Wed, Oct 16, 2019 @ 05:27 GMT

UK delays Brexit vote to Mar 12, EU mulls 21-month extensions

    UK Prime Minister Theresa May announced that a Brexit “meaningful vote” would not take place this week. Instead, the vote on the withdrawal agreement is rescheduled to March 12, just 17 days before the March 29 Brexit date. Though, the Parliament will still hold a series of Brexit votes on Wednesday. Also, May insisted that “we still have it within our grasp to leave the European Union with a deal on the 29th of March and that’s what I’m going to be working at”.

    On the other hand, Bloomberg reported that EU is mulling an Article 50 extension for as long as 21 months beyond March 29. The idea of a short three-month delay has been floating for some time. But it’s seen by EU as insufficient to break the deadlock. A three-month extension is only meaningful if for completing legal processes if UK Parliament approves the agreement.

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    IMF sees Eurozone facing prolonged period of anemic growth and inflation

      IMF forecasts Eurozone growth to slow to 1.3% in 2019, then rebound to 1.6% in 2020. Inflation is forecast to be at 1.3% in 201 and remain far off ECB’s 2% target at least until 2022. it urged that ECB’s monetary policy stimulus was “vital” as Eurozone was facing “a prolonged period of anemic growth and inflation”. And, “the undershooting of the inflation objective calls for prolonged monetary accommodation.”

      IMF expected more monetary easing could be necessary if inflation expectations worsen. However, it also raised doubt on the idea of tiered deposit rate in case of more monetary easing. It said “a regime of tiering… would have a very small impact on aggregate bank profitability and a questionable impact on credit conditions.”

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      Canadian Dollar shrugs mixed retail sales, follows oil higher

        Canadian Dollar shrugs off mixed retail sales data, but follows oil prices higher. Headline retail sales dropped -0.1% mom in December versus expectation of -0.3% mom. Ex-auto sales dropped -0.5% mom versus expectation of -0.3% mom.

        WTI Crude oil’s rally resumes today and hits as high as 57.85 so far. Rise fro 42.05 is in progress and should target 61.8% projection of 42.05 to 55.85 from 51.49 at 60.01. For now, we’d continue to expect strong resistance around 60, which is close to 50% retracement of 77.06 to 42.05 at 59.55. 55 week EMA (now at 59.48). Upside should be capped there to bring near term reversal.

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        Trump: We’re missing once in a lifetime opportunity before of Fed’s boneheads

          In a pair of tweets, US President Donald Trump urged Fed to cut interest rates down to zero or less. And the US government could then start to refinance its debt. He complained again that it’s only “naivete” of Fed chair Jerome Powell” for not allowing the US to pay lowest interest rate.

          He said The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet. The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”

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          China hit back on treatment of Huawei and three core issues in trade negotiations with US

            The Chinese government is apparently furious at US move to sanction its telecom giant Huawei. Tensions of the two sides is set to escalate further while there is no set timing for resuming the collapsed trade talks. While Trump might want to meet Xi to clear out the outstanding issues to seal a trade deal at the upcoming G20 summit, the two sides are actually moving farther apart.

            Trump’s administration hit Huawei on two heavy measures yesterday. Firstly, the U.S. Commerce Department is adding Huawei and 70 affiliates to its “entity List” that bans them from buying US technologies without government approval. Secondly, Trump signed an executive order banning US companies from using telecom equipment made by companies deemed to pose a national security risk. As Commerce Secretary Wilbur Ross put, the decision was to “prevent American technology from being used by foreign-owned entities in ways that potentially undermine U.S. national security or foreign policy interests.”

            Chinese commerce ministry spokesman Gao Feng said today “China has emphasized many times that the concept of national security should not be abused, and that it should not be used as a tool for trade protectionism… China will take all the necessary measures to resolutely safeguard the legitimate rights of Chinese firms.”

            On trade Gao warned “the tariff hike by the United States will only bring greater difficulties to the consultations… “We urge the United States to cancel the wrong practices as early as possible, avoiding greater losses to Chinese and American companies and consumers, and causing a ‘recession-like’ impact on the world economy.”

            Gao also also clarified the three concerns on China. Firstly, all tariffs must be removed in order to reach a deal. Secondly, additional purchase of US goods is an issue to be resolved. Thirdly, the text of the agreement must be balanced, respecting each other’s sovereignty. Gao emphasized, “to reach any agreement, China’s three core concerns must be properly resolved,”

            Separately, Foreign ministry spokesman Lu Kang, said “negotiations and consultations, to have meaning, must be sincere… First, there must be mutual respect, equality and mutual benefit. Second, one’s word must be kept, and not be capricious.”

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            Into US session: Sterling weak on GDP contraction, US strongest

              Entering into US session, Dollar is trading as the strongest one for today, as lifted by US-Mexico deal on migration. Trump revealed today that a part of the agreement will need a “vote by Mexico’s legislative body”. He then threatens Mexican lawmakers that “we do not anticipate a problem with the vote but, if for any reason the approval is not forthcoming, tariffs will be reinstated.” But in any case, tariffs threats are averted for now.

              Saying in the currency markets, Canadian Dollar is the second strongest one. There is, for now, little case for BoC to cut interest rate and the next move is still more likely a hike. The question is just timing. Euro is the third strongest. On the other hand, New Zealand and Australian Dollar are among the weakest after China May imports contracted by most since July 2016. Sterling is the second weakest as UK GDP contracted -0.4% mom, in April, with steep deterioration in manufacturing.

              In other markets, currently

              • DOW future is up 131 pts,
              • Hold is down -1%
              • WTI oil is up 0.37%.

              In Europe:

              • FTSE is up 0.52%.
              • DAX is up 0.77%.
              • CAC is up 0.27%.
              • German 10-yer yield is up 0.034 at -0.220.

              Earlier in Asia:

              • Nikkei rose 1.20%.
              • Hong Kong HSI rose 2.27%.
              • China Shanghai SSE rose 0.86%.
              • Singapore Strait Times rose 0.69%.
              • Japan 10-year JGB yield dropped -0.005 to -0.121.
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              An update on GBP/USD short, lower the stop slightly

                Here’s an update on our GBP/USD short position (entered at 1.3150) as last updated in the weekly report. Yesterday’s rebound and breach of 1.3089 minor resistance did prompt us to consider exiting. But such rebound was triggered by ungrounded rumor that Theresa May is going to give a new proposal on Irish border to the EU. We had very very little trust on the news.

                Firstly, it’s Bloomberg citing unnamed source. More importantly, it just didn’t make sense for May to make any concession to the EU while she’s at Conservative Party meeting fighting her own Brexit rebels. Instead, the hardline rhetoric of Hammond and Raab made much more sense.

                Therefore, we gave the position a few more hours to develop. Admittedly, we’re a bit late in this update, which should be done two hours ago. Now that, with 1.2999 taken out as fall from 1.3297 resumes, it sounds like after the fact.

                But anyway, our view is unchanged that fall from 1.3297 is “possibly” resuming larger down trend from 1.4376. We’ll hold on to the short position entered at 1.3150. Stop is lowered to 1.3115 to lock in some profits. We still have not decided whether to get out at 1.2661/2784 support zone yet. Will keep monitoring.

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                Position trading: Hold EUR/JPY short, lower stop

                  Here’s an update on our EUR/JPY short trade (sold at 127.80, stop at 127.70) as last updated here. EUR/JPY’s decline resumed after recovery was limited at 127.09 and reached as low as 125.16 so far. Near term development stays bearish with the prior recovery limited by falling 4 hour 55 EMA.

                  From the daily chart point of view, daily MACD stays negative and is trending down, indicating continuing downside momentum. So, overall, the bearishness remains in EUR/JPY and it should be targeting 124.08/89 key support zone.

                  Ideally, we should see further downside accelerate through 124.08. That should confirm that fall from 137.49 is itself a medium term down trend rather than a correction. And in that case, the cross should target 61.8% retracement of 109.03 to 137.49 at 119.90 and possibly below.

                  However, loss of momentum ahead would probably keep 124.08 intact to bring rebound. The momentum of the current down move will be closely watched.

                  We’ll hold short and lower the stop to 127.10, slightly above 127.09 resistance. Target is put at 120.00 first, slightly above 119.90 fibonacci level. But we’ll see the reaction from 124.08 to decide whether to exit earlier.

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                  Mexico Guajardo has constructive and very positive NAFTA talk with US Lighthizer

                    Overnight, Mexican Economy Minister Ildefonso Guajardo had “constructive” and “very positive” talks with US Trade Representative Robert Lighthizer on NAFTA renegotiation. He added that both sides agreed to work towards hammering a deal in principal some time in August. And he said “We agree that in order to align the times and to eventually reach an agreement in principle, we should give ourselves the opportunity to move forward and try to bring this to fruition.”

                    The final format of the agreement remains to be seen as both Canada and Mexico insists on trilateral deal while the US is known for pushing bilateral deals. Another sticky point is the US push for a “sunset clause” which the other two sides firmly disagree to.

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                    China GDP grew 6.8% in Q1, Added USD 8.5B US debt holdings in Feb

                      Released from China, Q1 GDP grew 6.8% yoy, same as prior quarter and met expectation. Retail sales rose 10.1% yoy in March, up from prior 9.7% yoy and beat expectation of 9.7% yoy. Industrial production, however, rose 6.0% yoy, slowed from prior 7.2% yoy and missed expectation of 6.9% yoy. Fixed assets investment also slowed to 7.5% yoy, down from 7.9% yoy and missed expectation of 7.7% yoy. Overall, the set of data showed robust growth momentum.

                      Separately, US Treasury data showed showed that China remained the largest foreign creditor to the US, holding USD 1.18T in US bonds, bills and notes in February. Debt holding by China has indeed by USD 8.5B for the month, the largest rise in six months. But it should be noted that the data was for the period even before the 232 steel tariffs of the US, not to mention the Section 301 tariffs against China. The impact of trade tensions on Chinese interest in US debts remains to be seen.

                      Meanwhile, Japan came as second largest foreign holder of US debts, dropped slightly from USD 1.07T to USD 1.06T.

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                      Boston Fed Rosengren: Don’t let the economy run above capacity

                        Boston Fed President Eric Rosengren delivered a speech titled Ethics and Economics Making Cyclical Downturns Less Severe yesterday. There he argued that Fed shouldn’t let the economy “run above capacity” and “fall far below the sustainable unemployment rate”. He noted it’s the path that will “increase the probability of a longer recession-free period”.

                        It should be noted that unemployment rate, currently at 3.8% in May, is already quite far below Fed’s longer run rate at 4.5%. But where the real natural rate is, it’s still up for debate.

                        Also, Rosengren repeated his push for inflation range target. He said “one might allow the inflation target to rise within the range during periods of low real rates, thus providing more room for the funds rate to fall during an economic downturn.”

                        Full speech here.

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                        Euro’s international role recovered in period of trade tensions and protracted slowdown

                          ECB said in a report that euro’s international role strengthened in 2018 and early 2019 reversing a declining trend in recent years. Share of Euro as global reserve currency rose 1.2% in 2018, up from 19.5% to 20.8%. The euro’s share in international debt issuance and international deposits also increased, together with its share in the value of outstanding international loans.

                          ECB President Mario Draghi said that the period was “characterized by growing concerns about the impact of international trade tensions, a protracted slowdown in global growth, reversals in cross-border capital flows and challenges to multilateralism, including the imposition of unilateral sanctions.:

                          “On balance, these developments, together with progress towards deepening Economic and Monetary Union (EMU), seem to have had a positive effect on the international use of the euro, which showed tentative signs of recovering from historic lows.”

                          Full report here.

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                          Into US session: Swiss Franc stays stronges, but dollar is having a comeback

                            Entering into US session, Swiss Franc is trading as the strongest one. It’s followed by Dollar as the second strongest as the greenback is trying to stage a rebound before weekly close. New Zealand Dollar is the third strongest. On the other hand, Sterling seems to be troubled by EU’s rejection of UK Prime Minister Theresa May’s Chequers Brexit proposals. It’s followed by Yen, which is the second weakest, on strong global risk appetite. Euro’s rally is losing some momentum after mixed PMI data.

                            Major European stock indices extend this week’s rebound. At the time of writing, FTSE is up 0.89%, DAX up 0.42%, CAC up 0.65%. German 10 year bund yield is dropping back -0.0065, back at 0.465. Yesterday’s break of 0.5 handle was possibly a false dawn. Earlier today, Nikkei closed up 0.82%, Hong Kong HSI gained 2.50%. Singapore Strait Times rose 1.17%. China Shanghai SSE added 2.50% to 2797.48. 2800 handle is now within touching distance for the SSE.

                            Nikkei’s rally is rather impressive this week, partly helped by the selloff in Yen. Immediate focus will be on 24129.34 high next week. Based on current upside acceleration, it’s likely that this handle is taken out firmly to resume the long term up trend.

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                            ECB to revise down growth and inflation forecasts, SNB to stay cautious

                              ECB is widely expected to keep benchmark interest rate unchanged at 0.00% today. And it should stick with the plan to end the asset purchase program after December. Nevertheless, there are prospects of some dovish shifts. As indicated by recent economic data, growth momentum in the Eurozone, in particular in Germany, has slowed down quite notably. Recent slump in oil prices would also put some downward pressure in the energy led headline inflation in the bloc. ECB is generally expected to revise down 2019 growth and inflation forecasts.

                              President Mario Draghi’s comments on the economy will also be watched. ECB has so far viewed the slowdown in second half as temporary. But policy makers could start to feel more uncertainty about that. In particular, the slowdown in global trade due to protectionism is starting to bite exports growth, most notably in Germany. But for now, we’re not expecting ECB to change the forward guidance of keeping interest rates at present level at least through summer of 2019. The forward guidance itself is flexible enough.

                              SNB is also widely expected to keep the Sight Deposit rate unchanged at -0.75%, with 3-month Libor target range held at -1.25 to -0.25%. Some traders might look for hints of a rate hike in 2019. But it’s rather unlikely. EUR/CHF ‘s uptrend topped at 1.2004 back in April, rejected by the key 1.2 handle. Subsequent events, including Iran sanctions, Italian elections and budget, Turkish Lira crisis, trade war, stock markets rout, etc, sent the cross back to below 1.15. Meanwhile, domestically, Swiss economy also contracted -0.2% in Q3. There is little room for SNB policy makers to move away from negative interest rate.

                              Some suggested readings on ECB and SNB

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                              BoC to drop tightening bias, or would it?

                                BoC is widely expected to keep overnight rate unchanged at 1.75% today. Back in March, the central bank has already shifted to a more cautious stance and noted outlook “warrant a policy interest rate that is below its neutral range”. Also, given the mixed picture ” it will take time to gauge the persistence of below-potential growth and the implications for the inflation outlook.” But after all, tightening bias was maintained and there was just “increased uncertainty about the timing of future rate increases.”

                                Since then, data have been mixed. Headline CPI rose to 1.9% yoy in March, sharply higher than February’s 1.5% yoy. Core CPI also picked up slightly from 1.5% yoy to 1.6% yoy. Median CPI rose to 2.0% while trimmed mean CPI rose to 2.1% yoy. Job data remained resilient too. However, BoC’s Business Outlook Survey (BOS) disappointed with the overall business index falling to -0.6% in 1Q19. The result pointed to “a moderation from previously high levels of domestic and foreign demand for firms in most regions”.

                                There are speculations that BoC could totally drop tightening bias, and indicate that rates will stay there for longer. However, the recent data might not be giving enough pressure for BoC to do it. Also, oil price has been in strong rally since WTI bottomed at 42.05 last December. The current picture, with WTI back above 65, is drastically different from that one in January. Thus, the anticipated neutral shift is far from being certain. BoC will also release new economic projections. Today’s announcement is a wild card.

                                Some suggested readings:


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                                RBA kept cash rate at 1.5%, raised growth forecast, full statement

                                  RBA left cash rate unchanged at 1.50% as widely expected. Overtone is affirmative but as the improve in wages growth and inflation would be gradual, RBA is in no rush to raise interest rate.

                                  Here are some key points in the statement

                                  • GDP growth forecasts for 2018 and 2019 were “revised up a little” to around 3.5%.
                                  • GDP growth would slow in 2020 due to “slower export growth or resources”.
                                  • Growth in household consumption is “one continuing source of uncertainty” due to low income growth, high debt levels and some decline in asset prices.
                                  • Stronger than expected terms of trade are expected to “decline over time” but stay at relatively high level.
                                  • Labor market outlook “remains positive” and unemployment rate is expected to drop further to around 4.75% in 2020.
                                  • Rise is wages growth is “still expected to be a gradual process”.
                                  • Inflation outcomes were inline with expectations. CPI is expected to pickup over the next couple of years, gradually.
                                  • CPI is forecast to be at 2.25% in 2019 and a bit higher in 2020.

                                  Here is the full statement.

                                  Statement by Philip Lowe, Governor: Monetary Policy Decision

                                  At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

                                  The global economic expansion is continuing. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. Growth in China has slowed a little, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector. Globally, inflation remains low, although it has increased due to both higher oil prices and some lift in wages growth. A further pick-up in inflation is expected given the tight labour markets and, in the United States, the sizeable fiscal stimulus. One ongoing uncertainty regarding the global outlook stems from the direction of international trade policy in the United States.

                                  Financial conditions in the advanced economies remain expansionary but have tightened somewhat recently. Equity prices have declined and yields on government bonds in some economies have increased, although they remain low. There has also been a broad-based appreciation of the US dollar this year. In Australia, money-market interest rates have declined recently, after increasing earlier in the year. Standard variable mortgage rates are a little higher than a few months ago and the rates charged to new borrowers for housing are generally lower than for outstanding loans.

                                  The Australian economy is performing well. Over the past year, GDP increased by 3.4 per cent and the unemployment rate declined to 5 per cent, the lowest in six years. The forecasts for economic growth in 2018 and 2019 have been revised up a little. The central scenario is for GDP growth to average around 3½ per cent over these two years, before slowing in 2020 due to slower growth in exports of resources. Business conditions are positive and non-mining business investment is expected to increase. Higher levels of public infrastructure investment are also supporting the economy, as is growth in resource exports. One continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low, debt levels are high and some asset prices have declined. The drought has led to difficult conditions in parts of the farm sector.

                                  Australia’s terms of trade have increased over the past couple of years and have been stronger than earlier expected. This has helped boost national income. While the terms of trade are expected to decline over time, they are likely to stay at a relatively high level. The Australian dollar remains within the range that it has been in over the past two years on a trade-weighted basis, although it is currently in the lower part of that range.

                                  The outlook for the labour market remains positive. With the economy growing above trend, a further reduction in the unemployment rate is expected to around 4¾ per cent in 2020. The vacancy rate is high and there are reports of skills shortages in some areas. Wages growth remains low, although it has picked up a little. The improvement in the economy should see some further lift in wages growth over time, although this is still expected to be a gradual process.

                                  Inflation remains low and stable. Over the past year, CPI inflation was 1.9 per cent and, in underlying terms, inflation was 1¾ per cent. These outcomes were in line with the Bank’s expectations and were influenced by declines in some administered prices due to changes in government policies. Inflation is expected to pick up over the next couple of years, with the pick-up likely to be gradual. The central scenario is for inflation to be 2¼ per cent in 2019 and a bit higher in the following year.

                                  Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low. Growth in credit extended to owner-occupiers has eased but remains robust, while demand by investors has slowed noticeably as the dynamics of the housing market have changed. Credit conditions are tighter than they have been for some time, although mortgage rates remain low and there is strong competition for borrowers of high credit quality.

                                  The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

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                                  Fed chair Powell’s press conference live stream

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                                    Japan PMI manufacturing dropped to 51.6, slowing of growth momentum

                                      Japan PMI manufacturing dropped to 51.6 in July, hitting a 20-month low. That’s also below expectation of 52.7.

                                      Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

                                      “Flash survey data pointed to a slowing of growth momentum for Japan’s manufacturing sector at the beginning of the third quarter, following a robust performance so far this year.

                                      “New business grew at a much weaker rate and was broadly flat, while export demand, despite further yen depreciation, deteriorated for a second month running.

                                      “Slowing demand presents a worrying development given input delivery times lengthened to the sharpest extent in over seven years. Supply chain difficulties reportedly contributed to the fastest rate of input price inflation in since March 2011. Although output prices were raised at a relatively notable pace, the rate of increase was far weaker than that of costs, implying profit margin erosion.”

                                      Full release here.

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                                      RBA cut interest rate to 1.00%, full statement

                                        RBA cut interest rate by 25bps to 1.00% as widely expected.

                                        Full statement below.

                                        Statement by Philip Lowe, Governor: Monetary Policy Decision

                                        At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.00 per cent. This follows a similar reduction at the Board’s June meeting. This easing of monetary policy will support employment growth and provide greater confidence that inflation will be consistent with the medium-term target.

                                        The outlook for the global economy remains reasonable. However, the uncertainty generated by the trade and technology disputes is affecting investment and means that the risks to the global economy are tilted to the downside. In most advanced economies, inflation remains subdued, unemployment rates are low and wages growth has picked up. The slowdown in global trade has contributed to slower growth in Asia. In China, the authorities have taken steps to support the economy, while continuing to address risks in the financial system.

                                        Global financial conditions remain accommodative. The persistent downside risks to the global economy combined with subdued inflation have led to expectations of easing of monetary policy by the major central banks. Long-term government bond yields have declined further and are at record lows in a number of countries, including Australia. Bank funding costs in Australia have also declined, with money-market spreads having fully reversed the increases that took place last year. Borrowing rates for both businesses and households are at historically low levels. The Australian dollar is at the low end of its narrow range of recent times.

                                        Over the year to the March quarter, the Australian economy grew at a below-trend 1.8 per cent. Consumption growth has been subdued, weighed down by a protracted period of low income growth and declining housing prices. Increased investment in infrastructure is providing an offset and a pick-up in activity in the resources sector is expected, partly in response to an increase in the prices of Australia’s exports. The central scenario for the Australian economy remains reasonable, with growth around trend expected. The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income is expected to support spending.

                                        Employment growth has continued to be strong. Labour force participation is at a record level, the vacancy rate remains high and there are reports of skills shortages in some areas. There has, however, been little inroad into the spare capacity in the labour market recently, with the unemployment rate having risen slightly to 5.2 per cent. The strong employment growth over the past year or so has led to a pick-up in wages growth in the private sector, although overall wages growth remains low. A further gradual lift in wages growth is still expected and this would be a welcome development. Taken together, these labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.

                                        Inflation pressures remain subdued across much of the economy. Inflation is still, however, anticipated to pick up, and will be boosted in the June quarter by increases in petrol prices. The central scenario remains for underlying inflation to be around 2 per cent in 2020 and a little higher after that.

                                        Conditions in most housing markets remain soft, although there are some tentative signs that prices are now stabilising in Sydney and Melbourne. Growth in housing credit has also stabilised recently. Demand for credit by investors continues to be subdued and credit conditions, especially for small and medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality.

                                        Today’s decision to lower the cash rate will help make further inroads into the spare capacity in the economy. It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target. The Board will continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time.

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                                        BoJ Kuroda: Chinese economy to remain in doldrums in first half

                                          BoJ Governor Haruhiko Kuroda told the parliament that China’s economy “slowed quite significantly in the latter half of last year”. And he predicts that it may “remain in the doldrums in the first half of this year.” Nevertheless, Kuroda expects Chinese even economy to “pick up thereafter, as authorities have taken fiscal and monetary stimulative action.”

                                          Domestically, Kuroda expected that the net burden on households from this year’s scheduled sales tax hike to be smaller than previous hike in 2014. And he added that BOJ will be watching the impact of the sales tax hike on the economy. The impact could change depending on consumer sentiment, job and income conditions at that time.

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