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Dollar dives after ISM non-manufacturing dropped sharply to 52.6

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    ActionForex.com
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    Dollar dives notably after poor services data from US. ISM Non-Manufacturing PMI dropped to 52.6 in September, down from 56.4, and missed expectation of 55.1. Looking at some details, Production dropped -6.3 to 55.2. New Orders dropped -6.6 to 53.7. Employment dropped -2.7 to 50.3. Prices, on the other hand, rose 1.8 to 60.0.

    ISM said : “According to the NMI, 13 non-manufacturing industries reported growth. The non-manufacturing sector pulled back after reflecting strong growth in August. The respondents are mostly concerned about tariffs, labor resources and the direction of the economy.”

    Full release here.

    US to end Iranian oil sanction waivers for China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey

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      ActionForex.com
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      Oil price jumps sharply today on news that US is preparing to stop all Iranian oil sanction waivers. The announce could be made as soon as on Monday. Currently, China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey are buying Iranian oil without facing US sanctions. But such waivers would expire on May 2 and US will not be renewing it them.

      WTI crude oil surges to as high 65.92 so far today. 61.8% retracement of 77.06 to 42.05 at 63.68 is considered completely got rid of. Near term outlook will stay bullish as long as 63.08 support holds. Further rise should be seen back to 77.06 key resistance.

      In the bigger picture, there is no clear sign of range break out yet. Rise from 42.05 is seen as just a leg inside the sideway pattern from 77.06. Thus, upside should be limited by 77.06 to bring another medium term fall.

      German factory orders rose 5.5%, strongest since 2014

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        ActionForex.com
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        Germany factory orders rose 5.5% mom in January well above expectation of 1.5% mom. It’s also the biggest monthly rise since July 2014. However, over the year, factory orders dropped -1.4% mom.

        Looking at some details, domestic orders rose 1.3% mom while foreign orders rose 10.5% mom. New orders from Eurozone were up 15.1% mom. New orders from other countries rose 7.8% mom.

        Full release here.

         

        UK Johnson’s Brexit deal passed second reading with 358-234 votes

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          ActionForex.com
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          UK Prime Minister Boris Johnson finally won the approval for his Brexit Withdrawal Agreement in the Commons. MPS voted 358-234 to pass the second reading of the bill. The final stage of ratification will take place after Christmas. The Commons are expected to approve the legislation by January 9, then pass the the Lords, and then for Royal Assent.

          “This is the time when we move on and discard the old labels of ‘leave’ and ‘remain’ … now is the time to act together as one reinvigorated nation, one United Kingdom,” Johnson told parliament before the vote.

          “Now is the moment to come together and write a new and exciting chapter in our national story, to forge a new partnership with our European friends, to stand tall in the world, to begin the healing for which the whole people of this country yearn.”

          Japanese wages growth underwhelm as real income sinks for 17th mth

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            ActionForex.com
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            Subdued wage growth data in Japan is raising eyebrows, particularly at BoJ. An essential element for the central bank’s policy normalization is the establishment of a harmonious cycle between wage growth and prices. The recent figures, however, indicate that this equilibrium remains elusive.

            In August, labor cash earnings in Japan rose by a meager 1.1% yoy. This increase, while consistent with the prior month, fell short of the anticipated 1.5% growth. Furthermore, base salary growth, although increasing to 1.6% yoy from the preceding month’s 1.4%, has yet to manifest signals of a robust and sustainable upward momentum.

            The bright spot, perhaps, is the increase in overtime pay, which is often used as an indicator of business vibrancy, as 1.0% yoy ascent was observed, rebounding from July’s flat growth.

            However, inflation-adjusted real wages continued their downward spiral for the 17th consecutive month. August’s real wages declined by -2.5% yoy, surpassing the projected -2.1% yoy dip. This trend starkly reveals that despite any increments, wages are struggling to keep up with the consistent price surges, placing added strain on the average consumer’s pocket.

            Also released, household spending, a critical driver of economic activity, contracted by -2.5% yoy, a figure that, while better than the anticipated -4.3% yoy decline and an improvement from July’s -5.0% yoy reduction, still underscores constrained consumer expenditure.

            NY Fed: 1-yr inflation expectation unchanged at 4.8%, 3-yr rose to 3.7%

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              According to the July Survey of Consumer Expectations by the New York Fed, median one-year-ahead inflation expectations were unchanged at record 4.8%. Also, 3-year inflation expectation rose further from 3.6% to 3.7%, hitting the highest level since August 2013.

              Full release here.

              Germany PMI manufacturing ticked up 0.4 from 69-month low to 44.5

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                ActionForex.com
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                Germany PMI manufacturing rose to 44.5 in April, up from 44.1 but missed expectation of 45.2. It’s staying deep in contraction below 50. PMI services rose to 55.6, up from 55.4, beat expectation of 55.0. PMI composite rose to 52.1, up from 51.4.

                Commenting on the flash PMI data, Phil Smith, Principal Economist at IHS Markit said:

                “The overall picture for Germany’s private sector has changed very little according to April’s flash data, with strong growth across the services economy continuing to counteract the export-led weakness in manufacturing. Though the PMI has ticked up from March’s 69-month low, it’s merely signalling the same modest rate of underlying growth as seen on average over the opening quarter of the year.

                “Slight upticks in the manufacturing indices for output, new orders and employment saw the headline Manufacturing PMI post its first rise in nine months, albeit with the latest reading nonetheless the second-lowest since mid-2012. Amid reports of a declining car industry, strong competition across Europe and generally subdued global demand, the data showed another steep drop in German goods exports and the lowest confidence among manufacturers for six-and-a-half years.

                “The survey continues to highlight strong job creation across the service sector, which is in turn supporting wage growth and means we should see consumer demand continue to rise during the second quarter.”

                Full release here.

                Powell: Fed will carefully assessing incoming data and the evolving risks

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                  ActionForex.com
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                  In the highly anticipated Jackson Hole speech, Fed chair Jerome Powell said “substantial further progress test has been “met for inflation”. And there has also been “clear progress toward maximum employment”.

                  At July’s FOMC meeting, he view was that if the economy “evolved broadly as anticipated”, it could be “appropriate to start” tapering this year. However, “the intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the Delta variant.”

                  He added that Fed will be “carefully assessing incoming data and the evolving risks”, without giving any hint of the timing and pace of tapering

                  Full speech here.

                  Canada retail sales rose 0.4% in Jan, coronavirus impact to come later

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                    ActionForex.com
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                    Canada retail sales rose 0.4% to CAD 5.2B in January, slightly above expectation of 0.3% mom. Ex-auto sales, however, dropped -0.1% mom, versus expectation of 0.2% mom. Sales were up in only 4 of 11 subsectors, representing 48% of retail trade.

                    Statistics Canada also noted: “While the impacts of the coronavirus on the retail trade sector will be more noticeable in subsequent months, respondent comments for February note that business activities have been impacted.”

                    Full release here.

                    ECB’s Nagel uncertain if rate plateau is reached

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                      ActionForex.com
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                      ECB Governing Council, Joachim Nagel, Bundesbank head, posed a crucial question in his speech in Frankfurt, “Have we reached the plateau” on interest rates? He answered by stating that it “cannot yet be clearly predicted”. He continued, elaborating that “the forecasts still only show a slow decline toward the target level of 2%.”

                      Nagel’s comments hinted at the continuous monitoring of economic indicators, suggesting that while borrowing costs are expected to “remain at a sufficiently high level for a sufficiently long time,” the exact interpretation hinges on the incoming data.

                      Addressing concerns about Germany’s economic health, he remarked that characterizing Germany as the ‘sick man’ “seems exaggerated.” He attributed the present sluggish growth to specific influences such as the global economic deceleration, Russia’s conflict with Ukraine, and reduced public expenditure. Offering a silver lining, Nagel projected, “Once we get past the worst of these special factors, the weak growth should also ease. We expect the economy to grow again in 2024.”

                      On the other hand, Latvia’s central bank chief, Martins Kazaks, highlighted the structural nature of recent oil price hikes. He pointed out, “The recent oil price increase in my view is not a temporary or transitory, it’s very much a structural issue.” Such dynamics, according to Kazaks, present heightened inflation risks. Regarding the anticipated rate cuts, he expressed skepticism about their timing, asserting, “I think expecting rate cuts mid next year is somewhat too early.”

                      Fed Bostic: Room to run with rate hikes if economy runs fine

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                        ActionForex.com
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                        Atlanta Fed President Raphael Bostic said there is “room to run” with Fed’s rate hikes. as long as the economy is “running fine” and there is no sign of contraction. He expects the economy growth between 2.2-2.5% this year. But inflation is expected to rise above 2% target.

                        Bostic is still aiming at lifting Federal funds rate to neutral. And a slow approach is a good path for Fed. He’s currently seeing one rate hike this year and one in 2020.

                        Australia CBA PMI composite rose to 52.6, economy back in expansion

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                          ActionForex.com
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                          Australia CBA PMI Services rebounded strongly to 53.2 in June, up from 26.9, back in expansionary region. PMI Manufacturing also rose to 49.8, up from 44.0, very close to 50 stabilization level. PMI composite rose to 52.6, up from 28.1, also back in expansion, and hit the highest level in 9 months.

                          CBA Head of Australian Economics, Gareth Aird said: “The June PMIs are consistent with our view that we are now past the low point in economic activity. Overall conditions are still very soft, but there were a few encouraging pieces of information in the PMIs. Confidence has improved in both the manufacturing and services sectors. And the lift in both input and output prices is welcome as it suggests we are more likely to be in a period of disinflation rather than deflation. The further decline in employment was disappointing, but given the lagging relationship between employment and output it is not surprising. We should see headcount lift from here.”

                          Full release here.

                          Eurozone PPI up 5.0% mom, 43.3% yoy in Aug

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                            ActionForex.com
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                            Eurozone PPI rose 5.0% mom 43.3% yoy in August. For the month,industrial producer prices increased by 11.8% in the energy sector, by 0.8% for non-durable consumer goods, by 0.4% for capital goods, by 0.3% for durable consumer goods and by 0.1% for intermediate goods. Prices in total industry excluding energy increased by 0.3%.

                            EU PPI rose 4.9% mom, 43.0% yoy. The highest monthly increases in industrial producer prices were recorded in Ireland (+28.4%), Bulgaria (+12.5%) and Hungary (+10.6%), while the only decreases were observed in Luxembourg (-1.8%), Portugal (-0.6%) and Czechia (-0.1%).

                            Full release here.

                            Japan PMI manufacturing finalized at 52.7, new orders stagnates and input prices rose

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                              ActionForex.com
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                              Japan PMI Manufacturing was finalized at 52.7 in February, down from January’s 55.4. Markit said there was renewed fall in output amid near-stagnation in new orders. Input prices rose at sharpest pace since August 2008. Stocks of purchases had survey-record increase amid delays and shortages.

                              Usamah Bhatti, Economist at IHS Markit, said: “February PMI data pointed to a softer expansion in the Japanese manufacturing sector. The rate of growth eased to a five-month low, however, amid a renewed reduction in production levels and a broad stagnation in new orders… input price pressures intensified further, with average cost burdens rising at the sharpest pace in thirteen-and-a-half years… manufacturers commented that the degree of optimism regarding the 12-month outlook for output eased to a six-month low in February… This is broadly in line with the IHS Markit prediction for industrial production to grow 5.9% in 2022.”

                              Full release here.

                              IMF Georgieva urges patience as benefit of rates hikes not instantaneous

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                                ActionForex.com
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                                IMF Managing Director Kristalina Georgieva said that central banks should keep raising interest rates until they reach “neutral level”. “At this point we look for getting to a neutral mode, and in most places we are not quite yet there,” she added.

                                She explained that rates has to go up since “when inflation runs high, that undermines growth, it hits the poorest parts of the population the hardest.”

                                Georgieva also said “the benefits (of rate hikes) would come but they are not instantaneous, this requires some patience in society.” IMF projected that tightening will continue until 2024 when central banks are “seeing the impact of their actions”.

                                ECB’s Wunsch: Successive rate cuts in Jun and Jul could trigger excessive repricing

                                  By
                                  ActionForex.com
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                                  ECB Governing Council member Pierre Wunsch expressed today that he is “very comfortable” with rate cut in June. He also anticipates that at least two rates cuts this year, “barring any bad news”.

                                  However, Wunsch was careful to temper expectations regarding the pace of future rate cuts, particularly stressing that a reduction in rates in July, following a potential June cut, is “not a done deal”.

                                  He highlighted the importance of “managing expectations,” noting that too rapid a sequence of rate reductions could lead the markets to anticipate cuts at every ECB meeting. Such a perception could trigger an excessive repricing in the markets, which Wunsch views as problematic.

                                  China Caixin PMI manufacturing dropped to 50.6, third straight monthly drop, lowest since June 2017

                                    By
                                    ActionForex.com
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                                    China Caixin PMI manufacturing dropped -0.2 to 50.6 in August, missed expectation of 50.7. In the release, it’s noted that “output expands at faster pace… but new order growth weakens and employment continues to decline”. Also, confidence towards the 12-month business outlook remains lacklustre”.

                                    Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

                                    “The Caixin China General Manufacturing PMI slipped to 50.6 in August from July, marking the third straight monthly drop and its lowest level since June 2017.

                                    “The subindexes for new orders and output both remained in expansionary territory, with the former falling and the latter climbing up. This showed cooling demand and strong supply existed at the same time across the manufacturing sector.

                                    “The employment subindex, remaining in contractionary territory, dipped to its lowest level since July 2017. The subindex for new export orders inched up despite remaining in contractionary territory, implying a still-grim export situation.

                                    “Output charges and input costs both expanded at faster rates in August, indicating upward pressure on prices of industrial products. The subindex for future output, which reflects manufacturers’ outlook of production over the next 12 months, remained in positive territory and continued to edge up.

                                    “Stocks of finished items contracted at a steeper rate, while stocks of purchased items expanded further. The subindex for suppliers’ delivery times rose, even though it failed to make it into positive territory, which implied a slightly improved capital turnover among goods producers.

                                    “Generally speaking, the manufacturing sector continued to weaken amid soft demand, even though the supply side was still stable. Prices of industrial products were underpinned by a proactive fiscal policy, and environmental protection policies that had limited some factory production. I don’t think that stable supply can be sustained amid weak demand. In addition, the worsening employment situation is likely to have an impact on consumption growth. China’s economy is now facing relatively obvious downward pressure.”

                                    Full release here.

                                    Eurozone PMI manufacturing finalized at 47.7, toughest spell since 2013 continued

                                      By
                                      ActionForex.com
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                                      Eurozone PMI Manufacturing was finalized at 47.7 in May, unrevised, down from April’s 47.9. That’s also very close to six year low at 47.5 made in March. Looking at the member states, German PMI manufacturing was worst at 44.3. Austria reading dropped to 50-month low at 49.5. Italy reading improved to 8-month high at 49.5 but stayed below 50. Spain reading dropped to 3-month low at 50.2. France reading improved to 3-month high at 50.6, barely expanding.

                                      Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

                                      “Euro area manufacturing remained in contraction during May, suggesting the sector will act as a drag on the wider economy in the second quarter.

                                      “A fourth successive monthly drop in output and further steep decline in new orders underscored how the sector remains in its toughest spell since 2013. Companies are tightening their belts, cutting back on spending and hiring. Input buying, inventories and employment are all now in decline as manufacturers worry about being exposed to a further downturn in demand.

                                      “That said, although the headline PMI fell in May, the decline masked slower rates of decline for both output and new orders. The forward-looking orders- to- inventory ratio also picked up for a second month running to reach a six-month high, the improvement of which augurs well for the downturn to moderate in June.

                                      “However, trade wars, slumping demand in the auto sector, Brexit and wider geopolitical uncertainty all remained commonly cited risks to the outlook, and all have the potential to derail any stabilisation of the manufacturing sector.”

                                      Full release here.

                                      Also released, Swiss CPI slowed to 0.6% yoy in May, down from 0.7% yoy and matched expectation. Swiss PMI manufacturing rose 0.2 to 48.6 in May, below expectation of 48.8.

                                      Australia NAB business confidence and conditions improved, but further stimulus still likely needed

                                        By
                                        ActionForex.com
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                                        Australia NAB Business Confidence rose from 0 to 2 in October. Business Conditions also rose from 2 to 3. NAB said “this month’s survey results continue to point to only modest outcomes in the business sector, though forward-looking indicators have improved slightly and may be pointing to a stabilisation in conditions.” Also, “acknowledging that the impact of recent rate cuts will take time to flow through the economy, it appears that the support provided by both fiscal and monetary policy this year has done little to offset the slowdown in the business sector.”

                                        Alan Oster, NAB Group Chief Economist, also said: “The business sector has lost significant momentum over the past year or so, putting at risk the optimism around business investment and possibly employment going forward. Overall, we see this as a demand driven issue with private sector demand the weakest since the GFC. It may well be the case that the economy needs further stimulus in addition to the monetary and fiscal support provided so far to support demand and see a lift in business activity and confidence”.

                                        Full release here.

                                        ECB 2019 hike pricing is back as Italy worry faded and inflation jumped

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                                          ActionForex.com
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                                          Markets continued to stabilize further as Italian political turmoil is now a past. Italian 10 year bond yield dropped for another day, by 0.17 so far and is standing at 2.54. German 10 year bund yield, on the other hand, is rising 0.16 and is back above 0.40 at the time of writing. While the spread is still widener than 200, it’s much better than the worse day when it was over 300.

                                          Money markets are back pricing in the chance of an ECB hike next year. This is additionally supported by the stronger than expected inflation reading released last week. Now, markets are pricing in around 50% chance of a hike in June 2019. They are also now fully pricing in a 10 bps hike by September 2019.

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