Eurozone unemployment rate dropped to 6.8% in January, EU down to 6.2%

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Mar 03 22, 10:19 GMT

Eurozone unemployment rate dropped from 7.0% to 6.8% in January, better than expectation of 6.9%. EU unemployment rate dropped from 6.3% to 6.2%.

Eurostat estimates that 13.346 million men and women in the EU, of whom 11.225 million in the euro area, were unemployed in January 2022. Compared with December 2021, the number of persons unemployed decreased by 216 000 in the EU and by 214 000 in the euro area. Compared with January 2021, unemployment decreased by 2.522 million in the EU and by 2.117 million in the euro area.

Full release here.

UK PMI services finalized at 60.5 in Feb, composite at 59.9

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Mar 03 22, 10:07 GMT

UK PMI Services was finalized at 60.5 in February, up from January’s 54.1. That’s the highest level since last June. PMI Composite was finalized at 59.9, up from February’s 54.2.

Andrew Harker, Economics Director at IHS Markit: “The ebbing of the Omicron wave of the COVID-19 pandemic contributed to a rebound in growth in the UK service sector in February, with rates of expansion in activity and new business up sharply… Although the latest set of PMI data were encouraging, the inflationary picture still has the potential to limit growth, while it remains to be seen what impact the Russian invasion of Ukraine will have on the service sector and wider economy.”

Full release here.

Eurozone PMI composite finalized at 55.5, commensurate with GDP growth in excess of 0.6%

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Mar 03 22, 10:02 GMT

Eurozone PMI Services was finalized at 55.8 in February, up from January’s 51.1. PMI Composite was finalized at 55.5, up from January’s 52.3. That’s also the strongest reading since last September.

Looking at some member states, Ireland PMI Composite rose to 59.1, 3-month high. Spain rose to 56.5, 3-month high. Germany rose to 55.6, 6-month high. France rose to 55.5 while Italy rose to 53.6.

Chris Williamson, Chief Business Economist at IHS Markit said: “The survey data for February depict a eurozone economy that was regaining robust growth momentum ahead of the invasion of Ukraine. Business activity accelerated to a pace commensurate with GDP growth in excess of 0.6%, buoyed by a relaxation of virus restrictions…

“Though it remains early days to be assessing the impact of the war, growth prospects are also likely to have been hit by heightened risk aversion and new sanctions, dampening the rebound from the pandemic. With inflation risks rising and growth prospects waning, the Ukraine conflict adds to business and household headwinds for the coming months, and exacerbates the difficult juggling act of the ECB in controlling inflation while sustaining a robust economic recovery.”

Full release here.

Germany PMI services finalized at 55.8, highest since last August

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Mar 03 22, 09:56 GMT

Germany PMI Services was finalized at 55.8 in February, up from January’s 52.2. PMI Composite was finalized at 55.6, up from January’s 53.8. That’s also the highest level since last August.

Phil Smith, Economics Associate Director at IHS Markit:

“February’s PMI data showed Germany’s service sector recovering further from its slump at the end of last year, aided by an initial lifting of some restrictions and a strengthening of demand as the roadmap for the further easing of containment measures was laid out.

“Another strong round of job creation across the services economy contributed to a further improvement in the overall labour market in February, and was consistent with hopes of a continued pick-up in activity in the months ahead as the pandemic’s influence wanes. However, the survey captured the mood before the escalation of the Ukraine-Russia tensions into a conflict, which brings with it downside risks to the growth outlook.

“Inflationary pressures continue to run uncomfortably high, with the combination of the release of pent-up demand and sharply rising costs leading to a near record increase in prices charged across the service sector in February. Given the recent developments in energy prices and the threat of fresh supply disruptions, inflation looks set to stay higher for longer.”

Full release here.

France PMI services finalized at 55.5 in Feb, rebound in growth across the service sector

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Mar 03 22, 09:52 GMT

France PMI Services was finalized at 55.5 in February, up from January’s nine-month low of 53.1. PMI Composite was finalized at 55.5, up from January’s nine-month low of 52.7.

Joe Hayes, Senior Economist at IHS Markit:

“As daily COVID-19 case numbers took a downward trajectory, latest survey data showed a rebound in growth across the service sector in February. There were plenty of encouraging signs for economic activity midway through the first quarter – demand for services rose at the fastest pace since last summer, and panel member reports suggest that the underlying market trend is supportive. Looser virus containment measures have helped this, especially with respect to new business from abroad, which rose at a series record rate.

“Risks of growth dampeners still remain notable, however. Inflation risks are clearly tilted to the upside, with soaring energy prices and reports of rising wages maintaining pressure on business costs. It’s clear that pricing power among firms is strong at present. While selling prices continue to rise at near-record highs, new orders are growing at a decent clip. It’s likely that policymakers will need to intervene to cool price pressures, and this puts broader recovery efforts in a precarious position.”

Full release here.

China Caixin PMI composite unchanged at 50.1, still under triple pressure

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Mar 03 22, 05:13 GMT

China Caixin PMI Services dropped from 51.4 to 50.2 in February. PMI Composite was unchanged at 50.1.

Wang Zhe, Senior Economist at Caixin Insight Group said: “Overall, the manufacturing PMI rose in February, while the services PMI fell, but both remained in positive territory. Demand in the manufacturing sector improved, while demand in the services sector was greatly affected by the epidemic….

“Under the ‘triple pressure’ of demand contraction, supply shocks and weakening expectations, the economy’s recovery is still not robust. Stabilizing economic growth remains an important focus of the government.”

Full release here.

BoJ Nakagawa: Core inflation may briefly hit 2% on energy, food and industrial goods

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Mar 03 22, 04:40 GMT

BoJ board member Junko Nakagawa said “for the time being, inflationary pressure will remain strong, mainly for energy, food and industrial goods.” Core consumer prices may “briefly rise close to 2%.”

However, “even if that happens, what’s important is to scrutinise the factors and whether Japan’s economic fundamentals are strong enough to make such price rises sustainable,” she said.

“Global financial markets remain jittery due to escalating tensions in Ukraine. We’re monitoring changes in developments carefully,” she added.

BoE Cunliffe: Recent events led to abrupt shift in expectations

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Mar 03 22, 04:36 GMT

BoE Deputy Governor Jon Cunliffe said yesterday, “the events of the last few days have led to an abrupt shift in our expectations of the future and an increase in uncertainty.”

“The heightened perception of geopolitical risks, and the potential impacts on growth and inflation, can only increase risks around the adjustment away from riskier assets that is already underway,” he said.

Cunliffe added, “Russia is a relatively small part of the world economy, accounting for around 2% of world GDP. It accounts however for a much larger share of the world supply of energy and other commodities.”

BoE Tenreyro: Russia invasion will intensify trade shock and inflation

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Mar 03 22, 04:32 GMT

Referring to Russia invasion of Ukraine, BoE MPC member Silvana Tenreyro said yesterday, “recent developments will intensify the terms of trade shock that we were already experiencing, so will push up inflation and have a negative impact on activity. How exactly? That’s the job we will start next week.”

Tenreyro added that she had been surprised by the scale of wages growth. However, “when you are talking about spirals, you are talking about explosive dynamics which we haven’t seen yet. If anything, we are just starting the first round, so how can you talk about second round (effects)” she said.

Fed Evans: We need to alter policy towards a neutral stance

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Mar 02 22, 15:18 GMT

Chicago Fed President Charles Evans said “inflation is quite a risk to economic growth. And Fed needs to “alter monetary policy so it is moving towards a neutral stance.” He added, if inflation accelerates, “we can hike rates even faster.”

“We need to go above a zero rate by quite a bit, and we are going to get a move on,” Evan’s noted.

He expects headline inflation to stay above 3% level by the end of this year, before dropping to 2.5% in 2023. It will take until 2024 to get inflation back to the 2% target.

Fed Powell to Congress: Appropriate to raise interest rate later this month

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Mar 02 22, 15:14 GMT

In the semiannual testimony to Congress, Fed Chair Jerome Powell said,”with inflation well above 2 percent and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month.”

He reiterated that “federal funds rate is our primary means of adjusting the stance of monetary policy”. And, “reducing our balance sheet will commence after the process of raising interest rates has begun, and will proceed in a predictable manner primarily through adjustments to reinvestments.

Powell also said, “the near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain. Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook.”

Full remarks here.

BoC raise rate to 0.50%, refrains from QT for now

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Mar 02 22, 15:07 GMT

BoC raises overnight rate by 25bps to 0.50% as widely expected. The Bank Rate and the deposit rate now stand at 0.75% and 0.50% respectively. The policy rate is the “primary monetary policy instrument”. It added, “as the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further.”

BoC also said it’s “continuing its reinvestment phase” of QE, and keep its overall holdings of government bonds “roughly constant”. The timing of rate hike and quantitative tightening will be “guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.”

Full statement here.

US ADP jobs grew 475k in Feb, hiring remains robust but capped up labor supply

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Mar 02 22, 13:25 GMT

US ADP private employment grew 475k in February, above expectation of 320k. By company size, small businesses lost -96k jobs, medium added 18k while large businesses added 522k. By sector goods-producing jobs rose 57k and service-providing jobs rose 417k.

“Hiring remains robust but capped by reduced labor supply post-pandemic. Last month large companies showed they are well-poised to compete with higher wages and benefit offerings, and posted the strongest reading since the early days of the pandemic recovery,” said Nela Richardson, chief economist, ADP. “Small companies lost ground as they continue to struggle to keep pace with the wages and benefits needed to attract a limited pool of qualified workers.”

Full release here.

ECB de Guindos: Global financial exposure to Russia somewhat limited

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Mar 02 22, 11:56 GMT

European Central Bank (ECB) Vice President Luis de Guindos said, “invasion of Ukraine by Russia will have an impact on the economy in the eurozone, will also have an impact on inflation.”

“Global financial exposure to Russia is somewhat limited,” he said. “Most significant risks are energy shocks.”

De Guindos also said the Eurozone inflation data in February has been a “negative surprise”.

Eurozone CPI rose to new record 5.8% yoy in Feb

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Mar 02 22, 11:52 GMT

Eurozone CPI accelerated from 5.1% yoy to 5.8% yoy in February, well above expectation of 5.3% yoy. That’s also a new record high. Core CPI also rose from 2.3% yoy to 2.7% yoy, above expectation of 2.5% yoy.

Energy is expected to have the highest annual rate in February (31.7%, compared with 28.8% in January), followed by food, alcohol & tobacco (4.1%, compared with 3.5% in January), non-energy industrial goods (3.0%, compared with 2.1% in January) and services (2.5%, compared with 2.3% in January).

Full release here.

BoC to hike, EUR/CAD breaking to the downside

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ActionForex

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Mar 02 22, 05:56 GMT

BoC is widely expected to raise interest rate by 25bps to 0.50% today to kick start the tightening cycle. The central bank might also announce the plan to shrink its balance sheet. Overall tone of the statement should remain hawkish, setting the stages for more rate hikes ahead. Some analysts are expecting the policy rate to hit 1.25% by the end of the year.

Some previews on BoC

EUR/CAD’s down trend is trying to resume by breaking through 1.4098 low. But that’s more due to Euro’s broad based selloff than Canadian’s strength. Key level lies in 61.8% projection of 1.5096 to 1.4162 from 1.4633 at 1.4056. Sustained break there could prompt downside acceleration to 100% projection at 1.3699.

Above 1.4303 minor resistance will delay the bearish case and bring some consolidations. But outlook will remain bearish as long as 1.4633 resistance holds.

WTI oil breaks 110 on upside acceleration, heading to 147?

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ActionForex

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Mar 02 22, 05:39 GMT

Oil price surged to highest level since 2014 on concern of supply disruptions related to Russia invasion of Ukraine. The International Energy Agency’s 31 member countries have just agreed to release 60 million barrels of oil from their strategic reserves . But that’s apparently not enough to calm the markets.

WTI crude oil accelerated sharply to as high as 110.69 so far. Technically, further rise is expected as long as 102.19 resistance turned support holds. Next target is 100% projection of 33.50 to 85.92 from 62.90 at 115.32.

It’s still early to say. But is should be noted that fear driven moves in commodity markets could be extremely powerful. Just remember oil price was negative less than two years ago. So, decisive break of 115.32 could easily prompt more acceleration to 161.8% projection at 147.71, in rather quick manner.

Australia GDP grew 3.4% qoq in Q4, no material impact from Omicron

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ActionForex

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Mar 02 22, 05:25 GMT

Australia GDP grew 3.4% qoq in Q4, above expectation of 2.9% qoq. Real net national disposable income rose 1.7%. Terms of trade fell -5.1%. GDP in the December quarter 2021 was 3.4% above December 2019 pre-pandemic levels. The emergence of the Omicron variant over the second half of December 2021 did not have a material impact on activity this quarter.

Full release here.

SNB Zurbruegg: Important to keep rate differential to avoid excessive Franc appreciation

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Mar 02 22, 05:21 GMT

SNB Vice Chairman Fritz Zurbruegg said in a l’agefi interview, “Switzerland has always had lower rates than others since the financial crisis. It is very important for us to keep this differential to avoid an excessive appreciation of the Swiss franc.”

“As soon as the situation requires it, we’ll raise our interest rate,” he said. But, “we’ll keep this ability to intervene in foreign exchange markets if needed to ensure price stability.”

“Experience has shown that having some leeway within the range we associate with price stability has worked well in the past in Switzerland,” he added. “We are a small, open economy with capital flows linked to our safe-haven status. We cannot always achieve a precise target and inflation can fluctuate in the short term because we aim for the medium term.”

Fed Mester: Russia invasion adding upside risk to inflation, downside risk to growth

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Mar 02 22, 05:16 GMT

Cleveland Fed President Loretta Mester said yesterday that Russia’s invasion of Ukraine could push inflation up higher. “The unfolding event has implications for the economic outlook, adding upside risk to inflation even as it puts downside risks to the growth forecast,” she said.

“The challenge facing Fed policymakers is how to recalibrate monetary policy, reducing the accommodation from the emergency levels needed earlier in the pandemic in order now to get inflation under control and at the same time sustain the expansion and maintain healthy labor markets,” Mester added.

Loonie Steady as Inflation Confirms BoC Comfort, Risk Mood Mixed

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Dollar Sags, But Warsh Fed Risk May Flip the Script

Dollar Attempts Late-Week Recovery, Fed Dissent Fails to Shift Outlook

Live Comments

Eurozone unemployment rate dropped to 6.8% in January, EU down to 6.2%

UK PMI services finalized at 60.5 in Feb, composite at 59.9

Eurozone PMI composite finalized at 55.5, commensurate with GDP growth in excess of 0.6%

Germany PMI services finalized at 55.8, highest since last August

France PMI services finalized at 55.5 in Feb, rebound in growth across the service sector

China Caixin PMI composite unchanged at 50.1, still under triple pressure

BoJ Nakagawa: Core inflation may briefly hit 2% on energy, food and industrial goods

BoE Cunliffe: Recent events led to abrupt shift in expectations

BoE Tenreyro: Russia invasion will intensify trade shock and inflation

Fed Evans: We need to alter policy towards a neutral stance

Fed Powell to Congress: Appropriate to raise interest rate later this month

BoC raise rate to 0.50%, refrains from QT for now

US ADP jobs grew 475k in Feb, hiring remains robust but capped up labor supply

ECB de Guindos: Global financial exposure to Russia somewhat limited

Eurozone CPI rose to new record 5.8% yoy in Feb

BoC to hike, EUR/CAD breaking to the downside

WTI oil breaks 110 on upside acceleration, heading to 147?

Australia GDP grew 3.4% qoq in Q4, no material impact from Omicron

SNB Zurbruegg: Important to keep rate differential to avoid excessive Franc appreciation

Fed Mester: Russia invasion adding upside risk to inflation, downside risk to growth