Wed, Mar 29, 2023 @ 12:17 GMT

UK unemployment rate unchanged at 4.2%, earnings grew 2.6%

    UK unemployment stayed unchanged at 4.2% in March, at the lowest level since 1975.

    Average weekly earnings rose 2.9% 3moy excluding bonuses

    Average weekly earnings rose 2.6% 3moy including bonus, met expectations.

    Claimant count rose 31.2k in April versus expectation of 13.3k.

    Sterling is a touch higher after the release.

    NAFTA talks unlikely to have breakthrough before My 17

      Canadian Prime Minister Justin Trudeau discussed with Trump on phone yesterday on brining NFATA renegotiation to a “prompt conclusion”. But US Commerce Secretary Wilbur Ross side that none of the “big hot topics” were resolved as the May 17 deadline looms. He added hose are “very complex issues”, and are still “a work in progress”.

      It’s reported that, according to sources”, there is no plan for Mexican Economy Minister Ildefonso Guajardo or Canadian Foreign Minister Chrystia Freeland, and U.S. Trade Representative Robert Lighthizer to meet this week. It’s unlikely for any breakthrough in the negotiation.

      Currently, Canada and Mexico have their US steel tariffs exemption extended to June 1. Ross said, “depending on where we are on NAFTA on June 1, the president will decide whether or not to extend their situation.” And “it’s unforecastable at the moment.”

      BoJ Kuroda: “Absolutely no plan” to raise yield target

        BoJ Governor Kuroda told the parliament today that there is “absolutely no plan” to raise the yield target under the Yield Curve Control for now, as inflation is still distant from 2%. He also explained that removing the time frame to meet the 2% inflation target is not necessarily related to the side effect of monetary policy on bank profits.

        Regarding YCC, Kuroda said bond purchases are more sustainable under the framework, as the central bank has more flexibility. And, it’s be able to maintain long term year near 0% with smooth operations in JGB purchases.

        German GDP growth slowed to 0.3% qoq in Q1, Swiss PPI rose to 2.7% yoy in March

          First batch of data in European session saw German GDP rose 0.3% qoq, 2.3% yoy in Q1, below expectation of 0.4% qoq, 2.4% yoy. That’s also notably slower than Q4’s 0.6% qoq, 2.9% yoy. But nonetheless, the figures are decent.

          Swiss PPI rose 0.4% mom, 2.7% yoy, in April, up from March’s -0.2% mom, 2.0% yoy.

          UK employment data are upcoming. In particular, unemployment rate is expected to be unchanged at 4.2% in March. Average weekly earnings are expected to grow 2.6% 3m/y.

          Eurozone will also release industrial production, GDP. More focus will be on German ZEW economic sentiment.

          RBA Debelle: 2% is the focal point for wage outcomes now

            RBA Deputy Governor Guy Debelle delivered a speech titled “The Outlook for the Australian Economy” at the CFO Forum in Sydney today, where he talked about wages.

            He noted that “the experience of other countries with labour markets closer to full capacity than Australia’s is that wages growth may remain lower than historical experience would suggest.”

            Currently in Australia “2% seems to have become the focal point for wage outcomes, compared with 3–4% in the past.” Even so, “”there is a risk that it may take a lower unemployment rate than we currently expect to generate a sustained move higher than the 2% focal point evident in many wage outcomes today”.

            RBA minutes reiterated no strong case for near term hike

              RBA May meeting minutes reiterated that central bank’s stance that it’s not in rush to lift interest rates.

              The minuted noted that “stronger growth was expected over the following couple of years, which could reduce spare capacity in the economy and lead to a further gradual decline in the unemployment rate.” But, “the increase in wages growth and inflation was expected to be gradual however because spare capacity in the economy was expected to be reduced only slowly.”

              And, “as progress in lowering unemployment and having inflation return to the midpoint of the target range was expected to be gradual, members also agreed that there was not a strong case for a near-term adjustment in monetary policy.”

              Trump’s tweet on ZTE prompted bipartisan criticism

                Trump’s tweet regarding helping China telecoms company ZTE prompted bipartisan criticism and concerns on his softening stance. Republican Senator Marco Rubio said he hoped “this isn’t the beginning of backing down to China.” Democrat Senator Chuck Schumer said “this leads to the greatest worry, which is that the president will back off on what China fears most – a crackdown on intellectual property theft – in exchange for buying some goods in the short run.”

                On the other hand, Trump defended with another tweet saying that “ZTE, the large Chinese phone company, buys a big percentage of individual parts from U.S. companies. This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi”.

                US Ambassador to China Branstad: Trump wants a “dramatic increase” in food exports to China

                  US Ambassador to China Terry Branstad said in Tokyo today that both countries are still “very far apart” on resolving trade frictions. Branstad, was present at the meeting between Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He in Beijing earlier this month. He noted that “there are many areas where China has promised to do but haven’t. We want to see a timetable. We want to see these things happen sooner or later.”

                  He added that Trump would like to see a “dramatic increase” in food exports to China and “we’d like to see China being just as open as the United States.”

                  Trade talks will resume today with Liu arrived in Washington.

                  Dow shrugs off yield rise, heading to 25000

                    DOW opens higher on some optimism over US-China trade talk. Rise in treasury yields is shrugged off by investors. 10 year yield is back above 2.99 and hit at high as 2.997 so far. But there is no impact on stocks so far.

                    For now 25000 is the next handle to overcome. But based on current momentum, the real hurdle is between 25800.35 resistance and 78.6% retracement of 26616.71 to 23360.29 at 25919.83. We’ll keep monitoring the momentum to see if rise from 23531.31 is developing into an impulsive move to resume the larger up trend. For now, it’s early to tell.

                    OPEC raised both supply and demand forecasts, concerned with US trade relations

                      In May’s Monthly Oil Market Report, OPEC rated both 2018 oil supply and demand forecasts.

                      For 2018, oil demand growth is forecast to increase by around 1.65mb/d to average 98.85 mb/d. Growth was revised higher from prior month by 25tb/d. China is anticipated to lead oil demand growth in 2018, followed by Other Asia and OECD Americas. Non-OPEC supply growth was revised up by 0.01mbs in 2018 to 1.75mb/d, averaging 59.62mb/d in total. Meanwhile, OPEC production rose 12tb/d to average 31.93mb/d in April.

                      In the section regarding world economy, OPEC warned of the risk of development in trade relations. In particular, it “the latest rounds of US sanctions on Russia, tariffs on Chinese products in combination with considerable requests by the US in trade negotiations with China, US tariffs on steel and aluminium, prolonged North American Free Trade Agreement (NAFTA) negotiations, as well as the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) with IR Iran all point to rising uncertainty.

                      Full report can be found here.

                      A look at EURJPY and CADJPY as JPY in selloff mode

                        We’d soon enter into US session. JPY continues to trade with one of the weakest, along with NZD.

                        A quick glance at JPY Action Bias table, we can that EURJPY and GBPJPY are the stronger ones intraday. But both D Action Bias are neutral. CADJPY may lack momentum in H Action Bias, but 6H and D Action Bias argue it’s in a trend. That prompts us to have a deeper look.

                        EURJPY D action bias chart clearly shows that it’s rebounding after a prior decline halts ahead of near term support around 129 level. Current rebound, while strong, is not in clearly a trend yet. It could be part of a range consolidation pattern.

                        On the other hand, CADJPY D action bias chart showed it’s in a solid up move from around 80 level. The moved turned into consolidation after failing 86. The rally could indeed be resuming with last week’s breakout. So, while EURJPY is stronger today, CADJPY is a better candidate for trend trading.

                        Back at the regular bar chart, for now, intraday bias in CADJPY stays neutral. But break of 86.05 will confirm rise resumption. CADJPY should target 61.8% projection of 80.52 to 85.75 from 83.88 at 87.11. Though, break of 85.13 will delay the bullish case and bring more consolidation first.

                        Trump offered concession ahead of US-China trade talks, Hong Kong HSI gains 1.35%

                          China’s Vice Premier Liu He, President Xi Jinping’s top economic adviser is traveling to Washington to start the second round of trade talks tomorrow, with US Treasury Secretary Steven Mnuchin. Liu and his team will stay from May 15 to 19 according to a Foreign Ministry spokesperson.

                          Ahead of the meeting, Trump said he was working with Xi to help get Chinese telecoms company ZTE back in to business.


                          And he added that


                          White House spokeswoman Lindsay Walters confirmed that US officials were in contact with Beijing about ZTE. And, Commerce Secretary Wilbur Ross is expected to “exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE based on its facts.”

                          This is seen a concession by Trump ahead of the trade talks. And the news lifted Hong Kong stocks sharply higher. Hong Kong HSI gained 419.02 pts, or 1.35%, to close at 31541.08.

                          Cleveland Fed Mester: Fed fund rates could overshoot long run level

                            In a speech titled “Issues for U.S. Monetary Policy“, Cleveland Fed President Loretta Mester expressed her support for further rate hike. She noted that “the medium-run outlook supports the continued gradual removal of policy accommodation; it seems the best strategy for balancing the risks to both of our policy goals and avoiding a build-up of financial stability risks.

                            Regarding inflation, she noted that it will take a year or two to stabilize around the 2% target. And, she added that “we want to give inflation time to move back to goal … this argues against a steep path” on tightening. But, “as the expansion continues, it could be that in order to maintain our policy goals, we may need to move the fed funds rate, for a time, a bit above the level of the funds rate that is expected to prevail over the longer run”.

                            She also pointed to Fed’s March economic projections that fed funds rates could move a bit above the longer-run level at 3% by 2020. She noted that “2020 is a long time away and the policy path actually followed will be responsive to changes in the outlook.

                            ECB Villeroy de Galhau: Ending asset purchase in September or December not “a deep existential question”

                              ECB Governing Council member, Bank of France Governor Francois Villeroy de Galhau said today that “the time when our net asset purchases will end is approaching”. Currently, ECB’s EUR 30B per month asset purchase program is set to end after September. Villeroy de Galhau said whether it will end in September, or December is not “a deep existential question”.

                              Regarding interest rates, he added that “we could give additional guidance on its timing–well past meaning at least some quarters but not years–and its contingency on the inflation outlook.”

                              UK PM May reiterated commitment on nuclear pact to Iran

                                UK Prime Minister Theresa May reiterated UK’s commitment to the Iran nuclear deal to Iran President Hassan Rouhani over a phone call during the weekend. And she urged release of jailed British Iranians “on humanitarian grounds”. A Downing Street spokesman said that ” it is in both the UK and Iran’s national security interests to maintain the deal and welcomed president Rouhani’s public commitment to abide by its terms, adding that it is essential that Iran continues to meet its obligations.”

                                Foreign Ministers of the UK, Germany and France will meet this Tuesday to discuss on keeping the Iran nuclear after after US withdrawal.

                                Separately, French Finance Minister Bruno Le Maire urged EU to ” to work among ourselves in Europe to defend our economic sovereignty.” And, EU should hold “collective discussions with the United States to obtain… different rules” covering European companies that do business with Iran. Le Maire added that “Do we accept extraterritorial sanctions? The answer is no.” And, “Do we accept that the United States is the economic gendarme of the planet? The answer is no.”

                                No breakthrough in NAFTA talks as May 17 deadline looms

                                  The latest round of NAFTA negotiations ended last week without a breakthrough. US Trade Representative Robert Lighthizer just said pledge to continue working with Mexico and Canada.

                                  House Speaker Paul Ryan has given a May 17 deadline for notification of the new agreement. That’s a working deadline for having the new agreement to go through the current Congress by December.

                                  But both Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo are more focused on the “quality” of the deal rather than the pressure of time.

                                  Freeland said that “the negotiations will take as long as it takes to get a good deal.”

                                  Guajardo emphasized that “we’re not going to sacrifice the quality of an agreement because of pressure of time.”

                                  Bolton: Europeans Companies could face US sanctions

                                    Trump’s national security advisor John Bolton talked bout the decision to withdraw from the Iran nuclear pact on Sunday. He indicated that it’s “possible” for the US to impose sanctions on European companies that continue to do business with Iran. And, he noted that “it depends on the conduct of other governments”.

                                    Bolton also added, “the president said in his statement on Tuesday that countries that countries that continue to deal with Iran could face U.S. sanctions. Europeans are going to face the effective U.S. sanctions, already are really, because much of what they would like to sell to Iran involves U.S. technology, for which the licenses will not be available.” But he said he’s “hopeful in the days and weeks ahead” there would be a deal that really works.

                                    ECB Draghi suggested a new, common “fiscal instrument” for extra layer of stabilization

                                      ECB President Mario Draghi delivered a speech titled “Risk-reducing and risk-sharing in our Monetary Union” at the European University Institute today.

                                      He suggested that Eurozone needs a new, common “fiscal instrument” to ensure that member states wouldn’t be pulled apart during economic shocks. He said “we need an additional fiscal instrument to maintain convergence during large shocks, without having to over-burden monetary policy.” And, “its aim would be to provide an extra layer of stabilization, thereby reinforcing confidence in national policies.”

                                      St. Louis Fed Bullard: Interest rate may have reached neutral level already

                                        St. Louis Fed President James Bullard said today that interest rates may have already reached the so called “neutral” level. Beyond this point, monetary policy will become restrictive. And Bullard said that there are “reasons for caution in raising the policy rate further given current macroeconomic conditions.”

                                        At the same time, Bullard pointed to market-based inflation expectations and said investors “believe there is currently little inflationary pressure in the U.S.” Thus, leave interest rates unchanged would “re-center inflation expectations at the target.”

                                        Canada employment dropped -1.1k, missed expectation, USD/CAD slightly higher

                                          Canadian employment market contracted -1.1k in April, much worse than expectation of 20.5k. Unemployment rate was unchanged at 5.8%, in line with consensus.

                                          From US, import price index rose 0.3% mom in April, below expectation of 0.50%.

                                          USD/CAD recovers in reaction to the release, but there is no follow through buying yet. It has to overcome a minor support at 1.2813 before forming a temporary bottom. For now, further decline is still expected in the pair before the weekly close.