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US goods trade deficit widened to USD -82.9B in Aug

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    ActionForex.com
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    US goods trade deficit widened to USD -82.9B in August, from July’s USD -80.1B. larger than expectation of USD -81.8B. Exports of goods rose USD 3.2B over July to USD 118.3B. Imports of goods rose USD 6.0B to USD 201.3B. Wholesale inventories rose 0.5% mom to USD 637.0B. Retail inventories rose 0.8% mom to USD 599.7B.

    Full release here.

    UK PMI services rose to 54.3, but risk tilted to the downside

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      ActionForex.com
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      UK PMI services rose to 54.3 in August, up from 53.5, and beat expectation of 53.9. Markit noted in the released that there were stronger rises in business activity and new work. At the same time, input cost inflation accelerated, led by fuel prices and wage pressures. However, optimism towards the year-ahead business outlook was at lowest level since March.

      Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:

      “Faster service sector growth comes as much-needed welcome news after disappointing manufacturing and construction PMI surveys in August. The survey data indicate that the economy is on course to expand by 0.4% in the third quarter, a relatively robust and resilient rate of expansion that will no doubt draw some sighs of relief at the Bank of England after the rate hike earlier in the month.

      “Faster service sector order book and employment growth also offset slowdowns of both in the manufacturing and construction sectors, but also highlights the extent to which the economy has become more reliant on services to support growth, and in particular an especially strong financial service sector. Financial services have outperformed all other sectors so far this year.

      “Business expectations for the year ahead meanwhile sank markedly lower, down across all three sectors to one of the lowest levels seen since the EU referendum, largely reflecting increased anxiety over Brexit negotiations.

      “Given the increasingly unbalanced nature of growth and the darkening business mood, risks to the immediate outlook seem tilted to the downside.”

      Full release here.

      Into US session: Sterling strongest as traders reassess Brexit scenarios

        By
        ActionForex.com
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        Entering into US session, Sterling is trading as the strongest one for today so far, despite very poor UK PMI services. Technical support is a reason for the Pound’s rebound. GBP/USD drew support from 1.2661 key level. EUR/GBP was also rejected by 0.8939 near term resistance. But at the same times, traders are readjusting their positions on reassessment of Brexit vote outcome. A tricky point is, as UK Trade Minister Liam Fox said, if the Commons vote down Prime Minister Theresa May’s Brexit deal on December 11, it could eventually lead to UK unilaterally withdrawing Brexit. That is, no Brexit at all. It’s far fetched for now, but not totally impossible.

        Staying in the forex markets, Euro is trading as the second strongest one. Italian 10 year yield drops quite notably by -0.0769 to 3.072 at the moment. German 10 year yield is up 0.0074 at 0.271. That is, German-Italian spread is now at 280. That’s quite a positive development, as helped by continuous news/rumors/rhetorics that suggest Italy is working on its budget to avoid EU disciplinary actions. Dollar is following as the third strongest.

        Meanwhile, Australian Dollar is the worst performing one with terrible weak Q3 GDP data as well as risk aversion. Yen is the second weakest for today, (but it stays as the second strongest for the week), as risk aversion doesn’t intensify in Asia and Europe. Canadian Dollar is the third as BoC rate decision is awaited.

        In Europe, at the time of writing:

        • FTSE is down -1.03%
        • DAX is down -0.83%
        • CAC is down -0.91%
        • German 10 year yield is up 0.0074 at 0.271
        • Italian 10 year yield is down -0.0769 at 3.072

        Earlier in Asia:

        • Nikkei closed down -0.53% at 21919.33, after hitting day low at 21755.17
        • Singapore Strait times dropped -0.37% to 3155.92, after hitting day low at 3127.70
        • Hong Kong HSI dropped -1.62%
        • China Shanghai SSE dropped -0.61%
        • 10 year JGB year dropped -0.0007 to 0.069

        Fed George not inclined to dismiss inflation signals

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          ActionForex.com
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          Kansas City Fed President Esther George said she’s “not inclined to dismiss today’s pricing signals or to be overly reliant on historical relationships and dynamics in judging the outlook for inflation.” But she didn’t explicitly indicated whether she’s ready to adjust monetary policy for now.

          “The structure of the economy changes over time, and it will be important to adapt to new circumstances rather than adhere to a rigid formulation of policy reactions,” she said. “With a tremendous amount of fiscal stimulus flowing through the economy, the landscape could unfold quite differently than the one that shaped the thinking”.

          Japan PMI manufacturing finalized at 48.9, slipped further into contraction

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            ActionForex.com
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            Japan PMI Manufacturing was finalized at 48.9 in December, down from November’s 49.0. That’s the lowest level since October 2020. S&P Global noted there were strong reductions in output volumes and order books. Input buying was cut at strongest rate since September 2020. Supply pressures were the least widespread since February 2021.

            Laura Den man, Economist at S&P Global Market Intelligence, said: “December PMI data saw the Japanese manufacturing sector slip further into contraction territory in the final month of 2022. The downturn was largely centred around the current demand environment which is weak both internationally and domestically….

            “At the same time, forward looking indicators are increasingly painting a gloomier picture for Japan’s manufacturing sector in the future. Companies have cut back input buying sharply, and business sentiment waned to a seven-month low.”

            Full release here.

            New Zealand sets aside NZD 15B of pandemic fund for future use

              By
              ActionForex.com
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              New Zealand Finance Minister Grant Robertson said today that the country’s economy is “doing better than expected and is more open than anywhere else in the world”. Yet, “as we look around the world, it is clear that this global pandemic is continuing to grow.” In the face of ongoing uncertainty, “now is the time to be cautious and keep our powder dry.”

              Robertson announced to set aside the remaining NZD 15B of the NZD 50B Covid-19 Response and Recovery Fund, with no plans to spend it ahead of the election. “We are setting aside a significant sum of money to be used as needed in the future,” he added.”This is the fiscally and socially responsible thing to do.”

              “We are doing everything we can to keep Covid-19 at our border – nobody wants a second wave. The responsible course of action is to make sure we are prepared for the worst – to give confidence to New Zealanders that we will be able to continue to act swiftly and decisively in our ongoing fight against this virus,” Robertson said.

              Germany Ifo down to 88.5, manufacturing weakness steering economy into turbulent waters

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                ActionForex.com
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                Germany Ifo Business Climate fell from 91.5 to 88.5 in June, below expectation of 91.2. Current Assessment Index dropped form 94.8 to 93.7, slightly above expectation of 93.5. Expectations Index tumbled further from 88.3 to 83.6, below expectation of 88.0.

                By sector, manufacturing fell sharply from -0.1 to -6.6, lowest since November. Services dropped from 6.8 to 2.7. Trade edged down from -19.1 to -20.2. Construction decreased from -18.5 to -20.1.

                Ifo said: “Sentiment in the German economy has clouded over considerably… Above all, the weakness in the manufacturing sector is steering the German economy into turbulent waters.”

                Full Germany ifo release here.

                Japan GDP contracted -0.2% qoq, -1.0% annualized in Q1

                  By
                  ActionForex.com
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                  Japan GDP contracted -0.2% qoq in Q1, better than expectation of -0.4% qoq. In annualized term, GDP contracted -1.0%, first negative growth in two quarters, but better than expectation of -1.8%. GDP deflator dropped -0.4% yoy, also better than expectation of -1.2% yoy.

                  Economy minister Daishiro Yamagiwa said the economy has not returned to pre-pandemic levels but that further downside would likely be limited. He also expected the economy to pick up even though uncertainty remains due to Ukraine situation. Also, China’s zero-covid policy is having a significant impact on supply chains.

                  Fed chair Jerome Powell press conference live stream

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                    ActionForex.com
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                    UK GDP grew 1.0% mom in June, 4.8% qoq in Q2

                      By
                      ActionForex.com
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                      UK GDP grew 1.0% mom in June, matched expectations. That’s the fifth consecutive month of growth, GDP remained -2.2% below it’s pre-pandemic level in February 2020. Services was the main contributor, growing 1.5% mom. Production, on the other hand, dropped -0.7% mom while contraction also dropped -1.3% mom.

                      For Q2 as a whole, GDP grew 4.8% qoq, still -4.4% below the pre-pandemic level in Q4, 2019. ONS said, “there were increases in nearly all main components of expenditure apart from “trade”, with the largest contribution from household consumption”.

                      Full release here.

                      Into US session: Sterling weakest as May seeks short Brexit delay to June 30

                        By
                        ActionForex.com
                        -

                        Entering into US session, Sterling is undoubtedly the weakest one as Brexit chaos continue. UK PM May confirmed that she is seeking Article 50 extension till June 30. And she intends to have the third meaningful vote on her Brexit deal. At the same times, it’s reported that EU would only approve extensions till May 23. And most importantly, we’d repeat our doubt that even with an extension, and another MV, would the deal get through the Commons? If not, then what’s next? There is no answer.

                        Staying in the currency markets, Kiwiis second strongest weakest. Canadian Dollar is the third weakest as WTI is back below 59 after failing to take out 60 key resistance zone. Swiss Franc, Euro and Aussie are the strongest ones.

                        Looking ahead, FOMC rate decision, economic projections and press conference are the main focus of the day. Here are some previews.

                        In Europe:

                        • FTSE is up 0.20%.
                        • DAX is down -1.43%.
                        • CAC is down -0.19%.
                        • German 10-year yield is down -0.008 at 0.091.

                        Earlier in Asia:

                        • Nikkei rose 0.20%.
                        • Hong Kong HSI dropped -0.49%.
                        • China Shanghai SSE dropped -0.01%.
                        • Singapore Strait Times dropped -0.41%.
                        • Japan 10-year JGB yield rose 0.0092 to -0.036.

                        China PMI manufacturing rose to 50.1, non-manufacturing dropped to 52.3

                          By
                          ActionForex.com
                          -

                          China official PMI Manufacturing rose from 49.2 to 50.1 in November, above expectation of 49.6. PMI Non-Manufacturing dropped from 52.4 to 52.3, below expectation of 53.0. PMI Composite rose from 50.8 to 52.2.

                          “A series of policy measures to ensure energy supply and stabilize market prices have borne some fruits. The tight supply of electricity eased while prices of some raw materials dropped significantly in November,” said Zhao Qinghe, a senior NBS statistician.

                          Into US session: Dollar strongest on trade, ISM manufacturing next

                            By
                            ActionForex.com
                            -

                            Entering into US session, Dollar remains the strongest one for today, in reaction to US-China decision to put trade war escalation on hold. In addition Fed Vice Chair Richard Clarida sounded upbeat as he said baseline economic outlook remains positive. Markets will now enter into a crucial week to gauge the chance of a July Fed cut. Important economic will be released starting from ISM Manufacturing today.

                            Staying in the currency markets, Canadian Dollar is the second strongest one as oil prices also jump on the trade news. WTI oil is now trading around 60 handle. Euro is the third weakest after mixed data. On the positive side, Eurozone unemployment rate dropped to record low of 7.5% in May. For now, Yen and Swiss Franc are among the weakest on risk appetite. Australian Dollar ignore stocks’ rally and is the second weakest, awaiting RBA rate cut tomorrow.

                            In Europe, currently:

                            • FTSE is up 1.33%.
                            • DAX is up 1.31%.
                            • CAC is up 0.86%.
                            • German 10-year yield is down -0.0007 at -0.325.

                            Earlier in Asia:

                            • Nikkei rose 2.13%.
                            • China Shanghai SSE rose 2.22%.
                            • Hong Kong HSI was on holiday.
                            • Singapore Strait Times rose 1.52%.
                            • Japan 10-year JGB yield rose 0.153 to -0.146.

                            BoJ Uchida: Monetary easing to continue to nurture firms’ changing pricing strategies

                              By
                              ActionForex.com
                              -

                              BoJ Deputy Governor Shinichi Uchida highlighted in a speech today an emerging trend in firms’ pricing strategies, noting that “firms are developing more forward-looking strategies for setting prices.” According to Uchida, these changes “might be the chance to finally change Japan’s economy.” Hence, he emphasized BoJ will “patiently continue with monetary easing to carefully nurture these signs.”

                              Uchida was explicit in outlining the Bank’s monetary policy stances. Firstly, he ruled out near-term adjustments to short-term interest rate, currently at -0.10%, stating “there is still a long way to go before such decisions are made.”

                              Secondly, BoJ will “maintain the current framework” until sustainable and stable achievement of 2% inflation target “come in sight”.

                              Thirdly, Uchida affirmed the ongoing yield curve control under the present policy framework, aiming to balance its benefits and drawbacks, especially in relation to financial intermediation and the market.

                              Despite the high economic and price outlook uncertainty, Uchida stated the recent yield curve control modification, allowing the 10-year JGB yield to rise to up to 1%, is aimed at sustaining the ultra-loose policy. “Needless to say, we do not have an exit from monetary easing in mind,” he emphasized.

                              New Zealand BNZ services dropped to 45.9, lowest since Oct

                                By
                                ActionForex.com
                                -

                                New Zealand BusinssNZ Performance of Services index dropped -3.9 to 45.9 in January. That was the lowest result since October 2021. Looking at some details, activity/sales dropped sharply from 50.7 to 44.1. Employment ticked down from 49.1 to 48.1. New orders/businesses dropped deeply from 52.0 to 41.8. Stocks/inventories dropped from 51.0 to 47.6. Supplier deliveries also tumbled from 49.8 to 43.6.

                                BNZ Senior Economist Craig Ebert said that “the PSI can jag around quite a lot from month to month – upwards and downwards. However, it’s also worth pointing out that the long-term average of the PSI is 53.6, which is starting to feel some distance away. So much for the new traffic light system releasing the brakes on activity.”

                                Full release here.

                                UK PM May bashed by British media for failure at EU summit

                                  By
                                  ActionForex.com
                                  -

                                  UK media generally bashed Prime Minister Theresa May’s performance at the informal EU summit in Austria. There are headlines today like “May humiliated,” “Humiliation for May,” “Embarrassing rebuff for PM in Salzburg,” “Your Brexit’s broken,”etc. It’s rather common for UK politicians to get the harshest words back at home. Comments from the EU were so far rather gentle.

                                  House Minister James Brokenshire defended her in a BBC radio interview, saying ” the prime minister is getting the right deal for our country. She is sticking up for Britain, sticking up what will work for country. These are tough negotiations.”

                                  However, Scottish First Minister Nicola Sturgeon said, “Now that the EU has explicitly rejected it, the Chequers pretence has to stop. At the very least, single market/customs union membership must be back on the table and the Article 50 clock stopped to avoid a cliff edge”.

                                  Separately, European Commission President Jean-Claude Juncker urge EU and UK to be like “two loving hedgehogs”. And, “when two hedgehogs hug each other, you have to be careful that there will be no scratches.”

                                  US durable goods order jumped 2.7%, ex-transport orders rose 0.4%

                                    By
                                    ActionForex.com
                                    -

                                    US headline durable goods orders rose 2.7% to USD 258.5B in March, much stronger than expectation of 0.7%. Ex-trans orders rose 0.4%, also better than expectation of 0.2% . Ex-defense orders rose 2.3%. Transportation equipment rose 7.0% to USD 93.8B.

                                    Full release here.

                                    RBA Lowe: Australian economy recovering well, but still a long way to go

                                      By
                                      ActionForex.com
                                      -

                                      RBA Governor Philip Lowe said in a speech that “we received further confirmation that the Australian economy is recovering well”, and “these better-than-expected outcomes are very welcome news”. However, “there is still a long way to go and that the Australian economy is operating well short of full capacity”.

                                      “Over the past couple of weeks market pricing has implied an expectation of possible increases in the cash rate as early as late next year and then again in 2023”, he acknowledged. But, “this is not an expectation that we share”.

                                      “Our judgement is that we are unlikely to see wages growth consistent with the inflation target before 2024,” he reiterated. “This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024.”

                                      In the Q&A session, Lowe also said he’d be more “comfortable” if Australian Dollar’s exchange rate is lower, “because we need to get the unemployment rate down, inflation back to target and a lower currency would help us get there.” But the currency is not overvalued with commodity prices very high and interest rate differentials stable.

                                      Full speech here.

                                      Asian Update: Aussie knocked down by RBA Lowe, Yen jumps

                                        By
                                        ActionForex.com
                                        -

                                        Australian Dollar is under broad based pressure today after surprised turn in RBA Governor Philip Lowe’s stance. To him, the next interest rate move is no longer more likely a hike, but evenly balanced. Aussie reversed all of yesterday’s gains and is indeed the weakest one for the week too. New Zealand Dollar follows as the second weakest for today and then Canadian.

                                        Meanwhile, Yen jumps broadly today even though there is no sign of risk aversion. It’s probably more due to the selloff in Aussie again. Sterling is recovering some ground too. Dollar follows as the third strongest while Trump’s State of Union Address is largely ignored by the markets.

                                        For the week, Dollar is so far the strongest one, followed by Kiwi and then Yen. Aussie is the weakest, followed by Sterling and then Euro.

                                        In Asia:

                                        • Nikkei is currently up 0.27%.
                                        • Japan 10-year JGB yield is down -0.0082 at -0.017, staying negative.
                                        • China, Hong Kong and Singapore are still on lunar new year holiday.

                                        Overnight:

                                        • DOW rose 0.68%.
                                        • S&P 500 rose 0.47%.
                                        • NASDAQ rose 0.74%.
                                        • 100year yield dropped -0.022 to 2.702, defended 2.7 handle.

                                        RBA Lowe: No strong case for near term hike

                                          By
                                          ActionForex.com
                                          -

                                          RBA Governor Philip Lowe said:

                                          • Australian economy expected to be stronger in 2018.
                                          • “Businesses are reporting stronger business conditions than at any time since before the financial crisis.”
                                          • Economy is “moving in the right direction and interest rates still quite low, it is likely that the next move in interest rates in Australia will be up, not down.”
                                          • But “the board does not see a strong case for a near-term adjustment of monetary policy”, thanks to slow progress in unemployment and inflation.

                                          Regarding the steel and aluminum tariffs of the US, Lowe slammed it as “highly regrettable and bad policy”.

                                          • “History is very clear here. Protectionism is costly. It’s costly to the country that implements the protectionism, and it’s costly to everyone else. It’s just not the right thing to do.”
                                          • “How damaging will this be remains open. If it’s just confined to the current higher tariffs on steel and aluminium, then I think it’s manageable for the world economy.”
                                          • However, “this could turn very badly, though, if it escalates.”

                                          RBA is generally expected to keep rates on hold throughout 2018, except that NAB predicts one hike. Slowing growth in Q4 and risk of trade wars would add to the case for RBA to stand pat.

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