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UK CPI unchanged at 1.7%, core CPI rose to 1.7%

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    ActionForex.com
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    UK CPI was unchanged at 1.7% yoy in September, missed expectation of 1.8% yoy. Core CPI, on the other hand, accelerated to 1.7% yoy, up from 1.5% yoy, matched expectations. RPI, however, slowed to 2.4% yoy, down from 2.6% yoy and missed expectation of 2.7% yoy.

    Also from UK, PPI input dropped to -2.8% yoy, down from -0.9% yoy and missed expectation of -1.8% yoy. PPI output dropped to 1.2% yoy, down from 1.6% yoy and missed expectation of 1.3% yoy. PPI output core dropped to 1.7% yoy, down from 2.0% yoy, missed expectation of 1.9% yoy.

    Sterling firm despite DUP’s concerns on Johnson’s Brexit concessions

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      ActionForex.com
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      Sterling surged overnight on news that UK and EU are closing in on a Brexit deal in Brussels. The Pound remains firm in Asian session, awaiting further developments. It’s reported that both sides have hammered out most of the differences over the past 48 hours. UK Prime Minister Boris Johnson is said to have made several major concessions. Most notably, he now accepts that there will be customs checks between Northern Ireland and the rest of UK.

      Johnson’s move got support from fellow Conservatives. Steve Baker, chairman of the pro-Brexit European Research Group, said “I’m happy to say it was a very constructive conversation” and “I’m optimistic it is possible to reach a tolerable deal which I will be able to vote for.” Irish Prime Minister Leo Varadkar also gave a nod and said “the negotiations are moving in the right direction.”

      However, Northern Ireland’s DUP sounds very skeptical on it. Party leader Arlene Foster said “it would be fair to indicate gaps remain and further work is required.” Also, DUP needs “a deal that respects Northern Ireland’s constitutional position as per the Belfast Agreement within the U.K. and indeed respects the economic integrity of the U.K. single market.” Johnson will certainly need support from DUP before giving greenlight to such a deal.

      New Zealand CPI slowed to 1.5%, RBNZ expected to cut further

        By
        ActionForex.com
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        New Zealand CPI rose 0.7% qoq in Q3, above expectation of 0.6% qoq. Annually, CPI slowed to 1.5% yoy, down from 1.7% yoy, but beat expectation of 1.4% yoy. The trimmed-mean measures – which exclude extreme price movements – ranged from 1.7% to 1.8% for the year. This indicates that underlying inflation is higher than the 1.5% overall increase in the CPI. On a quarterly basis, trimmed means ranged from 0.5% to 0.6%.

        Full release here.

        Separately, RBNZ Deputy Governor Geoff Bascand said in a speech that New Zealand remains vulnerable to external shocks. And, “lower rates still may be needed to achieve our inflation and maximum sustainable employment objectives”. He added that there is reasonable prospect for the cash rate to go lower.

        Despite slightly stronger than expected inflation data, RBNZ is still generally expected to cut interest rate further from the current 1.00% level. The need for another shocking -50bps cut, like the one in August, is less likely though. The central bank is now expected to cut another -25bps in November, and probably another -25bps in February.

        China warns of countermeasures after US House passed legislations supporting Hong kong

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          ActionForex.com
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          US House of Representatives passed four measures on Tuesday, on unanimous voice vote, taking a hardline stance on China. In particular, three of the legislations were in support for Hong Kong following over four months of protests. China’s Foreign Ministry immediately responded by accusing the US of “sinister intentions” and warned of retaliation should the acts were passed in the Senate too.

          The measures include the Hong Kong Human Rights and Democracy Act that requires the US secretary os state to certify Hong Kong’s autonomy status every year. The Protect Hong Kong Act bans commercial exports of military and crowd-control items to Hong Kong Government. A third measures is a non-binding resolution, condemning China’s interference” in Hong Kong’s affairs and support the city’s right to protest. The fourth measure was another non-binding resolution commending Canada for its actions related to a US request to extradite Meng Wanzhou, CFO of telecom giant Huawei.

          China’s Foreign Ministry warned in a brief statement, “if the relevant bill is finally passed into law, not only will it hurt Chinese interests and China-US relations, but also seriously damage US interests. Regarding the wrong decision of the US, the Chinese side will have to enact effective countermeasures, firmly safeguard Chinese sovereignty, security and development interests”.

          Sterling surges as UK and EU said to be closing in on draft Brexit deal

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            ActionForex.com
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            Sterling surges as Bloomberg reported that UK and EU negotiators are closing in on a draft Brexit deal in Brussels. And there is even optimism that there will be a breakthrough before the end of today. GBP/USD takes out 1.2707 with conviction. Rise from 1.1958 is now on track to 100% projection of 1.1958 to 1.2582 from 1.2195 at 1.2819. Break will target 161.8% projection at 1.3205.

            IMF downgrades global growth forecast to 3% on trade war

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              ActionForex.com
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              IMF warned in the World Economic Outlook that the global economy is in a “synchronized slowdown”. And, thus, global growth forecast for 2019 was downgraded by -0.2% to 3.0%, lowest since global financial crisis. For 2020, growth forecast was also downgraded by -0.1% to 3.4%. IMF said, “growth continues to be weakened by rising trade barriers and increasing geopolitical tensions”. US-China trade tensions alone would “reduce the level of global GDP by 0.8 percent by 2020.”

              IMF also warned: “At 3 percent growth, there is no room for policy mistakes and an urgent need for policymakers to support growth. The global trading system needs to be improved, not abandoned. Countries need to work together because multilateralism remains the only solution to tackling major issues, such as risks from climate change, cybersecurity risks, tax avoidance and tax evasion, and the opportunities and challenges of emerging financial technologies.”

              Full release here.

              China said to tie US farm purchases to tariff removal

                By
                ActionForex.com
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                Uncertainties regarding the so-called phase 1 US-China trade deal surfaced today. According to a Bloomberg, China’s purchases of US farm products wouldn’t hit the USD 40B to USD 50B level as touted by Trump under the current term. To achieve the figure, China would need to remove some of its retaliatory tariffs. And with that in mind, China would request same reciprocal action by Trump. As we noted before, the phase 1 trade deal remains highly unsure, at least until both sides have put the agreement into texts.

                Earlier today, Chinese Foreign Ministry Geng Shuang confirmed that China has bought 320,000 tonnes of cotton, 230,000 tonnes of wheat and 20 million tonnes of soybeans from the U.S. However, it’s also noted by analysts that not all orders would be delivered to China this year. And there are risks that some of the orders could be cancelled if trade tension intensifies again.

                EU Barnier and UK Barclay said a Brexit deal this week still possible

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                  ActionForex.com
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                  EU chief Brexit negotiator Michel Barnier said, on arriving in Luxembourg for EU summit, that “even if an agreement (Brexit) has been difficult, more and more difficult, it’s still possible this week.” He added, “Reaching an agreement is still possible. Obviously, any agreement must work for all. The whole of the UK and the whole of the EU. Let me add also that it is high time to turn good intentions in a legal text.”

                  UK Brexit Minister Stephen Barclay said, “I am looking forward to … an opportunity to discuss these issues with my EU counterparts… The talks are ongoing we need to give them space to proceed. Detailed conversation are underway and a deal is still very possible.”

                  Bullard: Fed may decide to provide additional accommodation, on meeting-by-meeting basis

                    By
                    ActionForex.com
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                    In a prepared speech at a London Conference, St. Louis Fed President James Bullard warned “a sharper-than-expected slowdown could materialize in the quarters ahead.” “Trade policy uncertainty creates a disincentive for global investment. Accordingly, the global growth environment looks weaker in recent quarters,” he said, adding, “Slower global growth may feed back into slower growth in the U.S.”

                    And, that “may make it more difficult for the Federal Open Market Committee (FOMC) to achieve its 2% inflation target.” He added “the FOMC may choose to provide additional accommodation going forward, but decisions will be made on a meeting-by-meeting basis”. .

                    Full release here.

                    BoJ: Domestic demand on uptrend, upgrade Hokkaido assessment

                      By
                      ActionForex.com
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                      In its Regional Economic Report, BoJ, upgraded assessment on Hokkaido and described the economy as “expanding moderately”, instead of “recovering moderately. Assessment on other eight regions were kept unchanged, as recovering, expanding, or expanding moderately.

                      BoJ also said that “domestic demand had continued on an uptrend, with a virtuous cycle from income to spending operating in both the corporate and household sectors, although exports, production, and business sentiment had been affected by the slowdown in overseas economies.”

                      Full report here.

                      German ZEW dropped to -22.8, US-China trade settlement doesn’t diminish economic scepticism

                        By
                        ActionForex.com
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                        German ZEW Economic Sentiment dropped to -22.8 in October, down from -22.5 and beat expectation of -27.0. Current Situation Index, however, dropped to -25.3, down from -19.9, below expectation of -25.5. Eurozone ZEW Economic Sentiment dropped to -23.5, down from -22.4, better than expectation of -26.7. Eurozone Current Situation also dropped sharply by -10.8 to -26.4.

                        “The slight decrease in both the ZEW Indicator of Economic Sentiment and the situation indicator shows that financial market experts continue to expect a further deterioration of the German economy. The recent settlement in the trade dispute between the USA and China does not seem to diminish economic scepticism at this stage,” comments ZEW President Professor Achim Wambach.

                        Full release here.

                        UK unemployment rate edged higher to 3.9%, wage growth slowed

                          By
                          ActionForex.com
                          -

                          UK unemployment rate rose to 3.9% in the three month to August, up from 3.8% and above expectation of 3.8%. That figure was slightly lower than 4.0% a year ago. Unemployment rate for men came at 4.0% while unemployment rate for women was at 3.7%. Average weekly earnings (including bonus) growth slowed to 3.8%, down from 3.9% and missed expectation of 3.9%. Average earnings (excluding bonus) growth also slowed to 3.8%, down from 3.9% but beat expectation of 3.7%.

                          Full release here.

                          RBA minutes suggest no hurry for another rate cut despite easing bias

                            By
                            ActionForex.com
                            -

                            The minutes for October RBA meeting were clearly dovish. There, the central bank cut benchmark interest rate by -25bps to new historical low of 0.75%. Most importantly, RBA said, , “the Board would continue to monitor developments, including in the labour market, and was prepared to ease monetary policy further, if needed.”

                            Yet, the minutes revealed detailed arguments in favor of keeping the policy rate unchanged. But in the end, these factors ” did not outweigh the case for a further easing” at the meeting. Lower rates would help “reduce spare capacity”, and provide “greater confidence” that inflation would meet target. Additionally, RBA noted “the trend to lower interest rates globally”, and the effect on the economy and inflation outcomes.

                            Overall, another rate cut is still likely subject to the developments in employment and inflation. But the minutes suggested that RBA is more likely to stand pat for the rest of the year, for the effect of this year’s three rate cuts to play out.

                            Suggested readings:

                            AUD/JPY stays in tight range after the release. Current development suggests that corrective pull back form 74.49 has completed at 71.73. Rebound form 69.95 is still in progress and could resume soon. Break of 74.49 resistance will confirm this bullish view and target 100% projection of 69.96 to 74.49 from 71.73 at 76.27.

                            BoJ Kuroda: Need to pay closer attention to loss of momentum in inflation

                              By
                              ActionForex.com
                              -

                              In a speech to BoJ regional branch managers, Governor Haruhiko Kuroda reiterated that the central bank won’t hesitate to add to current stimulus is needed. In particular, he emphasized, “we need to pay closer attention to the possibility that momentum towards achieving our price target will be lost.”

                              Nevertheless, Kuroda maintained that the economy is likely to continue expanding moderately as a trend, despite overseas slowdown. Inflation is currently moving around 0.5% and is expected to accelerate gradually towards 2%, on positive output gap and rises in inflation expectation.

                              He also said BoJ needs to monitor the effects of Saturday’s powerful typhoon on the real economy, maintain functioning and smooth settlement of funds.

                              US Mnuchin: If there is no trade deal with China, tariffs would go in place

                                By
                                ActionForex.com
                                -

                                US Treasury Secretary Steven Mnuchin told CNBC today that he expected President Donald Trump and Chinese President Xi Jinping will be able to finish the trade agreement during their anticipated meeting in Chile on November 16-17. He also echoed Trump’s comments last week and said recent round of discussions covered intellectual property rights, financial services including currency and foreign exchange, and “very significant structural issues” dealing with agriculture. Though, Mnuchin also warned, “I have every expectation if there’s not a deal those tariffs would go in place”, referring to the next round of tariffs scheduled to mid-December.

                                On the other hand, Chinese media sounded much less enthusiastic, as Trump. On Sunday, China Daily said, “while the negotiations do appear to have produced a fundamental understanding on the key issues and the broader benefits of friendly relations, the Champagne should probably be kept on ice, at least until the two presidents put pen to paper.” It also warned, “as based on its past practice, there is always the possibility that Washington may decide to cancel the deal if it thinks that doing so will better serve its interests.”

                                Germany’s Economy Ministry expects stagnation but not recession

                                  By
                                  ActionForex.com
                                  -

                                  Germany’s Economy Ministry said “the export-oriented German industry is facing weak global trade, stagnating global manufacturing and falling demand for cars.” However, “a stronger slowdown or a pronounced recession are not to be expected at the moment”. Instead, “the German economy remains in stagnation. Economic activity is stuck at the existing level.”

                                  So far, growth in services and construction has largely offset the recession in manufacturing sector. But, considering recent indicators, there are increasing signs of spill over, which could further drag the labor market overall.

                                  The government is expected to publish new economic forecasts this week. In April, it predicted growth of 0.5% for 2019 and 1.5% for 2020. There is some room for downside recession in 2020’s figure.

                                  ECB de Guindos didn’t foresee recession in Eurozone

                                    By
                                    ActionForex.com
                                    -

                                    ECB Vice President Luis de Guindos said he didn’t foresee Eurozone entering into recession. However, low growth could extend for a longer time. Meanwhile, latest news regarding US-China trade negotiations were positive. De Guindos also warned that low profitability of banks would lead to low valuation, “making the inevitable consolidation of the sector very difficult.” Low profitability of Eurozone banks was also related to costly structures and excess capacity.

                                    Separately over the weekend, ECB policymaker Robert Holzmann complained that the current ECB monetary policy is “wrong” and “a different policy is needed in the future”. He added that ECB should think about lowering inflation target, temporarily, from 2% to 1.5%. Also, “I am convinced that she has heard the dissenting voices, that she will take them seriously and will try to find a new approach here.”

                                    Eurozone industrial production rose 0.4% mom, above expectation of 0.3% mom

                                      By
                                      ActionForex.com
                                      -

                                      Eurozone industrial production rose 0.4% mom in August, above expectation of 0.3% mom. Annually, Eurozone industrial production dropped -2.8% yoy. Production of capital goods rose by 1.2% mom and intermediate goods by 0.3% mom, while production of non-durable consumer goods fell by -0.3% mom, and durable consumer goods and energy by -0,4% mom.

                                      EU28 industrial production came in at 0.1% mom, -2.0% yoy. Among Member States for which data are available, the highest increases in industrial production were registered in Malta (5.6% mom), Estonia (3.9% mom) and Latvia (3.0% mom). The largest decreases were observed in Croatia (-3.0% mom), Slovakia (-2.6% mom) and Lithuania (-2.4% mom).

                                      Full release here.

                                      China imports and exports contracted deeply in Sept

                                        By
                                        ActionForex.com
                                        -

                                        China’s September trade data were rather poor. In particular, imports dropped -8.5% yoy versus expectation of -5.2% yoy,. suggesting weak domestic demand. Exports also contracted -3.2% yoy versus expectation of -3.0% yoy. Trade surplus widened to USD 39.7B. But year-to September, exports just dropped -0.1% yoy while imports dropped -5.0% yoy.

                                        In USD term, in September:

                                        • Total trade dropped -5.7% yoy to USD 396.6B.
                                        • Exports dropped -3.2% yoy to USD 218.1B.
                                        • Imports dropped -8.5% yoy to USD 178.5B.
                                        • Trade surplus came in at USD 39.7B.

                                        Year-to-September:

                                        • Total trade dropped -2.4% yoy to USD 3351.8B.
                                        • Exports dropped -0.1% yoy to USD 1825.1B.
                                        • Imports dropped -5.0% yoy to USD 1526.7B.
                                        • Trade surplus was at USD 298.4B.

                                        With US, Year-to-September:

                                        • Total trade dropped -14.8% yoy to USD 402.7B.
                                        • Exports to US dropped -10.7% yoy to USD 312.0B.
                                        • Imports from US dropped -26.4% yoy to USD 90.7B.
                                        • Trade surplus was at USD 221.3B.

                                        With EU, Year-to September:

                                        • Total trade rose 3.2% yoy to USD 522.5B.
                                        • Exports rose 5.1% yoy to USD 316.8B.
                                        • Imports rose 0.3% yoy to USD 205.8B.
                                        • Trade surplus was at USD 111.0B

                                        BoE Ramsden sees less of a case for rate cut

                                          By
                                          ActionForex.com
                                          -

                                          BoE Deputy Governor Dave Ramsden told Daily Telegraph that Brexit uncertainty has damaged UK’s “speech limit” for growth. He pointed to declining productivity and falling business investment. Also, “underlying growth has slowed through the year as Brexit uncertainty has really weighed,”

                                          Nevertheless, Ramsden saw “less of a case for a more accommodative monetary position”, even in case of another Brexit delay. Company wage costs were “picking up quite significantly, which will drive domestic inflationary pressure”. Meanwhile, spare capacity in the economy might not have opened up. Supply potential, the speed limit of the economy, is also slowing through this period

                                          Ramsden’s view was in contract to fellow BoE rate-setters Michael Saunders and Gertjan Vlieghe, who suggested that another delay to leaving the EU might mean lower interest rates.

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