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

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    ActionForex.com
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    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.

    ECB’s Lagarde: Current rates will bring inflation to target by 2025 end

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      ActionForex.com
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      ECB President Christine Lagarde, in her address to a European Parliament committee, expressed confidence in the current policy rates, emphasizing their effectiveness in steering inflation back towards the intended target.

      “Based on our latest assessment,” Lagarde mentioned, “we consider that our policy rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.”

      Lagarde also highlighted the headwinds faced by the euro area’s economy. After broadly stagnating during the first half of 2023, the economy has demonstrated signs of weakening further in the third quarter. This is particularly concerning given the previously resilient services sector, which is also starting to display weakness.

      Lagarde elaborated, “The services sector, which had been resilient until recently, is now also weakening,” noting that “job creation in the services sector is moderating and overall momentum is slowing.”

      Domestic price pressures, however, continue to remain formidable. A surge in holiday and travel spending combined with substantial wage growth is holding up services inflation.

      Nevertheless, according to staff projections, “inflationary pressures are expected to moderate and that inflation is set to reach our target by the end of 2025.”

      Full remarks of ECB Lagarde here.

      BoE Bailey: Covid more likely leads to intra-sectoral changes in the economy

        By
        ActionForex.com
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        In a speech, BoE Governor Andrew Bailey noted three component of structural changes in the economies in the future, with legacy of Covid too: “How what we buy has changed and the way we buy it; how the way we work has changed; and how what we make may need to change”

        He said, “my best guess is that there will be lasting changes”. Further, there may be a “reversal of the period of low productivity growth”, with Covid as the spur, the change agent. Also, a the change the direction of climate requires investment on a much larger scale.

        Nevertheless, Bailey doesn’t see Covid leading to the soft of inter-sectoral change in 80s and 90s. It’s “more likely to be a case of intra-sectoral change”, which ” may also increase the likelihood that more capital can be redeployed, and more rapidly.”

        Full speech here.

        Dollar index awaits NFP to guide range breakout

          By
          ActionForex.com
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          US non-farm payroll employment is again a major focus. Markets are expecting 425k job growth in October. Unemployment rate is expected to tick down by 0.1% to 4.7%. Average hourly earnings are expected to grow 0.4% mom.

          Looking at related data, ISM manufacturing employment rose from 50.2 to 52.0. But ISM services employment dropped from 53.0 to 51.6. ADP private jobs grew 571k, rose slightly from prior month’s 523k. Four-week moving average of initial jobless claims continued to trend down, notably, from 344k to 285k.

          All in all, today’s NFP will likely be a solid one, affirming Fed’s tapering plan. The main question ahead is whether wage growth would continue in a strong trend, the pushes up inflation, and force Fed for an earlier hike. Strong wage growth could push Dollar index out of the near term range.

          Dollar index is now  sitting in range below 94.56 short term top. The support from 55 day EMA is a bullish sign. Yet, it will have to break through key long term fibonacci resistance at 94.46 (38.2% retracement of 102.99 to 89.20) decisively to confirm medium term bullishness. In the case, we’d probably seen upside acceleration ahead to 61.8% retracement at 97.72. However, break of 93.27 support will suggest rejection by 94.46, and turn near term outlook bearish for deeper pull back.

          Fed to hike in Powell’s debut

            By
            ActionForex.com
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            Fed is widely expected to raise federal funds rate by 25bps to 1.50-1.75% today. Fed fund futures are pricing in near 95% chance of that. There is no reason for Fed to give market a surprise. The main question in everybody’s mind is whether Fed will hike a total of three times this year, or four. Fed fund futures are pricing more than 80% chance of another hike in June already, and close to 60% chance of another in September. But for now, it’s only pricing less than 40% chance of the fourth in December.

            As usual with a March FOMC meeting, new economic projections will be released. Given that the Republican’s tax cuts were done, there could be upward revisions in growth. Unemployment rate forecast might be left unchanged. PCE core at 1.5% in January, is still way off Fed’s median projection of 1.9% in 2018. There is little chance of a change in that figure. Meanwhile, any slight change in the federal funds rate projection would be market moving.

            Fed’s December projections:

            The event also bears additional significance as it’s Jerome Powell’s first press conference as Fed chair. His Congressional testimony was seen by some as more hawkish and upbeat than expected. Recapping that he said “my personal outlook for the economy has strengthened since December.” And, “we’ve seen some data that will in my case add some confidence to my view that inflation is moving up to target.” Powell might maintain the tone today and indicate his confidence in continuing the tightening cycle.

            Eurozone CPI slowed to 6.9% yoy in Mar, core CPI ticked up to 5.7% yoy

              By
              ActionForex.com
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              Eurozone CPI slowed from 8.5% yoy to 6.9% yoy in March, below expectation of 7.2% yoy. CPI core (all item ex energy, food, alcohol & tobacco) roes from 5.6% yoy to 5.7% yoy, matched expectations.

              Looking at the main components , food, alcohol & tobacco is expected to have the highest annual rate in March (15.4%, compared with 15.0% in February), followed by non-energy industrial goods (6.6%, compared with 6.8% in February), services (5.0%, compared with 4.8% in February) and energy (-0.9%, compared with 13.7% in February).

              Full Eurozone CPI release here.

              BoE’s Bailey anticipates sharp decline in inflation, stresses need for balance

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                ActionForex.com
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                BoE Governor Andrew Bailey, speaking at an International Institute of Finance conference, projected a “quite a strong drop” in next month’s inflation figures. This expectation is largely due to the unique household energy pricing system in the UK, which is set to impact the overall inflation calculations differently compared to other sectors.

                However, he was quick to temper this optimistic forecast with a note of caution regarding the broader inflationary landscape. According to Bailey, underlying components of the inflation measure continue to show disparities that could complicate monetary policy response.

                The Governor pointed out that while energy price inflation is currently running at minus 20%, the inflation in services remains high, around 6%. This stark contrast in inflation rates across different sectors presents an “unbalanced” picture.

                “We don’t have to have every component actually at target, but you do have to have a better balance,” Bailey remarked.

                Australia retal sales rose 0.5% in Jan, trade surplus widened to AUD 10.1B

                  By
                  ActionForex.com
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                  Australia retail sales rose 0.5% mom in January, slightly below expectation of 0.6% mom. Comparing to a year ago, sales turnover rose 10.6% yoy. All state and territories reported growth, except Queensland with -1.5% mom decline. Western Australia reported strongest sales growth by 2.1% mom, followed by Victoria and Tasmania at 1.0%.

                  Exports of goods and services rose 6% mom to AUD 39.8B in January. Imports of goods and services dropped -2% mom to AUD 29.7B. Trade surplus widened to AUD 10.1B, above expectation of AUD 6.3B.

                  Eurozone PMI composite down 0.3 to 50.3, indicative of 0.1% quarterly GDP growth

                    By
                    ActionForex.com
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                    Eurozone PMI Manufacturing rose to 46.6 in November, up from 45.9, beat expectation of 46.4. PMI Services dropped to 51.5, down from 52.2, missed expectation of 52.5. PMI Composite dropped to 50.3, down from 50.6.

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

                    “The eurozone economy remained becalmed for a third successive month in November, with the lacklustre PMI indicative of GDP growing at a quarterly rate of just 0.1%, down from 0.2% in the third quarter.

                    “Manufacturing remains in its deepest downturn for six years amid ongoing trade woes, and November saw further signs of the weakness spilling over to services, notably via slower employment growth. “Resilient jobs growth had provided a key support to the more domestically-focused service sector earlier in the year, but with employment now rising at its slowest pace since early-2015, it’s not surprising to see the service sector now also struggling.

                    “Tentative signs of life in the core eurozone countries of France and Germany are welcome news, as is an easing in the manufacturing downturn, but a fresh concern is that the rest of the region has slipped into decline for the first time since 2013.

                    “Business remains concerned by trade wars, Brexit and a general slowdown in demand, with heightened uncertainty about the economic and political outlook driving further risk aversion.”

                    Full release here.

                    EUR/USD head and shoulder in the making, ECB to hike how much?

                      By
                      ActionForex.com
                      -

                      ECB faces mounting pressure to deliver a decisive response to the recent bank rout that is raising serious doubts on whether they will raise interest rates by 50bps tomorrow as previously indicated. Market expectations for a 50bps hike have dropped to less than 30%, with a 70% chance of just a 25bps hike.

                      In February’s statement, ECB said explicitly that “the Governing Council intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March”. However, the central bank has a recent history of overturning its intentions, leaving investors uncertain of their next move.

                      In June 2022 statement, it said “the Governing Council intends to raise the key ECB interest rates by 25 basis points at its July monetary policy meeting”. But then in July, it hiked the three key interest rates by 50bps.

                      But of course, that’s just an “intention”. ECB never pre-commits to any policy move.

                      EUR/USD is now close to completing a head and shoulder top, with left shoulder at 1.0733, head at 1.1032, and right shoulder at 1.0759. Theoretically speaking, firm break of the neckline should have confirmed the reversal pattern already. On the other hand, strictly speaking, the ideal short entry should be on recovery back to the neckline, which might never happen.

                      To take a middle, decisive break of 38.2% retracement of 0.9534 to 1.1032 at 1.0258 will be taken as confirmation of the reversal. 61.8% retracement at 1.0106 will be the immediate near term target.

                      Let’s see whether ECB would help complete this technical formation.

                      Aussie lifted by retail sales, AUD/CAD long opportunity

                        By
                        ActionForex.com
                        -

                        Australian Dollar is trading as the strongest one as the week starts, on the back of some positive economic data.

                        Retail sales rose 0.4% mom in April versus expectation of 0.3% mom, and prior month’s 0.0%. The Australian Bureau of Statistics noted that cafes, restaurants and takeaways led the rise assisted by an unusually warm April. But there were likely negative impacts for some businesses in “clothing, footwear and personal accessories and department stores.” Company gross operating profits rose 5.9% qoq, 5.8% yoy seasonally adjusted in Q1. Wage growth was slow at 0.8% qoq seasonally adjusted and 5.1% yoy. TD securities inflation gauge, however, was flat 0.0% mom in May versus expectation of 0.3% mom and prior month’s 0.5% mom.

                        AUD/CAD is a pair to note as it’s showing consistent near-to-medium term upside momentum. From the action bias table, D row argues that’s AUD/CAD has just come out of a consolidation. This is also reflected in H and 6H action bias.

                        The above indication is consistent with the D action bias chart too.

                        Take a look at the regular OHLC chart, the break of 0.9873 indicates resumption of recent rebound from 0.9553. Strong support was seen slightly below 0.9578/91 medium term support zone. That is, the fall from 1.0241 should have completed too. Further rise should now be seen back to 61.8% retracement of 1.0241 to 0.9553 at 1.0066. A way to trade this move is by going long at the current level, with a stop below today’s low at 0.9780, and a target at 1.0066.

                        Eurozone PMI composite dropped to 31.4, scope for downturn to intensify further

                          By
                          ActionForex.com
                          -

                          Eurozone PMI Manufacturing dropped to 44.8 in March, down from 49.2, hitting a 92-month low. PMI Services dropped to 28.4, down from 52.6, hitting a record low. PMI Composite dropped to 31.4, down form 51.6, hitting a record low too.

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

                          “Business activity across the eurozone collapsed in March to an extent far exceeding that seen even at the height of the global financial crisis. Steep downturns were seen in France, Germany and across the rest of the euro area as governments took increasingly tough measures to contain the spread of the coronavirus.

                          “The March PMI is indicative of GDP slumping at a quarterly rate of around 2%, and clearly there’s scope for the downturn to intensify further as even more draconian policies to deal with the virus are potentially implemented in coming months.

                          Full release here.

                          GBP/CHF extending near term fall as BoE awaited

                            By
                            ActionForex.com
                            -

                            Today’s BoE meeting is, as new BoE Chief Economist Huw Pill described, “live” and “finely balanced”. There is a thin majority of economists expecting no change. But market pricing suggests that a hike is not really a surprise. But in either case, the new economic projections, as well as voting would more likely be the things that move markets.

                            Here are some previews:

                            Sterling is generally soft ahead of BoE’ rate decision. GBP/CHF broke through 1.2467 support this week and resumed the whole decline from 1.3070. For now the structure of the fall suggests that it’s corrective in nature. Hence, even in case of deeper decline, we’d expect strong support from 1.2259 to contain downside and bring rebound.

                            Nevertheless, while break of 1.2541 minor resistance will bring recovery, break of 1.2759 resistance is needed to signal a near term bullish reversal. Otherwise, outlook will be neutral at best.

                            France PMI manufacturing dropped to 51 in Jun, services to 54.4

                              By
                              ActionForex.com
                              -

                              France PMI Manufacturing dropped sharply from 54.6 to 51.0 in June, well below expectation of 53.8. That’s the lowest level in 19 months. PMI Services dropped from 58.3 to 54.4, below expectation of 57.5, lowest in 5 months. PMI Composite dropped from 57.0 to 52.8, also a 5-month low.

                              Joe Hayes, Senior Economist at S&P Global Market Intelligence said:

                              “France endured a particularly sharp slowdown in growth during June, as well as a further bifurcation between the manufacturing and services economies. Nonetheless, trends deteriorated in a broad-based fashion over the month as high inflation begins to bite harder. Overall growth was at its slowest since the Omicron disruption was at its peak in January. Barring this though, the ‘flash’ PMI for June is at its lowest level since April 2021.

                              “While a loss of momentum was to be expected as the resumption of economic activities post-lockdown boosted growth, the slowdown has been aggravated by substantial price pressures. This has been particularly aggressive in the manufacturing sector, where output and new orders both declined strongly and for the first time since October last year, serving as a worrying sign for what could be to come for the service sector.

                              “The slowing economic trend in France is also compounded by a fresh bout of political uncertainty due to the hung parliament result in the national elections. Business confidence slid to a 19-month low in June. Overall, June ‘flash’ PMI data add to tangible recession risks for France.”

                              Full release here.

                              China industrial production rose 9.8% yoy in Apr, retail sales rose 17.7% yoy

                                By
                                ActionForex.com
                                -

                                China industrial production rose 9.8% yoy in April, slowed from 14.1% yoy, matched expectations. Fixed asset investment rose 19.9% ytd yoy, slowed from 25.6%, above expectation of 19.0%. Retail sales slowed to 17.7% yoy, down from 34.2% yoy, missed expectation of 24.9% yoy.

                                The National Bureau of Statistics said that the economy showed “steady improvement” in April, but the foundation was “not solid” as new problems are emerging. Recovery also remains “uneven”. It expected the economy to operate within a reasonable range.

                                Hong Kong and China stocks trade mildly higher in Asian session after the releases, but lack clear momentum for sustainable rebound. HSI is up around 0.5% at the time of writing. The index will have to overcome 28250.60 support turned resistance to confirm short term bottoming. Otherwise, it remains vulnerable for another selloff through 27505.08 support to resume the larger decline from 31183.35.

                                Gold jumps on Dollar weakness, defended 1280 support

                                  By
                                  ActionForex.com
                                  -

                                  Riding on broad based weakness in Dollar, gold stages a strong rebound today. The solid break of 4 hour 55 EMA suggests that fall from 1324.49 has completed at 1280.85, after hitting 1280.85 support. Further recovery could now be seen back to 1324.49 resistance.

                                  At this point, 1276.76 cluster support (38.1% retracement of 1160.17 to 1346.17 at 1275.45) remains intact. Thus, there is no confirmation of medium term bearish reversal. Firm break of 1324.49 resistance will suggest that the consolidation pattern from 1346.71 has completed. And larger rise from 1160.17 could be resuming through 1346.71 high.

                                  Nevertheless, just in case, sustained break of 1275.45/1276.76 should also confirm completion of whole rise from 1160.17. Deeper decline should then be seen to 61.8% retracement at 1234.42 and below.

                                  German GCEE: 2020 GDP could shrink -4.5% in long U risk scenario

                                    By
                                    ActionForex.com
                                    -

                                    In the report “The Economic Outlook in the Coronavirus Pandemic”, the German Council of Economic Experts (GCEE) presented three scenarios for the German economy in 2020 and 2021 due to coronavirus pandemic.

                                    In the “baseline scenario”, economic situation will “normalize over the summer”. GDP would contract by -2.8% in 2020. GDP growth would bounce back to 3.7% in 2021, driven by catch-up effects and a large carry-over effect.

                                    In the “risk scenario (pronounced V)”, “widespread stoppage of production” or “restrictive measures” would remain in place longer than planned. GDP could contract -5.4% annualized in H1. In 2021, growth could bounce back to 4.9% with “large carry-over effect of 1.1 percentage points”.

                                    In the “risk scenario (long U)”, coronavirus containment would “last beyond the summer” and “delay economic recovery until 2021”. Policy measures may not be enough to prevent “far-reaching damage” to the economy. Ultimately, there is a risk of “negative feedback loops” through the financial markets or the banking system. 2020 GDP could shrink -4.5% with a slow recovery of 1.0% in 2021.

                                    Full report here.

                                    Germany ZEW dropped to 63.3, but current situation soared to 21.9

                                      By
                                      ActionForex.com
                                      -

                                      Germany ZEW Economic Sentiment tumbled to 63.3 in July, down from 79.8, below expectation of 75.4. Though, Current Situation index jumped to 21.9, up from -9.1, above expectation of 5.0. Eurozone ZEW Economic Sentiment also dropped to 61.2, down from 81.3, below expectation of 84.4. Eurozone Current Situation rose 30.4 pts to 6.0.

                                      “The economic development continues to normalise. In the meantime, the situation indicator for Germany has clearly overcome the coronavirus-related decline. Although the ZEW Indicator of Economic Sentiment has once again fallen significantly, it is still at a very high level. The financial market experts therefore expect the overall economic situation to be extraordinarily positive in the coming six months,” comments ZEW President Professor Achim Wambach on current expectations.

                                      Full release here.

                                      Canada Freeland repeats no deal is better than a bad deal ahead of NAFTA talk restart

                                        By
                                        ActionForex.com
                                        -

                                        High level NAFTA talks between Foreign Minister Chrystia Freeland and US Trade Representative Robert Lighthizer will resume on Wednesday, working towards a US imposed deadline of October 1. head of the meeting, Freeland reiterated the government’s position that “no deal is better than a bad deal.” And she explained that “any negotiator who goes into a negotiation believing that he or she must get a deal at any price … (will) be forced to pay the maximum price for that deal.”

                                        On the other hand, Trump continued to attack Canada. He told reporters “we love Canada, we love the people of Canada, but they are in a position that’s not a good trade position for Canada.” And, “they cannot continue to charge us 300 per cent tariff on dairy products, and that’s what they’re doing.”

                                        Trump close ally House Republican Steve Scalise also warned that “there is a growing frustration with many in Congress regarding Canada’s negotiating tactics.” And, “members are concerned that Canada does not seem to be ready or willing to make the concessions that are necessary for a fair and high-standard agreement.” But it’s unsure how much this such a view is shared among congressmen.

                                        French industrial production rose 19.6% in May, still down -21.2% from Feb

                                          By
                                          ActionForex.com
                                          -

                                          France industrial production rose 19.6% mom in May, above expectation of 15.0%. It also nearly recovered all of April’s -20.6% decline. Nevertheless, compared to February, the last month before the start of general lockdown, outlook was still down -21.2%.

                                          Full release here.

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