Sun, May 31, 2020 @ 20:49 GMT

CAD trading lower after retail sales and CPI

    Canadian Dollar trades notably lower after weaker than expected data.

    Headline retail sales rose 0.6% mom in March, above expectation of 0.4% mom. However, ex-auto sales was a big miss, contracted -0.2% mom versus consensus of 0.5% mom growth.

    Headline CPI slowed to 2.2% yoy in April, down from 2.3% yoy, and missed expectation of 2.3% yoy. CPI core common was unchanged at 1.9% yoy. CPI core median was unchanged at 2.1%. CPI core trim rose to 2.1% yoy.

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    Mid-US session update: Yen surges on risk aversion, USD turns mixed, Gold extends slide

      Risk aversion is back as the dominate theme while Yen surges broadly today. However, Australian Dollar is surprisingly resistent as and it’s following Yen as the second strongest. Canadian is trading as the weakest one as WTI crude oil dives after larger than expected increase in oil inventories. Dollar is trading mixed for the day. Gold drops to as low as 1175.74 so far and looks set to take out 1172.06 fibonacci level with ease.

      At the time of writing, DOW is down -0.78%, S&P 500 down -0.84%, NASDAQ down -1.28%. NASDAQ is clearly affected by the poor earnings recent of Chinese tech giant Tencent. As noted before, DOW’s strong break of 25120.07 is a strong signal of near term reversal. Focus will now be on whether it can draw support on 55 day EMA (now at 25033.) Or DOW would just go straight to channel support (now at 24412).

      European indices also suffered steep selloff today. DAX closed down -1.58%, CAC down -1.82% and FTSE down -1.49%. CAC’s strong break of 5342.29 support confirms completion of corrective rebound from 5242.64, at 5539.41. Further decline should now be seen through 5242.64 to 100% projection of 5657.44 to 5246.24 from 5539.41 at 5124.62. But, the real test is in 5038.12 key support level.

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      Bet on 50bps Fed cut surged after New York Fed Williams’ comments

        Dollar tumbled broadly as markets took New York Fed President John William’s speech as indication of aggressive rate cut in the upcoming FOMC meeting on July 31. Fed fund futures now indicate 46.2% chance of -50bps cut, comparing to 34.3% a day ago and 19.9% a week ago. Overall, markets are still pricing 100% chance of easing then.

        Williams said in a speech “Living Life Near the ZLB” (Zero Lower Bound), that when interest rates are in the vicinity of the ZLB, policymakers shouldn’t “keep your powder dry”. That is, they should “move more quickly to add monetary stimulus” to “vaccinate against further ills”.

        Also, he said “it’s better to take preventative measures than to wait for disaster to unfold”. And, “when you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress.”

        Later, in an unusual step, a New York Fed spokesperson “clarified” Williams’ comments. She said, “this was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting.”

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        Fed Powell: Current low interest rate means fiscal policy needed if economy weakens

          In the Semiannual Monetary Policy Report to the Congress, Fed Chair Jerome Powell warned that while “some of the uncertainties around trade have diminished recently, but risks to the outlook remain. In particular, Fed is ” closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy.”

          But for now, he said, the “current stance of monetary policy will likely remain appropriate”, if incoming information about the economic remains broadly consistent with FOMC’s outlook. He also reiterated that ” If developments emerge that cause a material reassessment of our outlook, we would respond accordingly.”

          Powell also pointed out that the current low interest rate environment means “it would be important for fiscal policy to help support the economy if it weakens”. He added, “Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn. A more sustainable federal budget could also support the economy’s growth over the long term.”


          Full remarks here.

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          Eurozone PMI composite finalized at 53.1, notable slowdown in Italy

            Eurozone PMI services was finalized at 53.7 in October, down from prior month’s 54.7. PMI composite was finalized at 53.1, down from September’s 54.1. Among the countries, Italy PMI composite dropped to 49.3, a 59-month low. German PMI composite also dropped to 5-month low at 53.4.

            Chris Williamson, Chief Business Economist at IHS Markit said:

            “Eurozone companies reported a disappointing start to the fourth quarter. Business activity is growing at its slowest rate for over two years and expectations have slumped to the bleakest since the end of 2014.

            “An export-led slowdown, linked to growing trade tensions and tariffs, has been exacerbated by rising political uncertainty, growing risk aversion and tightening financial conditions. The slowdown has consequently become more broad-based to increasingly envelop the services economy.

            “While the PMI numbers hint at an upward revision to the 0.2% flash estimate of third quarter GDP growth, it’s clear that the economy has slowed and that the weakness has intensified into the fourth quarter.

            “Italy has recorded an especially noticeable slowdown, slipping into decline during October, whilst Germany has also seen a worrying easing of growth, with both countries affected by rising political uncertainty. France and Spain, in contrast, have seen more resilient business conditions, though both are registering much slower growth than earlier in the year.”

            Full release here.

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            New Zealand CPI accelerated, but RBNZ core CPI slowed

              New Zealand CPI rose accelerated to 0.8% qoq in Q1, up from Q4’s 0.5% qoq, well above expectation of 0.3% qoq. Annual inflation rate rose to 2.5% yoy, highest since 2011. Impact of coronavirus pandemic was not much reflected in the data yet as lockdown measures started on March 25. Separately released, RBNZ’s own core CPI measures slowed to 1.7% yoy in Q1, down from 1.8% yoy.

              Separately, New Zealand Prime Minister Jacinda Ardern announced today that the country will “move out of Alert Level 4 lockdown at 11.59 p.m. on Monday April 27, one week from today”. Afterwards, “we will then hold in Alert Level 3 for two weeks, before reviewing how we are tracking again, and making further decisions at Cabinet on the 11th of May.”

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              USD/JPY heading back to 110 as WTI oil hits 71, 10 year yield hit 3%

                Oil price continues to surge on US withdrawal of Iran deal, WTI hit as high as 71.17 so far before retreat slightly to 70.9. US 10 year yield also follows and is back above 3% now.

                In the currency markets, today’s trend continue with USD and CAD trading as the strongest ones. Meanwhile, JPY is trading as the weakest one. The is in line with the development of surging oil and yield.

                Dollar is trading above last week’s high except versus JPY and GBP. Note that Yen’s strength last week was due to falling yields in US and, more so in Europe. Rebound in US yield could now put 110.02 resistance in USD/JPY back into focus.

                Action Bias of USD/JPY is looking promising. H row is all upside blue with the current rebound. D action also turned from neutral to upside blue already.

                Nonetheless, we’d stay cautious in the pair first, at least until either 110.02 is taken out, or when 6H action bias also turns upside blue.

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                RBNZ Hawkesby: Next rate move depends on global environment

                  RBNZ Assistant Governor Christian Hawkesby said in an interview that, after yesterday’s 50bps rate cut, “we’ve got a more balanced outlook for the OCR now”. However, he added, “even within those projections there’s some probability in there that we will need to reduce the OCR from where it is at the moment.”

                  Hawkesby explained that markets have already priced in a smaller 25bps before yesterday’s announce. And the New Zealand Dollar faced downward pressure after the decision, which could give an extra boost to exports. He added “it’s all part of the story of us getting back to our targets.” He hoped that the larger cut could help avoid further policy easing. But RBNA is “complete” open to use negative interest rates and other unconventional tools if necessary.

                  The main consideration for any next move is on global outlook. He said, “the obvious one is the global environment where we feel like the risks are tilted to the downside, and that was one of the factors that prompted us to ease with the 50 basis points this time around.”

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                  Into US session: Dollar weakens further as Trump meets Putin

                    Entering US session, European majors are generally strong today, led by Swiss Franc, followed by Sterling. On the other hand, both Yen and Dollar are extending last week’s selloff. The financial markets are generally quiet though.

                    After some weaker than expected economic data, China SSE closed down -0.61% at 2814.04, holding safely above 2800. Hong Kong HSI was up 0.05%, Singapore Strait Times ended lower by -0.85%. Nikkei is on holiday.

                    Major European indices are also trading lower. FTSE is losing -1.02% at the time of writing, DAX is down -0.15%, CAC is down -0.40%.

                    Trump is meeting Putin in Helsinki now but we’re no expecting anything ground-breaking there. EU Tusk and Juncker, though, seemed to have done something positive with China earlier today. And they’ll travel to Japan tomorrow.

                    For the session ahead US retail sales is a major focus. Headline sales is expected to rise 0.4% mom in June, with ex-auto sales up 0.4%. Empire State Manufacturing index is expected to drop from 25 to 20.3 in July. Business inventories are expected to rise 0.4% in May. Canada will release International Securities Transactions.

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                    US PPI accelerated to 2.1%, core PPI to 1.7%

                      US PPI rose 0.5% mom, 2.1% yoy in January, well above expectation of 0.2% mom, 1.4% yoy. PPI core rose 0.5% mom, 1.7% yoy, also well above expectation of 0.2% mom, 1.2% yoy.

                      Building permits rose 9.2% mom to 1.551m annualized rate, above expectation of 1.450m. Housing starts dropped -3.6% mom to 1.567m, above expectation of 1.390m.

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                      Australia GDP grew 0.9% qoq, 3.4% yoy, Aussie lifted briefly

                        Australian Dollar was lifted notably by better than expected GDP data in Asian session. Q2 GDP rose 0.9% qoq, 3.4% yoy, comparing to expectation of 0.8% qoq, 2.8% yoy. That’s marked the 27th year without recession, and it’s the strongest in almost six years. Chief Economist for the ABS, Bruce Hockman, said: “Growth in domestic demand accounts for over half the growth in GDP, and reflected strength in household expenditure.”

                        Looking at the details, domestic demand rose 0.6% qoq, government expenditure rose 1.0% qoq, new dwelling investments rose 3.6% qoq. However, employee compensation grew only 0.7% qoq “due to a rises in the number of wage and salary earners and wage rates.”

                        The lift to Aussie is relatively brief however. While the GDP figure was strong, it’s not enough to trigger even a rethink of interest path of RBA. Policymakers are looking for sign of pick up of wage growth.

                        Also released, Australia AiG performance of services index dropped -1.4 to 52.2 in August. New Zealand ANZ commodity price dropped -1.1% in August. China PMI services dropped to 51.5 in August, down from 52.8.

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                        UK PM May to face no-confidence vote after humiliating defeat over her Brexit deal

                          UK Prime Minister Theresa May suffered humiliating defeat over her Brexit deal. It’s voted down by 432 to 202, the biggest loss in modern UK history. It’s uncertain what the path will be exactly like after this point. But what’s sure is that opposition Labour Party leader Jeremy Corbyn has swiftly called for a no-confidence vote in the government. And that would be held at 1900GMT on Wednesday, today.

                          In a well-prepared statement, May said in the parliament after the defeat that “It is clear that the House does not support this deal. But tonight’s vote tells us nothing about what it does support. Nothing about how – or even if – it intends to honor the decision the British people took in a referendum Parliament decided to hold.”

                          She added that the first thing to do is to “confirm whether this government still enjoys the confidence of the House.” Secondly, she will meet with Conservatives, DUP and other senior parliamentarians from across the house to find “ideas that are genuinely negotiable and have sufficient support in this House.” Thirdly, she will go back to EU with those ideas.

                          British lawmakers crush Theresa May's Brexit deal by a record margin

                          British lawmakers have crushed Theresa May's Brexit deal, handing her the worst parliamentary defeat for a British government in the modern era. Immediately afterwards, opposition Labour leader Jeremy Corbyn put forward a motion of no confidence in May's government. He said the challenge would allow the House of Commons to "give its verdict on the sheer incompetence of this Government."

                          Gepostet von CNN am Dienstag, 15. Januar 2019

                          May’s statement below:

                          “Mr Speaker, the House has spoken and the Government will listen.

                          It is clear that the House does not support this deal. But tonight’s vote tells us nothing about what it does support. Nothing about how – or even if – it intends to honor the decision the British people took in a referendum Parliament decided to hold.

                          People, particularly EU citizens who have made their home here and UK citizens living in the EU, deserve clarity on these questions as soon as possible. Those whose jobs rely on our trade with the EU need that clarity. So with your permission Mr Speaker I would like to set out briefly how the Government intends to proceed.

                          First, we need to confirm whether this government still enjoys the confidence of the House. I believe that it does, but given the scale and importance of tonight’s vote it is right that others have the chance to test that question if they wish to do so.

                          I can therefore confirm that if the Official Opposition table a confidence motion this evening in the form required by the Fixed Term Parliaments Act, the Government will make time to debate that motion tomorrow. (Wednesday)

                          And if, as happened before Christmas, the Official Opposition decline to do so, we will – on this occasion – consider making time tomorrow to debate any motion in the form required from the other opposition parties, should they put one forward.

                          Second, if the House confirms its confidence in this government I will then hold meetings with my colleagues, our Confidence & Supply partner the DUP and senior parliamentarians from across the House to identify what would be required to secure the backing of the House.

                          The government will approach these meetings in a constructive spirit, but given the urgent need to make progress, we must focus on ideas that are genuinely negotiable and have sufficient support in this House.

                          Third, if these meetings yield such ideas, the Government will then explore them with the European Union.

                          Mr Speaker I want to end by offering two reassurances.

                          The first is to those who fear that the government’s strategy is to run down the clock to 29th March (Britain’s exit date from the EU).

                          That is not our strategy. I have always believed that the best way forward is to leave in an orderly way with a good deal and have devoted much of the last two years negotiating such a deal.

                          As you confirmed Mr Speaker, the amendment to the business motion tabled last week by my Right Honorable and Learned Friend the Member for Beaconsfield (Dominic Grieve) is not legally binding, but the government respects the will of the House.

                          We will therefore make a statement about the way forward and table an amendable motion by Monday.

                          The second reassurance is to the British people, who voted to leave the European Union in the referendum two and a half years ago.

                          I became Prime Minister immediately after that referendum. I believe it is my duty to deliver on their instruction and I intend to do so.

                          Mr Speaker, every day that passes without this issue being resolved means more uncertainty, more bitterness and more rancor.

                          The government has heard what the House has said tonight, but I ask Members on all sides of the House to listen to the British people, who want this issue settled, and to work with the government to do just that.”

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                          US ISM non-manufacturing dropped to 53.9, sharp fall in production

                            US ISM Non-Manufacturing Composite dropped to 53.9 in November, down from 54.7, missed expectation of 54.5. Looking at some details, production dropped sharply by -5.4 to just 51.6. However, new orders rose 1.5 to 57.1. Employment also rose 1.8 to 55.5.

                            ISM’s Anthony Nieves said: “The non-manufacturing sector had a slight pullback in November. The respondents hope for a resolution on tariffs and continue to be hampered by constraints in labor resources.”

                            Full release here.

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                            South Korean Moon declared era of no war with North Korean Kim

                              South Korean President Moon Jae-in had a rather successful summit, the third one this year, with North Korean Leader Kim Jong-Un. Speaking at a joint news conference in Pyongyang after the meeting, hey pledged to turn Korean peninsula into “land of peace without nuclear weapons and nuclear threats” and take “prompt steps” toward the goal.

                              Kim added that “the world is going to see how this divided nation is going to bring about a new future on its own”. Meanwhile, Moon said “the era of no war has started,” and “today the North and South decided to remove all threats that can cause war from the entire Korean peninsula.”

                              According to Moon, Kim also “expressed its readiness” on permanent dismantlement of its main nuclear facilities in Yongbyon. However, correspondingly measures have to be taken by the US.

                              Trump, as cheerleader on the sideline, tweeted “Kim Jong Un has agreed to allow Nuclear inspections, subject to final negotiations, and to permanently dismantle a test site and launch pad in the presence of international experts. In the meantime there will be no Rocket or Nuclear testing.” But again, there was no well deserved credit given to Moon.

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                              BoC Lane: US trade policies, lower oil prices, softened housing resulted in temporary slowing on Canadian economy

                                In a speech in Washington, BoC Deputy Governor Timothy Lane outlined the challenges the Canada is facing. Firstly, uncertainty on US trade policies held back Canadian business investments. Secondly, lower oil prices caused deterioration of Canada’s terms of trade. Thirdly, housing investment and consumption softened. Together, they resulted in “temporary slowing of Canada’s economic growth.”.

                                On the other hand, the US economy “has been powering ahead with the effects of the fiscal stimulus”. Fed also raised interest rates a couple of times last yet. The combined effects put downward press on the Canadian. And, “the lower Canadian dollar, in turn, will help support the economy through this period.”

                                Lane’s full speech here.

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                                BoJ Kuroda: Stock markets unstable due to global risks

                                  In a speech at the Meeting of Councillors of Nippon Keidanren (Japan Business Federation) in Tokyo, BoJ Governor Haruhiko Kuroda warned that “it’s necessary to bear in mind that uncertainties have recently increased with respect to developments in overseas economies.”

                                  He noted that the “stock market has been somewhat unstable”. And, “the fluctuations are partly attributable to changes in perception of various risks surrounding the global economy”.

                                  On monetary policy, though, Kuroda sounded rather cautious. He said “In complex times like now, what’s required is to persistently continue with the current powerful easing while weighing the benefits and costs of our policy in a balanced manner.”

                                  Kuroda’s full speech here.

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                                  BoC Poloz: Canada’s resilience could be seriously tested by COVID-19

                                    BoC Governor Stephen Poloz warned in a speech yesterday that the economy’s “resilience” could be “seriously tested by COVID-19”, depending on the “severity and duration of its effects”. Global economy will, “at the very least, be significantly disrupted” by the coronavirus in H1. Consumer and business confidence “could be set back for a longer period of time”, causing growth to “slow more persistently”.

                                    He added that monetary policy can contribute in the current situation by “buffering their effects on consumer and business confidence, thereby helping the economy bridge the situation.” And, “this contribution can be especially powerful when the shock is global and the response is coordinated.” BoC lowered interest rate by -50bps on Wednesday, following the same move by Fed on Tuesday.

                                    Poloz also reiterated that “Governing Council stands ready to adjust monetary policy further if required”. And, “we continue to closely monitor economic and financial conditions, in close coordination with other G7 central banks and fiscal authorities.”

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                                    Canada added 106.5k jobs, unemployment rate dropped to 5.7%

                                      Canadian Dollar jumps sharply after stellar job data. The employment market grew 106.5k in April, well above expectation of 15.0k. Unemployment rate dropped to 5.7%, down from 5.8% and beat expectation of 5.8%. On year-over-year basis, employment grew 2.3% or 426k, with 248k in full-time and 170k in part-time jobs. Employment grew in four provinces of Ontario, Quebec, Alberta and Price Edward Island.

                                      Full release here.

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                                      Italian eurosceptic Savona urged to be ready for all eventualities on Euro membership

                                        Italian European Affairs Minister Paolo Savona warned today that the country had to be ready for “all eventualities” on its Eurozone membership. He told a panel in the Senate that “we may find ourselves in a position where it’s not we who decide but others.” Hence, “my position regarding a Plan B … is that we have to be ready for all eventualities.”

                                        Savona is a known eurosceptic who’s nomination as Economy Minister was veto by President President Sergio Mattarella earlier this year. That led to academic Giovanni Tria taking up that post to solve the political and constitutional crisis.

                                        Bank of Italy Governor Ignazio Visco warned today that the country is now much more vulnerable than 10 years ago should another financial crisis hit. Visco urged “prudence and far-sightedness are needed to avoid (market) tensions and to avoid leaving Italians with a higher debt and lower income in the future.” Visco added that “there is certainly a need for public investments, to be chosen and implemented with maximum efficiency, just as there is a need for a broad and balanced tax reform.”

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                                        UK retail sales rose strongly by 0.7% in July, but Pound shows no reaction

                                          July is a rather strong month in UK retail sales, thanks to World Cup and good whether.

                                          Headline retail sales including fuel rose 0.7% mom, 3.5% yoy, well above expectation of 0.2% mom, 2.9% yoy.

                                          Ex-auto and fuel sales jumped 0.9% mom, 3.7% yoy, also well above expectation of 0.0% mom, 2.7% yoy.

                                          Full release here.

                                          But just like employment and inflation data released earlier this week, the Pound basically has no reaction. It’s trading mixed today, digesting this week’s loss against Dollar and Yen.


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