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UK unemployment unchanged at 4.2%, Sterling ignores wage growth miss

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    ActionForex.com
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    UK claimant count dropped -7.7k in May, better than expectation of 11.3k rise.

    Unemployment rate was unchanged at 4.2% 3 months to April, met expectation.

    Average weekly earnings, including bonus, slowed to 2.5% 3moy in April, below expectation of 2.6% 3moy. Prior month’s reading at 2.6% 3moy.

    Average weekly earnings including bonus slowed to 2.8% 3moy, below expectation of 2.9% 3moy. Prior month’s reading at 2.9% 3moy.

    At the time of writing, Sterling shrugs off the weaker than expected wage growth and strengthens against Dollar and Yen.

    Fed Bostic supports another 75bps rate hike in Jul

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      ActionForex.com
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      Atlanta Fed president Raphael Bostic said yesterday, “the data that came in the last several months really pointed to a need for us to get closer to that neutral stance faster,”

      “I’m confident that the economy will be able to withstand this next move. I would support a 75 basis point” rate hike at the July FOMC meeting, he added.

      Beyond July, the decisions will depend on incoming economic data. “If demand comes down much faster than we expected or supply comes back, I will be comfortable pulling off” further rate increases, Bostic said.

      Separately, St. Louis Federal Reserve president James Bullard said, “now we have lots of inflation, but the question is, can we get back to 2% without disrupting the economy? I think we can.”

      RBA Lowe: What’s of concern is accumulation of downside risks

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        ActionForex.com
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        RBA Governor Philip Lowe said today that the central scenario for 2019 is for growth of around 3%, inflation of around 2%and unemployment of around 5. And “this is not a bad set of numbers”. However, what is more of concern is the “accumulation of downside risks”.

        The first major area of risks globally is “political risks” including US-China trade and technology tensions, Brexit, rise of populism and strains in some wester European countries. Second area of international risk is China slowdown. Domestically, RBA board has recently been paying “particularly close attention” to household spending and housing market. Lowe noted that ” underlying trend in consumption is softer than it earlier looked to be”. Decline housing prices could also affect overall spending.

        On monetary policy, Lowe reiterated that “the probability that the next move is up and the probability that it is down are more evenly balanced than they were six months ago.”

        Lowe’s full remarks here.

        IMF Blog: Faster Fed hike could rattle financial markets

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          ActionForex.com
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          In an blog post, senior IMF officials said the continued to expect “robust US growth”. Inflation will “likely moderate” late this year as supply disruptions ease and fiscal contraction weighs on demand. Fed’s indication that it would raise interest rate more quickly “did not cause a substantial market reassessment of the economic outlook”.

          “Should policy rates rise and inflation moderate as expected, history shows that the effects for emerging markets are likely benign if tightening is gradual, well telegraphed, and in response to a strengthening recovery,” the post noted.

          However, “broad-based US wage inflation or sustained supply bottlenecks could boost prices more than anticipated and fuel expectations for more rapid inflation”.

          “Faster Fed rate increases in response could rattle financial markets and tighten financial conditions globally. These developments could come with a slowing of US demand and trade and may lead to capital outflows and currency depreciation in emerging markets.”

          Full blog post here.

          UK PM May confirms Brexit vote delay, will seek change in backstop with EU

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            ActionForex.com
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            UK Prime Minister Theresa May formally confirms in the Commons that the Brexit vote will be delayed. She said, the tomorrow’s vote went ahead, it would be lost by a wide margin. May said she’ll hold emergency talks with EU to discuss possible changes to the backstop. And, she pledges that changes to the backstop would ensure it’s not permanent.

            The second Brexit referendum, May warned that “this risks dividing the country again when as a House we should be striving to bring it back together”. And she added that ” if you want to stay part of the customs union, be honest that this this involves accepting free movement.” Or, “if you want to leave with no deal, be honest that this will cause significant damage in those parts of the county that can least afford it.”

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            Swiss KOF plunged to 92.9, a marked decline in growth rates in near future

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              ActionForex.com
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              Swiss KOF Economic Barometer dropped to 92.9 in March, down from 101.8. KOF said, “the Swiss economy can be expected to see a marked decline in growth rates in the near future. This plunge of the Barometer reflects the first economic consequences of the accelerated spread of the Coronavirus.”

              The reading was “about as low as after the minimum exchange rate for the Swiss franc was abandoned in January 2015”. nevertheless, “its troughs at the time of the economic crisis in 2008/9 were still significantly lower”.

              Full release here.

              US initial jobless claims dropped to 250k, below expectations

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                ActionForex.com
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                US initial jobless claims dropped -2k to 250k in the week ending August 13, below expectation of 261k. Four-week moving average of initial claims dropped -2750 to 247k.

                Continuing claims rose 7k to 1437k in the week ending August 6. Four-week moving average of continuing claims rose 13k to 1413.

                Full release here.

                China’s NBS PMI manufacturing rises to 50.1, first expansion in six months

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                  ActionForex.com
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                  China’s NBS Manufacturing PMI increased to 50.1 in October, meeting expectations and marking the first expansion since April. The improvement was led by large enterprises, which rose to 51.5 from 50.6, while medium-sized firms inched up to 49.4. Small enterprises, however, saw a further contraction, declining to 47.5 from 48.5.

                  Key subindices pointed to slight domestic improvement: production reached a six-month high of 52.0, and new orders returned to neutral at 50.0 after five months of contraction.

                  Though still below 50, subindices for employment (48.4), purchases (49.3), imports (47.0), and backlog of orders (45.4) showed smaller declines, suggesting a gradual stabilization.

                  However, new export orders continued to weaken, reaching an eight-month low at 47.3, underscoring soft external demand.

                  Non-Manufacturing PMI edged up from 50.0 to 50.2, just shy of the 50.5 forecast, with the employment subindex rising by 1.1 points to 45.8.

                  Japan’s export rises 3.8% yoy in Nov, while import falls -3.8% yoy

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                    ActionForex.com
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                    Japan’s exports rose 3.8% yoy in November to JPY 9.152T, supported by increased shipments of chip-making equipment to Taiwan and nonferrous metals to China, marking the second consecutive month of export growth. Imports, however, fell -3.8% yoy to JPY 9.270T, marking their first decline in eight months due to reduced demand for crude oil from Saudi Arabia and electronics parts from Taiwan.

                    The overall trade deficit stood at JPY -117.6B, extending its red streak to five months. On a seasonally adjusted basis, the deficit widened to JPY -384B from JPY -229B in October, as imports increased 1.9% mom, outpacing the 0.2% mom rise in exports.

                    Trade with key partners highlighted persistent imbalances. Japan recorded a JPY 664.03B trade surplus with the US, despite exports falling -8.0% yoy, while imports dipped slightly by -0.6% yoy.

                    Conversely, its trade deficit with China expanded to JPY 682B, as exports grew 4.1% yoy, and imports rose 4.2% yoy.

                    The trade gap with the EUR remained significant at JPY 210.19B, with exports plunging -12.5% yoy, while imports decreased -5.4% yoy.

                    German Ifo business climate rose to 103.8, points to 0.5% GDP growth in Q3

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                      ActionForex.com
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                      German Ifo business climate improved to 103.8 in August, up from 101.7, beat expectation of 102.0. Current assessment index rose to 106.4, up from 105.3 and beat expectation of 105.5. Expectations index also rose to 101.2, up from 98.2 and beat consensus of 98.5. .

                      Ifo President Clemens Fuest noted in the release that “The companies were once again more satisfied with their current business situation. Business expectations were revised noticeably upwards. In addition to a robust domestic economic situation, the truce in the trade conflict with the US contributed to improved business confidence. The German economy is performing robustly. Current figures point to economic growth of 0.5 percent in the third quarter.”

                      Full release here.

                      UK CPI slowed to 2.0% in May, core CPI slowed to 1.7%

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                        ActionForex.com
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                        UK CPI rose 0.3% mom in May. Annually, CPI slowed to 2.0% yoy, down from 2.1% yoy. Core CPI slowed to 1.7%, down from 1.8%. All three figures matched expectations. Also released, RPI was unchanged at 3.0% yoy, above expectation of 2.9% yoy. PPI input slowed to 1.3% yoy, beat expectation of 0.8% yoy. PPI output slowed to 1.8% yoy, matched expectations. PPI output core slowed to 2.0% yoy, matched expectations. House price index was unchanged at 1.4% yoy in April, above expectation of 1.1% yoy.

                        RBA Lowe: Case for slower tightening becomes stronger as rate rises

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                          ActionForex.com
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                          RBA Governor Philip Lowe reiterated in a speech that “further increases in interest rates will be required over the months ahead”. But policy is “not on a pre-sent path” due to uncertainties. Also, “all else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises.”

                          Lowe also highlighted three sources of uncertainty to the economy. The first is the “global economic environment”, including the US, Europe and China. He said, “some slowing in the global economy will help bring inflation down, but a sharp slowing would make the job of delivering a soft landing here in Australia much harder.”

                          The second source is “how inflation expectations and the inflation psychology in Australia adjust to the period of high inflation”. The third is “how households respond to higher interest rates”.

                          Full speech here.

                          Fed’s Bostic needs a little more data before supporting rate cuts

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                            ActionForex.com
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                            Atlanta Fed President Raphael Bostic emphasized a cautious approach regarding interest rate cuts, stating that he needs “a little more data” before supporting such a move. Bostic stressed the importance of ensuring that Fed doesn’t prematurely lower rates, saying, “We want to be absolutely sure.” He warned that it would be problematic if Fed cut rates and then had to reverse course by raising them again.

                            While Bostic acknowledged being encouraged by recent inflation readings, he reitereated that he might be ready to support a rate cut “by the end of the year.” However, he remains watchful of labor market dynamics, expressing concern over the rise in unemployment. Bostic clarified that this increase is largely due to a growing labor force rather than a decline in demand, which he considers a “good problem to have.”

                            Trump: Tariffs are a beautiful thing when you have all the money

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                              ActionForex.com
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                              In a CNBC Squawk Box telephone interview, Trump romanticized tariffs as a “beautiful thing” that countries with money should use. He said “People haven’t used tariffs, but tariffs are a beautiful thing when you are the piggy bank, when you have all the money. Everyone is trying to get our money”. He also touted boasted that “If we didn’t have tariffs we wouldn’t have made a deal with Mexico” on migration problem of the US.

                              He’s also confidence that the China trade deal is going to work out “Because of tariffs. Because right now China is getting absolutely decimated by countries that are leaving China, going to other countries, including our own.” China is “going to make a deal because they’re going to have to make a deal, ” Trump added.

                              Yet, he praised China’s system as “the head of the Fed in China is President Xi” and “He can do whatever he wants. They devalue.” They loosen”. He added, “They devalue their currency. They have for years. It’s put them at a tremendous advantage”. On the other hand, “we don’t have that advantage because we have a Fed that doesn’t lower interest rates.”

                              Trump said the Fed “certainly didn’t listen to me because they made a big mistake. They raised interest rates far too fast,” and he went on to chide them for hiking “the day before a bond issue goes out so we have to pay more money.” He certainly believed in a system that central banks work for the countries leader, instead of independently.

                              Asian update: Sterling extending rally, Yen lower as stocks rise

                                By
                                ActionForex.com
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                                Asian stocks trade broadly higher today following the extended rally in the US. There were rumors that Treasury Secretary Steven Mnuchin is considering to roll back tariffs on Chinese imports to facilitate negotiation. But such rumor was quickly denied. Also, the US government shutdown is extending it’s record run without any end in sight. But sentiments were not affected much.

                                In the currency markets, trading turns rather quiet today as most major pairs and crosses are stuck in tight range. For the week, Sterling remains the strongest one. And the Pound is extending rally against Dollar, Euro and Yen. It’s unsure what Brexit will eventually be. But for now, the chance of no-deal Brexit seems slim.

                                Staying in the currency markets, Dollar is the second strongest for the week as lifted by rebound in treasury yields. Canadian Dollar is the third strongest, helped by resilience in oil prices. WTI crude oil is back at 52.8 and looks set to extend recent rebound from 42.05. The Loonie will also face tests from Canadian CPI today. On the other hand, Kiwi, Swiss Franc and Yen are the weakest ones for the week.

                                In Asia, currently:

                                • Nikkei is up 1.34%.
                                • Hong Kong HSI is up 1.10%.
                                • China Shanghai SSE is up 1.02%.
                                • Singapore Strait Times is up 0.23%.
                                • Japan 10-year JGB yield is up 0.0025 at 0.014

                                Overnight:

                                • DOW rose 0.67%.
                                • S&P 500 rose 0.76%.
                                • NASDAQ rose 0.71%.
                                • 10-year yield rose 0.018 to 2.749.
                                • But 30-year yield ended flat at 3.077.

                                Dollar index shrugs FOMC, DOW jumped on remdesivir news

                                  By
                                  ActionForex.com
                                  -

                                  Fed kept monetary policy unchanged overnight as widely expected and reiterated the pledge to maintain rate target at 0-0.25% ” until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” Chairman Jerome Powell said there will be a “large increase” in economic activity when people are coming out to spend again while unemployment goes down. However, “it is unlikely it will bring us quickly back to pre-crisis levels,” he added. “Trying to be really precise about when that might happen and what the numbers might look like – it is very tough to do that.”

                                  Some suggested readings on Fed:

                                  Dollar softened a little bit further after FOMC’s announcement and press conference. But there was no avalanche selling. Dollar index is back pressing 55 day EMA and outlook is unchanged. Price actions from 102.99 are seen as a corrective pattern. Fall from 100.93 is likely the third leg. Break of 55 day EMA will pave the way to 98.27 support and possibly below. But downside should be contained by 61.8% retracement of 94.65 to 102.99 at 97.83 to bring rebound.

                                  DOW rose 532.31 pts, or 2.21% to close at 24633.86. But that’s mainly due to news that Gilead Sciences found promising results of its experiments on coronavirus treatment drug remdesivir. Technically, DOW’s rebound from 18213.65 could extend higher. But we’d expect strong resistance from 61.8% retracement of 29568.57 to 18213.65 at 25230.99 to limit upside, at least on first attempt. Break of 22941.88 support will mark short term topping and bring near term reversal.

                                  Bundesbank Weidmann: PEPP must be ended when emergency is over

                                    By
                                    ActionForex.com
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                                    Bundesbank President Jens Weidmann said today that the “coming year would not be a crisis year if assumptions about the pandemic are confirmed.” Also, “PEPP must be ended when the emergency is over”.

                                    He explained that the “preconditions” for ending net PEPP purchases are that “all major restrictions are lifted”, and the recovery is “solid”. Immediate measures should then be reduced in both the fiscal and monetary front.

                                    Net PEPP purchases could be reduced “step by step” in advance.

                                    BoJ delivers expected rate hike, upgrades core inflation forecasts

                                      By
                                      ActionForex.com
                                      -

                                      BoJ raised its uncollateralized overnight call rate by 25bps to 0.50% as widely expected, marking the highest level since 2008. The decision, made by an 8-1 vote, saw dissent from board member Nakamura Toyoaki, who advocated for a delay until March.

                                      In the new economic projections, core CPI forecasts were significantly revised upward from 1.9% to 2.4% for fiscal 2025, and slightly from 1.9% to 2.0% for fiscal 2026. Core-core CPI (excluding energy and fresh food) forecast was also raised from 1.9% to 2.1% for fiscal 2025, remaining unchanged at 2.1% for fiscal 2026. Real GDP growth projections were left steady at 1.1% for fiscal 2025 and 1.0% for fiscal 2026.

                                      At the post-meeting press conference, Governor Kazuo Ueda downplayed the sharp inflation forecast revisions, stating, “The rise in underlying inflation is moderate. I don’t think we are seriously behind the curve in dealing with inflation.”

                                      He reiterated the importance of a gradual approach to policy adjustments, and there no “preset idea” on the timing and pace of rate hikes. He also highlighted the estimated neutral range of 1%-2.5%, emphasizing that the current rate of 0.5% still has “some distance” to reach neutral.

                                      Also released, CPI core (ex-food) jumped from 2.7% yoy to 3.0% yoy in December, marking the highest rate in 16 months. CPI core-core (ex-food & energy) was unchanged at 2.4% yoy. Headline CPI rose from 2.9% yoy to 3.6% yoy.

                                      Full BoJ statement and outlook for economic and prices.

                                      Japan’s nominal wage gains hit 3% in Nov, but inflation erodes real earnings

                                        By
                                        ActionForex.com
                                        -

                                        Japan’s real wages fell by -0.3% yoy in November, marking the fourth consecutive monthly decline as wage growth failed to outpace inflation again.

                                        While nominal wages rose by a robust 3.0% yoy—beating expectations of 2.7% yoy and extending a 35-month streak of growth—consumer prices grew at an even faster pace of 3.4% yoy during the same period, up from 2.6% yoy in October.

                                        A notable highlight in the data was the sharp rise in special cash earnings, including bonuses, which surged by 7.9% yoy. Excluding bonuses and nonscheduled payments, average wages increased by 2.7% yoy, the fastest rate in 32 years, suggesting some underlying improvement in base wages.

                                        US crude oil inventories rose 3.5m barrels, WTI softens mildly

                                          By
                                          ActionForex.com
                                          -

                                          US commercial crude oil inventories rose 3.5m barrels in the week ending January 24, versus expectation of 0.7m rise. At 431.7m barrels, crude oil inventories are about 2% below the five year average for this time of year.

                                          WTI crude oil dips notably after the release but stays above 52.09 temporary low made earlier this week. At this point, while further fall is mildly in favor, we’d continue to look for strong support from 50.64, which is close to 61.8% retracement of 42.05 to 66.49 at 51.38, to contain downside and bring rebound. Break of 55.89 will indicate short term bottoming. However, sustained break of 50.64 will invalidate our view and open up the case for a test on 42.05 low.

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