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Dollar risks medium term reversal on much more dovish than expected Fed

    By
    ActionForex
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    Risks of medium term bearish reversal in Dollar jumps after the much more dovish than expected Fed projections. Break of 1.1419 resistance is taken as the first sign of medium term bottoming at 1.1176. That comes after hitting 61.8% retracement of 1.0339 to 1.2555 at 1.1186, on bullish convergence condition in daily MACD. Sustained trading above 1.1419 will bring further rise to 1.1569 to key resitance to confirm medium term bottoming. Though, it’s still too early to confirm trend reversal as we’ll have to look at the eventual strength and structure of the rise from 1.1176 to make a judgement.

    Australia AiG services rose to 56.2, rising sales, employment and new orders

      By
      ActionForex
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      Australia AiG Performance of Services Index rose 6.6 pts to 56.2 in January, hitting the highest level since June last year. Looking at some details, sales rose 5.3 to 58.9. Employment rose 0.5 to 56.7. New orders rose 10.5 to 57.9. Supplier deliveries rose 11.0 to 51.4. Input prices rose 0.8 to 66.1. Selling prices rose 4.0 to 62.2. Average wages dropped -2.9 to 56.9.

      Innes Willox, Chief Executive of Ai Group, said: “The performance of Australia’s services sector rose over the December-January period with sales, employment and new orders all growing compared with November…. Businesses reported a slight easing of input price and wages pressures compared with November while selling prices rose indicating a belated and partial recovery of earlier cost rises. The rise in employment, while encouraging, came alongside numerous reports of the unavailability of staff and appears likely to reflect businesses hiring staff to cover for the workforce impacts of the Omicron wave.”

      Full release here.

      Japan’s CPI core rises to 2.9%, above BoJ target for 19th mth, services prices surge

        By
        ActionForex
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        Japan’s core CPI, which excludes fresh food prices, rose slightly from 2.8% yoy to 2.9% yoy in October, falling just below expected 3.0% yoy. Notably, this core CPI has stayed above BoJ’s target of 2% for the 19th consecutive month, indicating persistent inflationary pressures.

        Headline CPI, which includes all items, accelerated from 3.0% yoy to 3.3% yoy. However, core-core CPI, which excludes both food and energy, showed a slight deceleration, dropping from 4.2% yoy to 4.0% yoy. Despite this decrease, core-core CPI has remained above 4.0% for seven consecutive months, highlighting sustained inflation in areas beyond just the volatile items.

        Breaking down the details, energy prices saw a significant decrease of -8.5% yoy. In contrast, food prices continued to climb, recording a 7.6% yoy increase. Durable goods also experienced a price rise of 3.2% yoy. Notably, services prices surged by 2.1% yoy, marking the fastest gain since 1993. This sharp increase in services prices underscores the broadening of inflationary pressures within the Japanese economy.

        Eurozone CPI slowed to 5.5% yoy in Jun, CPI core rose to 5.4% yoy

          By
          ActionForex
          -

          Eurozone CPI slowed from 6.1% yoy to 5.5% yoy in June, below expectation of 5.6% yoy. CPI core rose from 5.3% yoy to 5.4% yoy, matched expectations.

          Looking at the main components, food, alcohol & tobacco is expected to have the highest annual rate(11.7%, compared with 12.5% in May), followed by non-energy industrial goods (5.5%, compared with 5.8% in May), services (5.4%, compared with 5.0% in May) and energy (-5.6%, compared with -1.8% in May).

          Full Eurozone CPI release here.

          US initial jobless claims falls to 211k, vs exp 223k

            By
            ActionForex
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            US initial jobless claims fell -9k to 211k in the week ending December 28, below expectation of 223k. Four-week moving average of initial claims fell -3.5k to 223k.

            Continuing claims fell -52k to 1844k in the week ending December 21. Four-week moving average of continuing claims fell -7k to 1871k.

            Full US jobless claims release here.

            ECB forecasters see no enduring disinflation from tariffs

              By
              ActionForex
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              The ECB’s Q3 Survey of Professional Forecasters showed that headline inflation expectations have been revised down across the medium term. HICP inflation is now projected at 2.0% for 2025 (down from 2.2%) and 1.8% for 2026 (down from 2.0%), while 2027 remains unchanged at 2.0%. Core HICP inflation for 2025 is unchanged at 2.3%, but was revised down from 2.1% to 2.0% for both 2026 and 2027.

              Respondents cited tariffs as having a small downward effect on inflation in the short term, subtracting roughly -0.06 percentage points from the HICP in both 2025 and 2026, but anticipated no lasting impact beyond that.

              On growth, forecasters revised up their 2025 GDP forecast by 0.2 percentage points, trimmed 2026 by 0.1 points, and left 2027 unchanged at 1.4%.

              Full ECB SPF release here.

              BoJ Ueda meets PM Kishida: Exchange-rate volatility not discussed

                By
                ActionForex
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                In a meeting today, BoJ Governor Kazuo Ueda and Prime Minister Fumio Kishida discussed a range of financial topics. However, in a post-meeting address to the media, Ueda clarified that the recent volatility of exchange rates was not a focal point of their conversation. He stated, “There wasn’t anything in particular discussed today,” in response to inquiries regarding the topic.

                The backdrop to this meeting was Dollar’s significant surge over 145 Yen mark. To provide some historical context, when the currency reached this level in September 2022, it prompted Japan’s inaugural Yen-buying intervention operation in nearly a quarter of a century, since 1998.

                During their dialogue, Ueda shed light on BoJ’s recent decision to ease its hold on long-term interest rates, lifting the cap on 10-year JGB yield from 0.50% to 1.00%. Prime Minister Kishida expressed understanding and agreement with the central bank’s decision, Ueda remarked.

                Highlighting the periodic nature of such high-level meetings, Ueda noted that the recent gathering was in line with the tradition maintained by his predecessor, Haruhiko Kuroda. Such consultations, held once every few months, aim to facilitate discussions on prevailing economic and financial landscapes.

                 

                Japan PMIs: Two-speed recovery to undermine a sustainable return to pre-coronavirus level

                  By
                  ActionForex
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                  Japan PMI Manufacturing dropped to 37.8 in June, down from May’s 38.4. The data indicates productions fell at the more severe pace since March 2009. PMI Services, on the other hand, recovered to 42.3, up from 26.5. PMI Composite rose to 37.9, up from 27.8, staying well in contraction region.

                  Joe Hayes, Economists at IHS Markit, said: “While the services sector downturn eased noticeably, goods production fell at at accelerated pace in June. The rate of decline in manufacturing order books remained severe, hinting that the shape of the recoveries in the services and manufacturing sector could be very different. A two-speed recovery would undermine a sustainable return to -pre-COID-19 levels of economic activity”.

                  Full release here.

                  Fed Mester: Interest rate at lower end of neutral range

                    By
                    ActionForex
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                    Cleveland Fed President Loretta Mester said more rate hikes are still needed if the economy develops as she expected. She tweeted that “If economy performs as I expect, fed funds rate may need to move a bit higher. But if downside risks come to pass and economy is weaker than expected, I will adjust my outlook and policy views.”

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                    However, in a speech “Perspectives on the Economic Outlook and Monetary Policy in the Coming Year”, Mester said interest rate is already “at the lower end” of the longer-run neutral rate. It’s at a level that neither stimulates nor restricts the economy, and recent rate hikes are still working themselves through the economy. In the coming meetings, Fed will also finalize the plan for ending the balance-sheet runoff and completing balance-sheet normalization.

                    Mester also noted that the economy is a “very good spot”. While growth is slowing from an above-trend pace, labor markets are strong. Inflation is near 2% with no signs of appreciably rising. So, in her view “monetary policy does not appear to be far behind or far ahead of the curve”. And that gives Fed the opportunity to ” gather information on the economy and assess our forecast and the risks, before making any further adjustments in the policy rate.”

                    Her full speech here.

                    Eurozone economic sentiment dropped to 105, employment expectation dropped to 112.4

                      By
                      ActionForex
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                      Eurozone Economic Sentiment Indicator dropped from 106.7 to 105.0 in April. Industry confidence dropped from 9.0 to 7.9. Services confidence ticked down from 13.6 to 13.5. Consumer confidence dropped from -21.6 to -22.0. Retail trade confidence dropped from -2.4 to -4.3. Construction confidence rose from 8.9 to 7.1. Employment Expectation Indicator dropped from 113.5 to 112.4.

                      EU Economic Sentiment dropped from 106.6 to 104.9. Amongst the largest EU economies, the ESI fell markedly in Spain (-4.5) and to a lesser extent in France (-1.4). Confidence remained broadly stable in Germany (-0.1), the Netherlands (-0.1) and Poland (+0.3), while it improved in Italy (+1.3). Employment Expectation Indicator dropped from 112.7 to 111.7.

                      Full release here.

                      NFP to conclude eventful week, 10-year yield in focus

                        By
                        ActionForex
                        -

                        Today’s US Non-Farm Payroll report is poised to be the focal point, concluding a week brimming with significant market events. Expectations are set for moderation in headline job growth to 178k in January, from December’s robust 216k. Additionally, unemployment rate is anticipated to inch higher to 3.8% from 3.7%, while the pace of average hourly earnings growth is projected to decelerate to 0.3% mom.

                        Preliminary indicators such as ADP private employment figure, which registered growth of only 107k, and a slight dip in ISM manufacturing employment component to 47.1, suggest potential softness in the headline job growth. However, wage growth aspect remains a wildcard, capable of influencing market dynamics significantly.

                        A key post-NFP development to watch is in 10-year yield, which has witnessed a marked decline throughout the week. The strong downside momentum now amplifies the likelihood that the overarching downward trend from 4.997 peak is resuming.

                        A weekly close below 3.785 support would corroborate the bearish case, and steer 10-year yield to 61.8% projection of 4.997 to 3.785 from 4.198 at 3.448 this quarter, before it could find a bottom. That would also keep Dollar pressured, in particular against Yen.

                        Japan Abe expects US-China trade resolution, France to insist on climate change agreement at G20

                          By
                          ActionForex
                          -

                          Japan Prime Minister Shinzo Abe, host of this week’s G20 summit in Osaka, urged the group to deliver a strong message on issues including promotion of free trade, innovation-driven global growth and rule-making for the digital economy. He also expressed optimism that US and China will resolve their conflicts on trade. Abe said in a news conference, “I expect that the United States and China will resolve their trade friction in a constructive manner through dialogue such as their bilateral meeting at G20”.

                          Separately, it’s reported that French President Emmanuel Macron would insist on mentioning Paris climate change accord in the communiques. An unnamed French official was quoted by Reuters, “as for myself, I have one red line. If we don’t talk about the Paris Agreement and if we don’t get an agreement on it amongst the 20 members in the room, we are no longer capable of defending our climate change goals, and France will not be part of this, it’s as simple as that.”

                          Swiss KOF dropped to 96.5, gloomy economic prospects at beginning of the year

                            By
                            ActionForex
                            -

                            Swiss KOF Economic Barometer dropped to 96.5 in January, down from 104.1, missed expectation of 101.5, and back below long-term average of 100. KOF said, “after reaching an interim pandemic high in September, COVID-​19 is now weighing more heavily on the economy again. The pandemic is causing gloomy economic prospects at the beginning of the year.”

                            “Responsible for the decline are in particular the indicator bundles for accommodation and food service activities as well as other services,” KOF added. “But the outlook for manufacturing, financial and insurance services and private consumer demand is also less favourable than before. The outlook for construction is stable and foreign demand could provide a stronger impulse.”

                            Full release here.

                            SNB helds negative rate, pledge to intervene when needed, revised down inflation forecasts

                              By
                              ActionForex
                              -

                              SNB kept sight deposit rate unchanged at -0.75% as widely expected. Three month Libor target range is held at -1.25% to -0.25% correspondingly. SNB also pledged to “remain active in the foreign exchange market as necessary”.

                              SNB also noted that Swiss Fran is “still highly valued, and the situation on the foreign exchange market continues to be fragile.” Negative interest rate and the willingness to intervene “remains essential”. Theses measures “keep the attractiveness of Swiss franc investments low and reduce upward pressure on the currency.

                              Near term inflation forecast was revised lower due to “drop in oil prices”. Medium term inflation forecast is also revised lower due to “more moderate growth prospects”.

                              • For 2018, inflation is forecast to be at 0.9%, unchanged
                              • For 2019, inflation is forecast to be at 0.5%, revised down from 0.8%
                              • For 2020, inflation is forecast to be at 1.0%, revised down from 1.2%

                              Slow down in Q3 is seen as temporary by SNB. And it anticipates “solid growth in the coming quarters”. For the near term, world economy will continue to expand “somewhat above potential”. But “gradual slowdown is likely in the medium term”. SNB pointed out some significant risks including “political uncertainties and protectionist tendencies” For 2018, growth is projected to be at 2.5%, slightly revised down. For 2019, growth is projected to slow to 1.5%

                              Full statement here.

                              WTI oil upside breakout, targets 55.70 first, 58.26 next

                                By
                                ActionForex
                                -

                                WTI crude oil breaks through 53.92 resistance to resume near term up trend today. Further rise should be seen to 61.8% projection of 47.24 to 53.92 from 51.58 at 55.70 first, and then 100% projection at 58.26.

                                In any case, near term outlook will now stay bullish as long as 51.58 support holds. As for the chance of taking on 65.43 medium term structural resistance, we’ll see if WTI could accelerate upwards with the current move.

                                US ISM non-manufacturing dropped to 53.7, lowest since Aug 2016

                                  By
                                  ActionForex
                                  -

                                  US ISM Non-Manufacturing Composite dropped to 53.7 in July, down from 55.1 and missed expectation of 55.5. That’s also the lowest reading since August 2016. Looking at some details:

                                  • Headline index dropped -1.4 to 53.7.
                                  • Business Activity index dropped -5.1 to 53.1.
                                  • New orders dropped -1.7 to 54.1.
                                  • Employment rose 1.2 to 56.2.
                                  • Prices dropped -2.4 to 56.5.

                                  The 13 non-manufacturing industries reporting growth in July — listed in order — are: Accommodation & Food Services; Utilities; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Transportation & Warehousing; Construction; Information; Other Services; Finance & Insurance; Public Administration; Management of Companies & Support Services; Mining; and Health Care & Social Assistance. The five industries reporting a decrease are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Wholesale Trade; and Educational Services.

                                  Full release here.

                                  China: Adding tariffs can’t resolve any problem

                                    By
                                    ActionForex
                                    -

                                    Chinese Foreign Ministry spokesman Geng Shuang said in a regular press briefing that “adding tariffs can’t resolve any problem” of trade conflicts. “Talks are by their nature a process of discussion. It’s normal for both sides to have differences. China won’t shun problems and is sincere about continuing talks,” he added.

                                    Shuang also said “We hope the U.S. side can work hard with China, to meet each other halfway, and on the basis of mutual respect and equality, resolve each other’s reasonable concerns, and strive for a mutually beneficial, win win agreement.”

                                    Vice Premier Liu He will still travel to the US on May 9-10 to resume trade negotiations despite re-escalated tariff threats. That’s a slight delay comparing to the original plan of traveling to the US on Wednesday.

                                    It’s widely reported that China reneged on the commitments it made, explicitly with the new draft agreement sent to the US over the weekend. Both US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin confirmed that. And it’s seen as the trigger for Trump to declare trade war escalation to full blown level this Friday.

                                    Mnuchin also confirmed that “the entire economic team … are completely unified and recommended to the president to move forward with tariffs if we are not able to conclude a deal by the end of the week.”

                                    Germany PMI manufacturing dived to 44.7, entrenched downturn with steepest contraction since 2012

                                      By
                                      ActionForex
                                      -

                                      In March, Germany PMI manufacturing dropped sharply to 44.7, down from 47.6 and missed expectation of 48.0. That’s also the lowest level in 79 months. PMI services dropped to 54.9, down from 55.3 but beat expectation of 54.8. PMI composite dropped to 51.5, down from 52.8, hit a 69-month low.

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

                                      “The downturn in Germany’s manufacturing sector has become more entrenched, with March’s flash data showing accelerated declines in output, new orders and exports. Uncertainty towards Brexit and US-China trade relations, a slowdown in the car industry and generally softer global demand all continue to weigh heavily on the performance of the manufacturing sector, which is now registering the steepest rate of contraction since 2012.

                                      “The domestic market remains strong, which continues to be reflected in wage pressures and robust growth across the services sector of the economy, but the question is whether it can withstand a protracted downturn in manufacturing. The first decrease in factory employment for three years is perhaps a warning sign for the health of domestic demand, with overall job creation now running at its lowest since May 2016.

                                      “The overall rate of output price inflation has shown little change in March, but this masks starkly different trends at the sector level. The combination of robust domestic demand and wage pressures has seen services charges increase at a rate exceeded only once in the series history, while a near-stagnation in manufacturing input costs is reflected in the weakest rise in factory gate prices in almost two-and-a-half years.”

                                      Full release here.

                                      BoE Pill: Risks to economic and inflation outlook becoming two-sided

                                        By
                                        ActionForex
                                        -

                                        In reply to a questionnaire by the Treasury Select Committee, BoE policymaker Huw Pill said he expected interest rates to “remain at relatively low levels for the coming years, even as the impact of the COVID-19 pandemic recede.”

                                        But he acknowledged that “balance of risks is currently shifting towards great concerns about the inflation outlook.” Also, “current strength of inflation looks set to prove more long lasting than originally anticipated.” He emphasized that “risks to the economic and inflation outlook are again clearly becoming two-sided”.

                                        On BoE’s balance sheet, Pill said, “at a time when financial markets appear to be functioning normally, a gradual and predictable reduction in the stock of asset purchases can be achieved without disrupting markets and/or creating an undesired abrupt tightening of financial and monetary conditions”.

                                        Full answers to TSC questionnaire here.

                                        Japan’s PMI services finalized at 53.7, expansion continues

                                          By
                                          ActionForex
                                          -

                                          Japan’s services sector continued its expansion in August, with PMI Services index finalized at 53.7, unchanged from July’s figure. This marks the 23rd month of growth out of the past 24. PMI Composite, which includes both services and manufacturing, rose to 52.9 from 52.5 in July, reflecting the strongest overall growth since May 2023.

                                          The services sector showed solid performance, while manufacturing output posted its most significant increase since May 2022. According to Usamah Bhatti, economist at S&P Global Market Intelligence, August saw ongoing growth in activity, new business, and employment in the service sector. However, the pace of employment growth and business optimism slowed to seven- and 19-month lows, respectively.

                                          Full Japan PMI services final release here.

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