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Fed Powell: Economic activity has picked up from its depressed Q2 level

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    ActionForex.com
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    In the remarks released ahead of Tuesday’s testimony, Fed Chair Jerome Powell said “economic activity has picked up from its depressed second-quarter level:. Economic indicators showed “marked improvements” including household spending, housing, business fixed investment and labor. However, both employment and overall economic activity “remain well below their pre-pandemic levels”. The path ahead continues to be “highly uncertain”.

    “A full recovery is likely to come only when people are confident that it is safe to reengage in a broad range of activities,” he added. “The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government. Fed remains “committed to using our full range of tools to support the economy for as long as is needed.”

    Full remarks here.

    DOW breaks 55 day EMA, heading back to 25000

      By
      ActionForex.com
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      DOW opens sharply lower and it’s trading down nearly -900 pts at the time of writing. The strong break of 55 day EMA (now at 27340), and bearish divergence condition in daily MACD, suggests that 29199.35 is at least a short term top. Currently, we’re viewing it as a correction to the rise from 18213.65 first.

      Even that case, deeper fall would be seen to 24971.03 cluster support (38.2% retracement of 18213.65 to 29199.35 at 25002.81), which is also close to 25000 psychological level. Reaction from there would tell use whether this assumption of correction is correct, or DOW is indeed reversing the whole move.

      Gold breaks out of triangle, heading to 1862 support and below

        By
        ActionForex.com
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        Gold breaks out of triangle pattern today and hits as low as 1890.17 so far. The development suggests that corrective pattern from 2075.18 is starting another falling leg for 1862.55 support first. Break there will target 61.8% retracement of 1670.66 to 2075.18 at 1825.16. At this point, we’d expect strong support around there to contain downside to complete the correction.

        However, it should be noted that the strong break of 55 day EMA could be a sign of larger correction. This is not our preferred scenario yet. But firm break of 1862.55 would argue that Gold is indeed correcting the whole rise from 1160.17. In that case, deeper fall would be seen back to 38.2% retracement of 1160.17 to 2075.18 at 1725.64 in the medium term, which would then be close to 55 week EMA (now at 1696.48).

        ECB Lagarde: Uncertainty requires careful assessment of information including exchange rate

          By
          ActionForex.com
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          ECB President Christine Lagarde said in a speech the central bank’s pandemic response measures has stabilized the markets, protected the supply of credit and support the recovery. That should in turn support the return of inflation towards target.

          But at the same time, “the uncertainty of the current environment requires a very careful assessment of the incoming information, including developments in the exchange rate, with regard to its implications for the medium-term inflation outlook.. ECB stands ready to adjust all of its instruments as appropriate.

          Lagarde’s full speech here.

          Bundesbank: German economy gradually recovering from pandemic slump

            By
            ActionForex.com
            -

            According to the Bundesbank’s monthly report, German economy is “gradually recovery from the severe slump as a result of the coronavirus pandemic”. After the massive decline in GDP in springs experts expect a “strong countermovement” in Q3. But both industry and service sector would fall well below the pre-crisis level in the summer.

            Industrial productions continued its recovery at a slower pace in July Bundesbank assumes that “recovery will continue in the further course of the year, albeit at a slower pace”. Also, expectations regarding export are “still cautious”.

            It also noted that unemployment stood steady at 6.4% for the three month in a row. “The recovery tendencies in employment and unemployment could continue”

            Full release here.

            Sterling down as UK at a critical juncture on returning to lockdown

              By
              ActionForex.com
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              Sterling tumbles broadly today on concern that UK is returning to coronavirus lockdown. Chris Whitty, the government’s chief medical officer, is expected to warn at a briefing, “the trend in the UK is heading in the wrong direction and we are at a critical point in the pandemic… We are looking at the data to see how to manage the spread of the virus ahead of a very challenging winter period”

              Separately, Transport Secretary Grant Shapps also said UK was at a critical juncture, but any lockdown should be balanced. “We’re certainly at a very critical moment this morning,” Shapps said. “It is clear that we are just a few weeks behind what we’re seeing elsewhere in Europe.” “It is very important that we do everything we can to sort of bear down on this,” he added. “We’ll hear from others including the prime minister on the proposed next steps.”

              PBoC kept LPR unchanged for the fifth straight month

                By
                ActionForex.com
                -

                China’s PBoC kept its benchmark lending rates unchanged for the fifth consecutive month today. The one-year Loan Prime Rate was held at 3.85%. Five-year LPR was kept at 4.65%. That was basically in line with market expectations.

                Recent economic data from China suggested that the economy is on track for recovery. PBoC is expected to continue to stand pat, keeping the policy rate unchanged in the coming months. The main question now is when PBoC would start tightening up policy again. Some speculates that the LPR increase might come early next year.

                USD/CNH is now reversing the whole up trend from 2018 low at 6.2354 to 7.193. As long as 6.8600 near term resistance holds, USD/CNH would continue its decline to 6.6699 support, and possibly further to 61.8% retracement at 6.6021.

                UK manufacturers see no evidence of V sharp recovery

                  By
                  ActionForex.com
                  -

                  According to the Make UK/BDO Manufacturing Outlook Q3 survey, balance on investment intentions fell to -32% from -26% in the last quarter. Output and orders improved but were still way below historic averages. There were significant cuts to investment while employment prospects weakened. Forward looking indicators suggest conditions will improve albeit slowly. Overall, there was “no evidence of V shape recover”.

                  Also, Make UK is now forecasting manufacturing output to fall by -10.9% this year. 2021 recovery was downgraded by 6.2% to 5.1%. GDP is forecast to fall by -8.5% this year and recover by 10.1% in 2021.

                  Full release here.

                  Fed Kashkari wants stronger commitment to not raising rates

                    By
                    ActionForex.com
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                    Minneapolis  Fed President Neel Kashkari explained in an article the reasons for his dissent to the latest FOMC statement. He said, “I would have preferred the Committee make a stronger commitment to not raising rates until we were certain to have achieved our dual mandate objectives.”

                    His own proposed language was: “The Committee expects to maintain this target range until core inflation has reached 2 percent on a sustained basis.” “By eliminating both the direct reference to our assessment of maximum employment and any forecast of inflation climbing, this proposed language guards against the risk of underestimating slack in the labor market. ” he added.

                    Separately, Atlanta Fed President Raphael Bostic said he’s comfortable with inflation above 2% but wold look at more at the “trajectory than level”. If inflation went up to 2.3% but appeared stable, “that would be fine”. On the other hand,  “if we were at 2.2 and the next quarter at 2.4 and then at 2.6 that trajectory would give me concern”.

                    Canada retail sales rose 0.6% in Jul, in V-shaped recovery

                      By
                      ActionForex.com
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                      Canada retail sales rose 0.6% mom to CAD 52.9B in July, below expectation of 0.8% mom. Growth was led by higher sales at motor vehicles and parts dealers and gasoline stations. Core retail sales dropped -1.2% mom. StatCan said “overall, the recovery in total retail sales has been V-shaped, with sales in June and July, respectively, rebounding from the record low observed in April.”

                      Also from Canada, wholesale sales rose 4.3% mom in July, above expectation of 3.4% mom.

                      UK retail sales rose 0.8% in Aug, 4% above pre-pandemic level

                        By
                        ActionForex.com
                        -

                        UK retail sales rose 0.8% mom in August, above expectations of 0.7% mom. Over the year, sales rose 2.8% yoy, below expectation of 3.0% yoy. That’s the fourth consecutive month of growth, resulting in an increase of 4.0% comparing with February’s pre-pandemic level.

                        Full release here.

                        WTI extends rebound as OPEC+ urged full conformity on production cuts

                          By
                          ActionForex.com
                          -

                          Oil prices surged overnight after OPEC+ urged members to conform with production cuts in an online meeting yesterday. “The JMMC reiterated the critical importance of adhering to full conformity and compensating overproduced volumes as soon as possible,” OPEC officials said.

                          WTI extends the rebound from 35.98 to as high as 40.73 so far. Further rise is expected towards 43.50 resistance. At this point, we’re not expecting a firm break there. 43.75 is seen as a medium term top with subsequent price actions seen as developing into a sideway consolidation pattern. Break of 39.37 will start a third leg, a down leg, in the pattern.

                          CBI: 46% UK firms would cut jobs or not hire in 12 months

                            By
                            ActionForex.com
                            -

                            UK CBI found in a survey that 51% of firms are expecting to maintain or increase their permanent recruitment in the coming 12 months. At the same time, 46% are planning to either reduce permanent recruitment of not recruit at all. The balance of +5% was sharply lower than +56% in the survey last ear.

                            Matthew Fell, CBI Chief UK Policy Director, said: “The UK labour market has been under heavy stress since the outset of the Covid-19 crisis and, although the economy has started to re-open, pressure on firms remains acute… We are seeing a two-speed recovery. While some firms are already looking at creating new jobs, most others are in survival mode.”

                            Full release here.

                            Japan CPI core dropped to -0.4%, lowest in nearly four years

                              By
                              ActionForex.com
                              -

                              Japan CPI core (all items less fresh food) dropped to -0.4% yoy in August, down from 0.0% yoy, matched expectations. It’s the lowest readings in nearly four years, matching the low seen in November 2016. All item CPI slowed to 0.2% yoy, down form 0.3% yoy. CPI core-core (all items less fresh food and energy) turned negative to -0.1% yoy, down form 0.4% yoy. Downward pressure is generally expected on prices, which might send core CPI to as low as -1.0% later this year.

                              Separately, according to a telephone poll by Kydo news 66.4% of the public support new Prime Minister Yoshihide Suga’s cabinet. A survey by Nikkei newspaper and TV Tokyo showed 74% support. Suga is generally expected to follow most a large part of Abenomics as his economic policies.

                              US initial jobless claims dropped to 860k, continuing claims down to 12.6m

                                By
                                ActionForex.com
                                -

                                US initial jobless claims dropped -33k to 860k in the week ending September 12, above expectation of 825k. Four-week moving average of initial claims dropped -61k to 912k.

                                Continuing claims dropped -916k to 12628k in the week ending September 5. Four-week moving average of continuing claims dropped -533k to 13489k.

                                Full release here.

                                BoE kept policy unchanged, MPC briefed on plans to explore negative rates

                                  By
                                  ActionForex.com
                                  -

                                  BoE kept Bank Rate unchanged at 0.1% as widely expected. The target of asset purchases was also held at GBP 745B. Both decisions were made by unanimous votes. The central bank pledged to continue to “monitor the situation closely and stands ready to adjust monetary policy accordingly to meet its remit”. It “does not intend to tighten monetary policy until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”

                                  The central bank also noted that “recent domestic economic data have been a little stronger than the Committee expected” at the time of the August Monetary Policy Report. However, “it is unclear how informative they are about how the economy will perform further out.” Recent increases in coronavirus cases is some parts of the world “have the potential to weigh further on economic activity”. Meanwhile, “there remains a risk of more persistent period of elevated unemployment”.

                                  In the minutes, it’s noted that the Committee “had discussed its policy toolkit, and the effectiveness of negative policy rates”. The MPC had been briefed on the plans to explore how a negative Bank Rate could be implemented effectively, should the outlook for inflation and output warrant it at some point during this period of low equilibrium rates.”

                                  Full statement here.

                                  Minutes here.

                                  Eurozone CPI finalized at -0.2% in Aug, EU CPI at 0.4%

                                    By
                                    ActionForex.com
                                    -

                                    Eurozone CPI is finalized at -0.2% yoy in August, down from July’s 0.4% yoy. The highest contribution to the annual euro area inflation rate came from food, alcohol & tobacco (+0.33 percentage points, pp), followed by services (+0.30 pp), non-energy industrial goods (-0.03 pp) and energy (-0.77 pp).

                                    EU CPI was finalized at 0.4% yoy, up from July’s 0.9% yoy. The lowest annual rates were registered in Cyprus (-2.9%), Greece (-2.3%) and Estonia (-1.3%). The highest annual rates were recorded in Hungary (4.0%), Poland (3.7%) and Czechia (3.5%). Compared with July, annual inflation fell in sixteen Member States, remained stable in five and rose in six.

                                    Full release here.

                                    BoJ Kuroda: Given the pandemic, inflation is falling quite a lot in many countries

                                      By
                                      ActionForex.com
                                      -

                                      In the post meeting press conference, BoJ Governor Haruhiko Kuroda said “domestic and overseas markets remain jittery but tensions have eased somewhat.” He pledged that “the BOJ will continue with measures that are exerting positive effects in the economy”.

                                      “There is absolutely no need to change our 2% inflation target,” he said. “Given the pandemic, inflation is falling quite a lot in many countries. Prices may start falling in Japan as well. But that doesn’t mean Japan and western countries are discussing the need to change their inflation targets.”

                                      On exchange rate, Kuroda reiterated that “currency rates should move in a way that reflects economic fundamentals.” He maintained the stance of “watching currency moves carefully from that perspective.”

                                      BoJ stands pat, will not hesitate to ease further

                                        By
                                        ActionForex.com
                                        -

                                        BoJ left monetary policy unchanged as widely expected. Under the yield curve control framework, short term interest rate is kept at -0.1%. BoJ will also continue to purchase JGBs, without upper limit, to keep 10-year JGB yield at around 0%. The decision was made by 8-1 vote as usual, with Goushi Kataoka dissented, pushing to strengthen monetary easing.

                                        The central bank said the economic outlook is “likely to follow an improving trend through the materialization of pent-up demand and supported by accommodative financial conditions and the government’s economic measures”. But pace would be “only moderate while the impact of COVID-19 remains worldwide”. Annual CPI core is likely to be negative for the time being, but it’s expected to turn positive and increase gradually with economic improvement.

                                        It also reiterated the “extremely high uncertainties” over the pandemic impacts. For the time being it will closely monitor the impact of COVID-19 and “will not hesitate to take additional easing measures if necessary.”

                                        Full statement here.

                                        Australia employment grew 111k in Aug, unemployment rate dropped to 6.8%

                                          By
                                          ActionForex.com
                                          -

                                          Australia employment grew strongly by 111k to 12.6m in August, much better than expectation of -40k contraction. Full-time jobs rose 36.2k to 8.58m. Part-time jobs rose 74.8k to 4.00m. Unemployment rate dropped notably by 0.7 pts to 6.8%, much better than expectation of 7.8%. Participation rate also rose 0.1% to 64.8%. Monthly hours worked in all jobs also rose 1.6m hours to 1683 hours.

                                          All states and territories recorded increases in the number of employed people except for Victoria. The number of employed people in Victoria decreased by 42,400. In contrast, New South Wales recorded an increase of 51,500 employed people and there was an increase of 32,200 employed people in Western Australia. Unemployment rates decreased in most states and territories. The largest falls were seen in Northern Territory (down 3.3 pts to 4.2%). Increases were recorded in Victoria (up 0.4 pts to 7.1%) and Tasmania (up 0.3 pts to 6.3%).

                                          Full release here.

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