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Bank of Korea raises interest rate, embarking normalization process

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    ActionForex
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    Bank of Korea raised interest rate by 0.25% to 0.75% today, becoming the first major Asian economy to hike. “The Board will gradually adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above 2% for some time, despite ongoing uncertainties over the virus,” the BOK said in its monetary policy statement.

    Governor Lee Ju-yeol said, “we’ve decided to put the focus on reducing financial imbalances, and as we raise the rate, we are embarking on a process of normalizing policy in line with economic recovery.”

    BoK maintained its forecast of 4% GDP growth this year. Consumer inflation forecast was, however, upgraded from 1.8% to 2.1%.

    Full statement here.

    Japan corporate services price rose 1.1% yoy in Jul, on transportation fees

      By
      ActionForex
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      Japan corporate services price index rose 1.1% yoy in July, below expectation of 1.3% yoy. The increase was driven by 1.4% rise in transportation fees, and in particular, with international freight costs up 24.6%. Meanwhile, hotel service fees rose 10.8%, highest in six years, reflecting the impact of the Tokyo Olympics.

      “The recent increase in infections will weigh on services producer prices, though we could see service demand perk up if progress in vaccinations help re-open the economy,” said Shigeru Shimizu, head of the BoJ’s price statistics division.

      US 10-year yield jumped as focus turns to Jackson Hole

        By
        ActionForex
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        US 10-year yield staged a strong rally overnight, closing up 0.052 at 1.342. The development came as markets are awaiting the highly anticipated Jackson Hole Symposium, which kicks off today. While the main highlight is Fed Chair Jerome Powell’s speech on Friday, there would likely be continuous news flow of central banker comments ahead of that.

        After Fed hawk Robert Kaplan’s comments the possibly of adjusting the timing of tapering, it seems less likely for Fed to make a September announcement. We’ll look forward to other Fed officials for guidance, as Powell would act like what he used you be, composed, balanced, but non-inspirational.

        Some suggested reading on Jackson Hole:

        As for 10-year yield, it’s back pressing 55 day EMA (now at 1.344) with yesterday’s rise. Sustained trading above there, followed by firm break of 1.420 resistance, should confirm that the correction from 1.765 has completed 1.128. That came after hitting 50% retracement at 1.1345. We should then see further rise back to retest 1.1765 high during the rest of the year, as the world is well-vaccinated to live with the coronavirus.

        ECB Lane: There could be counterbalances in H2

          By
          ActionForex
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          ECB Chief Economist Philip lane said in an interview, Q2 GDP came in “well ahead of out June projections”, reflecting an “earlier opening up”, “strength of the world economy” and “progress in vaccinations”. It’s “still early days” regarding H2, and there could be “counterbalance” like bottlenecks, moderation in world economy, and the Delta variant. Overall, he said, “we’re broadly not too far away from what we expected in June for the full year.”

          The Delta variant is now “part of the mix in the US and global economies”, while Europe “may not be among the regions hardest-hit thanks to high vaccination rates and prior lockdown measures. Also, the infrastructure and system for vaccination has “eliminated uncertainty about Europe’s ability to carry out vaccinations.”

          On PEPP, Lane said “we’ll have to assess at the September meeting the appropriate calibration for the final quarter of the year”. He emphasized that “single philosophy” of maintaining favorable financing conditions regarding PEPP. “If favourable financing conditions require more purchases, we’ll conduct more purchases,” he said.

          Full interview here.

          US durable goods orders dropped -0.1% in Jul, ex-transport orders rose 0.7% mom

            By
            ActionForex
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            US durable goods orders dropped -0.1% mom to USD 257.2B in July, better than expectation of -0.2% mom. Ex-transport orders rose 0.7% mom, above expectation of 0.5% mom. Ex-defense orders dropped -1.2% mom. Transportation equipment, dropped -2.2% to USD 75.3B.

            Full release here.

            Germany Ifo business climate dropped to 99.4 in Aug, supply bottlenecks and rising inflections

              By
              ActionForex
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              Germany Ifo Business Climate dropped from 100.8 to 99.4 in August, below expectation of 100.4. Current Assessment index rose from 100.4 to 101.4, above expectation of 100.8. However, Expectations index dropped from 101.2 to 97.5, below expectation of 100.0.

              Looking at some more details, manufacturing dropped from 27.4 to 24.1. Services dropped from 19.8 to 17.7. Trade dropped from 15.8 to 9.0. Construction rose from 6.0 to 7.8.

              Ifo said: “This decline was due mainly to significantly less optimism in companies’ expectations. Concerns are growing in the hospitality and tourism sectors in particular. By contrast, companies assessed their current situation as somewhat better than in the previous month. Supply bottlenecks for intermediate products in manufacturing and worries about rising infection numbers are putting a strain on the economy.”

              Full release here.

              New Zealand goods exports rose 15% yoy in Jul, imports rose 35% yoy

                By
                ActionForex
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                New Zealand goods exports rose 15% yoy to NZD 5.8B in July. Goods imports rose sharply by 35% yoy to NZD 6.2B. Monthly trade balance was a deficit of NZD -402m, versus expectation of NZD 100m surplus.

                Exports to all trading partners were up (China +25% yoy, Australia 22% yoy, EU + 7.4% yoy, Japan +26% yoy), except the US (down -2.9% yoy. Imports from all top trading partners were up (China +22% yoy, EU + 38% yoy, Australia + 12% yoy, US + 14% yoy, Japan +71% yoy).

                Full release here.

                BoJ Nakamura warned of delayed spending, Japan expands state of emergency

                  By
                  ActionForex
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                  BoJ board member Toyoaki Nakamura warned in a speech today that the economy is still in a “severe state” and outlook was “highly uncertain” with risks skewed to the downside. He added, “the resurgence in infections may have somewhat delayed the timing for when pent-up demand materializes.”

                  But he’s hopeful that economic activity would strengthen strongly as pandemic impact subsides. Inflation is likely to gradually accelerate as the economy recovers. Also, he expects exports to increase steadily on robust global demand and recovery in capital expenditure.

                  Separately, Japan is set p expand a state of emergency to 8 more prefectures. That takes the total to 21 out of 47 total prefectures. Economy Minister Yasutoshi Nishimura emphasized, “the most important task is to beef up the medical system.”

                  Germany GDP growth finalized at 1.6% qoq in Q2, individual sectors diverged

                    By
                    ActionForex
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                    Germany GDP growth was finalized at 1.6% qoq in Q2, revised up from 1.5% qoq. In, seasonally and calendar-adjusted gross value added increased by 1.0%. Individual sectors showed diverging trends: Up 3.8% qoq in public services, education, health; up 1.1% qoq in trade, transport, accommodation and food services; up 0.1% qoq in construction; but down -1.3% in manufacturing.

                    Comparing with the same quarter a year earlier, GDP grew 9.8% yoy on price-adjusted term, and 9.4% yoy on price- and calendar-adjusted term.

                    Full release here.

                    RBNZ Hawkesby said 50bps hike actively considered, NZD/USD jumps

                      By
                      ActionForex
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                      RBNZ Assistant Governor Christian Hawkesby told Bloomberg that the decision to stand pat on OCR last week was mostly due to communications problem. It’s hard to explain the case when if the rate hike was delivered on the same day as New Zealand returned to pandemic lockdown.

                      He added that the decision was not due to risks and the policy decisions “won’t be tightly linked” to COVID -19. Demand as proven to be more resilient than anticipated.

                      Most surprisingly, Hawkesby also indicated that the central bank has considered a 50bps rate hike. “A 50 basis point move was definitely on the table in terms of the options that we actively considered,” he said.

                      NZD/USD’s rebound form 0.6804 accelerated higher today but stays well below 0.7087 resistance so far. It’s too early to say that the corrective pattern from 0.7463 has completed, with NZD/USD staying even below 55 day EMA. NZD/USD could have another dip to 38.2% retracement of 0.5467 to 0.7463 at 00.6701 before resuming the medium term up trend.

                      Gold back above 1800 as rebound resumed

                        By
                        ActionForex
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                        Gold’s rebound from 1682.60 resumed last week and it’s now trading slightly above 1800 handle. From a bigger picture, it’s possible that gold has once again drew enough support from long term fibonacci level of 38.2% retracement of 1046.27 to 2074.84 at 1681.92 to form a bottom.

                        However, we’d prefer to see, firstly, sustained trading above 1800 psychological level. Secondly, Gold will need to break through 1832.47 near term resistance. In that case, stronger rise could be seen at least to retest 1916.30 medium term resistance next. However, break of 1774.14 support will suggest that the rebound has completed and bring another test on 1681.92 fibonacci level again.

                        NASDAQ hit new record after full FDA approval to Pfizer-BioNTech vaccine

                          By
                          ActionForex
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                          Major US stock indexes closed higher after the Food and Drug Administration (FDA) granted full approval to the Pfizer-BioNTech’s COVID-19 vaccines. Pfizer shares also rose 2.4% while BioNTech stock rose 9.5%. Another vaccine maker Moderna also rose 7.5%. Both S&P 500 and NASDAQ closed at new record highs.

                          The notable support from 55 day EMA in NASDAQ once again reaffirmed its near term bullishness. The index should be on track to 61.8% projection of 10822.57 to 14175.11 from 13002.53 at 15704.4, probably later this week. Sustained break there could prompt some upside acceleration to next target at 100% projection at 16355.1. In any case, outlook will stay bullish as long as 14423.2 support holds, even with an initial rejection by 15k handle.

                          New Zealand retail sales rose 3.3% qoq in Q2, above expectations

                            By
                            ActionForex
                            -

                            New Zealand retail sales volume rose 3.3% qoq in Q2, above expectation of 2.0% qoq. 11 of 15 industries reported growth, and the largest increases were in electrical and electronic goods retailing (up 6.9%), food and beverage services (up 5.6%), motor vehicle and parts retailing (up 3.1%), pharmaceutical and other store-based retailing (up 7.5%), and accommodation (up 11.4%).

                            “Most retail industries saw increases in spending, with rises across all regions. Spending on big ticket items such as electrical goods, housewares, and vehicles was a priority for many consumers during this June quarter,” retail trade manager Sue Chapman said.

                            Full release here.

                            US PMI manufacturing dropped to 61.2, services down to 55.2

                              By
                              ActionForex
                              -

                              US PMI Manufacturing dropped from 63.4 to 61.2 in August, below expectation of 63.0. PMI Services dropped from 59.9 to 55.2, below expectation of 59.9. PMI Composite dropped from 59.9 to 55.4.

                              Chris Williamson, Chief Business Economist at IHS Markit, said:

                              “The expansion slowed sharply again in August as the spread of the Delta variant led to a weakening of demand growth, especially for consumer-facing services, and further frustrated firms’ efforts to meet existing sales.

                              “Not only have supply chain delays hit a new survey record high, but the August survey saw increasing frustrations in relation to hiring. Jobs growth waned to the lowest since July of last year as companies either failed to find suitable staff or existing workers switched jobs.

                              “Prices charged for goods and services grew at an increased rate as demand once again ran ahead of supply, most notably in the manufacturing sector.

                              “Prices look set to continue to rise sharply due to the persistent upward pressure on costs arising from shortages of materials and labor, though if demand continues to cool due to rising case numbers this should alleviate some of the inflationary pressures.”

                              Full release here.

                              Bundesbank: Output to rise sharply in summer

                                By
                                ActionForex
                                -

                                In the monthly report, Bundesbank said German economic output is “likely to rise sharply in summer 2021”, more strongly than in Spring. Industry was unable to take advantage of the growth in Q2 due to increased delivery bottlenecks. But there are initial signs that these delivery bottlenecks are “at least not worsening”. It remains to be seen if GDP could reach pre-crisis level in Summer or not until Autumn.

                                Inflation is expected to continue to rise in Germany, but then “decrease noticeably again at the beginning of 2022”, as the base effect will then no longer apply. Though, inflation could still be over 2% until mid-2022.

                                UK PMI manufacturing dropped to 60.1, services tumbled to 55.5

                                  By
                                  ActionForex
                                  -

                                  UK PMI Manufacturing dropped from 60.4 to 60.1 in August, above expectation of 59.5. PMI Services dropped notably from 59.6 to 55.5, below expectation of 59.0. PMI Composite dropped from 59.2 to 55.3.

                                  Chris Williamson, Chief Business Economist at IHS Markit, said: “Although the PMI indicates that the economy continues to expand at a pace slightly above the pre-pandemic average, there are clear signs of the recovery losing momentum in the third quarter after a buoyant second quarter… rising virus case numbers are deterring many forms of spending… Supplier delays have risen to a degree exceeded only once before… Prices have risen sharply again, albeit with the rate of inflation moving below July’s record high.

                                  “More positively, business expectations for the year ahead perked up in August, encouraging a record jump in employment as furloughed workers were brought back to the workplace. However, demand and supply availability need to improve further for this rise in employment to be sustained in coming months”

                                  Full release here.

                                  Eurozone PMI composite ticked down to 59.5, recovery retained impressive momentum

                                    By
                                    ActionForex
                                    -

                                    Eurozone PMI Manufacturing dropped from 62.8 to 61.5 in August, below expectation of 62.0. PMI Services dropped from 59.8 to 59.7, below expectation of 59.8. PMI Composite dropped from 60.2 to 59.5.

                                    Chris Williamson, Chief Business Economist at IHS Markit said: “The eurozone’s economic recovery retained impressive momentum in August, with the PMI dipping only slightly from July’s recent high to put its average in the third quarter so far at the highest for 21 years… Firms benefited from virus containment measures easing to the lowest since the pandemic began…

                                    “Supply chain delays continue to wreak havoc… combined with surging demand, led to another near-record increase in average selling prices for goods and services, though there are some welcome signs that these inflationary pressures may have peaked for now. Encouragement comes from a second month of job creation at the strongest for 21 years… some upward movement on wage growth… which could feed through to higher inflation”.

                                    Full release here.

                                    Germany PMI composite dropped to 60.0, still firmly inside growth territory

                                      By
                                      ActionForex
                                      -

                                      Germany PMI Manufacturing dropped from 65.9 to 52.7 in August, below expectation of 65.0. PMI Services dropped from 61.8 to 61.5, above expectation of 61.0. PMI Composite dropped from 62.4 to 60.6.

                                      Phil Smith, Associate Director at IHS Markit said: “With August’s flash PMI still firmly inside growth territory, the recovery of the German private sector looks to be continuing at a healthy pace. Although growth has slowed down since July, the data are still pointing to a stronger economic expansion in the third quarter than the provisional 1.5% increase in GDP seen in the three months to June.”

                                      Full release here.

                                      France PMI composite dropped to 55.9, another strong month of growth

                                        By
                                        ActionForex
                                        -

                                        France PMI Manufacturing dropped from 58.0 to 57.3 in July, matched expectations. PMI Services dropped from 56.8 to 56.4, below expectation of 57.0. PMI Composite dropped from 56.6 to 55.9.

                                        Joe Hayes, Senior Economist at IHS Markit said: “Another strong month of growth across France was signalled by the flash PMI figure for August. Despite some of the challenges businesses are facing on the supply side, it’s encouraging to see PMI data consistently signalling robust expansion. Furthermore, given we’re now midway through the third quarter, the survey data up to this point suggest we could see another decent out turn in the corresponding GDP figure.”

                                        Full release here.

                                        Japan PMI composite dropped to 45.9 in Aug, weaker demand and sustained supply chain pressures

                                          By
                                          ActionForex
                                          -

                                          Japan PMI Manufacturing dropped from 53.0 to 52.4 in August, below expectation of 53.4. PMI services dropped sharply from 47.4 to 43.5, worst in 15 months. PMI Composite dropped from 48.8 to 45.9, worst since August 2020.

                                          Usamah Bhatti, Economist at IHS Markit, said: “The Japanese private sector economy saw business conditions deteriorate further midway through the third quarter of the year, with flash PMI data signalling a quicker decline in business activity in August. The latest contraction was the quickest recorded since August 2020, while incoming business was reduced at the sharpest pace for seven months. Survey respondents commonly attributed weaker demand to ongoing COVID-19 restrictions, coupled with sustained supply chain pressures.”

                                          Full release here.

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