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Eurozone GDP contracts -0.1% qoq in Q3, EU grows 0.1% qoq

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    ActionForex.com
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    Eurozone’s GDP shrank unexpectedly in Q3, contracting by -0.1% qoq, defying expectations of a stagnant 0.0% growth. When compared with the same quarter of the previous year, Eurozone’s growth was barely positive at 0.1% yoy. Meanwhile, the broader EU reported a similar pattern, with a 0.1% growth both qoq and yoy.

    The performance across member states varied significantly. Latvia emerged as the top performer with 0.6% growth over the previous quarter, followed by Belgium and Spain, recording 0.5% and 0.3% growth respectively. Conversely, Ireland faced the steepest decline with a -1.8% contraction, followed by Austria at -0.6% and Czechia at -0.3%.

    Year-on-year growth rates revealed a similar disparity among the member states. Portugal, Spain, and Belgium led the way with 1.9%, 1.8%, and 1.5% growth respectively. However, Ireland experienced a sharp -4.7% decline, with Estonia (-2.5%), Austria and Sweden (-1.2% both) also facing significant contractions.

    Full Eurozone GDP release here.

    China’s import from EU jumped 20.5% mom, trade surplus shrank -31.0% mom, as US-China trade war starts

      By
      ActionForex.com
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      China’s July trade data revealed some interesting findings as US-China trade war formally started. Import from the EU jumped as massive 20.5% mom, 19.7% yoy. Trade surplus with EU dropped -31.0% mom, -7.9% yoy. On the other hand, trade surplus with US dropped a mere -3.0%, with -2.5% decline in export and -1.5% mom fall in imports. Looks like the EU could have the last laugh over Trump’s trade policy.

      Here are the details:

      Overall –

      China trade surplus in CNY term narrowed to CNY 177B in July, down from CNY 262B, missed expectation of CNY 225B. Exports rose 6.0% yoy to CNY 1390B while imports jumped 20.9% yoy to CNY 1213B. Year-to-Jul, exports rose 5.0% yoy to CNY 8894B while imports rose 12.9% yoy to CNY 7826B, with CNY 1068B surplus.

      In USD term, trade surplus narrowed to USD 28.1B, down from USD 41.6B and missed expectation of USD 39.1B. Exports rose 12.2% yoy to USD 215.6B while imports rose 27.3% yoy to USD 187.5B. Year-to Jul, exports rose 12.6% yoy to USD 1387B while imports rose 21.0% yoy to USD 1221B, with USD 166B surplus.

      With EU –

      EU remains China’s largest trading partner with total trade risen 5.9% mom, 13.4% yoy to USD 60.7B in July. Exports dropped -2.3% mom, rose 9.4% yoy to USD 35.9B. Imports rose a massive 20.5% mom and 19.7% yoy to USD 24.7B. For July, trade surplus with EU dropped -31.0% mom, -7.9% yoy to USD 11.2B.

      For year-to-July, China’s total trade with EU rose 12.7% yoy to USD 383B. Exports rose 10.8% yoy to USD 227B. Imports rose 15.6% yoy to USD 155B. Total trade surplus merely grew 1.6% yoy to USD 72.1B.

      With US –

      With the US, total trade dropped -2.3% mom, rose 11.2% yoy to USD 55.0B in July. Exports dropped -2.5% mom rose 11.2% yoy to USD 35.9B. Imports dropped -1.5% mom, rose 11.1% yoy to USD 24.7B. Trade surplus dropped -3.0% mom, rose 11.3% yoy to USD 28.1B.

      For year-to July, China’s total trade with US rose 12.2% yoy USD 357B. Exports rose 12.5% yoy to USD 259.1B. Imports rose 11.4% yoy to 97.5B. Trade surplus rose 13.2% yoy to USD 161.6B.

       

      Here are the links to:

      France’s Q1 GDP sees modest growth of 0.2% qoq

        By
        ActionForex.com
        -

        France’s Q1 GDP growth came in at a modest 0.2% qoq, slightly outperforming market expectations of 0.1% qoq.

        Final domestic demand (excluding inventories) contributed negatively to GDP growth, albeit less so than in the previous quarter (-0.1 points in Q1 2023 after -0.4 points). This was due to household consumption stabilizing (0.0% after -1.0%), while gross fixed capital formation (GFCF) experienced a minor decline (-0.2% after 0.0%).

        In contrast, foreign trade provided a positive contribution to GDP growth (+0.6 points after +0.2 points). Imports decreased this quarter (-0.6% after +0.1%), while exports remained strong (+1.1% after +0.9%).

        Lastly, the contribution of inventory changes to GDP growth was negative this quarter (-0.3 points after +0.2 points in Q4 2022).

        Full France GDP release here.

        BoJ stands pat, lowers inflation forecasts once again

          By
          ActionForex.com
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          BoJ left monetary policy unchanged today as widely expected, by 7-2 vote again. Short term policy interest rate is held at -0.1%. On long term interest rate, BoJ will continue with asset purchases to keep 10 year JGB yield at around 0%. G. Kataoka dissented again, pushing for more monetary easing due to “heightening uncertainties regarding development in economic activity and prices”. Y. Harada dissented because “allowing the long-term yields to move upward and downward to some extent was too ambiguous”.

          In the Outlook for Economic Activity and Prices report, BoJ noted that the economy is likely to continue to grow above potential in fiscal 2018. For fiscal 2019 and 2020, the economy is expected to continue on an “expanding trend”, partly supported by “external demand”. But growth is projected to decelerate due to a “cyclical slowdown” in business fixed investments and the scheduled sales tax hike.

          CPI continued to show “relatively weak developments” comparing to growth and labor market. Though, BoJ maintained that “further price rises are likely to be observed widely and then medium- to long-term inflation expectations are projected to rise gradually”. Thus, CPI will gradually increase towards 2% target. On risks, BoJ said both economic and prices risks are “skewed to the downside”.

          In the updated economic projects, fiscal 2018 growth forecast was downgraded from 1.5% to 1.4%. Growth forecasts for 2018 and 2019 were kept unchanged at 0.8%. Fiscal 2018 core CPI projection was lowered notably to 0.9%, down from 1.1%. For fiscal 2019 and 2020, ex-sales-tax-hike core CPI projections were also lowered, to 1.4% and 1.5%, down from 1.5% and 1.6% respectively.

          Also, note that the ex-sales-tax-hike core CPI projections are notably lower than April’s forecasts, at 1.8% in fiscal 2019 and fiscal 2020 respectively.

          Fed to upgrade growth forecasts, eyes on reactions to yields, some previews

            By
            ActionForex.com
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            Fed is generally expected to keep monetary policy unchanged today. Fed funds rate will be kept at 0-0.25%. Asset purchase will also remain at USD 120B per month pace. Developments since last meeting were positive, with upbeat economic data released recently, passage of USD 1.9T of fiscal stimulus, and progress in vaccination. Fed would likely upgrade GDP forecast for the year, but emphasize it’s premature to even consider stimulus withdrawal.

            A much talked about topic is the surge in treasury yields. Fed chair Jerome Powell could just reiterate the view that rising yields were a result of better economic developments and stronger market confidence. That might give treasury yields a note for another powerful rise. Or, yields could be knocked down if there is any hint on the possibility of some measures like operation twist to curb yields. The reactions in the markets could be very volatile.

            Here are some suggested readings:

            UK CPI accelerated to 1.8%, core CPI up to 1.6%

              By
              ActionForex.com
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              UK CPI accelerated to 1.8% yoy in January, up from 1.3% yoy, beat expectation of 1.4% yoy. CPI Core also accelerated to 1.6% yoy, up from 1.4% yoy, beat expectation of 1.4% yoy. RPI accelerated to 2.7% yoy, up from 2.2% yoy, beat expectation of 2.4% yoy.

              PPI input came in at 0.9% mom, 2.1% yoy versus expectation of -0.4% mom, 3.5% yoy. PPI output was at 0.3% mom, 1.1% yoy, versus expectation of -0.1% mom, 1.2% yoy. PPI output core was at 0.1% mom, 0.7% yoy versus expectation of 0.1% mom, 0.6% yoy.

              Japan real wages grew at fastest pace since 1997

                By
                ActionForex.com
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                Japan nominal labor cash earnings rose strongly by 3.6% yoy in June versus expectation of 1.7% yoy. Real wages grew 2.8% yoy, the fastest pace in 21 years since January 1997. Looking at the details, regular pay grew 1.5% yoy. One-off payment including bonuses jumped an impressive 7.0% yoy. Overtime pay also rose 3.5% yoy, a notable acceleration of 2.0% yoy in May. The set of data should be welcomed by BoJ. Nonetheless, persistent strength is needed to eventually change the “social mode” of deflation mind set, which suppresses inflation pressures. Also from Japan, overall household spending dropped -1.2% yoy in June, matched expectations.

                Elsewhere, UK BRC retail sales monitor rose 0.5% yoy in July, below expectation of 1.3% yoy. Australia AiG performance of construction index rose to 52.0 in July, up from 50.6.

                ECB’s Vasle: Probably done with rate hikes, but still many uncertainties

                  By
                  ActionForex.com
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                  In a panel discussion held in Skopje today, opinions about the future of interest rates and inflation were aired by two members of ECB’s Governing Council.

                  Bostjan Vasle suggested that the series of interest rate hikes might have come to an end, citing a possible easing of inflation. Boris Vujcic, on the other hand, shared a more cautious perspective, highlighting potential challenges in attaining the 2% inflation target.

                  Vasle, Slovenia’s central bank head, was quoted saying, “It’s probably the case that we are done with interest-rate increases.” He noted that current economic indicators appear favorable, with preliminary signs of inflation tapering off.

                  However, Vasle also pointed out the prevailing uncertainties, stating, “We are seeing some signs of inflation going down, also some first signs of sustainability of this trends, but on the other hand, there are still many uncertainties.”

                  Croatian central bank chief Vujcic, acknowledged the downward movement towards the 2% goal but pointed out the statistical effects that may be influencing these figures. His words served as a reminder of the monetary policy challenges that could arise if the disinflation process stalls before reaching the target.

                  “You might get into a situation where the inflation rate — the disinflation process — stops at a level, which is not your target,” Vujcic expressed. “Then it’s challenging for monetary policy, because it has to do something more to bring it all the way down to 2%.”

                   

                  BoE hikes 75bps, two doves dissented

                    By
                    ActionForex.com
                    -

                    BoE raises Bank Rate by 75bps to 3.00%. The decision was made by 7-2 votes. Swati Dhingra voted for 50bps hike while Silvana Tenreyro voted for just 25bps hike.

                    Tightening bias is maintained as “should the economy evolve broadly in line with the latest Monetary Policy Report projections, further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets.”

                    But there are “considerable uncertainties” around the outlook. If outlook suggests more persistent inflation pressures, the Committee will “respond forcefully”.

                    Full statement here.

                    In the updated central economic projections, four-quarter GDP is projected to contract -.19% in 2023 Q4, and then -0.1% in 2024 Q4, before growing again in 2025 Q4. CPI is projected to peak at 10.9% in 2022 Q4, then slow to 5.2% in 2023 Q4, and 1.4% in 2024 Q4. Unemployment rate is projected to rise notably from 3.7% in 2022 Q4 to 4.9% in 2023 Q4,5.9% in 2024 Q4, and then 6.4% in 2025 Q4.

                    US initial jobless claims dropped to 6.6m, continuing claims more than doubled to 7.46m

                      By
                      ActionForex.com
                      -

                      US initial jobless claims dropped -261k to 6,606k in the week ending April 4. Four-week moving average of initial claims rose 1,599k to 4,266k.

                      Continuing claims rose 4,396k to 7,455k in the week ending March 289, highest on record. Four-week moving average of continuing claims rose 1,439k to 3,500k.

                      Full release here.

                      US initial jobless claims dropped -1k to 216k

                        By
                        ActionForex.com
                        -

                        US initial jobless claims dropped -1k to 216k in the week ending December 22, slightly below expectation of 220k. Four-week moving average on initial claims dropped -4.75k to 218k.

                        Continuing claims dropped -4k to 1.701M in the week ending December 15. Four-week moving average dropped -1k to 1.676M.

                        Full release here.

                        NIESR forecasts slight growth for UK economy, averting recession in 2023

                          By
                          ActionForex.com
                          -

                          According to NIESR’s projections, UK economy is set to witness a marginal increase in GDP of 0.1% in the fourth quarter of this year. The institute’s report highlighted, “Our central forecast does not expect a recession in 2023.”

                          Delving into the specifics of the economic forecast, NIESR stated, “These forecasts remain broadly consistent with the longer-term trend of low, but stable economic growth in the United Kingdom.”

                          Looking ahead to the next two years, NIESR expects the pace of growth to remain relatively subdued. The institute’s report forecasts GDP growth of 0.6% for 2023, followed by further restrained growth of 0.5% in 2024. The primary cause for this muted growth, as per NIESR, is the ongoing productivity slump.

                          Full NIESR release here.

                          Japan Q4 GDP finalized at 0.5%, modest recovery with external risks

                            By
                            ActionForex.com
                            -

                            Japan Q4 GDP growth was finalized at 0.5% qoq, revised up from 0.3% qoq and beat expectation of 0.4%. GDP deflator was finalized at -0.3% yoy, unrevised. In January, overall household spending rose 2.0% yoy, beat expectation of -0.6% fall. Current account surplus widened to JPY 1.8T.

                            Japan Economy Minister Toshimitsu said Q4’s data showed modest recovery but weak external demand warranted attention. He sounded confident that steady recovery has been confirmed. However, the government is watching overseas risks including slowdown in China.

                            Vice Finance Minister for International Affairs Masatsugu Asakawa also sounded cautious regarding China. He noted that it’s “inevitable for Chinese economy to slow, with its potential growth lowering as a trend:. Though, he also noted that “it is unlikely to falter greatly as there’s room for authorities’ stimulus measures.”

                            US oil inventories dropped -3.5m barrels, WTI staying in range

                              By
                              ActionForex.com
                              -

                              US commercial crude oil inventories dropped -3.5m barrels in the week ending April 2, versus expectation of -2.0m. At 498.3m barrels, oil inventories are about 3% above the five year average for this time of year. Gasoline inventories rose 4.0m barrels. Distillate inventories rose 1.5m barrels. Propane/propylene inventories rose 0.3m barrels. Total commercial petroleum inventories rose 2.3m barrels.

                              WTI is staying in sideway pattern from 57.31 and outlook is unchanged. With 62.22 resistance intact, the correction from 67.83 could still extend lower. Break of 57.31 will target 38.2% retracement of 33.50 to 67.83 at 54.71. We’d expect strong support from there to bring rebound. On the upside, break of 62.22 will argue that the correction has completed and bring retest of 67.83. high.

                              UK payrolled employees rose 35k in Mar, unemployment rate dropped to 3.8% in Feb

                                By
                                ActionForex.com
                                -

                                UK payrolled employees rose 35k in March, comparing to February. Number of payrolled employees were 544k or 1.9% above prepandemic level in February 2020. Claimant count dropped -46.9k, larger than expectation of -41.1k.

                                In the three months to February, unemployment rate dropped to 3.8% matched expectations. That’s -0.2% lower than the previous three-month period, and -0.1% below pre-pandemic levels. Average earnings including bonus rose 5.4% over the year, below expectation of 5.7%. Average earnings excluding bonus jumped 4.0% over the year, above expectation of 3.7%.

                                Full release here.

                                Italy election: No clear winner, Euro steady

                                  By
                                  ActionForex.com
                                  -

                                  In Italy, based on the early vote counts, there will be no clear winner in the election. Center-right coalition of former Primer Minister Silvio Berlusconi is heading for a win in the election, but falls short of a majority. That means, it will take weeks of negotiations before a government could be formed. Anti-establishment Five Star movements to come in second place. Center-left coalition by the governing Democratic Party will come in third.

                                  Euro has little reaction and is steady.

                                  Bundesbank: Exports to be a solid pillar of German economic recovery

                                    By
                                    ActionForex.com
                                    -

                                    Germany’s Bundesbank said economy recovery is “likely to b e interrupted for the time being as the coronavirus pandemic “flared up again in autumn”. Though, a “similarly severe impairment” as in Spring is “not to be expected.

                                    It projects GDP to dropped -5.5% this year. For 2021 and 2022, strong economic growth of 3% and 4.5% is expected, then slow down to 1.8% in 2023. “GDP will already reach its pre-crisis level again in early 2022”.

                                    “Due to the economic upturn in key partner countries, German exports should be a solid pillar of the economic recovery,” Bundesbank added.

                                    Full report here.

                                    Japan PMI manufacturing finalized 48.9, seventh month of contraction

                                      By
                                      ActionForex.com
                                      -

                                      Japan PMI Manufacturing was finalized at 48.9 in November, up from 48.4 in October. That’s the seven straight month of sub-50 reading, signalling a continuation of the downturn in the manufacturing sector. Jibun Bank noted that solid decline in new orders led to further output cutbacks. Economic weakness across Asia hit exports. Selling charges also decreased for the sixth month running.

                                      Commenting on the latest survey results, Joe Hayes, Economist at IHS Markit, said:

                                      “Japan’s manufacturing sector remains firmly stuck in contraction, with the same issues which have plagued the industrial world once again hitting firms where it hurts. In particular, export orders dropped at the fastest rate since mid-year amid reports of demand weakness at key trade destinations, namely China.

                                      “At the sub-sectors, it was intermediate and investment goods which were the primary sources of economic decline, whereas consumer goods makers observed improvements in business conditions.

                                      “Signs of how deeply-rooted this manufacturing downturn in Japan has become were seen in other survey data. Price discounting has been a trend in each of the past six months, highlighting that firms are now actively trying to tackle the sluggish demand conditions. Inventories of inputs also fell at a sharp rate, suggesting that firms are not expecting output requirements to rise anytime soon.”

                                      Full release here.

                                      US retail sales rose 0.5% mom in Mar, ex-auto sales up 1.1% mom

                                        By
                                        ActionForex.com
                                        -

                                        US retail sales rose 0.5% mom to USD 665.7B in March, slightly below expectation of 0.5% mom. Ex-auto sales rose 1.1% mom, above expectation of 0.7% mom. Ex-gasoline sales dropped -0.3% mom. Ex-auto, ex-gasoline sales rose 0.2% mom.

                                        Total sales for January through March period were up 12.9% yoy.

                                        Full release here.

                                        AUD/JPY ready to resume rally as CPI awaited

                                          By
                                          ActionForex.com
                                          -

                                          Australian Dollar is trading as the strongest one today on US-China trade optimism. But it’s going to face an important test from consumer inflation data tomorrow. CPI is expected to rise 0.5% qoq in Q3, down from Q2’s 0.6% qoq. RBA Governor Philip Lowe indicated earlier today that the central bank is “prepared to ease” monetary policy further if needed. Though, after three interest rate cuts this year, the central bank will likely stay on the sideline for a while, to let the impacts feed through to the economy. Inflation and employment are the key pieces of data to influence RBA’s decision next year.

                                          Aussie will likely be given another lift in case of upside surprise in tomorrow’s data. AUD/USD is pressing 74.82 temporary top for now. Prior support from 4 hour 55 EMA affirms near term bullishness. Break of 74.82 will resume the rise from 71.73, as well as that from 69.95. Next upside target will be 100% projection of 69.95 to 74.49 from 71.73 at 76.27, which is close to 76.16 key resistance.

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