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Eurozone exports rose 28.9% yoy in May, imports rose 52% yoy

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    ActionForex.com
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    Eurozone exports of goods to the rest of the world rose 28.9% yoy to EUR 248.5B in May. Imports of goods rose 52.0% yoy to EUR 274.8B. Trade deficit came in at EUR -26.3B. Intra-eurozone trade rose 33.0% yoy to EUR 231.6B.

    In seasonally adjusted term, exports rose 4.8% mom to EUR 241.8B. Imports rose 2.0% mom to EUR 267.8B. Trade deficit narrowed from April’s EUR -31.8B to EUR -26.0B, slightly smaller than expectation of EUR -26.3B. Intra-eurozone trade rose from EUR 217.2B to EUR 221.4B.

    Full release here.

    BoE hikes 50bps, known hawk consents, two doves dissent again

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      ActionForex.com
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      BoE raises Bank Rate by 50bps to 4.00% as widely expected. The decision was made by 7-2 votes. Swati Dhingra and Silvana Tenreyro voted for no change again, as in December. Known hawk Catherine Mann consented this time.

      In the accompanying statement, BoE noted that “domestic inflationary pressures have been firmer than expected”. Still the bank expects that rate hike since December 2021 to have an “increasing impact on the economy in the coming quarters”.

      In the new economic forecasts, annual CPI inflation is expected fall from current 10.5% to around 4% towards the end of the year. Also, conditioned on interest at around 4.50% in mid 2023 and falls back to 3.25% in three years time, CPI will decline to below 2% target in the medium term.

      Also, the economy is expected to have a “much shallower” recession than prior expected. Calender -year GFP growth is expected to be at -0.50% in 2023 and -0.25% in 2024 only.

       

      Full statement

      Full monetary policy report here.

      ECB maintains interest rates and forward guidance, to end APP this month

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        ActionForex.com
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        ECB let interest rates unchanged today as widely expected. That is, main refinancing rate, marginal lending facility and deposit facility rates are held at 0.00%, 0.25% and -0.40% respectively.

        ECB maintained forward guidance that interest rates will “remain at their present levels at least through the summer of 2019”.

        Also, the asset purchase program will end this month as scheduled.

        Full statement below:

        Monetary Policy Decisions

        At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.

        Regarding non-standard monetary policy measures, the net purchases under the asset purchase programme (APP) will end in December 2018. At the same time, the Governing Council is enhancing its forward guidance on reinvestment. Accordingly, the Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

        The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

        EU Malmström willing to scrap auto tariffs if US does the same

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          ActionForex.com
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          EU Trade Commissioner for Trade Cecilia Malmström told the European Parliament’s trade committee that they are willing to scrap auto tariffs in the negotiation with the US. She noted “we said that we are ready from the EU side to go to zero tariffs on all industrial goods, of course if the U.S. does the same, so it would be on a reciprocal basis.”

          And, “we are willing to bring down even our car tariffs down to zero … if the U.S. does the same,” she said, adding that “it would be good for us economically, and for them.”

          But she also emphasized that it’s not about “restarting TTIP” but aiming for “a more limited trade agreement.” And more importantly, “agriculture would not be in the agreement, nor public procurement as it looks to today.”

          NZD/USD extends down trend, pressing MT channel support

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            NZD/USD’s decline resumes today and hit as low as 0.6420 so far. The weakness in Kiwi is mainly due to external factors, rather than domestic ones. The economy remains strong while RBNZ is expected to continue with its tightening cycle. But the pace of rate hike would likely be outpaced by Fed’s. Additionally, concerns over China’s slowdown on lockdowns, and general risk-off sentiment are weighing on New Zealand Dollar too.

            Immediate focus is now on medium term channel support (now at 0.6430). Sustained break there could prompt further downside acceleration to 61.8% projection of 0.5467 (2020 low) to 0.7463 (2021 high) at 0.6229. Nevertheless, break of 0.6543 minor resistance would be an initial sign of stabilization, and turn bias to the upside for rebound first.

            BoJ’s Uchida cautions against premature policy shift

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

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

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

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

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

              Cleveland Fed Mester: Further gradual tightening is appropriate this year

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                ActionForex.com
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                Cleveland Fed President Loretta Mester expressed her support for more rate hike this year. She said in a prepared speech for University of Pittsburgh’s graduate school of business that “If the economy evolves as I anticipate, I believe further gradual increases in interest rates will be appropriate this year and next year.”

                She added that “continued gradual reduction in monetary policy accommodation, given the economic outlook, will put monetary policy in a better position to address whatever risks, whether to the upside or to the downside, are ultimately realized.”

                Yen higher in Asiaa, ignores strong stock markets rally

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                  ActionForex.com
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                  Asian stocks surge strongly and broadly today. At the time of writing, Nikkei is up 0.88%, and Singapore Strait Times is up 0.66%. But the more powerful rallies are found in Chinese and Hong Kong stocks. The Shanghai SSE is up 1.43% while HSI is up 2.06%. The moves are partly follow-up to record close in NASDAQ and S&P 500 on Friday. Also, the markets responded positively to the PBoC’s measures to pause Yuan’s decline. In short, China’s central bank reintroduced measures that acts counter-cyclical to market forces to keep Yuan from falling too quickly.

                  USD/CNH (offshore Yuan) is now notably below August high at 6.9586. And 6.9871 key resistance 2016 high, temporarily defended. With a short term top formed, USD/CHN will likely gyrate lower to 55 day EMA (now at 6.7238) and possibly further to 38.2% retracement of 6.2358 to 6.9586 at 6.6825. But we’d like to emphasize that the pull back is also due post-Powell weakness in Dollar. And, for such a heavily intervened currency, technical analysis is not that useful generally.

                  Meanwhile, the currency markets are not too fuzzed with the developments. Yen ignores the return of risk appetites and trades higher today. Australian Dollar turns softer while Dollar remains weak. After all, the forex markets are quietly mixed. The UK will be on holiday today and the only notable data is German Ifo business climate. Light summary holiday trading might prevail.

                  UK CBI: Manufacturing output stabilized, but remains on receiving end of double whammy

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                    ActionForex.com
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                    UK CBI monthly Industrial Trends Survey indicated that manufacturing output stabilized August. 15% of manufacturers reported total order books to be above normal, and 28% said they were below normal, giving a balance of -13% (from -34% in July). This month’s figure is line with the long-run average (-13%).

                    Anna Leach, CBI Deputy Chief Economist, said: “Despite signs of stabilisation in the data this month, UK manufactures remain on the receiving end of a double whammy: the slowdown in the global economy and Brexit uncertainty. Trade tensions between nations such as China and the US only exacerbate the demand uncertainty facing UK manufacturers.

                    “As we get closer to October, it’s crucial that the new Prime Minister secures a Brexit deal ahead of that deadline and gets on with pressing domestic priorities, from improving our infrastructure to fixing the apprenticeship levy.”

                    Full release here.

                    RBNZ Orr: Banking system has significant capital and liquidity buffers

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                      ActionForex.com
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                      RBNZ Governor Adrian Orr said that the “significant capital and liquidity buffers” built up in the banking system before the coronavirus pandemic “buffers can now be used to support their customers’ long-term economic future”. Stress tests suggest that banks “banks can continue to lend and prosper through a broad range of adverse scenarios.”

                      Deputy Governor Geoff Bascand also said the Bank and the Government have been working with in number of initiatives to support the flow of lending and functioning of the financial system. “Our actions have included making bank funding plentiful and cheap, facilitating the deferral of loan payments, and ensuring cash was readily accessible nationwide,” he added.

                      Full release here.

                      US PPI up 0.3% mom, 3.5% yoy in Jan, above expectations

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                        ActionForex.com
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                        US PPI for final demand rose by 0.4% mom in January, exceeding market expectations of 0.2% mom.

                        Final demand services increased by 0.3% mom, while final demand goods rose by 0.6% mom. Core PPI measure, which strips out volatile food, energy, and trade services, climbed 0.3% mom.

                        On an annual basis, headline PPI accelerated to 3.5% yoy, surpassing forecasts of 3.2% yoy. Core PPI followed closely, advancing 3.4% yoy.

                        Full US PPI release here

                        Stocks jump as US-China trade talk at different level scheduled

                          By
                          ActionForex.com
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                          US stocks open sharply higher after China appears have back down from their stance in trade war with US. Instead of warning of retaliation to US President Donald Trump’s new tariffs, China said it would seek consultations and negotiations as resolution to trade conflicts. Furthermore, Trump later said there is a “talk scheduled for today at a different level”.

                          DOW opened higher today and hit as high as 26348.94. But it appears to be struggling to take out 55 day EMA again and pares back some gain as the session continues. This EMA (now at 26301) remains a major focus. As long as it holds, further fall is expected through 25440.39 at a later stage. Though, sustained trading above will turn focus back to 27398.68 high.

                          Fed Clarida: Flatter Philips curve makes anchoring long-run inflation expectations more important

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                            ActionForex.com
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                            In a speech, Fed Vice Chair Richard Clarida said neutral interest rates appear to have fallen in the US and abroad. And, “this global decline in r* is widely expected to persist for years”. He emphasized the importance of the trend as “all else being equal, a fall in neutral rates increases the likelihood that a central bank’s policy rate will reach its effective lower bound (ELB) in future economic downturns. ” And that in turn “could make it more difficult during downturns for monetary policy to support household spending, business investment, and employment, and keep inflation from falling too low.”

                            Clarida pointed to another key development in decreasing responsiveness of inflation to resource slack. That is, “short-run Phillips curve appears to have flattened, implying a change in the dynamic relationship between inflation and employment”. He warned that a flatter Philips curve increases the cost of reversing unwelcome increase in long-run inflation expectations. And “a flatter Phillips curve makes it all the more important that longer-run inflation expectations remain anchored at levels consistent with our 2 percent inflation objective.”

                            Clarida’s full speech here.

                            Canada retail sales rose 0.4% in Jan, coronavirus impact to come later

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                              ActionForex.com
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                              Canada retail sales rose 0.4% to CAD 5.2B in January, slightly above expectation of 0.3% mom. Ex-auto sales, however, dropped -0.1% mom, versus expectation of 0.2% mom. Sales were up in only 4 of 11 subsectors, representing 48% of retail trade.

                              Statistics Canada also noted: “While the impacts of the coronavirus on the retail trade sector will be more noticeable in subsequent months, respondent comments for February note that business activities have been impacted.”

                              Full release here.

                              Australia Jan trade balance: Massive AUD 1.06b surplus

                                By
                                ActionForex.com
                                -

                                Australia recorded massive trade surplus of AUD 1.06b in January, a turnaround from December’s AUD -1.15b trade deficit.

                                Exports jumped 4% mom to AUD 33.9b, with 4% rise in non-rural goods, 54% rise in non-monetary gold. Much more than offsetting -8% fall in rural goods.

                                Imports, on the other hand, dropped -2% to AUD 32.9b. Consumption goods dropped -7%, non-monetary gold dropped -19%, capital goods dropped 1%.

                                AUD/JPY is tentatively drawing strong support from key medium term cluster at 81.48, 50% retracement of of 72.39 (2016) low to 90.29 (2017 high) at 81.34. But the bigger hurdle is on 84.34 support turned resistance for confirming short term bottoming. Otherwise, risk will remain on the downside.

                                US Treasury Mnuchin said it’s fake news about Trump push for WTO exit

                                  By
                                  ActionForex.com
                                  -

                                  US Treasury Steven Mnuchin calls the report about Trump wants to exit WTO “fake news” and an “exaggeration.”

                                  Mnuchin added that “the president has been clear, with us and with others, he has concerns about the WTO, he thinks there’s aspects of it that are not fair, he thinks that China and others have used it to their own advantage, but we are focused on free trade. That’s what we’re focused on – breaking down barriers.”

                                  Earlier today, Axios reported, quoting unnamed source” that Trump also said “I don’t know why we’re in it. The WTO is designed by the rest of the world to screw the United States.” The reported added that “sources with knowledge of the situation say the Trump administration will continue to call attention to various ways in which the U.S. encounters what some Trump advisers perceive is unfair and unbalanced treatment within framework of the WTO.”

                                  GBP dives as UK Q1 GDP grew only 0.1% qoq

                                    By
                                    ActionForex.com
                                    -

                                    Now it’s Sterling’s turn. GBP dives sharply as Q1 GDP grew merely 0.1% qoq much worse than expectation of 0.3% qoq and prior quarter’s 0.4% qoq. Annual rate was unchanged at 1.4% yoy. Index of services rose 0.4% 3mo3m below expectation of 0.6%. Now, it could be the final nail to close the case of a May BoE rate hike.

                                    Some selling was seen in GBP/USD prior to the release, but it quickly accelerates down after the disappointment. GBP/USD is now on course for 1.3711 key support level. Decisive break there will be a strong indication of bearish medium term reversal. But remember, US will release Q1 GDP later today too.

                                    Williams: Fed has to stick to 2% inflation target

                                      By
                                      ActionForex.com
                                      -

                                      New York Fed President John Williams told WSJ that it’s important for Fed to stick to its 2% inflation target. Fed has to make sure inflation expectations don’t slip too far, which will affect actual inflation in the future.

                                      “There’s been a process of going through the stages of grief about a low neutral rate,” he said. “These factors are basically the hand we’ve been dealt for the next five to 10 years.”

                                      He warned “if inflation continues to underrun our target levels like it has, this downward trend in inflation expectations will likely continue with inflation expectations falling well below target levels.”

                                      Fed Bullard: We should continue to move expeditiously on rates

                                        By
                                        ActionForex.com
                                        -

                                        St. Louis Fed President James Bullard told WSJ, “we should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation” and “I don’t really see why you want to drag out interest rate increases into next year.”

                                        Bullard also indicated that he backs another 75bps rate hike in September. He also reiterated he preference to have federal funds rate at 3.75-4.00% by the end of the year, from current 2.25-2.50%.

                                        China exports rose 3.3% in July, imports dropped -5.6%, better than expectations

                                          By
                                          ActionForex.com
                                          -

                                          China’s trade data came in better than expected and helped stabilize market sentiments. At least there was recovery in exports in July while imports contracted less than expected.

                                          Total with US continued to show contraction, with year-to-July trade dropped -13.4% yoy. Imports from US also contracted -28.3% yoy. On the other hand, total trade with EU grew 4.6% yoy from January to July, with exports increased 6.1% yoy and import increased 2.3% yoy.

                                          Nevertheless, the real tests will come later in the year as US tariffs on USD 300B in Chinese goods take effect on September 1.

                                          Here are some details.

                                          In July, in USD terms:

                                          • Total trade dropped -0.8% yoy to USD 398.0B.
                                          • Exports rose 3.3% yoy to USD 221.5B, above expectation of -0.2% yoy.
                                          • Imports dropped -5.6% yoy to USD 176.5B, above expectation of -8.8% yoy.
                                          • Trade surplus narrowed to USD 45.0B, down from June’s 51.0B but beat expectations of USD 44.2B.

                                          Year-to-day from January to July:

                                          • Total trade dropped -1.8% yoy to USD 2559.5B.
                                          • Exports rose 0.6% to USD 1392.6B.
                                          • Imports dropped -4.5% to 1166.9B.
                                          • Trade surplus was at USD 255.7B.

                                          Year-to-day from January to July, with EU:

                                          • Total trade rose 4.6% yoy to USD 400.2B.
                                          • Exports rose 6.1% yoy to USD 241.1B
                                          • Imports rose 2.3% yoy to USD 159.1B.
                                          • Trade surplus was at USD 82.1B.

                                          Year-to-day from January to July, with US:

                                          • Total trade dropped -13.4% yoy to USD 308.0B.
                                          • Exports dropped -7.8% yoy to USD 238.3B.
                                          • Imports dropped -28.3% yoy to USD 69.8B.
                                          • Trade surplus was at USD 168.5B.

                                          Year-to-day from January to July, with AU:

                                          • Total trade rose 7.7% yoy to USD 94.6B.
                                          • Exports rose 1.9% yoy to USD 26.2B.
                                          • Imports rose 10.0% to USD 68.5B.
                                          • Trade deficit was at USD 42.3B.
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