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AUD continues to under-perform NZD and CAD

    By
    ActionForex
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    Australian Dollar is continuing to under-perform New Zealand and Canadian Dollar. While Victoria’s lockdown is set to be eased by mid-night, it’s uncertain what the New South Wales government could do on restrictions after the end of the month as delta variant is still spreading quickly in the community. Whether RBA would taper asset purchase beyond September is now is question as renewed lockdowns are derailing recovery.

    AUD/NZD edged lower today as fall from 1.0944 is still in force. Downside momentum weakened a little on oversold condition in daily RIS. But there is no sign of bottoming yet. With 1.0611 resistance intact, AUD/NZD is on track to 1.0415 support next.

    AUD/CAD’s decline from 0.9991 resumed after failing to sustain above 55 day EMA. It’s still trying to draw support from 0.9247 key support level but firm break of 0.9417 resistance is needed to indicate short term bottoming. Sustained trading below 0.9247 would open up further fall towards 61.8% retracement of 0.8058 to 0.9991 at 0.8796.

    EUR/CHF breaking to downside, EUR/GBP soft

      By
      ActionForex
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      Euro has been trading as the relatively weaker European majors since ECB reaffirmed it dovish stance last week. The new forward guidance indicated that inflation must projected to be on target 12-18 months away before consideration of rate hike. At the same time, there is no sign of tapering the PEPP program yet and it’s going to last until March next year anyway.

      EUR/CHF’s breach of 1.0802 temporary low suggests that recent decline is resuming. Rejection by 4 hour 55 EMA affirms near term bearishness too. Fall from 1.1149 is on track to 1.0737 cluster support (61.8% retracement of 1.0505 to 1.1149 at 1.0751). Downside momentum is so far capped by the medium term channel support. We’ll see if EUR/CHF could accelerate further. below the channel.

      EUR/GBP also staged a sharp reversal after spiking to 0.8668 last week. The lack of deterioration in coronavirus infections and deaths was a good sign for the UK, after the so called “Freedom Day”. It’s now possible that corrective pattern from 0.8718 would take another take through 0.8502 support before completion. That is, Euro could continue to underperform Sterling for a little while.

      BoE Vlieghe: Appropriate to keep current stimulus in place for several quarters at least

        By
        ActionForex
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        BoE MPC member Gertjan Vlieghe reiterated in a speech that the current inflation peak is “likely to be temporary”. The supply bottlenecks and base effects are “set to wane next year”.

        Also, the UK is “not out of the woods yet” in terms of the virus and the impact of the economy. He added that most recent data indicated that economy remains “an average recession away from full employment”. The delta variant is “still causing health and economic damage”.

        Also, various government support schemes are “coming to an end”, he said, “I would want to see how the economy copes with that, before adding monetary tightening on top of fiscal tightening”.

        Hence, he said, “it will remain appropriate to keep the current monetary stimulus in place for several quarters at least, and probably longer”. “When tightening does become appropriate, I suspect not much of it will be needed, given the low level of the neutral rate.”

        Full speech here.

        Germany Ifo dropped to 100.8, supply bottlenecks and infections weigh

          By
          ActionForex
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          Germany Ifo Business Climate dropped to 100.8 pts in July, down slightly from 101.7, below expectation of 102.1. Current Assessment index rose to 100.4, up from 99.7. Expectations index dropped to 101.2, down from 103.7.

          Looking at some details, manufacturing index dropped from 28.5 to 27.4. Services dropped from 28.5 to 27.4. Trade dropped from 17.8 to 15.8. Construction rose from 4.2 to 5.7.

          Ifo said: “Companies evaluated their current business situations as somewhat better, but their expectations for the coming months were significantly less optimistic. Supply bottlenecks and concerns over newly rising infection numbers are weighing on the German economy.”

          Full release here.

          Japan PMI manufacturing dropped to 52.2, services dropped to 46.4

            By
            ActionForex
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            Japan PMI Manufacturing dropped slightly from 52.4 to 52.2 in July, below expectation of 53.1. PMI Services dropped from 48.0 to 46.4. PMI Composite dropped from 48.9 to 47.7.

            Usamah Bhatti, Economist at IHS Markit, said: “Flash PMI data indicated that Japanese private sector businesses saw a faster reduction in activity during July. Output fell at the quickest pace for six months, while the contraction in new business inflows was the fastest since February. Survey members attributed the deterioration in business conditions to persistent rises in COVID-19 cases and state of emergency measures which dampened activity and demand.”

            Full release here.

            New Zealand goods exports rose 17% yoy in June, imports rose 24% yoy

              By
              ActionForex
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              New Zealand goods exports rose 17% yoy to NZD 6.0B in June. Goods imports rose 24% yoy to NZD 5.7B. Monthly trade balance reported NZD 261m surplus, slightly below expectation of NZD 297m.

              Exports to all top trading partners were up, including China (40%), EU (21%), Australia (9.5%), Japan (13%) and US (2.9%). Imports from all top trading partners were up too, including EU (51%), China (17%), Japan (69%), USA (52%) and AU (18%).

              Full release here.

              Canada retail dales dropped -2.1% in May, more contraction expected in June

                By
                ActionForex
                -

                Canada retail sales dropped -2.1% mom to CAD 53.8B in May, better than expectation of -3.0% mom decline. The largest declines occurred at building material and garden equipment and supplies dealers (-11.3%) and motor vehicle and parts dealers (-2.4%). Sales decreased in 8 of 11 subsectors, representing 65.6% of retail trade. Advance estimate showed further -4.4% mom contraction in retail sales in June.

                Full release here.

                ECB dissenter Wunsch not comfortable taking a commitment for five or six years

                  By
                  ActionForex
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                  ECB Governing Council member Pierre Wunsch confirmed to CNBC that he voted against the central bank’s new forward guidance. But he urged that “my dissent shouldn’t be dramatized,” as “we all agree we want to be supportive in this phase of the recovery, we all actually want to go to 2%”.

                  “The most important conclusion of the retreat actually, and our new strategy, is what I would call a ‘no regret’ conclusion, in that we all agree that what we have been doing in the last few years was necessary and proportional,” Wunsch said.

                  “The question is whether this proportionality test that we are going to have to make in the future — whether we can remain proportional in what we do and take commitments over a long period of time, like five or six years in the future.”

                  “We might be faced with issues of fiscal dominance, issues of financial dominance, and I just, at the end of the day, did not feel comfortable taking a commitment for five or six years.”

                   

                  ECB SPF sees higher inflation and growth in 2021 and 2022

                    By
                    ActionForex
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                    In the ECB Survey of Professional Forecasters (SPF) for Q3, inflation expectations for Eurozone were revised up for 2021 and 2022. Growth projections were upgraded across the horizon while unemployment forecasts were revised down.

                    Inflation forecast:

                    • For 2021 at 1.9% (revised up from Q2 forecast at 1.6%).
                    • For 2022 at 1.5%, (up from 1.3%).
                    • For 2023 % 1.5% (unchanged).

                    Real GDP growth forecast:

                    • For 2021 at 4.7% (up from 4.2%).
                    • For 2022 at 4.6% (up from 4.1%).
                    • For 2023 at 2.1% (up from 1.9%).

                    Unemployment rate forecast:

                    • For 2021 at 8.1% (down from 8.5%).
                    • For 2022 at 7.8% (down from 7.8%).
                    • For 2023 at 7.5% (down from 7.7%).

                    Full release here.

                     

                    UK PMI composite dropped to 57.7, Delta variant overshadowed freedom day

                      By
                      ActionForex
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                      UK PMI Manufacturing dropped from 63.9 to 60.4, below expectation of 62.7. PMI Services dropped from 62.4 to 57.8, below expectation of 62.0. PMI Composite dropped from 62.2 to 57.7.

                      Chris Williamson, Chief Business Economist at IHS Markit, said: “July saw the UK economy’s recent growth spurt stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages, and also cast a darkening shadow over the outlook.

                      “Concerns over the Delta variant have meanwhile overshadowed the passing of “freedom day”, and were a key factor alongside Brexit and rising costs behind a sharp slide in business expectations for the year ahead, which slumped to the lowest since last October. The PMI indicates that GDP growth will likely have slowed in the third quarter, after having rebounded sharply in the second quarter.”

                      Full release here.

                      Eurozone PMI composite rose to 60.6, 21-yr high, enjoying a summer growth spurt

                        By
                        ActionForex
                        -

                        Eurozone PMI Manufacturing dropped from 63.4 to 62.6 in July, above expectation of 62.5. PMI Services rose from 58.3 to 60.4, above expectation of 59.6, a 181-month high. PMI Composite rose from 59.5 to 60.6, highest in 252 months.

                        Chris Williamson, Chief Business Economist at IHS Markit said: “The eurozone is enjoying a summer growth spurt as the loosening of virus-fighting restrictions in July has propelled growth to the fastest for 21 years. The services sector in particular is enjoying the freedom of loosened COVID-19 containment measures and improved vaccination rates, especially in relation to hospitality, travel and tourism.”

                        Full release here.

                        Germany PMI composite rose to record 62.5, remains in the fast lane

                          By
                          ActionForex
                          -

                          Germany PMI Manufacturing rose from 65.1 to 65.6 in July, above expectation of 64.1. PMI Services rose from 57.5 to 62.2, above expectation of 59.5, record high since June 1997. PMI Composite rose from 60.1 to 62.5, record high since Jan 1998.

                          Phil Smith, Associate Director at IHS Markit said: “Germany’s private sector economy remains in the fast lane to recovery, according to July’s flash PMI survey. Buoyed by a resurgent service sector, the survey’s headline index is now at a record high and signals that the recovery still possesses strong momentum at the start of the third quarter.”

                          Full release here.

                          France PMI manufacturing dropped to 58.1, services dropped to 57.0

                            By
                            ActionForex
                            -

                            France PMI Manufacturing dropped from 59.0 to 58.1, below expectation of 58.3. PMI Services dropped from 57.8 to 57.0, below expectation of 59.0. PMI Composite dropped from 57.4 to 56.8.

                            Joe Hayes, Senior Economist at IHS Markit said: “It’s perhaps slightly disappointing to see the headline composite output figure dip slightly in July, but as the French economy normalises to a state of looser lockdown restrictions, it is not so much of a surprise. Regardless, the PMI pointed to another strong month-on-month rate of output growth, with service providers outperforming their manufacturing counterparts once again.”

                            Full release here.

                            UK retail sales rose 0.5% mom in Jun, boosted by Euro 2020 start

                              By
                              ActionForex
                              -

                              UK retail sales rose 0.5% mom in June, matched expectations. Sales were up 9.5% comparing to pre-pandemic level in February 2020. ONS said, “the largest contribution to the monthly increase in June 2021 came from food stores where sales volumes rose by 4.2%, with anecdotal evidence suggesting these increased sales may be linked with the start of the Euro 2020 football championship.”

                              The volume of sales for the three months to June was 12.2% higher than in the previous three months. That’s driven in large part of particularly strong sales in April.

                              Full release here.

                              UK Gfk consumer confidence rose to -7, gradual release of pent-up demand

                                By
                                ActionForex
                                -

                                UK Gfk Consumer Confidence rose from -9 to -7 in July. The index has improved for six months in a row. Personal financial situation over next 12 months was unchanged at 11. General economic situation over the next 12 months dropped from -2 to -5. However, major purchase index rose from -5 to 2.

                                Joe Staton, Client Strategy Director GfK, says: “The healthy seven-point rise in the major purchase measure aligns with strong retail growth figures that reflect the gradual unlocking of the UK high street and release of pent-up demand as Brits hit shops, restaurants and venues. However, threats from increasing consumer price inflation, rising COVID infection figures, and the looming end of furlough and the Job Retention Scheme could put the brakes on this rebound.

                                Full release here.

                                Australia PMI composite dropped to 45.2, growth streak brought to a halt

                                  By
                                  ActionForex
                                  -

                                  Australia PMI Manufacturing dropped from 58.6 to 56.8 in July, a 4-month low. PMI Services dropped from 56.8 to 44.2, a 14-month low. PMI Composite dropped from 56.7 to 45.2, also a 14-month low.

                                  Jingyi Pan, Economics Associate Director at IHS Markit, said: “Latest indications from the IHS Markit Flash Australia Composite PMI suggested that Australia’s growth streak had been brought to a halt in July, and perhaps no surprise given the renewed lockdowns aimed to bring the COVID-19 situation under control.”

                                  Full release here.

                                  ECB press conference live stream

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                                    ActionForex
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                                    US initial jobless claims rose to 419k, above expectation

                                      By
                                      ActionForex
                                      -

                                      US initial jobless claims rose 51k to 419k in the week ending July 17, worse than expectation of 350k. Four-week moving average of initial claims rose 750 to 385k.

                                      Continuing claims dropped -29k to 3236k in the week ending July 10, lowest since March 21, 2020. Four-week moving average of continuing claims dropped -44k to 3338k, also the lowest since March 21, 2020.

                                      Full release here.

                                      ECB stands pat, issues new forward guidance

                                        By
                                        ActionForex
                                        -

                                        ECB keeps interest rate unchanged today, with main refinancing rate, marginal lending facility rate, and deposit facility rate at 0.0)%, 0.25%, and -0.50% respectively. Net purchase under APP will continue at monthly pace of EUR 20B. The EUR 1850PEPP will continue “until at least the end of March 2022”. Purchase pace remain at “significantly higher pace” than during first months of the year.

                                        Also, ECB now expects key 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.” It added that this may also imply “a transitory period in which inflation is moderately above target.”

                                        Full statement here.

                                        BoE Broadbent: The appropriate policy response to current inflation is nothing

                                          By
                                          ActionForex
                                          -

                                          BoE Deputy Governor Ben Broadbent said in a speech, “most of the overshoot relative to target in the latest CPI numbers… reflects unusually strong inflation in goods prices”. That would also be true of the “larger overshoot we’re going to see towards the end of this year”. “If this was only a story about global goods prices,” he added, then the appropriate policy response to the current inflation would be “nothing”.

                                          Also, “while we know it’s going to go further over the next few months, I’m not convinced that the current inflation in retail goods prices should in and of itself mean higher inflation 18-24 months ahead, the horizon more relevant for monetary policy,” he added.

                                          Full speech here.

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