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Fed’s Williams suggests one more rate hike as “reasonable starting place”

    By
    ActionForex
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    In a Yahoo Finance interview, New York Fed President John Williams stated that one more rate hike could be a “reasonable starting place,” noting that it aligns with the median expectation of his colleagues. However, Williams emphasized the importance of data-driven decisions, saying, “We have to be driven by the data… I will say that one thing that we’re paying attention to is credit conditions but also do we really see signs of this underlying inflation coming down?”

    Williams highlighted the challenges ahead, stating, “Some of this core services inflation excluding housing hasn’t budged yet, so we’ve got our work cut out for us to get inflation back to 2%.” He added that the central question revolves around determining what will be sufficiently restrictive on policy and whether additional measures are needed to achieve their goals, with data and outlook as the key drivers.

    IMF: Global growth to bottom at 2.8% this year

      By
      ActionForex
      -

      The IMF released its World Economic Outlook, projecting global growth to slow from 3.4% in 2022 to 2.8% in 2023 and bottom there, and then rise to 3.0% in 2024. Global inflation is expected to decelerate from 8.7% in 2022 to 7% in 2023 and further to 4.9% in 2024.

      Pierre-Olivier Gourinchas, Economic Counsellor and Director of Research at IMF, said in a blog post, “The global economy’s gradual recovery from both the pandemic and Russia’s invasion of Ukraine remains on track. China’s reopened economy is rebounding strongly. Supply chain disruptions are unwinding, while dislocations to energy and food markets caused by the war are receding. Simultaneously, the massive and synchronized tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back towards targets.”

      For 2023, global growth projections were reduced by 0.1% compared to January’s forecast. US growth was revised up by 0.2% to 1.6%, Eurozone growth by 0.1% to 0.8%, and UK growth by 0.3% to -0.3%. However, Japan’s growth projection was revised down sharply by 0.5% to 1.3%. Canada and China’s growth forecasts remained unchanged at 1.5% and 5.2%, respectively.

      Regarding interest rates, the IMF believes recent increases in real interest rates are likely temporary. Once inflation is under control, advanced economies’ central banks are expected to ease monetary policy and bring real interest rates back towards pre-pandemic levels.

      Full IMF Worl Economic Outlook here.

      Bitcoin breaks out surpassing 30k, NASDAQ to follow?

        By
        ActionForex
        -

        Bitcoin has finally broken through its recent range to the upside, surpassing 30k level for the first time since June 2022. While some observers may attribute the rally since mid-March to safe-haven flows amid banking turmoil, it seems more likely that Bitcoin is moving in tandem with tech stocks, in anticipation of Fed nearing a pause in tightening.

        With 100% projection of 15452 to 25242 from 19552 at 29342 now surpassed, the next target is 161.8% projection at 35392. Even if a retreat occurs, outlook will remain bullish as long as 27,808 support holds.

        Focus now shifts to the upside momentum of the current move and the reaction to the 35392 projection target. This level is close to the 38.2% projection of 68986 to 15452 at 35901.

        Strong upside momentum and a decisive break of the 35k/36k zone would suggest that the rise from 15452 is a of a medium-term impulsive up trend, potentially leading to further gains. Conversely, weak momentum and rejection by the 35k/36k zone would indicate that rebound from 15452 remains just a corrective move.

        Another question arising is whether NASDAQ can follow suit and decisively break through 38.2% retracement of 16,212.22 to 10,088.82 at 12,427.95, confirming the underlying bullish momentum in tech-related sectors.

        Eurozone Sentix Investor Confidence rose to -8.7, negative momentum weakening

          By
          ActionForex
          -

          Eurozone Sentix Investor Confidence increased from -11.1 to -8.7 in April, surpassing the expected -14.0. The Current Situation index experienced its sixth consecutive rise, moving from -9.3 to -4.3, reaching its highest level since March 2022. The Expectations index, however, remained unchanged at -13.0.

          Sentix commented on the data, stating, “There is no doubt that the Eurozone economy has come through the winter months better than many feared in the autumn.” However, when considering the future, investors are less optimistic, citing “still considerable uncertainty about the further course of the Ukraine war, concerns about a lasting burden on the energy-intensive industrial sector, and – new – question marks about the state of the US economy.”

          Despite these concerns, the Sentix Theme Barometer indicates that negative expectations regarding inflation and central bank policy have noticeably decreased. While not an all-clear signal, the negative momentum seems to be weakening.

          Full Eurozone Sentix release here.

          Eurozone retail sales down -0.8% mom in Feb, EU down -0.9% mom

            By
            ActionForex
            -

            Eurozone retail sales volume dropped -0.8% mom in February, matched expectations. Volume of retail trade decreased by -1.8% for automotive fuels, by -0.7% for non-food products and by -0.6% for food, drinks and tobacco.

            EU retail sales declined -0.9% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in Slovenia (-10.5%), Hungary and Poland (both -2.0%) and Sweden (-1.6%). The highest increases were observed in Cyprus (+1.6%), Luxembourg (+0.8%) and Belgium (+0.7%).

            Full Eurozone retail sales release here.

            China CPI slows to 18-month low, PPI sees steepest decline since June 2022

              By
              ActionForex
              -

              China’s CPI slowed from 1.0% yoy to 0.7% yoy in March, falling below the expected 1.0% yoy and marking the lowest level in 18 months since September 2021. Excluding food and energy, CPI increased from 0.6% to 0.7% yoy. Food prices rose by 2.4% yoy compared to a year ago, down from 2.6% yoy in February. Notably, pork prices surged by 9.6% yoy, up from a rise of 3.9% yoy in February.

              Dong Lijuan, an NBS statistician, attributed the easing consumer inflation in March to “continued resumption of production and life as well as sufficient market supplies.” He also mentioned that the fall in factory-gate prices was affected by a high comparison base in the previous year.

              Meanwhile, PPI dropped from -1.4% yoy to -2.5% yoy, matching expectations and marking the steepest decline since June 2022. Dong Lijuan, senior NBS statistician, explained that “production and life continued to recover with sufficient supplies in March.”

              Australian NAB business confidence improved, conditions remain resilient

                By
                ActionForex
                -

                Australia NAB Business Confidence improved from -4 to -1 in March, while Business Conditions dropped slightly from 17 to 16. Delving into some details, trading conditions rose from 25 to 26, profitability conditions dipped from 14 to 13, and employment conditions fell from 12 to 10.

                NAB Chief Economist Alan Oster commented, “Business conditions have been resilient, slowly edging lower over the past few months but remaining well above their long-run average.” He added that “trading conditions are particularly elevated, indicating that businesses continue to experience strong demand, and conditions are generally strong across states and sectors.”

                On the topic of confidence, Oster stated, “Confidence appears to have stabilized, but it remains below average at -1 index point.” He noted that confidence was particularly poor in retail and wholesale sectors, likely due to firms being concerned about the sustainability of consumer spending.

                In summary, the survey suggests the Australian economy is still holding up, with some easing in inflation. However, Oster emphasized that “there is still a long way to go to bring inflation back down to the RBA’s target band and growth could be more volatile from there.”

                Full Australia NAB business confidence release here.

                Australia consumer sentiment jumped 9.4% on RBA pause

                  By
                  ActionForex
                  -

                  Australia Westpac Melbourne Institute Consumer Sentiment Index witnessed a significant 9.4% increase in April, jumping from 78.4 in March to 85.8. This remarkable recovery can be largely attributed to RBA’s decision to pause rate hikes during its April meeting, breaking a sequence of ten consecutive meetings with cash rate increases.

                  However, confidence remains weak, sitting -10.4% lower than April of the previous year, before the tightening cycle began. Respondents continue to exercise caution, with 34.11% still expecting the Standard Variable Rate to rise by more than 1% over the year, although this figure is down from 44.55%.

                  Regarding the RBA’s meeting on May 2, Westpac noted that the central bank would benefit from a clean read on underlying inflation from the March quarter Inflation Report, set to be released on April 26, as well as staff’s refreshed economic forecasts. Westpac anticipates that a final 0.25% increase in the cash rate during the May Board meeting would be the best policy approach, rather than waiting for additional information and risking higher rates later in the cycle.

                  Full Australia Westpac consumer sentiment release here.

                  BoJ Ueda stands firm on monetary easing and negative rates

                    By
                    ActionForex
                    -

                    In his first press conference as new Bank of Japan Governor, Kazuo Ueda stated that the central bank will maintain its massive stimulus program, echoing the stance of the previous leadership. Ueda commented, “The BOJ’s current monetary easing is a very powerful one. We need to strive, as we have done so far, to appropriately grasp economic, price, and financial developments to see whether trend inflation will stably and sustainably achieve 2%.”

                    The governor acknowledged the side-effects of the BOJ’s negative rates, particularly on banks, but noted that banks seem to have sufficient buffers and financial intermediation is functioning. Ueda emphasized the necessity of maintaining negative rates, stating, “Given trend inflation has yet to hit 2%, it’s appropriate to maintain negative rates.”

                    Regarding Yield Curve Control (YCC), Ueda said, “When looking at current economic, price, and financial developments, it’s appropriate to maintain YCC for now.” He added that any major changes to YCC should be determined by evaluating the economic, price, and financial trends, while also weighing the benefits and costs of the policy.

                    Ueda noted some positive signs in inflation and wages, saying, “Trend inflation is rising somewhat. There’s also some positive signs in wages. There’s a good chance this will lead to stable, sustained achievement of higher, trend inflation.”

                    Dollar braces for CPI release, a look at EUR/USD and DXY

                      By
                      ActionForex
                      -

                      This week promises to be eventful for Dollar, with key data releases including CPI, PPI, retail sales, and University of Michigan Consumer Sentiment. Additionally, Fed will publish minutes from March FOMC meeting, and numerous policymakers are expected to share their views on the economy and interest rates.

                      Specifically, headline CPI is forecasted to drop further from 6% to 5.2% in March. This marks a significant improvement from last year’s 9.1% peak in July and represents the ninth consecutive month of cooling consumer inflation. If realized, the headline CPI reading would be the lowest since June 2021’s 5.0%, nearly two years ago. Conversely, core CPI is projected to tick up from 5.5% to 5.6%, breaking the five-month downtrend since September last year.

                      Following last week’s robust job data, traders have increased bets on a 25bps rate hike in May, with over a 60% chance. However, whether Fed opts for one, two, or no additional rate hikes may not make a significant difference. The primary focus is when Fed will start reversing course and cutting interest rates, which largely depends on how quickly core inflation falls back to a level consistent with price stability or remains stuck above the Fed’s target.

                      Presently, fed fund futures indicate a nearly 70% chance of a cut back to 4.50-4.75% in July, far from the Fed’s own projections. According to the March dot plot, only one policymaker envisions rates ending below 5% this year.

                      EUR/USD began losing upside momentum last week, stalling before 1.0320 resistance. It appears that a clear downside surprise in core CPI is needed to push EUR/USD past 1.0320 to resume the larger uptrend from the 2020 low at 0.9534. Conversely, breaking 1.0787 support will extend the consolidation pattern from 1.0320 with a third leg back towards 1.0515 support.

                      In parallel, for Dollar index, intense selling pressure is required to push DXY below 100.82 low to resume the downtrend from 114.77. Breaking above 103.44 resistance will extend the consolidation pattern from 100.82 with another upleg towards 105.88 resistance.

                      BoC expected to hold steady: Loonie’s fate lies in oil prices and US data

                        By
                        ActionForex
                        -

                        Bank of Canada (BoC) is widely anticipated to maintain its pause this week, leaving interest rates unchanged at a 15-year high of 4.50%. Governor Macklem has emphasized that there’s no need for additional rate hikes if the economy unfolds according to central bank’s projections, which forecast stalling growth for the rest of the year, subsequently cooling inflation. Macklem also stated that an “accumulation of evidence” would be required before considering resuming tightening.

                        Consequently, it’s unlikely that BoC’s announcement on Wednesday or Macklem’s speech on Thursday will trigger significant volatility in Canadian Dollar. Instead, Loonie is expected to be more reactive to developments in oil prices, as WTI crude remains stuck around 80 mark. Additionally, the currency could be influenced by US CPI data and the release of FOMC minutes when paired against the greenback.

                        From a technical perspective, USD/CAD appears to be in the third leg of the corrective pattern from 1.3967. Deeper decline is expected as long as 1.3563 minor resistance holds. However, robust support is anticipated around 1.3224, which should contain the downside and complete the pattern. On the other hand, a sustained break of 1.3563 and 55-day EMA (now at 1.3562) would likely result in a stronger rally back towards 1.3860 resistance level. Ultimately, the larger uptrend is envisaged to resume through 1.3976 at a later stage.

                        Gold falls below 2000 as expectations of anther Fed hike firm up

                          By
                          ActionForex
                          -

                          Gold dipped below 2000 as near-term pullback extended into Asian session, with many markets still on holiday. Shift appears to be driven by growing market conviction that Fed will implement another 25bps hike in May, as fed fund futures now indicate a 66% probability. This sentiment follows last week’s robust US non-farm payroll report. However, expectations could still change after release of March CPI data and FOMC minutes on Wednesday.

                          Technically, a short-term top for Gold may have formed at 2032.05, evidenced by a bearish divergence in 4-hour MACD. Rally from 1084.48 might have completed a five-wave sequence and stalled just ahead of key resistance zone between 2070.06 and 2074.84 record high.

                          Considering this, a deeper pullback is now anticipated. Crucial near-term support level can be found at 38.2% retracement of 1804.48 to 2032.05 at 1945.11 which is in proximity to 1949.55 support level. As long as this support zone holds, current price action from 2032.05 should be regarded as a brief corrective phase, and a rally to new record highs is expected sooner rather than later.

                          However, sustained break of 1945.11/1949.55 support zone could signal a deeper fall in underway, possibly extending the long-term consolidation pattern from 2074.84 with another downward leg. In this scenario, gold prices could decline to 61.8% retracement of 1804.48 to 2032.05 at 1894.41 or even further towards 1084.48.

                          US NFP grew 236k in Mar, unemployment rate ticked down to 3.5%

                            By
                            ActionForex
                            -

                            US non-farm payroll employment rose 236k in March, above expectation of 228k. That’s compared to average monthly gain of 334k over the prior 6 months.

                            Unemployment rate dropped from 3.6% to 3.5%, below expectation of 3.6%. Participation rate rose 0.1% to 62.6%.

                            Average hourly earnings rose 0.3% mom, matched expectations. Over the past 12 months, average hourly earnings rose 4.2% yoy. Average workweek edged down by -0.1% hours.

                            Full US non-farm payroll release here.

                             

                            US initial jobless claims rose to 228k, continuing claims highest since late 2021

                              By
                              ActionForex
                              -

                              US initial jobless claims dropped -18k to 228k in the week ending April 1, above expectation of 200k. Four-week moving average of continuing claims dropped -4k to 238k.

                              Continuing claims rose 6k to 1823k in the week ending March 25, highest level since December 11, 2021. Four-week moving average continuing claims rose 10.5k to 1804k, highest since November 13, 2021.

                              Full US jobless claims release here.

                              Canada employment grew 34.7k in Mar, unemployment rate unchanged at 5%

                                By
                                ActionForex
                                -

                                Canada employment grew 34.7k in March, well above expectation of 10.2k. Employment gains in March were concentrated among private sector employees (+35,000; +0.3%). There was little change in the number of public sector employees and self-employed workers.

                                Unemployment rate was unchanged at 5.0%, better than expectation of 5.1%. That’s just above the record low of 4.9% recorded in June and July of 2022. Total hours worked rose 0.4% mom, 1.6% yoy. Average hourly wages rose 4.% yoy.

                                Full Canada employment release here.

                                ECB Lane: Appropriate to hike further if baseline holds up

                                  By
                                  ActionForex
                                  -

                                  In an interview with Cyprus News Agency, ECB Chief Economist Philip Lane stressed the importance of being data-dependent and scientific in deciding on a potential interest rate hike at the May meeting. He explained, “if the baseline we developed before the banking stress holds up, it will be appropriate to have a further increase in May. However, we need to be data-dependent about the assessment of whether that baseline still holds true at the time of our May meeting.”

                                  Lane highlighted three factors that will influence the May decision: the inflation outlook, assessing the underlying dynamic of inflation, and the speed at which interest rate increases are restricting the economy and bringing down inflation. He urged focusing on understanding every data point instead of predicting the decision, stating, “rather than asking me what the next interest rate decision will be, the focus should be on understanding every data point that comes in.”

                                  Responding to a question regarding OPEC’s production, the ECB Chief Economist note that the movement in oil prices should be weighed against the context of a large drop in recent months and a significant ongoing reduction in gas prices. Lane emphasized the importance of monitoring how the rest of the economy responds to the energy dynamic and analyzing the incoming data until the day of the May meeting.

                                  Full interview of ECB Philip Lane here.

                                  UK PMI construction dropped to 50.7, mixed fortunes in the sector

                                    By
                                    ActionForex
                                    -

                                    UK PMI Construction dropped from 54.6 to 50.7 in March, below expectation of 53.6, indicating a mixed picture for the industry.

                                    Tim Moore, Economics Director at S&P Global Market Intelligence, explained that civil engineering and commercial projects saw a sustained rebound in output levels and improved tender opportunities, leading to the strongest rate of job creation in five months.

                                    However, a sharp decline in house building raised concerns, as subdued demand and rising interest rates contributed to the steepest fall in housing activity in almost three years.

                                    Despite these challenges, overall expectations for construction output in the coming year remain positive, with survey respondents citing improved availability of construction inputs and expectations for moderating purchasing price inflation.

                                    Full UK PMI construction release here.

                                    US 10-year yield plunges to 7-month low on worries of sharper slowdown

                                      By
                                      ActionForex
                                      -

                                      Following weaker-than-expected private job data and services PMI, US 10-year yield dropped to its lowest level in seven months overnight. Despite these signs of a potential cooling in the economy, which could prompt the Fed to ease up on tightening measures, major stock indexes closed mixed, suggesting that investors may be more concerned about a sharper slowdown on the horizon.

                                      Technically, 10-year yield is approaching a critical support level at 55 week EMA (now at 3.237). A rebound around the EMA, followed by a break of 3.61 resistance, would initially signal a short-term bottoming. More importantly, this would argue that price fluctuations from 4.333 are merely a medium-term corrective pattern.

                                      However, firm break of the 55 week EMA could indicate that 10-year yield is already correcting the whole uptrend that began at 0.398 (2020 low). In this scenario, a deeper decline through the 3% handle to 38.2% retracement of 0.398 to 4.333 at 2.829 could occur before finding sufficient support for a sustainable bounce.

                                      China Caixin PMI services rose to 57.8, highest since Nov 2020

                                        By
                                        ActionForex
                                        -

                                        China’s Caixin PMI Services index exceeded expectations in March, rising from 55.0 to 57.8, marking the highest level since November 2020. The data revealed sharp increases in activity, sales, and employment, with the services sector showing stronger expansion compared to the manufacturing sector. Business confidence remained historically strong, while input price inflation reached a seven-month high. The PMI Composite also experienced a slight increase from 54.2 to 54.5, reaching its highest point since June 2022.

                                        Wang Zhe, Senior Economist at Caixin Insight Group said: “Production, demand and employment all grew, with the services sector showing a stronger expansion, whereas manufacturing activity turned comparatively sluggish. Input costs and prices charged remained stable, and businesses were highly optimistic.”

                                        Full China Caixin PMI services release here.

                                        US ISM services dropped to 51.2, sharp decline in new orders

                                          By
                                          ActionForex
                                          -

                                          US ISM Services PMI dropped from 55.1 to 51.2 in March, below expectation of 54.5. Looking at some details, business activity/production dropped from 56.3 to 55.4. New orders tumbled sharply from 62.6 to 52.2. New export orders dived from 61.7 to 43.7. Employment dropped from 54.0 to 51.3. Prices dropped from 65.6 to 59.5.

                                          Anthony Nieves, Chair of ISM Services Business Survey Committee: “There has been a pullback in the rate of growth for the services sector, attributed mainly to (1) a cooling off in the new orders growth rate, (2) an employment environment that varies by industry and (3) continued improvements in capacity and logistics, a positive impact on supplier performance. The majority of respondents report a positive outlook on business conditions.”

                                          “The past relationship between the Services PMI and the overall economy indicates that the Services PMI for March (51.2 percent) corresponds to a 0.5-percent increase in real gross domestic product (GDP) on an annualized basis.”

                                          Full ISM Services release here.

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