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German Altmaier: Most difficult part in US trade talks to follow

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    ActionForex.com
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    German Economy Minister Peter Altmaier told Deutschlandfunk radio today that “for some weeks and months now, we’re observing with concern that the U.S. is tightening its trade policies, that tensions are increasing.” And, “the impact can already be seen in the world economy, global growth has slowed.”

    Regarding the trade talks between EU and US, Altmaier said “We are not yet where we want to be. We might have made one-third of the way and the most difficult part will be now”. Though he added he was in favor of lowering auto tariffs, “ideally to zero percent”.

    But Altmaier also reiterated EU’s position that agriculture will not be included in any trade talks. He said “agriculture is a very sensitive topic, so we don’t want to talk about this in the current situation.”

    Fed Daly: We’re talking about talking about tapering only

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      San Francisco Fed President Mary Daly told CNBAC that “we haven’t seen substantial further progress just yet. We’re still looking for substantial further progress.”

      “What we’ve seen is some really bright spots, some very encouraging news. It gives me hope, and I am bullish for the future. But it’s too early to say that the job is done,” she added.

      Also, “we’re talking about talking about tapering, and that is what you want out of us. You want to be long-viewed here,” she said. “But I want to make sure that everyone knows it’s not about doing anything new. Right now, policy is in a very good place. Policy is supporting the American people.”

      Eurozone PMI dropped to 25-month low, GDP growth waning to 0.3% in Q4

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        Eurozone PMI manufacturing dropped to 52.1 in October, down from 53.2 and missed expectation of 53.1. That’s a 26-month low. PMI services dropped to 53.3, down from 54.7 and missed expectation of 54.5. That’s a 24- month low. PMI composite dropped to 52.7, down from 54.1, hit a 25-month low.

        Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

        “The pace of Eurozone economic growth slipped markedly lower in October, with the PMI setting the scene for a disappointing end to the year. The survey is indicative of GDP growth waning to 0.3% in the fourth quarter, and forward-looking indicators, such as measures of future expectations and new business inflows, suggest further momentum could be lost in coming months.

        “The slowdown is being led by a drop in exports, linked in turn by many survey respondents to trade wars and tariffs, which appears to have darkened the global economic environment and led to increased risk aversion. It is therefore not surprising to see the slowdown broadening out across the economy, hitting the service sector.

        “The survey will make for uncomfortable reading at the ECB. Although the survey’s price gauges remain elevated and close to seven-year highs, the headline PMI has fallen to a level that would historically be consistent with a bias towards loosening monetary policy in order to prevent any further deterioration of economic growth.”

        Full release here.

        New Zealand BusinessNZ manufacturing dropped to 50.6, soft growth and rising inflation

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          New Zealand BusinessNZ Performance of Manufacturing index dropped from 54.3 to 50.6 in November. Looking at some details, production dropped from 53.2 to 52.2. Employment dropped from 51.7 to 48.2. New orders rose from 54.2 to 54.7. Finished stocks dropped from 54.6 to 48.3. Deliveries dropped from 59.9 to 42.9.

          BNZ Senior Economist, Doug Steel stated that “the PMI implications for economic (and employment) growth seem clear – soft.  But with obvious difficulties remaining on the supply side, we’d suggest that inflation is still rising.”

          Full release here.

          Fed Powell: 2021 going to be strong than previously though on a combination of better developments

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            In an NPR radio interview, Fed Chair Jerome Powell said 2021 going to be stronger than previously thought, because of a “combination of better developments” including vaccines and fiscal stimulus.

            “As we make substantial further progress towards our goals we will gradually roll back” the asset purchase program. He emphasized, the “process will take place with the greatest transparency.” And that would only happen “when the economy is all but fully recovered.”

            On other topics, Powell said, “level of debt today is not unsustainable, no question of US being able to service its debt right now.” “Climate change is an important issue we will be dealing with for a long time with significant economic implications.”

            Full interview here.

            Japan PMI manufacturing ticked up to 49.7, services rose to 54.3

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              ActionForex.com
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              In August, Japan’s Service PMI climbed from 53.8 to 54.3, while the Manufacturing PMI saw a slight increase from 49.6 to 49.7, just above anticipated figures. Composite PMI also edged up from 52.2 to 52.6.

              Andrew Harker, from S&P Global Market Intelligence, pointed out the robust performance of the service sector, driven by consistent new order growth. In contrast, manufacturing only marginally rebounded but remained below the growth threshold.

              Despite the overall rise in new orders, manufacturing employment remained flat, ending its 28-month growth streak. Additionally, heightened oil prices impacted both sectors, causing the steepest rise in input costs in four months. Notably, business confidence dwindled in both domains due to longer-term economic uncertainties.

              Full Japan PMI release here.

              ECB Coeure: Growth to return in H2, no grounds for overly gloomy thoughts

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                ECB Executive Board Member Benoit Coeure said in a newspaper interview that policymakers expected “growth to return in the second half of the year”. He told German daily Frankfurter Allgemeine Zeitung “there are no grounds for overly gloomy thoughts”. However, he admitted for now “it is very uncertain how long and how strong the downturn will be.”

                On monetary policy, Coeure sees no argument for tiered deposit rate. He urged banks to focus on their own costs, rather than blaming ECB’s negative rate for lower profits. Meanwhile, currently, markets are pricing in no rate cut until at least 2021. Coeure warned “we are not tied to such market expectations; they are an important input, but we are not led by them.” He added market pricing are merely reflecting “an assessment of the downside risks which is different to that of the Governing Council”.

                BoE Haskel ready to vote for more stimulus

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                  ActionForex.com
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                  BoE policymaker Jonathan Haskel said risks are skewed to the downside for UK’s economy. “I stand ready to vote for more stimulus measures should they be needed”, he said.

                  Haskel also noted the positive effects of negative interest rates for Eurozone . “That said, the effectiveness is probably going to be contingent on the structure of the financial system and the position where we are in the cycle, so we have to look at that very carefully,” he added.

                  ECB Holzmann: We’ll need in autumn to decide to do another 0.5% or less

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                    ECB Governing Council member Robert Holzmann told Austrian broadcaster ORG on Sunday, “the economy will grow less strongly, the forecasts point in this direction, that has made us somewhat cautious.”

                    “We will see in the autumn what the economic situation is. Then we can probably decide if we do another 0.5% (rate hike) or less,” he added.

                    He also noted that ECB might have to accept a moderate recession to curb inflation. “We hope that won’t become necessary,” he said.

                    BoC stands pat as economic slowdown eases inflationary pressures

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                      ActionForex.com
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                      BoC keeps overnight rate target unchanged at 5.00%, aligning with market expectations. In its policy statement, the central bank emphasized its ongoing concern about inflationary risks, stating it “remains prepared to raise the policy rate further if needed.”

                      Nevertheless, BoC also noted recent data suggesting that the Canadian economy is “no longer in excess demand”. This shift is seen as contributing to a reduction in inflationary pressures across a broad range of goods and services prices. This observation suggests a subtle yet significant change in the economic environment, potentially signaling a pivot in the central bank’s future policy decisions.

                      Full BoC statement here.

                      USD/CAD is steady after the policy announcement. The focus for the rest of the week will be on whether rebound from 1.3479 could extend through 1.3625 resistance decisively to confirm that whole correction from 1.3897 has completed.

                      EU Malmstrom preparing a list of rebalancing measures for US auto tariffs

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                        ActionForex.com
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                        EU Trade Commissioner Cecilia Malmstrom said today that while she hoped Commission President Jean-Claude Juncker’s visit to the US on July 25 could ease trade tensions, the EU is prepared for retaliation. She said that “if the U.S. would impose these car tariffs that would be very unfortunate. We are preparing together with our member states a list of rebalancing measures there as well. And this we have made that clear to our American partners.” And she added that “it is done in the same way as with steel and aluminum.”

                        Also, regarding Juncker’s visit, she said it’s to “try to establish a good relations, try to see how we can de-escalate the situation, avoiding it going further and see if there is a forum where we can discuss these issues.” She added that “we don’t go there to negotiate anything.”

                        Juncker himself said he’s “upbeat and related” ahead of the trip to Washington. He also emphasized that “we will continue to react tit-for-tat to the provocations that might be thrown at us.” And, “when it comes to trade, the European Union, its internal market, its single market, form an indivisible unity and it’s the Commission that is in charge of articulating trade policy. All efforts to divide the European Union are in vain.”

                        US ISM services rose to 64 in May, another record high

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                          ActionForex.com
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                          US ISM Services PMI rose 1.3 pts to 64.0 in May, above expectation of 62.9. That’s another record higher, following 63.7 in March. Looking at some details, business activity/production rose 3.5 to 66.2. New orders rose 0.7 to 63.9. Employment dropped -3.5 to 55.3. Prices rose 3.8 to 80.6.

                          ISM said: “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for May (64 percent) corresponds to a 5.2-percent increase in real gross domestic product (GDP) on an annualized basis.”

                          Full release here.

                          Fed Bullard: Stay with very easy monetary policy inside the pandemic tunnel

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                            ActionForex.com
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                            St. Louis President James Bullard said in a Bloomberg TV interview that “It’s too early to talk about changing monetary policy.” Policymakers want to “stay with our very easy monetary policy while we are still in the pandemic tunnel”. “If we get to the end of the tunnel,” he added, “it will be time to start assessing where we want to go next.”

                            “When you start to get to 75% vaccinated, 80% vaccinated and CDC starts to give more hopeful messages that we are bringing this under better control and starts relaxing some of their guidelines, then I think the whole economy will gain confidence from that,” Bullard said. “Cases are up right now, that is a little bit concerning.”

                            Australia’s NAB business confidence steady at 1, conditions normalize with slowing cost growth

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                              ActionForex.com
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                              Australia’s NAB Business Confidence held steady at 1 in April. Business Conditions index fell from from 9 to 7. Notably, trading conditions declined from 15 to 12, while profitability was unchanged at 6. A significant reduction was observed in employment conditions, which dropped from 6 to 2.

                              NAB Chief Economist Alan Oster reflected on these figures: “All three components of business conditions were back at their long-run averages in April.” He described this as a milestone, marking a normalization after the unusually high levels of 2022, “reflecting slowing economic growth.”

                              Labour cost growth decreased to 1.5% from 1.7%, and purchase cost growth slowed to 1.2% from 1.5%. Meanwhile, product price growth rose slightly to 0.9% from 0.7%. Retail price growth moderated significantly to 0.9% from 1.4%.

                              Oster noted, “There was some further improvement in the pace of cost growth in April, and a step down in the pace of retail price growth.” He suggested these changes could indicate easing in inflation in the second quarter, though further observation is needed to confirm this trend.

                              Full Australia NAB business confidence release here.

                              France PMIs: Softer growth in July dents hopes of swift recovery to long-run rate

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                                ActionForex.com
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                                Franc PMI manufacturing dropped to 50.0 in July, down from 51.9, missed expectation of 51.6. PMI services dropped to 52.2, down from 52.9, missed expectation of 52.8. PMI Composite dropped to 51.7, down from 52.7.

                                Commenting on the Flash PMI data, Eliot Kerr, Economist at IHS Markit said:

                                “Following a seven-month high in June, growth of the French private sector eased at the start of the third quarter. The slowdown was driven by softer new order growth, as sales at manufacturers slipped back into contraction territory at a time of ongoing geopolitical tensions.

                                “Notably, the rate of expansion in overall business activity remains historically subdued and far weaker than the averages registered during 2017 and 2018. Moreover, softer growth in July dents hopes of a swift recovery to the long-run rate, which were beginning to materialise after June’s solid performance.”

                                Full release here.

                                EUR/GBP rally drags down GBP/JPY and GBP/USD

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                                  ActionForex.com
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                                  EUR/GBP spikes higher in early European session, after clearing 0.8750. A major reason is believed to be Bundesbank’s monthly purchase for UK’s contribution to EU membership. Today’s move could be exaggerated by thinner holiday liquidity. Also EUR/GBP bearish could be finally giving up after the cross failed to sustain below 0.8686 last week. But it’s worth a watch to see if the rebound is turning into something sustainable. For now, based on current momentum, it could be heading back to 61.8% retracement of 0.8967 to 0.8666 at 0.8852 with a short term based formed.

                                  The move in EUR/GBP is also affecting other pairs. GBP/JPY dip notably lower after hitting 150.48.

                                  GBP/USD also dips after hitting 1.4243.

                                  On other hand, EUR/USD is staying firm after edging higher to 1.2475.

                                  Australia retail sales turnover down sharply by -3.9% mom in Dec

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                                    ActionForex.com
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                                    Australia retail sales turnover dropped sharply by -3.9% mom to AUD 34.47m in December, much worse than expectation of -0.3% mom. That’s the first contraction after 11 straight months of growth. Still, sales turnover remained elevated at its sixth highest level on record, and was up 7.5% yoy for the year.

                                    Ben Dorber, ABS head of retail statistics, said: “The large fall in December suggests that retail spending is slowing due to high cost-of-living pressures… The latest Consumer Price Index showed that prices continued to rise strongly in the December quarter. To see the effect of consumer prices on recent turnover growth, it will be important to look at quarterly retail sales volumes which we will release next week.”

                                    Full release here.

                                    UK manufacturing contracts most since 2002, GBP/USD eyes 1.2668 minor support

                                      By
                                      ActionForex.com
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                                      In April, UK industrial production dropped -2.7% mom, -1.0% yoy, much worse than expectation of -1.0% mom, 0.9% yoy. Manufacturing production dropped -3.9% mom, -0.% yoy, also way below expectation of -1.4% mom, 2.0% yoy. The contraction in manufacturing sector was the worst since June 2002 and the impact of Golden jubilee shutdowns. Also from UK, visible trade deficit narrowed to GBP -12.1B in April versus expectation of GBP -13.1B.

                                      GBP/USD dips notably after the data releases. Focus is immediately back on 1.2668 minor support. Break will indicate completion of the corrective rebound from 1.2559. Further decline would then be seen back to retest 1.2559.

                                      Eurozone Sentix investor confidence dropped to -26.4, dynamics reminiscent of crisis year 2008

                                        By
                                        ActionForex.com
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                                        Eurozone Sentix Investor Confidence dropped from -15.8 to -26.4 in July, worse than expectation of -20.0. That’s the lowest level since May 2020. Current situation index dropped from -7.3 to -16.5, worst since March 2021. Expectations index dropped from -24.0 to -35.8, lowest since December 2008.

                                        Sentix said: “In every respect, the dynamics are reminiscent of the crisis year 2008, and what was then the collapse of the financial system is now the danger of the collapse of the European energy supply. While the financial system essentially consists of money, which can be printed by its own central bank in any amount as needed, a lack of gas is not so easy to replace.

                                        “Moreover, practically all sectors of the economy would be negatively affected by a gas or electricity blackout. So it is time for governments to realise the gravity of the situation and take effective countermeasures. One way or another, they cannot rely on the ECB this time. Rather, the states should rely on war diplomacy”.

                                        Full release here.

                                        Risk sentiment resilient ahead of FOMC rate hike, some previews

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                                          ActionForex.com
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                                          Fed is widely expected to continue to slow down its tightening pace today, and raise interest rate by 25bps to 4.50-4.75%. The accompanying statement should clearly indicate that the work is not done yet on fighting inflation. Such message should be echoed by Fed Chair Jerome Powell in the post-meeting press conference.

                                          Fed fund futures are now pricing in another 25bps rate hike to 4.75-5.00% in March. But the main questions are, firstly, whether rate will peak above or below 5% level, and secondly, for how long it will stay there. No concrete answer would be provided at least until new economic projections to be published in March.

                                          Here are some suggested readings on FOMC:

                                          Overall risk sentiment has been resilient going into FOMC announcement. For now, further rise is in favor in S&P 500 as long as 55 day EMA (now at 3934.97) holds. Decisive break of 41.00.51 resistance will confirm resumption of whole rebound from 3491.58 low. Further break of 61.8% projection of 3491.58 to 4100.51 from 3764.49 could prompt upside acceleration to 100% projection of 3491.58 to 4100.51 from 3764.49 at 4373.42, even as a bear market rally. If that happens, risk-on sentiment would continue to cap any rebound attempt of Dollar.

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