Boston Fed Bank President Eric Rosengren said the US is “still in the depths of a recession” and he hoped, “over the course of the spring we’re really talking about a significant recovery.”
“The first thing we can do is do everything in our power to get back to full employment as quickly as possible,” he added.” “I don’t want to say that the burden is all on monetary policy. Most of the burden is actually on fiscal policy when interest rates are as low as they are.”
Minneapolis Fed President Neel Kashkari said he’s “not concerned” about the massive fiscal stimulus response to the pandemic as “this is like wartime spending”. The US has the “capacity to do what we need to do” with more government borrowing.
“The key now is for the Federal Reserve to keep our foot on the monetary policy gas until we really have achieved maximum employment as we call it,” Kashkari added. “And I think it’s going to be important for Congress to continue to be aggressive supporting people who have been laid off, supporting small businesses until we really get the pandemic behind us and restore the economy.”
SNB Chairman Thomas Jordan said yesterday, at the moment, ” foreign exchange interventions are very important because we have seen great pressure on the franc, especially in the COVID crisis.” Over CHF 100B was spent on intervention in the first nine months of 2020, to curb the surge in the safe haven currency.
Jordan was bother by US designation of Switzerland as a currency manipulator. He insisted that Switzerland was “anything but a currency manipulator” as he pointed to the appreciation of the Franc over the last 12 years, and persistently low inflation. Also, “this designation by the Americans will have no influence on our monetary policy.”
“We have to … pursue a sensible monetary policy in the overall interest of the country,” Jordan added. “At the moment, unfortunately, that means that these interest rates are very low. As soon as possible, we will raise interest rates.”
US ISM Manufacturing Index dropped to 58.7 in January, down from 60.5, missed expectation of 59.5. Looking at some details, new orders dropped -6.4 to 61.1. Production dropped -4.0 to 60.7. But employment rose 0.9 to 52.6. Prices rose 4.5 to 82.1.
ISM said: “The manufacturing economy continued its recovery in January. Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are continuing to cause strains that limit manufacturing growth potential. However, panel sentiment remains optimistic (three positive comments for every cautious comment), similar to December levels.”.
Eurozone unemployment rate was unchanged at 8.3% in December, matched expectations. EU unemployment rate was also unchanged at 7.5% Eurostat estimated that 16 million men and women in the EU, of whom 1367 million in the Eurozone, were unemployed in December 2020. Compared with November, the number of persons unemployed increased by 67000 in the EU and by 55000 in the Eurozone.
UK PMI Manufacturing was finalized at 54.1 in January, down from December’s 3 year-high of 57.5. Markit said supply chains were stretched by Brexit and COVID restrictions. Input cost and selling price inflation both accelerated.
Rob Dobson, Director at IHS Markit: “A mixture of harsher COVID-19 restrictions and Brexit led to near-record supply-chain disruptions, lower exports and increased costs… The hope is that the current constraints will start to ease once COVID-19 restrictions are lifted, vaccines are rolled out and ports, suppliers and manufacturers adapt to the new trading environment post-Brexit. If so, supply, demand and production bottlenecks should slowly work through the system and growth will not be knocked too far off course through 2021. However, there is no swift end in sight to these headwinds, and the longer the current circumstances remain the greater the potential damage to the sector and its suppliers.”
Eurozone PMI Manufacturing was finalized at 54.8 in January, down from December’s 55.2. Markit said the marked gains in new orders and output sustained. But delivery delays intensified, leading to rapid rise in purchase prices. Looking at some member states, the Netherlands hit 28-month high at 58.8. Germany retreated to 4-month low at 47.1. Italy hit 34-month high at 55.1. Australia hit 26-month high at 54.2. France recovered to 6-month-high at 51.6. But Spain contracted at 49.3, 7-month low.
Chris Williamson, Chief Business Economist at IHS Markit said: “Eurozone manufacturing output continued to expand at a solid pace at the start of 2021, though growth has weakened to the lowest since the recovery began as new lockdown measures and supply shortages pose further challenges to producers across the region… While future prospects brightened, with manufacturers’ optimism striking a three-year high in January to sound a reassuring note of confidence at the start of the year, any potential delays to the vaccine roll-outs will add an additional layer of uncertainty to the outlook.”
GBP/CHF hits as high as 1.2271 so far today. The break of 1.2259 resistance is tentatively seen as signal of resuming whole rebound from 1.1102. Further rise is now expected as long as 1.2145 minor support holds. Next target is 61.8% projection of 1.1102 to 1.2259 from 1.1683 at 1.2398. Firm break there would bring upside acceleration to 100% projection at 1.2840.
USD/CHF’s break of 0.8925 also suggests resumption of rebound from 0.8756. Further rise should be seen to 0.8998 support turned resistance first, which is close to 100% projection of 0.8756 to 0.8925 from 0.8837. Firm break there will argue that rebound from 0.8756 is indeed correcting the whole down trend from 0.9901 to 0.8756, and target 38.2% retracement at 0.9193.
Silver’s rally accelerates after gapping up today and hits as high as 29.22 so far. The strong break of 27.91 resistance confirms resumption of near term rise from 21.88. Next target is 100% projection of 21.88 to 27.91 from 24.12 at 30.15, which is close to 29.84 high.
We’re indeed looking at resumption of whole medium term up trend from 11.67, as consolidation pattern from 29.84 has apparently completed at 21.88. Decisive break of 29.84/30.15 will confirm this bullish case. Stronger upside acceleration should then be seen to 61.8% projection of 11.67 to 29.84 from 21.88 at 33.10.
Japan PMI Manufacturing was finalized at 49.8 in January, slightly down from December’s 50.0.
Usamah Bhatti, Economist at IHS Markit, said: “The Japanese manufacturing sector slipped back into contraction territory at the start of the year… as a rise in COVID-19 infections and issuance of a state of emergency dampened operating conditions… Manufacturers indicated a renewed fall in output levels… firms were further discouraged to replace voluntary leavers in the sector as staffing levels reduced.
“Nonetheless, the short-term prospects for the Japanese manufacturing sector appear to be turning a corner, with firms reporting a stable level of new orders. Businesses were also optimistic that the pandemic would subside over the coming year, triggering a wider economic recovery in Japan which would boost output levels. IHS Markit estimates industrial production will grow 7.1% in 2021, although this is from a lower base and does not fully recover the output lost in 2020.”
China Caixin PMI Manufacturing dropped to 51.5 in January, down from 53.0, missed expectation of 52.7. That’s also the lowest reading in seven months. Markit said that production and new orders both expanded at notably slower rates at the start of the year. There was fresh decline in new export business. Input costs and output prices both rose sharply.
Wang Zhe, Senior Economist at Caixin Insight Group said: “Overall, the manufacturing sector continued to recover in January, but the momentum of both supply and demand weakened, dragged by subdued overseas demand. The gauge for future output expectations was the lowest since May last year though it remained in positive territory, showing manufacturing entrepreneurs were still worried about the sustainability of the economic recovery. In addition, the weakening job market and the sharp increase in inflationary pressure should not be ignored.”
Released over the weekend, the official PMI manufacturing dropped to 51.3 in January, down from 51.9, below expectation of 51.5. PMP non-manufacturing dropped sharply to 52.4, down from 55.7, missed expectation of 55.1.
Australia AiG Performance of Manufacturing rose to 55.3, up from 52.1, indicating a stronger improvement in conditions over the summer holiday period. Five of the six manufacturing sectors reported positive trading conditions (results over 50 in trend terms), with the strongest results reported from manufacturers in machinery & equipment and chemicals, pharmaceuticals, cleaning, rubber, petroleum & related products.
US personal income rose 0.6% mom, or USD 116.6B in December, well above expectation of 0.1% mom. Spending dropped -0.2% mom, or USD -27.9B, versus expectation of -0.40% mom. Headline PCE pride index accelerated to 1.3% yoy. Core PCE price index accelerated to 1.5% yoy.
Canada GDP grew 0.7% mom in November, above expectation of 0.4% mom. This is the seventh consecutive monthly gain. Total economic activity was still around -3% below the pre-pandemic level in February. Good-producing industries grew 1.2% mom while services-producing industries rose 0.5% mom. 14 of 20 industrial sectors posted gains. Meanwhile, preliminary information indicates an approximate 0.3% mom GDP growth in December.
Also released, Canada IPPI rose 1.5% mom in December versus expectation of 1.4% mom. RMPI rose 3.5% mom versus expectation of 2.5% mom.
Bitcoin’s strong rally today, with 34899 resistance firmly taken out, suggests that the five-wave triangle consolidation pattern has completed at 29283. That’s slightly early than expected, leaving 28989 support untested. Anyway, for now, further rise should be seen to 40000/41964 resistance zone.
We’d expect this resistance zone to be taken out to resume the larger up trend to 61.8% projection of 17629 to 41964 from 29283 at 44322. The move out of a triangle pattern could be a terminal fifth wave. Hence, we’d look for strong resistance around 44322, to limit upside to form a “real” top. We’ll hold on to this bullish view as long as 31987 support holds.
Germany GDP grew 0.1% qoq in Q4, above expectation of 0.0% qoq. DeStatis said in Q4, “the recovery process slowed due to the second coronavirus wave and another lockdown imposed at the end of the year. This affected household consumption in particular, while exports of goods and gross fixed capital formation in construction supported the economy. ” For the year 2020 as a whole, GDP dropped -5.0%.
Also from Germany, unemployment dropped -41k in December versus expectation of 7k rise. Unemployment rate was unchanged at 6.0%. Import price index rose 0.6% mom in December, versus expectation of 1.0% mom.
Swiss KOF Economic Barometer dropped to 96.5 in January, down from 104.1, missed expectation of 101.5, and back below long-term average of 100. KOF said, “after reaching an interim pandemic high in September, COVID-19 is now weighing more heavily on the economy again. The pandemic is causing gloomy economic prospects at the beginning of the year.”
“Responsible for the decline are in particular the indicator bundles for accommodation and food service activities as well as other services,” KOF added. “But the outlook for manufacturing, financial and insurance services and private consumer demand is also less favourable than before. The outlook for construction is stable and foreign demand could provide a stronger impulse.”
France GDP contracted -1.3% qoq in Q4, better than expectation of -3.9% qoq. GDP was -5% below its level a year ago. Insee said that “the loss of activity this quarter was marked by the lockdown in effect from the end of October to mid-December and by the curfews put in place during the months of October and December”. Over the full 2020, GDP dropped -8.3%.
Looking at some details, household consumption dropped -5.4%. Gross fixed capital formation grew 2.4%. Total domestic demand dropped -2.7%. Exports 4.8%, more than imports’s 1.3%. Foreign trade made a positive contribution to GDP growth, added 0.9%. Change in inventories also made a positive contribution by 0.4%.
Japan industrial production dropped -1.6% mom in December, below expectation of -1.5% mom. Though, on the bright side, manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to rebound 8.9% in January and decline 0.3% in February. The government also maintained that industrial production was picking up.
Also from Japan, unemployment rate was unchanged at 2.9% in December, better than expectation of a tick up to 3.0%. Tokyo CPI core improved to -0.4% yoy in January, up from -0.9% yoy, above expectation of -0.6% yoy.
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Fed Bostic: This recession was unlikely anything we had before
Atlanta Fed President Raphael Bostic said “this recession was unlike anything we ever had before, so the recovery is going to be that way as well”. As for the way out there in 2023, 2024, ” there’s a lot that’s going to happen that could go one way or another.”
“A lot of the recent developments have been positive,” he added. “We should be open to the possibility that things might happen more strongly than they would otherwise.”
Still, Bostic was not worrying about price pressures. “It’s not really the level of inflation but much more the trajectory as we move forward that I’m going to be focusing on to get answers of whether the economy might be moving into places that make me uncomfortable,” he said.