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Chinese Yuan nosedives to year low amid deepening property sector concerns

    By
    ActionForex
    -

    The Chinese Yuan nosedived to its lowest mark this year, echoing growing anxieties that spread from the real estate domain to the financial sector. Fueling this downturn, JPMorgan Chase & Co. rang alarm bells today, highlighting heightened liquidity strains for debt-ridden developers and their non-bank stakeholders. This follows a notable hiccup by a subsidiary of Zhongzhi Enterprise Group Co., which stands among China’s premier private wealth management entities. The said unit stumbled in ensuring timely payments across multiple products.

    These defaults in the trust sector could potentially trigger a detrimental cycle impacting the onshore debt of privately-owned enterprise developers. The escalating apprehensions regarding potential developer defaults have soured the investment climate. Consequently, trust entities may either find it challenging or may express reluctance in rolling over existing products tied to real estate.

    USD/CNH’s break of 7.2853 resistance confirms resumption of whole rally from 6.6971 (Jan low). Purely technically speaking, current rise should target 7.3745 resistance first (2022 high), and then 61.8% projection of 6.8100 to 7.2853 from 7.1154 at 7.4091. However, market watchers are most intrigued by a looming question: When will China’s authoritative bodies intervene to arrest the Yuan’s descent?

    Japan in Spotlight: Q2 GDP, Nikkei, and Yen dynamics garner attention

      By
      ActionForex
      -

      Investor attention is set to pivot towards Japan’s Q2 GDP data in the upcoming Asian session. Preliminary forecasts project a qoq growth of 0.8%, translating to an annualized expansion of 3.1%. In today’s trading, Nikkei took a significant hit, sliding by -1.27% or -413.7 points, largely influenced by bearish sentiments rooted in China’s property sector. Meanwhile, Yen showed signs of wavering post an initial surge, setting the stage for a keen watch on its reaction, as well as Nikkei’s, to the impending GDP figures.

      After some initial volatility following BoJ’s adjustment on YCC on July 28, Nikkei has weakened notably. Technically, it’s now pressing 55 D MEA and looks vulnerable to deeper decline. Nevertheless, Overall price actions from 33772.89 are just viewed as a corrective move to the long term up trend only, as also supported by the structure. Hence, even in case of a deeper pull back, strong support should be seen from 38.2% retracement of 25661.89 to 33772.89 to contain downside. Meanwhile, strong rebound from current level, would bring retest of 33772.89 high.

      Meanwhile, Yen continued to weaken after brief post-BoJ spike, with USD/JPY breaking through 145 handle today. Market chatter suggests a potential pushback by Ministry of Finance in the 145-148 range, though tangible signs of intervention remain absent. Yet it’s a wait-and-watch game to discern if Japan would act beyond the 145 mark. Nevertheless, technically, 61.8% projection of 129.62 to 145.06 from 137.22 at 146.76 doe present a resistance to overcome.

      NZD/USD under siege on domestic data and Asian market risks

        By
        ActionForex
        -

        NZD/USD is having a notable decline today, pressured by dismal services data from New Zealand and an escalating sense of risk aversion throughout Asian markets. This downtrend also sets a tense backdrop leading up to this week’s RBNZ rate decision, with the central bank widely anticipated to hold for the second consecutive month.

        Last week’s break of 0.5984 support should confirm resumption of whole decline from 0.6537. Near term outlook in NZD/USD will stay bearish as long as 0.6117 resistance holds. Next target is 100% projection of 0.6537 to 0.5894 from 0.6410 at 0.5857.

        For now, the structure of the decline from 0.6537 is still favoring that it’s a correction to rebound from 0.5511. Hence, strong support should emerge below 0.5857 to bring reversal. However, any downside acceleration below 0.5857 would raise the chance that it’s indeed resuming the larger down trend through 0.5511.

        NZ BNZ services plunges down to 47.8, deepening contraction as activity dives

          By
          ActionForex
          -

          New Zealand’s service sector, as gauged by the BusinessNZ Performance of Services Index, experienced a marked decline in July, descending from 49.6 to a worrying 47.8. This latest reading is not only the lowest since January 2022 but also trails the long-term average of 53.5 significantly.

          A detailed analysis of the index highlights concerning trends. The activity component has sharply dropped from 50.9 to 39.6, marking its worst performance since August 2021 and setting a gloomy record. Specifically, this month’s reading stands as the worst non-lockdown related reading on record since 2007. New orders within businesses have taken a substantial hit, plummeting from 50.4 to 43.8.

          Meanwhile, employment showed a marginal decrease, moving from 49.1 to 49.0. On a brighter note, stocks or inventories observed an increase, jumping from 47.2 to 54.0, with supplier deliveries also ticking up from 51.0 to 52.1.

          BusinessNZ’s Chief Executive, Kirk Hope, said. “The further fall into contraction during July also saw another lift in the proportion of negative comments,” he remarked, drawing attention to the sharp increase in negative feedback, which escalated to 67% from 55.6% in June and 49.4% in May.

          Hope continued, “Overall, negative comments received were strongly dominated by a general downturn in the economic conditions/slowing economy, as well as ongoing increased costs.”

          BNZ Senior Economist, Doug Steel, weighed in on the data, highlighting a distressing pattern. “The results all point to a sharp drop in demand in July, significantly accelerating the slowing trend that had been evident for many months,” he said.

          Full NZ BNZ PSI release here.

          US PPI up 0.3% mom in Jul, services rose 0.5% mom, goods rose 0.1% mom

            By
            ActionForex
            -

            US PPI for final demand rose 0.3% mom in July, above expectation of 0.2% mom. PPI services rose 0.5% mom while PPI goods edged up 0.1% mom. PPI ex-food, energy, and trade services rose 0.2% mom.

            For the 12 months ended in July, PPI rose 0.8% yoy, above expectation of 0.7% yoy. PPI ex-foods, energy and trade services rose 2.7% yoy.

            Full US PPI release here.

            UK GDP rose 0.5% mom in Jun, up 0.2% qoq in Q2

              By
              ActionForex
              -

              UK GDP grew 0.5% mom in June, well above expectation of 0.2% mom. Production grew 1.8% mom. Services was up 0.2% mom. Construction also rose 1.6% mom.

              For Q1, GDP grew 0.2% qoq, above expectation of 0.0% qoq. But the level of quarterly GDP was -0.2% below its pre-pandemic level in Q4 2019. Services grew 0.1% on the quarter. Production grew by 0.7% with 1.6% growth in manufacturing. Construction rose 0.3%.

              The implied price of GDP rose by 2.1% in Q2, which was primarily driven by higher price pressures for household consumption (1.5%) and government consumption (3.1%).

              Full UK monthly and quarterly GDP releases here.

              RBA Lowe: Possible that some further tightening will be required

                By
                ActionForex
                -

                Addressing the House of Representatives Standing Committee on Economics today, outgoing RBA Governor, Philip Lowe Lowe stated that the purpose behind the pauses in July and August was “to provide time to assess the impact of the (rates) increases to date and the economic outlook and the associated risks.”

                He reiterated that “it is possible that some further tightening of monetary policy will be required”. But the decision would be largely based on incoming data and the Board’s evolving analysis of economic forecast and potential risks.

                Lowe expressed optimism about recent economic data, remarking, “It is encouraging that the recent data are consistent with inflation returning to target over the next couple of years.”

                But he also pinpointed two risks that RBA is closely monitoring. “The first is the outlook for household consumption,” he said, attributing this concern to the myriad of factors currently influencing household finances and expenditures.

                The second risk highlighted was the potential persistence of high services price inflation which could lead to “prolonging the period of inflation being above target.”

                Lowe emphasized the RBA’s forecast, which assumes a resurgence in productivity rates, aligning with levels seen pre-pandemic. Such growth, he suggested, would help in moderating the unit labour costs and subsequently, inflation. Yet, he cautioned, “If this pick-up in productivity does not occur, all else constant, high inflation is likely to persist, which would be problematic.”

                Full remarks of RBA Lowe here.

                New Zealand BNZ manufacturing slumps to Post-GFC low in July

                  By
                  ActionForex
                  -

                  New Zealand’s BusinessNZ Performance of Manufacturing Index has experienced a drop in July, declining from 47.4 to 46.3. Digging into the details, there was a notable dip in Production, which plummeted from 47.3 to 42.9, and Employment wasn’t far behind, decreasing from 46.8 to 44.3. On a slightly brighter note, New Orders saw a modest increase, moving from 43.8 to 45.0, and Finished Stocks slightly ticked up from 52.3 to 52.6. However, Deliveries took a sharp hit, falling from 49.9 to 42.3.

                  Feedback from the manufacturing sector portrayed a gloomy picture. Negative comments in July stood at 72%, a slight decrease from June’s 74.5%, but higher than May’s 66.7% and April’s 70.3%. The core concerns cited by manufacturers revolved around general market uncertainty, escalating costs, and inclement weather affecting demand, particularly during July.

                  Catherine Beard, BusinessNZ’s Director of Advocacy, remarked on the PMI’s July figures, indicating that they “showed very little signs of potential improvements for the sector as a whole.” Echoing this sentiment, BNZ Senior Economist, Doug Steel, highlighted the gravity of the situation, noting that “the July result was the fifth consecutive monthly sub-50 reading and, outside of Covid lockdown periods, the lowest reading since the GFC days back in June 2009.”

                  Full NZ BNZ PMI release here.

                  Fed’s Daly on CPI: Not a Victory Yet

                    By
                    ActionForex
                    -

                    San Francisco Fed President, Mary Daly, offered a measured response to yesterday’s US CPI release, stating that while the figures “came in largely as expected, and that is good news,” it does not signify a comprehensive victory over the ongoing inflation challenges. “It is not a data point that says victory is ours,” Daly warned.

                    Highlighting the nuanced nature of the current inflation landscape, Daly noted the decrease in goods inflation and indicated promising trends in housing. However, her main concern lies with core services inflation that excludes housing.

                    Despite the general trend of receding inflation, core services inflation remains stubborn. Daly emphasized, “We do need to see that come back to prepandemic levels if we’re going to be confident that we can get to 2% on a sustainable basis.”

                    Offering insight into Fed’s future strategy, Daly was cautious: “Whether we raise another time, or hold rates steady for a longer period — those things are yet to be determined.”

                    She stressed the importance of upcoming data before Fed’s next meeting, suggesting it would play a critical role in shaping decisions. “It would be premature to project what I think would happen because there’s a lot of information coming in between now and our next meeting” in September, she added.

                     

                    US jobless claims rose to 248k, above expectations

                      By
                      ActionForex
                      -

                      US initial jobless claims rose 21k to 248k in the week ending August 5, above expectation of 230k. Four-week moving average of initial claims rose 3k to 228k.

                      Continuing claims dropped -8k to 1684k in the week ending July 29. Four-week moving average of continuing claims dropped -9k to 1701k.

                      Full US jobless claims release here.

                      US CPI and core CPI rose 0.2% mom in Jul, matched expectations

                        By
                        ActionForex
                        -

                        US CPI and core CPI rose 0.2% mom in July, matched expectations. Food prices rose 0.2% mom,Energy prices rose 0.1% mom. The index for shelter was by far the largest contributor to the monthly all items increase, accounting for over 90 percent of the increase, with the index for motor vehicle insurance also contributing.

                        For the 12 months, headline CPI rose slightly from 3.0% yoy to 3.2% yoy, below expectation of 3.3% yoy. Core CPI slowed slightly from 4.8% yoy to 4.7% yoy, below expectation of being unchanged. Food prices were up 4.9% yoy while energy prices were down -12.5% yoy.

                        Full US CPI release here.

                         

                        US CPI awaited, NASDAQ heading lower to 55 D EMA

                          By
                          ActionForex
                          -

                          Markets await key US consumer inflation data scheduled for release today, with projections centered on a 0.2% mom uptick for both headline and core CPI. On a yoy basis, headline CPI is anticipated to climb from 3.0% to 3.3%, while core CPI is projected to remain steady at 4.8%.

                          This anticipated rise in headline inflation, marking the first surge in over a year, can be attributed to unfavorable base effects and a moderate uptick in gas prices. Thus, this shouldn’t particularly alarm Fed officials.

                          If the inflation figures align with expectations, the 0.2% monthly increase in both core CPI would be largely consistent with Fed’s 2% inflation target. Such a scenario would strengthen the case for Fed to pause again in its September meeting, adopting a wait-and-see approach.

                          Following broad decline in US stocks, NASDAQ closed down -1.17% overnight. Current development suggests that a short term top at least formed at 14446.55. Deeper decline is expected to 55 D EMA (now at 13600.45).

                          The grappling question is whether rise from 10088.82, as the second wave of the medium term corrective pattern from 16212.22, has run off its course. It just missed target of 161.8% projection of 10088.82 to 12269.55 from 10982.80 at 14511.22.

                          Robust support from 55 D EMA would maintain near term bearishness for another rise through 14446.55 at a later stage. However, sustained break of this EMA would raise the chance of a bearish reversal. That is, the third leg of the medium term pattern has already started. NASDAQ would then test the second line of defense at 38.2% retracement of 10088.82 to 14446.55 at 12781.89 to determine its fate.

                          Japan’s PPI slows down for seventh consecutive month

                            By
                            ActionForex
                            -

                            Japan’s PPI for July has once again reported a slowdown, decelerating from 4.3% yoy in the previous month to 3.6% yoy. However, this figure slightly surpassed market expectations, which anticipated a drop to 3.5% yoy. It’s worth noting that this marks the seventh consecutive month of decline for PPI, tracing back from its December peak of 10.6% yoy.

                            Looking at some details, yen-denominated import prices saw a significant dip. The -14.1% yoy decline in July, a steeper fall than June’s -11.4% yoy, extends the negative trend to its fourth consecutive month.

                            Simultaneously, yen-denominated export prices also demonstrated downward trends, slipping from a positive growth of 0.8% yoy in the preceding month to a negative -0.2% yoy in July.

                            Full Japan PPI release here.

                            WTI hits highest level this year, targeting 85 next

                              By
                              ActionForex
                              -

                              WTI crude oil continued its impressive rally, marking its highest price point for the year. This surge comes in the wake of Saudi Arabia’s firm stance, as the nation’s cabinet confirmed yesterday its unwavering support for the precautionary strategies adopted by OPEC+.

                              Adding weight to this commitment, just last week, Saudi Arabia prolonged its voluntary slash in production by a significant 1 million barrels daily until the end of September. Besides, Russia further bolstered the market sentiment by announcing a reduction in oil exports by 300,000 bpd for September.

                              Technically, near term outlook in WTI will now stay bullish as long as 79.94 support holds. Next target is 161.8% projection of 63.67 to 74.74 from 66.94 at 84.85, and possibly above.

                              However, barring any dramatic development, strong resistance should be seen from 38.2% retracement of 131.82 (2022 high) to 63.67 (2023 low) at 89.70 to limit upside, at least on first attempt.

                              RBNZ business survey points to lower inflation expectations, steady interest rates

                                By
                                ActionForex
                                -

                                As seen from the latest Quarterly RBNZ Survey of Expectations, businesses have slightly tapered their inflation expectations in the near term but wage inflation expectations were on the rise. RBNZ OCR is expected to be unchanged at the current 5.50% through the quarter.

                                Expectations for annual inflation one year ahead have moderated, moving from 4.28% to 4.17%. However, a two-year horizon sees a marginal uptick in these expectations, which have climbed from 2.79% to 2.83%.

                                More long-term views, reflected in the five and ten-year ahead inflation expectations, both indicate a pullback, dropping to 2.25% (from 2.35%) and 2.22% (from 2.28%), respectively.

                                A notable area of concern stems from the annual wage inflation expectations. Over the course of both one and two years, these expectations are on the rise. For the year ahead, expectations climbed from 4.80% to 5.04%, and for the two-year mark, they increased from 3.53% to 3.66%.

                                Regarding monetary policy, the survey results indicate a stable outlook on the OCR. By the close of the September 2023 quarter, businesses anticipate OCR to average around 5.53%, a minimal climb from the prior quarter’s estimate of 5.47%. A one-year ahead mean estimate rose 32 basis points to 5.16% from the previous 4.84%.

                                Average one-year ahead GDP growth forecast surged to 1.02%, up from previous 0.48%. Moreover, businesses seem to be projecting continued momentum, with two-year ahead GDP growth expectations reaching 1.95% from preceding 1.66%.

                                Full RBNZ Survey of Expectations here.

                                China CPI down -0.3% yoy, first negative since 2021

                                  By
                                  ActionForex
                                  -

                                  China’s CPI for July registered a drop of -0.3% yoy, marking its first decline since February 2021. Although this result is slightly better than the market’s expectation of a -0.4% drop, it underscores the economic headwinds faced.

                                  Core inflation measure, which excludes the often erratic food and energy costs, showed a rise to 0.8% yoy from a mere 0.4% yoy. This points to some underlying demand within the economy, albeit muted.

                                  A deeper dive into CPI reveals that food prices have seen a -1% fall yoy, a sharp contrast to the 2.3% yoy rise observed in the previous month. On the other hand, non-food prices climbed 0.5% yoy last month, bouncing back from a -0.6% yoy.

                                  Dong Lijuan, chief statistician at the NBS, commented, “With the impact of a high base from last year gradually fading, the CPI is likely to rebound gradually.”

                                  On the PPI front, situation remains challenging. PPI improved from -5.4% yoy to -4.4% yoy in July. This figure not only missed market expectations, which stood at -3.8% yoy, but also marked the tenth straight month of negative readings.

                                  Fed’s Harker foresees stable rates and soft landing

                                    By
                                    ActionForex
                                    -

                                    Philadelphia Fed President Patrick Harker suggested a pause on rate changes in the coming months, emphasizing the importance of allowing current monetary policy measures to take effect.

                                    He said today, “Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work.”

                                    He also cautioned against expecting immediate rate reductions, noting, “The pandemic taught us to never say never, but I do not foresee any likely circumstance for an immediate easing of the policy rate.”

                                    Harker indicated that there might be a slight rise in the unemployment rate, which was most recently recorded at 3.5% in July, along with a deceleration in the GDP’s growth rate.

                                    Nonetheless, he remains optimistic, stating, “In sum, I expect only a modest slowdown in economic activity to go along with a slow but sure disinflation.”

                                    “I do see us on the flight path to the soft landing we all hope for and that has proved quite elusive in the past, he added.

                                     

                                    ECB consumer survey: Easing inflation expectations, but waning spending optimism

                                      By
                                      ActionForex
                                      -

                                      In June ECB Consumer Expectations Survey, consumer concerns over inflation appear to be receding, with expectations for both short-term and three-year horizons declining. Despite steady views on income growth over the next year, there’s a palpable decrease in optimism around consumer spending. Meanwhile, the outlook for economic growth sees a marginal uptick, albeit remaining muted.

                                      Notably, consumers seem to be less concerned about rampant inflation. Expectations for inflation over the next 12 months have retreated, with mean prediction decreasing from 5.1% to 4.7%. Median inflation outlook for the same period experienced a steeper decline, shifting from 3.9% down to 3.4%. This downward trend also extends to longer-term predictions. Mean inflation expectations for a three-year horizon have decreased from 4.0% to 3.8%, while median expectations for the same period have edged down from 2.5% to 2.3%.

                                      Consumer views on household income for the next 12 months remained steady, with both mean and median expectations unmoved at 1.2% and 0.1% respectively. However, there’s growing pessimism concerning consumer spending. Expectations for mean household spending over the next year have slightly decreased from 3.5% to 3.4%, while median forecast has descended more markedly from 2.4% to 2.1%.

                                      In terms of economic performance, consumers are marginally less bearish about near-term growth outlook. Mean expectation for economic growth over the next year has improved slightly from -0.7% to -0.6%, even though median remains unchanged at flat 0.0%. Interestingly, there were no alterations in consumer outlook for unemployment over the next year, with predictions holding steady.

                                      Full ECB Consumer Expectations Survey here.

                                      China’s exports down -14.5% yoy in Jul, shipments to ASEAN down -21.4% yoy

                                        By
                                        ActionForex
                                        -

                                        July saw a sharper-than-expected contraction in China’s exports, with decline of -14.5% yoy to USD 281.76B. This marked the steepest drop since February 2020 and exceeded market expectations, which had forecasted a decline of -12.5% yoy. Concurrently, imports also took a hit, plunging by -12.4% yoy to USD 201.16B, much steeper than anticipated -5% yoy drop.

                                        With these declines, China’s trade surplus unexpectedly widened. July’s figures show surplus expanding from USD 70.6B to USD 80.6B, surpassing the market forecast of USD 67.8B.

                                        A key observation was the sharp decline in shipments to ASEAN – one of China’s primary trade partners. Exports to ASEAN dropped by a significant -21.43% yoy in July, marking its second straight monthly decline. This is noteworthy as ASEAN had played a pivotal role in bolstering China’s export sector earlier in the year.

                                        In addition, exports to EU and US followed suit with declines of -20.62% yoy and -23.12% yoy, respectively. The dip in shipments to US represents a continued trend, with July marking the twelfth consecutive month of decline.

                                        Australia NAB business confidence rose to 2, inflationary pressures on the rise

                                          By
                                          ActionForex
                                          -

                                          Australia’s NAB Business Confidence Index for July revealed an upward tick, moving from -1 in June to 2. However, Business Conditions saw a slight dip from 11 to 10. Delving into specific metrics, readings for trading conditions, profitability, and employment remained unchanged with the previous month, all settling at 16, 10, and 6 respectively.

                                          Notably, the month saw a pronounced rise in price and cost growth. Labour cost growth surged to 3.7% in quarterly equivalent terms, up from June’s 2.3%, and purchase cost growth escalated to 2.6%, a jump from the previous month’s 2.2%. Furthermore, final price growth climbed to 2%, doubling June’s 1%.

                                          Commenting on the findings, NAB Chief Economist, Alan Oster, remarked, “Business conditions in July remained resilient and have largely held steady at above-average levels over the past few months.”

                                          He added, “While business confidence rebounded to positive territory, overall confidence remains muted.”

                                          Oster further noted the inflationary pressures highlighted by the survey, noting, “Despite the Q2 CPI release indicating an improvement, the survey underscores that the upward pressure on inflation remains significant.”

                                          Full Australia NAB Business Confidence release here.

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