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Australia PMI composite dropped to 15-month low, heavily impacted by restrictions

    By
    ActionForex
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    Australia PMI Manufacturing dropped from 56.9 to 51.7 in August, hitting a 14-month low. PMI Services dropped from 44.2 to 43.3, a 15-month low. PMI Composite dropped from 45.2 to 43.5, also a 15-month low.

    Jingyi Pan, Economics Associate Director at IHS Markit, said: “Australia’s private sector remained stuck in decline in August… as activity remained heavily impacted by current mobility restrictions brought about by the spread of the COVID-19 Delta variant. Not only were demand and business activity hit, employment conditions also deteriorated, with private sector staffing levels falling for the first time since October 2020… The one bright spot had been an improvement in the outlook amongst Australian private sector firms in August, with hopes of an improvement in the COVID-19 situation expected to spark an eventual rebound for the Australian economy.”

    Full release here.

    Fed Kaplan might need to adjust view on tapering due to Delta

      By
      ActionForex
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      Dallas Fed President Robert Kaplan said the the economic impact from the Delta variant is “unfolding rapidly”. “So far it’s not having a material effect” on consumer activity, he added. But, “it is having an effect in delaying return to office, it’s affecting the ability to hire workers because of fear of infection,” and may be affecting production output.

      Kaplan previously said he would like to start tapering asset purchases in October. But he might now need to adjust he views “somewhat” due to Delta.

      Canada retail sales rose 4.2% mom in Jun, missed expectations

        By
        ActionForex
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        Canada retail sales rose 4.2% mom to CAD 56.2B in June, below expectation of 5.0% mom. Sales increased in 8 of 11 subsectors, representing 69.5% of retail trade. Core retail sales, excluding gasoline stations and motor vehicles and parts dealers, rose 4.6% mom. For Q2 as a whole, sales dropped -0.7% qoq. In the advance estimate, sales is expected to drop -1.7% mom in July.

        Full release here.

        UK retail sales dropped -2.5% mom in Jul, ex-fuel sales dropped -2.4% mom

          By
          ActionForex
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          UK retail sales dropped -2.5% mom in July, well below expectation of 0.4% mom. Ex-fuel sales dropped -2.4% mom. Over the last 12 months, retail sales rose 2.4% yoy, below expectation of 6.4% yoy. Ex-fuel sales rose 1.8% yoy.

          Retail sales volumes over the last three months were up 11.1% on a year earlier.

          Full release here.

          CAD/JPY pressing 85.40 key support, completing head and shoulder top?

            By
            ActionForex
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            CAD/JPY is now pressing 85.40 key support level after this week’s steep decline. Sustained break of this support would carry rather bearish medium term implications. Firstly, that would complete a head and shoulder top reversal pattern (ls: 88.06, h: 91.16, rs: 88.44). Secondly, 55 week EMA (now at 85.24) would be firmly taken out. Thirdly, that could also confirm completion of whole rise from 73.80 (2020 low) at 91.16, as a leg in the sideway pattern that started at 74.80 (2016 low), after rejection by 91.62 key resistance (2017 high).

            Sustained break of 85.40 would push CAD/JPY to 100% projection of 91.16 to 85.40 from 88.44 at 82.68. That is close to 50 % retracement of 73.80 to 91.16 at 82.48.

            AUD/USD to draw strong support from 0.7 on next fall

              By
              ActionForex
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              Australian Dollar remains broadly pressured today. New South Wales reported another 644 new coronavirus infections and 4 deaths. Greater Sydney’s lockdown will be extended until the end of September. That is, the lockdown, which has already lasted for 8 weeks, will run for at least 13 weeks. Also, a curfew will be introduced for 12 local government areas of Sydney, as people there must stay stop between 9pm and 5am.

              While more downside is still in favor in AUD/USD for the immediate future, we’d start to looking for bottoming sign on next move. Oversold condition in daily MACD could start to slow the decline. 161.8% projection of 0.8006 to 0.7530 from 0.7890 at 0.7120 will be met. Additionally, AUD/USD should then enter a strong support zone around 0.7 psychological level, 0.6991 support, and 38.2% retracement of 0.5506 to 0.8006 at 0.7051. Let’s see if AUD/USD would at least turn into sideway trading.

              UK Gfk consumer confidence dropped to -8, GBP/CHF breaks near term support

                By
                ActionForex
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                UK Gfk consumer confidence dropped slightly from -7 to -8 in August, below expectation of -6. “Against a backdrop of cooling headline inflation and soaring house prices, the U.K. consumer confidence index is stable at minus 8 this August,” Joe Staton, GfK’s client strategy director, said.

                “Expectations for our personal financial situation for the coming 12 months are holding up and this positivity bodes well for the economy going forward this year and next,” Staton said. The index measuring changes in personal finances over the past 12 months is up one point at 0.

                Sterling is the weakest European major for the week, and is trading just better than commodity currencies. GBP/CHF drops through 1.2498 support to resume the choppy fall from 1.3070. Deeper decline is now expected as long as 1.2640 resistance holds. Such decline is seen as a correction to up trend from 1.1107. Next target is 38.2% retracement of 1.1107 to 1.3070 at 1.2320. Nevertheless, we’d look for strong support 1.2259 resistance turned support to bring rebound, at least on first attempt.

                Philly Fed manufacturing dropped to 19.4, but remained elevated

                  By
                  ActionForex
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                  In the August Philadelphia Fed Manufacturing Business Outlook Survey diffusion index for currency activity dropped to 19.4 in August, down from 21.9, below expectation of 24.3. It’s also the fourth consecutive decline. 28% of the firms reported increases in current activity while 9% reported decreases.

                  Philadelphia Fed said: “Responses to the August Manufacturing Business Outlook Survey suggest continued expansion for the region’s manufacturing sector. The indicators for current activity and shipments decreased from last month but remained elevated. Additionally, the firms reported increases in new orders and employment. The survey’s future indexes moderated this month but continue to suggest expected growth over the next six months.”

                  Full release here.

                  US initial jobless claims dropped to 348k, continuing claims at 2.82m

                    By
                    ActionForex
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                    US initial jobless claims dropped -29k to 348k in the week ending August 14, better than expectation of 362k. That’s also the lowest level since March 14, 2020. Four-week moving average of initial claims dropped -19k to 378k, lowest since March 14, 2020 too.

                    Continuing claims dropped -79k to 2820k in the week ending August 7, lowest since march 14, 2020. Four-week moving average of continuing claims dropped -111k to 2999k, lowest since March 21, 2020.

                    Full release here.

                    ECB Lane explains three conditions for rate hike

                      By
                      ActionForex
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                      ECB Chief Economist Philip Lane explained a a blog post the three key conditions for lifting interest rates, as reflected in the latest forward guidance.

                      The first condition “until we see inflation reaching two per cent well ahead of the end of our projection horizon” provides reassurance that the convergence of inflation towards the new target should be sufficiently advanced and mature at the time of policy rate lift off. It helps to “hedge monetary policy against the risk of reacting to forecast errors”.

                      The second condition expects inflation to stay at 2%  “durably for the rest of the projection horizon”. It “telegraphs that reaching the inflation target should be lasting.”

                      The third condition  “progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term” signals that policy rates should not be lifted unless underlying inflation is also judged to have made satisfactory progress towards the target.

                      Lane further explained that “underlying inflation” is a broad concept and refers to the persistent component of inflation that filters out short-lived, reversible movements in the inflation rate and provides the best guide to the medium-term inflation developments

                      Also, the sentence that the forward guidance “may also imply a transitory period in which inflation is moderately above target” makes explicit that rate forward guidance that is committed to avoiding premature tightening.

                      Full blog post here.

                      AUD/JPY staying bearish as NSW delta cases rose to record again

                        By
                        ActionForex
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                        Australian Dollar continues to trade as the second worst performing one, just next to New Zealand Dollar, this week. New South Wales just reported record 681 daily new delta cases and another death, while regional lockdown has been extended until August 28, in line with Greater Sydney. Victoria reported 57 new cases as Melbourne is in tough restrictions until at least September 2. Overall, weaker risk-sentiment is also weighing on Aussie, after DOW’s -1% fall overnight.

                        AUD/JPY is one of the biggest movers this week, and is on track to continue with the decline from 85.78. Such fall is seen as a correction to the up trend from 59.89 for the moment. Next target is 78.44 resistance support, and then 38.2% retracement of 59.89 to 85.78 at 75.89. We’d tentatively look for some support from there to bring rebound. But in any case, break of 81.56 resistance is needed to indicate completion of the decline. Or, near term outlook will stay bearish in case of recovery.

                        Australia unemployment rate dropped to 4.6%, people falling out of the labour force

                          By
                          ActionForex
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                          Australia employment grew 2.2k in July, better than expectation of -45.0k contraction. Full-time jobs dropped -4.2k while part-time jobs rose 6.4k. Unemployment rate dropped -0.3% to 4.6%, which was already -0.6% lower than than 5.1% level at the start of the pandemic in March 2020. However, participation rate dropped by -0.2% to 66.0% at the same time.

                          Bjorn Jarvis, head of labour statistics at the ABS, said: “Early in the pandemic we saw large falls in participation, which we have again seen in recent lockdowns. Beyond people losing their jobs, we have also seen unemployed people drop out of the labour force,”

                          “In Victoria, we saw unemployment fall by 19,000 people in July 2020, during the second wave lockdown, and by 13,000 in the June 2021 lockdown. The fall in unemployment in New South Wales in July 2021 was more pronounced than either of these, falling by 27,000 people.”

                          “In each of these instances, the unemployment rate also fell. Falls in unemployment and the unemployment rate may be counter-intuitive, given they have coincided with falls in employment and hours, but reflect the limited ability for people to actively look for work and be available for work during lockdowns. This means that people are falling out of the labour force.”

                          Full release here.

                          FOMC minutes: Most participants said appropriate to start tapering this year

                            By
                            ActionForex
                            -

                            In the minutes of July 27-28 FOMC meeting, Fed said “all participants” assessed that progress were made towards the both the maximum-employment and price-stability goals. However, “most participants” judged that the standard of “substantial further progress” on employment “had not been met yet”. “Most participant” said the standard was met regarding price-stability, even though a few participants noted that “transitory nature” of this year’s rise in inflation.

                            “Most participant” said provided that the economy were to “evolve broadly as they anticipated”, it could be “appropriate” to start tapering “this year”. “Various participants” said the economic and financial conditions would likely warrant a reduction in purchase “in coming months”.

                            But “several others” indicated that tapering would more likely to be become appropriate “early next year”, as they saw prevailing conditions in labor market as not being close to the “substantial further progress” standard, or due to the “uncertainty” about progress on price stability.

                            Full minutes here.

                            Canada CPI accelerated to 3.7% yoy in Jul

                              By
                              ActionForex
                              -

                              Canada CPI rose 0.6% mom in July, fastest pace since January. Annually, CPI accelerated to 3.7% yoy in July, up from June’s 3.1% yoy, above expectation of 3.4% yoy. Prices rose at a faster pace year over year in six of the eight major components, with shelter prices contributing the most to the all-items increase.

                              CPI common was unchanged at 1.7% yoy, below expectation of 1.8% yoy. CPI median rose from 2.4% yoy to 2.6% yoy, above expectation of 2.4% yoy. CPI trimmed rose from 2.7% yoy to 3.1% yoy, above expectation of 2.5% yoy.

                              Full release here.

                              Eurozone CPI finalized at 2.2% yoy in Jul, core CPI at 0.7% yoy

                                By
                                ActionForex
                                -

                                Eurozone CPI was finalized at 2.2% yoy in July 2021, up from June’s 1.9% yoy. Core CPI was finalized at 0.7% yoy. Highest contribution came from energy (+1.34%), followed by food, alcohol & tobacco (+0.35%), services (+0.31%) and non-energy industrial goods (+0.17%).

                                EU CPI was finalized at 2.5%, up from 2.2% in June. The lowest annual rates were registered in Malta (0.3%), Greece (0.7%) and Italy (1.0%). The highest annual rates were recorded in Estonia (4.9%), Poland and Hungary (both 4.7%). Compared with June, annual inflation fell in nine Member States, remained stable in two and rose in sixteen.

                                Full release here.

                                UK CPI slowed to 2.0% yoy in Jul, core CPI down to 1.8% yoy

                                  By
                                  ActionForex
                                  -

                                  UK CPI slowed to 2.0% yoy in July, down from 2.5% yoy, below expectation of 2.2% yoy. Core CPI slowed to 1.8% yoy, down from 2.3% yoy, below expectation of 2.2% yoy. RPI dropped to 3.8% yoy, down from 3.9% yoy, below expectation of 3.7% yoy.

                                  PPI input came in at 0.8% mom, 9.9% yoy, versus expectation of 1.2% mom, 10.8% yoy. PPI output was at 0.6% mom, 4.9% yoy, versus expectation of 0.4% mom, 4.8% yoy. PPI core output was at 0.7% mom, 3.9% yoy.

                                  Full CPI release here.

                                  Fed Powell: People and businesses have improvised and learned to adapt to COVID

                                    By
                                    ActionForex
                                    -

                                    Fed Chair Jerome Powell said yesterday that “it’s not yet clear whether the Delta strain will have important effects on the economy; we’ll have to see about that.” While COVID is “still with us,” he said, “people and businesses have improvised and learned to adapt.”

                                    The pandemic is “still casting a shadow on economic activity. We cannot declare victory yet,” Powell said. But “many companies … have adapted their business models to the new world,”

                                    Separately, Minneapolis Fed President Neel Kashkari said it’s “reasonable” to start tapering later this year. “There’s a lot of public discussion about, will it be at the end of this year, will it be the beginning of next year: Those seem like reasonable ranges of deliberation, but ultimately it will be driven by the data,” he added.

                                    Japan exports rose 37.0% yoy in Jul, imports rose 28.5% yoy

                                      By
                                      ActionForex
                                      -

                                      Japan export rose 37.0% yoy to JPY 7356B in July, slightly below expectation of 39.0% yoy. By region, exports to China rose 18.9% yoy, led by chip-making equipment and plastic. Exports to the US grew 26.8% yoy, led by exports of cars, car parts and motors. Imports rose 28.5% yoy to JPY 6915B, below expectation of 35.1% yoy. Trade balance came in at JPY 441B.

                                      In seasonally adjusted term, exports was unchanged at JPY 7049B. Imports dropped -1.6% mom to 6997B. Trade balanced reported a surplus of JPY 52.7B.

                                      Also from Japan, machinery orders dropped -1.6% mom in June, versus expectation of -2.8% mom.

                                      Australia leading index dropped to 1.3 in Jul, still consistent with above trend growth

                                        By
                                        ActionForex
                                        -

                                        Australia Westpac-MI leading index dropped from 1.36% to 1.30% in July. The index is still consistent with above trend growth over the next 3 to 9 months. Nevertheless, Westpac also said, “no Leading Index can accurately predict the impact of sudden virus lockdowns, although the direct effects of measures will start to become more apparent in the August Index.”

                                        Also, with the deteriorating outlook in New South Wales and Melbourne due to lockdowns, West pact has revised down Q3 GDP forecast to a contraction of -2.6%, to be followed by 2.6% growth in Q4, and very strong growth of 5.0% in 2022.

                                        Westpac added that RBA would likely to “take the same approach” as August in September meeting. That is, there would be no response to the current lockdown risks. However, it added, “we certainly cannot rule out a policy change in September especially if, as we assess, developments have raised some questions as to the vulnerability and timing of the expected recovery.

                                        Full release here.

                                        RBNZ keeps rate unchanged on heightened uncertainty, NZD spikes lower and recovered

                                          By
                                          ActionForex
                                          -

                                          RBNZ kept Official Cash Rate unchanged at 0.25% today, instead of raising it. The decision was “made in the context of the Government’s imposition of Level 4 COVID restrictions on activity across New Zealand.” Nevertheless, it reiterated that the “least regrets policy stance” was still to “further reduce the level of monetary stimulus”. But the Committee agreed to stand pat at this meeting “given the heightened uncertainty with the country in a lockdown.”

                                          In the summary record, it’s also noted that committee members “now had more confidence that rising capacity pressures will feed through into inflation, and that employment is at its maximum sustainable level.” They concluded that “they could continue removing monetary stimulus”, following haling the LSAP program in July.

                                          Full statement here.

                                          NZD/USD spiked lower to 0.6867 after the announcement but quickly recovered. Outlook stays bearish as long as 0.7087 resistance holds. Sustained break of 0.6879 support will extend the fall from 0.7463 to 38.2% retracement of 0.5467 to 0.7463 at 0.6701.

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