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US oil inventories dropped -1.0m barrels, WTI rejected by 90

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    ActionForex.com
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    US commercial crude oil inventories dropped -1.0m barrels in the week ending January 28, versus expectation of 1.8m rise. At 415.1m barrels, oil inventories are about -9% below the five year average for this time of year.

    Gasoline inventories rose 2.1m barrels. Distillate dropped -2.4m barrels. Propane/propylene dropped -4.3m barrels. Total commercial petroleum inventories dropped -5.8m barrels.

    Earlier today, OPEC+ decided to raise production by another 400k barrels a day in March, continuing with the monthly plan agreed back in last July.

    WTI crude oil hit 90.10 earlier today but failed to sustain above 90 handle and retreated. For now, further rise will remain in favor as long as 86.75 support holds, which is close to 4 hour 55 EMA. Current rally could still target 61.8% projection of 66.46 to 87.70 from 62.42 at 95.54 before topping.

    However, considering bearish divergence condition in 4 hour MACD, break of 86.75 support will confirm short term topping and bring deeper pull back to 82.42 support, and possibly below.

    BoC to hike 75bps, may signal slower tightening ahead

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      ActionForex.com
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      BoC is widely expected to deliver another rate hike today. The markets seem to have now reached a consensus expectation of a 75bps increase in overnight rate to 4.00%. That would be the highest level since 2008. The tightening cycle shouldn’t stop there, but BoC may indicate that the pace would slow ahead. Some analysts are expecting another 50bps hike in December, followed by a 25bps hike early next year. But the decisions beyond together will very depend on upcoming economic data.

      Here are some previews on BoC:

      USD/CAD’s up trend was capped at 1.3976 earlier this month, on overbought condition. For now, further rise is expected as long as 1.3501 support holds. Up trend from 1.2005 would target 200% projection of 1.2005 to 1.2947 from 1.2401 at 1.4285 on break of 1.3976. Nevertheless, break of 1.3501 support will bring deeper fall to 55 day EMA (now at 1.3430) and below.

      US Kudlow hopeful on China trade talks, Perdue reveals new farmer aids

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        ActionForex.com
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        White House economic adviser Larry Kudlow indicated yesterday that US trade team could travel to China to restart trade negotiations. Meanwhile, China could re-start agricultural purchases soon. He said, “as I read it, it looks like there will be a trip to China and we expect, we hope strongly that China will very soon start buying agriculture products, No. 1 as part of an overall deal and No. 2 as a goodwill gesture.”

        Kudlow also sounded positive and added, “I wouldn’t be surprised if we saw a lot of positive news on that coming up… I’m going to strike a note of hopefulness.” However, Commerce Secretary Wilbur Ross sounded more cautious and said “I’m not aware that the gate has opened to any significant degree.”

        Separately, Agriculture Secretary Sonny Perdue announced new aid package to help farms hurt by Trump’s trade war with China. The government will pay a minimum of USD 15 per acre to farmers. He said, “we’re anticipating right now three tranches; probably 50 percent … or minimum there of $15 an acre initially.” The second and third tranches would be dependant on market conditions.

        Chinese stocks rebound as Premier Li pledged to step up countercyclical measures

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          ActionForex.com
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          Stocks in China and Hong Kong buck the global trade and rebounds notably today. At the time of writing, China Shanghai SSE is up 1.35%. Hong Kong HSI is up 1.34%.

          Sentiments are apparent lifted by news that the Chinese government is going to provide more stimulus to the economy. The State Council noted in a brief statement in its website that Premier Li Keqiang pledged to step up “countercyclical adjustments” of macro policies.

          The comments were made when Li at a meeting with officials of the country’s banking and insurance regulator after visiting Bank of China, Industrial and Commercial Bank of China and China Construction Bank. Measures will include tax cuts, targeted lowering of reserve requirements to help small and private companies.

          UK CPI unchanged at 2.0%, core CPI rose to 1.8%

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            ActionForex.com
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            In June, UK headline CPI was unchanged at 2.0% yoy, matched expectations. Core CPI accelerated to 1.8% yoy, up from 1.7% yoy, matched expectations. RPI slowed to 2.9% yoy, down from 3.0% yoy, matched expectations. PPI input was at -1.4% mom, -0.3% yoy, versus expectation of -0.5% mom, 0.3% yoy. PPI output was at -0.1% mom, 1.6% yoy, versus expectation of 0.1% mom, 1.7% yoy. PPI output core was at 0.1% mom, 1.7% yoy, matched expectations.

            In May, house price index rose 1.2% yoy, slowed from 1.5% yoy, versus expectation of 1.3% yoy.

            GBP/CHF’s broke 1.2297 support yesterday and resumed down trend from1.3854. Further fall should be seen to 100% projection of 1.3854 to 1.2297 from 1.3399 at 1.1842 in medium term.

            Eurozone PMI manufacturing finalized at 51.4, manufacturing boom faded away to near stagnation

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              ActionForex.com
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              Eurozone PMI manufacturing was finalized at 51.4 in December, unrevised. It’s down from November’s 51.8 and hit the lowest since February 2016. Markit also noted that “fall in new work signalled for third month running” and “confidence about the future hits fresh six-year low”. Among the countries, Germany hit 33-month low at 51.5. Spain hit 28-month low at 51.5. France hit 27-month low at 49.7, in contraction. Italy, despite recovering to 2-month high at 49.2, remained in contraction.

              Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

              “A disappointing December rounds off a year in which a manufacturing boom faded away to near stagnation.

              “The weakness of the recent survey data in fact raises the possibility that the goods producing sector could even act as a drag on the overall economy in the fourth quarter, representing a marked contrast to the growth surge seen this time last year. The last three months of 2018 saw manufacturers report the worst quarterly performance in terms of production since the second quarter of 2013.

              “Worryingly, current production levels were achieved only by firms eating into backlogs of orders received in prior months and a dearth of new orders means capacity will be cut back in coming months unless demand revives. December saw a third consecutive monthly drop in new orders.

              “More encouragingly, some of the recent weakness could prove temporary, being the result of protests in France and the auto sector struggling to adjust to new emissions regulations. However, the undercurrent of weak demand and growing risk aversion evident across the surveys suggests that any rebound could prove modest at best, with Brexit representing a particularly worrying unknown for the outlook.”

              Full release here.

              US PMI manufacturing rose to record 62.6, PMI services dropped to 64.8

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                ActionForex.com
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                US PMI Manufacturing rose to record high at 62.6, up from 62.1. PMI Services dropped to 64.8, down from 70.4. PMI Composite dropped to 63.9, down from 68.7.

                Chris Williamson, Chief Business Economist at IHS Markit, said:

                “The early PMI indicators point to further impressive growth of the US economy in June, rounding off an unprecedented growth spurt over the second quarter as a whole.

                “While both output growth and inflows of new orders have come off their peaks in both manufacturing and services, this is as much due to capacity constraints limiting firms’ abilities to cope with demand rather than any cooling of the economy.

                “Although price gauges have also slipped from May’s all-time highs, it’s clear that the economy continues to run very hot. Prices charged for goods and services are still rising very sharply, record supply shortages are getting worse rather than better, firms are fighting to fill vacancies and manufacturers’ warehouse stocks are being depleted at a worrying rate as firms struggle to meet demand.

                “While the second quarter will likely represent a peaking in the pace of economic growth, a concomitant peaking of inflation is far less assured.”

                Full release here.

                Canada retail sales dropped -1.2%, ex-auto sales dropped -0.5%

                  By
                  ActionForex.com
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                  Canada retail sales dropped -1.2% mom to 50.9B in October, well below expectation of 0.1% mom rise. Ex-auto sales dropped -0.5% mom, also missed expectation of 0.2% mom. Lower sales were reported in 8 of 11 subsectors, representing 81% of retail trade. Also, sales were down in six provinces. Retail sales dropped -2.0% in Ontario, -1.7% in Quebec, -0.9% in British Columbia.

                  Full release here.

                  Fed officials want more evidence before considering rate cuts

                    By
                    ActionForex.com
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                    A wave of comments from several Fed officials overnight highlighted a consensus on the need for patience before initiating interest rate reductions. While the higher than expected inflation readings in January and February were “concerning”, they’re not seen as derailing the broader disinflation process yet. Nevertheless, the sentiment is clear: more evidence is required to confirm inflation’s downward path towards 2% target before any policy easing is initiated.

                    Cleveland Fed President Loretta Mester emphasized the necessity of observing “a couple more months of data” to verify if the recent inflationary trends are indeed reversing. Mester pointed out the need for “more evidence” that supports the continuation of inflation’s decline. Meanwhile, Fed is in a “policy position” to adjust policy “more swiftly and sooner” if labor markets were to “deteriorate significantly”

                    Minneapolis Fed President Neel Kashkari on penciled in two “rate cuts” this year back in March, predicated on inflation’s decline towards target.” Yet, if inflation is “moving sideways”, he would question “whether we needed to do those rate cuts at all.”

                    Chicago Fed President Austan Goolsbee said the inflation in the first two months of the year “should not knock us off the path back to target”. He views housing inflation as the “most valuable indicator” now. “If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target.”

                    Richmond Fed President Thomas Barkin emphasized the strategic patience afforded by a “strong labor market,” suggesting that Fed has the time needed for the economic “clouds to clear” before commencing with rate adjustments.

                    UK construction PMI rose to 53.2, but underlying data paints less rosy picture

                      By
                      ActionForex.com
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                      UK PMI construction rose to 53.2 in October, up from 52.1 and beat expectation of 52.1. Markit noted “fastest growth in civil engineering since July 2017”. However, there was “slower rise in new projects at construction companies:” and “business optimism weakest in nearly six years”.

                      Trevor Balchin, Economics Director at IHS Markit, which compiles the survey:

                      “Although total UK construction activity rose at a stronger pace in October, the underlying survey data paint a less rosy picture for the sector towards the end of the year.

                      “New contracts increased at only a modest pace, and firms were the least optimistic regarding the 12-month outlook for nearly six years. Construction companies again linked uncertainty to Brexit negotiations, which influenced delays to final decisions at clients.

                      “Moreover, the higher total activity figure reflected the civil engineering sector, which saw a rebound following declines in August and September. Housing and commercial construction activity both rose more slowly in October, and at rates that remained below long-run survey averages.

                      “More positively, construction firms continued to raise headcounts at a strong pace, suggesting they are not expecting an imminent contraction in demand. That said, if the new orders and expectations indices remain at current levels or fall further, the employment index could also drift back towards the 50.0 no-change mark.”

                      Full release here.

                      New Italian government sworn in with pro-EU democrat as economy minister

                        By
                        ActionForex.com
                        -

                        The new coalition government of 5-Star Movement and Democratic Party (PD) finally sworn into office today, ending recent political turmoil. Giuseppe Conte remains as Prime Minister that leads a cabinet with 7 women and 14 men. The government will now face confidence votes in the lower and upper houses next Monday and Tuesday. Conte is expected to win both votes.

                        The important role of economy minister is taken up by Roberto Gualtieri, a Democrat, and the chairman of the European Parliament’s Committee on Economic and Monetary Affairs. His appointment is seen as sending a clear signal Rome wanted to reset its relations with Brussels.

                        ECB Makhlouf: Demand factors will dominate and lead to a fall in prices with coronavirus pandemic

                          By
                          ActionForex.com
                          -

                          ECB Governing Council member Gabriel Makhlouf said “predicting how demand and supply shocks will interact over the medium to long term is not straightforward”. “Both demand and supply side factors will continue to impact on inflation”. But he believed that “demand factors will dominate and lead to a fall in prices” with the coronavirus pandemic.

                          He explained, “fear of infection, weak labour markets, heightened uncertainty and higher precautionary savings will lead to lower demand for goods and services which implies that the real natural rate of interest is likely to remain at low levels.”

                          US consumer confidence rose to 108.0, second month of improvement

                            By
                            ActionForex.com
                            -

                            US Conference Board Consumer Confidence rose from 103.2 to 108.0 in September, above expectation of 104.5. Present Situation index rose from 145.3 to 149.6. Expectations Index also rose from 75.8 to 90.3.

                            “Consumer confidence improved in September for the second consecutive month supported in particular by jobs, wages, and declining gas prices,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

                            “The Present Situation Index rose again, after declining from April through July. The Expectations Index also improved from summer lows, but recession risks nonetheless persist. Concerns about inflation dissipated further in September—prompted largely by declining prices at the gas pump—and are now at their lowest level since the start of the year.”

                            Full release here.

                            US initial jobless claims rose to 218k, continuing claims hits near 2-yr high

                              By
                              ActionForex.com
                              -

                              US initial jobless claims rose 7k to 218k in the week ending November 25, above expectation of 215k. Four-week moving average of initial claims fell -500 to 220k.

                              Continuing claims rose 86k to 1927k in the week ending November 18, highest since November 27, 2021. Four-week moving average of continuing claims rose 29k to 1866k, highest since December 11, 2021.

                              Full US jobless claims release here.

                              CAD/JPY in strong rebound as BoC in focus

                                By
                                ActionForex.com
                                -

                                With a light economic calendar, main focus will be on BoC monetary policy decision today. No change is expected as the central has just stopped asset purchases back in October. Also, at that statement, BoC had pushed forward the timing for the first rate hike to “sometime in the middle quarters of 2022”, compared with previous estimate of “the second half of 2022”. Given the uncertainty surrounding Omicron, the central bank will more likely keep the rhetoric unchanged than not.

                                Some previews on BoC:

                                Canadian Dollar is in strong rebound this week, partly on return of risk-on sentiment, in tandem with rebound in oil prices. CAD/JPY’s pull back from 93.00 could have completed at 87.68, after hitting 61.8% retracement of 84.65 to 93.00 at 87.83.

                                Sustained trading above 55 day EMA (now at 89.78) will affirm this case and pave the way for retesting 93.00 high next. Also, given that CAD/JPY has defended medium term trend line support and 55 week EMA very well, the whole up trend from 73.80 could be ready to resume through 93.00 in this case.

                                Nevertheless, another fall and sustained trading below 87.83 will turn focus back to 84.65 key medium term structural support.

                                Trump: China trade deal in advanced stages, very close to signing summit

                                  By
                                  ActionForex.com
                                  -

                                  Trump indicated overnight that the US is “very, very close” to completing a trade agreement with China. And there will be a “signing summit” with Chinese President Xi Jinping soon. Trump said that “we’re going to have another summit, we’re going to have a signing summit” and “so hopefully, we can get that completed. But we’re getting very, very close.”

                                  He later also tweeted that “China Trade Deal (and more) in advanced stages. Relationship between our two Countries is very strong. I have therefore agreed to delay U.S. tariff hikes. Let’s see what happens?” “If a deal is made with China, our great American Farmers will be treated better than they have ever been treated before!”

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                                  Trump decided to delay new tariffs on USD 200B of Chinese imports beyond March 1. For not, there is no information on how long that would that be postponed. A spokeswoman for the U.S. Trade Representative’s Office said the agency had no announcements at this time beyond the president’s remarks.

                                  Separately, Trump has left for a summit with North Korean leader Kim Jong-un in Vietnam. An initial one-on-one meeting is scheduled for Wednesday, followed by dinner with advisers.

                                  Australia CPI accelerated to 1.6% on automotive fuel prices

                                    By
                                    ActionForex.com
                                    -

                                    Australia CPI rose 0.6% qoq in Q2, above expectation of 0.5% qoq. Annually, headline CPI accelerated to 1.6% yoy, up from 1.3% yoy ane beat expectation of 1.5% yoy. RBA trimmed mean CPI was unchanged at 1.6% yoy versus expectation of 1.5% yoy. RBA weighted median CPI slowed to 1.2% yoy, down from 1.4% yoy, matched expectations.

                                    ABS Chief Economist, Bruce Hockman said: “automotive fuel prices rose 10.2 per cent in the June quarter 2019. This rise had a significant impact on the CPI, contributing half of the 0.6 per cent rise this quarter. Automotive fuel prices returned to levels recorded in late 2018 after falling 8.7 per cent in the March quarter 2019.”

                                    And, “annual growth in the CPI continues to be subdued due to falls in a number of administered prices. Through the year, utility prices have fallen 0.2 per cent and child care has fallen 7.9 per cent following the introduction of the Child Care Subsidy package in July 2018.”

                                    Full release here.

                                    China to open up banking and insurance sectors as new round of trade negotiation with US starts

                                      By
                                      ActionForex.com
                                      -

                                      New round of US-China trade negotiations started in Beijing today. US Treasury Secretary Steven Mnuchin said he had a “nice working dinner” yesterday and “it’s good to be back here” in Beijing. It widely known that while progress has been made two key sticky points remained unresolved, an enforcement mechanism and the timelines for lifting imposed additional tariffs.

                                      Meanwhile, China Banking and Insurance Regulatory Commission said it will further open up the banking an insurance sectors. And it plans to issue 12 new measures soon. The measures include dropping the USD 10B asset requirements for foreign companies to set up a legal entity in the country. The USD 20B asset requirements for foreign banks to set up a branch will also be removed. Approval procedures for foreign banks to conduct Yuan businesses will be removed.

                                      Ethereum breaches 3000, Bitcoin presses 40k

                                        By
                                        ActionForex.com
                                        -

                                        Ethereum extends recent down trend today and hit as low as 2927.20, just ahead of 61.8% retracement of 1715.62 to 4863.75 at 2918.20. Further decline is expected as long as 3245.45 resistance holds. Decline from 4863.75 is seen as in the same degree as the rise from 1715.62 to 4865.75. Deeper decline would be seen to or even further to 100% projection of 4863.75 to 3439.00 from 4126.20 at 2701.45, which is close to 2647.30 support, before forming a bottom.

                                        Similarly, Bitcoin is also extending recent fall and hit as low as 39636. Deeper fall is expected as long as 43577 resistance holds. Current fall from 68986 would target 61.8% projection of 68986 to 41908 from 52101 at 35366 before BTC/USD forms a bottom.

                                        Australia export price down -8.5% qoq in Q2, largest fall since 2009

                                          By
                                          ActionForex.com
                                          -

                                          Australia’s Q2 Export Price Index registered -8.5% qoq drop, the most substantial quarterly decline since Q3 2009. Concurrently, the index declined -11.2% yoy compared to the same quarter last year. On the flip side, Import Price Index dipped slightly by -0.8% qoq, – 0.3% yoy.

                                          Michelle Marquardt, Head of Price Statistics at Australian Bureau of Statistics (ABS), attributed this steep fall in the Export Price Index to a substantial contraction in global energy demand. “Global economic slowdown and eased supply pressures are contributing to a retreat in energy prices from their 2022 peak,” said Marquardt.

                                          The dampening effect of weaker energy prices extended to the Import Price Index, which saw a decline of -0.8% in Q2 2023. More specifically, the prices of petroleum and petroleum products decreased by -7.0% in this quarter. Nevertheless, this decline in energy prices was somewhat counterbalanced by inflationary pressures on various imported consumption and capital goods.

                                          Full Australia international trade price indexes release here.

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