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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.

      German Ifo dropped to 102.8, global uncertainty increasingly taking its toll

        By
        ActionForex
        -

        German Ifo business climate dropped to 102.8 in October, down from 103.7, below expectation of 103.2. Current assessment gauge dropped to 105.9, down from 106.4 and missed expectation of 106.0. Expectations gauge dropped to 99.8, down from 101 and missed consensus of 100.3. Manufacturing, services and trade indices record decline in the month, but construction hit another record high.

        Ifo president Clemens Fuest noted in the release that “firms were less satisfied with their current business situation and less optimistic about the months ahead. Growing global uncertainty is increasingly taking its toll on the German economy.”

        Full release here.

        New Zealand GDP contracts – 0.2% qoq in Q2, manufacturing offers some resilience

          By
          ActionForex
          -

          New Zealand’s GDP contracted by -0.2% qoq in Q2, slightly better than the expected -0.4% qoq decline. Despite the overall negative figure, 7 out of 16 industries posted increases, with manufacturing leading the growth.

          GDP per capita also saw a decline, falling by -0.5%, marking the fourth consecutive quarter of contraction in this metric. The last time GDP per capita increased was back in Q3 2022.

          On the expenditure side, GDP was flat for the quarter, showing no growth or contraction at 0.0%. Household spending, however, provided a small positive with a 0.4% increase. Real gross national disposable income was also flat at 0.0%, reflecting limited income growth in the face of economic headwinds.

          Full NZ GDP release here.

          China Caixin PMI manufacturing rose to 50, pandemic impacts demand, supply and circulation

            By
            ActionForex
            -

            China Caixin PMI Manufacturing rose from 49.2 to 50.0 in September, above expectation of 49.6. Caixin said new orders returned to growth. Output fell at softer pace. Inflation pressures picked up amid material shortages.

            Wang Zhe, Senior Economist at Caixin Insight Group said: “On the one hand, the epidemic continued to impact demand, supply, and circulation in the manufacturing sector. The state of the epidemic overseas and the shortage of shipping capacity also dragged down total demand. Epidemic control measures have clearly impacted the logistics industry.”

            Also released, the official NBS PMI Manufacturing dropped from 50.1 to 49.6 in September, versus expectation of 50.2. PMI Non-Manufacturing rose from 47.5 to 53.2, above expectation of 50.8.

            Eurozone industrial production rose 0.7% mom in Feb, EU up 0.6% mom

              By
              ActionForex
              -

              Eurozone industrial production rose 0.7% mom in February, below expectation of 0.8% mom. Production of durable consumer goods rose by 2.7%, non-durable consumer goods by 1.9% and intermediate goods by 0.9%, while production of capital goods fell by -0.1% and energy by -1.1%.

              EU industrial production rose 0.6% mom. Among Member States for which data are available, the highest monthly increases were registered in Italy (+4.0%), Croatia (+2.7%) and Ireland (+2.4%). The largest decreases were observed in Slovenia (-8.3%), Lithuania (-3.8%) and Malta (-2.7%).

              Full release here.

              IMF cut Asia growth forecasts to 4% in 2022, 4.3% in 2023

                By
                ActionForex
                -

                IMF lowered Asia’s growth forecast in to 4.0% in 2022, 4.3% in 2023, and 4.6% in 2024. Japan’s growth forecast was held unchanged at 1.7% in 2022, downgraded slightly to 1.6% in 2023, and raised to 1.3% in 2024. For China, growth forecasts was downgraded to 3.2% in 2022, 4.4% in 2023, and 4.5% in 2024.

                “As the effects of the pandemic wane, the region faces new headwinds from global financial tightening and an expected slowdown of external demand,” the report said.

                As for China, “with a growing number of property developers defaulting on their debt over the past year, the sector’s access to market financing has become increasingly challenging,” the report noted.”Risks to the banking system from the real estate sector are rising because of substantial exposure.”

                Full report here.

                 

                UK retail sales volume down -0.3% mom in Sep, sales value down up 0.1% mom

                  By
                  ActionForex
                  -

                  UK retail sales volume fell -0.3% mom in September, much worse than expectation of 0.3 mom rise. Ex-automotive fuel sales volume fell -0.1% mom.

                  Looking broader, sales volumes (include and excluding fuel) fell by -1.1% in the three months to October 2023 when compared with the previous three months.

                  In value term, retail sales rose 0.1% mom while ex-fuel sales was flat 0.0% mom.

                  Full UK retail sales release here.

                  Japan national CPI core rose to 0.8%, but core-core slowed

                    By
                    ActionForex
                    -

                    Japan national CPI core (all items ex-fresh food), rose to 0.8% yoy in January, up from 0.7% yoy, matched expectations. But it remains well below BoJ’s 2% target. Headline CPI slowed to 0.7% yoy, down form 0.8% yoy. CPI core-core (all items ex-fresh food, energy slowed to 0.8% yoy, down fro 0.9% yoy.

                    BoJ Governor Haruhiko Kuroda told the parliament today that he saw the economy to continue with moderate recovery. The central bank won’t hesitate to take additional easing measures if necessary. But he didn’t believe it’s needed now.

                    Kuroda added that uncertainty regarding China’s coronavirus outbreak is high, because of the impact on exports, production, and tourism. He’d watching the effects with “grave concern.” Also, the coronavirus will be the “biggest topic on the agenda” at this week’s G20 meeting.

                    RBA’s Hunter cautious on persistent inflation despite wage trends

                      By
                      ActionForex
                      -

                      At a conference today, RBA Chief Economist Sarah Hunter highlighted the central bank’s intense focus on inflation, which continues to exceed the target band.

                      Discussing the latest CPI data, Hunter noted, “Yesterday’s data did confirm that there’s still strength in a number of categories that we’ve seen up until this point that’s still there.” The latest CPI figures, which show a slight increase from 3.5% to 3.6% in April, underline ongoing inflationary pressures across various sectors.

                      “So clearly there’s still some strength in inflation, and that’s a key consideration for the board in their decision-making,” Hunter added.

                      While wage growth appears to have peaked, Hunter expressed concerns about productivity which remains weak: “We can see some components of wages growth coming off already, particularly individual agreements,” she said. However, she also pointed out, “But equally, we are seeing that there’s a bit of a productivity challenge over the last few years.”

                      Fed’s Goolsbee: Jobs data weak, but recession not imminent

                        By
                        ActionForex
                        -

                        Chicago Federal Reserve President Austan Goolsbee addressed the recent economic concerns in an interview with CNBC, noting that last Friday’s jobs numbers were “weaker than expected” but not yet indicative of a recession.

                        He emphasized the Fed’s commitment to its core mandates: “The Fed’s job is very straightforward: maximize employment, stabilize prices and maintain financial stability. That’s what we’re going to do.”

                        Goolsbee highlighted the Fed’s forward-looking approach, stating, “If the conditions collectively start coming in like that on the through line, there’s deterioration on any of those parts, we’re going to fix it.”

                        Japan’s exports rebound by 3.1% yoy in Oct, but trade deficit persists

                          By
                          ActionForex
                          -

                          Japan’s exports rose 3.1% yoy in October, reaching JPY 9,427B, a strong recovery from the -1.7% yoy decline in September, which marked a 43-month low.

                          This rebound was primarily driven by a 1.5% yoy increase in shipments to China, buoyed by strong demand for chipmaking equipment. However, exports to the US, Japan’s largest trading partner, fell -6.2% yoy, reflecting weakness in auto shipments.

                          On the import side, growth remained modest at 0.4% yoy, totaling JPY 9,888B. This resulted in a trade deficit of JPY -461B for the month, the fourth straight month of shortfall.

                          Seasonally adjusted data showed exports declining -0.7% mom to JPY 8,882B, while imports ticked up 0.2% mom to JPY 9,239B, leading to a seasonally adjusted trade deficit of JPY -358B.

                          Full Japan trade balance release here.

                          ECB’s De Cos: Monetary tightening process well advanced but still have some way to go

                            By
                            ActionForex
                            -

                            During an event in Barcelona yesterday, ECB Governing Council Pablo Hernandez de Cos, said, “The process of monetary tightening is already well advanced, although, with the information currently available to us, we still have some way to go.”

                            He further explained, “We also anticipate that interest rates will have to remain in restrictive territory for a long time to reach our target in a sustained manner.”

                            Acknowledging the potential impact of this strategy on economic activity, de Cos pointed out, “The tightening process is having and will have short-term costs in terms of lower economic activity.”

                            However, he underscored the necessity of this process in maintaining price stability, which he deemed crucial for promoting long-term economic growth.

                            “Keeping price stability is the main contribution that the central bank can make to ensure economic growth solid long term,” he concluded.

                             

                            China’s GDP grows 5.3% yoy in Q1, but March data weak

                              By
                              ActionForex
                              -

                              China’s GDP grew 5.3% yoy in Q1, above expectation of 5.0% yoy. Comparing to Q4, GDP grew 1.6% yoy. By sector, primary industry was up 3.3% yoy, secondary industry rose 6.0% yoy, tertiary industry rose 5.0% yoy.

                              In March, retail sales rose 3.1% yoy, below expectation of 5.1% yoy. Industrial production rose 4.5% yoy, below expectation of 6.0% yoy. Fixed asset investment rose 4.5% ytd yoy, above expectation of 4.3%.

                              USD/CNH is steady after the release with focus on 7.2815 resistance. firm break there will resume whole rebound from 7.0870 and target 100% projection of 7.0870 to 7.2318 from 7.1715 at 7.3163. For now, outlook will stay bullish as long as 7.2354 support holds, in case of retreat.

                              Italy Salvini willing to compromise everything to EU except unemployment rate

                                By
                                ActionForex
                                -

                                Italian Deputy Prime Minister Matteo Salvini, leader of the League, expressed his confidence on an agreement with EU over the country’s excessive deficit. He comments came ahead of a coalition meeting with another deputy prime minister, Luigi Di Maio of the 5-Star Movement, and Prime Minister Giuseppe Conte.

                                Salvini said “The last thing we want to do is pick up a fight with Europe … The only thing I’m not ready to compromise on is the need to reduce Italy’s unemployment rate”. And, “I believe it is also in Europe’s interest to have an Italy that runs and not an Italy that strolls, so I’m convinced that among sensible people an accord can be found.”

                                RBA to stand pat and lower GDP growth forecast this week

                                  By
                                  ActionForex
                                  -

                                  RBA is going to announce rate decision again tomorrow. And, it’s widely expected the it would keep the cash rate unchanged at 1.50%, and maintain a neutral stance. The message has been delivered repeatedly, while the next move is a hike, there is no pressing need to act in the near term.

                                  The more interest part could be the new economic forecasts. Back in February, RBA projected GDP to grow 3.25% in both 2018 and 2019. And, they were above the government’s forecasts released back in December. The government projected growth to be at 3.0% in fiscal 2018/19 and fiscal 2019/20. There are some expectations for RBA to lower 2018 growth forecast this week, while the government may raise it as it delivers the May Budget.

                                  Also, RBA projected underlying inflation (in February) to hit 1.75% in 2018 and 2.00% in 2019. But there is sofar no sign of any up trend in inflation yet. It’s more likely for RBA to keep inflation projections unchanged.

                                  Yuan rebounds on suspected intervention, Shanghai SSE regains 2800

                                    By
                                    ActionForex
                                    -

                                    The onshore USD/CNY breached 6.81 earlier today as selling in Yuan continued. But on suspected intervention by state owned banks, USD/CNY quickly dropped through 6.8 handle and it’s now back at 6.78.

                                    The offshore USD/CNH also followed and dropped through 6.8 too.

                                    The news and the development helped lifted the Shanghai SSE composite back into positive territory. It’s now trading above 2% and is back above 2800. It’s also helped lifted Hong Kong HSI by more than 400 pts back above 28200.

                                    New Zealand ANZ business confidence ticked lower to -15.6, activity outlook also steady

                                      By
                                      ActionForex
                                      -

                                      Preliminary reading of New Zealand ANZ Business Confidence in November showed slight improvement to -15.6, up from October’s -15.7. Own Activity outlook dropped slightly to 4.6, down from 4.7. Looking at some details, export inte3ntions improved from -3.5 to 0.0. Investment intentions dropped from 1.9 to -3.3. Employment intentions rose from -2.5 to -1.4. Inflation expectations rose from 1.38 to 1.55.

                                      ANZ said, “now that the wage subsidy has wound up and the lost summer for tourism looms large, business resilience will be tested. But it’s fair to say the starting point looks much more positive than looked likely a few months ago.”

                                      Full release here.

                                      Eurozone PPI dropped -0.5% mom, -0.8% yoy, worse than expectation

                                        By
                                        ActionForex
                                        -

                                        Eurozone PPI came in at -0.5% mom, -0.8% yoy in August, worse than expectation of -0.2% mom, -0.4% yoy. Industrial producer prices dropped by -1.9% mom in the energy sector, while remaining stable for intermediate goods and capital goods, and increasing by 0.1% mom for durable consumer goods and by 0.2% mom for non-durable consumer goods. Prices in total industry excluding energy remained stable.

                                        EU28 PPI came in at -0.4% mom, -0.3% yoy. The largest decreases in industrial producer prices were recorded in Spain (-1.4% mom), Greece (-1.3% mom), Belgium, Denmark and Lithuania (all -0.7% mom), while the highest increases were observed in Bulgaria (0.7% mom), Hungary (0.4% mom) and Slovenia (0.3% mom).

                                        Full release here.

                                        GBP/CHF staying bearish as SNB and BoE loom

                                          By
                                          ActionForex
                                          -

                                          SNB and BoE rate decisions are the next focuses for today. SNB is expected to policy unchanged today but start turning up a hawkish tone, setting the stage for the first rate hike in 15 years at the September meeting. Inflation reaching 2.9%, a 14-year high, in May isn’t much of a problem comparing to other parts of the world. Yet, ECB’s tightening stance is giving SNB much room to adjust policy now.

                                          The situation for BoE is more complicated. A 25bps hike to 1.25% is the base case. There are arguments for a larger hike with inflation at 7.8% yoy. Yet, there are also arguments for a pause given that UK economy has already started a recession in Q2. The eventual decision and the voting could drive much volatility in the Pound.

                                          Here are some previews for BoE and SNB:

                                          GBP/CHF is staying in the down trend from 1.3070 for now and outlook remains bearish as long as 1.2292 resistance holds. But the structure of the decline suggests that it’s more of a corrective move. Downside potential could be limited with strong support at around 61.8% retracement of 1.1107 to 1.3070 at 1.1857 to complete the down trend.

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