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Trump to China: We’re not ready to make a deal, tariffs could go up very substantially, very easily

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    ActionForex.com
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    Trump said the US isn’t ready to make a trade deal with China yet. He added “I think they probably wish they made the deal that they had on the table before they tried to renegotiate it”. And, “They would like to make a deal. We’re not ready to make a deal.”

    Trump also threatened that tariffs on Chinese goods “could go up very, very substantially, very easily.” Though, “I think sometime in the future China and the United States will absolutely have a great trade deal, and we look forward to that,” Trump said. “Because I don’t believe that China can continue to pay these, really, hundreds of billions of dollars in tariffs. I don’t believe they can do that.”

    Comments from China remained hard-line over the weekend, a commentary published by the official Xinhua News Agency accused the US of “scapegoating” China for its trade imbalance and domestic economic issues. And, “the United States is attempting to squeeze an unequal trade deal out of China, using measures such as tariff hikes and targeting its tech companies.”

    Eurozone CPI hits new record 8.1% yoy in May

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      ActionForex.com
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      Eurozone CPI accelerated further from 7.4% yoy to 8.1% yoy in May, another record and above expectation of 7.7% yoy. CPI core also rose from 3.5% yoy to 3.8% yoy, above expectation of 3.5% yoy.

      Looking at the main components, energy is expected to have the highest annual rate in May (39.2%, compared with 37.5% in April), followed by food, alcohol & tobacco (7.5%, compared with 6.3% in April), non-energy industrial goods (4.2%, compared with 3.8% in April) and services (3.5%, compared with 3.3% in April).

      Full release here.

      Fed Powell: Common-sense risk-management approach served well

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        ActionForex.com
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        Fed Chair Jerome Powell reiterated his recent messages in a speech in New York today. He noted that “nearly all job market indicators are better than a few years ago, and many are at their most favorable levels in decades.” Business-sector productivity growth also “moved up in the first three quarters of 2018.” Price stability side of Fed’s mandate is “in a good place” as “inflation by our preferred measure averaged roughly 2 percent last year” but “signs of upward pressure on inflation appear muted despite the strong labor market”.

        Powell also noted again that “over the past few months we have seen some crosscurrents and conflicting signals about the near-term outlook.” Those include slowdown in major economies, particularly China and Europe. There is elevated uncertainty around unresolved government policy issues including Brexit and trade negotiations. Financial markets conditions have tightened since last fall. Also, “some surveys of business and consumer sentiment have moved lower. Unexpectedly weak retail sales data for December also give reason for caution.”

        All in all, Fed will be “patient as we determine what future adjustments to the target range for the federal funds rate”. He also added that “common-sense risk-management approach has served the Committee well in the past.”

        Full speech here.

        US goods exports down -7.5% yoy in May, imports down -8.8% yoy

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          ActionForex.com
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          US goods exports dropped -7.5% yoy to USD 162.84B in May. Goods imports dropped -8.8% yoy to USD 253.98B. Goods trade deficit came in at USD -91.1B, versus expectation of USD -92.3B.

          Wholesale inventories fell -0.1% mom to USD 912.9B. Retail inventories rose 0.8% mom to USD 787.7B.

          Full US trade balance release here.

          US retail sales rose 0.3% mom in Aug, ex-auto sales down -0.3% mom

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            ActionForex.com
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            US retail sales rose 0.3% mom to USD 683.3B in August, above expectation of 0.0% mom. Ex-auto sales dropped -0.3% mom, below expectation of 0.0% mom. Ex-gasoline sales rose 0.8% mom. Ex-auto, ex-gasoline sales rose 0.3% mom.

            Comparing with a year ago, total sales rose 9.1% yoy. Total sales for June through August were up 9.3% from the same period a year ago.

            Full release here.

            China’s coronavirus cases slowed, South Korea Moon pushes emergency responses

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              ActionForex.com
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              According to China’s National Health Commission, on February 17, confirmed Wuhan coronavirus cases rose 1886 to 72436. Death tolls rose 98 to 1868. New suspected cases rose 1432 to 6242. Tedros Adhanom Ghebreyesus, WHO director-general, said on Monday that the data “appear to show a decline in new cases”. But he also cautioned that “it’s too early to tell if this reported decline will continue. Every scenario is still on the table”. He added “This trend must be interpreted very cautiously. Trends can change as new populations are affected.”

              South Korea President Moon Jae-in used rather strong words in urging the cabinet to come up with special measures to counter the impact from the coronavirus outbreak. He said as a weekly cabinet meeting, “emergency situations require an emergency prescription. The current situation is much more serious than we thought.” “It is the time when special measures are absolutely necessary to use every possible means that the government can mobilize,” he added.

              Moon also said the use of the government’s emergency funds should be just the “beginning”. “This is not enough,” he added. “In order to respond to the emergency economic situations, I want you to exert policy-related imagination that goes beyond expectations with no restrictions.”

              Japanese Finance Minister Taro Aso also pledged today to ensure fiscal policy steps to respond to the outbreak. He noted that economic fundamentals are still holding steady, even though slowing global growth had an impact on the manufacturing sector.

              Fed Barkin: You just can’t declare victory too soon

                By
                ActionForex.com
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                Richmond Fed President Thomas Barkin told Fox Business yesterday that recent inflation reports have been encourage. But the median CPI is “still too high” and, “you just can’t declare victory too soon.”

                “I would want to see inflation compellingly back to our target” before easing up on rate hikes, he said. Meanwhile the terminal rate will be dependent on the “path of inflation”.

                US ISM manufacturing unchanged at 52.8, prices dropped to 52.5, employment jumped to 54.2

                  By
                  ActionForex.com
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                  US ISM Manufacturing PMI was unchanged at 52.8 in August, slightly above expectation of 52.6. Looking at some details, new orders rose from 48.0 to 51.3. Production dropped from 53.5 to 50.4. Employment jumped from 49.9 to 54.2. Prices dropped sharply from 60.0 to 52.5.

                  ISM said: “Manufacturing performed well for the 27th straight month. With (1) supplier delivery performance recording its fourth straight month of improvement, (2) price increase growth slowing significantly for the second consecutive month, (3) hiring and total employment both positive and expanding and (4) lead times easing across all three categories of purchasing activity, the sector is at or approaching supply/demand equilibrium.”

                  Also, “the past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI for August (52.8 percent) corresponds to a 1.4-percent increase in real gross domestic product (GDP) on an annualized basis.”

                  Full release here.

                  NZ ANZ business confidence fell to fresh record low

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                    ActionForex.com
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                    New Zealand ANZ business confidence declined from -57.1 to -70.2 in December, a new record low. Looking at some details, own activity outlook fell from -13.7 to -25.6. Export intentions dropped form -5.4 to -10.0. Investment intentions dropped form -8.1 to -20.5. Employment intentions dropped from -4.0 to -16.3. Pricing intentions rose from 58.5 to 59.1. Cost expectations declined form 88.7 to 84.4. Inflation expectations dropped from 6.39 to 6.23.

                    ANZ said: “The fall in business confidence is certainly dramatic, but while it’s at a fresh record low, it would be incorrect to read this as an indication that any recession is likely to be unusually severe. Rather, it’s unusually widely anticipated. It’s a situation unprecedented in recent decades for a central bank to admit it is deliberately engineering a recession.”

                    Full release here.

                    RBA hikes 25bps, further increases needed over the months ahead

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                      ActionForex.com
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                      RBA raises the cash rate target by 25bps to 3.35% as widely expected. The Board also expects that “further increases in interest rates will be needed over the months ahead”. To assess “how much” further hike is needed, close attention will be paid to “developments in the global economy, trends in household spending and the outlook for inflation and the labour market.”

                      The central noted that underlying inflation at 6.9% in December was “high than expected” with “strong domestic demand “adding to the inflationary pressures in a number of areas of the economy.” Inflation is expected to decline to 4.75% this year, then to around 3% by mid-2025. Medium-term inflation expectation remain” well anchored”.

                      GDP growth is expected to slow to 1.50% in 2023 and 2024. Unemployment rate is projected to rise form current 3.50% to 3.75% by the end of 2023, and then 4.50% by mid-2025.

                      Full statement here.

                      China retail sales, production, investment posted sharp contraction in February

                        By
                        ActionForex.com
                        -

                        February economic data released from China are overwhelmingly poor, but unsurprising. Retail sales dropped -20.5% yoy versus expectation of -4.0% yoy. Industrial production dropped -13.5% yoy versus expectation of -3.0% yoy. Fixed asset investment dropped -24.5% ytd yoy versus expectation of -2.0% ytd yoy.

                        The National Bureau of Statistics sounded optimistic in its statement. It said, while the epidemic has incurred relatively big shocks to economic activities, the impacts are largely “short-term, external and controllable.” “The economy has withstood the shocks of the epidemic,” it added.

                        Dollar index accelerating downward ahead of NFP

                          By
                          ActionForex.com
                          -

                          US non-farm payrolls report will be a major focus for today. Markets are expecting NFP to show another -8m job less in May. Unemployment rate is expected to jump further up from 14.7% to 19.6%. Other employment data were not too promising. ADP report showed -2.76m contraction in private sector jobs. ISM manufacturing employment improved to 31.8 while non-manufacturing employment rose to 32.1. But both were deep in contraction region. Four-week moving average of initial jobless claims also stayed huge at 2.28m.

                          Dollar index suffered another round of steep decline this week. Selling accelerated further after ECB announced to expand the PEPP yesterday. Technically, the strong break of 55 week EMA in DXY further affirm the case that whole rise form 88.2 (2018 low) has already completed at 102.99, ahead of 103.82 high (2016 high). Next defend zone is between 94.65 support and long term trend line at around 95.5. We’d look for support from there to bring a near term recovery.

                          Polish suggestion of 5-year limit on Irish backstop is not EU position

                            By
                            ActionForex.com
                            -

                            Polish Foreign Minister Jacek Czaputowicz suggested limiting the Irish backstop arrangement to five years, to help get the Brexit deal through UK parliament. However, European Commission spokesman Margaritis Schinas said that is not EU’s position.

                            Schinas told reports that “we have a unanimous, and I repeat unanimous, EU 27 position on the Withdrawal agreement and it’s clear that the doorstep statement you’re referring to was not part of the EU position.”

                            SNB bucks expectations and keeps interest rate steady

                              By
                              ActionForex.com
                              -

                              In an unexpected move that diverged from the market’s anticipations, SNB held its policy rate steady at 1.75%, side-stepping the anticipated hike to 2.00%. The conditional inflation projections have undergone downward revision. While inflation could surge above 2% target in upcoming quarters, it’s projected to retract back to 1.9% in 2025 based on current interest rate, without further tightening.

                              Despite this, SNB did not completely distance itself from a hawkish tone, and maintained the further tightening “may become necessary”. It also reiterated the willingness to intervene in the market with focus on “selling foreign currency

                              Delving into the specifics of the conditional inflation projections, based on steady 1.75% policy rate, inflation is forecasted to ascend to 2.0% by the end of this year. It will scale up to its apex at 2.2% in the second quarter of 2024, before experiencing a slight dip to 1.9% at the onset of 2025, maintaining that level thereafter.

                              On the economic growth front, SNB’s projections lean towards the cautious side, forecasting tepid growth for the remainder of the year. The annual growth is projected to hover around a modest 1%.

                              RBA on hold, keeps tightening bias

                                By
                                ActionForex.com
                                -

                                RBA kept its cash rate target at 4.10%, retaining a hawkish bias. The bank noted, “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe.” However, RBA underscored that any future decision will be data-dependent and based on an “evolving assessment of risks.”

                                Explaining the decision to hold rates, RBA stated that “higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so.” Amidst “uncertainty” surrounding the economic outlook, maintaining the current rate provides “further time” to assess the impact of previous hikes.

                                While the central bank anticipates recent data to be “consistent” with an inflation return to its 2-3% target over the forecast horizon, it warned of “significant uncertainties”.

                                RBA expressed concerns about the surprising persistence of services price inflation overseas, which could potentially reflect in Australia. Additionally, it mentioned uncertainties about “how firms’ pricing decisions and wages will respond to the slowing in the economy at a time when the labour market remains tight.” Also, it stated that “the outlook for household consumption is also an ongoing source of uncertainty.”

                                Full RBA statement here.

                                Eurozone economic sentiment rose slgihtly to 67.5, employment expectations jumped

                                  By
                                  ActionForex.com
                                  -

                                  Eurozone Economic Sentiment Indicator rose slightly to 67.5 in May, up from 64.9, but missed expectations of 70.5. Employment Expectations Indicator led the way, jumped to 70.2, up from 58.9. Industrial Confidence rose to -27.5, up from -32.5. Consumer Confidence rose to -18.8, up from -22.0. Retail Trade Confidence rose slightly to -29.7, up from -30.1. On the other hand, Services Confidence dropped to -43.6, down from -38.6. Construction Confidence dropped to -17.4, down from -16.1. Business Climate dropped to -2.43, down from -18.1.

                                  Full release here.

                                  Aussie drops after CPI miss, AUD/CAD heading to 0.9488 support first

                                    By
                                    ActionForex.com
                                    -

                                    Australian Dollar dips notably after weaker than expected consumer inflation data. AUD/CAD’s recovery from 0.9488 could have already completed at 0.9757. Deeper fall could be seen back towards 0.9488 support. Break there will resume the whole decline from 0.9991.

                                    But overall, the fall from 0.9991 is seen as a correction to the up trend from 0.8058 only. Hence, in case of downside extension, strong support should be seen from 0.9247 cluster support level to contain downside and bring rebound. This level coincides with 38.2% retracement of 0.8058 to 0.9991 at 0.9253, as well as 100% projection of 0.9991 to 0.9488 from 0.9757 at 0.9254.

                                    Australian Dollar tumbles broadly on domestic political turmoil

                                      By
                                      ActionForex.com
                                      -

                                      Australian Dollar is sold off sharply on domestic political turmoil which could eventually bring in the seventh prime minister in a decade. The government also adjourned the lower house of parliament until September 10 for the leading Liberal party to clear up its own mess.

                                      Still Prime Minister Malcolm Turnbull survived a leadership challenge by seven votes earlier this week. But three of Turnbull’s key ministers changed they mind, including Finance Minister Mathias Cormann. Challenger, former Home Affairs Minister Peter Dutton called for another leadership vote today, which Turnbull is widely expected to fail.

                                      In a crisis press conference, Turnbull said he would only step aside if rivals gather enough signatures. But in that case, the ballot could happen as early as mid-Friday. It’s reported that Treasurer Scott Morrison is prepared stand in take up Dutton’s challenge, to prevent the the Liberal party from turning further to the right.

                                      Opposition Labor leader Bill Shorten criticized that the “cannibalistic behavior” over the Liberal leadership was eating the government alive.

                                      EUR/JPY upside breakout, EUR/USD to follow?

                                        By
                                        ActionForex.com
                                        -

                                        EUR/JPY’s rally accelerates today and break of 127.07 resistance confirms resumption of whole rise form 114.42. Next target should be long term fibonacci level of 61.8% retracement of 137.49 (2018 high) to 114.42 at 128.67.

                                        Focus should also be on 1.2272 resistance in EUR/USD. Firm break there would affirm underlying strength in Euro. EUR/USD should then target 61.8% projection of 1.0635 to 1.2011 from 1.1602 at 1.2452. That could also bring stronger rise in Euro elsewhere.

                                        BoJ minutes: Timing of reaching inflation target was merely a projection

                                          By
                                          ActionForex.com
                                          -

                                          BoJ released minutes of the April 26-27 meeting today. The only surprise out of that meeting was that BoJ dropped the time frame it set for achieving the 2% inflation target. The minutes provided more details on the discussions. Many members believed that the timing of reaching the 2% inflation was “merely a projection”. At the some time, “some market participants perceived this projection as a deadline for achieving 2 percent inflation, linking changes in said timing to policy adjustments, and this view was deeply entrenched among them.”

                                          Some members expressed that “attracting excessive attention merely to forecast figures would not be appropriate from the perspective of communication with the markets”. And, most members expressed that ” it was appropriate to cease providing a description on the projected timing of achieving the price stability target”. And that was with the aim to clarify that the timing was “not a specific deadline” for meeting inflation target. Nonetheless, one member expressed the concern that dropping the time frame could “weaken the effects of the commitment” of BoJ to hit target.

                                          Full minutes here.

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