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US initial jobless claims jumped to 242k

    By
    ActionForex
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    US initial claims rose 13k to 242k in the week ending April 29, higher than expectation of 235k. Four-week moving average of continuing claims rose 3.5k to 239k.

    Continuing claims dropped -38k to 1805k in the week ending April 22. Four-week moving average of continuing claims dropped -4.5k to 1828k.

    Full US jobless claims release here.

    ECB hikes 25bps, reiterates data-dependent approach

      By
      ActionForex
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      ECB raised its three key interest rates by 25bps today, with main refinancing rate, marginal lending rate, and deposit rate becoming 3.75%, 4.00%, and 3.25%, respectively, effective May 10.

      In the accompanying statement, ECB explained that incoming information broadly supports the assessment of the medium-term inflation outlook that the Governing Council formed at its previous meeting.” While headline inflation has declined recently, the ECB noted that “underlying price pressures remain strong.”

      The central bank acknowledged that the transmission of past rate increases to euro area financing and monetary conditions has been forceful, but added that “the lags and strength of transmission to the real economy remain uncertain.”

      ECB emphasized its commitment to ensuring that policy rates are “sufficiently restrictive” to achieve a timely return of inflation to the 2% medium-term target, stating that rates will be kept at these levels “for as long as necessary”.

      The Governing Council will continue to follow a data-dependent approach, basing its policy rate decisions on assessments of inflation outlook in light of incoming economic and financial data, underlying inflation dynamics, and strength of monetary policy transmission.

      Full ECB statement here.

      Eurozone PPI at -1.6%mom, 5.9% yoy in Mar

        By
        ActionForex
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        Eurozone PPI came in at -1.6% mom, 5.9% yoy in March, versus expectation of -1.4% mom, 5.9% yoy. For the month, industrial producer prices decreased by -4.8% in energy sector and by -0.4% for intermediate goods, while prices increased by 0.2% for capital goods, by 0.3% for durable consumer goods and by 0.9% for non-durable consumer goods. Prices in total industry excluding energy increased by 0.2%.

        EU PPI came in at -1.5% mom, 7.0% yoy. The largest monthly decreases in industrial producer prices were recorded in Greece (-7.3%), Ireland (-4.6%) and Lithuania (-4.0%), while the highest increases were observed in Cyprus (+2.4%), France (+2.0%) and Croatia (+0.5%).

        Full Eurozone PPI release here.

        UK PMI services finalized at 55.9, reignited inflationary pressures

          By
          ActionForex
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          UK PMI Services were finalized at 55.9 in April, marking a significant increase from March’s 52.9 and the highest reading since April 2022. S&P Global highlighted that demand conditions continued to improve, with higher salary payments contributing to steeper cost inflation. PMI Composite was finalized at 54.9, up from March’s 52.2.

          Tim Moore, Economics Director at S&P Global Market Intelligence, stated, “A strong rate of service sector growth meant that the UK economy started the second quarter of 2023 in positive fashion. Overall private sector output expanded at the fastest pace for one year, despite another fall in manufacturing production during April.”

          Moore added that service providers experienced the steepest upturn in new work for 13 months, as resilient consumer spending combined with a turnaround in demand for business services to boost overall order books. However, he also noted that the swift rebound in customer demand appears to have reignited inflationary pressures, with around 34% of the survey panel reporting a rise in their prices charged in April, roughly three times higher than the pre-pandemic average.

          Full UK PMI Services release here.

          Eurozone PMI services finalized at 12-month High, growth to continue in months ahead

            By
            ActionForex
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            Eurozone PMI Services were finalized at 56.2 in April, up from March’s 55.0, marking a 12-month high. PMI Composite was finalized at 54.1, up from March’s 53.7, an 11-month high.

            Among member states, Italy’s PMI composite rose to 55.3, a 17-month high, while Germany’s increased to 54.2, a 12-month high. Ireland rose to 53.5, a 2-month high. However, Spain dropped to a 2-month low of 56.2, and France fell to a 2-month low of 52.4.

            HCOB noted that the service sector is robust across Eurozone, with companies able to pass on at least some inflation in intermediate inputs to customers. Service firms’ confidence was reflected in the solid index reading for business expectations and increased staffing levels compared to the previous month.

            However, HCOB also highlighted that Eurozone order backlog grew at a weaker pace, nearly stagnating in Germany and falling slightly in Italy. Despite this, all PMI indicators suggest that growth in the Eurozone services sector will continue in the months ahead.

            Full Eurozone PMI Services release here.

            ECB to hike today, 25bps or 50bps?

              By
              ActionForex
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              As ECB gears up for its seventh consecutive interest rate hike in a row today, market participants are divided on the size of the increase. While the majority expect a 25bps hike, which would bring the main refinancing rate to 3.75% and the deposit rate to 3.25%, a 50bps move cannot be totally ruled out.

              The size of the hike carries significant implications for the market. A 50bps increase would suggest that the tightening cycle could extend beyond June, even if it slows down then. However, a 25bps hike would create more ambiguity for July meeting. Ultimately, the path forward will still heavily depend on the next round of economic projections, only available at June meeting.

              Suggested readings on ECB:

              EUR/CHF’s recovery from 0.9774 has been underwhelming, stalling at 0.9878 before reversing course. It seems that price actions from 0.9995 are forming a triangle consolidation pattern. While a break below 0.9774 cannot be ruled out, any downside should be limited. Conversely, breaking 0.9878 resistance would indicate that the rise from 0.9704 is set to resume through 0.9995. Let’s see how it plays out.

               

              IMF Srinivasan highlights uncertainty in Japan’s monetary policy and potential impacts

                By
                ActionForex
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                Krishna Srinivasan, director of IMF’s Asia and Pacific Department, has expressed concerns over uncertainty in Japan’s monetary policy direction amid rising inflation.

                He stated in a press briefing, “Japanese government bond yields have increased notably since October. Changes in Japan’s monetary policy that lead to further increases in government bond yields could have global spillovers through Japanese investors, who have large investment positions in debt instruments abroad.”

                Srinivasan also warned that portfolio rebalancing by these investors could potentially trigger a rise in global yields, “causing portfolio outflows for some countries”.

                Regarding China, he noted that over the medium term, a slowdown in productivity and investment is expected, which would lower growth below 4 percent by 2028. This could have profound adverse implications for the rest of the region, given their strong trade linkages with China.

                Srinivasan also highlighted the risk of the global economy fragmenting into trading blocs, saying, “If this happens, the larger exposures will be to Asian economies that currently export significantly to the US and Europe, and those that are currently part of global value chains that see them export intermediate goods to China for use in Chinese exports.”

                Full remarks of IMF Srinivasan here.

                China Caixin PMI manufacturing contracts in Apr, demand softens and prices plunge

                  By
                  ActionForex
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                  China’s Caixin PMI Manufacturing dropped to 49.5 in April, down from 50.0 and below the expected 50.8, marking the first contraction reading in three months. According to Caixin, output expanded only marginally due to softening demand conditions. Input costs and selling prices fell at the quickest pace in over seven years.

                  Wang Zhe, Senior Economist at Caixin Insight Group said: “In a nutshell, manufacturing activity weakened in April. Manufacturing supply saw a marginal slowdown of expansion, demand dipped month-on-month, the labor market worsened further, logistics was relatively smooth, inventories remained stable, and prices plunged. Despite all these factors, businesses maintained high confidence in the economic outlook.”

                  Full China Caixin PMI Manufacturing release here.

                  Fed Powell leaves door open for June pause but rules out rate cut

                    By
                    ActionForex
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                    US stocks, treasury yields, and Dollar closed lower following FOMC rate decision and post-meeting press conference. Although Fed opened the door for a possible pause in June, no confirmation was provided, and a rate cut by year-end was ruled out.

                    Despite softening its hawkish tone, Fed Chair Jerome Powell did not explicitly confirm a pause following yesterday’s 25bps rate hike. Powell noted that “we’re closer, or maybe even there” regarding the terminal rate of the current tightening cycle. From June onward, policy decisions will be made on a “meeting-by-meeting” basis, with Fed “prepared to do more” if necessary.

                    Powell also dismissed the possibility of a rate cut this year. He said, “We on the committee have a view that inflation is going to come down not so quickly, it will take some time,” and “in that world, if that forecast is broadly right, it would not be appropriate to cut rates” this year.

                    Regarding the economy, Powell expressed optimism, stating, “the case of avoiding a recession is in my view more likely than that of having a recession.”

                    Additional readings on FOMC:

                    DOW is holding above 32233.85 near term support after the pull back this week. It’s probably also trying to draw support from 55 D EMA (now at 33359.36). Another rally is still in favor through 34712.28 resistance to 61.8% projection of 68220.94 to 34712.28 from 31429.82 at 35169.54. However, firm break of 332.33.85 will argue that the pattern from 34712.28 has started another falling leg back towards 31429.82 support. Now that there is no breakthrough after FOMC, the markets will look into tomorrow’s non-farm payroll for inspirations.

                    Fed Chair Jerome Powell press conference live stream

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                      ActionForex
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                      Fed hikes 25bps, soften hawkish stance but no clear indication of pause

                        By
                        ActionForex
                        -

                        FOMC raises federal funds rate target by 25bps to 5.00-5.25% as widely expected, on unanimous vote. Hawkish stance is softened but there is no explicit indication of a pause in the accompanying statement.

                        Fed said, “In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

                        That compared to March statement that “The Committee anticipates that some additional policy firming may be appropriate”

                        Also, Fed maintained the pledge that “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals”.

                        Full FOMC statement here.

                        US ISM services rose to 51.9, corresponds to 0.7% annualized GDP growth

                          By
                          ActionForex
                          -

                          US ISM Services PMI rose from 51.2 to 51.9 in April, below expectation of 53.1. Looking at some details, business activity/production dropped from 55.4 to 52.0. New orders rose from 52.2 to 56.1. Employment dropped from 51.3 to 50.8. Prices rose from 59.5 to 59.6.

                          ISM said: “There has been a slight uptick in the rate of growth for the services sector, due mostly to the increase in new orders and ongoing improvements in both capacity and supply logistics. The majority of respondents are mostly positive about business conditions; however, some respondents are wary of potential headwinds associated with inflation and an economic slowdown.”

                          “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for April (51.9 percent) corresponds to a 0.7-percent increase in real gross domestic product (GDP) on an annualized basis.”

                          Full ISM services release here.

                          US ADP jobs grew 296k in Apr, pay growth slowed

                            By
                            ActionForex
                            -

                            US ADP private employment grew 296k in April, well above expectation of 150k. By sector, goods-producing jobs rose 67k. Service-providing jobs rose 229. By establishment size, small companies added 121k jobs, medium companies added 122k, large companies added 47k.

                            Median change in annual pay of job-stayers rose 6.7% yoy, slowed slightly from 6.9% yoy. Median change in annual pay of job-changers rose 13.2% yoy, slowed notably from 14.2% yoy.

                            “The slowdown in pay growth gives the clearest signal of what’s going on in the labor market right now. Employers are hiring aggressively while holding pay gains in check as workers come off the sidelines. Our data also shows fewer people are switching jobs.” Nela Richardson, Chief Economist, ADP, said.

                            Full US ADP release here.

                            Eurozone unemployment rate hits record low at 6.5%

                              By
                              ActionForex
                              -

                              Eurozone unemployment rate dipped to a new record low in March, falling from 6.6% to 6.5%, below the expected 6.6%. Meanwhile, the EU unemployment rate remained steady at 6.0%.

                              Eurostat estimates that 12.96m individuals in EU, including 11.01m in Eurozone, were unemployed in the month. This marks a decrease of -155k in EU and -121k in Eurozone compared to February. Furthermore, compared to March 2022, unemployment fell by -353k in EU and -365k in the Eurozone.

                              Full Eurozone unemployment rate release here.

                              Fed to hike 25bps today, but pause afterwards?

                                By
                                ActionForex
                                -

                                Fed is widely anticipated to deliver another 25bps rate hike today, bringing federal funds rate target to 5.00-5.25%. Despite ongoing concerns over regional banks in the US, Fed appears unconcerned about overall financial stability. Service prices remain sticky, even as inflation appears to be declining.

                                With market pricing in near 90% chance of the 25 bps move, surprises seem unlikely. However, after this increase, fed fund futures indicate an almost 100% chance of no change in June, with the path beyond that trending downward. FedChair Jerome Powell may stay non-committal in the post-meeting press conference, and point to June’s new economic projections for guidance. But a more explicit pause signal could boost risk markets.

                                Here are some readings on FOMC:

                                As for US stocks, despite initial selloff yesterday, major indexes recovered some ground and close down around -1% only. NASDAQ is still struggling to break through 12269.55 resistance. But near term bias will remain on the upside as long as 11798.77 support holds. The real test lies in 38.2% retracement of 16212.22 to 10102.61 at 12436.48. Decisive break there will be a solid bullish sign that should push for at least a test on 13181.08 cluster resistance. Nevertheless, firm break of 11798.77 support could prompt near term reversal, and steeper selloff back to 10982.80 support and possibly below.

                                NZD/USD jumps as strong job data supports another RBNZ hike

                                  By
                                  ActionForex
                                  -

                                  New Zealand Dollar surges broadly today, as strong job growth data together with record annual wages growth basically seal the deal for another RBNZ rate hike on May 24.

                                  Technically, NZD/USD’s fall from 0.6381 should have completed at 0.6110 already, and further rise is now in favor back towards this resistance. The favored case is that current rise is merely the third leg of the sideway pattern from 0.6083. Outlook remains bearish as long as 0.6381 resistance holds, for resumption of the corrective decline from 0.6537 at a later stage. Break of 0.6160 minor support should bring deeper fall through 0.6083.

                                  Nevertheless, firm break of 0.6381 will argue that the correction from 0.6537 has completed, and the whole rally from 0.5511 might then be ready to resume through 0.6537 high.

                                  Australian retail sales exceed expectations, rising 0.4% mom in Mar

                                    By
                                    ActionForex
                                    -

                                    Australia’s retail sales turnover increased by 0.4% mom to AUD 35.3m in March, surpassing expectations of 0.2% mom. Year-on-year, sales turnover was up by 5.4% compared to the same month a year ago.

                                    Ben Dorber, Australian Bureau of Statistics Head of Retail Statistics, noted that while retail sales recorded a third consecutive rise in March, pull-back in spending on discretionary goods has kept monthly turnover at a similar level to six months ago.

                                    Dorber also noted the importance of analyzing quarterly retail sales volumes, set to be released next week, in order to understand the impact of consumer prices on recent turnover growth, particularly as CPI data showed high inflation levels despite slower growth in March quarter.

                                    Full Australia retail sales release here.

                                     

                                    New Zealand’s financial system well-positioned for higher interest rate environment

                                      By
                                      ActionForex
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                                      In May 2023 Financial Stability Report, RBNZ Governor Adrian Orr highlighted that the country’s financial system is well-placed to handle the higher interest rate environment and international financial disruptions. Global inflation continues to persist at levels significantly above central banks’ policy targets. Although central banks have recently slowed pace of tightening, the full impact of previous tightening measures remains to be seen.

                                      Governor Orr explained that “to date there have been limited signs of distress in banks’ lending portfolios, with only a small share of borrowers falling behind on their payments.” This resilience, he said, reflects ongoing strength of the labor market and the ability of borrowers to adjust their spending or use previous savings and repayment buffers.

                                      Full RBNZ Finance Stabhility report here.

                                      New Zealand employment growth exceeds expectations; unemployment rate remains low

                                        By
                                        ActionForex
                                        -

                                        New Zealand employment data for Q1 showcased a 0.8% qoq increase, surpassing expectation of 0.4% qoq growth. Unemployment rate remained steady at 3.4%, defying expectations of rise to 3.5% and staying close to record low of 3.2% made in Q1 2022. Additionally, employment rate climbed from 69.3% to 69.5%, while labor force participation rate rose from 71.8% to 72.0%. Both employment and participation rates reached their highest levels since records began in 1986.

                                        All sector wage inflation was at 1.0%, 4.3% yoy. “Annual wage cost inflation is at its highest level since the series began in 1992, up from 4.1 percent in the year to the December 2022 quarter,” business prices manager Bryan Downes said. “This aligns with other wage measures, like the unadjusted LCI and average hourly earnings, both of which also had the largest annual increases on record.”

                                        Full New Zealand employment release here.

                                        DOW down over 500 pts on debt ceiling and banking worries

                                          By
                                          ActionForex
                                          -

                                          Traders are growing increasingly cautious as US stocks open significantly lower today, with selloff gaining momentum throughout the early part of the session. At the time of writing, DOW is down by over -500 points. This decline appears to be a delayed response to Treasury Secretary Janet Yellen’s warning that the department “will be unable to continue to satisfy all of the government’s obligations” as early as June 1, unless Congress raises or suspends the debt limit beforehand. Yellen communicated this warning in a letter to House Speaker Kevin McCarthy. In addition, concerns surrounding regional banks persist, with major bank shares falling by more than -2.5%.

                                          For now, DOW is still holding above near term structural support at 33233.85, which is close to 55 D EMA at 33351.58. The rise from 31429.82 is still intact for extending at a later stage through 34712.28 resistance. Nevertheless, break of 33233.85 will suggest that the corrective pattern from 34712.28 is extending with another falling leg before completion. Let’s see if the deciding move would happen before or after FOMC rate announcement tomorrow.

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