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Japan household spending rose 4% yoy in May, highest in four years

    By
    ActionForex
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    Japan overall household spending rose 4.0% yoy in May, well above expectation of 1.40% yoy. That’s the fastest pace in four years since May 2015. The results argued that pickup in consumption could help offset some weakness in external demand in Q2.

    However, spending ahead could be weighed down by sluggish wage growth ahead. Sentiments could also weaken on uncertainty over economic outlook, due to trade war. Additionally, the scheduled sales tax hike could also have negative impacts on spending.

    For now, Prime Minister Shinzo Abe is holding on to the plan to raise sales tax to 10% this October.

    BoJ Amamiya: No plan to issue digital currency in the near future

      By
      ActionForex
      -

      BoJ Deputy Governor Masayoshi Amamiya said today the central bank has no plan to issue digital currency in the near future. And he disagreed to the idea that central banks can boost the effectiveness of negative interest rate policies by issuing digital currencies. “To overcome the nominal zero lower bound, central banks would need to eliminate cash,” Amamiya said. “Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this.”

      On the economy, Amamiya still expected to climb to 2% target. But he repeated BOJ wouldn’t hesitate to ease policy further if momentum to hit inflation target is disrupted. While downside risks are strong, he noted many global central bankers share the view that global economy will recover in the second half.

      China said to tie US agricultural purchases to lift of Huawei ban

        By
        ActionForex
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        An SCMP report in Hong Kong suggested that China’s commitment to buy additional agricultural products, as part of the agreement with US to halt trade war escalation, was not unconditional. Apparently, as Chinese media noted, if US “flip-flops” again in future trade negotiations, the purchase will be stopped again.

        Additionally, China would want to see how the ban on tech giant Huawei is lifted, before committing the purchases. Trump has promised to ease supply ban on Huawei and White House could make an announcement on the details soon. For now, it’s believed that Trump’s administration was still debating how to ease the restrictions.

        German 10-yr yield breaks ECB’s -0.4% deposit rate, Rehn calls for easing now

          By
          ActionForex
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          German 10-year bund yield drops to another record low of -0.407 so far today. More importantly, it’s now below ECB’s -0.40% deposit rate for the first time ever. The steep decline is interpreted as a clear sign that markets are expecting further rate cut by the central bank.

          Firstly, ECB President Mario Draghi has already set the easing course last month, even though he’s on the way out later this year. Secondly, the nomination of current IMF Managing Director Christine Lagarde is seen as a node to further easing.

          Such expectation is further affirmed by explicitly dovish comments from Governing Council member Olli Rehn. He told German newspaper Boersen Zeitung that “if we really want to live up to our mandate, further monetary stimulus is now needed until there is improvement in economic and inflation prospects”.

          “We should no longer see the recent slowdown in growth as a brief temporary dip in the economy, as a ‘soft patch’, Rehn added. “We are experiencing a longer phase of weaker growth.” Also, what is also of great concern to us now are inflation expectations,” Rehn said. “Market-based inflation expectations have fallen sharply and remain far too low.”

          China: US must lift all punitive tariffs for a trade deal to be reached

            By
            ActionForex
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            Gao Feng, spokesperson of China’s Ministry of Commerce, said US must remove all punitive tariffs for a trade deal to be reached between the two countries.

            He noted in a regular press briefing that tariffs hurt both sides and ultimately harm the interests of American corporations and consumers. Tariffs also create uncertainty for the global economy.

            Gao also confirmed that teams from both sides are in contact on trade negotiations.

            Eurozone retail sales dropped -0.3% mom, well below expectation

              By
              ActionForex
              -

              Eurozone retail sales dropped -0.3% mom in May, below expectation of 0.4% mom rise. Volume of retail trade decreased by -1.3% for automotive fuel, by -0.5% for food, drinks and tobacco, and by -0.1% for non-food products

              EU28 retail sales dropped -0.4% mom. Trade volume decreased by -1.6% for automotive fuel, by -0.5% for food, drinks and tobacco, and by -0.3% for non-food products.

              Among Member States for which data are available, the largest decreases in the total retail trade volume were registered in Croatia (-4.4%), Lithuania (-3.0%) and Sweden (-2.8%). The highest increases were observed in Portugal (1.5%), Spain (1.1%) and Belgium (1.0%).

              Full release here.

              Australia retail sales rose 0.1%, missed expectations, AUD/JPY steady

                By
                ActionForex
                -

                Australia retail sales rose 0.1% mom in May, below expectation of 0.2% mom.

                ABS Director of Quarterly Economy Wide Surveys, Ben James said: “There were mixed results across the industries with rises in Cafes, restaurant and takeaway food services (0.7%), Household goods retailing (0.5%), and Other retailing (0.6%). These rises were offset by falls in Food retailing (-0.3%), Department stores (-0.4%), and Clothing, footwear and personal accessory retailing (-0.2%).”

                In seasonally adjusted terms, there were rises in Victoria (0.6%), South Australia (0.5%), the Australian Capital Territory (0.7%), and the Northern Territory (0.5%). There were falls in Queensland (-0.3%), New South Wales (-0.1%), Western Australia (-0.2%), and Tasmania (-0.4%).

                Full release here.

                AUD/JPY is steady despite the data miss. AUD is lifted this week despite RBA rate cut. Strong rise in iron ore price and solid export data are supporting the Aussie. A short term bottom should be in place at 73.93 after hitting 61.8% retracement of 70.27 to 80.71 at 74.25. For now, further rise is in favor as long as 75.13 minor support holds. Break of 76.28 resistance and sustained trading above 55 day EMA will bring stronger rebound to 61.8% retracement of 80.71 to 73.93 at 78.12. However, rejection by 55 day EMA, followed by 75.13 minor support, will likely resume the fall from 80.71 through 73.93 low.

                WH Kudlow: Won’t lift tariffs during trade talks with China

                  By
                  ActionForex
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                  White House Economic Adviser Larry Kudlow said US-China trade negotiations will “continue in earnest this coming week”. The teams are “on the phone” and are “going to be on the phone this coming week”. He doesn’t know “precisely when” but the teams will be scheduling face-to face meeting.

                  Meanwhile, Kudlow emphasized that “We’ve been accommodative. We will not lift tariffs during the talks” He added, “we are hoping that China will toe its end of it by purchasing a good many of American imports.”

                  Crude oil inventories dropped -1.1m barrels, WTI soft after prior rejection by 60

                    By
                    ActionForex
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                    US commercial crude oil inventories dropped -1.1m barrels in the week ending June 28, higher than expectation of -2.8m barrels. At 468.5m barrels, crude oil inventories are about 5% above the five year average for this time of year.

                    WTI crude oil stays soft after the release. It tumbled earlier this week as market is concerned that the output cut announced by OPEC+ would not be sufficient to correct the imbalance driven by the global economic slowdown. (More in this report)

                    Technically, a short term top should be formed at 60.22 after rejection by resistance zone between 60.03 and 61.8% retracement of 66.49 to 50.64 at 60.34. WTI is also back below both 55 day and 4 hour 55 EMA. Deeper fall is now mildly in favor to 54.86 resistance turned support.

                    For now, we’re slightly favoring the case the decline from 66.39 has completed at 50.64. Thus, we’d look for strong support below 54.86 to contain downside to bring rebound. Near term outlook will, for now, stays neutral until a break of 50.64 or 60.22.

                    EU won’t open excessive deficit orocedure for Italy

                      By
                      ActionForex
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                      European Commission decided today not to go ahead to open the so called Excessive Deficit Procedure (EDP) for Italy’s lack of compliance with the debt criterion.

                      In the statement, Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: “I welcome the actions taken by the Italian government to ensure a better budget outcome in 2019. Ensuring sound public finances is a bedrock for confidence and growth. Respecting the commitment to prepare a 2020 budget in line with the EU fiscal rules and thus avoiding further uncertainty will be important in this context.”

                      Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “The aim of the Stability and Growth Pact is not to punish or discipline anyone; it is to ensure that governments pursue sound public finances and correct problems swiftly when they occur. I am pleased to note this is the case today. The Italian government has responded to the Commission’s signal one month ago that an Excessive Deficit Procedure was warranted by adopting a sound package of measures that ensure broad compliance with the Pact. We will carefully monitor the implementation of these measures in the second half of the year. Moreover, we stand ready to ensure that the 2020 draft budget to be presented this autumn will be compliant with the Pact. I have no doubt that we will work seamlessly in this context with the next Commission.”

                      Full statement here.

                      US ISM non-manufacturing dropped to 55.1, mixed sentiment on trade and tariffs uncertainty

                        By
                        ActionForex
                        -

                        US ISM Non-Manufacturing Composite dropped to 55.1 in June down from 56.9 and missed expectation of 56.0. Looking at some details, Business Activity dropped -3.0 to 58.2. New Orders dropped -2.8 to 55.8. Employment dropped -3.1 to 55.0.

                        ISM noted in the release: “Although the non-manufacturing sector’s growth rate dipped in June, the sector continues to reflect strength. The comments from the respondents reflect mixed sentiment about business conditions and the overall economy. A degree of uncertainty exists due to trade and tariffs.”

                        Full release here.

                        US good and services trade deficit rose 8.4% to USD -55.5B

                          By
                          ActionForex
                          -

                          US goods and services trade deficit jumped 8.4% to USD -55.5B in May, wider than expectation of -53.2B. It’s also the highest level this year. Exports rose 2.0% to USD 210.6B while imports rose 3.3% to USD 266.2B. Trade deficit with China widened to USD -31.1B.

                          Full release here.

                          US initial jobless claims dropped -8k to 221k

                            By
                            ActionForex
                            -

                            US initial jobless claims dropped -8k to 221k in the week ending June 29, slightly above expectation of 220k. Four-week moving average of initial claims rose 0.5k to 222.25k. Continuing claims dropped -8k to 1.686m in the week ending June 22. Four-week moving average of continuing claims dropped -1.75k to 1.687m.

                            Full release here.

                            ADP jobs growth at 102k, missed expectation, job market continues to throttle back

                              By
                              ActionForex
                              -

                              ADP report shows private sector employment grew 102k in June, below expectation of 140k. Though, it’s already a strong rebound from May’s 41k (revised from 27k).

                              “Job growth started to show signs of a slowdown,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “While large businesses continue to do well, small businesses are struggling as they compete with the ongoing tight labor market. The goods producing sector continues to show weakness. Among services, leisure and hospitality’s weakness could be a reflection of consumer confidence.”

                              Mark Zandi, chief economist of Moody’s Analytics, said, “The job market continues to throttle back. Job growth has slowed sharply in recent months, as businesses have turned more cautious in their hiring. Small businesses are the most nervous, especially in the construction sector and at bricks-and-mortar retailers.”

                              Full release here.

                              UK PMI services dropped to 50.2, all surveys point to -0.1% GDP contraction in Q2

                                By
                                ActionForex
                                -

                                UK PMI Services dropped to 50.2 in June, down from 51.0 and missed expectation of 51.0. That’s a also a three-month low, just above 50 no-change mark. All Sector PMI dropped to 49.2, down from 50.7, signalling a reduction in overall private sector business activity for the first time in 35 months.

                                Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:

                                “The near-stagnation of the services sector in June is one of the worst performances seen over the past decade and comes on the heels of steep declines in both manufacturing and construction. Collectively, the PMI surveys indicate that the economy has slipped into contraction for the first time since July 2016, suffering the second-steepest fall in output since the global financial crisis in April 2009.

                                “The June reading rounds off a second quarter for which the surveys point to a 0.1% contraction of GDP.

                                “The latest downturn has followed a gradual deterioration in demand over the past year as Brexit-related uncertainty has increasingly exacerbated the impact of a broader global economic slowdown. Risks also remain skewed to the downside as sentiment about the year ahead is worryingly subdued, suggesting the third quarter could see businesses continue to struggle.

                                “One ray of hope came from a further rise in employment as firms continued to hire new staff despite the drop in output, but the resulting decline in productivity signalled was the largest in the survey’s 20-year history.

                                “Average selling prices for goods and services meanwhile rose at one of the slowest rates seen over the past three years, despite steeply rising costs, boding ill for corporate profits.

                                “The worsening picture will put further pressure on the Bank of England to add stimulus. For policymakers to not loosen policy with the all sector PMI at its current level would be unprecedented in the survey’s two-decade history.”

                                Full release here.

                                Eurozone PMI Composite finalized at 52.2, indicative of 0.2% growth in Q2

                                  By
                                  ActionForex
                                  -

                                  In June, Eurozone PMI Services is finalized at 53.6, revised up from 53.4 and up fro May’s 52.9. PMI Composite is finalized at 52.2, revised up from 52.1 and up from May’s 51.8. Among the member states, Italy PMI Composite was at 3-month high of 50.1. Spain was unchanged at 52.1. Germany was unchanged at 52.6. France hit 7-month high at 52.7.

                                  Chris Williamson, Chief Business Economist at IHS Markit said:

                                  “The June PMI surveys indicate that the pace of eurozone economic growth picked up at the end of the second quarter, though it would be wrong to get overly excited by the upturn. The survey is indicative of GDP merely rising by just over 0.2% in the second quarter, and a deterioration of business expectations for the year ahead to one of the lowest seen for over four years suggests the business mood remains sombre. Downside risks to the outlook prevail amid trade war worries, rising geopolitical uncertainty and slowing global economic growth.

                                  “Looking at the largest states, the survey data are consistent with GDP growth easing sharply to 0.4% in Spain and only modest 0.2% expansions in both France and Germany. Italy is on course to see a 0.1% decline.

                                  “Growth is being fuelled by the service sector which is helping offset the deep manufacturing downturn. However, a major concern is that, the longer the manufacturing slump persists, the greater the likelihood of the weakness spilling over to services, where the resilience in the face of the factory sector’s downturn so far this year is looking increasingly unusual.

                                  “Inflationary pressures have also moderated as weak demand prompted companies to increasingly compete on price.

                                  “Given the relatively weak current and future growth being signalled by the PMI and the accompanying slide in inflationary pressures, we expect to see renewed stimulus from the ECB in coming months.”

                                  Full release here.

                                  Australia trade surplus jumped to record high, building approvals recovered

                                    By
                                    ActionForex
                                    -

                                    Australia trade surplus widened to a fresh record high of AUD 5.7B in May, up fro AUD 4.8B in April, and beat expectation of USD 5.3B.

                                    Exports rose AUD 1,442M (4%) to AUD41,585m. Non-rural goods rose AUD 1,316M (5%), rural goods rose AUD 46M (1%) and non-monetary gold rose AUD 22M (1%). Net exports of goods under merchanting fell AUD 1M (5%). Services credits rose AUD 58M (1%).

                                    Import rose AUD515m (1%) to AUD 35,839M. Capital goods rose AUD 348M (5%), non-monetary gold rose AUD 68M (17%) and intermediate and other merchandise goods rose AUD 66M (1%). Consumption goods fell AUD 73M (1%). Services debits rose AUD 107M (1%).

                                    Also from Australia, building approvals rose 0.7% (seasonally adjusted) in May, versus expectation of 0.0%. Rise in Victoria (14.4%) drove the national increase. Meanwhile falls were recorded in Queensland (6.3%), Western Australia (4.7%), South Australia (2.9%) and Tasmania (1.2%), while New South Wales was flat. Private dwellings excluding houses rose 1.2 per cent, while private house approvals decreased 0.3 per cent.

                                    BoJ Funo: Necessary to maintain low rates for prolonged period, but no need to ease further

                                      By
                                      ActionForex
                                      -

                                      BoJ board member Yukitoshi Funo said it’s necessary to maintain current ultra-loose monetary policy. However, he saw no need to ramp up stimulus for now.

                                      Funo said, “given price growth and inflation expectations aren’t heightening much, it’s necessary to maintain sufficiently low rates for a prolonged period to achieve the BoJ’s price target.” However, he’s also optimistic that “we can expect Japan’s economy to recover in the latter half of this year”. And, “as such, I see no need to ease policy further now,”

                                      He also noted the forward guidance is already leaving open the possibility of the BoJ maintaining current policy for long. “We say ‘at least’ until spring 2020 because there’s a good chance current low rates will be maintained beyond spring next year.”

                                      IMF Lagarde nominated to be next ECB president

                                        By
                                        ActionForex
                                        -

                                        After three days of marathon summit negotiations, EU leaders have finally agreed to nominate two women for the two top posts. France’s IMF Managing Director Christine Lagarde is chosen as the successor of Mario Draghi as ECB President. German Defence Minister Ursula von der Leyen, a close ally of Chancellor Angela Merkel, would succeed Jean-Claude Juncker as European Commission President.

                                        In other decision, Belgium’s Liberal caretaker Prime Minister Charles Michel would overtake Donald Tusk as European Council President. Spain’s acting Foreign Minister, Josep Borrell, is nominated as EU’s foreign policy chief.

                                        Fed Mester: Too soon to decide to cut interest rate

                                          By
                                          ActionForex
                                          -

                                          Cleveland Fed President Loretta Mester said in a speech that she will be monitoring incoming data to determine if her baseline outlook of sustainable-growth remains intact. And for now, it’s “too soon” to make that determination. Hence, she said, “I prefer to gather more information before considering a change in our monetary policy stance.”

                                          To be more specific, Mester added, “if I see a few weak job reports, further declines in manufacturing activity, indicators pointing to weaker business investment and consumption, and declines in readings of longer-term inflation expectations, I would view this as evidence that the base case is shifting to the weak-growth scenario. In this scenario, the economy’s short- to medium-term equilibrium interest rate would be moving down, and our policy rate could need to move down ”

                                          Mester’s full speech here.

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