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BoJ Adachi: It’s difficult to envision a post-COVID-19 economy

    By
    ActionForex
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    Bank of Japan board member Seiji Adachi said in a speech that it’s “difficult to envision a post-COVID-19 economy, at least for the time being”. The “process of making drastic changes to the socioeconomic structure can be painful”. It’s worth considering whether monetary might act as a “sort of safety net” for, or a “means of directly promoting” reforms.

    Also, he added, “if the pace of economic recovery is much slower than expected, it is not possible to completely rule out the risk that firms’ positive stance toward the outlook will be lost or that corporate bankruptcies and discontinuation of businesses will increase”. Thus, “it remains necessary in the COVID-19 era to maintain an accommodative monetary policy stance while carefully monitoring economic developments.”

    Full speech here.

    RBNZ Hawkesby sees less stimulus required, NZD/JPY extends rally

      By
      ActionForex
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      RBNZ Assistant Governor Christian Hawkesby said today that there is no change in forward guidance that OCR will stay at 0.25% until March 2021. Though, “less stimulus is required than we thought in August”, even though a “substantial amount” is still needed. Negative rates is a policy tool for the central bank is needed. But Hawkesby added that it’s less likely if banks use the cheap loans from the new FLP program.

      New Zealand Dollar surges this week as markets see less urgency for negative rates due to improvement in outlook. ANZ still expects a cut to negative in August 2021, but it’s now “become a bit of a toss up”.

      NZD/JPY’s rally from 59.49 resumes this week with strong break of 71.97 resistance The solid support from 55 week EMA is a sign of medium term bullishness. Focus is now on 73.53 structural resistance. Decisive break there should reaffirm this. NZD/JPY, be it starting an up trend or just correcting the long the down trend, should then target 61.8% retracement of 94.01 to 59.49 at 80.82.

      BoE Tenreyro: Negative rate worked fairly well in Europe

        By
        ActionForex
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        BoE MPC member Silvana Tenreyro said in a Yorshire Post interview, “the positive evidence related to negative interest rate policy comes from Europe, where it has worked fairly well.” “It led to lower lending rates and increases in lending; and banks’ profitability actually increased,” she added.

        Also, “we will be in a world of low-interest rates for a long time, important to engage with the review of negative rates,” she said.

        Fed Daly: Recent vaccine news is heartening

          By
          ActionForex
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          San Francisco Fed President Mary Daly said yesterday that her “modal outlook” is the US economy will continue to expand at a “gradual pace”. The current resurgence in infections gave her “cause for concern”, but the recent vaccine news is “heartening”. “When the virus is behind us, I feel we have the economy in a good position to go,” she said.

          Kansas City Fed President Esther George said the “calibration” of monetary policy right now is “appropriate”. Those, she’s encouraged and surprised by the strength of bounceback in the economy in Q3. He expected growth to moderate though.

          Australia Westpac consumer sentiment hits 7-yr high on housing market optimism

            By
            ActionForex
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            Australia Westpac Consumer Sentiment rose 2.5% to 107.7 in November, up from 105.0. The index is now 35.3% above it’s level in August, and 13% above the six-month average prior to the pandemic in March. Further, it’s a seven year high, strongest reading since November 2013.

            Westpac said the main message from this survey is the encouraging optimism which is building around the outlook for the housing market. The boost from record low interest rates is clearly over-riding negatives around high unemployment; the overhang of deferred loans; the prospect of withdrawal of significant fiscal support; slow population growth; and rising vacancy rates.

            Full release here.

            NZD/USD surges after RBNZ, targeting 0.7131 next

              By
              ActionForex
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              NZD jumps even though RBNZ maintained a dovish tone. Some analysts noted that the FLP could be enough to stimulate the economy as recovery remains on track. Additionally, if a vaccine becomes available early next year, RBNZ might not need to cut rates into negative territory. An RBA style cut to 0.10% might be enough for RBNZ in February.

              NZD/USD took out 0.6797 resistance early this week to resume whole rebound from 0.5469 low. Next near term target is 61.8% projection of 0.5920 to 0.6797 from 0.6589 at 0.7131.

              More importantly, NZD/USD is now sitting comfortably above 55 week EMA, indicating continuing medium term bullishness. The rise from 0.5469, be it a corrective move or the start of new trend, would target 0.7557 cluster resistance (61.8% retracement of 0.8840 to 0.5469 at 0.7552), in medium term.

              RBNZ keeps OCR at 0.25%, launches new stimulus with FLP

                By
                ActionForex
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                RBNZ decided to keep the Official Cash Rate unchanged at 0.25% today while the Large Scale Asset Purchase Programme will continue, up to NZD 100B. The central bank introduced additional stimulus through a Funding for Lending Programme, commencing December, to lower banks’ funding costs and lower interest rates.

                RBNZ also “reaffirmed that an FLP, a lower or negative OCR, purchases of foreign assets, and interest rate swaps remain under consideration.” The banking system is also “on track to be operationally ready for negative interest rates by year end.”.

                Full statement here.

                Fed Kaplan cautious and concerned about short term downside risks

                  By
                  ActionForex
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                  Dallas Fed President Robert Kaplan said he’s “cautious and concerned” about the short term downside risks in the economy due to resurgence of coronavirus spread. He warned that “the next two quarters are going to be very challenging, very difficult.” In particular, household income and spending will drop off “at some point” without additional fiscal stimulus.

                  Nevertheless, he’s optimistic that growth will rebound with the arrival of vaccines. Business contacts have indicated that they’re gearing up fro a strong H2 in 2021.

                  UK Lords voted to amend Brexit treaty breaking bill, GBP/CHF surges

                    By
                    ActionForex
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                    Sterling jumps sharply after UK House of Lords voted against the controversial part of a bill that perceived as breaching Brexit Withdrawal Agreement. The Lords voted 433-165 to pass an amendment to the internal market bill removing measures that see to disapply some of the Northern Ireland protocol. 44 tory rebels were among those voted for the amendment.

                    Prime Minister Boris Johnson’s spokesperson insisted that the clauses ” clauses represent a legal safety net to protect the integrity of the UK’s internal market and the huge gains of the peace process.” The government twill retable these clauses when the bill returns to the House of Commons, which backed the bill by 340 to 256 before.

                    GBP/CHF took out 1.1968 resistance yesterday on the coronavirus vaccine news. The rally accelerates further today and it’s set to take on 1.2222/59 key resistance. Break will carry much bullish implications and resume whole rebound from 1.1102.

                    German ZEW dropped to 39 in Nov, worries over recession

                      By
                      ActionForex
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                      German ZEW Economic Sentiment dropped to 39.0 in November, down from 56.1, slightly below expectation of 40.0. Current Situation index dropped to -64.3, down form -59.5, slightly above expectation of -65.0. Eurozone ZEW Economic Sentiment dropped to 32.8, down from 52.4, missed expectation of 43.3. Current Situation indicator rose slightly by 0.2 pts to -76.4.

                      ZEW President Achim Wambach: “Financial experts are concerned about the economic impact of the second wave of COVID-19 and what this will entail. The ZEW Indicator of Economic Sentiment has therefore once again significantly decreased in November, indicating a slowdown of economic recovery in Germany. There is also the additional worry that the German economy could head back into recession. According to the assertions made by the experts, neither the Brexit negotiations nor the outcome of the US presidential election currently are having an impact on the economic expectations for Germany.”

                      Full release here.

                      UK claimant count dropped -29.8k in Oct, unemployment rate rose to 4.8% in Sep

                        By
                        ActionForex
                        -

                        UK claimant count dropped -29.8k in October, much better than expectation of 78.8k rise. That’s a monthly decrease of -1.1% to 2.6million. However, the level was still 112.4% above March’s number before the pandemic hit the job market.

                        In the three months to September, unemployment rose 0.3% to 4.8%, matched expectations. Average earnings excluding bonus rose 1.9% 3moy, above expectation of 1.5%. Average earnings including bonus rose 1.3% 3moy, also above expectation of 1.0%.

                        Full release here.

                        Australia NAB business confidence jumped to 5, but remains fragile

                          By
                          ActionForex
                          -

                          Australia NAB Business Confidence jumped and turned positive to 5 in October, up from September’s -4. It’s also the highest reading since mid-2019. Business confidence recorded just slight improvement from 0 to 1. Looking at some details, trading conditions rose from 4 to 8. Profitability rose from 1 to 4. But employment remained negative, ticked higher from -6 to -5.

                          NAB said: “The survey continues to show that the economy has rebounded from the sharp fall in activity in H1 2020 and will likely continue to recover as the economy reopens. However, it will likely take some time for activity to fully recover, with capacity utilisation restored and the pipeline line of work replenished. The improvement in confidence is encouraging but remains fragile, and it will likely remain that way until a vaccine is available. In the interim, confidence will be an important factor for how quickly businesses expand employment and capex as demand normalises.”

                          Full release here.

                          Japan mulls new stimulus package that attracts private investment

                            By
                            ActionForex
                            -

                            Japanese Economy Minister Yasutoshi Nishimura said the cabinet is instructed by Prime Minister Yoshihide Suga to compile a new stimulus package as soon as possible. In particular, Nishimura said, “we’ll want to consider government spending that will attract private investment.” Also, the measures will focus on shifting to a “green society”. For now, the size of the new package hasn’t been decided yet.

                            Finance Minister Taro Aso said the pace of recovery in private demand was fast, as seen in the automotive sector.

                            Fed Kaplan: Coronavirus trends are in the wrong direction

                              By
                              ActionForex
                              -

                              Dallas Fed President Robert Kaplan warned that the “trends are in the wrong direction” regarding coronavirus trends. He’s still expecting the economy to be around -2.5% smaller by year end, comparing to last year. Growth is expected to be around 3.5% next year. However, rising coronavirus spread could drag down growth this year and early next year.

                              Separately, Cleveland Fed President Loretta Mester said Fed Chair Jerome Powell will discuss with the Treasury to decide whether to extend the emergency lending programs beyond the end of the year. But in her view, “but in my view, if it were me, I would extend all of them,” Mester said. “The fact that they exist provides confidence to the markets.”

                              Dollar strikes back as 10-yr yield breaks key resistance, Gold eyes key support

                                By
                                ActionForex
                                -

                                Dollar is trying to make a come back with strong rally in US treasury yield, as also confirmed by the steep fall in gold. 10 year yield is trading up 0.145 at 0.965 at the time of writing. Technically, the strong break of near term channel resistance is a clear sign of upside acceleration. More importantly, 0.957 key resistance is violated too. Focus will now be on two things. Firstly, could TNX sustain above 0.957? Secondly could TNX breaks through 1% handle with conviction? If both happens, chance for a Dollar come back would increase.

                                As for gold, the rejection from 1973.58 resistance retains near term bearishness. Focus is indeed back on 1848.39 support in Gold. Firm break there will resume the whole decline from 2075.18. In the bigger picture. Firm break of 1848.39 would raise that chance that fall from 2075.18 is a medium term correction, correcting the whole up trend from 1160.17. In that case, we might see gold falling further to 55 week EMA (now at 1737.56). We’ll see how gold, yield and Dollar interacts ahead.

                                DOW future up 1500 pts as coronavirus vaccine now 90% effective, AUD/JPY soars

                                  By
                                  ActionForex
                                  -

                                  Sentiments are given a massive boost after Pfizer and BioNTech said today that their COVID-19 vaccine is now over 90% effective. The companies have began manufacturing the vaccine already, before knowing whether it would be effect, to save time to help fighting the pandemic that has plagued the world since February. They expect to produce up to 50 million doses to protect 25 million people this year. 1.3 billion doses of the vaccine are expected in 2021.

                                  At the time of writing, DOW future is up nearly 1500 pts. 10-year yield is up 0.0982 at 0.913. FTSE is up 4.81%. DAX is up 5.49%. CAC is up 6.62%. Yen’s selling finally takes off, with AUD/JPY breaking a key near term resistance at 76.52, which indicates completion of the correction from 78.46. Retest of this high should be seen next.

                                  Eurozone Sentix dropped to -10, coronavirus containment has negative impacts on recovery

                                    By
                                    ActionForex
                                    -

                                    Eurozone Sentix Investor Confidence dropped to -10.0 in November, down from -8.3, but beat expectation of -14.0. Current Situation Index, ticked down from -32.0 to -32.3. But Expectations Index dropped form 18.8 to 15.3, hitting the lowest since May.

                                    Sentix said, the coronavirus containment measures taken by European governments are “not only a human burden for citizens”, but also have a “negative impact on the economic recovery process”. The so-called “lockdown light” has so far had little effect on investors’ assessment of the situation. The decline in expectation could be worst if not for better international situation. Also, ECB’s further easing may also had a positive effect on inventors.

                                    Full release here.

                                    Bank of France estimate -4% GDP loss in Oct, -12% in Oct on pandemic restrictions

                                      By
                                      ActionForex
                                      -

                                      Bank of France said the outlook for November is “on the whole oriented clearly downwards”, but in a more differentiated and limited way than during the first round of coronavirus restrictions earlier this year.

                                      The loss of GDP in October, comparing to normal pre-pandemic level is estimated at around -4%, just slight deterioration from September’s -3.5%. For November, GDP loss is estimated to be around -12%. The figures were much better than the -31% loss in GDP recorded in April.

                                      Full release here.

                                      Reuters Tankan manufacturing rose to -13, still well below pre-pandemic level

                                        By
                                        ActionForex
                                        -

                                        The Reuters Tankan sentiment index for Japanese manufacturers improved to -13 in November, up from October’s -16. That’ marked improvement over the cyclic low of -46 registered back in June. However, the index remained negative for the 16th straight months since August 2019. It’s also staying well below February’s pre-pandemic level at -5.

                                        Non-manufacturing index was up slightly to -13, from October’s -16. Improvement over May’s low of -36 is less drastic. It’s, nonetheless, still the 9th straight month of negative reading since March.

                                        Overall, the data suggested that the Japan economy is still struggling to shake off the drag from the pandemic crisis.

                                        BoJ members concerned with prolonged fight against coronavirus

                                          By
                                          ActionForex
                                          -

                                          In the Summary of Opinions at BoJ’s October 28/29 monetary policy meeting, it’s noted that “the fight against COVID-19 may be prolonged”. The central bank “should avoid brining a premature end to its current monetary policy responses”. BoJ should “exercise utmost vigilance against the possibility of a sudden change in financial markets and make policy responses flexibly when necessary”

                                          Additionally, one member warned that “if economic recovery is delayed, credit risk might materialize, leading to a risk on the financial system side.” It’s “top priority” to ensure corporate financing and sustain employment”. Also, BoJ should “further look for ways to enhance the sustainability” of ETFs and J-REITs purchases.

                                          “If COVID-19 spreads again and economic activity is pushed down, the CPI could stay in negative territory for a protracted period and deflation might take hold.”

                                          Full summary of opinions here.

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