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RBA minutes reveal considerations of rate hike and pause

    By
    ActionForex
    -

    The minutes from the RBA April 4 monetary policy meeting revealed that the Board weighed the options of a 25bps rate hike and a pause. On balance, there was a “a stronger case to pause at this meeting and reassess the need for further tightening at future meetings”, after having “additional data and an updated set of forecasts”. But members emphasized the to communicate clearly that “monetary policy may need to be tightened at subsequent meetings”. RBA kept cash rate target unchanged at 3.6% at that meeting.

    The case for a 25bps hike was primarily driven by concerns over high inflation and a tight labor market. The potential persistence of high inflation and two additional factors—upgraded near-term population growth projections and the risk of larger wage increases in parts of the economy—also supported further tightening.

    On the other hand, the case for a pause stemmed from the already restrictive monetary policy following significant tightening in a short period, with the full effects on the economy yet to be observed. Tighter monetary policy had contributed to a housing market slowdown, decelerated consumption growth, and financial pressure on some households with housing loans. The value of pausing lay in the opportunity to gather additional data on various economic indicators and to receive updated forecasts from the staff, which would be invaluable in reassessing the economic outlook and determining the extent of further tightening needed.

    Full RBA minutes here.

    Cryptos take a breather, Ethereum above 2k but Bitcoin loses 30k

      By
      ActionForex
      -

      Cryptocurrencies are experiencing a slowdown as traders refocus their attention on earnings and economic fundamentals. Last week, Ethereum’s Shapella Upgrade was successfully implemented, causing a surge past the 2000 level. While some feared the upgrade would lead to a selloff, investors chose to emphasize the long-term advantages of the update. As a result, Ethereum remains well-supported above the 2000 threshold despite the pullback.

      In the short term, Ethereum’s prospects appear bullish, provided the 1824.70 support level remains intact. An ongoing rally could propel Ethereum towards a long-term fibonacci retracement level of 38.2% retracement of 4863.75 to 878.50 at 2400.86. However, Rejection by this level will keep price actions from 878.50 as a corrective move only, and keep medium term outlook neutral at best.

      Meanwhile, Bitcoin has slipped back under the 30k mark after a brief spike to 31011 last week. The near-term outlook for Bitcoin will stay bullish as long as the 27808 support level holds. The climb from 15452 has the potential to reach a 38.2% retracement of 68986 to 15452 at 35901. Similar to Ethereum, if Bitcoin is rejected by 35901, price action from 15452 would be viewed as corrective, leaving the medium-term outlook neutral at best.

      AUD/NZD rebound gains traction ahead of RBA minutes

        By
        ActionForex
        -

        AUD/NZD continues to extend its rebound from 1.0585 short-term bottom, prompting traders to further close their short positions as the previous selloff failed to push the cross through 1.0469 low. Market participants are awaiting the release of RBA minutes in the upcoming Asian session, along with Australian PMIs and New Zealand CPI data this week.

        Expectations on New Zealand’s CPI remain divided, with some anticipating a slowdown from 7.2% yoy level. If realized, this would fall below RBNZ’s forecast of 7.3%, potentially sparking speculation of a less aggressive rate hike path. Conversely, improvements in Australia’s PMI could bolster RBA’s confidence in resuming tightening with another rate hike in May.

        Technically, break of 1.0789 resistance now argues that fall from 1.1085 has completed at 1.0585. Rise from there could be seen as the third leg of the pattern from 1.0469. Further rally could be seen back to 1.1085 resistance next. However, on the downside, break of 1.0732 support will bring retest of 1.0585 low instead.

        ECB Kazaks hints at potential smaller rate hike in May

          By
          ActionForex
          -

          ECB Governing Council member Martins Kazaks has suggested that a smaller rate hike of 25 basis points in May is possible, although a 50 basis point increase should not be dismissed entirely.

          In an interview with Latvian news service Leta, Kazaks stated, “At some points, it’s only natural that the step size is reduced. For example, the increase could be not 50 basis points, but 25 basis points.”

          Regarding the upcoming ECB Council meeting in May, Kazaks commented, “Should we move to a lower step already at the ECB Council meeting in May? I think there is every possibility for that, but a 50 basis point increase is not an option that can be ignored.”

          Kazaks remains optimistic about the Eurozone’s economic outlook, pointing out that “the economy is still resilient, there will probably not be a recession in the Eurozone this year, the labor market remains strong, the pressure on wages is still very high and in some cases even increasing. Therefore, in my opinion, a rate increase is necessary.”

          Yen’s downward spiral persists ahead of inflation data, CHF/JPY aiming new high

            By
            ActionForex
            -

            Japanese Yen continues its selloff in Asian session, remaining the worst performer in April thus far. The currency’s weakness is primarily driven by expectations of ongoing policy divergence between BoJ and other major central banks, as well as a rebound in major global benchmark yields.

            New BoJ Governor Kazuo Ueda appears in no rush to modify the parameters of yield curve control or the framework itself, nor does he seem ready to alter the joint statement between the central bank and the government. Consequently, the BoJ’s exit from its ultra-loose monetary policy appears distant.

            This stance is based on the assumption that Japan’s inflation will slow this year, while domestic wage growth momentum is insufficient to maintain a sustainable 2% inflation target. Markets are awaiting this week’s March CPI report to determine the validity of this view.

            From a technical perspective, CHF/JPY is a key pair to watch, as it could be the first Yen pair to break through last year’s high and resume its long-term uptrend. The cross is currently rallying towards 151.43 high, with upside acceleration reflected in daily MACD. A firm break here would target 161.8% projection of 137.40 to 147.58 from 140.21 at 154.27. The outlook will remain bullish as long as 147.58 resistance-turned-support holds during any retreats.

            While it may be too early to evaluate, a sustained break of 151.54 could also signal the resumption of the two-decade uptrend from the 58.83 (2000 low). The next medium-term target would the 61.8% projection of 106.71 to 151.43 from 137.40 at 165.30.

             

             

            NZ BNZ Services dropped to 54.4, but keeps its head above water

              By
              ActionForex
              -

              New Zealand’s service sector growth slowed down in March, with the BusinessNZ Performance of Services Index (PSI) declining to 54.4 from 55.8 in February. However, the index stayed above the long-term average of 53.6.

              BusinessNZ Chief Executive Kirk Hope highlighted the uptick in negative sentiment, with the proportion of negative comments surging from 51.9% in February to 58.6% in March. The main concerns expressed were a cooling economy, the impact of price increases, and overall uncertainty.

              Despite these challenges, BNZ Senior Economist Craig Ebert remains cautiously optimistic. He noted that while the PSI held relatively steady in March, the Performance of Manufacturing Index (PMI) slipped into slightly negative territory. Nonetheless, Ebert believes that there is enough positive momentum to suggest an underlying tendency for growth in activity.

              Full NZ BNZ PSI release here.

              Fed’s Waller: Not much progress on inflation, my job is not done

                By
                ActionForex
                -

                In a speech, Fed Governor Christopher Waller expressed concern over the persistently high inflation rates and emphasized the need for the continuation of tighter monetary policies.

                Waller stated, “Whether you measure inflation using the CPI or the Fed’s preferred measure of personal consumption expenditures, it is still much too high and so my job is not done.”

                “I interpret these data as indicating that we haven’t made much progress on our inflation goal, which leaves me at about the same place on the economic outlook that I was at the last FOMC meeting, and on the same path for monetary policy,” he added.

                His outlook remains consistent with the stance from the last FOMC meeting, indicating a steadfast commitment to tightening monetary policy. He emphasized that “the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further.”

                The Fed Governor also emphasized that, given the current circumstances, “monetary policy will need to remain tight for a substantial period of time, and longer than markets anticipate.”

                Full speech of Fed Waller here.

                US retail sales down -1% mom in Mar, ex-auto sales down -0.8% mom

                  By
                  ActionForex
                  -

                  US retail sales contracted -1.0% mom to USD 691.7B in March, worse than expectation of -0.5% mom. Total sales for January through March period were up 5.4% from the same period a year ago.

                  For the month, ex-auto sales dropped -0.8% mom to USD 562.9B, below expectation of -0.4% mom. Ex-gasoline sales decreased -0.6% mom to USD 636.5B. Ex-auto and gasoline sales declined -0.3% mom to USD 507.6B.

                  Full US retail sales release here.

                  ECB’s Lagarde expects inflation to continue falling with receding price pressures

                    By
                    ActionForex
                    -

                    In a speech, ECB President Christine Lagarde anticipates Eurozone inflation to continue falling as lagged price pressures recede and tighter monetary policy increasingly affects demand. However, she notes that historically high wage growth, driven by tight labor markets and compensation for high inflation, will support core inflation over the projection horizon, as it gradually returns to rates around the ECB’s target.

                    Lagarde admits that this outlook is shrouded in uncertainty, with both upside and downside risks. She states, “Stronger than expected pipeline pressures or higher than anticipated increases in wages or profits could drive up inflation, while financial market tensions and falling energy prices could lead to faster disinflation.”

                    ECB staff projections predict that Eurozone economy will recover in the coming quarters, driven by a strong labor market, resolved supply bottlenecks, and moderating inflation. Nevertheless, Lagarde acknowledges that risks to the growth outlook lean towards the downside, with persistently elevated financial market tensions potentially dampening confidence and tightening broader credit conditions more than anticipated. Russia’s ongoing war against Ukraine remains a significant downside risk to the economy, potentially raising energy and food costs once more.

                    Full speech of ECB Lagarde here.

                    Fed Bostic: Recent data consistent with one more rate hike

                      By
                      ActionForex
                      -

                      In a recent interview with Reuters, Atlanta Fed President Raphael Bostic discussed the implications of this week’s slowing consumer price increases and falling producer price inflation. According to Bostic, these developments are in line with the possibility of one more rate hike, as momentum suggests a trajectory towards 2% inflation.

                      Bostic expressed that the aggressive rate increases over the past year are just beginning to “bite” the economy, justifying a pause after one more rate increase. This pause would allow for an assessment of the economy and inflation’s progression while aiming to minimize the impact on growth and employment.

                      Despite the current economic landscape, Bostic remains optimistic, believing that unemployment won’t need to surpass 4% and that the economy can continue to grow, albeit at a slower pace. He attributes the persistent consumer demand and robust hiring to the economic distortions caused by the trillions of dollars in government support provided during the COVID-19 pandemic.

                      DOW surges as disinflation gains momentum and fed’s tightening cycle nears end

                        By
                        ActionForex
                        -

                        US stocks closed significantly higher overnight, with DOW and S&P 500 extending their near-term rallies. This week’s data supported the view that disinflation is gaining momentum in the US, as evidenced by the notable downside surprise in US PPI and the below-expectation headline CPI readings for March. Additionally, jobless claims data indicated that job market remains stable rather than overheated. The overall picture suggests that while inflation is slowing, the economy isn’t crashing. These factors also contribute to the case that Fed’s tightening cycle is nearing its end, although it remains uncertain when Fed will reverse course.

                        Technically, DOW’s corrective pattern from 34712.28 should have completed with three waves down to 31429.82. Further rise is now expected as long as 55 D EMA (now at 33078.05) holds. Break of 34712.28 resistance is envisaged as the rally continues. The test for the near term lies in 61.8% projection of 28660.94 to 34712.28 from 31429.82 at 35169.54. Decisive break there could add more fuel to the rally and prompt upside acceleration through. 36952.65 high later in the year.

                         

                         

                         

                        NZ BNZ manufacturing dropped to 48.1, sector faces headwinds

                          By
                          ActionForex
                          -

                          New Zealand’s BusinessNZ Performance of Manufacturing Index fell from 51.7 in February to 48.1 in March, slipping back into negative territory after briefly reaching positive levels in January and February. The decline in the index signals challenges for the manufacturing sector.

                          A closer look at the data reveals that production dropped from 48.7 to 43.3, its lowest level since August 2021. Employment shrank from 55.2 to 47.1, while new orders dipped from 51.5 to 46.7, matching November 2022 levels. Finished stocks decreased from 55.1 to 48.4, and deliveries rose slightly from 52.2 to 53.8.

                          Catherine Beard, BusinessNZ’s Director of Advocacy, pointed out that the numbers behind the main March result indicate the manufacturing sector is facing significant headwinds. BNZ Senior Economist Craig Ebert added that although New Zealand’s March PMI was disappointing, it was “not especially negative in the longer-term context” and was in line with global manufacturing readings.

                          Full NZ BNZ PMI release here.

                          BoJ Ueda foresees core inflation slowing, reiterates commitment to ultra-loose monetary policy

                            By
                            ActionForex
                            -

                            BoJ Governor Kazuo Ueda, who recently attended the G20 finance leaders’ meeting in Washington, expects core consumer inflation in Japan, currently around 3%, to slow below 2% by the latter half of this fiscal year. Ueda emphasized the central bank’s commitment to maintaining ultra-loose monetary policy in order to achieve its 2% inflation target in a stable and sustainable manner.

                            Ueda believes that “as our base scenario is for global growth to pick up after a period of slowdown, Japan’s wages will likely keep rising.” He added that the BoJ’s forecasts already factor in the possibility of a global economic slowdown, but a severe global recession is not considered in the baseline projection.

                            As for the upcoming April policy meeting, Ueda said, “It’s been just a week since I took office and now I am on a business trip. I’ll think about it closely once I’m back.” Market participants are closely watching the BoJ’s first policy meeting under Ueda’s leadership on April 27-28, where the board will release fresh quarterly growth and inflation forecasts extending through fiscal 2025.

                            BoE Pill acknowledges disappointing UK GDP data, cautions on inflation path

                              By
                              ActionForex
                              -

                              BoE Chief Economist Huw Pill commented on today’s UK GDP release at an event hosted by MNI Connect, calling the 0% growth in February “somewhat disappointing from an overall point of view.” However, Pill noted that the current data profile is much better than the Monetary Policy Committee’s forecasts from the second half of last year.

                              Pill also addressed inflation concerns, stating that “recent releases serve as a reminder that the precise path of inflation may be bumpier than we expect.” Despite this, he anticipates a decline in inflation in the second quarter as last year’s significant energy price increases drop out of the annual comparison.

                              Bundesbank Nagel: Monetary-policy have to stubborn to fight against inflation

                                By
                                ActionForex
                                -

                                Bundesbank President Joachim Nagel, in an interview with CNBC on the sidelines of the IMF Spring Meetings, described euro-zone price gains as “a very stubborn phenomenon” and emphasized the need for persistent action against inflation. Nagel stated, “it’s definitely the case that we on the monetary-policy side have to be even more stubborn to fight against inflation.”

                                Nagel acknowledged the necessity to do more on the inflation front, explaining that while headline inflation might be heading in the right direction, core inflation remains at a very elevated level. He expects core inflation to come down before summer but warned that it would likely stay at high levels for the next few months, requiring continued vigilance in addressing the inflation issue.

                                Regarding the German economy, Nagel expressed confidence in its ability to adapt and overcome challenges, stating that “the energy crisis is more or less solved.” He added, “We had a really worried situation in the past, but this is now over, and the outlook is good.

                                NIESR: UK GDP grew 0.1% in Q1, to expand 0.3% in Q2

                                  By
                                  ActionForex
                                  -

                                  NIESR estimated that UK GDP grew by 0.1% in Q1, an upgrade from prior forecasts -0.1% contraction. The early forecasts for Q2 sees quarterly growth rate picking up to 0.3%.

                                  Paula Be jar a no Carbo Associate Economist, NIESR said: “The UK economic outlook for the first quarters of this year appears to be more resilient than previously thought, though broadly consistent with the longer-term trend of flatlining economic growth.”

                                  Full NIESR release here.

                                  US PPI at -0.5% mom, 2.7% yoy in Mar

                                    By
                                    ActionForex
                                    -

                                    US PPI for final demand dropped -0.5% mom in March, well below expectation of 0.1% mom. Two-thirds of the decline in the PPI for final demand can be attributed to a -1.0% mom decrease in prices for final demand goods. The PPI for final demand services also moved down -0.3% mom. Prices for final demand less foods, energy, and trade services edged up 0.1% mom.

                                    For the 12 months period, PPI dropped from 4.6% yoy to 2.7% yoy, below expectation of 2.7% yoy. PPI less foods, energy, and trade services was up 3.6% yoy.

                                    Full US PPI release here.

                                    US initial jobless claims rose to 239k, highest since Jan 2022

                                      By
                                      ActionForex
                                      -

                                      US initial jobless claims rose 11k to 239k in the week ending April 8, above expectation of 235k. That’s the highest level since January 15, 2022. Four-week moving average of continuing claims rose 2k to 240, highest since November 20, 2021.

                                      Continuing claims dropped -13k to 1810k in the week ending April 1. Four-week moving average of continuing claims rose 9.5k to 1814k, highest since November 13, 2021.

                                      Full US jobless claims release here.

                                      UK economy stalls in Feb as GDP growth misses expectations

                                        By
                                        ActionForex
                                        -

                                        UK economy experienced a slowdown in February, with no monthly growth (0.0% mom) in GDP, falling short of the 0.1% mom growth expected by analysts. The disappointing result follows a 0.4% mom growth in January. The data reveals that services contracted by -0.1% mom after a 0.7% mom growth in January, while production fell by -0.2% mom following a -0.5% mom contraction in January. In contrast, construction sector saw growth of 2.4% mom, rebounding from a -1.7% mom contraction in January.

                                        In the three months to February, GDP grew by a mere 0.1% when compared to the three months to November. During this period, services grew by 0.1%, production declined by -0.2%, and construction experienced growth of 0.9%. The lackluster performance raises concerns about the overall health of the UK economy.

                                        Full UK GDP release here.

                                        Also published, industrial production came in at -0.2% mom, -3.1% yoy, versus expectation o f0.3% mom, -3.7% yoy. Manufacturing production was at 0.0%mom, -2.4% yoy, versus expectation of 0.3% mom, -4.7% yoy. Goods trade deficit narrowed slightly to GBP -17.5B, versus expectation of GBP -17.0B.

                                        Australian employment grew solidly by 53k, bolstering case for more RBA tightening

                                          By
                                          ActionForex
                                          -

                                          Australian labor market continued to show strength in March, with employment growth significantly outperforming expectations. The strong employment data shows very few signs of weakness in the labor market, suggesting that RBA may need to resume tightening in May.

                                          According to the today’s data, employment increased by 53k in seasonally adjusted terms, well above expectation of 20k gain. Full-time jobs saw an increase of 72.2k, while part-time employment declined by -19.2k.

                                          Despite expectations of a rise to 3.6%, unemployment rate remained unchanged at 3.5%. Additionally, the participation rate held steady at 66.7%, and monthly hours worked decreased by -0.2%. Lauren Ford, the ABS head of labor statistics, highlighted that the unemployment rate stayed at a near 50-year low of 3.5%.

                                          Ford also noted that the employment-to-population ratio increased by 0.1 percentage point to 64.4%, with the participation rate remaining at 66.7%. Both indicators were close to their historical highs in November 2022, reflecting a tight labor market that has made it challenging for employers to fill the high number of job vacancies.

                                          Full Australia employment data release here.

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