebke, Economist at Hamburg Commercial Bank, said: “The French economy is still feeling the heat at the start of the fourth quarter… Our GDP nowcast model, with PMI figures in the mix along with a bunch of other indicators, is pointing to fractional growth in the fourth quarter.

    “The services sector is hitting roadblocks… Things are going south in the manufacturing sector, and there is no relief in sight… Price indices are in perilous territory…. Higher inflation rates would put the European Central Bank into a difficult position as it more or less signalled at its last meeting that no further rate hikes will be carried out.”

    Full France PMI release here.

    Japan exports had 8th straight month of double-digit decline in Aug

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      In non-seasonally adjusted term, Japan’s expected dropped -14.8% yoy to JPY 5232B in August. That’s the 8th straight month of double-digit decline, as well as the 21st month of contraction. It’s the worst run since the 23-month contraction through July 1987. Exports are generally expected to stay weak and might not reach pre-pandemic level until a least early 2022. Imports dropped -20.8% yoy to JPY 4984B. Trade surplus came in at JPY 248B.

      In seasonally adjusted term, exports rose 5.9% mom to JPY 5580B. Imports rose 0.1% mom to JPY 5230B. Trade surplus widened to JPY 350B.

      Fed Bullard explains voting for 50bps hike this week

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        In a statement, St. Louis Fed President James Bullard explained by he voted for a 50bps rate hike on March 16 FOMC meeting, instead of 25bps. Additional, in the Summary of Economic Projections, he penciled in more rate hikes to 3% this year.

        “The combination of strong real economic performance and unexpectedly high inflation means that the Committee’s policy rate is currently far too low to prudently manage the U.S. macroeconomic situation,” he said. “Moreover, U.S. monetary policy has been unwittingly easing further because inflation has risen sharply while the policy rate has remained very low, pushing short-term real interest rates lower. The Committee will have to move quickly to address this situation or risk losing credibility on its inflation target.”

        Bullard also compared to what Fed did back in 1994 and 1995, where FOMC “made a similar discrete adjustment to the policy rate to better align it with the macroeconomic circumstances at that time”. And, the results were excellent”.

        Full statement here.

        UK Raab: Substantive differences remain with EU and Brexit agreement

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          ActionForex.com
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          UK Brexit Minister Dominic Raab held a phone call with EU chief negotiator Michel Barnier. After that, Raab said “while there remain some substantive differences we need to resolve, it is clear our teams are closing in on workable solutions to the outstanding issues in the Withdrawal Agreement, and are having productive discussions in the right spirit on the future relationship.”

          Raab added that “we agreed to review the state of play in the negotiations following the informal meeting of heads of state or government of the European Union in Salzburg next Thursday, and we reiterated our willingness to devote the necessary time and energy to bring these negotiations to a successful conclusion.”

          Philadelphia business outlook: General activity, new orders, shipments, and employment all indicated continued expansion

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            ActionForex.com
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            Philadelphia business outlook diffusion index rose from 22.3 to 23.2 in April, beating expectation of 21.2. There were nearly 37% of manufacturers reported increases in overall activity during the month, while 14% reported decreases. Philadelphia Fed noted in the release that the responses ” suggest continued growth for the region’s manufacturing sector. The indexes for general activity, new orders, shipments, and employment all indicated continued expansion this month.” And, “looking ahead six months, the firms continued to be optimistic about the outlook for manufacturing activity.”

            Full release here

            Also from US, jobless claims dropped 1k to 232k in the week ended April 21, slightly above expectation of 230k. Four week moving average rose 1.25k to 231.25k. Continuing claims dropped 15k to 1.86m in the week ended April 14.

            UK retail employment balance dropped to lowest since 2009

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              ActionForex.com
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              UK CBI realized sales balance dropped to -6% in the year to August, down from July’s 4%. They’re expected to drop further next month, at a faster rate of -17%. Employment balance in the retail sector dropped sharply, at -45%, sharpest pace since February 2009. Faster fall is expected in the quarter head at -52%.

              Alpesh Paleja, CBI Lead Economist, said: “The furlough scheme has proved effective at insulating workers and businesses in some of the worst-hit sectors during the pandemic, but these findings reinforce fears that many job losses have been delayed rather that avoided.

              “Indeed, the latest survey shows that trading conditions for the retail sector remain tough, even against the backdrop of business slowly returning. Firms will be wary of deteriorating household incomes and the risk of further local lockdowns potentially hitting them in the pocket for a second time.

              Full release here.

              China’s 2023 economic growth at 5.2%, population shrinks for second year

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                China’s GDP grew 5.2% yoy in Q4, an uptick from Q3’s 4.9% yoy. For the full year of 2023, the economy also recorded a growth rate of 5.2%. On a quarter-by-quarter basis, GDP growth rate was 1.0% qoq, matched expectation, though this marked a slowdown from the previous quarter’s revised 1.5% qoq gain.

                In the industrial sector, production rose by 6.8% yoy in December, slightly higher than the previous month’s 6.6%, meeting market forecasts. However, retail sales growth decelerated to 7.4% yoy, a drop from November’s 10.1% yoy and below the expected 8.1% yoy.

                Investment patterns showed a mixed trend. Overall fixed asset investment in 2023 grew by 3.0%, slightly exceeding the 2.9% expectation. Within this category, real estate investment saw a significant drop of -9.6%. Conversely, investment in infrastructure and manufacturing rose by 5.9% and 6.5%, respectively, signaling growth in these areas.

                Amidst these economic developments, China faces a demographic challenge as its population fell for the second consecutive year in 2023. Total population decreased by -2.75m to 1.409B, a more rapid decline than in 2022.

                CAD/JPY upside breakout, targets 108.52, then 109.93

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                  CAD/JPY breaks through 107.62 high today on broad based Yen selloff. The break of near term channel resistance also indicates upside acceleration. Further rally is expected now as long as 106.55 minor support holds. Next near term targets are 161.8% projection of 101.39 to 105.07 from 102.57 at 108.52, and then 200% projection at 109.93.

                  Current development also indicates resumption of long term up trend from 73.80 (2020 low). Next medium term target is 161.8% projection of 73.80 to 91.16 from 84.65 at 112.73.

                  Six central banks to discuss digital currencies in April

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                    Japan’s Nikkei newspaper reported that six global central banks will meet in April, together with Bank of International Settlements on the topic of digital currencies. Central banks of the UK, Eurozone, Japan, Canada, Sweden and Switzerland said last month that they’re going to share information regarding digital currencies issuance.

                    For the April meeting, discussions will include ways to streamline cross-border settlement, as well as security issues. An interim report is expected in June, with a final report to be published around Autumn.

                    BoJ board member Takako Masai said together that “In Japan, we don’t have any plans now to issue central bank digital currencies… But we need to make an effort so we’re ready to respond, in case public demand for central bank digital currencies rise dramatically.”

                    RBA Harper: Still plenty of excess capacity in the economy

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                      ActionForex.com
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                      RBA board member Ian Harper said there’s “still plenty of excess capacity in the economy”. The tendency for monetary stimulus to product an asset-price bubble is “way off where we’re presently headed”. Policymakers indeed wanted asset prices to be increasing to speed up investment. Harper added, “the bank can continue to buy bonds for as long as it likes, there’s no obstacle to that.”

                      “The recent changes that the Fed made, well that was to bring them up to where we are basically,” he said. “We’ve never religiously or rigidly interpreted the timeframe over which we would seek the inflation rate to be within the target band.”

                      US consumer confidence fell to 106.1, expectations near recession threshold

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                        ActionForex.com
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                        US Conference Board Consumer Confidence fell from 114.0 to 106.1 in August, well below expectation of 116.5. Present Situation Index fell from 153.0 to 144.8. Expectations Index fell from 88.0 to 80.2.

                        Dana Peterson, Chief Economist at The Conference Board:

                        • “Consumer confidence fell in August 2023, erasing back-to-back increases in June and July.”
                        • “Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular.
                        • “Assessments of the present situation dipped in August on receding optimism around employment conditions
                        • “Expectations for the next six months tumbled back near the recession threshold of 80, reflecting less confidence about future business conditions, job availability, and incomes.”

                        Full US Consumer Confidence release here.

                        UK PM May bashed by British media for failure at EU summit

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                          ActionForex.com
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                          UK media generally bashed Prime Minister Theresa May’s performance at the informal EU summit in Austria. There are headlines today like “May humiliated,” “Humiliation for May,” “Embarrassing rebuff for PM in Salzburg,” “Your Brexit’s broken,”etc. It’s rather common for UK politicians to get the harshest words back at home. Comments from the EU were so far rather gentle.

                          House Minister James Brokenshire defended her in a BBC radio interview, saying ” the prime minister is getting the right deal for our country. She is sticking up for Britain, sticking up what will work for country. These are tough negotiations.”

                          However, Scottish First Minister Nicola Sturgeon said, “Now that the EU has explicitly rejected it, the Chequers pretence has to stop. At the very least, single market/customs union membership must be back on the table and the Article 50 clock stopped to avoid a cliff edge”.

                          Separately, European Commission President Jean-Claude Juncker urge EU and UK to be like “two loving hedgehogs”. And, “when two hedgehogs hug each other, you have to be careful that there will be no scratches.”

                          Eurozone economic sentiment rose to 103.5, on stronger consumers and industry managers

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                            ActionForex.com
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                            Eurozone economic sentiment indicator rose to 103.5 in February, up from 102.6, beat expectation of 101.5. The improvement resulted from higher confidence among consumers and, to a lesser extent, industry managers. Looking at some details, industry confidence rose from -7.0 to -6.1. Services confidence edged up from 11.0 to 11.2. Consumer confidence rose fro -8.1 to -6.6. Retail trade confidence dropped slightly from -0.1 to -0.2. Construction confidence dropped from 5.8 to 5.3.

                            Amongst the largest euro-area economies, the ESI saw marked improvements in the Netherlands (+2.0), France (+1.9) and Spain (+1.2), while a more moderate one in Germany (+0.6). Sentiment in Italy remained flat (+0.0).

                            Full release here.

                            BoJ’s Uchida cautions against premature policy shift

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                              ActionForex.com
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                              BoJ Deputy Governor Shinichi Uchida voiced caution over a hasty shift in monetary policy amid current economic climate. In an interview with Nikkei, Uchida emphasized that Japan was far from needing to hastily raise interest rates.

                              “The risk of missing the opportunity to achieve our 2% target with a premature policy shift is bigger than that of being too late in tightening policy and allowing inflation to continue running above 2%,” Uchida explained.

                              Uchida noted the budding changes in Japanese companies’ behavior, which have been rooted in the country’s deflationary period. He stressed the importance of nurturing these developments with care. However, he cautioned that uncertainty remains high over inflation outlook, including impact of pricing behaviors and wage hikes by companies.

                              “We have not reached a point where we can foresee the 2 percent price stability target can be attained stably and sustainably,” Uchida said. He also recognized the burden placed on households due to more than 2% rise in core CPI, reinforcing the importance of supporting the economy with current monetary easing to stabilize inflation at 2%, in tandem with wage growth.

                              Uchida also touched on foreign exchange rates, noting the unwanted uncertainty caused by Yen’s rapid and one-sided depreciation. He highlighted the importance of stable foreign exchange rates, which should reflect economic and financial fundamentals. “The BOJ will coordinate with the government, and closely monitor developments in the foreign exchange market and their impact on the economy and prices,” he added.

                              Dollar mildly higher after data. Jobless claims drop 4k to 226k

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                                ActionForex.com
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                                First batch of US data release:-

                                • Initial jobless claims Mar 9: 226k vs exp 226k vs prior 230k
                                • Continuing claims Mar 2: 1.88m vs exp 1.90m vs prior 1.88m
                                • Empire state manufacturing Mar: 22.5 vs exp 15.0 vs prior 13.1
                                • Philly Fed manufacturing Mar: 22.3 vs exp 23.0 vs prior 25.8
                                • Import price index Feb: 0.4% mom vs exp 0.2% mom vs prior 0.8% mom

                                Dollar strengthens mildly after the release.

                                Eurozone CPI slowed sharply to 8.5% yoy in Jan, core unchanged at 5.2% yoy

                                  By
                                  ActionForex.com
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                                  Eurozone CPI slowed sharply from 9.2% yoy to 8.5% yoy in January, well below expectation of 9.0% yoy. CPI core (all items less energy, food, alcohol & tobacco) was unchanged at 5.2% yoy, above expectations of 5.1% yoy.

                                  Looking at the main components, energy is expected to have the highest annual rate in January (17.2%, compared with 25.5% in December), followed by food, alcohol & tobacco (14.1%, compared with 13.8% in December), non-energy industrial goods (6.9%, compared with 6.4% in December) and services (4.2%, compared with 4.4% in December).

                                  Full release here.

                                  BoC stand pat, maintain pledge to keep rate at ELB and continue with QE

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                                    ActionForex.com
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                                    BoC left monetary policy unchanged as widely expected. Overnight rate is kept at effective lower bound of 0.25%. Bank rate and deposit rate correspond at 0.50% and 0.25% respectively. The QE program will continue at at least CAD 5B per week.

                                    In the accompany statement, BoC said the global and Canadian economies are “evolving broadly in line” with July MPR. The strong reopening phase will be followed by a “protracted and uneven recuperation phase, which will be heavily reliant on policy support”.

                                    The central bank maintain the pledge to keep policy rate at ELB ” until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.”. The QE program will continue ” until the recovery is well underway and will be calibrated to provide the monetary policy stimulus needed to support the recovery and achieve the inflation objective.”

                                    Full statement here.

                                    German retail sales dropped -0.6% mom in May, 10-year bund yield hits new record low

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                                      ActionForex.com
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                                      German retail sales dropped -0.6% mom in May, well below expectation of 0.5% mom. Compared with 2018, for the first fives months of the year, retail sales rose 2.8% in real terms. The weak data dampened hope that domestic demand could offset the drag from global trade on the export-led economy. Euro is steady after the release. But German 10-year bund yield is extending recent record run, hitting as low as -0.362 so far today.

                                      Full release here.

                                      Gold resume upside, but should top below 1380 on bearish divergence

                                        By
                                        ActionForex.com
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                                        Gold’s recent up trend from 1160.17 (2018 low) resumed today by breaking 1326.25 and reaches as high as 1327.60 so far. Near term outlook will now remain bullish as long as 1302.32 support holds. And current rally would target next resistance at 1366.05 (2018 high).

                                         

                                        The question now is, whether gold is strong enough to resume the rebound from 1046.37 long term bottom (2015 low). That would imply a solid break of key fibonacci level of 38.2% retracement of 192.070 to 1046.37 at 1380.36. It tried this resistance twice since 2016 but failed.

                                        As daily MACD now displays bearish divergence condition, we’d expect another failure this time. And, even if gold is to break 1380 eventually, a near term fall back, possibly back to 55 week EMA (now at 1265.20) would likely be seen first.

                                        That is, while current rise might extend further, we’d expect upside to be limited below 1380 handle to bring near term reversal.

                                         

                                        US PPI rose 1.4% mom, 11.2% yoy in Mar, record 12-month increase

                                          By
                                          ActionForex.com
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                                          US PPI for final demand rose 1.4% mom in March, above expectation of 1.1% mom. For the 12-month period, PPI accelerated to 11.2% yoy, up from 10.2% yoy, above expectation of 10.5% yoy. That’s also the largest increase since the 12-month data were first calculated in November 2010.

                                          PPI for final demand goods rose 2.3% mom while PPI for final demand services rose 0.9% mom. PPI final demand less goods, energy and trade services rose 0.9% mom, fastest since January 2021. For the 12 months, PPI for final demand less foods, energy and trade services rose 7.0% yoy.

                                          Full release here.

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