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UK unemployment rate rose to 4.5% in Aug, claimant counts added 2.7m in Sep

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    ActionForex
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    UK unemployment rose to 4.5% in the three months to August, up from 4.3%, above expectation of 4.3% too. That;s also 0.6% higher than a year ago. Though, total actually weekly hours worked rebounded with a record increase of 20.0m over the quarter, or 2.3%, to 891m hours. Average weekly hours worked rose 0.7 hours to 27.3 hours. Average earnings including bonus rose 0.0% 3m/y in August. Average earnings excluding bonus rose 0.8% 3omy.

    Claimant counts rose 2.7m in September represents a monthly increase of 1.0%. That’s 120.3% higher than the figure in March.

    Full release here.

    China’s imports and exports surged in Sep, trade surplus shrank

      By
      ActionForex
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      In September, in USD terms, China’s total trade rose 11.4% yoy to USD 442.5B. exports rose 9.9% yoy to USD 239.8B. Imports rose 13.2% yoy to USD 202.8B Trade surplus came in at USD 37.0B, down from August’s USD 58.9B and missed expectation of USD 59.3B.

      Year-to-date, total trade dropped -1.8% yoy to USD 3298B. Imports dropped -0.8% yoy to USD 1811B. Exports dropped -3.1% yoy to USD 1485B. Trade surplus was at USD 326B.

      With the EU, year-to-date, total trade rose 0.4% yoy to USD 461.2B. Exports rose 3.1% yoy to USD 279.5B. Imports dropped -3.6% yoy to USD 181.7B. Trade surplus was at USD 97.9B

      With the US, year-to-date, total trade dropped -0.6% to USD 401.5B. Exports dropped -0.8% yoy to USD 310.0B. Imports rose 0.2% yoy to USD 91.4B. Trade surplus was at USD USD 218.6B.

      UK BRC retail sales reported strongest growth since Dec 09

        By
        ActionForex
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        UK BRC Retail Sales Monitor rose 6.1% yoy in September. That’s the strongest like-for-like retail sales growth since December 2009.

        Paul Martin, Partner, UK Head of Retail, KPMG: “The resilience of British retailers has been nothing shy of remarkable in recent months, with 6.1% like-for-like growth in September serving to reinforce that. That said, this month’s uptick is against the woeful performance recorded in September 2019 and so caution remains vital. Last year, the prospect of a no-deal Brexit loomed over purchasing decisions dampening demand, but now that same prospect is accompanied by the recent resurgence of COVID-19 numbers. Combined, these factors could have a significant impact on retail growth over the next months.

        Full release here.

        BoE Bailey: We haven’t addressed the question of using negative rates

          By
          ActionForex
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          BoE Governor Andrew Bailey said in a webinar yesterday that the central isn’t ready for implementation of negative interest rate yet. “Given the shock we’ve had, there are good reasons to say we shouldn’t rule them out and therefore they’re in the toolbox,” he said. “We haven’t addressed the question of should we use them.”

          Earlier, Governor Sam Woods has sent a letter banks asking for their readiness on negative interest. “We are requesting specific information about your firm’s current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration – and the steps that you would need to take to prepare for the implementation of these,” Woods said in a letter. “We are also seeking to understand whether there may be potential for short-term solutions or workarounds, as well as permanent systems changes.”

          BoE Woods asking banks’ readiness for negative rates

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            ActionForex
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            BoE Deputy Governor Sam Woods sent as letter to banks asking for their readiness on negative interest, as it could be an option to take based on current situation.

            “We are requesting specific information about your firm’s current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration – and the steps that you would need to take to prepare for the implementation of these,” Woods said in a letter.

            “We are also seeking to understand whether there may be potential for short-term solutions or workarounds, as well as permanent systems changes,” he said.

            BoJ Kuroda: We are flexible, innovative when considering measures to take

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              ActionForex
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              BoJ Governor Haruhiko Kuroda reiterated that policymakers will “closely monitor the impact of COVID-19 and not hesitate to take additional easing measures as necessary”. “The BOJ hasn’t run out of policy tools. We have a lot of policy tools to counter,” he added. “We are flexible, innovative when considering measures to take.”

              Regarding fiscal policy, Kuroda said, “I don’t think we need a so-called negative income tax or basic income system because we already have a fairly well-established, well-developed, medical insurance and pension system.”

              Swiss government sees smaller GDP contraction this year, further upward pressure on Franc remains high

                By
                ActionForex
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                Swiss Government’s Export Group said prospects for 2020 are “less negative than feared in the middle of the year”. But “momentum is likely to weaken as time goes on”. The group expects GDP to fall by -3.8% this year. That’s much better than June forecast of -6.2%. That’s the biggest GDP contraction since 1975. Unemployment is to average 3.2% over the year as a whole, versus June forecasts of 3.8%.

                For 2021, the Export Group expects GDP to grow by 3.8%, revised down from June’s 4.9%. Economic output would return to pre-crisis level “only towards the end of 2021”, assuming no further widespread lockdown in “Switzerland or in key trading partner countries”. Any improvement in the labor market is “expected to be slow at best”. Unemployment rise forecast to average 3.4% in 2021, revised down from June’s 4.1%.

                SECO also said most significant economic crisis are still linked to the coronavirus pandemic. International trade conflicts poses further risks to global economy, as well as hard Brexit. “The risk of upheaval on the financial markets and further upward pressure on the Swiss Franc also remains high”.

                Full release here.

                Japan’s corporate goods price deflation worsens

                  By
                  ActionForex
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                  Japan’s corporate goods price index dropped further to -0.8% yoy in September, down from -0.6% yoy, missed expectation of -0.5% yoy. Wholesales prices also dropped -0.1% mom, indicating risk of upstream deflation. “With the global economy still reeling from the pandemic’s pain, the pace of its recovery remains modest. That will weigh on Japan’s wholesale inflation,” a BOJ official told a briefing.

                  Also from Japan, bank lending rose 6.4% yoy in September, below expectation of 7.5% yoy. Machinery orders rose 0.2% mom in August, well above expectation of -1.0% mom decline.

                  ECB Visco: Monetary policy must remain expansive for a long time

                    By
                    ActionForex
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                    ECB Governor Council member Ignazio Visco told Il Corriere della Sera newspaper, “price changes tend to be very low, if not negative, and a gap has been created with our goal of price stability, with effects that can be dangerous”. Because of this, monetary policy “monetary policy must be expansive and remain so for a long time”.

                    Currently, ECB is adopting a price target of “below of close to 2%”. Visco said it’s “vague and difficult to understand.” He’s in favor of a change to a medium term symmetrical 2% target.

                    Visco, also the governor of the Bank of Italy, expects the Italian economy to recovery with around 5% growth next year. But he warned of a prolonged decline in demand and policymakers must “do everything to reduce uncertainty.

                    Separately, Italian Health Minister Roberto Speranza said on Sunday that the country is preparing for fresh restrictions as new coronavirus cases surged again. Though, he added, “now we need a change of pace, and to intervene with measures, not comparable to those adopted in the past, which could allow us to put the contagion under control and avoid tougher measures later on.”

                    ECB Lane: It’s not a satisfactory inflation outlook

                      By
                      ActionForex
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                      ECB Chief Economist Philip Lane said in a WSJ interview that inflation outlook not satisfactory and the central bank would decide on the next move on a “meeting by meeting” basis. Even if inflation does climb to 1.3% in 2022 as in ECB’s projections, it would stay well below the 2% target. There ares speculations that ECB could expand the PEPP program by year end.

                      “The current inflation level remains far away from our goal,” Lane said . “We don’t think that is a satisfactory inflation outlook.” “I wouldn’t focus on any one meeting… It’s not the case that we only look at the formal projection rounds.”

                      Lane also noted that the next phase of the economy is “going to be tougher”. “The big question, and this is why there is so much uncertainty, is: how quickly can the current dynamic, with rising cases, be stabilized.””Some of that uncertainty will be resolved this autumn,” he added. “We will know the fiscal plans, we will know more about the pandemic.”

                      NIESR expects UK GDP growth to stall in Sep, slow to 1.3% in Q4

                        By
                        ActionForex
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                        NIESR expects UK GDP growth to “stop” in September, bringing total Q3 growth to 15%. For Q4, with the background of a likely widening of lockdown restrictions, a winding down of government support schemes, and return of extensive Brexit related uncertainty, pace of recovery will be even slower, forecast to be at just 1.3%.

                        “Today’s ONS estimates suggest that GDP grew by 8 per cent in the three months to August. Although the latest estimates also signal a fourth consecutive monthly increase, with growth of 2.1 per cent in August itself, output is still about 9 per cent below the levels seen in February. These numbers would suggest that the UK could grow by about 15 per cent in the third quarter of 2020. However, there is further cause for concern ahead with the likely re-imposition of lockdown measures, the winding down of government support measures, and Brexit uncertainty. We expect the economy at the end of this year to be some 8.5 per cent below its level at the end of 2019.” Dr Kemar Whyte Senior Economist – Macroeconomic Modelling and Forecasting.

                        Full release here.

                        Canada employment grew 378k, unemployment rate dropped to 9%

                          By
                          ActionForex
                          -

                          Canada employment grew 378k in September, well above expectation of 230k. The majority came from full-time jobs which grew 334k. Services producing jobs grew 2.1% while good-producing jobs rose 2.0%.

                          Unemployment rate dropped for the fourth straight month to 9.0%, also better than expectation of 10.1%. 1.8m people Canadians were unemployed, down -214k from August.

                          Full release here.

                          UK GDP grew 2.1% mom in August, still -9.2% below pre-pandemic level

                            By
                            ActionForex
                            -

                            UK GDP grew only 2.1% mom in August, well below expectation of 5.7% mom. While that was the fourth consecutive month of increase, GDP remains -9.2% below pre-pandemic level in February. Looking at some details, services grew 2.4% mom (-9.6% below Feb. level), production grew 0.3% mom (-6.0% below Feb level), manufacturing grew 0.7% mom (-8.5% Feb level), construction rose 3.0% mom (-10.8% below Feb level).

                            Rolling three months growth in GDP from June to August was at 8.0% 3mo3m. Services rose 7.1% 3mo3m. Production rose 9.3% 3mo3m. Manufacturing rose 11.3% 3mo3m. Construction rose 18.5% 3mo3m.

                            Also from UK, trade deficit widened to GBP -9.0B in August, slightly better than expectation of GBP -9.1B.

                            China Caixin PMI composite dropped to 54.5, economy remained in recovery phase

                              By
                              ActionForex
                              -

                              China Caixin PMI Services rose to 54.8 in September, up fro August’s 54.0, above expectation of 54.5. PMI Composite dropped to 54.5, down from 55.1.

                              Wang Zhe, Senior Economist at Caixin Insight Group said: “Overall, the economy remained in a post-epidemic recovery phase and improved at a faster pace. Supply and demand both expanded in the manufacturing and services sectors…. In the near term, there will still be uncertainties from Covid-19 overseas and the U.S. election, and the development of “dual circulation” in the domestic and international markets will continue to face challenges.”

                              Full release here.

                              Fed Kaplan skeptical about benefits of more QE

                                By
                                ActionForex
                                -

                                Dallas Fed President Robert Kaplan said expected the economy to shrink about -2.5% this year, which is among the most bullish forecasts by Fed’s policymakers. Though, he noted the recession has hit some sectors and some groups of people worse than others. “It will take more than just a vaccine to revive depressed industries”.

                                The “number one economic policy, more than fiscal or monetary policy, is mask-wearing,” he said. “If there is no fiscal stimulus, mask-wearing, following health protocols will be even more important.”

                                Also, he’s “skeptical about the benefits of doing more” QE. “The bond-buying needs to curtail, the Fed balance sheet growth needs to curtail” when the pandemic crisis passes. Also, it’s not “healthy” for the markets to be “addicted, or too reliant” on Fed.

                                Fed Rosengren: Fiscal policy is the right tool for this time

                                  By
                                  ActionForex
                                  -

                                  Boston Fed President Eric Rosengren said yesterday that “fiscal policy is the right tool for this time”. It’s “tragic that it has not been deployed already”. He also noted that his economic outlook was much weaker than other Fed policymakers because additional fiscal stimulus was not counted in.

                                  “Most of my colleagues had an assumption that there was going to be additional fiscal stimulus. I had a somewhat different assumption,” he said. “I assumed no fiscal stimulus until the beginning of next year. As a result my forecast was much weaker than many of my colleagues.”

                                  Rosengren also said the recovery from the pandemic was made more difficult due to the ” slow build-up of risk in the low-interest-rate environment that preceded the current recession”. He noted that commercial real estate firms have “gradually increased risk by taking on more leverage, which magnifies returns with good outcomes – but also magnifies losses when bad outcomes occur.

                                  Fed George: New statement is a message of patience

                                    By
                                    ActionForex
                                    -

                                    Kansas City Fed President Esther George said in a speech that the revised FOMC statement is interpreted as a “tolerance” for higher inflation, “less as a promise to engineer” it. Also, there is “little benefit” in getting too tied up in a “precise mathematical formulation” of the “average”.

                                    She also viewed the statement as a “message of patience”. That is, “we are signaling that the committee is unlikely to preemptively tighten policy at the prospect that inflation is approaching 2 percent, but rather a willingness to wait until the data confirms its arrival”.

                                    Nevertheless, “given an unsettled outlook for inflation, it is not yet clear how much patience will be required,” she added. ” The pandemic has affected prices in a variety of ways, and it will be difficult to assess the underlying pace of inflation until the dust settles. ”

                                    George’s full speech here.

                                    US initial jobless claims dropped to 840k, continuing claims dropped to 11m

                                      By
                                      ActionForex
                                      -

                                      US initial jobless claims dropped -9k to 840k in the week ending October 3, above expectation of 820k. Four-week moving average of initial claims dropped -13.2k to 857k. Continuing claims dropped -1003k to 10976k in the week ending September 26. Four-week moving average of continuing claims dropped -642k to 12112k.

                                      Full release here.

                                      ECB minutes: Further appreciation of Euro constitutes a risk to both growth and inflation

                                        By
                                        ActionForex
                                        -

                                        In the account of September 9-10 monetary policy meeting, ECB attributed the recent appreciation in Euro exchange to two main drivers. The first and most important one was “substantial improvement in global risk sentiment” and “reversal of previous safe-have flows” into the US. The second was “likely related to monetary policies implemented in the United States and the euro area”. Looking ahead “market positioning remained tilted towards further euro appreciation”.

                                        Members considered that a further appreciation of Euro “constituted a risk to both growth and inflation”. A “significant impact of the exchange rate appreciation on euro area inflation had been included in the September 2020 ECB staff projections.” Nevertheless, an argument was made that the ultimate impact of a “one-off adjustment” of the exchange rate would be seen in the “level of prices” rather than in “rate of inflation”. The economic impacts were also “difficult to reliably disentangle”.

                                        Full accounts here.

                                        ECB Schnabel: Markets vulnerable to repricing after compression of risk premia

                                          By
                                          ActionForex
                                          -

                                          ECB Executive Board member Isabel Schnabel said the central bank is watching out for signs of credit crunch. She noted that markets are “quite resilient so far despite rising in virus infections”. But they’re “vulnerable to repricing after compression of risk premia”. “We are monitoring this very carefully, we’re looking at whether this translates into tighter credit standards and lower lending, which could also impair (ECB) policy transmission.”

                                          Separately, Vice President Luis de Guindos said “Inflation expectations are very subdued as a result of the pandemic and some specific factors and we have to act with the tools available to us.”

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