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ECB reiterates readiness to adjust policy after communication chaos

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    ActionForex
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    ECB Executive Board member Isabel Schnabel told German news paper Die Zeit that the central bank is “ready to do everything in its mandate to counter market turmoil that disrupts monetary policy transmission, otherwise monetary policy cannot function,””. But she also cautioned against overestimating the power of central banks, and emphasized monetary policy alone could not solve the problem of coronavirus pandemic.

    Italy’s 10-year benchmark yield spiked to as high as 2.983 earlier today, on comments from Austrian central bank head Robert Holzmann that ECB’s policy was at its limit. Additionally, Italy is the most serious epicenter of the pandemic in Europe. Holzmann’s comments problem and ECB official response, saying that the March 12 decision was unanimous and it stands ready to adjust all of its measures. Holzmann himself later also clarified that “Monetary policy has not yet reached its limits, not by a long stretch.”

    Eurozone CPI finalized at 1.2%, services the biggest contributor

      By
      ActionForex
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      Eurozone CPI was finalized at 1.2% yoy in February, slowed from 1.4% yoy. The largest contribution came from services (+0.72%), followed by food, alcohol & tobacco (+0.41%), non-energy industrial goods (+0.13%) and energy (-0.03%).

      EU27 CPI was finalized at 1.6% yoy, down from 1.7% yoy. The lowest annual rates were registered in Italy (0.2%), Greece (0.4%) and Portugal (0.5%). The highest annual rates were recorded in Hungary (4.4%), Poland (4.1%) and Czechia (3.7%). Compared with January, annual inflation fell in twenty-one Member States, remained stable in one and rose in five.

      Full release here.

      EU to close external borders for 30 days to slow coronavirus spread

        By
        ActionForex
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        EU leaders agreed overnight to close the external borders for 30 days to slow the spread of coronavirus pandemic. All non-EU citizens are not allowed to enter EU. But movements within EU are allowed. Also, the restrictions do not apply to medical staff nor goods. The restrictions will take effect as soon as individual governments take the necessary internal measure.

        “The enemy is the virus and now we have to do our utmost to protect our people and to protect our economies,” European Commission President Ursula von der Leyen said. “We are ready to do everything that is required. We will not hesitate to take additional measures as the situation evolves.”

        European Council President Charles Michel pledge that “the union and its member states will do whatever it takes”, and EU will arrange for the repatriation of citizens of member countries.

        Fed Bostic: Everything is on the table at this stage

          By
          ActionForex
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          Atlanta Fed President Raphael Bostic said work continues at the Fed and “at this stage everything is on the table” regarding coronavirus responses. He warned that the challenges are going to be “acute and are going to come fast,” for restaurants, bars and other small firms.

          Philadelphia Fed President Patrick Harker said the current coronavirus outbreak “in some ways is the proverbial black swan.” “The suffering and fear that is across the world, not just in this country, it’s palpable, it’s real.” He urged central banks to do what they can to stimulate the economy and keep markets functioning.

          Minneapolis Fed President Neel Kashkari said Fed is “not at the front line” of the fight against coronavirus. He added, “but we do have a job to do and we are using our tools aggressively to try to make sure the financial system is ultimately working.” He also rejected the idea that Fed could save the rate cuts for later use. “The notion that we should save our cuts for later is a colorful metaphor, but it’s just flat-out wrong.” Meanwhile, he said “I don’t think there’s much interest in going below zero.”

          US to spend $1.2T on coronavirus relief, DOW recovered slightly by 5%

            By
            ActionForex
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            US stocks rebounded slightly overnight as investors responded to the administration’s coronavirus stimulus package, that could add up to USD 1.2T in spending. USD 1000 checks will be made available to Americans as Treasury Secretary Steven Mnuchin said, “Americans need cash now, and the president wants to give cash now. And I mean now, in the next two weeks.”

            Mnuchin’s proposal is reported to include USD 300B for small business loans, USD 200B in stabilization funds, USD 250B in cash payments with possibility of second round, as well as tax deferrals. He said, “It is a big number. This is a very big situation in this economy, we put a proposal on the table that would inject $1 trillion into the economy.”

            DOW ended up 1048.86 pts or 5.20%. S&P 500 rose 6.00%. NASDAQ rose 6.23%. Despite the recovery, there is no confirmation of bottoming in DOW yet. We’re seeing 23189.76 as the key near term resistance to overcome. As long as it holds, further decline remains in favor for the near term, before DOW finds a bottom.

            US retail sales dropped -0.5% mom, ex-auto sales dropped -0.4% mom

              By
              ActionForex
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              US retail sales dropped -0.5% mom to USD 528.1B in February, much worse than expectation of 0.2% mom  rise. Ex-auto sales dropped -0.4% mom, versus expectation of 0.3% mom. Ex-gasoline sales dropped -0.3% mom. Ex-auto, ex-gasoline sales dropped -0.2% mom.

              Full release here.

              German ZEW dropped -58.2 pts to -49.5, largest fall on record

                By
                ActionForex
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                German ZEW economic sentiment dropped sharply from 8.7 to -49.5 in March, way worse than expectation of -23.4. The -58.2 pts decline was the largest since the survey started back in December 1991. That’s also the lowest since 2008 financial crisis. Current situation index dropped to -43.1, down from -15.7, missed expectation of -25.0. For Eurozone, ZEW economic sentiment dropped -59.9 pts to -49.5. Current situation index dropped -38.2 to -48.5.

                “The economy is on red alert. The financial market experts currently expect to see a decline in real gross domestic product in the first quarter, while also considering a further drop in the second quarter to be very likely. For the whole of 2020, the majority of experts currently expect a decline in real GDP growth of approximately one percentage point as a result of the corona pandemic,” comments ZEW President Achim Wambach.

                Full release here.

                UK OBR: Coronavirus is like a wartime situation

                  By
                  ActionForex
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                  Robert Chote, head of the Office for Budget Responsibility, said to the UK parliament that the government needs to unveil a big stimulus package that will help all businesses to counter the coronavirus impact.

                  He noted, “the lesson of earlier crises is that one sector’s problems in a situation like this quickly become every other sector’s problems.” Also, “this is not a time to be squeamish about one off additions to public sector debt. It’s more like a wartime situation,” he added.

                  Sir Charlie Bean, OBR member and former BoE deputy governor, said coronavirus hit “ought to be different from the financial crisis. ” “There isn’t a fundamental structural problem in the economy that needs correcting, at least in the most part.”

                  UK unemployment rate edged higher to 3.9%, wage growth mixed

                    By
                    ActionForex
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                    UK unemployment rose to 3.9% in the three months to January, slightly above expectation of staying at 3.8%. Average earnings excluding bonus grew 3.1% 3moy, slowed form 3.2% and missed expectation of 3.3%. Average earnings including bonus, on the other hand, rose 3.1% 3moy, rose 2.9% and beat expectation of 3.0%.

                    Full release here.

                    RBA: Significant coronavirus effect on economy the more realistic scenario

                      By
                      ActionForex
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                      Minutes of March 3 RBA meeting noted that “it was becoming increasingly clear that COVID-19 would cause major disruption to economic activity around the world”. The recent outbreak outside of China ” raised the prospect of a broader and more extended disruption to the global economy”.

                      The global development “was having a significant effect on the Australian economy, particularly in the education, transport and tourism sectors”. Uncertainty was also likely to “affect household spending and business investment in coming months.” Q1 GDP was likely to be “noticeably weaker than previously expected”.

                      Board members have considered a “number of scenarios” regarding monetary policy response to coronavirus outbreak. If the outbreak would be contained in the very near future, “maximum effect” of further stimulus would be felt in the “recovery phase”. However, this scenarios was considered “very unlikely, with the more realistic scenario being that the outbreak would have a significant effect on the Australian economy.”

                      RBA cut interest rate by 25bps to 0.50% at that meeting. Earlier on Monday, it indicated that there will be additional measures to be announced this coming Thursday. Markets generally expect another rate cut to bring the benchmark rate down to 0.25%.

                      New Zealand launches NZD 12.1B fiscal stimulus to cushion coronavirus impacts

                        By
                        ActionForex
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                        New Zealand government announced a massive NZD 12.1B stimulus program to support the economy at the time of disruptions by coronavirus pandemic. That’s equivalent to 4% of the country’s GDP. The package includes NZD 2.8B in income support, NZD 5.1B in wage subsidy support, NZD 2.8B in business tax changes, NZD 500m support for aviation sector and NZD 600m boost for health services.

                        Finance Minister Grant Robertson said the economy is expected to fall -1% by Q1 if 2021 if the package is implemented, better than -3% without the support. He also told the parliament that recession was “almost certain” in New Zealand”. “We will have an extended period of deficits and our debt as a country will have to substantially increase,” he added.

                        BCC downgrades UK 2020 growth forecast to 0.8% on coronavirus impacts

                          By
                          ActionForex
                          -

                          The British Chambers of Commerce downgraded UK 2020 growth forecast due to disruption caused by the impact of coronavirus. GDP is now projected to growth 0.8% in 2020, lowered from prior forecast of 1.0%. That would be the weakest full growth growth since 1992, outside of 2008/09 financial crisis. Growth is than projected to pick up to 1.4% in 2021 and 1.6% in 2022.

                          Suren Thiru, Head of Economics at BCC, said: “Early evidence of disruption to supply chains and weakening in consumer demand and business activity could mean that even in the case of a temporary shock to the economy, there may be some long-term impact on economic output – particularly if significant action is needed to combat its spread.”

                          Adam Marshall, Director General, added: “Coronavirus could further weaken an already stagnant UK economy, as many businesses are starting to report an impact on their cashflow and growth prospects. The Chancellor and the Bank of England have responded to the immediate challenge with measures to help firms hit by Coronavirus, and they must now ensure this support gets to businesses as quickly as possible.

                          DOW down 10% as selloff extends, key fibonacci support being tested

                            By
                            ActionForex
                            -

                            US stocks plunged deeply at open and hit the first circuit breaker immediately, halting trading of 15 minutes. There is no clear sign of any recovery after second open yet, with DOW currently down around -10%. We’d maintain DOW is close to a long term fibonacci support level of 38.2% retracement of 6469.96 to 29568.57 at 20744.89. And a rebound should be due.

                            However, sustained break of 20744.89 could trigger another round of position squaring. Decline could accelerate further to 61.8% retracement at 15293.62.

                            US Empire state manufacturing dropped to -2.15, worst since 2009

                              By
                              ActionForex
                              -

                              US Empire State Manufacturing Survey general business conditions index dropped a massive -34pts to -21.5 in March, well below expectation of 8.7. it’s also the worst reading since 2009. Looking at some details, new orders dropped -3.14 to -9.3. Shipments dropped -20.6 to -1.7. Delivery times dropped -6.1 to 2.2. Number of employees dropped -8.1 to -1.5. Average employee workweek dropped -9.6 to -10.6.

                              Full release here.

                              IMF ready to mobilize $1T lending capacity as coronavirus response

                                By
                                ActionForex
                                -

                                IMF Managing Director Kristalina Georgieva said in a blog post that the fund is ready to mobilize its USD 1T lending capacity to help member countries on coronavirus impacts. And, “as a first line of defense, the Fund can deploy its flexible and rapid-disbursing emergency response toolkit to help countries with urgent balance-of-payment needs.”

                                Meanwhile she also urged that “the case for a coordinated and synchronized global fiscal stimulus is becoming stronger by the hour.” There are three areas of actions for the global economy, including fiscal policies, monetary policies and regulatory responses. “All this work—from monetary to fiscal to regulatory—is most effective when done cooperatively.”

                                EU Breton: Obviously we are expecting a recession this year

                                  By
                                  ActionForex
                                  -

                                  EU’s internal market Commissioner Thierry Breton told BFM Business radio that due to the coronavirus pandemic “obviously we are expecting a recession during the year 2020.” “We are at war with the virus. An economic war.”

                                  He noted before before the crisis, EU were expectation around 1.4% growth for the whole continent. But, “now we expect a negative impact of between 2% and 2.5%”.

                                  BoJ Kuroda: Impact of coronavirus could continue for the time being

                                    By
                                    ActionForex
                                    -

                                    At the post meeting press conference, BoJ Governor Haruhiko Kuroda said the coronavirus has already has an impact of Japan’s economy through “decline in inbound tourism, as well as on exports, output and consumption”. Also, “event cancellations and people staying home have led to a sharp slump in consumption.”. Hence, BoJ revised down economic assessment.

                                    Additionally, “given the fact the epidemic is spreading with a lag among various countries, the impact of the virus could continue for the time being.” Nevertheless, he’s optimistic that “once the impact is mitigated demand could pick up”. Japan’s economy would resume a “moderate expansion trend” then.

                                    He also emphasized that it was “necessary to take necessary action quickly, particularly ahead of the March fiscal year-end, to ensure corporate financing remains smooth and markets restore stability.”

                                    BoJ eases by double ETF purchases, introduces new loan program

                                      By
                                      ActionForex
                                      -

                                      After an emergency meeting today, BoJ announced further monetary easing to counter the economic impact of coronavirus pandemic. In particular, annual pace of ETF purchase is doubled from JPY 6T to JPY 12T. J-REIT purchases are also doubled to JPY 180B per year.

                                      The Special Funds-Supplying Operations to Facilitate Corporate Financing is introduced to provide loans against corporate debt at 0% interest rate with maturity up to 1 year. The operation will be conduced until end of September this year.

                                      The policies under the yield curve control is held unchanged. Short-term policy interest rate target is kept unchanged at -0.10%. BoJ will continue to purchase JGBs to keep 10-year yield at around zero percent. Annual pace of monetary base expansion is kept at around JPY 80T.

                                      The central bank also pledged to “take additional monetary easing steps as needed without hesitation with a close eye on the impact from the coronavirus epidemic for the time being”.

                                      Full release here.

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

                                        By
                                        ActionForex
                                        -

                                        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.

                                        NZD/USD staying in down trend for 0.58 after Fed and RBNZ cuts

                                          By
                                          ActionForex
                                          -

                                          NZD/USD is trading mildly lower after emergency rate cut by both Fed and RBNZ. The pair remains in near term fall from 0.6755. Next near term target will be 100% projection of 0.6755 to 0.6191 from 0.6447 at 0.5883.

                                          The level is close to a long term projection level too. That is, 61.8% projection of 0.8835 to 0.6102 from 0.7557 at 0.5868. Hence, we’d expect some support from 0.5868/83 to contain downside and bring rebound, at least on initial attempt. But, outlook will stay bearish as long as 0.6447 resistance holds, in any case.

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