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BoC press conference live stream
Gold resuming rebound, to take on 1800 handle
Gold is resuming the rebound from 1677.69 today and it’s now eyeing 1800 handle. Overall near term outlook is unchanged. A double bottom reversal pattern (1676.54, 1677.69) was formed. Further rise is expected as long as 1763.36 support holds, for 38.2% retracement of 2075.18 to 1676.65 at 1828.88.
Sustained break of 1828.88 will further affirm the case that whole correction from 2075.18 has completed with three waves down to 1676.65. Stronger rally would then be seen back to channel resistance (now at 1874.90) for confirmation.
US oil inventories rose 0.6m barrels, WTI risks more downside
US commercial crude oil inventories rose 0.6m barrels in the week ending April 16, versus expectation of -3.7m barrels. At 493m barrels, oil inventories are about 1% above the five year average for this time of year. Gasoline inventories rose 0.1m barrels. Distillate fuel inventories dropped -1.1m barrels. Propane/propylene inventories dropped -0.1m barrels. Commercial petroleum inventories rose 3.6m barrels.
WTI crude oil formed a temporary top at 64.34 earlier this week and retreated. The structure of the recovery from 57.31 to 64.34 argues that correction from 67.83 may not be completed yet. Sustained trading below 4 hour 55 EMA will bring retest of 57.31 support. On the upside, though, break of 64.34 will bring retest of 67.83 high.
CAD surges after BoC, a look at EUR/CAD, CAD/JPY
Canadian Dollar jumps broadly after BoC statement. The tapering was well expected. But BoC now expects economic slack to be absorbed in H2 2022, suggesting that the timing of rate hike could happen much earlier than prior expected.
CAD/JPY appears to have drawn strong support from 55 day EMA and rebounded. Focus is back on 86.88 minor resistance. Break will suggest that pull back from 88.28 has completed at 85.40. Stronger rise would then be seen back to retest 88.28 high quickly.
EUR/CAD’s fall is also back on 1.4949 support with the steep post BoC fall. Break will indicate that corrective rebound form 1.4723 has completed at 1.5191, and bring retest of 1.4723 low.
BoC tapers, expects economic slack to be absorbed in H2 of 2022
BoC left overnight rate target unchanged at 0.25% as widely expected. Bank rate and deposit rate are held at 0.50% and 0.25% respectively. Weekly net purchases of Canadian Government bonds is reduced from CAD 4B to CAD 3B, as widely expected too. It noted that “this adjustment to the amount of incremental stimulus being added each week reflects the progress made in the economic recovery.”
Also, as economic prospect improve, BoC now expects that economic slack will be absorbed some time in H2 of 2022, much earlier than March’s expectation of “until into 2023”. BoC will only commits to hold policy interest rate at ELB until then.
BoC revised real GDP growth forecast to 6.5% in 2021 (up from 4%), 3.75% in 2022 (down from 5%) and 3.25% in 2023 (up from 2.25%). Inflation is expected to rise “temporarily” to around top of 1-3% target range over the next few months, due to base-year effects. But CPI is expected to ease back to 2% over H2 of 2021. As slack is absorbed, inflation should return to 2% on a “sustained basis some time in the second half of 2022”.
Canada CPI jumped to 2.2% yoy in March, accentuated by base-year effects
Canada CPI accelerated to 2.2% yoy in March, up from February’s 1.1% yoy, slightly below expectation of 2.3% yoy. CPI common rose to 1.5% yoy, up from 1.3% yoy , above expectation of 1.4% yoy. CPI median rose to 2.1% yoy, up from 2.0% yoy, matched expectations. CPI trimmed rose to 2.2% yoy, up from 1.9% yoy, above expectation of 2.0% yoy.
StatCan said price growth in March 2021 was “accentuated by what is known as base-year effects, originating in March 2020. “As the upward impact of these temporary base-year effects will influence the 12-month movement over the next few months, the historical movements affecting current growth trends will be examined.”
UK CPI accelerated to 0.7% yoy, core CPI rose to 1.1% yoy
UK CPI accelerated to 0.7% yoy in March, up from 0.4% yoy , matched expectations. Core CPI also accelerated to 1.1% yoy, up from 0.9% yoy, above expectation of 1.0% yoy. “The rate of inflation increased with petrol prices rising and clothes recovering from the falls seen in February,” Office for National Statistics official Jonathan Athow said.
Also released, RPI accelerated to 1.5% yoy in March. PPI input came in at 1.3% mom, 5.9% yoy. PPI output was at 0.5% mom, 1.9% yoy. PPI output core was at 0.4% mom, 1.7% yoy.
CAD/JPY extends correction as BoC tapering awaited
BoC is widely expected to become the first major central bank to scale back monetary stimulus today. It would announce to its asset purchases to CAD3B/week, from CAD4B/week previously. Overnight rate will be held at effective lower bound of 0.25%. The central will also likely revise up its economic projections.
The main question is whether the more optimistic outlook would prompt a change in the forward guidance. BoC had indicated that the policy rate will stay unchanged “until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved”, and this would unlikely happen until 2023. A better economic outlook might lead the members to see slack be absorbed earlier than 2023.
Here are some previews:
- BOC Preview – Expects Upgrades on Economic Forecasts and More Optimistic Forward Guidance
- Bank of Canada Policy Meeting: A Bond Tapering Story
- Will a Bank of Canada Taper Lift CAD?
Canadian Dollar is currently the weakest one for the week, even worse than the greenback. Tapering of asset purchase was well priced in already. If there is no significant upgrade in the outlook, we’d expect CAD’s correction to continue. CAD/JPY’s break of 86.05 support overnight suggests that deeper correction in underway. Near term bearishness is also affirmed by rejection by 4 hour 55 EMA. We’d now expect deeper fall to 38.2% retracement of 77.91 to 88.28 at 84.31.
New Zealand CPI rose 0.8% qoq, 1.5% yoy in Q1
New Zealand CPI rose 0.8% qoq in Q1, matched expectations. Annually, CPI accelerated to 1.5% yoy, up from 1.4% yoy. Looking at some details, the rises in prices were led by transport, which rose 3.9% qoq, biggest quarterly rise in over a decade. Rent prices rose 1.0% qoq, biggest quarterly rise in a year.
Australia retail sales rose 1.4% mom in Mar, led by Victoria and Western Australia
Australia retail sales rose 1.4% mom, or AUD 423.9m, in March. Over the year, sales was up 2.3% yoy. The rises were led by Victoria (4%) and Western Australia (5.5%), with both states rebounding from COVID-19 lockdown restrictions during February. Queensland, which saw COVID-19 restrictions impact March 2021, saw a minor fall.
NASDAQ rejected by 14175 resistance, Yen rebounds as stocks pull back
Yen rebounds strong in US morning as pull back in stocks intensify. In particular, NASDAQ appears to be rejected solidly by 14175.11 resistance. It’s down around -1.3% at the time of writing. The development suggests that consolidation pattern from 14175.11 is extending with another falling leg. NASDAQ could be heading back to 55 day EMA (now at 13429) and below. We’d see if such development could help push for a deeper pull back in Yen crosses.
AUD/JPY and NZD/JPY extending rebound, to retest recent highs
AUD/JPY powers through 84.39/46 minor resistance today, as rise from 83.02 resumes. Further rally is now expected as long as 83.73 support holds. At this point, it’s unsure whether consolidation pattern from 85.43 has completed already. Hence, we’d pay attention to topping at around 85.43. Though, eventually, the whole up trend from 59.89 is expected to resume sooner or later. It’s just a matter of time. Next medium term target is 61.8% projection of 73.13 to 85.43 from 83.02 at 90.62.
Similarly, NZD/JPY is also resuming rise from 75.61 today, and hits as high as 78.36 so far. Further rally is expected as long as 77.38 minor support holds, for retesting 79.19 high. We’d also be cautious on topping around there. But eventually upside breakout is anticipated. Next medium term target is 61.8% projection of 68.86 to 79.19 from 75.61 at 81.99.
UK claimant counts rose 10.1k in Mar, unemployment rate dropped to 4.9% in Apr
UK Claimant Count rose 0.4% mom, or 10.1k to 2.7million in march. The level was still 114.3%, or 1.4m, above March 2020. Though, it has been relatively stable since May 2020.
Unemployment rate dropped to 4.9% in the three months to February, down from 5.0%, better than expectation of a rise to 5.2%. Average earnings excluding bonus rose 4.4% 3moy versus expectation of 4.2%. Average earnings including bonus rose 4.5% 3moy, below expectation of 4.8%.
RBA: Household and businesses adjustment to fiscal support tapering an important near term issue
In the minutes of April 6 meeting, RBA said economic recovery was “expected to continue”, with “above-trend” growth forecast in 2021 and 2022. But an important near-term issue was “how households and businesses would adjust to the tapering of several fiscal support measures”. There might be a “temporary pause” in the pace of labor market improvements.
It also reiterated that “wage and price pressures had remained subdued and were expected to remain so for several years”. It would “take some time” to reduce the spare capacity to generate wage growth that’s consistent with the inflation target. Annual CPI was expected to rise “temporarily” to around 3% in the middle of the year on “reversal of some pandemic-related price reductions”. But underlying terms inflation was expected to “remain below 2 per cent over both 2021 and 2022.”
Overall, RBA maintained target for cash rate and 3 year AGS yield at 0.10%, as well ass the settings for Term Funding Facility and government bonds purchases. The board does not expect the conditions for raising interest rates to be met “until 2024 at the earliest”.
BoJ Kuroda: We’re not at a stage to debate ETF exit
BoJ Governor Haruhiko Kuroda said that it’s too early to consider exit from ETF purchases. “When we are to unload our ETF holdings, we will set guidelines on how to do this at a policy-setting meeting,” Kuroda told parliament. “But we’re not at a stage now to debate an exit.”
Separately, it’s reported that BoJ is considering to downgrade inflation forecasts for the current fiscal year. The central bank expected core consumer prices to be at 0.5% this fiscal year. But cuts in mobile phone charges could push core inflation by around -0.2%. BoJ will release updated quarterly forecasts at its policy meeting on April 26-27.
Bundesbank: Germany economic output decreased in Q1
In the monthly report, Bundesbank said Germany economic output decreased in Q1. Stricter and longer-lasting restrictions increased the losses in many service sectors.
Industrial production fell in February as “supply bottlenecks for preliminary products must have played an important role in the decline.” Automotive industry was “particularly hard hit”. However, there was no renewed demand problem, as incoming orders “rose significantly again” in February, and have now “recovered considerably from the slump in the previous year”.
BoE and Treasury to create a Central Bank Digital Currency Taskforce
BoE and UK Treasury announced to jointly create a Central Bank Digital Currency (CBDC) Taskforce today, to “coordinate the exploration of a potential UK CBDC”. The Taskforce will be co-chaired by BoE Deputy Governor for Financial Stability Jon Cunliffe, and Treasury’s Director General of Financial Services, Katharine Braddick.
BoE also noted there was not decision yet on whether to introduce a CBDC. But it will “engage widely with stakeholders on the benefits, risks and practicalities of doing so”.
Additionally, a CBDC Engagement Forum is created to “engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC.” A CBDC Technology Forum is created to “engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives.”
EUR/USD breaks 1.2 handle as Dollar selloff resumes
EUR/USD’s rally resumes in early European session and it finally takes out 1.2 handle with some power. The solid support from 55 day EMA affirms near term bullishness. The development is also inline with out view that correction from 1.2348 has completed with three waves down to 1.1703. We’d now expect further rally back to 1.2242/2348 resistance zone.
Japan exports surged 16.1% yoy in March, imports rose 5.7% yoy
Japan’s exports rose 16.1% yoy in March to JPY 7378B, as led by exports of autos, plastics and non-ferrous metals. That’s the first double-digit annual growth in more than three years. Though, the growth rate was skewed by the low base effect due to the pandemic. Exports to China was up 37.2% yoy, to US up 4.9% yoy, to EU up 12.8% yoy. Imports rose 5.7% yoy to 6714B. Trade surplus came in at JPY 663.7B.
In seasonally adjusted term, exports rose 4.3% mom to JPY 6524B. Imports dropped -0.7% mom to 6226B. Trade balance turned to JPY 298B surplus.
Australia NAB business confidence rose to 17 in Q1, economic recovery built further momentum
Australia NAB quarterly business confidence rose to 17 in Q1, up from 15. Business conditions rose from 11 to 17. Business condition for next 3 months rose form 19 to 26. Business conditions for next 12 months rose form 24 to 31. Next 12-month capex plans rose from 31 to 34, highest level since mid 1990s.
Alan Oster, NAB Group Chief Economist: “The survey suggests that the economic recovery built further momentum in Q1. What is particularly welcome is that the improvement is broad-based with conditions and confidence improving in most industries and are at an above-average level in all. Moreover, the lift in trading conditions and profitability over the last two quarters is now being translated into the Survey’s employment indicator”.
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