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BoE Bailey: Faster tightening will help, but policy not on predetermined path

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    ActionForex.com
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    In the post meeting press conference, BoE Governor Andrew Bailey said, “overall a faster pace of policy tightening at this meeting will help to bring inflation back to the 2% target sustainably in the medium term,” he said.

    “Looking ahead, that does not mean we’re now moving to a predetermined path of raising bank rate by 50 basis points per meeting, or indeed any other number for that matter.”

    “Policy is not on a preset path. And what we do this time does not tell you what we’re going to do next time. All options are on the table for our September meeting, and beyond that.”

    Into European session: Canadian Dollar strongest, Dollar paring loss

      By
      ActionForex.com
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      Entering into European session, Canadian Dollar is so far the strongest one for today as supported by resilience in oil prices. WTI is staying firm at around 56.5 level. Dollar is the second strongest but it’s merely paring back some of yesterday’s steep decline. The greenback is pressured by Fed rate outlook as well as falling treasury yields. New York Fed John William’s comments indicates he’s comfortable on keeping interest rate unchanged until there is a change in economic outlook. Dollar and treasuries will look into FOMC minutes to be released later in the day.

      Staying in the currency markets, New Zealand Dollar pares back some of recent rebound after mixed PPI. Yen follows as the second weakest as Asian stocks, except China, extends recent rally. Sterling is the third weakest one so far.

      In Asia:

      • Nikkei closed up 0.60%.
      • Hong Kong HSI is up 0.95%.
      • China Shanghai SSE is down -0.01%.
      • Singapore Strait Times is up 0.44%.
      • Japan 10-year JGB yield is down -0.005 at -0.035.

      Overnight:

      • DOW rose 0.03%.
      • S&P 500 rose 0.15%.
      • NASDAQ rose 0.19%>
      • 10-year yield dropped -0.019 to 2.647.
      • 30-year yield dropped -0.006 to 2.991.

      One thing to note is that 5-year yield at 2.458, is below 6-month yield at 2.501. Yield curve is getting more inverted again.

      Fed: Economic activity increased in almost all districts

        By
        ActionForex.com
        -

        Fed’s Beige Book economic report noted that “economic activity increased in almost all Districts, but remained well below where it was prior to the COVID-19 pandemic.”

        Looking at some details, consumer spending “picked up” while retail sales “rose”, but was “far below year-ago levels”. Manufacturing activity “moved up” in most districts, from a “very low levels”.

        Employment “increased on net in almost all districts”, but payrolls in all districts were “well below pre-pandemic levels”. Prices were “little changed overall”.

        Full report here.

        ECB Panetta: Intervening on inflation now creates more damage than benefit

          By
          ActionForex.com
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          ECB Executive Board member Fabio Panetta said the current inflation in Eurozone is bad but also temporary. It’s driven by supply chain disruptions and energy prices which are “bound to be overcome”. He would be among the first in favor to intervene if inflation are becoming more permanent.

          But he added, “the central bank is not intervening because if it did, it would create more damage than benefit. It’s like an illness, not all medicines are good for all illnesses.”

          Canada CPI slowed to 2.2%, retail sales contracted, CAD dives as BoC hike in question

            By
            ActionForex.com
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            Canadian Dollar dives notably after a set of much weaker than expected data.

            Headline retail sales dropped -0.1% mom in August versus expectation of 0.4% mom. Ex-auto sales dropped -0.4% mom versus expectation of -0.2% mom.

            Headline CPI dropped sharply by -0.4% mom in September versus expectation of -0.1% mom. Annually, CPI slowed to 2.2% yoy, down from 2.8% yoy and missed expectation of 2.9% yoy.

            CPI core common slowed to 1.9% yoy, down from 2.0% yoy. CPI core median slowed to 2.0% yoy, down from 2.1% yoy. CPI core trim slowed to 2.1% yoy, down from 2.2% yoy.

            The set of data, in particular the sharp fall in CPI, raises the important question of whether BoC is still going to hike next week on October 24.

            Full CPI and retail sales release.

            Swiss CPI slowed to 3.0% yoy in Oct, core CPI down to 1.8% yoy

              By
              ActionForex.com
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              Swiss CPI rose 0.1% mom in October, below expectation of 0.2% mom. Core CPI (excluding fresh and seasonal products, energy and fuel) was flat at 0.0% mom. Domestic products prices dropped -0.1% mom. Imported products prices rose 0.4% mom. Goods prices rose 0.4% mom while services produces dropped -0.2% mom.

              Annually, CPI slowed from 3.3% yoy to 3.0% yoy, below expectation of 3.2% yoy. Core CPI slowed form 2.0% yoy to 1.8% yoy. Domestic products prices slowed from 1.8% yoy to 1.7% yoy. Imported product prices slowed from 7.8% yoy to 6.9% yoy. Goods inflation slowed from 5.9% yoy to 5.7% yoy. Services inflation slowed form 1.2% yoy to 0.9% yoy.

              Full release here.

              NIESR expects UK GDP growth to stall in Sep, slow to 1.3% in Q4

                By
                ActionForex.com
                -

                NIESR expects UK GDP growth to “stop” in September, bringing total Q3 growth to 15%. For Q4, with the background of a likely widening of lockdown restrictions, a winding down of government support schemes, and return of extensive Brexit related uncertainty, pace of recovery will be even slower, forecast to be at just 1.3%.

                “Today’s ONS estimates suggest that GDP grew by 8 per cent in the three months to August. Although the latest estimates also signal a fourth consecutive monthly increase, with growth of 2.1 per cent in August itself, output is still about 9 per cent below the levels seen in February. These numbers would suggest that the UK could grow by about 15 per cent in the third quarter of 2020. However, there is further cause for concern ahead with the likely re-imposition of lockdown measures, the winding down of government support measures, and Brexit uncertainty. We expect the economy at the end of this year to be some 8.5 per cent below its level at the end of 2019.” Dr Kemar Whyte Senior Economist – Macroeconomic Modelling and Forecasting.

                Full release here.

                Japan Abe welcomes UK to join TPP with open arms

                  By
                  ActionForex.com
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                  Japan Prime Minister Shinzo Abe said in a Financial Times interview that he would welcome UK to join the Trans-Pacific Partnership “with open arms”. Abe’s words could be used by Brexiteers to reaffirm their stance that there are more opportunities outside of the EU. On the other hand, it’s also a clear signal that Japan is sticking with the trade pact despite US withdrawal under Trump. And the preserving the TPP could be at a very high priority during the trade negotiation with the US.

                  On Brexit, Abe urged “that both sides can contribute their wisdom and at least avoid a so-called disorderly Brexit.” Also, he hoped that “the negative impact of Brexit to the global economy, including Japanese businesses, will be minimized.”

                  BoE Carney on Brexit preparation: Not hoping for the best but preparing for the worst

                    By
                    ActionForex.com
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                    BoE Governor Mark Carney said the central bank “does not focus on the most likely outlook” in Brexit preparation. Instead, BoE focuses on the possible consequences of a disorderly, cliff-edge exit from the EU, however unlikely that may be.” That is, Carney added “we aren’t hoping for the best, we’re preparing for the worst in several ways.”

                    On global financial regulations, Carney emphasized that “we need to tailor not taper. It is critical that the process of evaluation and adjustment does not compromise overall system resilience.”

                    UK CPI rose to 2.5%, core CPI unchanged at 1.9%, Sterling steady

                      By
                      ActionForex.com
                      -

                      Sterling is steady after consumer inflation data met expectations.

                      UK headline CPI rose to 2.5% yoy in July , up from 2.4% yoy and met expectation.

                      Core CPI was unchanged at 1.9% yoy, met expectation.

                      RPI, however, slowed notably to 3.2% yoy, down from 3.4% yoy and missed expectation of 3.6% yoy.

                      PPI input rose to 10.9% yoy, up from 10.3% yoy, above expectation of 10.8% yoy.

                      PPI output slowed to 3.1% yoy, down from 3.3% yoy and missed expectation of 3.2% yoy.

                      PPI output core dropped to 2.2% yoy, down from 2.4% yoy, missed expectation of 2.2% yoy.

                      House price index slowed to 3.0% yoy in June, slowed from 3.5% yoy, above expectation of 2.8% yoy.

                      Canada GDP grew 0.7% mom in Nov, above expectations

                        By
                        ActionForex.com
                        -

                        Canada GDP grew 0.7% mom in November, above expectation of 0.4% mom. This is the seventh consecutive monthly gain. Total economic activity was still around -3% below the pre-pandemic level in February. Good-producing industries grew 1.2% mom while services-producing industries rose 0.5% mom. 14 of 20 industrial sectors posted gains. Meanwhile, preliminary information indicates an approximate 0.3% mom GDP growth in December.

                        Full release here.

                        Also released, Canada IPPI rose 1.5% mom in December versus expectation of 1.4% mom. RMPI rose 3.5% mom versus expectation of 2.5% mom.

                        BoE’s Pill prepared to raise rates if necessary

                          By
                          ActionForex.com
                          -

                          BoE Chief Economist Huw Pill emphasized today the readiness of the Bank to raise interest rates further if the situation demands, but also indicated that further rate hikes are not a necessity at the current juncture.

                          Pill highlighted today’s wage growth data, noting, “We did have this morning the latest official data on pay growth in the UK with pay growing at 7.7%… But actually over the summer pay growth has remained very strong and we certainly wouldn’t see pay growth of that rate as consistent with achieving the 2% inflation target on an ongoing basis.”

                          BoE is closely monitoring the upcoming October CPI data, anticipating a decline to “around 5%.” However, Pill acknowledges that even this level is significantly higher than the target, remarking, “But nonetheless, 5% is still much too high.”

                          Pill also expressed concerns about the persistence of inflation, partly attributed to ongoing supply issues. He stressed the importance of maintaining a consistent policy approach, stating, “We need to meet inflation persistence with persistent restrictiveness in policy.”

                          Eurozone imports fell -10% yoy in Mar, exports rose 7.5% yoy

                            By
                            ActionForex.com
                            -

                            Eurozone goods exports to the rest of the world rose 7.5% yoy to EUR 269.2B in March. Imports fell -10.0% yoy to EUR 243.5B. Trade surplus came in at EUR 25.6B. Intra-Eurozone trade rose 0.6% yoy to EUR 246.4B.

                            In seasonally adjusted term, goods exports dropped -0.1% mom to EUR 243.3B. Imports dropped -7.1% mom to EUR 226.2B. Trade balanced turned into EUR 17.0B surplus, above expectation of EUR 5.6B. Intra-Eurozone trade dropped from EUR 230.9B to EUR 223.2B.

                            Full Eurozone trade balance release here.

                            Australian retails rose 0.9% mom, strong Sep in subdued 2023

                              By
                              ActionForex.com
                              -

                              Australia’s retail sales turnover registered a 0.9% mom growth in September to AUD 35.87B. This robust performance dwarfed the modest analyst expectations of a 0.3% mom growth. On an annual basis, sales turnover presented a rise of 2.0% yoy compared to the same month in the preceding year.

                              Speaking on the development, Ben Dorber, ABS head of retail statistics, elucidated, “The strong rise in September came from a diverse range of factors across the Retail industry.” He pinpointed the uncommonly warm onset of spring as a significant catalyst while technology and energy-conscious programs also had their roles.

                              However, while September’s figures paint a buoyant picture, Dorber pointed to a more restrained broader context.

                              “While the rise in September was the largest since January, subdued spending for most of 2023 means that underlying growth in Retail turnover remains historically low,” he said.

                              Adding weight to this perspective, he shared that “Retail turnover in trend terms is up only 1.5 per cent compared to September 2022 – the smallest trend growth over 12 months in the history of the series.”

                              Full Australia retail sales release here.

                              Bitcoin breaks 45k barrier, eyeing 50k

                                By
                                ActionForex.com
                                -

                                Bitcoin soars notably today, and breaks 45k mark for the first time in nearly two years, signaling a resurgence in its medium-term uptrend. The flagship cryptocurrency could be gathering momentum to extend its medium term up trend at the start of the year.

                                Two key events are driving this optimism: the pending SEC approval for spot Bitcoin ETF products, with 14 applications currently under review, and the much-anticipated Bitcoin halving event, a code-embedded process that occurs every four years.

                                From a technical perspective, break of 44727 short term top indicates resumption of whole up trend from 15452 (2022 low). Near term outlook will stay bullish as long as 41511 support holds. Next target is 161.8% projection of 15452 to 31815 from 24896 at 51371.

                                In the bigger picture, upside acceleration as seen in W MACD suggests that rise from 15452 is an impulsive move. Hence, sustained break of 51371 would solidify the case that Bitcoin is ready to resume the long term up trend through 68986 historical high at a later stage.

                                ECB de Guindos: Current environment characterized by weakening macroeconomic outlook and increasing uncertainty

                                  By
                                  ActionForex.com
                                  -

                                  ECB Vice President Luis de Guindos said “the current environment is characterized by a weakening of the macroeconomic outlook and increasing uncertainty, even though the latest indicators point to a stabilization of economic activity.”

                                  He also warned that “the lower-for-longer interest rate environment creates strains on bank profitability with implications for financial stability.” He urged Eurozone countries to considering raising counter cyclical buffers on bank. That would quickly be released in case of an eventual downturn.

                                  More responses on EU-US trade negotiations

                                    By
                                    ActionForex.com
                                    -

                                    Finance Minister Bruno Le Maire urged that “each side, the Europeans and the Americans, must find something in these discussions”, and, “any trade deal must be based on reciprocity”. He also emphasized that agriculture must be excluded from the trade negotiations. To him, Europe could not ease its food safety and environmental norms. Also, he seems to prefer more focus in the negotiation and said “we don’t want to enter into a negotiation a wide-ranging deal.”

                                    German Foreign Minister Heiko Maas welcomed the results even though “this is not yet the result we are aiming for”. He acknowledged that “it has made a positive result in the whole discussion…on free trade or protectionism more likely than before.” Economy Minister Peter Altmaier also expressed his optimism that ” we can get a good result in the coming weeks and months.”

                                    Department for International Trade said in statement that “we welcome the agreement by the U.S. and the EU to work together to reduce barriers to trade and to further increase trade and investment.” And, “we look forward to progress towards the removal of steel and aluminum tariffs and de-escalation of the tit-for-tat action that could harm businesses and jobs on both sides of the Atlantic.”

                                    Gold and Silver jump after poor US ISM

                                      By
                                      ActionForex.com
                                      -

                                      Gold and silver rise notably as Dollar weakens after poorer than expected ISM manufacturing PMI. The disappointing data prompts some talks that Fed officials could start to turn more cautious about the pace of tightening.

                                      Gold’s break of 1687.82 resistance indicates short term bottoming at 1614.60. Further rise is now in favor as long as 1659.51 minor support holds, to 55 day EMA (now at 1718.30), which is close to medium term falling channel resistance.

                                      For now, it’s still early to call for bullish trend reversal, despite bullish convergence condition in daily MACD. But sustained break of 55 day EMA should at least bring stronger rise towards 38.2% retracement of 2070.06 to 1614.60 at 1788.58.

                                      Silver is making slightly more progress than gold with strong break of 55 day EMA. Further rally is now expected as long as 19.20 minor support holds. Break of 20.86 resistance will target 38.2% retracement of 30.07 to 17.54 at 22.32. Reaction from there will reveal the chance of bullish trend reversal.

                                      Fed’s Bostic: Current policy rate sufficient to curb inflation

                                        By
                                        ActionForex.com
                                        -

                                        Atlanta Fed President Raphael Bostic made a clear stance today, expressing confidence in the prevailing policy rate’s ability to bring inflation down to the desired 2% mark. In his words, “I think that our policy rate is at a sufficiently restrictive position to get inflation down to 2%.” Contrary to some speculations about further hikes, he stated, “I actually don’t think we need to increase rates anymore.”

                                        Bostic’s comments come at a crucial juncture when the market is closely monitoring the bond market dynamics, especially recent sharp rise in Treasury yields. Responding to queries about the possible impact of rising Treasury yields on the Fed’s policy approach, Bostic highlighted that the present rates are “clearly” on the restrictive side, hinting at a visible slowdown in economic activities. He also hinted at more repercussions from the Fed’s past hikes that might manifest in the near future.

                                        In addition to domestic economic indicators, Bostic also touched upon the geopolitical developments, particularly the recent violent episodes in Israel. Recognizing the potential of such geopolitical events to infuse further uncertainty in the global economic landscape, Bostic underscored the need for the Federal Reserve to remain agile. He emphasized the importance of being nimble and ready to adapt in light of rapidly evolving global scenarios.

                                        BoE Broadbent: Risks to unemployment are in both directions

                                          By
                                          ActionForex.com
                                          -

                                          BoE Deputy Governor Ben Broadbent said in the TSC hearing that “it remains the case, on our central forecast, that UK economy doesn’t return to its pre-pandemic size until early 2022, after the same point for both the US and the Euro area.”

                                          Also, “as the furlough scheme is assumed to close at the end of April while restrictions still exist, “the recovery in demand is expected to be insufficient to prevent a material rise in unemployment”.

                                          BoE’s monetary easing “already anticipates a significant rise in unemployment and spare capacity through the spring and summer of this year.” Still, “there are clearly significant risks around that, not least from the relative timings of the ending of restrictions on the one hand and the closure of the furlough scheme on the other.”

                                          “Those risks are in both directions,” he added.

                                          Full remarks here.

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