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BoE Cunliffe: Could see stockpiling cycle build up again in Q3 on Brexit

    By
    ActionForex
    -

    In an interview with Newcastle Journal yesterday, BoE Deputy Governor Jon Cunliffe said “I haven’t picked up a strong sense that the economy is contracting and people are seeing big drops in demand”.

    Q2 will likely be weak due to unwinding of stocks. But he added “with Q1 and the second quarter of this year, you won’t get a very accurate read on the underlying nature of the economy”.

    Additionally, there is a Brexit “decision point” coming up on October 31. And, “we don’t know whether we’ll leave, or stay, or whether there’ll be an extension”. He added “we could see that stockpiling cycle build up again”.

    Fitch affirmed Japan’s A rating, expects growth to lose steam after robust Q1

      By
      ActionForex
      -

      Fitch Ratings has affirmed Japan’s Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘A’ with a stable outlook. In the statement, Fitch noted that the ratings ” balance the strengths of an advanced and wealthy economy, with high governance standards and strong public institutions, against weak medium-term growth prospects and high public debt.”

      The rating agency projects GDP growth of 0.8% in 2019 despite an unexpectedly robust 2.1% in Q1. And, GDP growth is expected to lose steam through early 2020 from “weakening exports and industrial production.” Japan and other countries in the region are reeling from the effects of the “global trade downturn” associated with the escalation in the US-China trade dispute. And, a further escalation of global trade tensions could pose a “significant risk” to the outlook for Japan. Also, “recent imposition of export restrictions on Korea has increased geopolitical tensions”.

      Full releases here.

      EU Malmstrom: WTO in deep crisis, appellate body would probably collapse

        By
        ActionForex
        -

        EU Trade Commissioner Cecilia Malmstrom warned in a conference in France that WTO is in “deep crisis” and “we have to recognize this”. In particular, she said “if the appellate body collapses, which probably it will in December – at least temporarily – we will have no enforcement. And if you have no rules everybody can do whatever they want.”

        At the same conference, WTO Director General Alan Wolff said “you get into a possible scenario where a country that lost (a case) says we appeal but there is no appeal which means the panel is not final. Then, “you could go to retaliation and counter-retaliation, which is what has happened between the U.S and China, which is certainly not good for the world.”

        US retail sales rose 0.4%, ex-auto sales rose 0.4%, far above expectations

          By
          ActionForex
          -

          US retail sales rose 0.4% mom in June, above expectation of 0.1%. Ex-auto sales also rose 0.4%, above expectation of 0.1%. Also from US, import price index dropped -0.9% mom in June, worse than expectation of -0.7% mom. From Canada, international securities transactions rose CAD 10.2B in May, above expectation of USD 5.0B.

          Dollar rises notably after the release. EUR/USD is possibly now heading back to 1.1193 temporary low.

          Into US session: Sterling weakest despite solid job data, Euro follows

            By
            ActionForex
            -

            Entering into US session, Sterling is the weakest one for today despite solid employment data. UK unemployment rate stayed at 45-year low while wage growth accelerated. But that’s overshadowed by renewing no-deal Brexit fear. Both runners Boris Johnson and Jeremy Hunt rejected Irish backstop in any part of Brexit deal. Such position will make Brexit negotiations very tough ahead. Euro is the second weakest as German ZEW Economic Sentiment deteriorated further in July.

            On the other hand, New Zealand Dollar is the strongest one as CPI accelerated in Q2 as expected. Dollar follows as the second strongest. However, the greenback will face tests from retail sales and industrial production data.

            In Europe, currently:

            • FTSE is up 0.43%.
            • DAX is up 0.19%.
            • CAC is up 0.51%.
            • German 10-year yield is down -0.013 at -0.265.

            Earlier in Asia:

            • Nikkei dropped -0.69%.
            • Hong Kong HSI rose 0.23%.
            • China Shanghai SSE dropped -0.16%.
            • Singapore Strait Times rose 0.36%.
            • Japan 10-year JGB yield dropped -0.0071 to -0.121.

            German ZEW dropped to -24.5, a lasting containment of factors are causing uncertainty

              By
              ActionForex
              -

              German ZEW Economic Sentiment dropped to -24.5 in July, down from -21.1 and missed expectation of -22. Current Situation Index dropped to -1.1, down from 7.8 and missed expectation of 5. Eurozone ZEW economic sentiment dropped slightly to -20.3, down from -20.3 and beat expectation of -20.9. Eurozone Current Situation index dropped -6.9 to -10.6.

              ZEW President Achim Wambach said: “Continued negative trend in incoming orders in the German industry is likely to have reinforced the financial market experts’ pessimistic sentiment. A lasting containment of the factors that are causing uncertainty in the export-oriented sectors of the German economy is currently not in sight. The Iran conflict seems to be intensifying and the ongoing trade dispute between the USA and China is a burden not only to Chinese economic development. Furthermore, no discernible progress has been made in the negotiations as to what Brexit will look like.”

              Full release here.

              UK unemployment rate stayed at 45-yr low, wage growth picked up

                By
                ActionForex
                -

                UK unemployment rate was unchanged at 3.8% in the three months to May, matched expectations. It was the lowest level since December 1974. Average weekly earnings including bonus grew 3.4% 3moy, much higher than expectation of 3.1% 3moy. Average weekly earnings excluding bonus also grew 3.6% 3moy, above expectation of 3.5% 3moy. In June, jobless claims rose 38.0k, above expectation of 18.9k.Claimant count rate rose 0.1% to 3.2%.

                Sterling drops notably earlier today and remains weak despite stronger than expected wage growth. EUR/GBP is extending rise from 0.8472 towards 0.9101 key resistance. Considering loss of upside momentum as seen in 4 hour MACD. We’d expect strong resistance below 0.9101 to limit upside.

                ECB Villeroy: Should not rely too exclusively on market based inflation expectation measures

                  By
                  ActionForex
                  -

                  ECB Governing Council member Francois Villeroy de Galhau reiterated his stance that ECB rate decision should be “data dependent”. In the upcoming meeting, policymakers will “assess actual economic data and we will act accordingly if and when needed.”

                  He acknowledged that policymakers would “take account of market indications” but emphasized “must not be market dependent”. That is ECB should not rely “too exclusively for inflation expectations on market-based measures”.

                  Additionally, Villeroy also noted monetary policy is limited as it cannot repair the damage from protectionism, or replace structural reforms or more selective fiscal policies. And, “monetary policies cannot do everything and cannot perform miracles.”

                  New Zealand CPI rose 0.6% qoq, NZD/USD extending rebound

                    By
                    ActionForex
                    -

                    New Zealand CPI rose 0.6% qoq 1.7% yoy in Q2, matched expectations. The annual rate accelerated from 1.5% yoy in Q1. However, the rise in headline inflation was largely due to the 5.8% quarter increase in petrol price, which contributed 0.25% to the 0.6% qoq figure. That suggests the pick-up could be temporary only, not to mention that annual CPI remains firmly below 2% mid-point of RBNZ’s 1-3% target range.

                    Stronger monetary stimulus and economic growth is required to lift inflation sustainably back to the 2% target. Yet, domestic and global headwinds remain. Thus, more OCR cuts are still expected for RBNZ. August could be the month to deliver even though it’s not totally certain yet.

                    Full release here.

                    NZD/USD’s choppy rebound from 0.6481 resumed this week by taking out 0.6726 resistance. Such rise is seen as part of the sideway pattern from 0.6424. It should now be heading to 78.6% retracement of 0.6969 to 0.6481 at 0.6865. But upside should be limited below 0.6969 resistance to bring near term reversal.

                    RBA minutes indicate easing bias, but wait-and-see first

                      By
                      ActionForex
                      -

                      In the minutes of July 2 RBA rate meetings, it’s noted that “the Board would continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time.”

                      The conclusion indicates that RBA is still adopting an easing bias after cutting interest rate in both June and July meeting. However, the next move will come “if needed”, as the central will first “monitor developments” to see how the economy reacts to the prior rate cuts.

                      Full minutes here.

                      Australian Dollar firms up mildly after the release. Yet, AUD/JPY is staying below 76.28 resistance. Thus, there could be more consolidations before rebound from 73.93 resumes. Break of 76.28 is expected eventually as long as 75.13 support holds.

                      AUD/USD is still eyeing 0.7047 resistance for now. Break will resume the rebound from 0.6831. Though, rejection by 0.7047, followed by 0.6983 minor support, will turn bias to the downside for 0.6910 support.

                      US Mnuchin: Debt ceiling deal soon, another call with China this week

                        By
                        ActionForex
                        -

                        US Treasury Secretary Steven Mnuchin said yesterday that a deal is close on raising debt ceiling. and he didn’t see another government shutdown looming over the issue. Trump’s administration and Congress have been discussing a possible two-year budget that sets that overall federal spending for fiscal 2020 and 2021. He added “we’re getting closer”.

                        He emphasized that all parties wanted to reach an agreement on the budget issues. And, if a deal on all issues couldn’t be reached before summer recess, lawmakers would either stay put or approve an increase in the debt ceiling. He noted, “I think we’re very close to a deal, but as you know, these deals are complicated.”

                        Separately, he also noted that there will another telephone call with Chinese officials this week regarding resuming trade negotiations. And, “to the extent that we make significant progress, I think there’s a good chance we’ll go there later.”

                        US Empires State Manufacturing index rose 12.9 pts to 4.3

                          By
                          ActionForex
                          -

                          US Empires State Manufacturing General Business Outlook improved to 4.3 in July, up 12.9 pts from -8.6. Looking at some details, new orders were little changed, and shipments increased. Unfilled orders and inventories continued to move lower, while delivery times were longer. The employment index remained negative, falling to its lowest level in nearly three years. Input price increases continued to moderate somewhat, while the pace of selling price increases remained modest. Indexes assessing the six-month outlook indicated that firms were fairly optimistic about future conditions.

                          Full release here.

                          Trump said China’s slowest growth in 27 yrs was because of US tariffs

                            By
                            ActionForex
                            -

                            Trump claimed that China’s growth slowing to worst in 27 years was a result of his tariffs, that prompted companies to leave China. And, this is why China wants to make a trade deal with him. He hailed his tariffs are bringing in billions of dollar, and they pay by “devaluing & pumping”.

                            In his tweet, Trump said: “China’s 2nd Quarter growth is the slowest it has been in more than 27 years. The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal with the U.S., and wishes it had not broken the original deal in the first place. In the meantime, we are receiving Billions of Dollars in Tariffs from China, with possibly much more to come. These Tariffs are paid for by China devaluing & pumping, not by the U.S. taxpayer!”

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                            Global business activity expectations dropped decade low, marked deterioration in US

                              By
                              ActionForex
                              -

                              Markit Global Business Outlook Survey dropped from 24 in February to 18 in in July, hitting the lowest since data were first collected in 2009. The survey was carried out three times per year, and if shows net balance of global firms predicting rising output in the coming year.

                              US has seen the biggest slide in business optimism apart from Brazil, down to 16. Confidence ticked higher in Eurozone to 27, but remained closed to six-year lows. UK also improved slightly 32, joint second-weakest since 2009. Japan’s reading dropped to three-year low at 11.

                              Commenting on the survey, Chris Williamson, Chief Business Economist at IHS Markit, said:

                              “The global business mood has darkened to the gloomiest since the height of the financial crisis in 2009. Escalating trade tensions have fuelled the downturn in optimism, exacerbating wider worries about slowing economic growth in key markets.

                              “Not only does the survey indicate a further weakening of global economic growth in the second half of 2019, but companies are expecting profits to be especially hard hit, which is leading to a pull-back in both hiring and business investment around the world. This in turn adds to the risk of the downturn becoming more entrenched in coming months, absent renewed policy stimulus measures.

                              “The big change since earlier in the year has been a marked deterioration of optimism among US companies, alongside a slide in business optimism in China, indicating how trade war tensions are hurting both economies. In contrast, sentiment picked up slightly in the eurozone and UK, albeit remaining worryingly subdued.”

                              Full release here.

                              Germany Economy Ministry expects weak basic economic trend for Q2

                                By
                                ActionForex
                                -

                                Germany’s Economy Ministry said in the monthly reported that the industrial economy continues to develop “sluggishly” as “headwind” from foreign demand remains “palpable”. Additionally, current data suggests a “calmer” pace in the service sector. And this indicates a “weak basic economic trend” for Q2.

                                The report further noted that “after the cautious development in the second quarter, the buoyant forces could again come to bear stronger if the external environment calmed down again.” But there are “significant downside risks” due to trade conflicts, Brexit and geopolitical tensions.

                                Full report here.

                                China Q2 GDP slowed to 27-year low, but June data beat expectations

                                  By
                                  ActionForex
                                  -

                                  GDP growth slowed to 6.2% yoy in Q2, down from Q1’s 6.4% yoy, matched expectations. That’s also the slowest pace in at least 27 years. However, quarterly growth actually accelerated to 1.6% qoq, up from Q1’s 1.4% qoq and beat expectation of 1.5% qoq.

                                  Also June’s data come in stronger than expected. But it remains to be seen if the momentum towards the end of the quarter could sustain. Headwinds from US tariffs and weaker global growth would still likely drag down China’s growth ahead.

                                  Fixed assessment investment, excluding rural, rose 5.8% ytd yoy in June, up from 5.6% and beat expectation of 5.6%. Industrial production rose 6.3% yoy in June, up from 5.0% and beat expectation of 5.2%. Retail sales jumped 9.8% yoy, up from 8.6% yoy and beat expectation of 8.5% yoy. Surveyed unemployment rate rose from 5.0% to 5.1%.

                                  USD/CNH (offshore Yuan), dips mildly in Asian session but that’s mainly due to mild weakness in Dollar. Recent consolidation from 6.9620 is still in progress and would extend further in range.

                                  US PPI slowed to 1.7% yoy, core PPI unchanged 2.3% yoy

                                    By
                                    ActionForex
                                    -

                                    US PPI rose 0.1%, 1.7% yoy in June, versus expectation of 0.1% mom, 1.6% yoy. PPI core rose 0.3% mom, 2.3% yoy, versus expectation of 0.2% mom, 2.1% yoy.

                                    Full release here.

                                    WH Navarro: Trade negotiation with China in a quiet period, be patient and don’t listen to garbage

                                      By
                                      ActionForex
                                      -

                                      White House trade advisor Peter Navarro said trade negotiation with China is “in a quiet period” and urged people to be “patient with the process”. He also trashed media in US and China as they reported “garbage” regarding trade negotiation. Instead he urged people to only listen to comments from either Trump or Trade Representative Robert Lighthizer.

                                      Navarro said on CNBC Squawk Box that “my advice for investors is to be patient with the process and don’t believe anything you read in either the Chinese or the US press about these negotiations unless it comes from the mouth of either the president or advisor Lighthizer”.

                                      And, “there’s just going to be a lot of garbage coming out of the Wall Street Journal and the People’s Daily and everything in between,” he added, “there were all sorts of stories written and they were designed to shape the negotiations and they didn’t have any insight into them.”

                                      ECB Visco : Will asset hot to adjust policy instruments in the coming weeks

                                        By
                                        ActionForex
                                        -

                                        ECB Governing Council member Ignazio Visco said the central bank “will need to adopt further expansionary measures if the euro zone economy does not pick up.” And, “in the coming weeks the ECB will continue to assess how to adjust the instruments at its disposal”. This is in-line with market expectations that ECB is ready ramp up monetary stimulus either on July 25 or later in September.

                                        Being Governor of Bank of Italy too, Visco expected the Italian economy to grow just 0.1% this year, marginally below the government’s 0.2% official forecast. Though, he also expected growth to pickup to just slightly below 1% in 2020 and 2021. He urged the government to adopt “prudent” budget deficit targets for the coming years. But he also welcomed recent fall in Italian yields, after EU averted the Excessive Deficit Procedure on the country.

                                        China trade surplus widened to USD 51B, both imports and exports declined

                                          By
                                          ActionForex
                                          -

                                          In June, in USD terms, US imports dropped -7.3% yoy to USD 16.19B. Exports dropped -1.3% yoy to 21.28B. Both import and exports were worse than expectation of -4.6% yoy and -0.6% yoy respectively. Trade surplus came in at USD 51.0B above expectation of USD 45.2B.

                                          The results clearly showed some impacts in trade after US imposition on higher tariffs on USD 200B of Chinese goods came into effect. But so far, there was no notably improvement in US-China trade balance. US trade deficit with China came in at USD -140.5B in the first half, worse than USD -133.8B in first half of 2018.

                                          Here are some details:

                                          From Jan to Jun, with US:

                                          • Total trade dropped -14.2% yoy to USD 258.3B.
                                          • Exports dropped -8.1% yoy to USD 199.4B.
                                          • Imports dropped -29.9% yoy to USD 58.9B.
                                          • Trade surplus was at USD 140.5B.

                                          From Jan to Jun, with EU:

                                          • Total trade rose 4.9% yoy to USD 338.0B.
                                          • Exports rose 6.0% yoy to USD 202.8B.
                                          • Imports rose 3.3% yoy to 135.2B.
                                          • Trade surplus was at USD 67.6B

                                          From Jan to Jun, with AU:

                                          • Total trade rose 6.3% yoy to 78.7B.
                                          • Exports rose 2.0% to USD 22.1B.
                                          • Imports rose 8.1% to USD 56.7B.
                                          • Trade deficit was at USD -34.6B.
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