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Canada retail sales dropped -0.1%, ex-auto sales dropped -0.2%

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    ActionForex.com
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    Canada retail sales dropped -0.1% mom in August to CAD 51.5B, below expectation of 0.4% mom. Ex-auto sales dropped -0.2% mom, above expectation of -0.3% mom. Sales were down in six sectors, representing 51% of total retail trade.

    Retail sales in Ontario dipped -0.8%. In Manitoba (-1.6%) retail sales were down for the first time in three months. Sales rebounded in British Columbia (+0.8%) and New Brunswick (+3.8%).

    Full release here.

    February 25 imagery suggests North Korea testing nuclear reactors at Yongbyon

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      ActionForex.com
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      Defence & security intelligence analysts Jane’s reported that North Korea likely had preliminary testing it’s nuclear reactors at the Yongbyon research facility. That came weeks ahead of the planned meeting between North Korean Leader Kim Jong-un and South Korean President Moon Jae-in next month. There will also be a planned meeting between Kim and US President Donald Trump in May.

      But it should be noted that the analysis was based on an imagery from February 25. Jane’s noted:-

      • Satellite imagery suggests that preliminary testing of North Korea’s experimental light water reactor (ELWR) at Yongbyon may have begun.
      • Signatures of testing in late February follow logically from numerous indicators of increased activity at the ELWR that were visible throughout 2017, although reactor criticality is only likely to occur later in 2018 or in 2019.
      • The ELWR was built and optimized for electricity production, but has ‘dual-use’ potential and can be modified to produce fissile material for nuclear weapons.

       

      AUD/JPY and NZD/JPY break support ahead of Kuroda’s last BoJ meeting

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        ActionForex.com
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        Yen is seeing a broad recovery today as investors anticipate Haruhiko Kuroda’s last BoJ monetary policy meeting tomorrow. As with four of his predecessors, Kuroda is unlikely to make any changes to policy during this last meeting, with his comments expected to echo what has been said numerous times before. Specifically, he is likely to reiterate that the current ultra-loose monetary policy is still appropriate until there is sustained inflation above the 2% target led by wage growth.

        Meanwhile, the government’s nominees for the next BoJ Governor and Deputy Governors have been approved by the lower house of parliament today. The upper house will vote on the nominees tomorrow. Kazuo Ueda will officially replace Kuroda on April 8, and chair his first monetary policy meeting on April 27-28. The two deputy governor nominees, Shinichi Ueda and Ryozo Himino, will take office from March 20.

        Yen is making progress today by breaking through near term resistance levels against commodity currencies. AUD/JPY’s break of 90.21 support argues that corrective rise from 87.00 has completed at 93.02. Sustained trading below channel support (now at 89.91) will affirm this bearish case and target 87.00/88.10 support zone.

        NZD/JPY’s break of 83.59 support also argue that corrective pattern from 81.02 has completed at 85.20. Sustained trading below trend line support (now at 83.44) will bring deeper fall to 82.31 support first, and then 81.02 low.

        Fed’s Mester not eager to consider rate hikes

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          ActionForex.com
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          Cleveland Fed President Loretta Mester, in an interview with WSJ, expressed a cautious stance on interest rate hikes, stating, “I am not eager to consider interest rate hikes.” Mester emphasized that Fed is in a “really good place” to study the economy before deciding on the next steps for interest rates.

          Mester highlighted that it’s too early to determine whether the disinflation has stalled or if inflation is set to reverse. She noted that there are clear indications that the real side of the economy is “moderating”, which is contributing to a better balance within the economy.

           

          New Zealand Treasury: Continued Business Pessimism Increased Downside Risk

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            In the Monthly Economic Indicators report, New Zealand Treasury warned that “continued weakness in business confidence to weigh on domestic economic growth”, “renewed US-China trade tensions lead to significant market volatility”. Also, “global slowdown in manufacturing continues, but shows little sign of spilling over into services”.

            The report noted that “manufacturing sector indicated contractionary sentiment for the first time since August 2012” while ANZ Business Confidence fell further. And, “continued general business pessimism has increased the downside risk for our near-term GDP growth forecasts, but there are tentative signs that the downward trend in confidence may have stabilised.”

            Full report here.

            Released from New Zealand, terms of trade index rose 1.6% qoq in Q2, up from 1.0% qoq and beat expectation of 1.0% qoq.

            Swiss CPI unexpectedly slowed to 3.3% yoy, EUR/CHF extends rebound

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              ActionForex.com
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              Swiss CPI dropped -0.2% mom in September, below expectation of 0.1% mom. The decrease of 0.2% compared with the previous month can be explained by several factors including falling prices for fuels, heating oil, hotels and supplementary accommodation. In contrast, prices for clothing and footwear increased.

              Comparing with the same month a year ago, CPI slowed to 3.3% yoy, down from 3.5% yoy, below expectation of 3.5% yoy. Core CPI (excluding fresh and seasonal products, energy and fuel) was flat mom, up 2.0% yoy (unchanged from August). Domestic product prices rose 1.8% yoy (unchanged from August). Imported product prices rose 7.8% yoy (down from 8.6% yoy in August).

              Full release here.

              EUR/CHF rises further as Swiss CPI unexpectedly slowed. Immediate focus is now on 0.9712 resistance. Firm break there will raise the chance of larger bullish reversal, and target 0.9864 structural resistance for confirmation.

              Into US session: Sterling suffers fresh selling, Dollar strongest

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                ActionForex.com
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                Entering into US session, Dollar is the strongest one for today and is making some progresses on rally attempt. USD/CAD has taken out 1.3340 resistance which completes a near term head and shoulder reversal pattern. But at this point, the greenback still fails to break near term resistance against Euro, Swiss and Aussie yet. Boston Fed Eric Rosengren’s speech provides little inspiration. And the greenback might look into ISM services.

                At this point, Euro is the second strongest one, followed by Swiss Franc. Data from Eurozone continue to paint a picture that the worst is behind. Italy services PMI rose to 50.4, back above 50. France PMI services was revised up to 50.2, back above 50. Eurozone PMI services was also revised up to 52.8. Retail sales rose 1.3% mom. German 10-year yield is back above 0.18 but European stocks shrug.

                Meanwhile, Sterling suffers fresh selling at the moment and is trading as the weakest one. Weaker than expected PMI services provide no support. There’s report that UK isn’t expecting a breakthrough on Irish backstop when Attorney General Geoffrey travels to Brussels tonight. But it’s hardly any news. Commodity currencies follow as next weakest.

                In Europe, currently:

                • FTSE is up 0.35%.
                • DAX is down -0.28%.
                • CAC is down -0.25%.
                • German 10-year yield is up 0.0201 at 0.183.

                Earlier in Asia:

                • Nikkei dropped -0.44%.
                • Hong Kong HSI rose 0.01%.
                • China Shanghai SSE rose 0.88%.
                • Singapore Strait Times dropped -0.52%.
                • Japan 10-year JGB yield rose 0.008 to 0.009.

                WTI resumes up trend after brief consolidations, targeting 65.4

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                  ActionForex.com
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                  WTI oil resumes recent up trend after brief consolidation and hits as high as 62.70 so far in Asian session. It’s believed that restoration of US oil production after the deep freeze in Texas could take longer than expected. With possible pipeline freeze and work on examination oil infrastructure, resumption in output could take more than just days.

                  Near term outlook in WTI will now stay bullish as long as 58.57 support holds. Next target is 65.43 key long term structure resistance.

                  BoE Haldane: Roughly half of the pandemic slump recovered

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                    ActionForex.com
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                    BoE Chief Economic Andy Haldane said there was a bounce back in the economy, and it has been a “V”. “Roughly half of the roughly 25% fall in activity during March and April has been clawed back over the period since. Nevertheless, “that of course doesn’t tell us about where we might go next”. Looking ahead, he added, “we could do more QE, could purchase other assets” and “we are reviewing negative rates”.

                    As for the challenges ahead in the next three years, Haldane said “overwhelmingly, the main challenge….. is likely to continue to be assessing the on-going effects of the Covid crisis on output, jobs and inflation and to set monetary policy in the light of this”.

                    Irish PM Varadkar: Possible for us to come to an agreement on Brexit

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                      ActionForex.com
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                      Sterling rebounded strongly overnight and would very likely end the week and the biggest winner. It was firstly lifted by the “constructive” talks between UK Prime Minister Boris Johnson and Irish Prime Minister Leo Varadkar. Then upbeat comments from Varadkar added more fuel to the Pound’s rally.

                      Varadkar told reporter: “I think it is possible for us to come to an agreement, to have a treaty agreed, to allow the UK to leave the EU in an orderly fashion and to have that done by the end of October.. Also, “I don’t think this should be seen in the context of who’s making concessions, or who the winners and losers are, I don’t think that’s the game any of us want to play.”

                      Earlier, they issued a joint statement, saying that “both continue to believe that a deal is in everybody’s interest”. More importantly, “they agreed that they could see a pathway to a possible deal. Their discussion concentrated on the challenges of customs and consent.” UK Brexit Secretary Steve Barclay and EU negotiator Michel Barnier will meet in Brussels on Friday. Officials will “continue to engage intensively” with each other in the search for a deal.

                      China PMI manufacturing broke downtrend, but stayed contractionary

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                        ActionForex.com
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                        China PMI manufacturing rose 0.1 to 49.5 in January, up from 49.4 and beat expectation of 49.3. It’s, nonetheless, the second month of contractionary reading. It’s noted in the release that the continuous decline since August last year was finally broken, showing signs of stabilization. Slight increase in export orders also suggested that sharp decline export growth since November was slowing down.

                        However, decline in new orders and backlog orders reflected downward pressure on demand. Overall, “the current economy has signs of stabilization, but the foundation still needs to be consolidated. Also from China PMI non-manufacturing rose to 54.7, up from 53.8, and beat expectation of 53.9. Full release in simplified Chinese.

                        Also release in Asia session, Japan industrial production dropped -0.1% mom in December versus expectation of -0.5% mom. Housing starts rose 2.1% yoy in December, matched expectation. Australia import prices rose 0.5% qoq in Q4, above expectations of 0.3% qoq. UK Gfk consumer confidence was unchanged at -14 in January.

                        BoJ Wakatabe: Necessary to be vigilant against risk of decline in inflation

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                          ActionForex.com
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                          BoJ Deputy Governor Masazumi Wakatabe warned today that “it’s necessary to be vigilant against the risk of a decline in the inflation rate.” Temporary external shocks like the coronavirus pandemic could lead to persistent stagnation. And, “in order to address both upside and downside risks to prices, the BOJ must continue to strongly commit itself to achieving its price target.”

                          Additionally, he said the BoJ must “constantly have deep discussions” on improving its policy. “It’s necessary to give further consideration to what kind of monetary policy should be taken in the COVID-19 era, while referring to discussions being held at other central banks.”

                          New Zealand’s Q2 CPI beats expectations despite slowdown

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                            ActionForex.com
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                            New Zealand’s CPI experienced a slightly slowed but stronger-than-expected rise in Q2, registering 1.1% qoq increase compared to Q1’s 1.2% qoq. This exceeded the anticipated 0.9% qoq rise for the quarter. Year-on-year inflation also surpassed expectations, with 6.0% yoy rise as opposed to expected 5.9% yoy, despite slowdown from 6.7% yoy in the previous quarter.

                            StatsNZ, New Zealand’s pointed out that food prices, which rose 2.2% qoq and 12.3% yoy, were the primary drivers of Q2 annual inflation rate. Rising prices for vegetables, ready-to-eat food, and dairy products like milk, cheese, and eggs played a significant role. Housing and household utilities, another crucial sector, experienced quarterly increase of 1.2% qoq and 6.0% yoy increase annually.

                            On analyzing the CPI data further, it was found that excluding food, inflation increased by 4.6% yoy. Excluding housing and household utilities, it increased by 6.1% yoy. When excluding alcoholic beverages and tobacco, the annual increase stood at 5.9% yoy. CPI increased by 6.1% yoy when food, household energy, and vehicle fuels were excluded.

                            Full New Zealand CPI release here.

                            Gold breaking down, heading back to 1676 support

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                              ActionForex.com
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                              Gold drops notably in early US session and it’s now heading back to 1700 handle. Current development argues that corrective recovery from 1676.65 has completed at 1755.29, ahead of 1764.31 support turned resistance. It’s also held well below falling 55 day EMA, keeping near term outlook bearish. Corrective fall from 2075.18 is likely still in progress.

                              Break of 1676.65 will extend such correction to 50% retracement of 1160.17 to 2075.18 at 1617.67. We’ll look for bottoming signals again there.

                              BoE publishes discussion paper on central bank digital currency

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                                ActionForex.com
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                                BoE published a discussion paper on central bank digital currency today. Governor Andrew Bailey said in the release, “we live in an increasingly digitalized world where the way we make payments and use money is changing rapidly.”

                                “The prospect of stablecoins as a means of payment and the emerging propositions of CBDC have generated a host of issues that central banks, governments, and society as a whole, need to carefully consider and address. It is essential that we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money,” he added.

                                Full release here.

                                Fed Kaplan: US economy is more more interest rate sensitive than it has been historically

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                                  ActionForex.com
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                                  Dallas Fed President Robert Kaplan warned in a speech that in the even of an economic downturn,  level, growth and credit quality of corporate debt could “contribute to a deterioration in financial conditions which could, in turn, amplify the severity of a growth slowdown in the U.S. economy.” Thus, vigilance is warranted and Fed will continue to monitor corporate debt.

                                  Meanwhile, he is “also sensitive to these corporate debt developments in light of the historically high level of U.S. government debt and the forward estimates for the path of government debt to GDP. An elevated level of corporate debt, along with the high level of U.S. government debt, is likely to mean that the U.S. economy is much more interest rate sensitive than it has been historically.”

                                  Full speech here.

                                  China Caixin PMI manufacturing showed “marginal weakening” in March

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                                    ActionForex.com
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                                    China Caixin PMI manufacturing dropped to 51.0 in March, down from 51.6 and missed expectation of 51.7. That’s also the lowest level in four months.

                                    Quotes from the release by Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group:

                                    • “The Caixin China General Manufacturing PMI fell to 51.0 in March. The sub-indices of output and employment both fell from the previous month, while new orders increased at a slightly slower rate, highlighting that the deceleration in the manufacturing sector was mainly driven by the supply side and that demand has remained relatively stable.
                                    • “Output prices rose at a faster pace in March than in the previous month while the increase in input costs weakened markedly, which will help shore up manufacturers’ profits.
                                    • “The willingness of companies to restock waned as, apart from a slower expansion in output, the growth rates in stocks of finished goods and stocks of purchases also declined in March.
                                    • “Overall, the manufacturing PMI reading in March showed that demand was not as strong as expected, leading to lower willingness of manufacturers to produce and restock. However, the ability of manufacturers to make a profit was beefed up by the stable increase in new orders and the much slower jump in input costs.
                                    • “The growth momentum of the Chinese manufacturing economy may have weakened in March, but at a marginal pace.”

                                    Released over the weekend, however, the official China PMI manufacturing rose to 51.5, up from 50.3. Official PMI manufacturing rose to 54.6, up from 54.4.

                                    Fed Daly in watch-and-see position on interest rate

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                                      ActionForex.com
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                                      San Francisco Fed President Mary Daly said she’s in a “watch-and-see position right now” regarding further interest-rate cut. In inflation data comes in “more robust, that would be confidence-generating for me”. However, if data is soft, “that would be something I would want to consider.”

                                      Though she also noted that “right now, with little inflationary pressure and considerable uncertainty about the threshold for full employment, I’m biased towards including as many workers as possible in the expansion.”

                                      Into European session: Euro lower after ECB, commodity currencies recover

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                                        ActionForex.com
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                                        Entering into US session, European majors are the weakest ones today. Euro dips notably after ECB left interest rate unchanged and revised forward guidance. It will now keep interest rates at present level through the end of 2019, prolonged from summer of 2019. Also a new round of quarterly TLTRO-III is announced. These are actually not surprising given the deterioration in Eurozone outlook. Focus will turn to ECB President Mario Draghi’s press conference and new economic projections. Sterling in the currency markets, Sterling is the weakest as there is sign of any breakthrough in Irish backstop impasse. Commodity currencies are generally higher even though outlook for BoC, RBA and RBNZ are all dovish.

                                        In Europe, currently:

                                        • FTSE is down -0.29%.
                                        • DAX is down -0.19%.
                                        • CAC is down -0.06%.
                                        • German 10-year yield is down -0.0165 at 0.113, heading back to 0.1 handle.

                                        Earlier in Asia:

                                        • Nikkei dropped -0.65%.
                                        • Hong Kong HSI dropped -0.89%.
                                        • China Shanghai SSE rose 0.14%.
                                        • Singapore Strait Times rose 0.21%.
                                        • Japan 10-year JGB yield dropped -0.0062 to -0.001.

                                        UK signs trade deal with Japan, opens a pathway to TPP

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                                          ActionForex.com
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                                          In Tokyo today, UK International Trade Secretary Liz Truss and Japan Foreign Minister Toshimitsu Motegi formally signed a trade agreement, putting in pen the deal they agreed in principle back in September. That’s the first major trade deal UK came to since Brexit. The deal is seen as largely preserving the terms which UK traded with Japan as part of the EU. UK expected it to boost GDP by 0.07% over the next 15 years.

                                          The deal “has a much wider strategic significance”, Truss hailed . “It opens a clear pathway to membership of the Comprehensive Trans-Pacific Partnership — which will open new opportunities for British business and boost our economic security.”

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