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Fed Barkin: Gonna be a lot more inertia, persistence to inflation

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    ActionForex.com
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    Richmond Fed President Thomas Barkin told BloombergTV that today’s US CPI data is “about as expected”.

    “Inflation is normalizing but it’s coming down slowly. I just think there’s gonna be a lot more inertia, a lot more persistence to inflation than maybe we’d all want,” he added.

    ISM manufacturing dropped to 52.1, price paid jumped, manufacturers concerned with trade war escalation

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      ActionForex.com
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      ISM Manufacturing Index dropped to 52.1 in May, down from 52.8 and missed expectation of 53.0. Looking at some details, new orders rose from 51.7 to 52.7, productions dropped from 52.3 to 51.3. Employment rose from 52.4 to 53.7. Prices rose 3.2 to 53.2.

      “Respondents expressed concern with the escalation in the U.S.-China trade standoff, but overall sentiment remained predominantly positive. The PMI® continues to reflect slowing expansion,” says Timothy Fiore, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee..

      Here are some comments from respondents:

      • “Ongoing tariffs [issue is] impacting costs and influencing supplier realignment on country of origin. Border issue is causing delays in imports from Mexico.” (Computer & Electronic Products)
      • “The threat of additional tariffs has forced a change in our supply chain strategy; we are shifting business from China to Mexico, which will not increase the number of U.S. jobs.” (Chemical Products)
      • “Sales remain strong. Labor remains tight. Tariffs are having a significant impact on cost of goods. No impact on where we buy our goods.” (Food, Beverage & Tobacco Products)
      • “The threat of a 15-percent increase on Section 301 tariffs is a concern. Although the potential has been around for months, the recent deadline was not expected. We had calculated and communicated the potential cost impact to our leadership.” (Petroleum & Coal Products)
      • “Newly increased tariffs on Chinese imports pose an issue on a number of chemicals and materials that are solely produced in China. We are expecting increases in raw materials starting June 1.” (Plastics & Rubber Products)

      Full release here.

      German ZEW rose to 61.8, despite uncertainty about further course of lockdown

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        ActionForex.com
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        German ZEW economic sentiment rose to 61.8 in January, up from 55.0, above expectation of 60.0. Current situation index edged up to -66.4, from -66.5, above expectation of -68.0. Eurozone economic sentiment rose to 58.3, up from 54.4, above expectation of 45.5. Eurozone current situation dropped -3.2 pts to -78.9.

        “Despite the uncertainty about the further course of the lockdown, the economic outlook for the German economy has improved slightly. The results of the ZEW Financial Market Survey in January show that export expectations in particular have risen significantly,” comments ZEW President Professor Achim Wambach.

        Full release here.

        Germany’s Gfk consumer climate rises to -25.1, consumers still have major worries

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          ActionForex.com
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          Germany’s Gfk Consumer Climate for January rose from -27.6 to -25.1. In December, income expectations rose from -16.7 to -6.9. Willingness to buy rose from -15.0 to -8.8. Willingness to save rose from 5.3 to 7.3.

          “It remains to be seen whether the current increase represents the start of a sustained recovery in consumer sentiment,” explains Rolf Bürkl, consumer expert at NIM.

          “Consumers still have major worries. Geopolitical crises and wars, sharply rising food prices and discussions around national budget for 2024 continue to cause uncertainty. As a result, the level of consumer sentiment is currently still very low.”

          Full German Gfk consumer climate release here.

          Trump to announce USD 50b tariffs on China today, China fights back… verbally… for now

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            Trump is set to announce the tariffs on 100 different types of Chinese goods today, as follow up to the section 301 of the Trade Act of 1974 investigation. Bloomberg reported that the targeted amount would be at around USD 50b annually. White House official Raj Shah also said in a statement that “tomorrow the president will announce the actions he has decided to take based on USTR’s 301 investigation into China’s state-led, market-distorting efforts to force, pressure, and steal U.S. technologies and intellectual property.” It’s believed that the tariffs won’t take effect immediately. And the list of targeted products will be finalized after industry input. But it’s only confirmed when it’s confirmed.

            On the other hand, China is readying retaliation measures. But before that, China’s Ministry of Commerce pointed to WTO ruling against the Obama-era anti-subsidy tariffs. Back in 2012, China went to WTO to challenge U.S. anti-subsidy tariffs on Chinese exports including solar panels, wind turbines, steel cylinders and aluminum extrusions. And, the WTO ruled the United States had not fully complied with a 2014 ruling against its anti-subsidy tariffs on a range of Chinese products

            The MOFCOM criticized that the US has “violated WTO rules, repeatedly abused trade remedy measures, which has seriously damaged the fair and just nature of the international trade environment and weakened the stability of the multilateral trading system.” THe MOFCOM also pledged to oppose “protectionism by the US ahead of any possible trade measures against China” and to ” take all necessary measures to resolutely protect its interests”

            Separately, a former vice commerce minister and now an executive deputy director of the China Center for International Economic Exchanges, Wei Jianguo, warned that “if Trump really signs the order, that is a declaration of trade war with China.” Wei said “China is not afraid, nor will it dodge a trade war.” And, there are “plenty of measures to fight back, in areas of automobile imports, soybean, aircraft and chips.

            OECD: Global growth to strengthen in 2018, 2019

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              OECD Interim Economic Outlook: GETTING STRONGER, BUT TENSIONS ARE RISING

              The world economy will continue to strengthen in 2018 and 2019, with global GDP growth projected to rise to about 4%, from 3.7% in 2017.

              Stronger investment, the rebound in global trade and higher employment are helping to make the recovery increasingly broad-based.

              New tax reductions and spending increases in the United States and additional fiscal stimulus in Germany are key factors behind the upward revision to global growth prospects in 2018 and 2019.

              Inflation remains low, but is likely to rise modestly.

              Still-elevated risk-taking and high debt levels in many countries raise financial vulnerabilities. Monetary policy normalisation could also result in greater volatility of exchange rates and capital flows, particularly in emerging market economies.

              Medium-term growth prospects remain much weaker than prior to the financial crisis, reflecting less favourable demographic trends and a decade of sub-par investment and productivity.

              Economic policies face several challenges:

              • A gradual normalisation of monetary policy is needed, but to a varying degree across the major economies. Continued clear communication about the path to normalisation is essential to minimise the risk of financial market disruptions.
              • Fiscal policy choices should avoid being excessively pro-cyclical and be clearly focused on measures that strengthen the prospects for sustainable and more inclusive medium-term growth.
              • Structural reform efforts should be revived, seizing the opportunity of the stronger economy to help secure a more robust recovery of productivity, investment and living standards.

              Safeguarding the rules-based international trading system will help to support growth and jobs. Governments should avoid escalation and rely on global solutions to resolve excess capacity in the global steel industry.

              Handout for the press

              Download the presentation

              Fed Clarida: Necessary conditions for rate hike to be met by 2022 end

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                ActionForex.com
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                In a speech, Fed Chair Vice Clarida said the US is “a ways away from considering raising interest rates”. However, if outlook for inflation and unemployment realized over time, the “three necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022”.

                Clarida also said his individual projections for GDP growth, the unemployment rate, inflation and the policy rate path were quite close the the September median projections. Real GDP would return to its prepandemic trend growth trajectory by Q4 this year, representing “one of the most rapid such recoveries in 50 years.” The 4.2 “employment gap” relative to the previous cycle peak will be eliminated by the end of 2022.

                Realized PCE inflation so far this year was “much more than a ‘moderate’ overshoot” of the 2% target. But ” I would not consider a repeat performance next year a policy success”. Also, risks to inflation outlook are “to the upside”.

                Full speech here.

                Fed Williams: Clearly, right not, we have not achieved substantial further progress

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                  ActionForex.com
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                  New York Fed President John Williams said Fed has a “very clear market” that “substantial further progress” needed to be achieved before tapering asset purchases. “That’s where I’m focused, clearly, right now we have not achieved that,” he said.

                  “This is a time of very high uncertainty,” he noted, adding that “I’m not going to give a forecast of when the committee will come to a decision around changing the pace of asset purchases.” He preferred completing tapering before raising interest rates but “that’s way off in the future for me”.

                  US NFP rose 187k in Jul, missed expectations

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                    US non-farm payroll employment rose 187k in July, below expectation of 200k. That’s also notably lower than the average monthly gain of 312k over the prior 12 months.

                    Unemployment rate ticked down from 3.6% to 3.5%, below expectation of 3.6%. Unemployment rate has been ranging between 3.4% and 3.7% since March 2022. Labor force participation rate was unchanged at 62.6% for the fifth consecutive month.

                    Average hourly earnings rose 0.4% mom, above expectation of 0.3% mom. Over the past 12 months, average hourly earnings has increased by 4.4% yoy. Average workweek fell slightly by -0.1 hour to 34.3 hours.

                    Full US non-farm payroll release here.

                    BIS: Cash is still on the rise

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                      ActionForex.com
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                      The Bank of International Settlement said in the quarterly review: –

                      • “Some of the breathless commentary gives the impression that cash in the form of traditional notes and coins is going out of fashion fast,”
                      • “Despite all the technological improvements in payments in recent years, the use of good old-fashioned cash is still rising in most, though not all, advanced and emerging market economies.”
                      • “The resilience of cash as a social institution reminds us of the importance of understanding the economic functions of money, beyond just the innovations in technology,”

                      BoJ minutes reveal diverging views on future policy direction

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                        ActionForex.com
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                        The minutes from BoJ meeting held on July 27 and 28 have unveiled differing perspectives among board members regarding the future direction of monetary policy. While a consensus was apparent on the immediate need to sustain ultra-low interest rates, members were divided on how to approach the medium to long term.

                        One member stated, “there was still a significantly long way to go before revising the negative interest rate policy, and the framework of yield curve control needed to be maintained”.

                        The same member emphasized the importance of patience and consistency, suggesting that “it should carefully nurture the long-awaited signs of change in firms’ behavior by patiently continuing with monetary easing.”

                        Another participant weighed the risks of delaying versus hastening monetary tightening. In their perspective, the “risk of missing a chance to achieve the 2 percent target due to a hasty monetary tightening outweighed the risk of the inflation rate continuing to exceed 2 percent if monetary tightening fell behind the curve.”

                        Yet another member presented a more optimistic outlook on the inflation target, noting that the “achievement of 2 percent inflation in a sustainable and stable manner seemed to have clearly come in sight.” They further suggested that between January and March 2024, it might be feasible to evaluate the Bank’s success in achieving the inflation target.

                        Despite the differences in outlook, BoJ decided to persist with its current easing policy settings but also opted to grant long-term borrowing costs more flexibility to rise.

                        Full BoJ minutes here.

                        UK PM May to boost trade with Commonwealth family

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                          ActionForex.com
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                          The leaders of the 53 Commonwealth member states are meeting in the Commonwealth Heads of Government Meeting this week. UK Prime Minister Theresa May is expected to make use of her speech at the business forum today to boost trade as Brexit looms.

                          Ahead of the meeting, May said in a statement that “our Commonwealth family already accounts for one-fifth of global trade.” And “we must continue to work together to build further upon this solid foundation by building on our existing trade links and establishing new ones.” May is set to unveil new programs to boost Commonwealth-wide support to women-owned businesses. There will also be new funding for a new Commonwealth Standards Network to establish a common language for goods and services.

                          Separately, a major push for a “people’s vote” on the final Brexit deal was launched by MPS of different parties, celebrities and business leaders. The MPs included Conservative Anna Soubry, Labour’s Chuka Umunna, the Greens’ Caroline Lucas and Liberal Democrat Layla Moran.

                          AUD/JPY breaks 80 as up trend continues, targets 84.6, then 88.0

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                            ActionForex.com
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                            AUD/JPY’s rally continues today and reaches as high as 80.14 so far. Outlook will now stay bullish as long as 78.83 support holds. Current rally is part of the up trend from 59.89 and should target 61.8% projection of 59.89 to 78.46 from 73.13 at 84.60.

                            The break of the multi-year channel resistance, as well as the strong from rising 55 week EMA, suggests that whole down trend from 105.42 has completed with three waves down to 59.89. We’re now looking at further rally, in the medium term, to 61.8% retracement of 105.42 to 59.89 at 88.02.

                            Canada CPI rose to 1.1% yoy, ex-gasoline down to 1.0% yoy

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                              ActionForex.com
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                              Canada CPI accelerated to 1.1% yoy in February, up from 1.0% yoy, but missed expectation of 1.3% yoy. Excluding gasoline, CPI slowed to 1.0% yoy, down from 1.3% yoy. CPI Common was unchanged at 1.3% yoy, missed expectation of 1.4% yoy. CPI median was unchanged at 2.0% yoy, matched expectations, CPI trimmed rose to 1.9% yoy, up from 1.8% yoy, below expectation of 1.8% yoy.

                              Full release here.

                              ECB’s Muller expects steady interest rates for the time being

                                By
                                ActionForex.com
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                                ECB Governing Council member Madis Muller said today he does not anticipate any further hikes in interest rates for the time being.

                                The significant question is on the duration for which borrowing costs might remain at heightened levels. Expounding on this, he mentioned, “will depend on how the euro-area economy develops over the year and how the slowing of inflation plays out.”

                                Highlighting the current economic climate, Muller stated, “Right now, we see that the economic situation is relatively weak in the euro area as a whole.”

                                He, however, expressed a cautious optimism about the region’s economic future, noting the potential for modest improvements. ”

                                Looking forward, it could start improving slightly. If the recovery is slower, then that means smaller pressures in terms of inflation,” Muller added.

                                Sterling lifted mildly as domestic data gave Carney some confidence

                                  By
                                  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.

                                  Fed Bullard: I’m thinking two more moves this year

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                                    ActionForex.com
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                                    St. Louis Fed President James Bullard reiterated the need for more rate hikes to combat persistent inflationary pressures. He stated, “I think we’re going to have to grind higher with the policy rate in order to put enough downward pressure on inflation and to return inflation to target in a timely manner.”

                                    “I’m thinking two more moves this year – exactly where those would be this year I don’t know – but I’ve often advocated sooner rather than later,” he added.

                                    According to Bullard, Fed’s March median forecast, which suggested rates peaking at 5.1%, was predicated on a slowing U.S. economy and rapidly falling inflation. Instead, he noted, the economy has exhibited robust growth and inflation has not been abating as swiftly as hoped.

                                    With this unexpected scenario in play, Bullard cautioned about the risks of inflation not subsiding to lower levels. Referring to the buoyant labor market, he emphasized, “As long as the labor market is so good it is a great time to get this problem behind us and not replay the 1970s.”

                                    China won’t adjust global quota on wheat, corn and rice for US trade deal

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                                      China’s Vice Agriculture Minister Han Jun told Caixin media that the country is not going to adjust overall annual quota for the three staple food despite the US-China trade deal phase one. The annual quotas are 9.64 million tonnes for wheat, 7.2 million tonnes for corn and 5.32 million tonnes for rice.

                                      “This is a global quota. We will not adjust for one country,” Han said. “China imports wheat, corn and rice from the international market, mainly to moderate the domestic surplus”. Han’s comments were in line with some expectations that China has to cut imports from other markets to accommodate the agreed increase in US agricultural products.

                                      Chinese Vice Premier Liu He has scheduled to travel to Washington from January 13 to 15, to sign the phase one trade deal with the US.

                                      Eurozone PMI manufacturing finalized at 53.2, export-led slowdowns clearly evident in Germany, France, Italy, Spain and Austria

                                        By
                                        ActionForex.com
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                                        Eurozone PMI manufacturing was finalized at 53.2 in September, revised down from down from August’s 54.6. Key findings are “exports rise only slightly, weighing on growth of total orders and production”, and, “global trade concerns push confidence down to near three-year low”.

                                        Among the countries, German PMI manufacturing was finalized at 25-month low at 53.7. Austria PMI manufacturing dropped to 23-month low at 55.0. Spain reading dropped to 51.4, 25-month low. Italy reading dropped to 50.0, 25-month low.

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

                                        “Eurozone manufacturing shifted down yet another gear at the end of the third quarter. The sector has seen booming growth at the start of the year rapidly fade to the worst performance for two years in September as production and jobs growth have slowed in response to a stalling of export trade.

                                        “The survey paints the worst trade picture for over five years, with export growth having slumped sharply from a series record high in late 2017 to near-stagnation in September.

                                        “The slowdown can be linked to sluggish demand and increased risk aversion among customers, often linked to worries about trade wars and tariffs, but also ascribed to rising political uncertainty and higher prices.

                                        “Forward-looking survey indicators suggest the worst is yet to come: optimism about the year ahead is close to a three-year low, inflows of new orders and input buying are the weakest for over two years and backlogs of work are dropping for the first time in over three years.

                                        “Production also continues to run ahead of order book growth, which is a key sign that output and jobs growth will be reined-in further as we move into the fourth quarter unless demand revives.

                                        “Export-led slowdowns are clearly evident in Germany, France, Italy, Spain and Austria, but the weakening picture is by no means universal, with the Netherlands and Ireland being notable in continuing to report strong growth of both output and exports.”

                                        Full release here.

                                        Also from Eurozone, unemployment rate dropped to 8.1% in August, below expectation of 8.2%.

                                        Fed chair Powell press conference live stream

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