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Eurozone PMI composite finalized at 20-mth low, hopes of avoiding recession further dashed

    By
    ActionForex
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    Eurozone PMI Services was finalized at 48.8 in September, down from August’s 49.8, a 19-month low. PMI Composite was finalized at 48.1, down from prior month’s 48.9, a 20-month low.

    Looking at some member state, Ireland PMI Composite rose to 52.2 while France rose to 51.2. But Spain dropped to 48.4 (8-month low). Italy dropped to 47.6 (20-month low). Germany dropped to 45.7 (28-month low).

    Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Any hopes of the eurozone avoiding recession are further dashed by the steepening drop in business activity signalled by the PMI. Not only is the survey pointing to a worsening economic downturn, but the inflation picture has also deteriorated, meaning policymakers face an increasing risk of a hard landing as they seek to rein in accelerating inflation.

    Full release here.

    AUD/NZD topped but not reversing yet

      By
      ActionForex
      -

      AUD/NZD spikes lower after RBNZ’s 50bps rate hike. The development also came with the background that RBA disappointed the markets with a 25bps hike yesterday.

      Technically, a short term top was in place at 1.1489 after AUD/NZD hit medium term channel resistance. But it’s still early to call for a medium term correction. As long as 55 day EMA (now at 1.1211) holds, the consolidation from 1.1489 should be relatively brief, and larger up trend should resume sooner rather than later.

      However, firm break of the 55 day EMA will open up deeper correction through channel support to 1.0987, before having some support for a bounce.

      RBNZ hikes by 50bps, considered 75bps

        By
        ActionForex
        -

        RBNZ raises Official Cash Rate by 50bps 3.50% as widely expected. In the summary of record it’s noted that the Committee considered whether to hike by 50bps or 75bps, but decided that 50bps was appropriate at this meeting.

        In the statement, RBNZ noted that domestic spending has remained “resilient”. Employment levels are “high” while productivity capacity is “constrained” by labor shortages. wage pressures are “heightened”. Also, “spending continues to outstrip the capacity to supply goods and services, with a range of indicators continuing to highlight broad-based pricing pressures.”

        Full statement here.

        Fed Daly: Needs to hold restrictive policies until truly done on inflation

          By
          ActionForex
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          San Francisco Fed President Mary Daly said Fed needs to raise interest further and hold restrictive policies in place until it’s “truly done” on bring back inflation to 2% target.

          “Those interest rate increases slow the economy and they do have spillover effects on currencies in other countries,” Daly said, of the Fed’s interest-rate rises. “But central banks, no matter where you are, are meant to create policy for the nation that they serve, and then we have to be aware of how this affects the global economy because that’s part of the puzzle.”

          ECB Villeroy: Should continue rate hike to neutral by year end

            By
            ActionForex
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            ECB Governing Council member Francois Villeroy de Galhau said in a Dutch newspaper NRC interview, “we will raise interest rates as much as necessary to bring core inflation down.”

            Villeroy added that ECB should continue raising interest rates, “without hesitation”, to neutral “by the end of the year”. He estimates that neutral a somewhere “below or close to 2%”.

            “I don’t say that rate hikes will stop there, but we will have to comprehensively assess the inflation and economic outlook,” he added.

            Eurozone PPI up 5.0% mom, 43.3% yoy in Aug

              By
              ActionForex
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              Eurozone PPI rose 5.0% mom 43.3% yoy in August. For the month,industrial producer prices increased by 11.8% in the energy sector, by 0.8% for non-durable consumer goods, by 0.4% for capital goods, by 0.3% for durable consumer goods and by 0.1% for intermediate goods. Prices in total industry excluding energy increased by 0.3%.

              EU PPI rose 4.9% mom, 43.0% yoy. The highest monthly increases in industrial producer prices were recorded in Ireland (+28.4%), Bulgaria (+12.5%) and Hungary (+10.6%), while the only decreases were observed in Luxembourg (-1.8%), Portugal (-0.6%) and Czechia (-0.1%).

              Full release here.

              Fed Williams: Our job on inflation is not yet done

                By
                ActionForex
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                New York Fed President John Williams said yesterday, “Clearly, inflation is far too high, and persistently high inflation undermines the ability of our economy to perform at its full potential. Tighter monetary policy has begun to cool demand and reduce inflationary pressures, but our job is not yet done.”

                He expects inflation to ease to 3% next year, and move “close to our 2% goal in the next few years”. “To help rein in demand to levels consistent with supply—and therefore bring inflation down—monetary policy needs to do its job,” Williams said. “The FOMC is taking strong actions toward that end.”

                BoE Mann: Premature to judge how mini-budget affect monetary policy trajectory

                  By
                  ActionForex
                  -

                  BoE MPC member Catherine Mann said yesterday that it’s “premature” to judge the extent of UK Prime Minister Liz Truss’s budget is going to affect “monetary policy trajectory decisions”.

                  “I people don’t have to spend their money on heating their apartments, or homes, they are now we’re in a position to redirect some of that spending on to other goods and services,” she added. “So it’s that ability to redirect expenditures on goods and services, that becomes an important consideration for the monetary policy trajectory.”

                  Mann also expressed her concern that inflation expectations are “drifting” away from BoE’s anchor. “I do see increasingly embedded inflation, I do see inflation expectations drifting, I do see a sterling depreciation spillover and I do see daylight between real incomes and real consumption possibilities,” she said.

                  RBA hikes by only 25bps, maintain tightening bias

                    By
                    ActionForex
                    -

                    RBA raises the cash rate target by only 25bps to 2.60%, smaller than expectation of a 50bps hike. Tightening bias is maintained as the board “expects to increase interest rates further over the period ahead”. The size and timing of future hikes will continued to be determined by incoming data and the board’s assessment of inflation and labor market outlook.

                    In the accompanying statement, RBA said inflation is expected to “further increase” over the coming months. CPI would be around 7.75% over 2022, a little above 4% over 2023, and around 3% over 2024. The economy is “continuing to grow solidly” with national income boosted by a “record level of the terms of trade”. Labor markets is “very tight”. Wages growth is “continuing to pick up” but “remains lower than in other advanced economies” with high inflation.

                    Full statement here.

                    AUD/USD dips slightly after the smaller than expected rate hike, but there is no follow through selling. Consolidation pattern from 0.6362 is still in progress with bearish bias for downside breakout at a later stage.

                    Gold and Silver jump after poor US ISM

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

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

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

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

                      US ISM manufacturing dropped to 50.9, lowest in more than 2 years

                        By
                        ActionForex
                        -

                        US ISM Manufacturing PMI dropped from 52.8 to 50.9 in September, below expectation of 52.3. That’s the lowest level since May 2020. Looking at some details, new orers dropped from 51.3 to 47.1. Production rose slightly from 50.4 to 50.6. Employment dropped notably from 54.2 to 48.7. Prices dropped from 52.5 to 51.7.

                        ISM said: “The past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI for September (50.9 percent) corresponds to a 0.8-percent increase in real gross domestic product (GDP) on an annualized basis.”

                        Full release here.

                        UK PMI manufacturing finalized at 48.4, goods producing sector a drag on GDP

                          By
                          ActionForex
                          -

                          UK PMI Manufacturing was finalized at 48.4 in September, up from August’s 47.3. S&P Global said output and new orders fell further. New export business declined. Input costs and output price inflation accelerated.

                          Rob Dobson, Director at S&P Global Market Intelligence, said: “The downturn in UK manufacturing continued at the end of the third quarter, meaning the goods producing sector looks set to have acted as a drag on GDP. Manufacturers have once again cut back production as new order intakes declined for the fourth successive month.

                          “Factories are reporting tough market conditions both at home and abroad. Disappointingly, exports continue to fall despite the more competitive exchange rate.

                          “There was also less positive news on the price front, with rates of inflation in input costs and selling prices both picking up in September, linked in part to import costs rising due to the weaker pound.

                          Full release here.

                          Eurozone PMI manufacturing finalized at 48.4, ugly combination of recession and inflation

                            By
                            ActionForex
                            -

                            Eurozone PMI Manufacturing was finalized at 48.4 in September, down from August’s 49.6. That’s also a 27-month low. Looking at some member states, France PMI Manufacturing was finalized at 47.7, a 28-month low. Germany was finalized at 47.8, a 27-month low. Greece (49.7), the Netherlands (49.0), Spain (49.0), Austria (48.8) and Italy (48.3) were all in contraction, while Ireland (51.5) was in expansion.

                            Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “The ugly combination of a manufacturing sector in recession and rising inflationary pressures will add further to concerns about the outlook for the eurozone economy… Excluding the initial pandemic lockdowns, eurozone manufacturers have not seen a collapse of demand and production on this scale since the height of the global financial crisis in early-2009.

                            Full release here.

                             

                            Swiss CPI unexpectedly slowed to 3.3% yoy, EUR/CHF extends rebound

                              By
                              ActionForex
                              -

                              Swiss CPI dropped -0.2% mom in September, below expectation of 0.1% mom. The decrease of 0.2% compared with the previous month can be explained by several factors including falling prices for fuels, heating oil, hotels and supplementary accommodation. In contrast, prices for clothing and footwear increased.

                              Comparing with the same month a year ago, CPI slowed to 3.3% yoy, down from 3.5% yoy, below expectation of 3.5% yoy. Core CPI (excluding fresh and seasonal products, energy and fuel) was flat mom, up 2.0% yoy (unchanged from August). Domestic product prices rose 1.8% yoy (unchanged from August). Imported product prices rose 7.8% yoy (down from 8.6% yoy in August).

                              Full release here.

                              EUR/CHF rises further as Swiss CPI unexpectedly slowed. Immediate focus is now on 0.9712 resistance. Firm break there will raise the chance of larger bullish reversal, and target 0.9864 structural resistance for confirmation.

                              Japan PMI manufacturing finalized at 50.8, weakness even turned worse

                                By
                                ActionForex
                                -

                                Japan PMI Manufacturing was finalized at 50.8 in September, down from August’s 51.5. S&P Global said high inflation and subdued global market conditions weight on order books. Output fell at sharpest pace in a year, while input buying reduced. Weak yen drove inflationary pressures higher.

                                Joe Hayes, Senior Economist at S&P Global Market Intelligence, said: “Weakness in Japan’s manufacturing sector persisted in September and even turned worse. New orders fell at their sharpest rate in two years – high inflation is eroding client purchasing power, while slowing global economic growth is hurting exports. Weakness in the yen is doing little to bolster export demand either and instead is pushing imported inflation up drastically and drove domestic price pressures up even further.”

                                Full release here.

                                Japan business outlook deteriorated in Q3

                                  By
                                  ActionForex
                                  -

                                  Japan Tankan large manufacturing index dropped from 9 to 8, below expectation of 11. That’s the third straight quarter of deterioration. Non-manufacturing index improve slightly from 13 to 14, above expectation of 13, and rise for the second straight quarter.

                                  Large manufacturing outlook dropped from 10 to 9, below expectation of 11. Non-manufacturing outlook also deteriorated from 13 to 11, below expectation of 15.

                                  Nevertheless, large companies are expected to increase capital expenditure by 21.5% in the current fiscal year ending March 2023, above expectation of 18.8%.

                                  Meanwhile, companies expect inflation to hit 2.6% a year from now, and 2.1% three years ahead. Five years ahead inflation is also projected at 2.0%, highest since data became available in 2014.

                                  BoJ: Upside risks of inflation to be examined humbly and without any preconceptions

                                    By
                                    ActionForex
                                    -

                                    In the summary of opinions of BoJ’s September 21-22 meeting, it’s noted that risks of “consumer prices deviating significantly upward from the baseline scenario, including the impact of foreign exchange rates, needs to be examined humbly and without any preconceptions.”

                                    But while a “certain degree of upside risk to prices” exists, there is a “long way to go” to achieve 2% inflation target in a “sustainable and stable manner”. Output gap has been “negative”, unemployment rate and active active job openings-to-applicants ratio “have not returned to pre-pandemic levels”. Surge in energy and raw material prices has brought about an “outflow of income” from Japan. It is “appropriate” to continue with the current monetary easing.

                                    Regarding exchange rate, one opinion noted that ” further depreciation of the yen is partly due to differences in the direction of monetary policy between Japan and other economies.. the Bank needs to carefully explain the significance of continuing with the current monetary easing.”

                                    Full summary of opinions here.

                                    US PCE price slowed to 6.2% yoy, core PCE rose to 4.9% yoy

                                      By
                                      ActionForex
                                      -

                                      US personal income rose 0.3% mom or USD 71.6B in August, matched expectations. Personal spending rose 0.4% mom or USD 67.6B, above expectation of 0.2% mom.

                                      PCE price index rose 0.3% mom, matched expectations. PCE core price index, ex-food and energy, rose 0.6% mom, above expectation of 0.5% mom. Prices for goods dropped -0.3% mom while prices for services rose 0.6% mom. Food prices rose 0.8% mom. Energy prices dropped -5.5% mom.

                                      From the same month a year ago, PCE price index slowed from 6.4% yoy to 6.2% yoy, below expectation of 6.6% yoy. PCE core price index, ex-food and energy, accelerated from 4.7% yoy to 4.9% yoy, above expectation of 4.7% yoy. Goods prices rose 8.6% yoy while services prices rose 5.0% yoy. Food prices jumped 12.4% yoy and energy prices jumped 24.7% yoy.

                                      Full release here.

                                      Eurozone CPI rose to 10% yoy in Sep, energy up 40.8% yoy, food up 11.8% yoy

                                        By
                                        ActionForex
                                        -

                                        Eurozone CPI accelerated further from 9.1% yoy to 10.0% yoy in September, above expectation of 9.1% yoy. CPI core (ex-energy, food, alcohol & tobacco) also rose from 4.3% yoy to 4.8% yoy, above expectation of 4.7% yoy.

                                        Looking at the main components , energy is expected to have the highest annual rate in September (40.8%, compared with 38.6% in August), followed by food, alcohol & tobacco (11.8%, compared with 10.6% in August), non-energy industrial goods (5.6%, compared with 5.1% in August) and services (4.3%, compared with 3.8% in August).

                                        Full release here.

                                        Swiss KOF edged up to 93.8, still augurs a cooling of economy

                                          By
                                          ActionForex
                                          -

                                          Swiss KOF Economic Barometer rose slightly from 93.5 to 93.8 in September, better than expectation of of 86.2. yet, the reading remains below its long-term average, “augurs a cooling of the Swiss economy for the end of 2022.”

                                          The slight increase is “primarily attributable to bundles of indicators from the manufacturing and other services sectors”. On the other hand, “indicators from the finance and insurance sector and for foreign demand are sending negative signals.”

                                          Full release here.

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