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UK retail sales rose 1.4% mom in Apr, ex-fuel sales up 1.4% mom

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    ActionForex.com
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    UK retail sales rose 1.4% mom in April, well above expectation of -0.2% mom decline. That’s also more than enough to recover the -1.2% mom decline in March. Ex-fuel sales also rose 1.4% mom, versus expectation of -0.2% mom, reversing the -0.9% mom decline in March.

    However, for the most recent 3 months on previous 3 months, headline sales dropped -0.3% while ex-fuel sales dropped -0.5%.

    Full release here.

    BoC Macklem: The very rapid growth of reopening is over

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      BoC Governor Tiff Macklem told a parliamentary committee that “the very rapid growth of the reopening phase is now over”. The economy has “has entered in the slower-growth recuperation phase”. GDP would have shrunk around -5.5% in 2020 and it’s expected to grow around 4% in 2021 and 2022.

      Growth is anticipated to be “uneven across sectors and choppy over time”. Business investment will “remain subdued” and exports to “grow only slowly”. The economy will still be operating its potential into 2023. Inflation is expected to stay below the 1-3% target range “until early next year”, and remain less than 2% “into 2023”.

      Interest rate will remain at 0.25%, the effective lower bound “for an extended period”. BoC has committed to keep it there “until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved”. In the current outlook “this takes us into 2023”. The QE program all also “continue until the recovery is well underway”.

      Full remarks here.

      Fed Harker wants to start tapering sooner than later

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        ActionForex.com
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        Philadelphia President Patrick Harker told WSJ that he’s “in the camp of starting the tapering process.” Asked if tapering should start this year, he said “yes”

        “I would like to see tapering begin. I’d like to see it happen sooner rather than later,” he added. “I’d like to see it being a slow, methodical process.”

        German Gfk consumer sentiment jumps to -20.9, falling inflation and wages increase

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          ActionForex.com
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          Germany’s GfK Consumer Sentiment index for June improved significantly, rising from -24.0 to -20.9 and surpassing expectations of -22.5. This marks the fourth consecutive month of improved sentiment.

          In May, economic expectations jumped from 0.7 to 9.8, while income expectations rose from 10.7 to 12.5, the highest level since January 2022. Willingness to buy edged up slightly from -12.6 to -12.3, and willingness to save dropped sharply from 14.9 to 5.0, the lowest value since August 2023.

          Rolf Bürkl, consumer expert at NIM, explained that “falling inflation rates combined with considerable wage and salary increases strengthen consumer purchasing power. This stimulates income expectations and also reduces consumer uncertainty, which was responsible for the comparatively high willingness to save in previous months.”

          Despite these positive trends, Bürkl noted that uncertainty still lingers among German consumers. This is attributed to the lack of clear future prospects in the country, which undermines planning certainty for significant purchases. “People will have to regain this certainty before they are willing to invest their growing purchasing power in larger purchases,” he added.

          Full German Gfk consumer sentiment release here.

          Fed Williams: Not my baseline to cut interest rates this year

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            ActionForex.com
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            New York Fed President John Williams maintained a hawkish stance on Fed’s monetary policy, asserting the necessity of persisting with rate hikes to control surging inflation.

            “We haven’t said we are done raising rates,” Williams stated yesterday, emphasizing that future decisions would be data-driven, aligning with Fed’s goals. He stressed, “We’ve made incredible progress” on tackling inflation, but left the door open for further policy tightening, saying, “if additional policy firming is appropriate, we’ll do that.”

            Williams projected that a restrictive monetary policy stance would be necessary for an extended period to curb inflation from 4% to the targeted 2%. He denied any likelihood of rate cuts in the current year, quashing speculations of such a move. He said, “I do not see in my baseline forecast any reason to cut interest rates this year.”

            Addressing the inflation conundrum, Williams declared price pressures “too high” and acknowledged a discrepancy between demand and supply, with the former outpacing the latter. He noted signs of a “gradual cooling in the demand for labor,” as well as for certain goods and commodities, yet emphasized that these were outweighed by the overall demand-supply mismatch.

            World bank upgrades 2021 global growth forecast to 5.6%

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              ActionForex.com
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              In the Global Economic Prospect report, World Bank upgrades global to 5.6% in 2021 (from January projection of 4.1%). Growth is then projected to slow to 4.3% in 2022 (up from 3.8%), and then 3.1% in 2023 (new).

              US growth upgraded to 6.8% in 2021 (from 3.5%), 4.2% in 2022 ( from 3.3%), and 2.3% in 2023 (new). Eurozone growth is also upgraded ti 4.2% in 2021 (from 3.6%), then accelerate to 4.4% in 2022 (from 4.0%), and then slow to 2.4% in 2023 (new). China growth is projected to be 8.5% in 2021 (from 7.9%), then slow to 5.4% in 2022 (from 5.2%) and then 5.3% in 2023.

              David Malpass, World Bank Group President, said: “Following last year’s collapse, the global economy is experiencing an exceptionally strong but uneven recovery. While advanced economies are re- bounding, many of the world’s poorest countries are being left behind, and much remains to be done to reverse the pandemic’s staggering human and economic costs. Moreover, the recovery is not assured: the possibility remains that additional COVID-19 waves, further vaccination delays, mounting debt levels, or rising inflationary pressures deliver setbacks.”

              Full report here.

              Canada manufacturing sales rose 1.2% mom in May

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                ActionForex.com
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                Canada manufacturing sales rose 1.2% mom to CAD 72.9B in May, above expectation of 0.8%mom. The rise was mainly driven by higher sales of chemical products (+4.8%), motor vehicles (+4.8%) and machinery (+4.2%). Sales in primary metal manufacturing decreased the most (-6.9%).

                Full Canada manufacturing sales release here.

                Into US session: Euro recovering post ECB losses

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                  ActionForex.com
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                  Entering into US session, Euro receives a wave of buying in the current 4H. It’s probably already past the first post-ECB selling climax.

                  Still, upside momentum is not too convincing as seen in EUR Action Bias table.

                  We’ve mentioned here out hesitation on selling EUR/USD right after ECB as D action bias didn’t turn downside red. And it happened that D action bias is still staying in neutral green.

                  Though, the overall outlook stays bearish in EUR/USD and it’s just a matter of time for downside breakout. Hence, we’ll stick with a safer strategy to sell EUR/USD at 1.1700, slightly above 4 hour 55 EMA, with stop above 1.1851 resistance.

                  BoJ’s Uchida: Deflation battle nears end, but anchoring inflation expectations remains a challenge

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                    In a speech today, BoJ Deputy Governor Shinichi Uchida expressed optimism that the end of Japan’s long battle against deflation is “in sight.” However, he emphasized that there remains a “big challenge” in anchoring inflation expectations at 2% target.

                    Uchida pointed out that it is “not so clear” whether Japan has fully overcome the “deflationary norm.” A critical question is whether companies will maintain their current price-setting behaviors once the global inflationary pressures subside. He highlighted the importance of the labor market in this context.

                    “If the structural changes in the labor market continue, companies will have to build business models that generate enough profits and wages to keep and attract employees,” Uchida noted. Regarding price-setting strategies, he added that companies need to “rewrite their prices in their menus promptly,” reflecting labor costs while considering the potential impact on product demand.

                    Full speech of BoJ’s Uchida.

                    ECB’s Panetta argues for early and gradual rate cuts, dismisses core inflation fears

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                      ActionForex.com
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                      ECB Council member Fabio Panetta articulated a sense of urgency for ECB to loosen its approach, suggesting that “the time for a reversal of the monetary policy stance is fast approaching.”

                      Panetta advocates for a nuanced evaluation of the timing and methodology of interest rate adjustments, contrasting the implications of initiating “quickly and gradually” against opting for “later and more aggressive” measures. He warns that the latter could “increase volatility in financial markets and economic activity”.

                      The backdrop to Panetta’s remarks is a macroeconomic conditions characterized by significant disinflationary progress at an “advanced stage”, with progress toward 2% target “continues to be rapid.

                      He emphasizes the absence of any “upward de-anchoring of inflation expectations,” pointing instead to emerging downside risks. This observation effectively counters concerns over enduring high core inflation, which Panetta now deems “groundless.”

                      The crux of Panetta’s argument lies in the potential consequences of delayed policy adaptation. “If monetary policy were to take too long to accompany the ongoing disinflation, downside risks to inflation could emerge that would conflict with the symmetrical nature of the objective set by the ECB’s Governing Council,” he said.

                      US trade deficit up slightly to USD 80.7B, deficit with China widened

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                        ActionForex.com
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                        US exports of goods and services rose 1.5% to USD 228.1B in December. Imports rose 1.6% mom to USD 308.9B. Trade deficit came in at USD 80.7B, smaller than expectation of USD 83.0B.

                        The deficit with China increased USD 6.0B to USD 34.1B. Exports decreased USD 2.2B to USD 11.8B and imports increased USD 3.8B to USD 45.9B.

                        The deficit with the European Union decreased USD 3.0B to USD 16.3 B in December. Exports increased USD 0.7B to USD 25.1B and imports decreased USD 2.4B to USD 41.4B.

                        Full release here.

                        WHO Tedros warned coronavirus is public enemy number one

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                          ActionForex.com
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                          WHO Director-General Tedros Adhanom Ghebreyesus warned yesterday that China’s Wuhan coronavirus, or COVID-19, is the “public enemy number one”. And, “viruses can have more powerful consequences than any terrorist action.” The first vaccine is estimated to be 18 month from now. AT this point, Tedros said there have been 92 cases of human-to-human transmission in 12 countries outside China. But the WHO had not seen sustained local transmission yet, except in specific cases like the Diamond Princess liner.

                          Some experts estimated that each infected person would transmit the virus to about 2.5 other people. That would result in an attack rate of 60-80%. Prof Gabriel Leung, the chair of public health medicine at Hong Kong University, said in London that “60% of the world’s population is an awfully big number.” He added: “We need to get a clear view of the contagion and plug the holes in our understanding of the disease to inform public health decisions that affect hundreds of millions of lives.”

                          According to China’s National Health Commission, on February 18, Wuhan coronavirus cases added 1749 to 74185. Death tolls added 136 to 2004.

                          UK PMI services finalized at 49.5, faltering growth and sticky inflation

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                            ActionForex.com
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                            UK PMI Services was finalized at 49.5 in August, down from July’s 51.5, and represents the lowest level since January. Furthermore, PMI Composite was finalized at 48.6, down from 50.8 in July, indicating the first contraction since the start of the year.

                            Tim Moore, Economics Director at S&P Global Market Intelligence, elaborated on the concerning developments. He noted that service sector businesses are “clearly feeling the impact of rising interest rates on client demand”

                            “Worries about the broader business climate also dampened spending in August,” Moore said, adding that “faltering UK economic growth and sticky inflation” are contributing to more cautious outlook.

                            A key takeaway from the survey is the pace at which backlogs of work are decreasing—reported as the fastest in over three years. This suggests that businesses are scaling back their operations, perhaps in anticipation of tougher times ahead. The survey also highlighted cooling job market within service sector, as job creation dipped to its lowest point since March.

                            The report pointed out that competitive pressures may have started to curb inflation within the service economy. The latest round of price hikes was the slowest seen in two years, offering a glimmer of hope that inflation may stabilize or even decline in the near term.

                            Full UK PMI Services release here.

                            Asian stocks tumble as Trump moves to ban TikTok and WeChat, HSI down -2.2%

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                              ActionForex.com
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                              Asia markets tumble broadly, particularly serious in Hong Kong, after US President Donald Trump issued an executive order to ban China’s TikTok and WeChat apps. The orders will go into effect in 45 days, and block all transactions with TikTok’s owner ByteDance, and transactions involving WeChat. The move was made under the International Emergency Economic Powers Act, which allows the president to declare a national emergency, block transactions and seize assets, in response to “unusual and extraordinary threat”.

                              “To protect our Nation, I took action to address the threat posed by one mobile application, TikTok. Further action is needed to address a similar threat posed by another mobile application, WeChat,” Trump said. “This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information — potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage”.

                              At the time of writing, Hong Kong HSI is down -566 pts or -2.27%. It’s still holding above a near term channel support nevertheless. If HSI could rebound from the current level and break through 25201.43 resistance, near term bullish would be retained for another rise through 26782.61. However, sustained trading below the channel support will argue that the corrective rise from 21139.26 has completed and bring deeper fall to 22519.73 support to confirm.

                              BoE Broadbent: Energy price guarantee’s inflationary effect outweighs limiting inflation

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                                ActionForex.com
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                                BoE Deputy Governor Ben Broadbent said in a speech that firstly, “for as long as it’s in place, the government’s Energy Price Guarantee has the effect of limiting headline inflation and, to that extent, any related strengthening of second-round (and more persistent) effects on domestic inflation.”

                                Secondly, “by the same token, however, it mitigates the severity of the hit to household incomes and thereby supports domestic demand,” he added. “As the Committee noted last month, this would – all else equal – add to inflation in the medium term.”

                                “Compared with the forecast we had in August, the MPC has judged that the second effect is likely to outweigh the first,” he said.

                                But Broadbent added, there is uncertainty about the “nature and duration” of the energy subsidies. “The MPC will take account of any fiscal news in the forthcoming Medium-Term Fiscal Plan, as well as any other news relevant for the medium-term inflation outlook, in its next set of forecasts,” he said.

                                Full speech here.

                                Weaker than expected data show further cool down in China

                                  By
                                  ActionForex.com
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                                  A batch of weaker than expected July economic data from China showed the economy has cooled further.

                                  Retail sales grew 8.8% yoy, down from prior 9.0% and missed expectation of 9.2% yoy. Industrial production grew 6.0% yoy, unchanged from prior 6.0% yoy but missed expectation of 6.3% yoy. Fixed asset investment growth slowed to 5.5% ytd yoy, down from 6.0% yoy and missed expectation of 6.0% yoy. Unemployment rate rose to 5.1%, up from 4.8%.

                                  In particular, fixed asset investment growth was the slowest on record since early 1996. That suggested weakening business confidence that could be hurt by rising trade tensions with the US, as well as China’s own deleveraging policy. Weak retail sales highlights the difficulty of shift focus to domestic consumption for growth momentum, in case of a full-blown trade war.

                                  FOMC minutes: Many emphasized cost of doing too little

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                                    ActionForex.com
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                                    In the minutes of September 20-21 FOMC meeting, it’s noted that with “broad-based and unacceptably high level of inflation” and the “upside risks”, participants remarked that “purposefully moving to a restrictive policy stance in the near term was consistent with risk-management considerations”.

                                    Further than that, “many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.”

                                    Also, “several participants underlined the need to maintain a restrictive stance for as long as necessary”.

                                    Full minutes here.

                                    Sterling drops sharply after Brexit Minister Raab resigns in protest to PM May’s deal

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                                      ActionForex.com
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                                      Sterling tumbles sharply as UK Brexit Secretary Dominic Raab resigns today, just after Prime Minister Theresa May seemed to have got Cabinet support on her Brexit plan. Raab complained that “Above all, I cannot reconcile the terms of the proposed deal with the promises we made to the country in our manifesto at the last election.”

                                      Raab also warned in his resignation letter “no democratic nation has ever signed up to be bound by such an extensive regime, imposed externally without any democratic control over the laws to be applied, nor the ability to decide to exit the arrangement.” And he emphasized that “this is, at its heart, a matter of public trust,” and “I cannot support the proposed deal.”

                                      May’s government is now in deeper turmoil. as the future of the Brexit plan is bring into huge uncertainty.

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                                      Adding to that, October retail sales data were rather poor. Including auto and fuel, sales dropped -0.5% mom in October versus expectation of 0.2% mom. Excluding auto and fuel, sales dropped -0.4% mom versus expectation of 0.2% mom.

                                      Mnuchin in “very productive conversations” with China on trade agreement to avert Section 301 tariffs

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                                        ActionForex.com
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                                        US Treasury Secretary Steven Mnuchin said in a Fox News Sunday interview that the US is having “very productive conversations” with China. And he’s “cautiously hopeful we can reach an agreement” to avert the tariffs on USD 50-60b announced last week. Mnuchin noted that both countries agreed on reducing the US trade deficit to China. And, they were trying “to see if we can reach an agreement as to what fair trade is for them to open up their markets, reduce their tariffs, stop forced technology transfer.”

                                        But Mnuchin emphasized that the US is still on track to impose the Section 301 tariffs unless there is an “acceptable agreement” for Trump to sign off on. He also noted that “we’re not afraid of a trade war, but that’s not our objective.” And, “in a negotiation you have to be prepared to take action.”

                                        Separately, the WSJ reported that Mnuchin and US Trade Representative Robert Lighthizer sent a letter to Chinese Vice Premier Liu He last week, detailing the list of specific request for China. And the list is reported to include reduction of Chinese tariffs on US vehicles, purchases of semiconductor products and larger access to China’s financial markets.

                                        China industrial production rose 9.8% yoy in Apr, retail sales rose 17.7% yoy

                                          By
                                          ActionForex.com
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                                          China industrial production rose 9.8% yoy in April, slowed from 14.1% yoy, matched expectations. Fixed asset investment rose 19.9% ytd yoy, slowed from 25.6%, above expectation of 19.0%. Retail sales slowed to 17.7% yoy, down from 34.2% yoy, missed expectation of 24.9% yoy.

                                          The National Bureau of Statistics said that the economy showed “steady improvement” in April, but the foundation was “not solid” as new problems are emerging. Recovery also remains “uneven”. It expected the economy to operate within a reasonable range.

                                          Hong Kong and China stocks trade mildly higher in Asian session after the releases, but lack clear momentum for sustainable rebound. HSI is up around 0.5% at the time of writing. The index will have to overcome 28250.60 support turned resistance to confirm short term bottoming. Otherwise, it remains vulnerable for another selloff through 27505.08 support to resume the larger decline from 31183.35.

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