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Eurozone CPI confirmed at 1.4%, core at 0.8%

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    ActionForex.com
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    Eurozone CPI was finalized at 1.4% yoy in March, unrevised, down from 1.5% yoy in February. Core CPI was finalized at 0.8% yoy, unchanged from February’s reading. EU28 inflation was confirmed at 1.6% yoy.

    The highest contribution to the annual euro area inflation rate came from energy (+0.52 percentage points, pp), followed by services (+0.51 pp), food, alcohol & tobacco (+0.34 pp) and non-energy industrial goods (+0.04 pp).

    EUR/USD attempts to rally earlier today but fails to take out 1.1324 resistance. It’s staying in range after the releases.

    Heading into US session, a look at USD, EUR & GBP

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      ActionForex.com
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      It’s a big day for USD and EUR, and slightly less so far GBP today. Let’s have a look at how the three are performing after events from Eurozone and UK.

      From USD heatmap, it’s clear that the main trend is up as seen in the W and M row. Except that, USD cannot overwhelm CAD. D row, all in red, suggests some weakness today. But light red means it’s more in consolidation then reversal. This is affirmed by 4H row which shows US up against all but EUR and GBP. Hence, USD is in consolidation as we await ADP employment, FOMC, and ISM services and NFP later in the week.

      EUR remains rather weak. Outlook versus Sterling is a bit mixed. 4H row shows EUR is recovering against others, but there is no follow through buying. While in-line with expectation GDP growth figure stabilized the selloff, there is no momentum for a solid rebound yet.

      Comparing to EUR, GBP’s movement today is much more convincing. It’s up against all as seen in the D row. And strengthen at the moment remains strong too with 4H row all in deep blue. It’s still in decline for the month. And is in deep red against USD, JPY, CHF and CAD for the week. So, while the rebound is strong, it’s much more likely a correction than a reversal. But for counter trend strategies, GBP is a much better choice to bet on than EUR.

      Eurozone goods expects down -2.7 yoy, imports fell -18.2% yoy

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        ActionForex.com
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        Eurozone exports of goods to the rest of the world dropped -2.7% yoy to EUR 227.8B in Jul. Imports fell -18.2% yoy to EUR 221.3B. Eurozone recorded EUR 6.5B trade surplus. Intra-Eurozone trade fell -7.9% yoy to EUR 211.8B.

        In seasonally adjusted term, exports fell -1.7% mom to EUR 232.6B. Imports rose 0.7% mom to EUR 229.7B. Trade surplus narrowed from EUR 8.6B to EUR 2.9B, smaller than expectation of EUR 13.5B. Intra-Eurozone trade fell slightly from EUR 219.3B to EUR 218.7B.

        Full Eurozone trade balance release here.

        CAD/JPY struggling at 100, eyes on BoC hike

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          ActionForex.com
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          BoC is widely expected to continue with tightening today. But opinion on the size of the rate hike is split, with odds slightly in favor to 50 than 25. The main question, though, is not about how much the hike is, but how BoC would indicate the path forward. That is, how close interest is to the terminal rate. This is what the statement would be scrutinized for.

          Some suggested readings on BoC:

          CAD/JPY’s decline halted last week after hitting 99.46, but it’s just struggling around 100 handle, with no momentum for a solid rebound. For now, deeper fall is expected as long as 4 hour 55 EMA (now at 101.88) holds. Break of 99.46 will resume the decline from 110.87 as a long term correction. CAD/JPY should have a take on 38.2% retracement of 73.80 to 110.87 at 96.70 before forming a bottom.

          Japan’s PMI services reaches record high in April, record optimism too

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            ActionForex.com
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            Japan PMI Services rose to 55.4 in April, up from 55.0 in March, marking the eighth consecutive month in growth territory. This represents the highest reading since records began in 2007, surpassing the previous record set in 2013. S&P Global also noted that year-ahead business expectations reached an all-time high, while prices charged increased at the steepest pace in nine years. Meanwhile, the PMI Composite remained unchanged at 52.9, as stronger services growth offset a sharper reduction in manufacturing production.

            Tim Moore, Economics Director at S&P Global Market Intelligence attributed the record rise in service sector output to a rebound in demand for face-to-face consumer services, recovery in international tourist arrivals, and improvement in new business from abroad.

            Moore also emphasized the high level of business confidence, with around four times as many service providers expecting an increase in activity as those forecasting a decline. This optimism marked the highest level in more than 15 years of data collection.

            Furthermore, service providers increasingly passed on higher business expenses to customers to alleviate pressure on margins from rising wages and transportation costs. This resulted in the steepest increase in service sector output charges since the sales tax hike in April 2014.

            Full Japan PMI services release here.

            Stocks surged as Fed Powell pledged to listen, with patience

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              ActionForex.com
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              US stocks surged overnight as lifted by Fed Chair Jerome Powell’s comments, strong job report and Chinese easing. DOW, S&P 500 and NASDAQ all extended post-Christmas rebound and made new weekly high before closing strong. DOW rose 3.29%, S&P 500 rose 3.43% and NASDAQ rose 4.26%. Treasury yield also staged a strong come back with 10 year yield added 0.105 to 2.659.

              In short, Powell pledged that Fed was “listening” to the markets after December’s volatility. And, “particularly with the muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.” He also added that “we are always prepared to shift the stance of policy and to shift it significantly” if needed.

              Separately, Cleveland Fed President Loretta Mester said in a Reuters interview that federal funds rate is close to neutral. She added, “we really need to be looking at the data and having the economy tell us, do we need to move more? Do we need to move more, faster? Can we wait?” She emphasized “We should take our time and assess … We may be where we need to be.”

              US retail sales rose 1% mom in Jun, ex-auto sales up 1%

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                ActionForex.com
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                US retail sales rose 1.0% mom to USD 680.6B in June, above expectation of 0.8% mom. Ex-auto sales rose 1.0% mom, above expectation of 0.6% mom. Ex-gasoline sales rose 0.7% mom. Ex-auto, ex-gasoline sales rose 0.7% mom. Retail trade rose 1.0% mom. Gasoline sales rose 3.6% mom. Total sales for the three months through June were up 8.1% yoy.

                Full release here.

                US PMIs improved, but point to subdued 1.5% annualized Q3 GDP growth

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                  ActionForex.com
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                  US PMI Manufacturing rose to 51.0 in September, up from 50.3, beat expectation of 50.3. PMI Services also rose to 50.9, up from 50.7, but missed expectation of 51.5. PMI Composite rose to 51.0, up from 50.7.

                  Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said:

                  “The survey indicates that businesses continue to struggle against the headwinds of trade worries and elevated uncertainty about the outlook. Although picking up slightly, the overall rate of growth in September remained among the weakest since 2016, commensurate with GDP rising in the third quarter at a subdued annualized rate of approximately 1.5%. Prospects also look gloomy, with inflows of new business down to the lowest since 2009 and firms’ expectations of growth over the coming year stuck at one of the most subdued levels since 2012.

                  “Jobs are now also being cut across the surveyed companies for the first time since January 2010, as firms have become more risk averse and increasingly eager to cut costs. At current levels, the survey employment index is indicative of non-farm payroll growth falling below 100,000.

                  “Price pressures have meanwhile also eased, with both input costs and average selling prices for goods and services dropping again in September, painting a picture of the weakest corporate inflationary pressures for a decade.

                  “Key to the recent deterioration has been a further spill-over of the trade-led slowdown in manufacturing to the service sector. Inflows of new service sector business almost stalled in September to register the smallest rise since the survey began in 2009. A ray of light comes from manufacturing reporting some easing of headwinds, though factory conditions likewise remained among the toughest since 2009 to underscore the broad-based nature of the current lassitude.”

                  Full release here.

                  UK PM May seeking Article 50 extensions until June 30

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                    ActionForex.com
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                    UK Prime Minister Theresa May confirms at PMQs in parliament that has written to European Council President Donald Tusk to seek extension of article 50 until June 30. She noted that MPs voted for only a short extension last Thursday. Also, holding European election would not be in anyone’s interest. May also said the government will hold another meaningful vote.

                    May said: “As prime minister, I am not prepared to delay Brexit any further than the 30th of June … I have therefore this morning written to President Tusk, the president of the European Council, informing him that the UK seeks an extension to the article 50 period until the 30th June… The government intends to bring forward proposals for a third meaningful vote. If that vote is passed, the extension will give the House time to consider the Withdrawal Agreement Bill. If not, the House will have to decide how to proceed.”

                    Here is May’s letter to Tusk.

                    US consumer confidence dropped to 92.6, uncertainty does not bode well for the recovery, nor for consumer spending

                      By
                      ActionForex.com
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                      US Conference Board Consumer Confidence dropped to 92.6 in July, down from 98.3, missed expectation of 94.0. Present Situation Index rose from 86.7 to 94.2. Expectations Index, however, dropped from 106.1 to 91.5.

                      “Consumer Confidence declined in July following a large gain in June,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index improved, but the Expectations Index retreated. Large declines were experienced in Michigan, Florida, Texas and California, no doubt a result of the resurgence of COVID-19.”

                      “Looking ahead, consumers have grown less optimistic about the short-term outlook for the economy and labor market and remain subdued about their financial prospects. Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending.”

                      Full release here.

                      PBoC Yi: Increasing macro leverage ratio and non-performing loans are two risks

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                        ActionForex.com
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                        China’s PBOC Governor Yi Gang said in the virtual meeting of the World Economic Forum, “monetary policy will continue to prop up the economy, but at the same time we will watch for the risks. We will keep a delicate balance between supporting economic recovery, at the same time preventing risk.”

                        “One risk is the macro leverage ratio of China increased somewhat last year, the second risk is non-performing loans that are growing, and we also look at external risks, which is look at the capital flow situation,” he added.

                        Yi also pledged to “ensure our policies are consistent and stable”, and the central bank “will not exit from supporting policy prematurely.”

                        Japan Tankan large manufacturing index dropped to lowest since 2013, but beat expectations

                          By
                          ActionForex.com
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                          Japan Tankan large manufacturing index dropped to 5 in Q3, down from 7 but beat expectation of 2. That’s the third straight quarter of decline and was the lowest level since June 2013. Large manufacturing outlook also dropped to 2, down from 7 but beat expectation of 1.

                          Non-manufacturing index dropped to 21, down from 23 and beat expectation of 20. Non-manufacturing outlook dropped to 15, down from 17, but missed expectation of 16. Large all industry capex rose 6.6%, slowed from 7.4% and missed expectation of 7.0%.

                          The data suggested that business confidence worsened as global slowdown and trade tensions weighed. Yet, the deteriorations were not as bad as expected and capital expenditure were still holding up. The data could be neutral to BoJ’s policy. That is, they might not add enough pressure to additional easing from the central bank.

                          Also released, unemployment rate was unchanged at 2.2% in September, better than expectation of 2.3%.

                          Japan said to remove South Korea from trade whitelist

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                            ActionForex.com
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                            Kyodo news reported that, as trade frictions intensified, Japan is going to remove South Korea from the white list of countries that gives the latter preferential treatment in trade. The announcement could be made as soon as on August 2, and change could take effect after 21 days.

                            Japan is reported to have cited “significantly undermined” trust between the two countries and “certain issues” with South Korea’s export controls and regulations. After the move, products and technology that could be diverted to military use would need to obtain approval from Ministry of Economy before exporting to South Korea.

                            Asked about the plan, Chief Cabinet Secretary Yoshihide Suga told a news conference that nothing had been decided on the time frame. There are currently 27 countries on Japan’s white list including the United States, Britain, Germany, Australia, New Zealand and Argentina.

                            Fed Evans: Inflation to stay more elevated in 2022

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                              ActionForex.com
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                              Chicago Fed President Charles Evans said, “inflation will stay more elevated in 2022”, but “we have time to be patient”. In his own view, Fed will not need to raise interest rates until 2023.

                              Nevertheless, in a speech, he said there are signs that inflation pressures could build up more broadly. “These developments deserve careful monitoring and present a greater upside risk to my inflation outlook than I had thought last summer.”

                              Separately, Fed Governor Michelle Bowman said, “housing supply issues are unlikely to reverse materially in the short term, which suggests that we are likely to see higher inflation from housing for a while.”

                              UK Barclay: No-deal Brexit underpriced, House won’t approve current deal

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                                ActionForex.com
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                                UK Brexit Minister Stephen Barclay warned today that no-deal Brexit is underpriced. He also told EU chief Brexit negotiator Michel Barnier that the current withdrawal agreement would not be approved by the UK parliament without any change.

                                Barclay said “I think a no deal is underpriced. It is still this government’s intention and both leadership candidates’ intention to seek a deal and I think it is the will of many members of parliament for there to be a deal”. However, “the question then will be is there a deal that is palatable to parliament and if not will parliament vote to revoke or will we leave with no deal?”

                                Regarding his conversation with Barnier, Barclay clarified “What I said was the House had rejected it three times … that the European election results in my view had further hardened attitudes across the House and that the text unchanged, I did not envisage going through the House.”

                                Germany, France and Britain seek US sanction exemptions in Iran

                                  By
                                  ActionForex.com
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                                  Reuters reported that Germany, France and Britain sent a letter to US Treasury Secretary and Secretary of State on June 4, requesting US sanction exemptions in EU companies in Iran.

                                  The letter state that “as close allies, we expect that the extraterritorial effects of U.S. secondary sanctions will not be enforced on EU entities and individuals, and the United States will thus respect our political decisions.”

                                  EU expected exemptions on pharmaceuticals, healthcare, energy, automotive, civil aviation, infrastructure and banking companies.

                                  EU ministers also warned that “An Iranian withdrawal from the (nuclear agreement) would further unsettle a region where additional conflicts would be disastrous.” And they emphasized that the 2015 JCoPA was “the best basis on which to engage Iran and address those concerns”.

                                  Fed Bullard: Strong Q3 may put US economy at full recovery by year end

                                    By
                                    ActionForex.com
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                                    St. Louis Fed President James Bullard said the US economy may rebound at a 35% annualized rate in Q3. Additionally, the strong rebound in Q3 “may put the U.S. economy within reach of a sort of ‘full recovery’ by the end of 2020.” With another 10% growth in Q4, the national income could be in reach of 2019 average.

                                    “These are big numbers, but not outside the realm of possibility,” he said. “I expect this rebound to continue in the U.S. as businesses learn how to produce products and services safely using simple, existing technology.”

                                    Nevertheless, “Fed policy would be the same regardless of how optimistic or less optimistic you might be about the outlook,” he said. “I don’t think it’s that reasonable to expect a second-wave scenario to be the one that would dominate your forecasts.”

                                     

                                    10-yr yield falls as Trump confirms no stimulus deal before election

                                      By
                                      ActionForex.com
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                                      It’s now clear that there won’t be any stimulus deal before elections. President Donald Trump indicated, “after the election we’ll get the best stimulus package you’ve ever seen.” DOW and S&P 500 closed lower overnight while NASDAQ ended with small gain. Treasury yield also finally moved in tandem with risk sentiments this week. 10-year yield dropped -0.023 to 0.778 overnight, giving up 0.8 handle.

                                      More downside is mildly in favor in TNX for the near term, as investors adjust their risk positions ahead of US elections. We’d anticipating further decline in stocks towards the end of the week, which should theoretically push bonds higher and yields lower. Still for TNX, downside should be contained by 55 day EMA (now at 0.719) unless there are very drastic developments.

                                      New Zealand Treasury: GDP growth likely falls below budget forecasts

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                                        ActionForex.com
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                                        In its Monthly Economic Indicators report, New Zealand Treasury Department noted that November data were “fair mixed” with some pointing to “further slowing in GDP growth”. Others indicated growth may be “leveling out”. On balance, “weaker-than-forecast investment and services exports are likely to see overall New Zealand GDP growth fall below Budget forecasts”

                                        It’s also noted that news flow surrounding trade tensions “continues to seesaw”. But “prospects of a US-China trade agreement have generally supported sentiment over the last month”.

                                        Full report here.

                                        Also from New Zealand, terms of trade index rose 1.9% in Q3, above expectation of 1.1%.

                                        US non-farm payroll dropped -20.5m, unemployment rate jumped to 14.7%

                                          By
                                          ActionForex.com
                                          -

                                          US non-farm payroll employment dropped by -20.5m in April. The over-the-month decline is that largest on record since 1939. Employment dropped to the lowest level since February 2011.

                                          Unemployment rate surged to 14.7%. This is the highest rate and largest over-the month increase in history of the series started back in January 1948. Labor force participation rate also dropped by -2.5% to 60.2%, lowest since January 1973.

                                          Full release here.

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