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US oil inventories rose 2.0m barrels, WTI weak after breaking key support

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    ActionForex
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    US commercial crude oil inventories rose 2.0m barrels in the week ending March 13, below expectation 3.5m barrels. At 453.7m barrels, inventories are about 3% below the five year average for this time of year.

    WTI crude oil break through 27.69/50 key support level today and stays weak after the release. Near term outlook will now stay bearish as long as 36.54 resistance. WTI should be taking long term support zone between 10.65 and 17.12 made between 1998/2001.

    Fed Daly: Inflation won’t hit 2% until 2021

      By
      ActionForex
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      San Francisco Fed President Mary Daly said “policy is in a good place. The economy is in a good place. And barring a material change in the outlook, then I’m comfortable with policy where it’s at, for the foreseeable future.” Her own forecast for inflation is that “it is gradually moving up to target, but my expectation is it wouldn’t achieve something like 2% until somewhere in 2021 as opposed to 2020.”

      She added that “we haven’t seen much yet” regarding the impact of China’s coronavirus outbreak. And, “the most important impact would be through confidence, and we haven’t seen that yet either.”

      Fed’s Williams highlights uncertainty tied to fiscal, trade, and regulatory Policies

        By
        ActionForex
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        New York Fed President John Williams said today that monetary policy remains “well-positioned” to balance Fed’s dual mandate of stable prices and maximum employment. He noted that the process of disinflation is expected to persist, though achieving the 2% target may take time, with a return to the goal likely “in the coming years.” The pace and direction of monetary policy, however, remain highly data-dependent

        Williams highlighted significant uncertainties clouding the economic outlook, including risks related to fiscal policies, trade dynamics, immigration changes, and regulatory shifts.

        Therefore, “our decisions on future monetary policy actions will continue to be based on the totality of the data, the evolution of the economic outlook, and the risks to achieving our dual mandate goals,” he added.

        Separately, Richmond Fed President Thomas Barkin commented on the December CPI report released today, acknowledging that it reinforces the narrative of inflation gradually declining toward Fed’s target. Barkin also downplayed the potential impact of rising 10-year Treasury yields on the Fed’s monetary policy stance.

         

        ECB policy contributed considerably to private consumption growth

          By
          ActionForex
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          ECB released a bulletin article “Private consumption and its drivers in the current economic expansion” today. It argues that private consumption has been a main driver of growth in the current cycle that started back in 2013. And this has been “largely driven by the recovery in the labour market”. And, as labor markets continue to improve, ” consumer confidence should remain elevated and private consumption should rise further”

          At the same time, the article said that ECB’s accommodative monetary policy has “contributed considerably to the expansion of private consumption”. At the same time, the policies have also “directly decreased income and wealth inequality”. There is little evidence that low interest rates have led to generalized increases in household indebtedness. And therefore, the overall economic expansion is “sustainable”.

          Full article here.

          ECB Coeure wants more clarity on pace of rate hike when conditions warrant

            By
            ActionForex
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            ECB Executive Board member Benoit Coeure urged the central to give more details in the forward guidance, regarding the pace of rate hike when it starts. He said, “should economic conditions warrant, there might be a case for the Governing Council to go beyond the timing to lift-off (rates) in further clarifying the pace at which it expects to remove policy accommodation.”

            And, “a further clarification of our reaction function might help market participants and the broader public to better anticipate the likely future path of short-term interest rates.”

            Currently, ECB’s plan is to half the monthly asset purchase to EUR 15B starting October, and stop it after December. Interest rates would stay at present levels through the summer of 2019.

            ECB’s Lane sees wages easing, cautions on persistent global shocks

              By
              ActionForex
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              ECB Chief Economist Philip Lane expressed confidence that services inflation will continue to moderate, citing subdued outcomes in recent wage agreements.

              Speaking at a lecture, Lane noted that the current wage settlements for 2025 are already “quite low,” with those for 2026 appearing even more restrained. That suggested easing cost pressures in the services sector, a key driver of core inflation.

              However, Lane tempered optimism by pointing to the persistent volatility in the global economic environment. He highlighted large recent swings in exchange rates and energy prices, attributing them to structural shifts in the global trading system.

               

              Into US session: EUR dives on German yield free fall, but AUD still the weakest

                By
                ActionForex
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                Entering into US session, Yen is back as the star performer, followed by Swiss Franc. This time, weaker than expected economic data were largely shrugged off by stocks and bond investors. Instead, renewed worry over Italy’s fiscal health boosted Italian yield up. German 10-year yield, on other hand, is in free fall on safe haven flow, breaking -0.11 handle. US 10-year yield also dives through 2.38 handle at the time of writing. Both developments help lift Yen and Swiss Franc, Dollar follows as third strongest for now.

                Australian Dollar is staying as the weakest one for today, followed by New Zealand Dollar. These two are probably the only ones who care about resumption of slowdown in China. Situation could only get worse with more tariffs ahead. Euro is currently the third weakest for today. US retail sales and Canada CPI will be the next triggers for volatility.

                Technically, EUR/JPY and GBP/JPY resume recent decline by breaking through 122.48 and 141.20 temporary lows. EUR/USD will likely take on 1.1173 minor support. Break will raise the chance of down trend resumption and target 1.1111 low next.

                In Europe, currently:

                • FTSE is down -0.04%.
                • DAX is down -0.60%.
                • CAC is down -0.48%.
                • German 10-year yield is down -0.0050 at -0.117.
                • Italian 10-year yield is up 0.0345 at 2.77.

                Earlier in Asia:

                • Nikkei rose 0.58%.
                • Hong Kong HSI rose 0.52%.
                • China Shanghai SSE rose 1.91%.
                • Singapore Strait Times dropped -0.15%.
                • Japan 10-year JGB yield rose 0.001 to -0.05.

                Australia NAB business condition rose 1pt, confidence dropped 1pt

                  By
                  ActionForex
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                  Australia NAB Business Condition recovered and rose 1pt to 15 in June. Business Confidence continued recent decline and dropped 1pt to 6. Alan Oster, NAB Group Chief Economist, noted that “the business conditions index held broadly steady in June after pulling back last month, and remains well above average, suggesting conditions are strong in the business sector. Conditions remain favourable across most states and industries.”

                  He added that overall, the survey is consistent with NAB’s outlook for 2018. Despite easing a little recently, leading indicators remain positive suggesting continued growth in output and employment. Higher profitability and trading conditions as well as high rates of capacity utilisation also remain conducive to higher business investment. This growth will be necessary to reduce the amount of spare capacity in the economy, which should in time see a rise in prices and wages growth, which we consider key to the path of monetary policy over the next few years”

                  Full release here.

                  ECB: Euro unchallenged as the second most widely used global currency

                    By
                    ActionForex
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                    ECB President Christine Lagarde said in an annual review that “the euro remains unchallenged as the second most widely used currency globally after the US dollar”. Share of Euro across various indicators of international currency was stable, averaging around 19% in 2020.

                    The relative resilience of the international role of the euro despite the pandemic shock stands in contrast to the significant decline observed in the wake of the euro area sovereign debt crisis. “To some extent, this development may reflect the effectiveness of the unprecedented policy support measures and coordinated approach that have prevailed in the euro area during the COVID-19 crisis,” said Lagarde.

                    On the topic of digital currency, Executive Board member Fabio Panetta said, “depending on its design, a central bank digital currency may support the use of a currency in cross-border payments. However, fundamental forces, such as the quality of economic policies and institutions, as well as the depth of markets, remain the most important factors for international currency status,”

                    Full release here.

                    RBA Lowe: We shouldn’t be worried about government borrowing

                      By
                      ActionForex
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                      RBA Governor Philip Lowe told ABC News that the coronavirus pandemic was “going to be perhaps a once-in-a-lifetime event” and it “required a truly extraordinary response”. “I didn’t think in my term of governor, I’d be buying AUD 40 billion of government bonds, which we’ve done in the past few weeks and lending over AUD 100 billion to the banking system.”

                      Lowe also noted that there shouldn’t be concern on escalating government debt. “If ever there’s a time to borrow, now is it,” he said. “We shouldn’t be worried” about the debt. “We have the capacity to borrow, our interest rates are as low as they’ve ever been, the Australian government has a long record of responsible fiscal policy, so the budget accounts are in reasonable shape,” he added.

                      Australia Westpac leading index dropped to 0.58 in May

                        By
                        ActionForex
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                        Australia Westpac leading index dropped from 1.09% to 0.58% in May, still indicating above trend growth for 2022. Westpac said, “the components of the Index are indicating an important emerging theme around Australia’s growth prospects – a significant shock to consumer confidence.”

                        On RBA policy, Westpac expects the central bank to hike a further 50bps in July. It assessed that at 1.35% after the hike, interest rate is still below the neutral setting. Given the tight labor market and rising inflation, further monetary tightening can be expected through 2022.

                        Full release here.

                        Japan PMI manufacturing finalized at 49.8, but short-term prospects turning a corner

                          By
                          ActionForex
                          -

                          Japan PMI Manufacturing was finalized at 49.8 in January, slightly down from December’s 50.0.

                          Usamah Bhatti, Economist at IHS Markit, said: “The Japanese manufacturing sector slipped back into contraction territory at the start of the year… as a rise in COVID-19 infections and issuance of a state of emergency dampened operating conditions… Manufacturers indicated a renewed fall in output levels… firms were further discouraged to replace voluntary leavers in the sector as staffing levels reduced.

                          “Nonetheless, the short-term prospects for the Japanese manufacturing sector appear to be turning a corner, with firms reporting a stable level of new orders. Businesses were also optimistic that the pandemic would subside over the coming year, triggering a wider economic recovery in Japan which would boost output levels. IHS Markit estimates industrial production will grow 7.1% in 2021, although this is from a lower base and does not fully recover the output lost in 2020.”

                          Full release here.

                          BoC Schembri: Rate to stay at ELB until excess capacity is absorbed

                            By
                            ActionForex
                            -

                            BoC Deputy Governor Lawrence Schembri said yesterday, “Our assessment of labour market conditions and underlying capacity and inflationary pressures is now more difficult. Consequently, more uncertainty exists around the timing of when the output gap will close and inflation will return sustainably to our 2-per-cent target.”

                            “We’ll keep the policy rate at the effective lower bound [0.25%] until excess capacity is absorbed … that excess capacity includes all the groups of employees that aren’t fully employed at this juncture,” Schembri said in response to a question after the speech.

                            “Now of course, one has to take into account that there’s going to be some natural friction in the labour market, people are going to move between jobs, so we’re not saying that there has to be zero unemployment,” he added.

                            Former UK PM Major: Revoke Brexit notice now, the clock must be stopped

                              By
                              ActionForex
                              -

                              Former UK Prime Minister John Major urged the current government to revoke Brexit notice to the EU now. He said, “We need to revoke article 50 with immediate effect. The clock, for the moment, must be stopped.”

                              He added, “It’s clear we now need the most precious commodity of all: time. Time for serious and profound reflection by both parliament and people. There will be a way through the present morass, there always is.”

                              Also, he said Brexit will weaken UK’s position in the world. He argued that “We are a more valued ally for America because of our influence in Europe and we are more valued by Europe because of our close relationship with America.” And, “Britain, shorn of both these long-standing allies, will be seen by the world as a mid-sized, middle-ranking power that is no longer super-powered by her alliances.”

                              WTI crude oil staying bearish despite strong rebound

                                By
                                ActionForex
                                -

                                WTI crude oil rebounded strongly yesterday, as lifted by news of outage of an oil export terminal after the earthquake in Turkey. But upside is capped below 55 day EMA, and far below 82.31 resistance.

                                For the near term, further decline is expected as long as 82.31 resistance holds. Price actions from 94.25 could be developing into a terminal triangle pattern, as the fifth wave of the whole down trend from 131.82.

                                If that’s the case, WTI should continue to lose downside momentum in the next decline, as reflected in persistent bullish condition in daily MACD. The end point of the down trend could be somewhere around 61.8% projection of 124.12 to 76.61 from 94.25 at 64.88, and 62.90 long term support.

                                Fed Kashkari: Virtually all of that news is in the wrong direction

                                  By
                                  ActionForex
                                  -

                                  Minneapolis Fed President Neel Kashkari said in a CNBC interview, “I’m confident we are going to get inflation back down to our 2% target, but I am not yet confident on how much of that burden we’re gonna have to carry versus getting help from the supply side.”

                                  He added that “virtually all of that news is in the wrong direction,” pointing to Ukraine war and lockdowns in China.

                                  He also emphasized that Fed is focused on its dual mandate, price stability and full employment. If data comes in different from expectations, Fed will change its policy approach.

                                  BCC expects negative UK GDP growth in Q2, Q3, Q4, inflation to peak at 14%

                                    By
                                    ActionForex
                                    -

                                    The British Chambers of Commerce said in a release that the UK economy is expected to “plunge into recession” before the end of 2022, with inflation “spiking to 14%”. Also, “lingering weakness in growth expected to continue into 2024”.

                                    BCC downgraded UK GDP growth forecast for 2022 from 3.5% to 3.3%. Also, a recession is forecast for the UK this year, with negative economic growth for Q2, Q3, and Q4. It expects the economy to return to 0.2% growth in 2023, and 1% growth in 2024.

                                    Inflation is projected to reach 14% in Q4 2022, upgraded from prior forecast of 10%. CPI is forecast to slow to 5% in 2023, and then return to BoE’s 2% target in 2024.

                                    BCC also expects BoE interest rate to increase from 2% in 2022 to 3% in 2023 and 2024.

                                    Full release here.

                                    BoJ Kataoka: Coronavirus outbreak may weaken consumption and capital expenditure

                                      By
                                      ActionForex
                                      -

                                      BoJ known dove Goushi Kataoka warned today coronavirus out break could hurt consumption and poses uncertainty to the economy. He called by stronger actions by the central bank. He said, “we need to be mindful that consumption may weaken further as a trend”, and, “worsening sentiment among automakers and retailers could also affect the outlook for capital expenditure.”

                                      In his view, BoJ should deepen the negative interest rate further. Additionally, it’s “very important” for government and the central bank to coordinate their policies. He added, “I believe there’s room for the BOJ to review its policy framework and re-examine its effect including how it interacts with fiscal and pro-growth policies.”

                                      Separately, Deputy Governor Masayoshi Amamiya said that with digital currencies, central banks could stifle private-sector financial innovation and draw money away from deposits at commercial banks. However, central banks must also conduct a “comprehensive study” on how digital currencies would affect their settlement and financial systems.

                                      Eurozone economic sentiment rose to 117.8, employment expectation rose to 113.6

                                        By
                                        ActionForex
                                        -

                                        Eurozone Economic Sentiment Indicator rose slightly from 117.6 to 117.8 in September, above expectation of 116.9. Employment Expectation Indicator rose 0.8 pts to 113.6, highest since 2018. Industrial confidence rose from 13.8 to 14.1. Services confidence dropped from 16.8 to 15.1. Consumer confidence rose from -5.3 to -4.0. Retail trade confidence dropped from 4.6 to 1.3. Construction confidence rose from 5.5 to 7.5.

                                        EU ESI was unchanged at 116.6 while EEI rose 1 pt to 113.6 (highest since 2018). Amongst the largest EU economies, the ESI rose in Spain (+1.7), Germany (+0.8), the Netherlands and Poland (both +0.6), while it worsened in France (-1.3) and Italy (-0.9).

                                        Full release here.

                                        Australian NAB quarterly business confidence dropped to 14, still optimistic growth picture

                                          By
                                          ActionForex
                                          -

                                          Australia NAB Quarterly business confidence dropped from 19 to 14 in Q1. Current business conditions dropped from 14 to 9. Business conditions for the next three months dropped from 29 to 21. Business conditions for the next 12 months dropped from 36 to 34. trading conditions dropped from 19 to 12. Profitability conditions dropped from 13 to 7. Employment conditions dropped from 9 to 8. Capex plans for the next 12 months dropped from 34 to 33.

                                          “Overall, the survey continues to paint an optimistic picture on growth – including the potential for a pickup in business investment. This comes despite global events and still some disruption from the virus. That said, the challenges for both business and policy makers remain clear with price pressures continuing to build.”

                                          Full release here.

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