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SNB stands pat, upgrades 2021 and 2022 inflation forecasts

    By
    ActionForex
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    SNB kept the sight deposits rate unchanged at -0.75% as widely expected. It also remained “remains willing to intervene in the foreign exchange market as necessary, in order to counter upward pressure on the Swiss franc”. The Swiss Franc “remains highly valued”.

    The new conditional inflation forecasts for 2021 and 2022 were revised higher “primarily due to higher import prices, all all for oil products and for goods affected by global supply bottlenecks”. New forecast stands at 0.6% for 2021, 1.0% for 2022 and 0.6% for 2023, comparing to September forecasts of 0.5% for 2021, 0.7% for 2022, and 0.6% for 2023. They based on assumption that policy rate remains at -0.75% over the entire forecast horizon.

    As for the economy, the baseline scenario is a “continuation of the economic recovery next year”. SNB expects GDP growth of around 3% for 2022 while unemployment is “likely to decline again somewhat”.

    Full statement here.

    Gold spiked lower after Fed, but quickly recovered

      By
      ActionForex
      -

      Gold spiked lower to 1752.32 after Fed decided to double tapering pace while the new projections indicated three rate hikes next year. Yet, Gold quickly recovered and there was no follow through buying in Dollar.

      For now, further fall will remain in favor in Gold as long as 1792.94 resistance holds. Break of 1752.32 will resume the decline from 1877.05 to 1721.46 first. Break there will target key long term support zone at 1676.55/1682.60.

      However, strong break of 1792.94 will now bring sustained trading above 55 day EMA. Considering bullish convergence condition in 4 hour MACD too, that would signal complete of fall from 1877.05 and bring stronger rise back towards this resistance.

      Japan exports rose 20.5% yoy in Nov, imports surged 43.8% yoy to record

        By
        ActionForex
        -

        Japan’s exports rose 20.5% yoy to JPY 7367B in November. That’s the ninth straight months of increase, helped by 4.1% rise in auto shipments. Exports to China rose 155.0% yoy. Imports rose 43.8% yoy to JPY 8322B. That’s the largest amount on record since 1979, jacked up by 144.1% yoy rise in fuels. Trade surplus came in at JPY 955B.

        In seasonally adjusted terms, exports rose 5.3% mom to JPY 7385B. Imports rose 5.9% mom to 7872B. Trade balance reported a deficit of JPY -487B.

        Japan PMI manufacturing dropped to 53.3, recovery sustained with softening momentum

          By
          ActionForex
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          Japan PMI Manufacturing dropped from 54.0 to 53.3 in December. PMI Services dropped from 53.0 to 51.1. PMI Composite dropped from 53.3 to 51.8.

          Annabel Fiddes, Economics Associate Director at IHS Markit, said: “The latest Flash PMI data showed that the Japanese private sector recovery was sustained in December, rounding off the best quarterly performance since Q4 2018. However, both manufacturers and services companies signalled softer rates of output and new order growth compared to November, to suggest a softening of momentum.”

          Full release here.

          Australia PMI manufacturing dropped to 57.4, PMI services dropped to 55.1

            By
            ActionForex
            -

            Australia PMI manufacturing dropped from 59.2 to 57.4 in December. PMI Services dropped from 55.7 to 55.1. PMI Composite dropped from 55.7 to 54.9.

            Jingyi Pan, Economics Associate Director at IHS Markit, said: “The Australian economy maintained growth at a strong rate in December… Supply issues meanwhile persisted, with lead times continuing to lengthen and reports of shortages persisting. This led to a surge in price pressures for private sector firms and affected business confidence… The climb in employment levels was also a positive sign with private sector firms across both the manufacturing and service sectors hiring at faster rates in December.”

            Full release here.

            Australia employment rose 366.1k in Nov, unemployment dropped sharply to 4.6%

              By
              ActionForex
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              Australia employment rose 366.1k in November, above expectation of 200k. Full-time employment rose 128.3k. Part-time employment rose 237.8k. Unemployment rate dropped sharply from 5.2% to 4.6%, better than expectation of 5.0%. Participation rate also jumped 1.4% to 66.1%. Monthly hours worked in all job rose 4.5% mom.

              ABS said: “The easing of restrictions in both New South Wales and Victoria had a large influence on the national figures, with employment in the two states increasing by 180,000 people and 141,000 people between October and November. Employment in those jurisdictions in November was only 52,000 people and 4,000 people below May, having fallen by 250,000 people and 145,000 people during the lockdowns.”

              Full release here.

              New Zealand GDP contracted -3.7% qoq in Q3, better than expectation

                By
                ActionForex
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                New Zealand GDP dropped -3.7% qoq in Q3, better than expectation of -4.3% qoq. For the year, GDP contracted -0.3% yoy, versus expectation of -1.6% yoy. Services industries dropped -2.7% qoq. Goods-producing industries dropped -7.3% qoq. Primary industries dropped -3.1% qoq.

                The contraction reflects a widespread drop in economic activity due to the COVID-19 alert level restrictions and nationwide-lockdown implemented in the second half of the quarter. But the contraction in Q3 was “less pronounced” when compared with Q2 2020.

                “The September 2021 quarter had fewer days in higher alert levels, and border restrictions were already in place. Also, some businesses may have adapted to and been better prepared for higher alert levels, compared with the first lockdown,” national accounts industry and production senior manager Ruvani Ratnayake said.

                Full release here.

                Fed press conference live stream

                  By
                  ActionForex
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                  Fed doubles tapering speech, 12 members project 3 hikes or more in 2022

                    By
                    ActionForex
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                    Fed kept federal funds rate target unchanged at 0-0.25%. And, “in light of inflation developments and the further improvement in the labor market”, Fed will now reduce monthly purchases of of treasury securities and MBS at a faster rate of USD 20B and USD 10B respectively. That is, the tapering speed is doubled.

                    In the new median economic projections for 2022:

                    • GDP growth forecast was raised from 3.8% to 4.0%.
                    • Unemployment forecast was lowered from 3.8% to 3.5%.
                    • PCE inflation forecast was raised from 2.2% to 2.6%.
                    • Core PCE inflation forecast was raised from 2.3% to 2.7%
                    • Federal funds rate forecast was raised from 0.3% to 0.9%.

                    In the new dot plot:

                    • All members project one rate hike or more in 2022.
                    • 5 members project two rate hikes in 2022.
                    • 12 members project three hikes or more in 2022.

                    Full statement here.

                    Full projections here.

                    US retail sales rose 0.3% mom in Nov ex-auto sales up 0.3% mom

                      By
                      ActionForex
                      -

                      US retail sales rose 0.3% mom to USD 639.8B in November, below expectation of 0.8% mom. Ex-auto sales rose 0.3% mom, below expectation of 1.0% mom. Ex-gasoline sales rose 0.1% mom. Ex-auto, ex-gasoline sales rose 0.2% mom.

                      Total sales for September through November period were up 16.2% yoy from the same period a year ago.

                      Full release here.

                      UK CPI rose to 5.1% yoy in Nov, highest since 2011

                        By
                        ActionForex
                        -

                        UK CPI accelerated further to 5.1% yoy in November, up from 4.2% yoy, above expectation of 4.7% yoy. That’s also the highest level since September 2011, when it stood at 5.2%. CPI core rose to 4.0% yoy, up from 3.4% yoy, above expectation of 3.8% yoy.

                        PPI input rose from 13.7% yoy to 14.3% yoy, above expectation of 11.0% yoy. PPI output rose from 8.6% yoy to 9.1% yoy, above expectation of 7.3% yoy. PPI core output also rose from 7.1% to 7.9%, above expectation of 7.1% yoy.

                        ONS Chief Economist Grant Fitzner said: “A wide range of price rises contributed to another steep rise in inflation, which now stands at its highest rate for over a decade. The price of fuel increased notably, pushing average petrol prices higher than we have seen before. Clothing costs – which increased after falling this time last year – along with prices for good, second-hand cars and increased tobacco duty all helped drive up inflation this month.”

                        “The costs of goods produced by factories and the price of raw materials have continued to increased significantly to their highest rate for at least twelve years.”

                        Full CPI and PPI release here.

                        Fed to speed up tapering, publish new dot plot

                          By
                          ActionForex
                          -

                          Fed Chair Jerome Powell has clearly indicated that there will be a discussion about accelerating the tapering pace, and ending the asset purchases a a few months early. We’d expect Fed to announce a decision today, probably a double in the size of tapering to USD 30B per month.

                          The main focus will be more on the new economic projections, in particular the dot plot. Back in October, nine policy makers penciled in one rate hike or more in 2022 (six expected one hike and three expected two hikes), while nine expected no change. We’d probably see the interest rate projections shift even more towards the hawkish side.

                          Here are some suggested previews:

                          China industrial production rose 3.8% yoy in Nov, retail sales rose 3.9% yoy

                            By
                            ActionForex
                            -

                            China industrial production rose 3.8% yoy in November, matched expectations. That’s a slightly faster growth rate than October’s 3.5% yoy. Retail sales rose 3.9% yoy, below expectation of 4.9% yoy, and slowed from prior month’s 4.9% yoy. Fixed asset investment rose 5.2% ytd yoy, slightly below expectation of 5.3%.

                            “Generally speaking, the national economy maintained the recovery momentum in November, and the major macro indicators stayed within a reasonable range,” the NBS said in its statement. “However, we must note that the international environment is increasingly complex and severe, and there are still many constraints on the domestic economic recovery.”

                            Australia Westpac consumer sentiment dropped to 104.3, different responses between states

                              By
                              ActionForex
                              -

                              Australia Westpac-Melbourne Institute consumer sentiment dropped -1.0% to 104.3 in December, staying in positive territory where optimists outnumber pessimists. Nevertheless, responses from states are rather different, with both NSW and Victoria posted significant falls (down 3.6% and 3.5% respectively) while sentiment was up in Queensland (3.4%), WA (3.2%) and SA (7.1%).

                              Westpac added that RBA’s meeting on February 1 will be a very important one with new economic forecasts. No action or commitment on interest rate is expected at the meeting yet. But RBA would lower the bond purchase pace from AUD 4B per week to AUD 2B per week.

                              Full release here.

                               

                              BoJ Kuroda: Consumer inflation will approach target through various channels

                                By
                                ActionForex
                                -

                                BoJ Governor Haruhiko Kuroda told parliament today, “it’s true there’s a chance consumer inflation will approach 2% through various channels.”

                                “But what’s desirable is for the economy to recover steadily and push up corporate profits, thereby leading to higher wages and inflation,” he added. “We’ll patiently maintain ultra-easy policy to achieve this at the earliest date possible.”

                                Kuroda also said Japan is not in a state of “stagflation”.

                                US PPI rose 0.8% mom, 9.6% yoy in Nov, highest annual rise on record

                                  By
                                  ActionForex
                                  -

                                  US PPI for final demand rose 0.8% mom in November, above expectation of 0.6% mom. For the 12-month period, PPI rose 9.6% yoy, accelerated from 8.6% yoy, above expectation of 9.1% yoy. That’s also the largest annual advance on record since November 2010.

                                  PPI less foods, energy, and trade services rose 0.7% mom, 6.9% yoy. The annual rise was the highest on record too, since August 2014.

                                  Full release here.

                                  IMF urges BoE to avoid inaction bias, should prepare markets for more frequent policy moves

                                    By
                                    ActionForex
                                    -

                                    IMF urged BoE to “avoid inaction bias” in a statement today, despite facing “difficult trade-offs”.

                                    “It would not be a simple matter to see through extended shifts in relative wages and prices while keeping expectations anchored,” IMF said. “It would be important to avoid inaction bias, in view of costs associated with containing second-round impacts. Careful communication would be needed to lay the groundwork with markets for potentially more frequent policy moves.”

                                    IMF said UK economic growth will “remain strong in the near term, but so too will price pressures”. It forecasts 6.8% growth in 2021, and 5% growth in 2022. Inflation would peak at about 5.5% in the spring of 2022, then gradually return to target by early 2024.

                                    Full statement here.

                                    Eurozone industrial production rose 1.1% mom in Oct, EU up 1.2% mom

                                      By
                                      ActionForex
                                      -

                                      Eurozone industrial production rose 1.1% mom in October, below expectation of 1.5% mom. Production of capital goods rose by 3.0%, durable consumer goods by 1.7%, non-durable consumer goods by 0.4% and energy by 0.1%, while production of intermediate goods fell by -0.6%.

                                      EU industrial production rose 1.2% mom. Among Member States for which data are available, the highest monthly increases were registered in Germany and Slovakia (both +3.0%), Greece (+2.5%) and Denmark (+2.1%). The highest decreases were observed in Estonia (-2.4%), Latvia (-1.5%), the Netherlands and Romania (both -0.9%).

                                      Full release here.

                                      UK unemployment rate dropped to 4.2% in Oct, employment rose 257k in Nov

                                        By
                                        ActionForex
                                        -

                                        UK unemployment rate dropped from 4.3% to 4.2% in the three months to October, matched expectations. Employment rate rose 0.2% to 75.5%. Average earnings including bonus rose 4.9% 3moy, above expectation of 4.5%. Average earnings excluding bonus rose 4.3% 3moy, above expectation of 4.0%.

                                        Total employment rose 257k to 29.4m in November. It’s also 424k above pre-coronavirus level in February 2020.

                                        Full release here.

                                        Australia NAB business confidence dropped to 12, come back to earth

                                          By
                                          ActionForex
                                          -

                                          Australia NAB business confidence dropped from 20 to 12 in November. Business conditions improved from 10 to 12. Looking at some details, trading conditions rose from 15 to 16. Profitability conditions rose were unchanged at 8. Employment conditions rose from 6 to 11.

                                          “Confidence remains high across states and industries, albeit it has come back to earth a little after the optimism associated with the end of lockdowns,” said NAB Chief Economist Alan Oster.

                                          “Forward indicators are also very strong with a rise in capital expenditure a welcome sign that businesses are beginning to look towards a period of expansion. These results align with the strong rebound in activity that we believe is now underway, as well as a positive outlook for the coming months with vaccination rates now very high.”

                                          Full release here.

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