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Eurozone economic sentiment indicator rose to 95.8 in Dec

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    ActionForex.com
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    Eurozone Economic Sentiment Indicator rose from 94.0 to 95.8 in December. Industry confidence rose from -1.9 to -1.5. Services confidence rose from 3.1 to 6.3. Consumer confidence rose from -23.9 to -22.2. Retail trade confidence rose from -6.6 to -3.6. Employment Expectations Indicator was unchanged at 107.3. E Economic Uncertainty Indicator dropped from 28.5 to 27.5.

    EU Economic Sentiment Indicator rose from 92.7 to 94.2. Employment Expectations Indicator dropped from 106.3 to 105.9. Economic Uncertainty Indicator dropped from 27.9 to 26.9. Amongst the largest EU economies, the ESI increased in Germany (+2.0), Spain (+1.9), the Netherlands (+1.5), Italy and Poland (both +0.9), while it eased again in France (-1.3).

    Full release here.

    US oil inventories dropped -1.6m barrels, WTI extending sideway consolidation

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      ActionForex.com
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      US commercial crude oil inventories dropped -1.6m barrels in the week ending September 18. At 494.4m barrels, inventories are about 13% above the five year average for this time of the year. Gasoline inventories dropped -4.0m barrels. Distillate dropped -3.4m barrels. Propane/propylene inventories rose 1.7m barrels. Commercial petroleum inventories dropped -7.5m barrels.

      WTI trades mildly higher after the release. The rebound form 35.98 lost momentum and pull back after hitting 41.43. But retreat was then contained at 38.66. Overall, it’s staying in a consolidation pattern below 43.50 medium term top, gyrating around a flat 55 day EMA. More sideway trading would be seen and the path could be quite unpredictable. But in any case, we’re not expecting a break of 43.50 for the near term. In case of another fall, downside should be contained by 34.36 support to bring rebound.

      ECB Schnabel: We should start thinking about gradual normalization of policy

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        ActionForex.com
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        ECB Executive Board member Isabel Schnabel said in an interview, ” it has become increasingly likely that inflation is going to stabilise around our 2 per cent target over the medium term.” There, “we should start thinking about a gradual normalization of our policy.”

        “With the most recent data, however, the risk of acting too late has increased and therefore we need a careful reassessment of the inflation outlook,” she added.

        Schnabel also pointed to a “demand component” in inflation in rising wages, in addition to energy prices and supply chain bottlenecks. She added, “we cannot simply look through everything, especially if inflation now becomes more broad-based and more persistent than we originally thought.”

        Full interview here.

        CHF/JPY takes a breather ahead of key resistance, outlook stays bullish

          By
          ActionForex.com
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          Swiss Franc’s “relative” strength in the past few weeks was very clear, as seen is downside breakouts in EUR/CHF and USD/CHF, but range trading in USD/JPY and EUR/JPY. Though, CHF/JPY lost momentum just ahead of 117.86 key resistance last week.

          For now, further rise is still expected as long as 116.43 support holds. Sustained break of 117.86/118.60 will indeed resume whole long term rebound from 101.71 (2016.06). That would pave the way to 100% projection of 101.71 to 118.60 from 106.73 at 123.62 in the medium term. That would solidify Franc’s leading role as a safe haven currency. Though, break of 116.43 support will, a least, turn near term outlook neutral first.

          RBA to stay patient despite slightly more positive than expected forecasts

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            ActionForex.com
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            In RBA’s latest Statement on Monetary Policy, economic projections were largely unchanged. Overall, the projections are slightly more positive than expected. But there wouldn’t be any change to the expectation that RBA will stand pat throughout 2018, at least. There was no downward revision in GDP forecast. Underlying inflation forecasts were revised slightly up. On the negative side, unemployment rate will take longer to drop again.

            And as noted in the statement, RBA said “the forecasts reflect the expected decline in spare capacity in the economy as GDP growth picks up and as the labour market moves towards full employment.” And, “a key area of uncertainty for the inflation outlook is around how quickly wages growth picks up in response to improving labour market conditions.”

            Year-average GDP growth is forecast to be at 3.00% in 2018 and 3.25% in 2019. CPI inflation is forecast to rise to 2.25% at 2018 year end and stay there till June 2020.

            The first change is that unemployment rate forecast was raised to 5.50% in June 2018 and December 2018, revised up from 5.25%. Onwards, unemployment rate is projected to drop to 5.25% in June 2019 and stay there till June 2020.

            The second change is that underlying inflation is expected to be higher at 2.00% in June 2018 and December 2018, revised up from 1.75%. Then underlying inflation is projected to stay a 2.00% till picking up again to 2.25% in June 2020.

            Below are the most updated forecasts.

            Here are February projections.

            Full release here

            Chicago Fed Evans reiterated interest rate could go beyond neutral

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              ActionForex.com
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              Chicago Fed published yesterday a speech of its President Charles Evans titled “Back to the Future of Monetary Policy“, originally intended to be delivered to a conference earlier this week in Argentina.

              There Evans reiterated his stance that Fed the current economic outlook “entail moving policy first toward a neutral setting and then likely a bit beyond neutral”. That was for helping the transition of the economy onto a “long-run sustainable growth path with inflation at our symmetric 2 percent target.”

              He added that “we may need to tighten somewhat further if currently unexpected tailwinds emerge that push the economy well beyond sustainable growth and employment levels, potentially leading to unacceptably high inflation beyond our symmetric objective.” For example, “forward momentum imparted by earlier monetary accommodation” might be underestimated. And, there could be “greater-than-expected fiscal impetus from the recent tax cuts and spending increase”.

              On the other hand, “the emergence of currently unexpected headwinds could dictate a shallower policy path.” For example, trade uncertainties could generate “adverse effects on business sentiment and spending”. And, ” firming in inflation expectations could stall out before expectations are clearly centered about 2 percent”.

              Full speech here.

              US initial jobless claims unchanged at 884k, continuing claims rose back o 13.4m

                By
                ActionForex.com
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                US initial jobless claims was unchanged at 884k in the week ending September 5, above expectation of 838k. Four-week moving average of initial claims dropped -21.8k to 970.8k.

                Continuing claims rose 93k to 13385k in the week ending August 29. Four-week moving average of continuing claims dropped -523.8k to 13982k.

                Full release here.

                Japan PMI manufacturing dropped to 53.2, signalling weaker improvement in manufacturing business conditions

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                  ActionForex.com
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                  Japan PMI manufacturing dropped to 53.2 in March, down from 54.1 and missed expectation of 54.3.

                  Key points from the release:

                  • Flash Japan Manufacturing PMI declines in March to 53.2, from 54.1 in February.
                  • New orders increase, albeit to weakest extent in five months.
                  • Job creation eases amid joint-softest pace of output growth since July 2017.

                  Quotes from Joe Hayes, Economist at IHS Markit:

                  “The headline PMI declined in March, signalling a weaker improvement in overall business conditions in the manufacturing sector. Output, new order and employment growth rates all slowed, while longer lead times continued to impact supply capacities.

                  “That said, with new business increasing for an eighteenth straight month, firms raised output prices to a quicker extent, signalling confidence in the demand climate and purchasing power of their clients. Despite two months of weaker headline PMI readings, the 2018 Q1 average still signals a robust operating environment.”

                  Full release here

                  Fed stands pat, aim to achieve inflation moderately above 2% for some time

                    By
                    ActionForex.com
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                    FOMC kept federal funds rate unchanged at 0-0.25% as widely expected. Additionally, Fed will continue with asset purchases “at least at the current pace”. Also, the committee would be “prepared to adjust the stance of monetary policy as appropriate”.

                    In line with the new “average inflation targeting”, Fed said: “With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.”

                    Dallas Fed President Robert Kaplan dissented, preferring to retain “greater policy rate flexibility”. Minneapolis Fed President Neel Kashkari dissented in favor of waiting for a rate hike until “core inflation has reached 2% on a sustained basis.”

                    Full statement here.

                    Sterling lifted mildly as domestic data gave Carney some confidence

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                      ActionForex.com
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                      BoE Governor Mark Carney delivers a speech titled “From Protectionism to Prosperity” where he also talked about monetary policy. He noted that the current path the economy is going is “consistent with the MPC’s current projection”, with the assumption of a relatively smooth Brexit.

                      Since the May meeting “international data have been mixed” with robust growth in the US and fading momentum in Eurozone. And there were marked loss of momentum in some merging markets. However, domestically, Carney said “the incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate.”

                      He pointed to some “number of indicators of household spending and sentiment have bounced back strongly” erratic Q1. Labor market has “remained strong” and there is “widespread evidence that slack is largely used up.” Pay and domestic cost growth have “continued to firm up broadly. And headline inflation is still “expected to rise in the short term” due to energy prices.

                      The overall impressions from Carney is that he’s rather confidence that economy developed as expected. And that would add to the case for an August rate hike.

                      Sterling is limited mildly against Dollar and Yen after the speech.

                      Full speech here.

                      Eurozone CPI finalized at 5.3% in Jul, core CPI at 5.5%

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                        ActionForex.com
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                        Eurozone CPI was finalized at 5.3% yoy in July, down from June’s 5.5% yoy. Core CPI (ex energy, food, alcohol & tobacco) was finalized at 5.5%, unchanged from June’s reading. The highest contribution came from services (+2.47%), followed by food, alcohol & tobacco (+2.20%),), non-energy industrial goods (+1.26%),) and energy (-0.62%),).

                        EU CPI was finalized at 6.1% yoy, down from prior month’s 6.4% yoy. The lowest annual rates were registered in Belgium (1.7%), Luxembourg (2.0%) and Spain (2.1%). The highest annual rates were recorded in Hungary (17.5%), Slovakia and Poland (both 10.3%). Compared with June, annual inflation fell in nineteen Member States, remained stable in one and rose in seven.

                        Full Eurozone CPI final release here.

                        Gold breaks 2000 with powerful move, 2150 next?

                          By
                          ActionForex.com
                          -

                          Gold’s up trend finally resumes with a powerful move to as high as 2030.86 so far, breaking 2000 handle for the first time ever. It’s now pressing an important long term projection level, 261.8% projection of 1046.37 to 1375.17 from 1160.17 at 2020.96. It remains to be seen if this projection level, together with overbought conditions, would cap gold’s upside and bring an overdue correction.

                          But for now, near term outlook will remain bullish as long as 1966.89 holds. Sustained trading above 2020.96 will pave the way to next medium term target of 161.8% projection of 1451.16 to 1747.75 from 1670.66 at 2150.54.

                          Swiss SECO downgrades 2024 growth forecast, raises inflation

                            By
                            ActionForex.com
                            -

                            In the update to Swiss State Secretariat for Economic Affairs economic forecasts, a marginal upgrade has been bestowed upon Switzerland’s 2023 GDP outlook, leveraging the robust performance in the first quarter. The forecast, adjusted for sporting events, now stands at 1.3%, a slight increase from the 1.1% predicted in June.

                            Despite this adjustment, outlook for 2024 has experienced a cut, settling at 1.2% as opposed to the earlier estimation of 1.5%. This renders the prospects for economic growth considerably below-average for both 2023 and 2024.

                            Shifting focus to CPI forecasts, the estimation for 2023 have been marginally trimmed down to 2.2%, a -0.1% decrease from June forecast. Conversely, 2024 projection experiences a hike, ascending from 1.5% to 1.9%.

                            SECO points towards substantial economic risks looming on the horizon. A pressing concern is the international persistence of inflation. The panorama of economic challenges also encompasses escalating risks tied to the global debt scenario fluctuations in property and financial markets. Monetary policy transmission could also be stronger than assumed.

                            Furthermore, the evolving situations in Germany and China emerge as potent risk factors, not just for the global economy but significantly impacting Swiss foreign trade.

                            Full SECO release here.

                            German Ifo warns of recession, downgrades 2019 GDP forecast to 0.5%

                              By
                              ActionForex.com
                              -

                              Ifo warned in the Economic Forecast Autumn 2019 that German economy is at risk of recession. -0.1% GDP contraction is expected in Q3, thus, together with -0.1% drop in Q2, that’s a technical recession. Also, 2019 growth forecast was downgraded from 0.6% to 0.5%.

                              Ifo noted: “This downturn was triggered by a series of world political events calling into question a global economic order that had evolved over decades and required adjustments to established international value chains. As a result, economic uncertainty worldwide rose to historic highs and the international economy cooled off increasing”.

                              “Meanwhile, world trade and world industrial production are declining. In addition, automobile manufacturers in particular are facing an abrupt technology shift, which in some cases brings with it enormous adaptation requirements.”

                              Full report here.

                              BoJ Kuroda: Excess exchange rate volatility recently is undesirable

                                By
                                ActionForex.com
                                -

                                BoJ Governor Haruhiko Kuroda told the parliament today that “excess (exchange rate) volatility in a short term as seen recently is undesirable.” He pledged to keep a close watch of the impact of the currency moves on the economy and prices. He also added that exchange rate moves should be stable and reflecting economic fundamentals.

                                On monetary policy, “it’s important to back the economic activity with powerful monetary easing,” Kuroda reiterated. “It will take time for sustainable, stable inflation to take hold in Japan.”

                                Japan’s PMI composite rises to 52.3, strengthening activity and intensifying price pressures

                                  By
                                  ActionForex.com
                                  -

                                  Japan’s PMI Manufacturing saw a modest increase from 47.2 to 48.2 in March, while PMI Services surged to from 52.9 to 54.9, its highest level since last May. Composite PMI, which combines both sectors, also climbed from 50.6 to 52.3, reaching its peak since last August.

                                  Usamah Bhatti, Economist at S&P Global Market Intelligence, underscored the private sector’s regained momentum at the end of Q1. The expansion was predominantly driven by service providers, while manufacturers experienced a continued, though less severe, contraction.

                                  Alongside this economic revival, Japan is facing a “renewed intensification of price pressures,” with the rate of input price inflation hitting a five-month high. This uptick was particularly pronounced among service providers, although manufacturers also reported “stubbornly high input prices”. Many firms opted to pass these increased costs onto customers, leading to the highest output charge inflation since last August.

                                  Full Japan PMI release here.

                                  Into US session: Euro turned mixed after Italy’s reply to EU, Sterling weakest

                                    By
                                    ActionForex.com
                                    -

                                    Entering into US session, Sterling is trading as the weakest one for today so far. Brexit concerns are weighing on the Pound. UK Prime Minister Theresa May is going to tell the parliament that 95% of the withdrawal agreement is done. But she continues to reject EU’s Irish backstop proposal. The deadlock remains a deadlock. Yen is among the weakest on strong global risk appetite, following rally in Chinese stocks and sharp fall in Italian yield. On the other hand, Canadian Dollar and Dollar are trading as the strongest ones. Canadian Dollar is trying to recover from Friday’s steep losses, with expectation that BoC will raise interest rate this week.

                                    Euro is mixed at the time of writing. EUR/USD hit as high as 1.1550 today but reversed after Italy replied to the EU, insisting to stick to its “hard” but “necessary” budget. The sentiment is not totally reflected in Italian yield though. Italian 10 year yield is down -0.1358 at 0.3446 at the time of writing. However, we’d like to point out that German 10 year yield is now at 0.459, down -0.004. That is, German-Italian spread is still at 298, less alarming but still very alarming.

                                    In European markets

                                    • FTSE is up 0.88% at 7111.94
                                    • DAX is up 0.81% at 11646.49
                                    • CAC is up 0.49% at 5109.37.

                                    Earlier in Asia,

                                    • China Shanghai SSE rose 4.09% to 2654.88, should have confirmed medium term bottoming.
                                    • Hong Kong HSI rose 2.32% to 26153.15
                                    • Nikkei rose 0.37% to 22614.82
                                    • Singapore Strait Times rose 0.51% to 3078.06.
                                    • Japan 10 year JGB yield rose 0.0031 to 0.153

                                    ECB Visco: Inflation may come down faster

                                      By
                                      ActionForex.com
                                      -

                                      Talking to Bloomberg TV, ECB Governing Council member Ignazio Visco said, “Since we have also been observing a substantial reduction in energy prices, we have to expect that this will be seen also in underlying inflation in the coming months, certainly by the end of the year.”

                                      Visco also suggested the possibility of a quicker pace than initially forecasted by ECB, saying, “The ECB projects that by the end of 2025 there will be 2% — my impression is that it might be faster.”

                                      Visco cautioned against the risks associated with making excessive adjustments, stating, “There is a risk of doing too much and I think that we have to be careful about that.” However, he also noted the potential risk of doing too little, emphasizing the need for balance and judicious decision-making based on incoming information.

                                      Meanwhile, another Governing Council member Klaas Knot expressed his perspective on potential policy adjustments beyond July. “For July I think it (rate hike) is a necessity, for anything beyond July it would at most be a possibility but by no means a certainty,” Knot said. He urged careful monitoring of the data from July onwards, to assess the distribution of risks surrounding the baseline.

                                      Eurozone CPI rose to 7.5% yoy, core CPI up to 3.1% yoy

                                        By
                                        ActionForex.com
                                        -

                                        Eurozone CPI accelerated sharply from 5.9% yoy to record high at 7.5% yoy in March, above expectation of 6.5% yoy. Core CPI also rose from 2.7% yoy to 3.0% yoy, but missed expectation of 3.1% yoy.

                                        Looking at the main components of Eurozone inflation, energy is expected to have the highest annual rate (44.7%, compared with 32.0% in February), followed by food, alcohol & tobacco (5.0%, compared with 4.2% in February), non-energy industrial goods (3.4%, compared with 3.1% in February) and services (2.7%, compared with 2.5% in February).

                                        Full release here.

                                        China announces additional tariffs on 5207 US imports, valued at USD 60B, rates from 5% to 25%

                                          By
                                          ActionForex.com
                                          -

                                          More from China, the Finance Ministry announced the counter measures to US threat of imposing 25% products on USD 200B in Chinese goods. The State Council’s Customs Tariff Commission decided to impost additional levies on 5207 US products, totalling around USD 60B in value.

                                          Additional 25% tariff will be imposed on 2493 products, additional 20% on 1078 products, additional 10% on 974 products and additional 5% on 662 products. The effect date is to be determined.

                                          Here is the official statement in simplified Chinese.

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