US initial jobless claims fell -3k to 217k in the week ending November 4, above expectation of 210k. Four-week moving average of initial claims rose 1.5k to 212k.
Continuing claims rose 22k to 1834k in the week ending October 28. Four-week moving average of continuing claims rose 32k to 1789k.
In the UK, ITV news reported that its correspondent overhead lead Brexit negotiator Olly Robbins said the parliament is facing a choice of Prime Minister Theresa May’s deal or a long article 50 extension. And, the issue is whether Brussels is clear on the terms of extension.
On the other hand, Brexit Minister Steve Barclay is quick to clarify that “the prime minister has been very clear that we are committed to leaving on the 29th of March… It’s not in anyone’s interest to have an extension without any clarity.”
And, the Financial Times reported that PM Theresa May told business leaders that extending Article 50 process beyond March 29 serves no purpose.
Germany Gfk Consumer Sentiment for February rose to 9.9, up from 9.7, beat expectation of 9.8. Economic Expectations also rose from -4.4 to -3.7.
Rolf Bürkl, GfK consumer expert: “Initial agreements in the trade dispute between the United States and China will also ease the situation in Germany. As an export nation, the country relies on the free and unrestricted exchange of goods.”
“The positive start for the consumer climate in 2020 confirms our assessment that private consumption will continue to be an important pillar of the German economy this year. For the year as a whole, GfK forecasts real growth in private consumer spending in Germany of one percent.”
St. Louis Fed President James Bullard told CNBC, “I think it’s too early to talk taper here”. And, “we’re going to let the chair open that discussion when he thinks it’s appropriate.”
“We’re not quite out of the pandemic yet,” he added. “Once we get out of the pandemic, then I think it will be time to look at whether monetary policy can change.”
“I don’t think you really want to change policy while you’re still in the pandemic tunnel. Even though you can sort of see the end of the tunnel, we’re not there yet, and we’ve got to push hard till we get all the way to the end,” he said.
The latest quarterly survey of business opinion by New Zealand Institute of Economic Research revealed notable improvement in business sentiment. Only a net 2% of firms now expect general business conditions to deteriorate, compared to the 52% pessimism recorded in the previous quarter.
Christina Leung, principal economist at NZIER, expressed confidence that inflation in New Zealand is on track to return to RBNZ’s target range of 1% to 3% by the second half of 2024, with a projection of reaching 2% in the first half of 2025.
“It’s a pretty encouraging picture for the Reserve Bank and it reinforces our expectations that there won’t be further increases,” in interest rate, Leung stated.
However, Leung also mentioned that NZIER does not anticipate a reduction in the cash rate until the middle of the next year, advocating for a “wait and see approach.” This cautious stance reflects a recognition of the need to monitor economic trends before making significant policy changes.
Incoming RBA Governor Michele Bullock made clear her primary focus would be tackling the country’s persistently high inflation. As Bullock prepares to take the helm of RBA on September 18, replacing her current role as deputy governor, her comments carry considerable weight for markets and policymakers alike.
“My first priority is to keep very focused on inflation. Inflation is still too high in Australia. It is coming down and we’re forecasting it to continue to come down, but it’s still too high,” said Bullock.
While she stopped short of providing a timeline for how long interest rates may remain elevated, Bullock did hint at the possibility of additional hikes in the future.
“I’m reluctant to give any sort of predictions on how long interest rates might have to stay high. In Australia’s case, all I can say is that we might have to raise interest rates again, but we’re watching the data very carefully,” she said.
Additionally, Bullock clarified that rate-setting decisions would, for the time being, be made on a “month-by-month”” basis until at least next year.
Australian Dollar rebounds after initial selling as speech of RBA Deputy Governor Guy Debelle echoed much of recent communications. There was no extra dovishness in his comments.
He noted that the weaker than expected GDP growth in second half of last year was primarily due to considerable slower growth in consumption. The main explanation is low growth in household income, and an increasing expectation that it is likely to remain low
However, other parts of GDP have evolved broadly as we had expected. Business investment outside mining has been “growing at a rate”. Exports have “continued to grow as expected”. Residential construction is at a “historically high level”. Also, labor market has been “surprisingly strong”.
Debelle noted that “the two lenses on economic growth provided by the labour market and the GDP data are in stark contrast”. Meanwhile, “a third lens, in the form of business surveys, sits in between the two”. And he noted that “the tension highlighted by these different lenses on economic growth is of crucial importance. Hopefully we will get some resolution of this tension in the coming months with the incoming flow of data.”
US initial jobless claims fell -1k to 202k in the week ending January 6, lower than expectation of 215k. Four-week moving average of initial claims fell -250 to 207.75k.
Continuing claims fell -34k to 1834k in the week ending December 30. Four-week moving average of continuing claims fell -8k to 1862k.
US initial jobless claims dropped -38k to 326k in the week ending October 2, below expectation of 349k. Four-week moving average of initial claims rose 3.5k to 344k.
Continuing claims dropped -97k to 2714k in the week ending September 25, lowest since March 14, 2020. Four-week moving average of continuing claims dropped -34.5k to 2765k, lowest since March 21, 2020.
New Zealand CPI rose 0.5% qoq in Q4, above expectation of 0.2% qoq. Annually, CPI was unchanged at 1.4% yoy, above expectation of 1.0% yoy.
The trimmed means CPI, which exclude extreme price movements, ranged from 1.7% to 2.1% yoy, indicating that underlying inflation is higher than the 1.4% overall increase in CPI.
Eurozone unemployment rate was unchanged at 7.5%, above expectation of 7.4%. That’s still the lowest level since July 2008. EU28 unemployment rate was unchanged at 6.3%, lowest since January 2000.
Among the Member States, the lowest unemployment rates in September 2019 were recorded in Czechia (2.1%) and Germany (3.1%). The highest unemployment rates were observed in Greece (16.9% in July 2019) and Spain (14.2%).
BoE raises Bank Rate by 50bps to 5.00%, larger than consensus of 25bps. The decision was made by 7-2 vote, with only known dove Swati Dhingra and Silvana Tenreyro voted for no change again.
Tightening bias is maintained as the central bank noted, “if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.”
BoE continues to expect CPI to “fall significantly further during the course of the year”. Services CPI is projected to “remain broadly unchanged in the near term”. Meanwhile, core goods CPI is expected to “decline later this year”.
Second-round effects in domestic price and wage developments are “likely to take longer to unwind than they did to emerge”. There has been “significant upside news in recent data that indicates more persistence in the inflation process.”
Fed Vice Chair Randal Quarles said in a speech that, “a significant portion of that recent boost to inflation will be transitory”, and it “will not interfere with the rapid growth driving progress toward the Fed’s maximum-employment goal.” He expected “strong recovery will keep rolling forward”. Nevertheless, “uneven global recovery” and “supply bottlenecks” are two “potential headwinds” for the economy.
Quarles added that, “if my expectations about economic growth, employment, and inflation over the coming months are borne out, however, and especially if they come in stronger than I expect, then, as noted in the minutes of the last FOMC meeting, it will become important for the FOMC to begin discussing our plans to adjust the pace of asset purchases at upcoming meetings.”
However, “the time for discussing a change in the federal funds rate remains in the future. The guidance for the federal funds rate commits to maintain the current rate until labor market conditions are consistent with our goal of maximum employment and inflation not only has reached 2 percent, but also is on track to moderately exceed 2 percent for some time.”
The minutes of the June FOMC meeting provided little inspirations to the markets overnight. It’s noted that job gains had been strong, unemployment rate hade decline, growth of household spending had picked up, business fixed investment continued to grow strongly, headline and core inflation have moved close to 2%, long term-inflation expectations were little changed. “Members viewed the recent data as consistent with a strong economy that was evolving about as they had expected.”
Flattening of the yield curve was a topic discussed during the meeting as that “might signal about economic activity going forward”. A numbers of factors were brought forward, including “reduction in investors’ estimates of the longer-run neutral real interest rate; lower longer-term inflation expectations; or a lower level of term premiums in recent years relative to historical experience reflecting, in part, central bank asset purchases.” And that could ” temper the reliability of the slope of the yield curve as an indicator of future economic activity.” A number of the meeting participants said that “it would be important to continue to monitor the slope of the yield curve.”
The minutes also noted that escalating trade tensions have already started hurting investments. The minutes pointed out that “many district contacts expressed concern about the possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity.” And, “contacts in some districts indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy.” And, most policymakers noted that “uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects”.
According to a CBI survey for the three months to August, UK business and professional services employment dropped at the quickest pace since 2009, with balance at -32%, down from -9%. Consumer services employment was even worse on record, with balance dropping from -31% to 063%. CBI added, “next quarter, employment is set to continue to fall, but the rate of decline is set to ease slightly.”
Ben Jones, CBI Principal Economist, said: “This quarter has shown some worrying falls in volumes, profitability and employment for the services sector. Although the pace of these declines is expected to ease, the impact of COVID-19 remains clear, with the services sector still facing challenges in terms of demand, revenues and cash flow… As we head into the autumn, the UK needs a bold plan to protect jobs as the job retention scheme draws to an end, to support the services sector.”
US ISM Manufacturing PMI rose from 59.9 to 61.1 in September, above expectation of 59.9. Looking at some details, new orders was unchanged at 66.7. Production dropped from 60.0 to 59.4. Employment rose from 49.0 to 50.2. Supplier deliveries rose from 69.5 to 73.4. Prices rose form 79.4 to 81.2.
ISM said: “The past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for September (61.1 percent) corresponds to a 5.1-percent increase in real gross domestic product (GDP) on an annualized basis.”
ECB Governing Council member Gabriel Makhlouf told WSJ, “I’m open to acting forcefully to get inflation down to our target.” He noted that interest rate could rise to above 3.5% and stay there.
Regarding speculations that ECB would cut interest this year, Makhlouf said, “I think that really is going too far… We’ll reach a point where we’re going to, then plateau.”
“I see the ECB as putting up interest rates after the March meeting…Even though inflation is coming down it’s still way above our target,” Makhlouf added.
German Ifo Business Climate fell from 86.3 to 85.2 in January, below expectation of 86.7. Current Assessment Index fell from 88.5 to 87.0, below expectation of 88.6. Expectations Index fell from 84.2 to 83.5, below expectation of 84.9.
But sector, manufacturing rose from -17.4 to -16.0. Services fell from -1.7 to -4.9. Trade fell from -26.7 to -29.7. Construction fell from -33.5 to -35.9.
Ifo said, sentiment among German companies has deteriorated further at the beginning of the year. The German economy is “stuck in recession”.
The latest release from Australia reveals a modest uptick in Westpac Consumer Sentiment Index, which rose by 2.7% mom to 82.1 in December. Despite this increase, Westpac’s analysis describes the sentiment as “still very weak,” emphasizing that “consumers remain far from upbeat.”
Regarding RBA’s next meeting on February 5-6, Westpac said, the “there is now a higher bar” to further tightening. It highlights the “subdued growth profile” and a “particularly weak household sector” underscored by the recent consumer sentiment results, suggesting that these factors might raise the threshold for another rate hike.
However, it’s important to note the central bank’s stance towards inflation. RBA has expressed a “very low tolerance for any upside surprises” in inflation rates, making the upcoming inflation data and the detailed quarterly release, due in late January, pivotal for February policy decision.
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for over a decade. Empowering the individual traders was, is, and will always be our motto going forward.
Contact us: contact@actionforex.com
© ActionForex.com © 2024 All rights reserved.
NFP grew just 130k, unemployment rate at 3.7%, but wage growth accelerated
US non-farm payroll report showed only 130k employment growth in August, below expectation of 162k. Prior month’s figure was also revised down from 164k to 159k. Unemployment rate was unchanged at 3.7%, matched expectations. Participation rate edged up to 64.2%. However, average hourly earnings rose 0.4% mom, above expectation of 0.3% mom. Dollar is slightly lower after the release as weak headline number was offset by strong wage growth.
Full release here.