US initial jobless claims dropped -10k to 281k in the week ending October 23, slightly better than expectation of 289k. That’s the lowest level since March 14, 2020. Four-week moving average of initial claims dropped -21k to 299k, lowest since March 14, 2020 too.
Continuing claims dropped -237k to 2243k in the week ending October 16, lowest since March 14, 2020. Four-week moving average of continuing claims dropped -142k to 2513k, lowest since March 21, 2020.
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ECB kept monetary policy unchanged as widely expected. The interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively. The forward guidance is maintained.
That is, “the Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target.”
PEPP purchases will continue with a total envelop of EUR 1850B, until at least end of March 2022. The pace of net asset purchases will remain “moderately lower” than in Q2 and Q3. APP purchases will continue at a monthly pace of EUR 20B too.
Eurozone Economic Sentiment Indicator rose to 118.6 in October, up from 117.8, above expectation of 116.9. Employment Expectations Indicator rose from 113.4 to 114.5. Industrial confidence rose from 14.1 to 14.2. Services confidence rose from 15.2 to 18.2. Consumer confidence dropped from -4.0 to -4.8. Retail trade confidence rose from 1.4 to 2.0. Construction confidence rose from 7.5 to 8.9.
EU ESI rose from 116.6 to 117.6. Amongst the largest EU economies, the ESI rose in Spain (+2.5), France (+2.1), Italy (+1.8), Poland (+1.5) and the Netherlands (+1.4), while it weakened slightly in Germany (-0.5).
In the post meeting press conference, BoJ Governor Haruhiko Kuroda said, “the yen’s recent weakening, as a whole, is definitely positive for Japan’s economy. It’s good for exports and lifts the yen-based profits firms earn overseas. It more than offsets the negative impact from rising import costs.”
“At present, currency rates are moving in line with fundamentals,” he said. “I therefore see no problems with the moves”. He added, “there’s no pre-set norm on the desirable level of real, effective exchange rates. I won’t comment on specific levels.”
“In the long run, if growth accelerates and the output gap turns positive, we’ll likely see inflation accelerate and heighten inflation expectations,” Kuroda said. “Under current conditions, there are more merits than demerits in maintaining ultra-loose monetary policy.”
ECB is widely expected to keep monetary policy unchanged today. The central bank might shed some light on asset purchases after the end of the emergency program PEPP next March. But the details on what to follow will only be revealed at the December meeting, together with new economic projections. There are some expectations that the flexibility of the original APP would be increased, but this is far from being certain.
There are also speculations of an earlier rate hike, with market pricing it to happen by 2022 year end. But President Christine Lagarde would likely talk down such expectations. Instead, ECB would just reiterate that the policy rates would “remain at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon and judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term”.
Some previews on ECB:
Australian bond yields surge sharply today after RBA skipped the asset purchases to defend the 0.10% April 2024 yield target. Yield on April 2024 AGS more than doubled to above 0.5%. Meanwhile, 3-year AGS yield extended recent rally and accelerated to as high as 1.19%.
The development prompted speculations that RBA would change its forward guidance to indicate that conditions for rate hike could come earlier than 2024. Westpac said it now confirm its expectation that RBA hike would come in February 2023. CBA is expecting a November 2022 hike while ANZ is forecasting a hike in H2 of 2023.
Separately, RBA Deputy Governor Guy DeBelle told the Senate today, “the monetary policy settings we have in place, as do other central banks around the world, are looking to generate a little higher inflation than we have seen over the last five, six years, as well generate more jobs.” Nevertheless, he added, “a little bit more inflation is welcome, a lot more inflation isn’t.”
BoJ kept monetary policy unchanged today as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.1%. 10-year yield target is maintained at around 0%, with JGB purchases without upper limit. It also reiterated that BoJ will continue with QQE with YCC “as long as it is necessary” for maintaining inflation at 2% target in a stable manner. It will also continue expanding the monetary base core CPI exceeds 2% and stays above in a stable manner.
Economic projections comparing to July forecast:
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Canadian Dollar jumps broadly after surprisingly hawkish BoC policy decision. USD/CAD and CAD/JPY are still bounded in range. But EUR/CAD is taking the lead with downside breakout.
The break of 1.4317 in EUR/CAD suggests resumption of fall from 1.5096. More importantly, it’s now resuming the medium term down trend. Sustained trading below 1.4317 will confirm the breakout and pave the way to 100% projection of 1.5783 to 1.4580 from 1.5096 at 1.3839. In any case, outlook will stay bearish as long as 1.4439 resistance holds, even in case of recovery.
GBP/CAD will be a focus now too as it’s diving towards 1.6889 support. Firm break there will resume the fall from 1.7623, and the decline from 1.57784 too. 100% projection of 1.7884 to 1.6849 from 1.7623 at 1.6588 will be next target.
BoC surprisingly announced to end quantitative easing today, and move to the reinvestment phase. That’s ahead of market expectation of tapering today and ending QE in December. Overnight rate is held at effective lower bound of 0.25%, bank rate is kept at 0.50% and deposit rate at 0.25%.
Regarding forecast guidance, BoC reiterated that its “remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.”
Now, BOC expects this to happen “sometime in the middle quarters of 2022″, ahead of September’s guidance of ” the second half of 2022.”
US durable goods orders dropped -0.4% mom to USD 261.3B in September, better than expectation of -1.1% mom. Ex-transport orders rose 0.4% mom, matched expectations. Ex-defense orders dropped -2.0% mom. Transportation equipment dropped -2.3% to USD 77.7B.
Also released, goods trade deficit came in at USD -93.6B in September, smaller than expectation of USD -88.2B. Goods exports dropped USD -7B to USD 142.2B. Goods imports rose USD 1.1B to USD 238.4B. Wholesale inventories rose 1.1% mom to USD 739.5B. Retail inventories dropped -0.2% mom to USD 602.9B.
German government cut 2021 economic growth forecast sharply to just 2.6%, comparing to April’s expectation of 3.5%. Economy Minister Peter Altmaier said the downgrade was partly due to supply bottlenecks and rising energy prices, particularly for gas.
Nevertheless, for 2022, growth forecast was upgrade from 3.6% to 4.1%, as the supply bottlenecks ease. Growth is expected to normalize to 1.6% in 2023.
“The precondition is that we stabilize international supply chains, and, for example, make sure that more of the chips are produced that are built into almost every device, especially cars,” Altmaier said earlier in an interview with ARD television.
Germany Gfk consumer sentiment for November rose to 0.9, up from 0.4, above expectation of -0.4. For October, economic expectations dropped from 48.5 to 46.6. Income expectations dropped sharply from 37.4 to 23.3. Propensity to buy rose from 13.4 to 19.4.
“This second increase to consumer sentiment in a row defies increasing inflation. German citizens are clearly expecting further price increases. That is why they consider to make purchases, in order to avoid even higher prices”, explains Rolf Bürkl, GfK consumer expert. “If the surge in prices continues, it would put a strain on consumer sentiment and a fundamental recovery would likely be further delayed.”
BoC is widely expected to continue tapering today, by announcing to lower weekly asset purchases by CAD 2B to CAD 1B. Also, the central bank would set the plan to end QE in December. Markets are currently pricing in three rate hikes in 2022, and would be eager to see any adjustment in the forward guidance to affirm such expectations. But BoC would probably hold their cards until December, and just reiterate that policy rate would stay at “the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved”.
Some previews on BoC:
CAD/JPY turned into sideway consolidations after hitting 93.00 last week, but overall bullish outlook is unchanged. Deeper pull back cannot be ruled out. But downside should be contained by 38.2% retracement of 84.88 to 93.00 at 89.89 to bring rebound. Meanwhile, break of 93.00 will resume larger up trend from 73.80. Next target is 61.8% projection of 73.80 to 91.16 from 84.65 at 95.37.
Australia CPI rose 0.8% qoq in Q3, matched expectations. Over the 12-month period, headline CPI slowed from 3.8% yoy to 3.0% yoy. Trimmed mean CPI jumped from 1.6% yoy to 2.1% yoy. Weighted median CPI rose from 1.6% yoy to 2.1% yoy too. Both trimmed mean and weighted mean CPI readings were highest in over five years, and the first annual movements above 2% since September 2015 quarter.
Head of Prices Statistics at the ABS, Michelle Marquardt said the most significant price rises in the September quarter were new dwellings (+3.3 per cent) and automotive fuel (+7.1 per cent).
New Zealand ANZ Business Confidence was finalized at -13.4 in October, down from September’s -7.2. Own Activity Outlook rose from prior month’s 18.2 to 21.7. Export intentions rose from 7.4 to 8.6. Investment intentions rose from 9.2 to 13.8. Employment intentions dropped from 14.1 to 10.9. Cost expectations rose from 84.2 to 87.2. Pricing expectations rose from 58.1 to 65.5. Inflation expectations rose further from 3.02 to 3.45.
ANZ said: “Despite living week to week to some extent, firms appear to be getting on with it as best they can. There are clearly challenges, with costs extremely high and profits expected to fall, but more positively, activity expectations, investment intentions and employment intentions are holding up. The COVID situation remains unpredictable, however, and we’ll be watching closely for any evidence of that uncertainty derailing plans.”
New Zealand goods exports rose 10% yoy or NZD 387B to NZD 4.4B in September. Goods imports rose 30% yoy or NZD 1.5B to NZD 6.6B. Trade deficit came in at NZD -2.2B, versus expectation of NZD -0.8B. The set of data marked the third successive month of record imports, resulting in a record trade deficit.
Exports to China rose 25%, to Australia dropped -8.4%, to US rose 23%, to EU rose -10%, and to Japan dropped -5.5%. Imports from China rose 48%, from EU rose 29%, from Australia rose 28%, from US dropped -2.1%, from Japan rose 41%.
“These three consecutive record months for imports are a reflection of both the higher prices New Zealanders are paying for consumer goods, and strong demand for capital goods such as machinery used in construction, and passenger vehicles,” international trade manager Alasdair Allen said.
US Conference Board Consumer Confidence Index rose from 109.8 to 113.8 in October, above expectation of 108.4. Present Situation Index rose from 144.3 to 147.4. Expectations index rose from 91.3 to 86.7.
“Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
“While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted. The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October—a sign that consumer spending will continue to support economic growth through the final months of 2021. Likewise, nearly half of respondents (47.6%) said they intend to take a vacation within the next six months—the highest level since February 2020, a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.”
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US GDP grew 2.0% annualized in Q3, missed expectations
US GDP grew 2.0% annualized in Q3, below expectation of 2.6%. The increase in real GDP in the third quarter reflected increases in private inventory investment, personal consumption expenditures (PCE), state and local government spending, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment, federal government spending, and exports. Imports, which are a subtraction in the calculation of GDP, increased.
Full release here.