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Fed Bullard: Getting to neutral isn’t going to be enough

    By
    ActionForex.com
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    St Louis Fed President James Bullard said in an FT interview, there’s “a bit of a fantasy” in current policy in centrals banks to think thank inflation could be brought down by moving interest rate to neutral.

    “Neutral is not putting downward pressure on inflation. It’s just ceasing to put upward pressure on inflation,” he said. “We have to put downward pressure on the component of inflation that we think is persistent.”

    “Getting to neutral isn’t going to be enough it doesn’t look like, because while some of the inflation may moderate naturally . . . there will be a component of it which won’t,” he added.

    Bullard also warned that this week’s CPI report just ” underscores the urgency that the Fed is behind the curve and needs to get moving.”

    “If markets and households get the idea that the Fed’s not going to do the right thing and not going to keep inflation under control, then you have to gain credibility by actually doing things that show them that you are serious,” he said.

    UK CPI jumped to 7% in Mar, highest since 1992

      By
      ActionForex.com
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      UK CPI rose 1.1% mom in March, above expectation of 0.7% mom. For the 12-month period, CPI accelerated from 6.2% yoy to 7.0% yoy, above expectation of 6.7% yoy. That’s the highest rate in the historic modeeled series since March 1992, when it stood at 7.1% yoy. RPI rose 1.0% mom, 9.0% yoy, versus expectation of 0.9% mom, 8.8% yoy.

      Also released, PPI input came in at 5.2% mom, 19.2% yoy, above expectation of 0.5% mom, 13.4% yoy. PPI output rose 2.0% mom, 11.9% yoy, above expectation of 0.7% mom, 10.2% yoy. CCPI output core rose 2.0% mom, 12.0% yoy, above expectation of 0.9% mom, 10.6% yoy.

      Full CPI release here.

      BoC to hike 50bps, a look at EUR/CAD

        By
        ActionForex.com
        -

        BoC is widely expected to raise interest rate by 50bps to 1.00% today, to curb inflation which was already at a 30-year high. That would be the first half a percentage point hike since May 2000. The tightening cycle will continue for sure, with some expecting to overnight rate hit 2.50% level by the end of the year. Another point to note is BoC would probably start the plan to unwind its balance sheet, and the pace will be closely watched.

        Here are some previews:

        Canadian Dollar is one of the stronger ones for the month, but rally stalled, following the pull back in oil prices. EUR/CAD’s recovery from 1.3586 temporary low might have completed at 1.3763, after failing to sustain above 4 hour 55 EMA. 1.3586 low will be back in focus today. Break there will extend larger down trend to 161.8% projection of 1.5096 to 1.4162 from 1.4633 at 1.3122. Meanwhile, break of 1.3763 will extend the recovery. But near term outlook will stay bearish as long as 1.3977 resistance holds.

        NZD/USD gets not much support from RBNZ hike

          By
          ActionForex.com
          -

          NZD/USD just receive very brief lift from larger than expected RBNZ rate hike. It struggles to break through 4 hour 55 EMA firmly and risk is mildly on the downside. Break of 0.6805 temporary low will resume the fall from 0.7033 to 0.6728 support. Sustained break there will argue that whole rebound from 0.6728 has completed at 0.7033, and bring retest of 0.6528 low.

          More importantly, break of 0.6728 support should also confirm rejection by trend line resistance, which in turn suggests that the choppy decline from 0.7463 is still in progress for another fall through 0.6528 low.

          RBNZ hikes by 50bps to 1.50%, path of least regret

            By
            ActionForex.com
            -

            RBNZ raises Official Cash Rate by 50bps to 1.50%, larger than expectation of a 25bps hike. That’s also the biggest rate increase in 22 years.

            It said in the statement that “moving the OCR to a more neutral stance sooner will reduce the risks of rising inflation expectations.  A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment.”

            Also, “the Committee agreed that their policy ‘path of least regret’ is to increase the OCR by more now, rather than later, to head off rising inflation expectations and minimise any unnecessary volatility in output, interest rates, and the exchange rate in the future.”

            Full statement here.

            Australia Westpac consumer sentiment dropped to 95.8, on interest rate, inflation and war

              By
              ActionForex.com
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              Australia Westpac consumer sentiment index dropped -0.9% to 95.8 in April, down from March’s 96.6. That’s the lowest level since September 2020. Westpac said “concerns around interest rates and inflation were starting to weigh on confidence… compounded by Russia’s invasion of Ukraine, an associated spike in petrol prices, and severe weather events.”

              Westpac expects RBA to raise interest rate at June meeting, after reviewing data releases “over coming months”. Once the tightening cycle starts, Westpac expects a series of rate hikes in most months in 2022, with a pause in September. Further rate hikes can be expected in first half of 2023 and the cash rate would peak at around 2% by June next year.

              Full release here.

              Fed Barkin: Best short-term policy path is rapid to neutral

                By
                ActionForex.com
                -

                Richmond Fed President Thomas Barkin said yesterday, “the best short-term path for us is to move rapidly to the neutral range and then test whether pandemic-era inflation pressures are easing, and how persistent inflation has become. If necessary, we can move further.”

                He added that the actions to combat inflation doesn’t “necessarily require a hard landing.” In fact, “it might help avoid one by convincing individuals and firms that the Fed is committed to our target, thereby cementing inflation expectations.”

                Barkin also said that the Fed needs to be “crystal clear that a growing economy requires stable prices, and that we will remain committed to addressing inflationary gusts.”

                US CPI rose to 8.5% yoy, core CPI rose to 6.5% yoy, highest since early 80s

                  By
                  ActionForex.com
                  -

                  US CPI rose 1.2% mom in March, above expectation of 1.1% mom. CPI core rose 0.3% mom, below expectation of 0.5% mom.

                  For the 12-month period, CPI accelerated from 7.9% yoy to 8.5% yoy, above expectation of 8.3% yoy. That’s the highest annual rate since December 1981.

                  CPI core ticked up from 6.4% yoy to 6.5% yoy, below expectation of 6.6% yoy. That’s the fastest 12-month increase since August 1982.

                  Energy index rose 32.0% yoy while goods index rose 8.8% yoy, largest 12-month increase since May 1981.

                  Full release here.

                  Germany ZEW economic sentiment dropped to -41, prospect of stagflation over next six months remains

                    By
                    ActionForex.com
                    -

                    Germany ZEW Economic Sentiment dropped from -39.3 to -41 in April, but was better than expectation of -48. Current Situation Index dropped from -21.4 to -30.8, above expectation of -35.0. Inflation expectations dropped -43.4 pts to 26.8.

                    Eurozone ZEW Economic Sentiment dropped from -38.7 to -43.0, above expectation of -46.5. Current Situation index dropped -6.6 pts to -28.5. Inflation expectations dropped -43.6 pts to 25.9.

                    “The ZEW Indicator of Economic Sentiment remains at a low level. The experts are pessimistic about the current economic situation and assume that it will continue to deteriorate. The decline in inflation expectations, which cuts the previous month’s considerable increase by about half, gives some cause for hope. However, the prospect of stagflation over the next six months remains,” comments ZEW President Achim Wambach.

                    Full release here.

                    UK payrolled employees rose 35k in Mar, unemployment rate dropped to 3.8% in Feb

                      By
                      ActionForex.com
                      -

                      UK payrolled employees rose 35k in March, comparing to February. Number of payrolled employees were 544k or 1.9% above prepandemic level in February 2020. Claimant count dropped -46.9k, larger than expectation of -41.1k.

                      In the three months to February, unemployment rate dropped to 3.8% matched expectations. That’s -0.2% lower than the previous three-month period, and -0.1% below pre-pandemic levels. Average earnings including bonus rose 5.4% over the year, below expectation of 5.7%. Average earnings excluding bonus jumped 4.0% over the year, above expectation of 3.7%.

                      Full release here.

                      Australia NAB business confidence rose to 16, strong rebound led by consumer demand

                        By
                        ActionForex.com
                        -

                        Australia NAB business confidence rose from 13 to 16 in March. Business conditions rose from 9 to 18. Looking at some details, trading conditions rose from 11 to 24. Profitability conditions rose from 5 to 13. Employment conditions rose from 8 to 12.

                        “A surge in business conditions headlined a really strong March survey,” said NAB Group Chief Economist Alan Oster. “Businesses reported very strong trading conditions and a sharp rise in profitability, which indicates demand is continuing to hold up as the economy rebounds from Omicron and growth gathers momentum.”

                        “Business confidence continued to improve in March, with little evidence of any adverse impact from events in Ukraine,” said Oster. “The outlook also strengthened in terms of forward orders which points to ongoing economic growth over coming months.”

                        “Overall, the results depict a very strong rebound, led by strong consumer demand.”

                        Full release here.

                        Japan PPI rose 7.3% yoy in Mar, index at highest level since 1982

                          By
                          ActionForex.com
                          -

                          Japan corporate goods price index rose 7.3% yoy in March, slowed from 9.7% yoy but beat expectation of 9.3% yoy. The March index, at 112.0, was the highest level since December 1982. The yen-based import price index surged 33.4% yoy, signaling that Yen’s depreciation could be amplifying import inflation.

                          Separately, Finance Minister Shunichi Suzuki warned, “The government will closely monitor developments in the foreign exchange market, including the recent depreciation of the yen with a sense of vigilance. That includes the impact on the Japanese economy.”

                          Fed Evans: Optionality of not going too far too quickly is important

                            By
                            ActionForex.com
                            -

                            Chicago Fed President Charles Evans said yesterday that 50bps rate hike in May is “obviously worthy of consideration; perhaps it’s highly likely even if you want to get to neutral by December.” But he also emphasized, “the optionality of not going too far too quickly is important.”

                            He added that but the end of the year, Fed will know a lot more about inflation. “Is it going to be that some of these pricing pressures have crested, and they start coming down? Or are they going to stay high — or are they going to be higher?” Evans said. “And if it’s because of supply concerns, real resource pressures, there’s going to be a lot of gnashing-of-teeth angst over the inflation versus the concern for the economy. And I think finding the right balance is going to always be at a premium.”

                            NIESR forecasts 1% UK GDP growth in Q1, flat in Q2

                              By
                              ActionForex.com
                              -

                              As UK GDP grew merely 0.1% mom in Q2, NIESR said the final forecast for Q1 is for growth of 1.0% only. The initial nowcast for the second quarter of 2022 is for GDP unchanged from the first quarter, with a small quarter-on-quarter fall in production and a small rise in construction.

                              NIESR added: “NIESR research has suggested that inflation will now average 7 per cent in 2022, and GDP growth could be reduced by 0.8 percentage points to 4.0 per cent from the 4.8 per cent we forecast in our Winter 2022 UK Economic Outlook. This analysis will be updated in our Spring UK Economic Outlook, to be published on 10th May.”

                              Full release here.

                              CHF/JPY upside breakout as Yen selloff intensifies

                                By
                                ActionForex.com
                                -

                                Yen selloff steps up a gear today and even CHF/JPY breaks through short term top at 133.53 to resume its long term up trend. For now, short term outlook will remain bullish as long as 130.74 support holds. There is prospect of upside acceleration to next target at 161.8% projection of 117.51 to 127.05 from 124.23 at 139.66.

                                More importantly, as seen in the monthly chart, CHF/JPY is now trying to break through 161.8% projection of 101.66 to 118.59 from 106.71 at 134.10. Sustained trading above this level could set up the for medium term upside acceleration towards 151.22 (2014 spike high).

                                UK GDP grew only 0.1% mom in Feb, production contracted

                                  By
                                  ActionForex.com
                                  -

                                  UK GDP grew 0.1% mom only in February, below expectation of 0.3% mom. Services was the main contributor to growth, up 0.2% mom. But that was offset by -0.6% mom contraction in production, and -0.1% mom in construction.

                                  Overall monthly GDP was 1.5% above its pre-coronavirus level in February 2020. Services was 2.1% above that level while construction was 1.1% above. However, production was -1.9% below.

                                  Full release here.

                                  Also published, manufacturing production came in at -0.4% mom, 3.6% yoy, versus expectation of 0.4% mom, 2.5% yoy. Industrial production came in at -0.6% mom, 1.6% yoy, versus expectation of 0.4% mom, 1.4% yoy. Goods trade deficit narrowed to GBP -20.6B, larger than expectation of GBP -16.8B.

                                  China PPI slowed to 8.3% yoy, CPI rose to 1.5% yoy in Mar

                                    By
                                    ActionForex.com
                                    -

                                    China PPI slowed from 8.8% yoy to 8.3% yoy, but still beat expectation of 7.9% yoy. However, the monthly rise of 1.1% mom in PPI was the fastest in five months, driven by surges in oil prices and non-ferrous metals.

                                    CPI accelerated from 0.9% yoy to 1.5% yoy in March, above expectation of 1.2% yoy. Core CPI, excluding food and energy, rose 1.1% yoy, unchanged from February’s reading. Prices of some food like flour, vegetable oil, fresh vegetables and eggs rose and were “affected by the rise in international prices of wheat, corn and soybeans and the domestic [coronavirus] outbreaks”, noted senior NBS statistician Dong Lijuan.

                                    BoJ Kuroda: Economy to continue to recover despite rising commodity prices

                                      By
                                      ActionForex.com
                                      -

                                      BoJ Governor Haruhiko Kuroda said in the quarterly branch manager meeting, “Japan’s economy has picked up as a trend, although some weakness has been seen in part, mainly due to the impact of COVID-19.”

                                      “As downward pressure on service consumption and the impact of supply shortages diminish, a pickup in overseas demand, accommodative monetary policy, and the government’s economic stimulus will likely help the Japanese economy recover despite being affected by rising commodity prices,” he added.

                                      Kuroda also cautioned that “extremely high uncertainties” remain over how the crisis in Ukraine will impact commodity prices and the Japanese economy. But he also indicated that commodity inflation is unlikely to trigger a change in the central bank’s ultra-loose policy, because it wouldn’t last long.

                                      CAD/JPY recovers mildly, but stays in consolidation

                                        By
                                        ActionForex.com
                                        -

                                        CAD/JPY recovers mildly after better than expected Canadian job data. But it’s just staying well inside consolidation pattern from 110.17. More sideway trading could still be seen. But outlook remains bullish with 96.70 support intact. Larger up trend is expected to resume sooner or later through 100.17 short term top.

                                        In case of upside breakout, next target will be 100% projection of 73.80 to 91.16 from 84.65 at 102.01.

                                        Canada employment grew 73k in Mar, unemployment rate dropped to record low 5.3%

                                          By
                                          ActionForex.com
                                          -

                                          Canada employment grew 73k, or 0.4% mom, in March, slightly below expectation of 78k. The growth was driven by 93k rise in full-time jobs. Services-producing jobs rose 42k while goods-producing jobs rose 31k.

                                          Unemployment rate dropped -0.2% to 5.3%, lowest on record since 1976. Total hours worked rose 1.3% mom. Average hourly wages rose 3.4% yoy.

                                          Full release here.

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