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Former BoJ Kiuchi: Core inflation to be slightly negative for three years, but BoJ actions unlikely

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    ActionForex
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    Former BoJ policy maker Takahide Kiuchi said the central bank is unlikely to ease further due to risks of banking-sector problems. He said, “Japan will likely see more small and midsized firms go under as the pandemic’s pain deepens, which could boost credit costs for lenders through next year… The pandemic has forced the BOJ to be more mindful of the risk of banking-sector problems, which means it can’t cut interest rates easily,”

    Kiuchi expected GDP to take around give years to return to pre-pandemic levels. Also, core consumer inflation will hove in “slightly negative territory for about three years”. Nevertheless, “the BOJ has already detached its policy from its 2% inflation target, which means it won’t take action to prop up prices.”

    New Zealand imports plunged -18% yoy in Jul, NZD/USD hovers in range

      By
      ActionForex
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      New Zealand’s goods exports dropped -0.2% yoy or NZD 9.8m to NZD 4.9B in July. Goods imports dropped -18% yoy or NZD 1.0B to NZD 4.6B. Trade surplus came in at NZD 282m, down from June’s NZD 475m, slightly below expectation of NZD 285m. Imports from all major trading partners expect China were down. On the other hand, exports to China and Japan decreased, while exports to USA, EU and Australia rose.

      Full release here.

      NZD/USD continues to hover slightly above 55 day EMA, drawing support from there. But at this point, correction from 0.6715 is still extended to extend lower. Firm break of the 55 day EMA would pave the way to 0.6385 support, and possibly to 38.2% retracement of 0.5469 to 0.6715 at 0.6239.

      US consumer confidence dropped to 84.8, consumer spending to cool in months ahead

        By
        ActionForex
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        Conference Board US Consumer Confidence dropped to 84.8 in August, down from 91.7, missed expectation of 93.2. Present Situation Index dropped sharply from 95.9 to 84.2. Expectations INdex also dropped from 88.9 to 85.2.

        “Consumer Confidence declined in August for the second consecutive month,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index decreased sharply, with consumers stating that both business and employment conditions had deteriorated over the past month. Consumers’ optimism about the short-term outlook, and their financial prospects, also declined and continues on a downward path. Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead.”

        Full release here.

        UK retail employment balance dropped to lowest since 2009

          By
          ActionForex
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          UK CBI realized sales balance dropped to -6% in the year to August, down from July’s 4%. They’re expected to drop further next month, at a faster rate of -17%. Employment balance in the retail sector dropped sharply, at -45%, sharpest pace since February 2009. Faster fall is expected in the quarter head at -52%.

          Alpesh Paleja, CBI Lead Economist, said: “The furlough scheme has proved effective at insulating workers and businesses in some of the worst-hit sectors during the pandemic, but these findings reinforce fears that many job losses have been delayed rather that avoided.

          “Indeed, the latest survey shows that trading conditions for the retail sector remain tough, even against the backdrop of business slowly returning. Firms will be wary of deteriorating household incomes and the risk of further local lockdowns potentially hitting them in the pocket for a second time.

          Full release here.

          German Ifo rose to 92.6, on road to recovery

            By
            ActionForex
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            German Ifo Business Climates rose to 92.6 in August, up from 90.5, above expectation of 92.0. Current Assessment index rose to 87.9, up from 84.5, above expectation of 87.0. Expectations index rose to 97.5, up from 97.0, missed expectation of 98.1.

            Ifo said, “companies assessed their current business situation markedly more positively than last month. Their expectations were also slightly more optimistic. The German economy is on the road to recovery.”

            Looking at some details, services posted marked improve to 7.8, up from 2.1. Service providers are “decidedly happier”. Manufacturing rose to -5.4, up from -12.1, but stayed negative as “many industrial companies still consider their current business to be poor”. Upward trend in trade “flattened noticeably, just edged higher to -4.8, up from -5.1. Construction rose from -2.5 to 0.0.

            Full release here.

            German Q2 GDP contraction finalized at single-digit -9.7%

              By
              ActionForex
              -

              Germany Q2 GDP contraction was finalized by -9.7% qoq, revised up from -10.1% qoq. The single-digit decline was a pleasant surprise but it’s nevertheless still much larger that the -4.7% qoq recorded in Q1 2009 during the financial crisis. It’s also the sharpest contraction since quarterly calculations started back in 1970.

              Full release here.

              S&P 500 hits record on vaccine hopes, heading to 3643 next

                By
                ActionForex
                -

                S&P 500 finally took out 3393.52 key resistance with conviction, and closed up 1.00% at 3431.28 record high. Optimism on coronavirus treatment boosted sentiments in general. In particular, shares of AstraZenca surged nearly 2%, boosted by reports that US is considering fast-tracking its coronavirus vaccine candidate.

                Technically, the focus now is whether SPX will pick up upside momentum after clearing 3393.52. But in any case, near term outlook will remain bullish as long as 3354.69 support holds. Next near term target will be 61.8% projection of 2191.86 to 3233.13 from 2999.74 at 3643.24.

                USTR said progress made in US-China trade deal implementation

                  By
                  ActionForex
                  -

                  US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin finally held a “regularly scheduled call” with Chinese Vice Premier Liu He to review the progress of the implementation of the trade deal phase one.

                  USTR said in a statement, the parties addressed steps that China has taken to “effectuate structural changes” for greater IP rights protections, “remove impediments” to Americans companies in financial services and agriculture, eliminate forced technology transfer. China’s purchases of US goods were also discussed. It added, “both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement.”

                  Chinese Commerce Ministry also confirmed the two sides had a “constructive dialog on strengthening the coordination of the macroeconomic policies of the two countries”. Both sides “agreed to create conditions and atmosphere to continue to push forward the implementation of the phase-one of the China-US economic and trade agreement”.

                  Markets up on rumors of Trump’s fast-tracking coronavirus vaccine

                    By
                    ActionForex
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                    Markets sentiment seemed to be lifted notably by news regarding US President Donald Trump’s move to fast-track UK vaccines on the COVID-19 before election. Financial Times reported that one way is to use an “emergency authorization” in October to a vaccine being developed by AstraZeneca Plc and Oxford University. The use would be based on the results from a relatively small UK study.

                    White House declined to comment on the report. A Health and Human Services department spokesman said the reports on using EUA before election was “absolutely false”. The administration hoped to have a vaccine available in Q1 2021 instead. AstraZeneca also denied discussion with the government about emergency authorization.

                    New Zealand retail sales dropped record -14.6% in Q2, not unexpected

                      By
                      ActionForex
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                      New Zealand retail sales dropped a record -14.6% qoq (ex-inflation) in Q2, better than expectation of -16.3% qoq. “This unprecedented fall in the June quarter was not unexpected, with COVID-19 restrictions significantly limiting retail activity,” StatsNZ retail statistics manager Kathy Hicks said.

                      12 of the 15 industries had lower sales over the year too. Some had record decline, and the main movements were: Food and beverage services, down -40%; fuel retailing, down -35%; motor vehicle and parts retailing, down -22%; accommodation, down -44%.

                      Full release here.

                      BoK Lee: recovery to remain weak as virus cases resurged

                        By
                        ActionForex
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                        Bank of Korea Governor. Lee Ju-yeol told the National Assembly, “after suffering sharp deterioration, the Korean economy showed some signs of an improvement on eased slumps in exports and consumption.”

                        But he warned, “as virus cases have recently resurged, the economic recovery is expected to remain weak, and economic uncertainty has further heightened.” “We will also closely monitor changes in financial stability, stemming from growing household debt amid rising home prices and excessive cash inflows to the housing market”.

                        BOK lowered policy rate to record lower of 0.50% in May. It’s expected to stand pay at the meeting on Thursday. South Korean economy contracted -3.3% qoq in Q2, worst in over two decades.

                        Japan Abe in hospital for the second time in a week

                          By
                          ActionForex
                          -

                          Concerns over Japanese Prime Minister Shinzo Abe’s health flared up again today as his visited a Tokyo hospital for the second time in a week. Some said Abe was just receiving the results of a medical check-up from a week ago, when he underwent a 7-hour examination. On the other hand, Nippon TV reported that he’s getting treatment for chronic illness.

                          Speculations about Abe’s health started earlier this month, with some Cabinet members expressing concerns of his exhaustion on fighting the coronavirus pandemic. There were also detailed reports on Abe’s walking speed. If the longest-serving prime minister couldn’t continue his job on health issue, Deputy Prime Minister Taro Aso would take over temporarily, awaiting the ruling LDP to elect a new leader.

                          US PMI composite rose to 54.7, 18-mth high, as demand picked up

                            By
                            ActionForex
                            -

                            US PMI Manufacturing rose to 53.6 in August, up from 50.9, a 19-month high. PMI Services rose to 54.8, up from 50.0, a 17-month high. PMI Composite rose to 54.7, up from 50.3, a 18-month high.

                            Siân Jones, Economist at IHS Markit, said:

                            “August data pointed to a further improvement in business conditions across the private sector as client demand picked up among both manufacturers and service providers. Notably, the renewed increase in sales among service sector firms was welcome news following five months of declines.

                            “Encouragingly, firms signalled an accelerated rise in hiring, as greater new business inflows led to increased pressure on capacity. Some also mentioned that time taken to establish safe businesses practices had now allowed them to expand their workforce numbers.

                            “However, expectations regarding output over the coming year dipped slightly from July due to uncertainty stemming from the pandemic and the upcoming election.

                            “Meanwhile, cost burdens surged higher amid reports of greater raw material prices. Although manufacturers increased their selling prices at a faster rate to help compensate, service sector firms noted that competitive pressures and discounting to attract customers had stymied their overall pricing power.”

                            Full release here.

                            Canada retail sales rose 23.7% in June, back above February’s level

                              By
                              ActionForex
                              -

                              Canada retail sales rose 23.7% mom in June, to CAD 53.0. That’s slightly below expectation of 24.7% mom rise. Nevertheless, it’s finally 1.3% highly than February’s pre-pandemic levels. Sales were up in all subsectors, primarily led by motor vehicle and parts dealers, as well as clothing and clothing accessories stores. Rounding out Q2, sales were still down -13.3% qoq comparing with Q1.

                              Full release here.

                              Little progress made at 7th Brexit talks

                                By
                                ActionForex
                                -

                                Little to no progress was made in at the seventh round of Brexit negotiations. EU’s chief negotiator Michel Barnier said “those who were hoping for negotiations to move swiftly forward this week will have bee disappointed and unfortunately I too am frankly disappointed and concerned, and surprised as well.”

                                Barnier further criticized, “the British negotiators have not shown any real willingness to move forward on issues of fundamental importance for the European Union and this despite the flexibility which we have shown over recent months.”

                                On the other hand, UK’s chief negotiator David Frost said, “substantive work continues to be necessary across a range of different areas of potential UK-EU future cooperation if we are to deliver it. We have had useful discussions this week but there has been little progress.”

                                Frost also blamed that “the EU is still insisting not only that we must accept continuity with EU state aid and fisheries policy, but also that this must be agreed before any further substantive work can be done in any other area of the negotiation, including on legal texts. This makes it unnecessarily difficult to make progress.”

                                UK PMI composite rose to 7-yr high, recovery gained speed

                                  By
                                  ActionForex
                                  -

                                  UK PMI Manufacturing rose to 55.3 in August, up from 53.3, beat expectation of 53.6. That’s the highest level in 30 months. PMI Services jumped to 60.1, up from 56.5, above expectation of 57.0, a 72-month high. PMI Composite rose to 60.3, up from 567.0, a 82-month high.

                                  Tim Moore, Economics Director at IHS Markit, said: “August’s data illustrates that the recovery has gained speed across both the manufacturing and service sectors since July. The combined expansion of UK private sector output was the fastest for almost seven years, following sharp improvements in business and consumer spending from the lows seen in April…. Positive signals for the recovery of course need to be considered in the context of UK GDP shrinking by around one-fifth during the second quarter of the year. Survey respondents often noted that it could take more than a year to return output to pre-pandemic levels and there were widespread concerns that the honeymoon period for growth may begin to fade through the autumn months.”

                                  Full release here.

                                  Eurozone PMI composite dropped to 51.6, recovery by undermined rising virus cases

                                    By
                                    ActionForex
                                    -

                                    Eurozone PMI Manufacturing dropped slightly to 51.7 in August, down from 51.8, below expectation of 53.0. PMI services tumbled to 50.1, down from 54.7, missed expectation of 54.0. PMI Composite dropped to 51.6, down from 54.9.

                                    Andrew Harker, Economics Director at IHS Markit said: “The eurozone’s rebound lost momentum in August, highlighting the inherent demand weakness caused by the COVID-19 pandemic. The recovery was undermined by signs of rising virus cases in various parts of the euro area, with renewed restrictions impacting the service sector in particular…The eurozone stands at a crossroads, with growth either set to pick back up in coming months or continue to falter following the initial post-lockdown rebound. The path taken will likely depend in large part on how successfully COVID-19 can be suppressed and whether companies and their customers alike can gain the confidence necessary to support growth.”

                                    Full release here.

                                    Germany PMIs: Slowdown centered on services, manufacturing relatively positive

                                      By
                                      ActionForex
                                      -

                                      Germany PMI Manufacturing rose to 53.0 in August, up from 51.0, above expectation of 52.5. That’s also the highest level in 23 months. PMI Services dropped sharply back to 50.8, down from 55.6, missed expectation of 55.6. PMI Composite eased back to 53.7, down from 55.3.

                                      Phil Smith, Associate Director at IHS Markit said: “The slowdown was centred on the service sector, where growth was close to stalling amid renewed travel restrictions and a sustained decline in overall employment that continues to undermine domestic demand. Manufacturing was a relative positive, at least in terms of trends in output and new orders, which grew at the fastest rates for two-and-a-half years. However, the further cutbacks to factory work force numbers are a reminder that there is still ground to make up and businesses remain under pressure to cut costs.”

                                      Full release here.

                                      France PMI manufacturing back in contraction, fragile demand conditions

                                        By
                                        ActionForex
                                        -

                                        France PMI Manufacturing dropped to 49.0 in August, down form 52.4, well below expectation of 53.0. It’s also now back in contraction. PMI Services dropped to 51.9, down sharply from 57.3, missed expectation of 56.3. PMI Composite dropped to 51.7, down from 57.3.

                                        Economist at IHS Markit said: “Following the sharp expansion registered in July, growth momentum has somewhat stuttered, with the expansion in new orders slowing to a snail’s pace as manufacturers fell back into contraction territory. Meanwhile, there was a reacceleration in the rate of job cutting after three months of successive easing. Overall, the results highlight the fragility of demand conditions faced by French businesses and cast further doubt over the V-shaped recovery that many had hoped for.”

                                        Full release here.

                                        Japan core CPI unchanged at 0% in July

                                          By
                                          ActionForex
                                          -

                                          Japan all item inflation rose to 0.3% yoy in July, up from 0.1%. Core CPI, all item ex fresh food, was unchanged at 0.0% yoy, below expectation of 0.1% yoy. Core-core CPI, all item ex fresh food and energy was unchanged at 0.4% yoy.

                                          Outlook for core inflation suggests that Japan is close to, if not already in, a deflationary situation. It’s becoming increasingly unrealistic to achieve BoJ’s 2% inflation target in any projection horizon.

                                          Full release here.

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