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US ISM manufacturing unchanged at 46.7, corresponds to -0.7% annualized GDP contraction

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    ActionForex.com
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    US ISM Manufacturing PMI was unchanged at 46.7 in November, missed expectation of 47.7. Looking at some details, new orders rose from 45.5 to 48.3. Production fell from 50.4 to 48.5. Employment fell from 46.8 to 45.8. Prices rose from 45.1 to 49.9.

    ISM said: “The past relationship between the Manufacturing PMI and the overall economy indicates that the November reading (46.7 percent) corresponds to a change of minus-0.7 percent in real gross domestic product (GDP) on an annualized basis.”

    Full ISM Manufacturing release here.

    Eurozone CPI holds steady at 5.3%, core CPI slows to 5.3%

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      ActionForex.com
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      In August, Eurozone’s CPI defied market expectations by remaining unchanged at a 5.3% yoy, contrary to anticipated slowdown to 5.1% yoy. Core inflation, which excludes energy, food, alcohol, and tobacco, did slow down, but only to match expectations, declining from 5.5% yoy to 5.3% yoy.

      A breakdown of the main components contributing to Eurozone’s inflation rate reveals a mixed bag. Food, alcohol, and tobacco are expected to register the highest annual rate in August at 9.8%, albeit lower than the 10.8% seen in July. Services come next, slipping slightly from 5.6% to 5.5%, followed by non-energy industrial goods which also dipped from 5.0% to 4.8%. Notably, energy costs seem to have eased their downward trend, registering at -3.3% compared to -6.1% in the previous month.

      Full Eurozone CPI release here.

      BoC Beaudry: Interest rate may need to go above 3%

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        ActionForex.com
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        BoC Deputy Governor Paul Beaudry said in a speech, “we noted that price pressures are broadening and inflation is much higher than we expected and likely to go higher still before easing.”

        “This raises the likelihood that we may need to raise the policy rate to the top end or above the neutral range to bring demand and supply into balance and keep inflation expectations well anchored,” he added.

        Beaudry also indicated that the neutral range, a rate that “neither stimulates nor weighs on growth”, is estimated to be “between 2% and 3%”

        Full speech here.

        Eurozone CPI finalized at 2.1%, core CPI at 1.1%

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          ActionForex.com
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          Eurozone CPI was finalized at 2.1% in July, up from June’s 2.0% and compares with 1.3% a year earlier. EU CPI was finalized at 2.2% in July, up from June’s 2.1%, compares with 1.5% a year earlier. Core CPI was finalized at 1.1%.

          Geographically, CPI ranged from 0.8% in Greece, 0.9% in Denmark and 1.0% in Ireland, to Romania (4.3%), Bulgaria (3.6%), Hungary (3.4%) and Estonia (3.3%). CPI in Germany was at 2.1%, France at 2.6% and Italy at 1.9%.

          Composition-wise, highest contribution came from energy at 0.89%, services at 0.64%, food alcohol and tobacco at 0.49%.

          Full release here.

          Into US session: Risk aversion eased thanks to Germany and China, Dollar pressured

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            ActionForex.com
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            Entering into US session, Dollar trades broadly lower for today, Swiss Franc and Japanese Yen followed. Meanwhile, Canadian, Australian and New Zealand Dollar are broadly higher.

            There is notably easing of risk aversion in early European session. One clear development is the strong rebound in German DAX which is trading up 1.3% at the time of writing. DAX is relieved by news that Chancellor Angela Merkel made a last minute deal with the Rebellious Interior Minister Horst Seehofer in immigration. That came after five hours of talks between the leader of Christian Democrats and Christian Social Union. CAC is trading up 0.97% while FTSE is up 0.54%.

            Another factor is the reversal in Chinese Stocks. The Shanghai SSE composite dropped to as low as 2722.45 earlier today but closed up 0.41% at 2786.88. The development propelled Australian Dollar back above 0.7328 key cluster support, with 0.74 back in sight.

            The decline in SSE was so steep, after clearing 3000 psychological, that it’s now close to an important support zone. That is, 100% projection of 3587.03 to 3062.73 from 3129.73 at 2695.44. It’s also now in proximity to 2638.30 (2016 low). Theoretically, downside momentum should slow on oversold condition and this 2638/95 zone should be defended on first attempt. A break above 2848.37 resistance would indicator short term bottoming.

            There is also prospect of more verbal, or even actual intervention by the Chinese government. But even in that case, the medium term outlook remains bearish as trade war with the US is inevitable. It’s just a matter of time when 2638.30 low is taken out firmly.

            Fed’s Mester: The next phase is not when to reduce rates

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              ActionForex.com
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              In a Financial Times interview, Cleveland Fed President Loretta Mester put emphasis on the duration of maintaining restrictive monetary policy to ensure that inflation reliably returns to the 2% target. That’s contrary to market expectations, which centers on timing and extent of rate cuts.

              Mester’s key statement, “The next phase is not when to reduce rates… It’s about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%,”

              “The markets are a little bit ahead. They jumped to the end part, which is ‘We’re going to normalize quickly’, and I don’t see that,” she added.

              When the discussion eventually shifts to the timing and pace of rate cuts, Mester highlighted the importance of one-year forward inflation expectations and their alignment towards the 2% target.

              “If you don’t take action as expected inflation comes down, then you’re really firming policy,” she warned. “You don’t want to inadvertently become more restrictive than you think is appropriate.”

              ADP employment grew 241k, USD lifted slightly

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                ActionForex.com
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                USD is lifted by better than expected job data in early US session. ADP report showed 241k growth in private sector jobs in March, well above expectation of 205k. Prior month’s figure was also revised up from 235k to 246k.

                Meanwhile, GBP is suffering some steeping selling after today’s much weaker than expected construction PMI, which dived into contractionary region at 47 in March. While EUR was supported by CPI and employment data, it only performs better than GBP in the current 4-hour bar.

                For the day, with US-China trade war as the main theme, NZD and JPY are trading as the strongest one. GBP is the weakest one, followed by CAD.

                Copper dips after hitting strong cluster resistance

                  By
                  ActionForex.com
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                  Copper prices dip notably today as metal traders appeared to be turning cautious ahead of FOMC rate decision. In addition, the market needs to seek direction from Chinese data including investment and production to gauge the outlook of demand.

                  Technically, Copper is facing a key cluster resistance zone at around 3.8229 support turned resistance, 55 D EMA (now at 3.8200), as well as 38.2% retracement of 4.3556 to 3.5393 at 3.8511. Rejection by this resistance zone, followed by 3.703 near term support will bring deeper fall back to 3.5393 low, with prospect of resuming the whole down trend from 4.3556. Given the correction between Australian Dollar and Copper, this bearish scenario could push AUD/USD back towards 0.6457 low.

                  On the other hand, sustained break of 3.8229/8511 will argue that whole fall from 4.3556 has completed with three waves down, and turn outlook bullish for 61.8% retracement at 4.0438 and above. This bullish development could help push AUD/USD through structural resistance at 0.6817 decisively.

                  Dollar extends rally after strong services and housing data

                    By
                    ActionForex.com
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                    Dollar’s rally seems to be finally picking up momentum after stronger than expected ISM services and new home sales. EUR/USD breaks 1.1316 minor support and should be heading back to 1.1215 low. USD/CHF also breaks 1.0024 and should be targeting 1.0098 resistance. USD/CAD also breaks 1.3340 resistance earlier today which indicates near term bullish reversal. Attention will be on 0.7054 support in AUD/USD to align dollar bullish outlook. At this point, Yen is the second strongest, followed by Aussie. New Zealand Dollar is weakest, followed by Sterling.

                    Hong Kong HSI gaps down after US warned of business risks

                      By
                      ActionForex.com
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                      Asian markets are trading broadly lower as led by Hong Kong HSI, which is down nearly -1.6% at the time of writing. In a late move last week, the US administration published a nine-page Hong Kong Business Advisory, jointly by the departments of State, Treasury, Commerce and Homeland Security. The document warned US firms of encountering a number of risks posed by China’s national security law in the city.

                      Today’s gap down in HSI suggests that corrective rebound from 26861.87 could have completed at 28218.52 already. The failure to even touch 55 day EMA is a near term bearish sign. The index could at least have another test on 26782.61 key medium term resistance turned support. Such development to cap gains in other Asian markets, and give Yen additional support.

                      RBA downgrades 2023, 2024 growth forecast, raised inflation

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                        ActionForex.com
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                        In the Statement on Monetary Policy, RBA noted that after a sequence of 50bps and 24bps rate hikes, “the Board recognised that interest rates had already been increased significantly in a short period of time”.

                        “In an uncertain environment, slowing the adjustment of policy allows time to assess the effects of the increases to date and the evolving economic outlook,” it added.

                        The Board expects that “interest rates will need to increase further”, but “monetary policy is not on a pre-set path”. The size and timing of future interest rate hikes will be determined by incoming data and assessment of the outlook of inflation and labor market.

                        In the new economic projections, year-average GDP growth forecast for:

                        • 2022 was left unchanged at 4%.
                        • 2023 was downgraded from 2.25% to 2.00%.
                        • 2024 was downgraded from 1.75% to 1.50%.

                        Year-end forecasts for headline CPI for:

                        • 2022 was revised up from 7.75% to 8.00%.
                        • 2023 was revised up from 4.25% to 4.75%.
                        • 2024 was revised up from 3.00% to 3.25%.

                        Year-end forecasts for trimmed mean CPI for:

                        • 2022 was revised up from 6.00% to 6.25%.
                        • 2023 was left unchanged at 3.75%.
                        • 2024 was revised up from 3.00% to 3.25%.

                        Year-end forecasts for unemployment rate for:

                        • 2022 was revised up from 3.25% to 3.50%.
                        • 2023 was revised up from 3.50% to 3.75%.
                        • 2024 was revised up from 4.00% to 4.25%.

                        Full SoMP here.

                        Coeure: ECB could communicate the range of inflation outcomes as target

                          By
                          ActionForex.com
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                          Outgoing ECB Executive Board Member Benoit Coeure said in farewell event today that the central bank should be more flexible with its inflation target. He said, “the ECB should clarify that it aims to deliver inflation of 2% over the medium term.  And it could communicate the range of inflation outcomes that can be considered acceptable in normal times.”

                          A band around the target wouldn’t weaken the central bank’s resolve. He added, “research shows that central banks have a strong incentive to already respond to inflation deviations within the tolerance zone, rather than waiting until inflation has crossed the edges.”

                          France PMI services revised down to 55.9, growth remained weak in Q2

                            By
                            ActionForex.com
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                            France PMI services was revised down to 55.9, from 56.4 in June, but up from May’s 54.3. PMI composite rose to 55.0, up from May’s 54.2.

                            Trevor Balchin, Economics Director at IHS Markit which compiles the France Services PMI® survey, said:

                            “French private sector expansion picked up in June, driven by a rebound in the services sector that more than offset a further slowdown in manufacturing output growth. Services activity has now outpaced goods production for the fifth month in a row.

                            “The overall rate of output growth was the second-weakest since January 2017, however, and on a quarterly basis the reading for Q2 (55.4) was the weakest since the final quarter of 2016 (52.0). This suggests that economic growth may remain weak in the second quarter, after the latest official release of GDP data confirmed a sharp slowdown in the first three months of the year. GDP growth slowed to 0.2% quarter-on-quarter in Q1 2018, having trended at an impressive 0.7% throughout the previous five quarters.”

                            Full France PMI services release.

                            Australia private credit rose 0.1%mom in Sep, PPI rose 0.4% qoq in Q3

                              By
                              ActionForex.com
                              -

                              Australia total private sector credit rose 0.1% mom in September, below expectation of 0.2% mom. Housing credit rose 0.4% mom. Personal credit dropped -0.8% mom. Business credit dropped 0.3% mom. Broad money rose 0.9% mom.

                              Also released, PPI rose 0.4% qoq in Q3 matched expectations. Over the year, PPI dropped -0.4% yoy.

                              FOMC Minutes: Slope of yield curve to be monitored

                                By
                                ActionForex.com
                                -

                                The minutes of the June FOMC meeting provided little inspirations to the markets overnight. It’s noted that job gains had been strong, unemployment rate hade decline, growth of household spending had picked up, business fixed investment continued to grow strongly, headline and core inflation have moved close to 2%, long term-inflation expectations were little changed. “Members viewed the recent data as consistent with a strong economy that was evolving about as they had expected.”

                                Flattening of the yield curve was a topic discussed during the meeting as that “might signal about economic activity going forward”. A numbers of factors were brought forward, including “reduction in investors’ estimates of the longer-run neutral real interest rate; lower longer-term inflation expectations; or a lower level of term premiums in recent years relative to historical experience reflecting, in part, central bank asset purchases.” And that could ” temper the reliability of the slope of the yield curve as an indicator of future economic activity.” A number of the meeting participants said that “it would be important to continue to monitor the slope of the yield curve.”

                                The minutes also noted that escalating trade tensions have already started hurting investments. The minutes pointed out that “many district contacts expressed concern about the possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity.” And, “contacts in some districts indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy.” And, most policymakers noted that “uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects”.

                                Australia Westpac leading index remains negative, indicating further slowdown

                                  By
                                  ActionForex.com
                                  -

                                  Australia’s Westpac Leading Index rose slightly from -1.04% to -0.94% in February, but it still marks the seventh consecutive month of negative growth rate, pointing to below-trend growth over the next 3-9 months. This is in line with Westpac’s forecast that growth in the Australian economy will be only 1% in 2023.

                                  The slowdown reflects the lagged effects of rising interest rates, a deep shock to real wages, a bottoming out of the savings rate, and falling house prices. Westpac also expects the weakness to extend into 2024, with more negative readings likely.

                                  RBA indicated in its March minutes that the board intends to consider a pause at its April meeting. However, Westpac does not expect that a decision to pause in April will mark the end of the cycle. It expects new information for the May meeting to indicate the need for a further response from the board, with a final 0.25% increase in the cash rate in May marking the end of the tightening cycle.

                                  Full Australia leading index release here.

                                  UK Hammond to China: We’re a firm supporter of trade liberalization and your long-term trusted partner

                                    By
                                    ActionForex.com
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                                    UK Chancellor of Exchequer Philip Hammond wrote in an article in China’s financial magazine Caixin, saying the the globalized UK is China’s long term partner. Hammond is visiting Beijing this week and he pledges to “convey a message to the outside world – as a firm supporter of trade liberalization and a free market, the United Kingdom is China’s long-term trusted partner.”

                                    Also, he wrote “Britain is committed to promoting free and open trade, and as Britain and its European cooperation partners form a new relationship, we will deepen our relations with other regions around the world.” And, there was “enormous development space” with cooperation with Chinese financial services businesses. Hammond also hailed that UK is an “ideal cooperation partner” to the Belt and Road initiative, and they would likely to ” grasp the unlimited opportunities” and “take a lead in its financing work.”

                                    This is Hammond’s article in simplified Chinese (gated). We’ve yet to find the English version.

                                    Into US session: Sterling weakest on Brexit deadlock, Dollar and Yen firm

                                      By
                                      ActionForex.com
                                      -

                                      Entering into US session, Sterling is once again the weakest one for today as Brexit uncertainty continues. But still, the Pound is holding above near term support levels against Dollar, Euro and Yen. And thus, it’s just experience volatility in tight range. After rejecting all four alternatives in the Commons, there remains no majority on the way forward regarding Brexit. And it’s reported that Conservative MP Oliver Letwin might be a abandoning attempts to use indicative votes to find a consensus.

                                      Meanwhile, Prime Minister Theresa May is maintaining the firm opposition to second referendum and a long Article 50 extension. The Financial Times even reported that May would rather go for a no-deal Brexit than revocation. It’s also reported that May is still considering to bring back her deal for a fourth vote. But Speaker John Bercow is said to reject it. After all, it seems no one knows what’s next.

                                      Staying in the currency markets, New Zealand Dollar is currently the second weakest, followed by Australian Dollar. Aussie dropped notably earlier today after RBA loosen up its monetary policy stance and hinted the next move is data-dependent. But there is no follow through selling yet. Meanwhile, Dollar and Yen are the strongest ones for today

                                      In Europe, currently:

                                      • FTSE is up 1.08%.
                                      • DAX is up 0.64%.
                                      • CAC is up 0.50%.
                                      • German 10-year yield is down -0.011 at -0.036.

                                      Earlier in Asia:

                                      • Nikkei closed down -0.03%.
                                      • Hong Kong HSI rose 0.21%.
                                      • China Shanghai SSE rose 0.20%.
                                      • Singapore Strait Times rose 0.90%.
                                      • Japan 10-year JGB yield is up 0.0101 at -0.068.

                                      SNB kept interest rate at -0.75%, downgrades inflation forecast

                                        By
                                        ActionForex.com
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                                        SNB left “expansionary” monetary policy unchanged as widely expected. Sight deposit rate is held at -0.75%. Three-month Libor target range is also kept at -1.25% to -0.25%. The central bank maintained the pledge to “remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration.”

                                        While Swiss Franc has depreciated slightly since December meeting, SNB said “it is still highly valued” and the currency markets situation remain “fragile”. Thus, negative interest rate and the SNB’s willingness to intervene in the foreign exchange market as necessary therefore remain essential. These measures keep the attractiveness of Swiss franc investments low and reduce upward pressure on the currency.

                                        Inflation forecast in 2019 is downgraded to 0.3%, down from December projection of 0.5%. For 2020, inflation is projected to be at 0.6%, down from 1.0%. For 2020, inflation is projected to pick up to 1.2%. The forecasts are based on keeping three-month Libor rate at -0.75% over the entire horizon. On growth, SNB expects GDP to grow by around 1.5% in 2019 as a whole.

                                        Full statement here.

                                        Australia PMI composite rose sharply to 52.2, back in expansion

                                          By
                                          ActionForex.com
                                          -

                                          Australia PMI Manufacturing rose to 57.3 in October, up from September’s 56.8. PMI Services jumped sharply to 52.0, up from 45.5. PMI Composite rose to 52.2, up from 46.0. All are four-month highs.

                                          Jingyi Pan, Economics Associate Director at IHS Markit, said: “Composite PMI indicated that the Australian economy is back in expansion in October as the easing of COVID-19 restrictions and plans for further opening up of the Australian economy restored confidence and rejuvenated economic activity…

                                          “Higher demand however translated to greater strains on the supply chain… Meanwhile employment levels rose at a slower rate with reports of constraints when trying to hire staff. These are issues that may persist in the short- to medium- term for firms as they take their time to clear.”

                                          Full release here.

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