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Australia retail sales rose 0.4%, growth in five of six industries

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    ActionForex.com
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    Australia retail sales rose 0.40% mom in June, above expectation of 0.3%. This followed 0.1% rise back in May. Ben James, Director of Quarterly Economy Wide Surveys said “there were rises in five of the six industries this month, although overall the retail environment remains subdued”. Full release here.

    In seasonally adjusted terms, there were rises in New South Wales (0.3%), Western Australia (0.8%), Queensland (0.4%), Victoria (0.3%), Tasmania (1.5%), and the Australian Capital Territory (0.3%). South Australia (-0.3%) and the Northern Territory (-0.2%) fell.

    Also from Australia, PPI rose 0.4% qoq, 2.0% yoy in Q2, above expectation of 0.2% qoq, 1.9% yoy.

    UK and Swiss signed agreement to protect GBP 32B trade relationship after Brexit

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      UK and Switzerland signed an agreement on Sunday that will protect GBP 32B trade relationship between the two countries. With the agreement, both countries will continue to trade on preferential terms after Brexit. That is, the two countries could continue to trade freely without new tariffs. But financial services are not included in the deal.

      UK Trade Minister Liam Fox hailed that “”Switzerland is one of the most valuable trading partners that we are seeking continuity for.” And, “this is of huge economic importance to UK businesses so I’m delighted to be here in Bern ensuring continuity for 15,000 British exporters. ”

      Fox added that “not only will this help to support jobs throughout the UK but it will also be a solid foundation for us to build an even stronger trading relationship with Switzerland as we leave the EU.”

      US NFIB Small Business Optimism Index declined to 89.8 in Dec

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        US NFIB Small Business Optimism Index declined -2.1 pts to 89.8 in December, below expectation of 91.6. That’s also the 12th consecutive month the index was below 49-year average of 98.

        “Overall, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate,” said NFIB Chief Economist Bill Dunkelberg. “Owners are managing several economic uncertainties and persistent inflation and they continue to make business and operational changes to compensate.”

        Full release here.

        RBA SoMP: Faster inflation slowdown in 2023, but not after

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          In the quarterly Statement on Monetary Policy, RBA reiterated that “some further tightening of monetary policy may be required” to ensure that inflation returns to target in a “reasonable timeframe”. But that will depend upon “how the economy and inflation evolve.”

          The new economic projections show both headline and trimmed mean inflation slowing more rapidly in 2023. However, both measures are only expected to reach the top of target range by mid-2025. Additionally, the central bank downgraded its GDP growth forecasts for 2023 and predicts a higher unemployment rate. The evolving economic landscape will be key in determining the RBA’s future policy moves.

          Year-average GDP growth forecast:

          • 2023 at 1.75% (revised down from 2.25%).
          • 2024 at 1.50% (unchanged).

          Unemployment rate forecast:

          • Dec 2023 at 4.00% (revised up from 3.75%).
          • Dec 2024 at 4.50% (revised up from 4.25%).

          Headline CPI forecast:

          • Dec 2023 at 4.50% (revised down from 4.75%).
          • Dec 2024 at 3.25% (unchanged).
          • Jun 2025 at 3.00% (unchanged).

          Trimmed mean CPI forecast:

          • Dec 2023 at 4.00% (revised down from 4.25%).
          • Dec 2024 at 3.00% (unchanged).
          • Jun 2025 at 3.00% (unchanged).

          Full RBA SoMP here

          Former Brexit Minister Davis predicts rejeciton by Commons and PM May will have to renegotiate with EU

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            Former Brexit Minister David Davis, the one before resigned Dominic Raab, criticizes that PM Theresa May’s Brexit agreement is a “dreadful deal” that is “”very, very favourable” to the EU. And, “It really does not fly by any measure, it doesn’t meet the requirements of the people, it’s not what they voted for, it doesn’t meet the requirements of the Conservative manifesto.”

            And he predicts that the agreement will be rejected by the House of Commons. Then, the government will have to come up with an alternative. And, May “will have to go back to renegotiate”.

            BoE Saunders: Next move is quite plausible a cut

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              BoE policymaker Michael Saunders said that “it is quite plausible that the next move in Bank Rate would be down rather than up.” He noted that “even without a no-deal Brexit, a scenario of persistently high uncertainty is probably the most likely outcome. And, “that would probably imply continued weakness in business confidence and investment, with softer job growth that drags on consumer spending, Saunders added, “it might well be appropriate to maintain a highly accommodative monetary policy stance for an extended period and perhaps to loosen policy at some stage, especially if global growth remains disappointing.”

              In case of disorderly Brexit, Saunders repeated BoE’s position that policy options won’t be automatic. And he warned that no-deal Brexit would “probably immediately leave some firms unprofitable. Others might face longer-term questions about their viability, or whether they would be better off relocating.”

              Eurozone GDP grew 0.7% qoq in Q2, EU up 0.6% qoq

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                Eurozone GDP grew 0.7% qoq in Q2, well above expectation of 0.1% qoq. Comparing with same quarter of last year, GDP grew 4.0% yoy.

                EU GDP grew 0.6% qoq, 4.0% yoy. Among the Member States for which data are available for the second quarter 2022, Sweden (+1.4%) recorded the highest increase compared to the previous quarter, followed by Spain (+1.1%) and Italy (+1.0%). Declines were recorded in Latvia (-1.4%), in Lithuania (-0.4%) and in Portugal (-0.2%). The year on year growth rates were positive for all countries.

                Full release here.

                Japan exports rose 37.0% yoy in Jul, imports rose 28.5% yoy

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                  Japan export rose 37.0% yoy to JPY 7356B in July, slightly below expectation of 39.0% yoy. By region, exports to China rose 18.9% yoy, led by chip-making equipment and plastic. Exports to the US grew 26.8% yoy, led by exports of cars, car parts and motors. Imports rose 28.5% yoy to JPY 6915B, below expectation of 35.1% yoy. Trade balance came in at JPY 441B.

                  In seasonally adjusted term, exports was unchanged at JPY 7049B. Imports dropped -1.6% mom to 6997B. Trade balanced reported a surplus of JPY 52.7B.

                  Also from Japan, machinery orders dropped -1.6% mom in June, versus expectation of -2.8% mom.

                  Canada GDP rose 0.4% mom in Oct, 6th consecutive rise

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                    Canada GDP rose 0.4% mom in October, above expectation of 0.3% mom. That’s the sixth consecutive month of increase. Overall, total economic activity was about -4% below February’s pre-pandemic level. Goods-producing industries rose 0.1% mom. Services-producing industries rose 0.5%. Activity rose in 16 of 10 industrial sectors.

                    Full release here.

                    NZ BNZ manufacturing improves to 46.7, ninth month in contraction

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                      New Zealand’s manufacturing sector experienced a slight improvement in November, as indicated by the BusinessNZ Performance of Manufacturing Index. The index rose from 42.9 to 46.7, marking its highest level since June. However, it’s important to note that the PMI remained in contraction territory (below 50) for the ninth consecutive month.

                      Breaking down the index, several components witnessed modest improvements. Production increased from 41.6 to 43.6, employment from 43.8 to 47.9, new orders from 44.5 to 47.7, finished stocks from 45.8 to 50.7, and deliveries from 43.3 to 48.0. Despite these gains, the improvements were not strong enough to push the overall PMI into the expansion zone.

                      The proportion of negative comments from the manufacturing sector was 58.7%, a decrease from 65.1% in October and 68.8% in September. This indicates a slight shift in sentiment, although a significant portion of feedback remains pessimistic. The predominant concerns cited by manufacturers revolved around a general lack of demand and sales, highlighting the primary challenges facing the industry.

                      BNZ Senior Economist, Craig Ebert, particularly focused on the production index. He noted that despite a slight improvement in November, the production index remained almost 10 points below its long-term average. Ebert emphasized that “That’s a big undershoot, in historical context”.

                      Full NZ BNZ PMI release here.

                      Italy’s Istat downgrades 2019 growth forecast to 0.3%, down from 1.3%

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                        Italy’s Istituo Nazionale di Statistica (Istat) EU downgrades the country’s growth forecast in 2019 significantly. It now projects GDP to grow just 0.3% in real terms. Back in November, it projected GDP to grow 1.3% in real terms. Domestic demand is expected to provide 0.3% to GDP growth (1.3% projected in November). while foreign demand and inventories will provide a null contribution.

                        Labor market assessment was downgraded t “stabilize over the forecasting period”, from “improve over the forecasting period”. Employment is expected to grow 0.1% in 2019 and unemployment will rise slightly to 10.8%, much higher than November expectation of 10.2%.

                        Full release here.

                        Separately, Deputy Prime Minister Matteo Salvini said “must get out from the cage”, as EU policy over the past decade had brought “precariousness and despair”. He criticized that budget rules limiting the deficit and debt should be removed to free up the bloc’s economies.

                        NASDAQ completed HnS top, to lend strong support from 12074

                          By
                          ActionForex.com
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                          NASDAQ closed down -2.11% or 274 pts to 12723.47 overnight. The strong break of 12983.05 neckline support confirmed the completion of head and should top reversal pattern as mentioned (ls: 13728.98, h: 14175.11, rs: 13601.33)  here. More downside is expected for now, for minimum target at 100% projection of 14175.11 to 13003.98 from 13601.33 at 12430.20 and below.

                          Still, we’d maintain that cluster support at 12074.06 (61.8% retracement of 10822.57 to 14175.11 at 12103.24) is the key level. We’d expect strong support from there to contain down side and bring rebound (at least on first attempt). That could keep the pattern from 14174.11 as a correction to rise from 10822.57 only, and set the base for up trend resumption later.

                          However, sustained break of 12074.06 will argue that NASDAQ is already correcting the whole up trend from 6631.42. That would open up the case of deeper medium term correction through 10822.57 support.

                          Similarly, even though S&P 500 looks vulnerable for a deeper pull back, we’d expect strong support from 3588.11 to contain downside to bring rebound. But sustained break there would indicate the start of a deeper correction to the whole up trend from 2191.86.

                          ECB: Panetta: Waiting on inflation will even be more costly

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                            ActionForex.com
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                            Fabio Panetta told Spanish newspaper El Pais in an interview published on Sunday, “the ECB has failed to reach its aim for too many years already.” And, “we cannot be satisfied with inflation at 1.2% in 2022 and 1.4% in 2023. The argument that we could extend the horizon to meet the aim is not a convincing one.”

                            “Waiting will be even more costly,” Panetta added. “It would make it more difficult to re-anchor inflation expectations and we would risk a permanent reduction of economic potential.”

                            Dollar index falls after Fed, on track to retest 89.20 low

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                              Dollar weakened overnight as Fed Chair Jerome Powell indicated in the post meeting press conference that “it is not time yet” to start discussing any change in the monetary policy stance. He added that recovery is “uneven and far from complete.” Fed is still “a long way from our goals” and it’s “going to take some time” to have substantial further progresses.

                              Powell also talk down the “one-time increases in prices”, as they are “likely to only have transitory effects on inflation.” “We think of bottlenecks as things that in their nature will be resolved as workers and businesses adapt, and we think of them as not calling for a change in monetary policy since they’re temporary and expected to resolve itself,” Powell said. “We know the base effects will disappear in a few months.”

                              Dollar index dropped further to close at 90.60 overnight. Near term outlook stays bearish with 55 day EMA (now at 91.54) intact. Retest of 89.20 should be seen next. Break there will resume larger fall from 102.99.

                              RBNZ Orr: Get ahead of the curve with this week’s rate cut

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                                RBNZ Governor Adrian Orr toned down the chance of another rate cut after yesterday’s, as he addressed a parliamentary committee today. He noted that “at the moment we see in the outlook for interest rates as…balanced”. Regarding yesterday’s cut, Orr pointed out that “the reason for the cut is global economic growth has slowed.” “Growth has come off rapidly in Europe, in China, though that’s stabilized more recently, and Australia … so key trading partners.”

                                Separately, Orr also told the Morning Report that the cut was “sensible” as our “forward projection [showed] a lower rate. And the question for the committee was “do we wait or do we move now”. Orr said “Moving now is the best choice for us as far as we consider because it means we get ahead of the curve – we aren’t chasing the economy in cycles, we’re actually getting ahead and removing the cycles.”

                                WH Kudlow: Communications with China picked up a notch

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                                  ActionForex.com
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                                  White House top economic advisor Larry Kudlow said yesterday that communications with Beijing had “picked up a notch”. He also confirmed that Treasury Secretary Steven Mnuchin had sent an invitation letter to senior Chinese officials to restart trade talks. Also, “there’s some discussions and information that we’ve received that the top of the Chinese government wishes to pursue talks.”

                                  Kudlow also added that “most of us think it’s better to talk than not to talk, and I think the Chinese government is willing to talk.” And, if they come to the table in a serious way to generate some positive results, yes, of course. That’s what we’ve been asking for months and months.”

                                  But he also cautioned that “I guarantee nothing.”

                                  Fed Daly: Recent rise in inflation compensation is encouraging

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                                    ActionForex.com
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                                    San Francisco Fed President Mary Daly said in a speech that “a swell of market and academic commentary has started to emerge about a quick snapback, an undesirable pickup in inflation, and the need for the Federal Reserve to withdraw accommodation more quickly than expected”.

                                    But that was only “reaction to a memory of high and rising inflation, an inexorable link between unemployment, wages and prices, and a Federal Reserve that once fell behind the policy curve”. She added, “the world today is different”.

                                    She viewed “recent rise in inflation compensation to roughly 2 percent as encouraging and in line with our stated goals. It suggests that our commitment to flexible average inflation targeting has already gained substantial credibility.”

                                    “Today, the costs are tilted the other way. Running inflation too low for too long can pull down inflation expectations, reduce policy space, and leave millions of Americans on the sidelines along the way.”

                                    Full speech here.

                                    France household consumption dropped -8.3% mom in Apr

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                                      ActionForex.com
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                                      France household consumption expenditure dropped -8.3% mom in April. The decline was mainly due to manufactured goods purchases (–18.9%), during the third lockdown. Energy expenditure dropped slightly by -0.6%. Food consumption dropped -0.2%. Spending was -9.5% below its average level in Q4, 2019.

                                      Also released, CPI came in at 0.3% mom, 1.8% yoy in May, matched expectations. GDP dropped slightly by -0.1% qoq in Q1. It stood -4.7% below prepandemic level in Q4 2019.

                                      Fed’s Mester views three rate cuts as appropriate, yet decision tightly contested

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                                        ActionForex.com
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                                        Cleveland Fed President Loretta Mester said overnight that three rate cuts might be appropriate this year, though she mentioned, “it’s a close call” on the possibility of fewer reductions being needed.

                                        Addressing the upcoming meeting scheduled for April 30-May 1, Mester expressed that it is unlikely there will be sufficient information available to make a decision on reducing rates by then. However, she left the door open for a rate cut in June, stating, “We have to be data dependent so I don’t want to rule that out.”

                                        Mester highlighted the importance of upcoming data to gauge whether the disinflation process is merely experiencing a “temporary detour” or if there are signs that efforts to bring inflation back down to the 2% target are faltering.

                                        She cautioned against premature or overly rapid rate reductions, warning that such actions could jeopardize the progress made on inflation control. “Moving rates down too soon or too quickly without sufficient evidence to give us confidence that inflation is on a sustainable and timely path back to 2% would risk undoing the progress we have made on inflation,” Mester remarked.

                                        BoJ deputy nominee Wakatabe: Policy should be date dependent, not date-driven

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                                          BoJ deputy governor nominee Masazumi Wakatabe in upper house confirmation hearing:

                                          • “There are various things the BOJ can do under its yield curve control policy. It can strengthen its existing tool kit, or could come up with a new policy.”
                                          • “The BOJ shouldn’t be bound by a set timeframe” for meeting the 2% inflation target.
                                          • “Its policy should be data-dependent, not date-driven.”
                                          • Planned sales tax hike in fiscal 2019 is the important considering on whether more easing is needed

                                          Another deputy nominee Masayoshi Amamiya said in the same occasion:

                                          • BoJ has ample tools for smooth stimulus exit when time comes.
                                          • But there is still a distant to 2% inflation target.
                                          • BoJ needs to continue with powerful monetary easing patiently
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