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US initial jobless claims rose to 885k, continuing claims dropped to 5.5m

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    ActionForex.com
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    US initial jobless claims rose 23k to 885k in the week ending December 12, well above expectation of a fall to780k. Four-week moving average of initial claims rose 34.3k to 812.5k.

    Continuing claims dropped -273k to 5508k in the week ending December 5. Four-week moving average of continuing claims dropped -215.5k to 5726k.

    Also released, housing starts rose to 1.55m annualized rate in November. Building permits rose to 1.64m. Philly Fed manufacturing index dropped sharply to 11.1, down from 26.3, missed expectation of 20.0.

    BoJ stands part, interest rate to remain at present or lower levels

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      ActionForex.com
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      BoJ kept monetary policy unchanged as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.10%. BoJ will continue to purchase Japanese government bonds, without setting an upper limit, to keep 10-year JGB yield at around 0%. Also, BoJ will offer to purchase 10-year JGBs at 0.25% every business day through fixed -rate purchase operations, to cap the upside. These decisions were made by unanimous vote.

      BoJ also pledge to continue with Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control to achieve 2% price target, “as long as it is necessary for maintaining that target in a stable manner”. The bank will not hesitate to take additional easing measures if necessary”. It expects short- and long-term policy interest rates to “remain at their present or lower levels”.

      Full statement here.

      Italian yield falls as government got EU approval on budget, Euro lifted

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        ActionForex.com
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        Italian 10 year yield drops notably at open today on news that the coalition government had finally got agreement from European Commission on its 2019 budget plan, thus avoiding disciplinary actions.

        It’s now trading down -0.163 at 2.784 and is set to challenge September’s low. German 10 year yield is now up 0.0053 at 0.252. Spread is back at 253.

        EUR/CHF benefits from the development and is extending recent rebound from 1.1224.

        ECB Villeroy backs 50bps hike this month to finish first half of the game

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          ActionForex.com
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          ECB Governing Council member Francois Villeroy de Galhau said in an interview on Sunday, for this month’s meeting, “it’s desirable to bring rates to 2%, so a rise of 0.5 or 50 basis points.”

          Bringing interest rate to 2% will market the first half of the game of normalization. “In the second half of the match, rates will continue to rise but I can’t say where this will stop,” adding the the pace would be slower.

          He also noted it would be “wise to start to reduce (the balance sheet) in 2023, beginning with the APP holdings in the “first half of the year, clearly but cautiously and progressively.”

          US initial jobless claims dropped to 196k, another lowest since 1969

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            ActionForex.com
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            US initial jobless claims dropped -8k to 196k in the week ending April 6, below expectation of 210k. It’s also the lowest since October 4, 1969, which it was 193k. Four-week moving average of initial claims dropped -7k to 207k, lowest since December 6 1969.

            Continuing claims dropped -13k to 1.713M. Four-week moving average of continuing claims dropped -11k to 1.735M.

            Also from the US, headline PPI accelerated to 2.2% yoy in March, well above expectation of 1.9% yoy. Core PPI slowed to 2.4% yoy, matched expectations.

            European Commission expects economy to return to pre-crisis levels earlier

              By
              ActionForex.com
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              In the Winter 2021 Economic Forecast, European Commission downgraded 2021 growth projection of EU to 3.7% (from Autumn’s 4.1%) and Eurozone to 3.8% (from 4.2%. But it upgraded 2022 growth projection of EU to 3.9% (from 3.0%) and Eurozone to 3.8% (from 3.0%).

              Eurozone and EU economies are now expected to reach pre-crisis levels “earlier than anticipated” in Autumn, “largely because of the stronger than expected growth momentum projected in the second half of 2021 and in 2022.”. Growth is “set to resume in the spring and gather momentum in the summer as vaccination programmes progress and containment measures gradually ease.” Inflation, however, is set to remain subdued.

              Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People said: “Today’s forecast provides real hope at a time of great uncertainty for us all. The solid expected pick-up of growth in the second half of this year shows very clearly that we are turning the corner in overcoming this crisis.”

              Paolo Gentiloni, Commissioner for Economy said: “Europeans are living through challenging times. We remain in the painful grip of the pandemic, its social and economic consequences all too evident. Yet there is, at last, light at the end of the tunnel. As increasing numbers are vaccinated over the coming months, an easing of containment measures should allow for a strengthening rebound over the spring and summer.”

              Full release here.

              China MOFCOM: Consumption faces more challenges in 2019 after slowdown last year

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                ActionForex.com
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                Chinese Commerce Department’s Deputy Director of the Market Operation Wang Bin admitted that consumption growth in 2018 has slowed down. In particular, growth in products related to automobiles and housing have been weak. Additionally, there will be more challenges for consumption growth in 2019 than expected.

                Wang added that there will be measures to boost consumption in five aspects. Those include polices on urban consumptions, rural consumptions, service consumptions, product circulations and consumption environments.

                MOFCOM’s briefing here (in simplified Chinese).

                ECB de Guindos: If inflation expectations start to de-anchor, we will act

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                  ActionForex.com
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                  ECB Vice President Luis de Guindos said today that the centra bank foresees “lingering softness” n the near term, due to geopolitical factors and trade tensions. Both are weighing on exports and manufacturing in Eurozone economy.

                  He emphasized that “if we see that inflation expectations start to de-anchor, we will act.” ECB has a “wide range of instruments available”, including forward guidance, TLTRO and QE is one of them. And, “a combination of actions” could be used to restore inflation.

                  De Guindos’ comments echoed President Mario Draghi’s yesterday. Draghi said, “in the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required.”

                  US initial jobless claims dropped to 215k, better than expectation

                    By
                    ActionForex.com
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                    US initial jobless claims dropped -18k to 215k in the week ending February 25, better than expectation of 235k. Four-week moving average of initial claims dropped -5k to 230.5k.

                    Continuing claims rose 2k to 1476k in the week ending February 19. Four-week moving average of continuing claims dropped -36k to 1540k, lowest since April 4, 1970.

                    Full release here.

                    Mid-US update: Dollar rebound may not sustain as stocks strength fades

                      By
                      ActionForex.com
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                      It’s a relatively slow day in the forex markets today, in terms of both news and movements. At this point, Yen and Swiss Franc remain the weakest ones for today on stocks rebound. But at the same time, Dollar is having a rebound, has risk aversion eased and US yields strengthen too. However, as the rally in US stocks seem to be fading, it remains to be seen whether treasury yields and US Dollar could maintain the gains before daily close.

                      In the US, DOW reached as high as 25040.58 earlier today but it’s now at 24745, up only 0.23%. S&P 500 is up 0.78% and NASDAQ is now flat. 10 year yield is up 0.023 at 3.340, after hitting 3.355 earlier today.

                      In Europe:

                      • FTSE closed up 1.25% at 7026.32
                      • DAX closed up 1.20% at 11335.48
                      • CAC closed up 0.44% at 4989.35
                      • German 10 year yield rose 0.0221 to 0.38, capped well below 0.4
                      • Italian 10 year yield dropped -0.0901 to 3.34. It’s a good sign that, at least, spread with German is below 300 for now.

                      FOMC minutes: Most participants said appropriate to start tapering this year

                        By
                        ActionForex.com
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                        In the minutes of July 27-28 FOMC meeting, Fed said “all participants” assessed that progress were made towards the both the maximum-employment and price-stability goals. However, “most participants” judged that the standard of “substantial further progress” on employment “had not been met yet”. “Most participant” said the standard was met regarding price-stability, even though a few participants noted that “transitory nature” of this year’s rise in inflation.

                        “Most participant” said provided that the economy were to “evolve broadly as they anticipated”, it could be “appropriate” to start tapering “this year”. “Various participants” said the economic and financial conditions would likely warrant a reduction in purchase “in coming months”.

                        But “several others” indicated that tapering would more likely to be become appropriate “early next year”, as they saw prevailing conditions in labor market as not being close to the “substantial further progress” standard, or due to the “uncertainty” about progress on price stability.

                        Full minutes here.

                        DOW dropped 758.9, 10-yr yield broke 1% despite Fed’s rate cut

                          By
                          ActionForex.com
                          -

                          Instead of giving market confidence a boost, Fed’s surprised -50bps rate cut overnight seemed to have knocked down sentiments instead. DOW closed down -2.94%, S&P 500 dropped -2.81% or 785.91 pts, NASDAQ lost -2.99%. 10-year yield broke 1% handle to new record low of 0.908, before closing at 1.010, down -0.078. Asia markets are mixed for now, with Nikkei flat, Hong Kong HSI down -0.80%, China Shanghai SSE flat, Singapore Strait Times down -0.36%.

                          With breach of 25859.60 minor support, DOW’s recovery from 24681.01 appears to have completed at 27084.59, after rejection by 50% retracement level. But for now, we’re not expecting the steep decline from 29568.57 to resume yet. Instead, DOW will likely gyrate towards 24681.01 low and recover from there to extend the consolidation pattern. In case of another rise, upside should be limited by 61.8% retracement at 27701.52.

                          When we talked about 0.8248 as downside target in 10-year yield back in late February, it looked a bit exaggerated. But it’s now suddenly so close. For now, we’d expect strong support from this 61.8% projection of 3.248 to 1.429 from 1.949 at 8.248 to contain downside to bring recovery. But even in that case, we’re not seeing any chance of a break back above 1.429 support turned resistance soon.

                          RBA discussed four options on bond purchases

                            By
                            ActionForex.com
                            -

                            RBA reiterated in the June minutes that it will make the decision on 3-year yield target and government bond purchase program at the July meeting. It emphasize “a return to full employment as a priority for monetary policy that would assist with achieving the inflation target”.

                            It will consider whether to extend the 3-year yield target from April 2024 bond to November 2024 bond. A key considering would be the prospect of having inflation sustainably within the 2-3% target rate some time in 2024.

                            Four options regarding future bond purchases after completion of the second AUD 100B of purchases in early September were discussed. The options included ceasing the purchases, repeating the AUD 100 purchases for another 6 months, scaling back the amount or spreading over a longer period, and moving to an approach where pace of purchases is reviewed more frequently.

                            Full minutes here.

                            Into US session: Franc and Yen strong again as China readies rare earth war

                              By
                              ActionForex.com
                              -

                              Entering into US session, Swiss Franc and Yen are running as the strongest ones for today. US-China trade war is again the main theme. There are reports that China is weaponizing its dominance on rare earths. Some claimed that might risk serious disruption to US industries. We’re skeptical on the impact of such move. And, the reactions from stocks are relatively mild too, considering DOW future is just down -167pts for the moment. Nevertheless, the message is reinforced. That is, China is not going to back down and rectify its own unfair practices. And the maximum pressure way of Trump is useless. Trade war is not as easy to as it seems to some people and it’s going to drag on longer.

                              Staying in the currency markets, for now, Dollar is following as the third strongest for the day shrugging off persistent decline in treasury yields. 10-year yield is currently down -0.0368 at 2.228, and could hit 2.2 handle pretty soon. New Zealand Dollar is the weakest one for today s far, followed by Sterling. Canadian Dollar is a the third weakest as markets await BoC rate decision. Euro is mixed while markets await European Commission’s formal warning letter to Italy for its deficit.

                              Some previews on BoC:

                              In Europe, currently:

                              • FTSE is down -1.31%.
                              • DAX is down -1.34%.
                              • CAC is down -1.79%.
                              • German 10-year yield si down -0.0075 at -0.165.

                              Earlier in Asia:

                              • Nikkei dropped -1.21%.
                              • Hong Kong HSI dropped -0.57%.
                              • China Shanghai SSE rose 0.16%.
                              • Singapore Strait Times dropped -0.06%.
                              • Japan 10-year JGB yield dropped -0.0229 to -0.094.

                              BoJ Ueda: It’s probably more difficult to deal with an undershoot of inflation

                                By
                                ActionForex.com
                                -

                                In the press conference following BoJ’s decision to stand pat, Governor Kazuo Ueda said, “at present, inflation has exceeded 2% for 13 straight months but could fall below that level ahead. That’s why we are not normalizing monetary policy. But if that view changes sharply, we will have to change policy.”

                                “We expect inflation to moderate, but it’s true the pace of decline is somewhat slow,” he said. “But we’re still in the early stages of the moderation. There’s uncertainty on whether the future slowdown will be a gradual one, or a quite sharp one.”

                                “What’s important is not just our median forecast but how certain that forecast is … We won’t act just by looking at the median forecast. We’d like to look comprehensively at various data including distribution”.

                                “We have to consider what tools we have at our disposal when inflation overshoots, and when it undershoots. When we compare these, it’s probably more difficult to deal with an undershoot of inflation.”

                                China said to be open to partial trade deal excluding resolutions to core issues

                                  By
                                  ActionForex.com
                                  -

                                  According to a Bloomberg report based on unnamed source, China is open to a partial trade deal with the US. The condition is that US will refrain from imposing additional tariffs, including the coming batch on October 15 and another batch in December. In return, China would offer to increase agricultural purchases. Financial Times said the annual purchase would be raised from USD 20m to USD 30m.

                                  Yet, China is unwilling to address the core issues, including intellectual property theft, forced technology transfer, subsides to state-owned enterprises, and enforcement of the agreement. Such a position is very unlikely to be accepted by trade hawks in the US administration, probably not by President Donald Trump neither.

                                  Political tensions between US and China are heating up just ahead of the high-level trade negotiations on Thursday and Friday. US expanded the trade blacklist of Chinese companies with involvements in China’s treatment of Uyghurs in Xinjiang, targeting 20 Chinese public security bureaus and eight companies., Also, US has imposed visa restrictions on officials allegedly responsible for the abuse of Uyghurs. China is said to be considering to restrict visa for anti-China US officials too.

                                  Bundesbank: Inflation could reach order of 10% in fall

                                    By
                                    ActionForex.com
                                    -

                                    Bundesbank said in its monthly report that the Germany will be adversely affected by the unfavorable developments on the gas market in the summer quarter and beyond. Also, the likelihood of GDP falling in the coming winter half-year has therefore increased “significantly”.

                                    Inflation rate is expected to reach “new highs” in the Autumn, and could reach the “order of 10 percent”. Outlook for inflation remains extremely uncertain, primarily due to the unclear situation on the commodity markets.

                                    Full report here.

                                    US Treasurer Mnuchin working on a 150-page document for “significant”, “structural” commitments from China

                                      By
                                      ActionForex.com
                                      -

                                      US Treasury Secretary Steven Mnuchin said in a CNBC interview that the trade deal with China is “not done yet”. But he added “we have made a lot of process” and “we still have more work to do”. They’re working on a 150-page, very detailed, document for “significant”, “structural” commitments from China. Mnuchin hoped to “make progress this month”. And, “if we do, there will be a summit of the Presidents”.

                                      At the same time, the White House and cabinet are “completely united” on the positions. Mnuchin went further and said “”Whether it’s myself, or Ambassador Lighthizer, Secretary Ross, Larry Kudlow or Peter Navarro — we’re all working very closely together and we have a common vision in executing and getting a real agreement”.

                                      Separately, National Economic Council Director Larry Kudlow said the negotiations are making “fantastic” progress last week. And, “We’re making great headway on nontariff barriers and tariffs regarding various commodities such as soybeans and energy and beef. We have mechanisms with regard to enforcement, which is — I think — unparalleled.”

                                      Kudlow also hailed that “Lighthizer has worked miracles on this Chinese deal,” and “we’ve never come this far on China trade.”

                                      Germany Ifo business climate rose to 90.2, starting new year with more confidence

                                        By
                                        ActionForex.com
                                        -

                                        Germany Ifo Business Climate rose slightly from 88.6 to 90.2 in January, below expectation of 90.5. Current Assessment ticked down from 94.4 to 94.1, below expectation of 95.0. Expectations index, on the other hand, improved from 83.2 to 86.4, above expectation of 85.0.

                                        By sector, manufacturing rose from -5.7 to -0.7. Services rose from -1.2 to 0.2. Trade rose from -20.0 to -15.4. Construction also rose slightly from -21.9 to -21.6.

                                        Ifo said: “Sentiment in the German economy has brightened. The ifo Business Climate Index rose to 90.2 points in January, up from 88.6 points in December. This is due to considerably less pessimistic expectations. Companies were, however, somewhat less satisfied with their current situation. The German economy is starting the new year with more confidence.”

                                        Full release here.

                                        Navarro accuses China for zero-sum game with the rest of the world

                                          By
                                          ActionForex.com
                                          -

                                          White House trade adviser Peter Navarro warned that China is in a “zero-sum game” with the rest of the world on trade. And he emphasized that “we have to defend ourselves,” as China is “attacking our crown jewels” with technology intellectual property theft.

                                          But at the same time, he downplayed the impact of trade war with China. He said that “we got two economies that add up to around $30 trillion in annual GDP. The amount of trade we’re affecting with the tariffs is a rounding error compared to that.”

                                          And, he added that “it’s much less disruptive than these headlines would suggest, and it’s much more constructive as we see the adjustments made in terms of where investment is going to go and where we’re going to build.”

                                          So that means, Navarro admitted that Trump’s trade policy is disruptive.

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