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UK Q4 GDP finalized at 0%, production dropped -0.7%

    By
    ActionForex
    -

    UK Q4 GDP was finalized at 0.0% qoq, 1.1% yoy. Service output rose 0.2% qoq, production output dropped -0.7% qoq, construction output dropped -0.1% qoq. Over the year, US economy grew 1.4% in 2020, up slightly from1.3% in 2018. Both were slowest since financial crisis of 2008 and 2009.

    Full release here.

    Into US session: Sterling strongest despite Brexit uncertainty, Yen dives on risk appetite

      By
      ActionForex
      -

      Entering into US session, Sterling is surprisingly the strongest one today. Much stronger than expected UK manufacturing PMI might be a positive factor for the Pound. But it should noted that the improvements could mainly reflect pre-Brexit stock-building. It could indeed be a major headwind moving forward. At the time same, the House Commons will hold a second session of indicative votes on Brexit today. Debate might center around options of customs union, single market or a combination. Also, there would be debates on confirmatory referendum. Prime Minister Theresa May could decide what she’d do next after having the results from the indicative votes.

      Staying in the currency markets, Yen is the weakest one on global risk market rally. Stronger than expected manufacturing PMIs from China raised hope that the worst is over for the Chinese economy. However, such improvement is not seen elsewhere yet, including Eurozone, Japan and even Australia. The ISM manufacturing index from US to be released today needs to give more positive signs to secure investor confidence.

      In Europe, currently:

      • FTSE is up 0.71%.
      • DAX is up 1.13%.
      • CAC is up 0.76%.
      • German 10-year yield is up 0.0332 at -0.035, staying negative.

      Earlier in Asia:

      • Nikkei rose 1.43%.
      • Hong Kong HSI rose 1.76%.
      • China Shanghai SSE rose 2.58%.
      • Singapore Strait Times rose 1.17%.
      • Japan 10-year JGB yield rose 0.0113 to -0.079.

      BoJ Kuroda: We are not debating an interest rate hike

        By
        ActionForex
        -

        In the post meeting press conference, BoJ Governor Haruhiko Kuroda said, “consumer inflation is likely to stay around 1% through the end of the BoJ’s projection period. As such, there is no need to modify the BoJ’s monetary easing.”

        “We are not debating an interest rate hike … As shown in the report, we’re not yet in a situation where inflation is steadily accelerating toward the BoJ’s goal. The median forecast of board members is for inflation around 1%. Under such conditions, we are absolutely not thinking about raising rates or modifying our easy monetary policy,” he said.

        “If achievement of 2% inflation comes into sight, the BoJ’s board will likely debate an exit strategy and communicate its intention to markets. That in itself won’t be that difficult. The problem is that unfortunately, we haven’t see inflation hit 2%. It’s premature to debate an exit strategy,” he added.

        BoC stands pat, record coronavirus cases to weigh on Q1

          By
          ActionForex
          -

          BoC kept overnight rate unchanged at “effective lower bound” of 0.25% as widely expected. Bank rate and deposit rate are held at 0.20% and 0.25% respectively. BoC also maintained its “extraordinary forward guidance” of keep rates at current level until inflation objective is achieved Also, the quantitative easing program will continue at current pace of at least CAD 4B per week.

          BoC noted globally, recent news of vaccines is “providing reassurance that the pandemic will end and more normal activities will resume”. However, “pace and breadth of the global rollout of vaccinations remain uncertain”. In the near term “new waves of infections are expected to set back recoveries in many parts of the world”.

          Q3 Canadian data were consistent with expectations of a “sharp economic rebound”. However, “activity remains highly uneven across different sectors and groups of workers”. Record high cases in coronavirus in Canada are also “forcing reimposition of restrictions. That would “weigh on ” Q1 growth and ” contribute to a choppy trajectory until a vaccine is widely available”.

          Full statement here.

          Yuan rebounds on PBoC’s aggressive fixing and state-owned banks’ support

            By
            ActionForex
            -

            Chinese Yuan rebounded significantly in Asian session, sparked by PBoC’s unexpectedly strong daily fixing. The fixing was set at 7.0996, markedly stronger than the anticipated 7.2222 by analysts, marking the largest strengthening bias since November. Also, reports suggest that state-owned banks actively participated in selling Dollars onshore, further tightening offshore Yuan liquidity.

            Economists interpret this orchestrated maneuver as a decisive message from PBoC, indicating a refusal to tolerate further weakening of Yuan. This action seems to correct what the authorities considered an overreaction by the market to last Friday’s sharp decline. The market’s speculation on Yuan depreciation appeared to be challenged by today’s fixing, aimed at recalibrating market perceptions.

            From a pure technical perspective, USD/CNH’s rise from 0.7087 is seen as the second leg of the corrective pattern from 7.3679 for now, which is still in progress. FUrther rally is expected as long as 55 D EMA (now at 7.2056) holds. Next target is 100% projection of 7.0870 to 7.2318 from 7.1715 at 7.3163. But break of 7.3679 high is not envisaged.

            However, these technical observations stand independent of the significant influence of PBoC’s interventions in the currency market.

             

            US oil inventories rose 7.7m barrels, WTI stays in consolidations

              By
              ActionForex
              -

              US commercial crude oil inventories rose 7.7m barrels in the week ending March 6, way above expectation of 2.0m. At 451.8m barrels, oil inventories are about 2% below the five year average for this time of year.

              Earlier today, OPEC slashed said global demand will rise by just 60k barrels a day this year, a sharp a reduction of 920,000 bpd from its previous forecast. It said, “considering the latest developments, downward risks currently outweigh any positive indicators and suggest further likely downward revisions in oil demand growth should the current status persist.”

              WTI crude oil is staying in consolidation above 27.50 low for now. Some more sideway trading is expected until certain breakthrough in Saudi Arabia-Russia oil price war, on either side. We’re not expecting a firm break of 27.69 (2016 low. Meanwhile, rebound attempt should be capped by 42.05 support turned resistance.

              Non-farm payrolls preview: Solid but uninspiring numbers expected

                By
                ActionForex
                -

                US Non-Farm Payrolls report will be the major focus for today. Markets are expected 175k job growth is March, a solid rebound from February’s terrible number of 20k. Unemployment rate is expected to be unchanged at 3.8%. Average hourly earnings growth is expected to slow to 0.2% mom.

                Looking at other employment related data, the employment component of ISM manufacturing rose notably from 52.3 to 57.5. That of ISM non-manufacturing also increased from 55.2 to 55.9. However, ADP employment was rather disappointing, at 129k versus expectation of 184k. Four-week moving average of initial jobless claims dropped to 213.5k. However, Conference Board consumer confidence dropped from 131.4 to 124.1.

                All in all, other data suggest that February’s disaster won’t extend into March, even though there might still be downside surprise. Meanwhile, there is prospect of upside surprise in upward revision in February’s number. Overall, the set of data is likely to be solid by uninspiring.

                Reactions could now be rather tricky. Stock investors might like to see a set of numbers that’s not strong enough to push Fed for a rate hike this year. And such relief could also lift treasury yields and then Dollar. Another set of weak number will highlight the underlying vulnerability in the economy. Even though that might add to the case of a Fed cut, the worries could overwhelm and send stocks, yields and Dollar lower.

                Here are some suggested readings on NFP:

                ECB’s de Guindos see lower growth and inflation than Dec forecasts

                  By
                  ActionForex
                  -

                  ECB Vice President Luis de Guindos, in an interview with Die Zeit, offered indicated that the growth forecast for the region, previously set at 0.8% for this year, might fall short of expectations.

                  De Guindos highlighted several factors contributing to this revised outlook, saying, “The prospects have even deteriorated.” He pointed out the key issues impacting the forecast: a slowdown in world trade, heightened geopolitical uncertainties, and the more rapid than anticipated impact of ECB’s interest rate hikes on the economy.

                  De Guindos also touched upon inflation trends, noting a shift from previous projections. The December projections had inflation returning to the 2% target by the second half of 2025. However, recent data suggest a more optimistic scenario.

                  De Guindos observed, “But inflation figures have mostly brought positive surprises recently.” He further speculated that inflation might settle “slightly lower” than their predictions.

                  Full interview of de Guindos here.

                  Australia employment grew 70.7k in Mar, hours worked back at pre-pandemic level

                    By
                    ActionForex
                    -

                    Australia employment grew 70.7k in March, double of expectation of 35.0k. However, growth was mainly driven by part-time jobs, which increased 91.5k to 4.20m. Full-time jobs contracted by -20.8k to 8.87m. Unemployment rate dropped to 5.6%, down from 5.8%, better than expectation of 5.7%. participation rate rose 0.2% to 66.3%, a record high. Monthly hours worked rose 2.2% mom or 38m hours, back to pre-pandemic levels.

                    Full release here.

                    Australia AiG services rose to 61.2, highest since 2003

                      By
                      ActionForex
                      -

                      Australia AiG Performance of Services Index rose 0.2 pts to 61.2 in May. That’s the highest monthly result since October 2003, indicating a stronger expansion. Four of the five services sectors indicated expansion while the other was broadly stable. Four of the five activity indicators, sales, ne orders, employment and deliveries, showed positive results.

                      Ai Group Chief Executive, Innes Willox, said: “Australia’s services sector maintained its momentum in May…. With existing capacity well utilised, and with reports of labour shortages becoming more common, conditions were in place for a substantial lift in investment in the sector.”

                      Full release here.

                      US durable goods orders rose 15.8, ex-transport orders rose 4.0%

                        By
                        ActionForex
                        -

                        US durable goods orders rose 15.8% mom to USD 194.4B in May, well above expectation of 10.3% mom. Ex-transport orders rose 4.0% mom, above expectation of 2.8% mom. Ex-defense orders rose 1.5.5%. Transportation equipment rose 80.7%.

                        Full release here.

                        Eurozone CPI finalized at 4.1% yoy in Oct, EU at 4.4%

                          By
                          ActionForex
                          -

                          Eurozone CPI was finalized at 4.1% yoy in October, up from September’s 3.4%. The highest contribution came from energy (+2.21%), followed by services (+0.86%), non-energy industrial goods (+0.55%) and food, alcohol & tobacco (+0.43%).

                          EU CPI was finalized at 4.4%, up from September’s 3.6% yoy. The lowest annual rates were registered in Malta (1.4%), Portugal (1.8%), Finland and Greece (both 2.8%). The highest annual rates were recorded in Lithuania (8.2%), Estonia (6.8%) and Hungary (6.6%). Compared with September, annual inflation rose in all twenty-seven Member States.

                          Full release here.

                          Bundesbank Nagel: ECB interest rates could rise this year

                            By
                            ActionForex
                            -

                            In a Die Zeit interview, new Bundesbank President Joachim Nagel said, “if the (inflation) picture does not change by March, I will advocate normalizing monetary policy.” “The first step is to end net bond purchases during 2022,” he said. “Then interest rates could rise this year.”

                            Nagel also expects inflation in Germany to rise “significantly” above 4% in 2022. He warned that the economic costs of acting too late on inflation are significantly higher than acting early.

                            Japan industrial production rose 3.8% mom in Oct, 5th straight month of growth

                              By
                              ActionForex
                              -

                              Japan industrial production rose 3.8% mom in October, well above expectation of 2.3% mom, and not much slower than September’s 3.9% mom. It’s also the fifth straight month of increase. The Ministry of Economy, Trade and Industry also said manufacturers expected growth to continue with another 2.7% mom in November, but a decline of -2.4% mom in December.

                              Retail sales rose 6.4% yoy in October, matched expectations. That’s the first annual rise in eight months., following a -8.7% yoy decline in September.

                              RBNZ stands pat, long-term inflation expectations remain anchored

                                By
                                ActionForex
                                -

                                New Zealand Dollar rebounds strongly after RBNZ surprised the markets by keeping OCR unchanged at 1.00%. There were some expectation of a cut to 0.75%. But RBNZ opted for a hold and just noted “interest rates will need to remain at low levels for a prolonged period”, and pledged to “add further monetary stimulus if needed.”

                                The RBNZ Committee noted “recent increases in wage and non-tradables inflation” as ‘expected outcome of monetary stimulus transmitting through the economy.” There was “slight decline in one- and two-year ahead survey measures of inflation expectations”. But “long-term inflation expectations remain anchored at close to the 2 percent target mid-point and market measures of inflation expectations have increased from their recent lows.”

                                Meanwhile the two options of keeping OCR at 1% versus lowering to 0.75% were debated. “Both actions were broadly consistent with the current OCR projection”. There was a consensus to stand pat. ” The Committee noted that the risks to the economy in the near term were tilted to the downside and agreed it would add further monetary stimulus if economic developments warranted it.”

                                NZD/USD’s strong rebound suggests that pull back from 0.6465 has completed completed at 0.6322, after breaching 0.6333 support briefly. Rise from 0.6203 might still be in progress. Focus is back 0.6465/6481 resistance zone. Sustained break there will be an early sign of medium term bullish reversal. On the downside, break of 0.6322 will retain medium term bearishness and bring retest of 0.6203 low first.

                                Australia trade surplus widened to AUD 5.8B as exports jumped

                                  By
                                  ActionForex
                                  -

                                  In seasonally adjusted term, Australia goods and services exports rose AUD 706M to AUD 40.89B in November. Goods and services imports dropped AUD 1020m to AUD 35.09B. Trade surplus widened by AUD 1.73B to AUD 5.80B.

                                  Balance on Goods and Services

                                  Full release here.

                                  Eurozone PMI improves to 49.5 with potential positive surprises from politics ahead

                                    By
                                    ActionForex
                                    -

                                    Eurozone PMI Services rose notably from 49.5 to 51.4, marking a return to expansion territory. However, PMI Manufacturing remained static at 45.2, firmly in contraction. Consequently, PMI Composite edged up from 48.3 to 49.5, signaling ongoing weakness in overall economic momentum.

                                    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that the service sector’s rebound is a “welcome boost” to the Eurozone economy, while manufacturing continues to face a severe downturn.

                                    Inflationary pressures remain a concern, particularly in the services sector. Input costs have risen for the third consecutive month, largely due to higher wage agreements, with businesses passing these costs onto customers. This persistent inflation challenge informed ECB’s cautious decision earlier this month to cut rates by just 25bps.

                                    Germany and France, the Eurozone’s largest economies, add to the uncertainty with ongoing political challenges, delaying necessary reforms to stimulate growth. Despite this, de la Rubia suggested there is potential for “positive surprises” in 2025 if clearer economic policies emerge from future governments.

                                    Full Eurozone PMI flash release here.

                                    China foreign currency reserves rose 0.05% in June

                                      By
                                      ActionForex
                                      -

                                      China’s foreign currency reserves rose USD 1.5B in June to USD 3.1121T, up 0.05%. The State Administration of Foreign Exchange spokesperson said that the China’s foreign exchange market was “generally stable”. Due to strength in the US Dollar and change in asset pricing, the overall currency reserve rose slightly.

                                      SAFE also noted that since the start of the year, China’s economy has “maintained a steady trend”. But there were “divergence” in global recovery, heightened trade friction, capital out-flow and currency depreciation pressure in emerging markets. Though, China’s cross-border capital flowed remained stable.

                                      Into US session: Sterling strongest on Brexit progress, Aussie and Kiwi weakest

                                        By
                                        ActionForex
                                        -

                                        Entering into US session, Australian and New Zealand Dollar remain the weakest one for today. But it’s followed by Dollar as the third weakest. On the other hand, Sterling and Yen are the strongest ones, followed by Euro. The Pound is apparently lifted by news that news that UK is making progress on Brexit and the supposed new Irish border proposals is a “step in the right direction”. But so far no detail is leaked, and thus, the gain is limited in Sterling too. Yen is, on the hand, boosted by both risk aversion and strong rally in 10 year JGB yield.

                                        Overall, we’d like to emphasize that USD/CHF and USD/JPY are merely in tight range and Dollar digests yesterday’s strong rally. But EUR/USD and GBP/USD strengthen today, they’re in nothing more than a corrective recovery. Over the week, Canadian and Dollar are still the two strongest ones.

                                        Stocks markets are generally in risk aversion today. AT the time of writing, DAX is down -0.07%, which is rather resilient. But CAC is down -0.95% and FTSE is down -0.91%. In Asia, Nikkei closed down -0.56%, Hong Kong HSI down -1.73%, Singapore Strait Times down -1.1%. China is still on holiday. US futures point to slightly lower open.

                                        Global treasury yields follow US higher today. German 10 year bund yield is currently up 0.0567 at 0.534. UK 10 year gilt yield is up 0.074 at 1.517. Also, Japan 10 year JGB yield is up 0.0178 at 0.159. US 10 year yield took out key resistance at 3.115 yesterday with strong momentum. We might see the rally continues today.

                                         

                                        Eurozone PPI up 0.7% mom, 36.3% yoy in May

                                          By
                                          ActionForex
                                          -

                                          Eurozone PPI rose 0.7% mom, 36.3% yoy in May, versus expectation of 1.0% mom, 36.7% yoy. For the month, industrial producer prices increased by 1.7% for intermediate goods, by 1.3% for non-durable consumer goods, by 0.9% for durable consumer goods and by 0.6% for capital goods, while they decreased by -0.2% in the energy sector. Prices in total industry excluding energy increased by 1.3%.

                                          EU PPI rose 0.8% mom, 36.4% yoy. Among Member States for which data are available, the highest monthly increases in industrial producer prices were recorded in Finland (+5.5%), Estonia (+5.4%) and Lithuania (+4.9%). Decreases were observed in Ireland (-19.4%), Slovakia (-4.4%), the Netherlands (-0.8%), Bulgaria and France (-0.1% both).

                                          Full release here.

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