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Germany GDP grew 1.8% qoq in Q3, below expectations

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    Germany GDP grew only 1.8% qoq in Q3, below expectation of 2.2% qoq. Overall GDP was still -1.1% lower (price-, seasonally and calendar-adjusted) than in the fourth quarter of 2019, the quarter before the coronavirus crisis began.

    Full release here.

    Swiss SECO expects significant slowdown in winter period, lowers 2022 GDP growth forecast

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      SECO lowered Swiss GDP growth forecast for 2022 from 3.4% to 3.0%. GDP growth is projected to slow further to 2.0% in 2023, as the economy normalizes. 2021 GDP growth forecast is revised up slightly from 3.2% to 3.3%.

      It said that “international supply and capacity bottlenecks are putting pressure on the industrial sector and causing sharp price increases globally”. Also, “uncertainty surrounding the pandemic has recently become strongly accentuated and several countries have stepped up their containment measures.”

      SECO expects a “significant slowdown in economic growth globally and in Switzerland in the 2021/22 winter period”. But economy recovery is “not, however, expected to come to standstill in the medium term”.

      Full release here.

      ECB Lagarde: Vaccine provides eagerly awaited light at the end of the tunnel

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        ECB President Christine Lagarde told the European Parliament yesterday that vaccine rollout across the Eurozone “provides the eagerly awaited light at the end of the tunnel… When containment measures are lifted and uncertainty recedes, we expect the recovery to be supported by favorable financing conditions, expansionary fiscal policies and a recovery in demand.”

        Though, she also emphasized, “if we want to pave the way for a sustainable recovery, we need to maintain and strengthen the common European approach that proved so effective last year. The ECB is committed to doing its part, within its mandate.”

        “Underlying price pressures are likely to remain subdued owing to weak demand, low wage pressures and the appreciation of the euro exchange rate,” Lagarde said. “Our pledge to preserve favorable financing conditions is crucial in the current environment.”

        WTI oil extends medium term rebound, 60 to cap upside

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          ActionForex.com
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          WTI crude oil’s break of 55.85 resistance last week confirmed resumption of whole rebound from 42.05. Further rise is now expected as long as 54.58 support holds. Nevertheless, for now, we’re viewing rebound from 42.05 as a corrective move. Hence, strong resistance will likely be seen around 61.8% projection of 42.05 to 55.85 from 51.49 at 60.01 to limit upside.

          This level is actually close to 50% retracement of 77.06 to 42.05 at 59.55. 55 week EMA (now at 59.48) is also in proximity.

          Japan PMI manufacturing unchanged at 48.9, services rose to 52.4

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            Japan PMI Manufacturing was unchanged at 48.9 in January, below expectation of 49.4. PMI Services rose from 51.5 to 52.4. PMI Composite rose form 49.7 to 50.8.

            Laura Denman, Economist at S&P Global Market Intelligence, said: “Japan’s private sector kicked off 2023 on a more positive note, as signalled by activity returning to growth territory in January. However, similar to trends recorded over much of the past six months, a divergence between the manufacturing and services sectors has remained.

            Full release here.

            Germany Gfk consumer sentiment plunged to -26.5, new historic low

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              Germany Gfk consumer sentiment for May dropped significantly from -15.7 to -26.5, well below expectation of -15.7. That’s the second month of decline, as well as a new historic low.

              Looking at some details for April, economic expectations plunged from -8.9 to -16.4. Income expectations dropped from -22.1 to -31.3. Propensity to buy dropped from -2.1 to -10.6.

              “The war in Ukraine and rates of high inflation have dealt a severe blow to consumer sentiment. This means that hopes of a recovery from the easing of pandemic-related restrictions have finally been dashed,” explains Rolf Bürkl, GfK consumer expert.

              Full release here.

              FOMC minutes: A majority hesitant on swift monetary easing

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                ActionForex.com
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                The latest FOMC minutes reveal a predominant caution against premature easing of monetary policy. The document underscores a consensus among “most participants” over the potential risks of reducing interest rates too hastily, expressing a preference for delaying cuts rather than risking the need to reverse course.

                During the FOMC meeting held on January 30-31, the discussion emphasized that participants did not anticipate it being appropriate to lower the federal funds rate target range without “greater confidence” that inflation was on a sustainable path back to 2% target. The determination of the future policy rate path was tied closely to “incoming data, the evolving outlook, and the balance of risks.” .

                Although the balance of risks towards employment and inflation goals was seen as “moving into better balance”, participants remained “highly attentive to inflation risks”. While upside risks to inflation have “diminished”, inflation remains above target. This vigilance is framed within a broader context of concern that “progress toward price stability could stall”, particularly in scenarios where demand strengthens unexpectedly or supply-side improvements falter.

                The predominant narrative within the FOMC leans towards a cautious approach to policy easing, with “most participants” underscoring the perils of “moving too quickly” and the importance of a meticulous evaluation of incoming data to ascertain whether inflation trends align with the target sustainably. In contrast, only “a couple of participants” raised concerns about the economic downsides of an “overly restrictive stance” persisting for an extended period.

                Full FOMC minutes here.

                Fed to announce tapering, some previews

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                  ActionForex.com
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                  FOMC monetary policy decision is the major focus today, as Fed should finally make a formal announcement on QE tapering. As the September minutes indicates, the pace would be “monthly reductions in the pace of asset purchases, by US$10B in the case of Treasury securities and US$5B in the case of agency mortgage-backed securities (MBS)”. The would eventually lead to completion of entire asset purchases by mid -2022. But, a hawkish surprise – monthly reduction at a faster pace – cannot be ruled out given the inflationary pressure.

                  Also, September’s dot plot revealed that half of the members had anticipated a rate hike in 2022. Meanwhile, the market has priced in futures have priced in over 60% of a rate hike by June next year. But Fed Chair Jerome Powell would likely reiterate that decision on interest rate is complete separated from that of asset purchases. There wouldn’t be any new hint on the timing of rate hike until December’s dot plot.

                  Suggested readings on Fed

                  Japan automakers slam Trump’s tariffs as Abe kept silence

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                    ActionForex.com
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                    Japan Prime Minister Shinzo Abe has been so far very quiet regarding trade tensions with the US. Abe and his cabinet members have repeatedly said that they do not want bilateral trade agreements. But Trump is insisting to force Japan into it. And that’s not to mention that Japan was the only close ally that was not even given a temporary exemption on the steel and aluminum tariffs. It’s even unsure what retaliation they’ll take. The meeting between Abe and Trump ahead of G6+1 submit also produced no progress on trade.

                    But back in his homeland, Abe is facing increasing pressure on him to take a stance. The Japan Automobile Manufacturers Association issued a statement today slamming the US probe of automobile imports using national security as excuse again. In the statement, JAMA expressed “gravely concerned” of the investigation. It emphasized that “automobiles are sold to consumers on the basis of their own choices, and it is consumers themselves who would be penalized, through increased vehicle prices and reduced model options”. Additionally, “business plans of automobile and auto parts manufacturers as well as imported vehicle dealers could be seriously disrupted, with potentially adverse impacts on the U.S. economy and jobs.”

                    JAMA also pointed to “facts” that their member companies operate “24 manufacturing plants and 44 R&D/design centers in 19 U.S. states and in 2017, nearly 3.8 million vehicles were produced by American workers at those facilities.” “Of that total, over 420,000 units were exported to countries around the world, further underscoring our contributions to employment and economic growth in the United States.”

                    JAMA concluded that “free and fair trade and a competitive climate in line with global rules benefit consumers in the United States and strengthen the sustainable growth of the U.S. auto industry and its economy. We will continue to monitor this situation closely and to uphold the vital importance of free trade worldwide.”

                    Full statement here.

                    German Merkel: We’re prepared for any Brexit outcome, even no-deal

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                      German Chancellor Angela Merkel will meet UK Prime Minister Boris Johnson on Wednesday evening to discuss Brexit. Ahead of that, Merkel said on Sunday, “We are glad of every visit, and you have to talk, and you have to find good solutions.” But also, “we are prepared for any outcome, we can say that, even if we do not get an agreement.”

                      Merkel noted “at all events I will make an effort to find solutions – up until the last day of negotiations.” And, “I think it’s always better to leave with an agreement than without one. But if that’s not possible, we’ll be prepared for the alternative as well.”

                      UK economy shows resilience: GDP up 0.2% mom in Sep, flat in Q3

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                        UK’s economy displayed unexpected resilience in today’s data releases, GDP figures surpassed market expectations both on a monthly and quarterly basis.

                        In September, GDP grew by 0.2% mom, defying the stagnation prediction of 0.0% mom. This growth was primarily driven by a 0.2% increase in the services sector, a crucial component of the UK economy. Additionally, the construction sector contributed positively with a 0.4% mom= growth, while production remained steady with no significant change.

                        On a quarterly scale, GDP figures remained flat at 0.0%, which is a more favorable outcome compared to the anticipated contraction of -0.1% qoq. On a year-on-year basis, GDP registered a growth of 0.6% yoy, indicating a modest but steady recovery from the same quarter in the previous year.

                        The services sector experienced a slight contraction of -0.1% qoq, whereas construction saw a marginal growth of 0.1% qoq. The production sector’s performance was broadly unchanged.

                        Full UK monthly GDP release here.

                        Full UK quarterly GDP release here.

                        US exports of goods and services rose 3.5% mom in Apr, imports dropped -3.4% mom

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                          US exports of goods and services rose 3.5% mom to USD 252.6B in April. Imports dropped -3.4% mom to USD 339.7B. Trade deficit narrowed from USD 107.7B to USD 87.1B, versus expectation of USD 89.3B.

                          In Q1, goods and services trade deficit with China increased USD 22.9B to USD 112.7B. The deficit with Canada increased USD 9.6B to USD 19.1B. The surplus with the United Kingdom increased USD 2.5B to USD 5.8B.

                          Full release here.

                          ECB Wunsch: We could afford some second-round effects, but not too much

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                            ECB Governing Council member Pierre Wunsch told Bloomberg TV that the economy is ” on the right path. But medium term inflation goal is not met yet. “It seems that we are at some kind of inflection point,” Wunsch said. “We are below our objective, so we could afford some second-round effects, but not too much.”

                            Wunsch also said the central bank will maintain a “very supportive monetary policy,” even after the end of its emergency bond-buying program in March.

                            UK GDP contracted -0.6% mom in Sep, worse than expectation

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                              UK GDP contracted -0.6% mom in September, worse than expectation of -0.4% mom. Services dropped -0.8% mom. Production grew 0.2% mom while construction rose 0.4% mom. GDP was then -0.2% below its pre-coronavirus levels in February 2020.

                              Q3 GDP contracted -0.2% qoq in Q3, versus expectation of -0.5% qoq. Quarterly GDP was -0.4% below pre-coronavirus level in Q4 2019. There was no growth in services during the quarter, while production dropped -1.5%, construction rose 0.6%.

                              Full monthly GDP release here.

                              Also released, industrial production came in at 0.2% mom, -3.1% yoy in September, versus expectation of -0.3% mom, -4.3% yoy. Manufacturing production came in at 0.0% mom, -5.8% yoy, versus expectation of -0.4% mom, -6.6% yoy. Goods trade deficit narrowed from GBP -17.2B to GBP -15.7B, smaller than expectation of GBP -18.6B.

                              ECB hikes 50bps, frontloading exit from negative deposit rate

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                                ActionForex.com
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                                ECB announced to raise the three key interest rates by 50bps today. The main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 0.50%, 0.75% and 0.00% respectively, with effect from 27 July 2022.

                                The “larger first step” in policy normalization was based on the “updated assessment of inflation risks and the reinforced support provided by the TPI for the effective transmission of monetary policy.” The “frontloading” of exit from negative deposit rate ” allows the Governing Council to make a transition to a meeting-by-meeting approach to interest rate decisions.” Future policy path will continue to be “data-dependent”.

                                Also, the Governing Council approved the Transmission Protection Instrument (TPI), to “ensure that the monetary policy stance is transmitted smoothly across all euro area countries”.

                                Full statement here.

                                Japan officials toughen up talks on Yen

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                                  ActionForex.com
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                                  Top Japanese officials toughened up the talks on Yen, as it tumbled notably again overnight following US CPI data. Finance Minister Shunichi Suzuki said Japan wouldn’t rule out any response if current trends in the foreign exchange market continued, with intervention as an option.

                                  The comment was echoed by top current diplomat Masato Kanda, who reiterated, “we are monitoring yen moves with a sense of urgency. We will respond appropriately to currency moves without ruling out any options.”

                                  Chief Cabinet Secretary Hirokazu Matsuno also said at a briefing that the government would take necessary action should excessive yen moves continue. He added that rapid currency moves were undesirable.

                                  Canada GDP grew 0.1% mom in Oct, essentially unchanged in Nov

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                                    Canada GDP rose 0.1% mom in October, matched expectations. Services-producing industries expanded 0.3% while goods-producing industries contracted -0.7%. 11 of 20 industrial sectors grew.

                                    Advance information indicates that real GDP was essentially unchanged in November. Increases in accommodation and food services and wholesale trade were offset by declines in construction as well as mining, quarrying and oil and gas extraction.

                                    Full release here.

                                    Canada CPI slowed to 6.3% yoy, core down to 5.3% yoy

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                                      ActionForex.com
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                                      Canada CPI slowed from 6.8% yoy to 6.3% yoy in December, matched expectations. Excluding food and energy, CPI Core slowed from 5.4% yoy to 5.3% yoy.

                                      CPI median dropped from 5.1% yoy to 5.0% yoy, above expectation of 4.9% yoy. CPI trimmed dropped from 5.4% yoy to 5.3% yoy, above expectation of 5.2% yoy. CPI common dropped from 6.8% yoy to 6.6% yoy, matched expectations.

                                      On a monthly basis, CPI dropped -0.6% mom, largest monthly decline since April 2020. The fall was mostly driven by gasoline prices, which also posted their largest monthly decline since April 2020.

                                      Full release here.

                                      ECB Kazaks: A rate increase in July is possible

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                                        ActionForex.com
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                                        ECB Governing Council member Martins Kazaks said in a Bloomberg interview, that it’s possible to hike interest rate in July. Meanwhile, QE could end at the end of June but the policy members will have to discuss it with new economic forecasts on hand.

                                        “A rate increase in July is possible, and I have no reason to disagree with what markets are pricing for the second half of the year,” he said. “We are on a solid path of policy normalization” where “we step-by-step gradually get to zero and then above”.

                                        “Gradual doesn’t mean slow,” added Kazaks. “It doesn’t mean being consciously behind the curve. No, it just means checking if taken policy measures are appropriate.”

                                        “We haven’t seen any major elements of stress in financial markets, which makes me think that ending QE early in the third quarter is possible and appropriate,” Kazaks said. “Whether it could already happen at the end of June, we’ll have to discuss when we get new forecasts.”

                                        UK GDP contracts -0.1% mom, production a main contributor

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                                          ActionForex.com
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                                          UK GDP contracted by -0.1% mom in May, slightly better than expectation of -0.3% mom contraction. However, taking a wider view, GDP showed stagnation over the three months to May. The contraction in May was largely due to a decrease in production output by -0.6% mom, contributing significantly to the overall GDP decline. In contrast, services output remained stagnant while construction output dipped by -0.2% mom.

                                          ONS shed light on the situation, attributing part of the contraction to additional bank holiday for King Charles III’s coronation on 8th May, which impacted a variety of manufacturing industries and construction businesses. On the brighter side, arts, entertainment, and recreation sector reported benefiting from the extra bank holiday.

                                          The ONS report also highlighted that sectors such as health (specifically nursing), rail network, education, and civil service all saw industrial action take place in May 2023. Such strikes played a part in the month’s economic movements.

                                          Full UK GDP release here.

                                          Also released, industrial production came in at -0.6% mom, -2.3% yoy, versus expectation of -0.4% mom, -2.3% yoy. Manufacturing production was at -0.2% mom, -1.2% yoy, versus expectation of -0.5% mom, -1.7% yoy. Goods trade deficit widened from GBP -14.6B to GBP -18.7B, larger than expectation of GBP -14.6B.

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