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ECB Kazaks: There’s no need to pause at the turn of the year

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    ActionForex.com
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    ECB Governing Council member Martins Kazaks said, “it’s clear that interest rates will need to rise much higher to bring inflation down to the target of 2% over medium term.”

    “There’s no need to pause at the turn of the year. The rate increases must continue into the next year — until inflation, especially core inflation, shows a visible slowdown,” he said.

    “In my view, recession in the euro area is a baseline scenario, but so far it’s likely to be relatively shallow and brief,” Kazaks said. “And hence insufficient to break the backbone of inflation persistence.”

    Germany Gfk consumer sentiment ticked up to -29.5, hindered by purchasing power concerns

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      ActionForex.com
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      Germany’s GfK consumer sentiment index for April posted a modest improvement for the sixth consecutive month, rising from -30.6 to -29.5, although it fell short of the expected -29.0. In March, economic expectations for dipped from 6.0 to 3.7, while income expectations increased from -27.3 to -24.3. Propensity to buy also saw a slight uptick from -17.3 to -17.0.

      GfK consumer expert Rolf Bürkl attributes the improved income expectations to the recent decline in energy prices, particularly for gas and heating oil. However, Bürkl cautions that inflation will remain elevated this year, albeit lower than the 6.9% recorded in 2022.

      He explains, “The expected loss of purchasing power is preventing a sustained recovery in domestic demand. Accordingly, private consumption is unlikely to make a positive contribution to economic growth in Germany this year.” This outlook is reinforced by the persistently low level of consumer sentiment.

      Full Germany Gfk consumer sentiment release here.

      Swiss SECO raised 2019 growth forecasts to 1.2%, still below average

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        ActionForex.com
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        Swiss State Secretariat for Economic Affairs expects growth to remain “below average” this year on subdued outlook and high uncertainty. But growth forecasts for 2019 was revised slightly up to 1.2%, from 1.1%. For 2020, growth projection was kept unchanged at 1.7%.

        SECO noted that “declining momentum in the international economy, the development of world trade is weak and demand for Swiss products is flattening out, slowing down the export economy.” And, “downside risks continue to predominate for the global economy”.

        It warned that with the recent tariff increases between US and China, the trade dispute has taken an “unfavourable turn”. Swiss economy would “cool off more strongly” if situation were to intensify further, particularly if EU and Germany were to be significantly affected. Meanwhile, “political uncertainty remains high in Europe”, including Brexit and Italy.

        Full release here.

        WTI crude oil extends uptrend to take on 60 key resistance

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          ActionForex.com
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          WTI crude oil’s rally resumes today and reaches as high as 59.46 so far. It’s now very close to key resistance zone around 60 psychological level. There are also 50% retracement of 77.06 to 42.05 at 59.55 and 55 week EMA at 59.25. For now, we do not expect a firm break of this 59.25/60.00 resistance zone. Bearish divergence condition in 4 hour MACD should also limit upside momentum. Break of 57.96 will indicate short term topping and bring pull back to 54.72 support. However, sustained break of 60 will pave the way to 61.8% retracement at 63.68 next.

          BoE Pill: Current momentum in economic activity may be slightly stronger than anticipated

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            ActionForex.com
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            In a speech, BoE Chief Economist Huw Pill said that “current momentum in economic activity may be slightly stronger than anticipated.”

            “CPI inflation is projected to fall to below the 2% target by the end of the forecast horizon”, he said. But “there are considerable uncertainties around this outlook.”

            “Upside risks arise in large part from the possibility that domestic inflationary pressures prove more persistent than anticipated, owing to so-called ‘second round effects’ in price, cost and wage setting behaviour,” he explained.

            “The latest data for private sector regular pay growth – which was published after the MPC’s forecast was finalised – surprised slightly to the upside.”

            Nevertheless, “some high-frequency indicators of wages have fallen quite sharply recently”.

            “The MPC will continue to monitor indications of persistence in domestic inflationary pressures closely, with a focus on developments in the labour market, in wage dynamics, in services price inflation and in measures of underlying inflation and inflation expectations.”

            Speaking notes and slides

            Ifo: German economy to shrink 4.2%, unemployment to jump to 4.9%

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              ActionForex.com
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              Ifo economist Timo Wollmershaeuser said in the report that the Germany economy “slumped drastically as a result of the corona pandemic” and GDP could shrink -4.2% in 2020. Unemployment rate will “skyrocket to 5.9%”. Fiscal stabilization measures will lead to a record” deficit of EUR 159B. Though, GDP could rebound next year with 5.8% growth.

              Downside risks include:significantly slower weakening of the pandemic; Restarting economic activity works worse than in the base scenario or triggers another wave of infection, further measures to fight infection come into force, which shut down production longer or to a greater extent than assumed here; Faults in the financial system; Sovereign debt crisis; Realignment of global value chains and sales markets

              Full report here.

              US PPI picked up to -0.4% yoy, core PPI at 0.3% yoy

                By
                ActionForex.com
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                US PPI rose 0.6% mom in July, above expectation of 0.3% mom. PPI core rose 0.5% mom, also above expectation of 0.1%. Annually, PPI climbed back to -0.4% yoy, up from -0.8% yoy, above expectation of-0.6% yoy. PPI core picked up to 0.3% yoy, up from 0.1% yoy, matched expectations.

                Full release here.

                Japan’s PMI manufacturing falls to 49.0, services rises to 50.2

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                  ActionForex.com
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                  Japan’s PMI Manufacturing index edged down to 49.0 from 49.2 in November, signaling a deepened contraction in the sector. In contrast, PMI Services rose slightly to 50.2 from 49.7, indicating a renewed, albeit modest, expansion. PMI Composite improved marginally but remained below the neutral mark at 49.8, up from 49.6.

                  Usama Bhatti, Economist at S&P Global Market Intelligence, noted that demand conditions were “stagnant,” while employment grew at the fastest rate in four months. Price pressures persisted across sectors, driven by rising raw material costs and Yen’s weakness. Firms responded with sharper increases in prices charged for goods and services, aiming to pass on these higher cost burdens to customers.

                  Full Japan PMI release here.

                  Japan PMI composite rose to 51.7, but manufacturing struggles

                    By
                    ActionForex.com
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                    Japan PMI Manufacturing ticked down from 50.8 to 50.7 in October, weakest in 21 months. PMI Manufacturing Output improved slightly from 48.3 to 48.7. PMI Services rose from 52.2 to 53.0. PMI Composite also rose from 51.0 to 51.7.

                    Laura Denman, Economist at S&P Global Market Intelligence, said: “Latest flash PMI data has pointed to a further improvement in Japan’s private sector economy in October… The manufacturing sector, however, continued to struggle in the face of weak demand conditions and severe cost pressures… With inflationary pressures remaining elevated across the private sector, business confidence dipped to a six-month low.”

                    Full release here.

                    China Caixin PMI services rose to 55.5, composite dropped to 54.0

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                      ActionForex.com
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                      China Caixin PMI Services rose from 54.5 to 55.5 in July, above expectation of 54.0. That’s the highest level since April 2021. PMI Composite dropped from 55.3 to 54.0.

                      Wang Zhe, Senior Economist at Caixin Insight Group said: “In general, the eased Covid situation and restrictions facilitated a continuous recovery in the economy. The services sector, which had been previously hit harder by the outbreaks than manufacturing, showed stronger improvement. Supply and demand continued to improve with supply stronger than demand. The labor market shrank greatly, adding to employment pressures. Business costs steadily climbed while prices charged remained stable, posing challenges for company profits. The market held on to positive sentiment, even with concerns about the outlook for Covid and the economy.”

                      Full release here.

                      US PCE inflation rose to 5% yoy, core PCE to 4.1% yoy, highest since 1990

                        By
                        ActionForex.com
                        -

                        US personal income rose 0.5% mom to USD 93.4B in October, above expectation of 0.3% mom. Personal spending rose 1.3% mom to USD 214.3B, above expectation of 1.0% mom.

                        Headline PCE accelerated 5.0% yoy, up from 4.4% yoy, above expectation of 4.6% yoy. That’s the highest level since December 1990. Core PCE rose to 4.1% yoy, up from 3.7% yoy, matched expectations, also the highest since December 1990.

                        Full release here.

                        BoJ Kuroda pledges appropriate policy actions again after meeting PM Abe

                          By
                          ActionForex.com
                          -

                          Japan Prime Minister Shinzo Abe and BoJ Governor Haruhiko Kuroda held a meeting today, just ahead of next week’s monetary policy meeting. After the meeting, Kuroda said the central bank has already been providing ample liquidity and steeping up asset purchases to counter recent market moves, which fluctuate “widely. He related that “we’ll take appropriate steps as necessary in a timely manner, while closely monitoring developments.”

                          Released earlier in Japan, large manufacturer sentiment dropped to a near nine-year low in Q1. The BSI large manufacturers index dropped to -17.2, down from -7.8, worst since 2011. Nevertheless, outlook in Q2 in expected to improve to -5.5, and then 6.1 in Q3.

                          China’s import from EU jumped 20.5% mom, trade surplus shrank -31.0% mom, as US-China trade war starts

                            By
                            ActionForex.com
                            -

                            China’s July trade data revealed some interesting findings as US-China trade war formally started. Import from the EU jumped as massive 20.5% mom, 19.7% yoy. Trade surplus with EU dropped -31.0% mom, -7.9% yoy. On the other hand, trade surplus with US dropped a mere -3.0%, with -2.5% decline in export and -1.5% mom fall in imports. Looks like the EU could have the last laugh over Trump’s trade policy.

                            Here are the details:

                            Overall –

                            China trade surplus in CNY term narrowed to CNY 177B in July, down from CNY 262B, missed expectation of CNY 225B. Exports rose 6.0% yoy to CNY 1390B while imports jumped 20.9% yoy to CNY 1213B. Year-to-Jul, exports rose 5.0% yoy to CNY 8894B while imports rose 12.9% yoy to CNY 7826B, with CNY 1068B surplus.

                            In USD term, trade surplus narrowed to USD 28.1B, down from USD 41.6B and missed expectation of USD 39.1B. Exports rose 12.2% yoy to USD 215.6B while imports rose 27.3% yoy to USD 187.5B. Year-to Jul, exports rose 12.6% yoy to USD 1387B while imports rose 21.0% yoy to USD 1221B, with USD 166B surplus.

                            With EU –

                            EU remains China’s largest trading partner with total trade risen 5.9% mom, 13.4% yoy to USD 60.7B in July. Exports dropped -2.3% mom, rose 9.4% yoy to USD 35.9B. Imports rose a massive 20.5% mom and 19.7% yoy to USD 24.7B. For July, trade surplus with EU dropped -31.0% mom, -7.9% yoy to USD 11.2B.

                            For year-to-July, China’s total trade with EU rose 12.7% yoy to USD 383B. Exports rose 10.8% yoy to USD 227B. Imports rose 15.6% yoy to USD 155B. Total trade surplus merely grew 1.6% yoy to USD 72.1B.

                            With US –

                            With the US, total trade dropped -2.3% mom, rose 11.2% yoy to USD 55.0B in July. Exports dropped -2.5% mom rose 11.2% yoy to USD 35.9B. Imports dropped -1.5% mom, rose 11.1% yoy to USD 24.7B. Trade surplus dropped -3.0% mom, rose 11.3% yoy to USD 28.1B.

                            For year-to July, China’s total trade with US rose 12.2% yoy USD 357B. Exports rose 12.5% yoy to USD 259.1B. Imports rose 11.4% yoy to 97.5B. Trade surplus rose 13.2% yoy to USD 161.6B.

                             

                            Here are the links to:

                            France PMI manufacturing dropped to 26-month low, service sector robust

                              By
                              ActionForex.com
                              -

                              France PMI manufacturing dropped to 50.7 in November down from 51.2 and missed expectation of 51.3. That’s the lowest in 26 months. PMI services dropped to 55.0, down from 55.3 and matched expectations. PMI composite dropped to 54.0, down from 54.1.

                              Commenting on the Flash PMI data, Eliot Kerr, Economist at IHS Markit said:

                              “The latest flash results pointed to a second consecutive contraction in manufacturing production as goods producers continued to mention weak automotive sector demand. Nonetheless, overall private sector output growth remained solid as the service sector reported robust growth.

                              “Despite input price inflation easing, panellists continued to cite higher raw material prices, particularly for oil. With pricing power muted, margins remained under pressure.

                              “The latest survey responses also revealed that recent protests over fuel taxes adversely affected the economy, with some panellists blaming demonstrations for lengthened delivery times.”

                              Full release here.

                              Yuan and stocks tumble in response to trade war escalation

                                By
                                ActionForex.com
                                -

                                In response to trade war escalation, Chinese Yuan and stocks tumble sharply at open today. USD/CNH (offshore Yuan) hit new high at 7.1832 before retreating mildly. China Shanghai SSE hit as low as 2849.24 and is currently down -0.95%. Hong Kong HSI suffers steep selloff and hit as low as 25249.51, and it’s currently down -2.79%. Some recoveries are seen on news that the National Reform and Development Commission (NDRC) will “reasonably expand effective investment” by lowering the requirement of the minimum capital ratio for some infrastructure projects.

                                USD/CNH’s up trend from 6.2359 is in progress. As long as 6.9909 support holds, further rise should be seen to 100% projection of 6.2359 to 6.9804 from 6.6704 at 7.4149 in medium term next.

                                Core inflation in Japan eases to 2%, but surpasses expectations

                                  By
                                  ActionForex.com
                                  -

                                  Japan’s CPI core (all items ex food) slowed from 2.3% yoy to 2.0% yoy, above expectation of 1.9% yoy. This marks the third consecutive month of decline, reaching the lowest level in 22 months and aligning precisely with BoJ’s inflation target of 2%.

                                  The headline CPI also saw a decrease, moving from 2.6% to 2.2% yoy. Nevertheless, CPI core-core (ex-food and energy) showed only modest improvement, edging down from 3.7% to 3.5% yoy.

                                  A significant factor contributing to the overall CPI’s decline a -12.1% yoy drop in energy prices, resulting from government interventions to mitigate utility bills through subsidies for oil wholesalers. In contrast, food prices saw 5.9% yoy increase, while accommodation fees surged by 26.9% yoy.

                                  The latest inflation data should fortify the argument for BoJ to terminate its negative interest rate policy soon. However, the decisive factor for the exact timing—be it March or April—hinges on the forthcoming wage negotiations between large enterprises and unions scheduled for March 13.

                                   

                                  Fed’s Kugler signals rate cuts later this year amid continued disinflation

                                    By
                                    ActionForex.com
                                    -

                                    In a speech overnight, Fed Governor Adriana Kugler noted that despite “a few bumps” earlier in the year, inflation has “continued to trend down” across “all price categories.”

                                    She mentioned that supply and demand are “gradually coming into better balance,” with supply bottlenecks easing and demand moderating due to high interest rates and the depletion of households’ excess savings.

                                    Kugler also pointed out that the labor market has seen “substantial rebalancing,” with nominal wage growth moderating. This trend suggests that inflation will continue moving toward Fed’s 2% target.

                                    Kugler indicated that if economic conditions continue to evolve favorably, with more rapid disinflation and resilient employment, “it will be appropriate to begin easing monetary policy later this year.” However, she stressed that her approach will remain data-dependent.

                                    She added that if the labor market cools too much and unemployment rises due to layoffs, it might be necessary to cut rates “sooner rather than later.” On the other hand, if data do not confirm that inflation is moving sustainably toward 2%, it may be appropriate to “hold rates steady for a little longer.”

                                    Full speech of Fed’s Kugler here.

                                    UK CPI slows to 3.4% in Feb, core down to 4.5%

                                      By
                                      ActionForex.com
                                      -

                                      UK CPI slowed from 4.0% yoy to 3.4% yoy in February, below expectation of 3.5% yoy. CPI core (excluding energy, food, alcohol and tobacco) slowed from 5.1% yoy to 4.5% yoy, below expectation of 4.6% yoy.

                                      CPI goods annual rate slowed from 1.8% yoy to 1.1% yoy, while CPI services annual rate eased from 6.5% yoy to 6.1% yoy.

                                      On a monthly basis, CPI rose 0.6% mom, below expectation of 0.7% mom.

                                      Full UK CPI release here.

                                      Eurozone PMI manufacturing revised up to 56.2, overall pace of expansion remains encouragingly solid

                                        By
                                        ActionForex.com
                                        -

                                        Eurozone PMI manufacturing was revised up to 56.2 in April, from 56.0. Markit noted
                                        slower rates of expansion in five of the eight nations covered, and slower increases in new work and employment offset slightly stronger gain in output

                                        Among the countries, Germany PMI manufacturing hit a 9-month low, Italy hit 15-month low and Spain hit 7- month low. France and Ireland performed pretty well by climbing to 2 month high.

                                        Comments from Chris Williamson, Chief Business Economist at IHS Markit:

                                        “The manufacturing sector saw growth weaken further at the start of the second quarter, but let’s not lose sight of the fact that the overall pace of expansion remains encouragingly solid.

                                        “Although growth has slowed markedly compared to the start of the year, December had seen the best performance in over 20 years of survey data collection, with factory activity clearly surging at an unsustainable rate. Since then, supply constraints – including raw material scarcities, supplier delivery delays and skill shortages – have constrained production. Strikes, bad weather and unusually high levels of illness have also plagued businesses.

                                        “Some of these adverse factors are therefore likely to be reversed in coming months, as capacity is increased, supply improves and factors such as strikes and weather cause fewer problems.

                                        “However, anecdotal evidence from the surveys also highlights how demand has been curbed by other issues such as the stronger euro and rising prices. Uncertainty has also intensified due to worries regarding trade wars and Brexit, underscoring downside risks to the outlook.

                                        “While the current pace of growth remains solid, the trend in the surveys in coming months will provide important clues as to the degree to which underlying demand may be waning and the extent to which policymakers should be concerned about the health of the economy.”

                                        Full release here

                                        Fed Kaplan skeptical about benefits of more QE

                                          By
                                          ActionForex.com
                                          -

                                          Dallas Fed President Robert Kaplan said expected the economy to shrink about -2.5% this year, which is among the most bullish forecasts by Fed’s policymakers. Though, he noted the recession has hit some sectors and some groups of people worse than others. “It will take more than just a vaccine to revive depressed industries”.

                                          The “number one economic policy, more than fiscal or monetary policy, is mask-wearing,” he said. “If there is no fiscal stimulus, mask-wearing, following health protocols will be even more important.”

                                          Also, he’s “skeptical about the benefits of doing more” QE. “The bond-buying needs to curtail, the Fed balance sheet growth needs to curtail” when the pandemic crisis passes. Also, it’s not “healthy” for the markets to be “addicted, or too reliant” on Fed.

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