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NZD/USD decline slows, some RBNZ previews

    By
    ActionForex
    -

    RBNZ rate decision will be a major focus in the coming Asian session. There is no chance of a shift in OCR, which is currently at 1.75%. While the economy appeared to have picked up momentum in Q3, Q4 data proved that was only a false dawn. RBNZ’s today in the upcoming statement should at least switch to the absolute neutral stance. That is, the language that next move could be up or down would be reintroduced. And there is prospect for the central to even tilt more to the dovish side.

    Here are some suggested readings:

    NZD/USD dived sharply last week after weaker than expected job data. But the decline slowed this week, with 4 hour MACD crossed above signal line. Intraday bias is turned neutral for now. As long as 0.6773 minor resistance holds, we’d expect further decline ahead. Break of 0.6706 will pave the way to 0.6551 low.

    Nevertheless, break of 0.6773 will indicate shorty term bottoming and bring stronger recovery. But even in that case, we don’t expect a break of 0.6941 resistance in near term.

    Into US session: Yen and Swiss Franc weakest as stocks rebound extend

      By
      ActionForex
      -

      Entering into US session, Yen and Swiss Franc remain the weakest ones for today and the week as stocks rebound continue. DOW futures are currently up 200 pts, cheering the deal in US Congress to avert another government shut down, with funding for 90km of bordering fencing. Dollar is following as the third weakest. US Treasurer Steven Mnuchin and USTR Robert Lighthizer arrived in Beijing today for trade talks, without any notable comments so far.

      Meanwhile, Australian Dollar is the strongest one, followed by Canadian. WTI is back at 53.8 after defending 51.37 support earlier. Sterling stays mixed as UK Prime Minister delivered her Brexit update in the parliament. The most important thing to note is that if she cannot get an approvable new deal by February 26, the Commons will be given a chance to vote on a plan B on the following day.

      In Europe, currently:

      • FTSE is down -0.07%.
      • DAX is up 1.03%.
      • CAC is up 0.86%.
      • German 10-year yield is up 0.0204 at 0.143.

      Earlier in Asia:

      • Nikkei rose 2.61%.
      • Hong Kong HSI rose 0.10%.
      • China Shanghai SSE rose 0.68%.
      • Singapore Strait Times dropped -0.16%.
      • Japan 10-year JGB yield rose 0.0184 to -0.009, staying negative.

      BoE Carney: Brexit is the first test of a new global order

        By
        ActionForex
        -

        BoE Governor Mark Carney noted in a speech today that global growth momentum is now “weakening in all major regions” and “downside risks have intensifed”. Also, the proportion of the global economy growing above trend has fallen from four-fifths to one-third.

        Tighter financial conditions could be part of the reaons for the deceleration. But he warned, “potentially more seriously, the slowing in global momentum may also be the product of rising trade tensions and growing policy uncertainty.” And, “risks from China and from de-globalisation are significant and growing.” Carney also emphasized “contrary to what you might have heard, it isn’t easy to win a trade war.”

        He added that Brexit is the “first test of a new global order”. It could be the “acid test” of “whether a way can be found to broaden the benefits of openness while enhancing democratic accountability.” And, Brexit can also lead to “new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities.”

        Full speech “The global outlook”.

        ECB Knot: Wait-and-see attitude is probably the optimal attitude

          By
          ActionForex
          -

          ECB Governing Council member Klaas Knot said there is no need to raise interest rates before more sign of inflation pickup to target. He said “we will have to be patient and also, in my view, modest with respect to the precise moment at which we can expect inflation to converge toward our medium-term objective.” And, at this moment, a “wait-and-see attitude is probably the optimal attitude.”

          Knot also tried to play down recession risk despite economic slow down. He said “the current situation might last a few quarters, but I’m still positive . . . that afterwards growth will return to levels slightly above potential again.”

          UK PM May: Parliament can vote on Brexit plan B is no new deal is agreed by Feb 26

            By
            ActionForex
            -

            UK Prime Minister Theresa May said in the parliament that she told European Commission President Jean-Claude Juncker last week that UK wanted “legal binding” changes to the withdrawal agreement that it would not be kept in the backstop. But Juncker insisted EU would not reopen negotiation on the withdrawal agreement.

            May told lawmakers such request for renegotiation was “reasonable”. But she also admitted that “some time” is needed to complete the process of negotiating a better deal on Irish backstop. Though, May is still aiming to leave the EU on March 29. She also promised that if she cannot get a deal by February 26, the Commons will have a chance to vote on a plan B the following day.

            For this week, it’s confirmed that there will be no meaningful vote in the Commons, but amendable motion for debate on Thursday.

            US Treasurer Mnuchin and USTR Lighthizer arrive in Beijing for trade talks

              By
              ActionForex
              -

              US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer arrived in Beijing today, ahead of the high-level meeting on Thursday.

              Mnuchin told reporters that “it’s great to be here back in Beijing,” and “we’re looking forward to several important days of talks.”

              Lighthizer arrived earlier but didn’t any any questions from reporters.

              Bundesbank Weidmann: Acting beyond mandate will undermine trust in ECB

                By
                ActionForex
                -

                Bundesbank President Jens Weidmann warned today that the Eurozone is still not crisis proof. He pointed out that “certain issues like the lack of credibility of fiscal rules or the harmful sovereign-bank nexus still have to be adequately addressed.”

                At the same time, fighting crises could force unelected ECB bankers to take political positions that’s beyond its own mandate. And, “acting beyond the mandate would also undermine people’s trust in the central bank.”

                He added, “at the end of the day, it could become more and more difficult for the European Central Bank to focus on its promise of a stable currency.”

                UK PM May: Hold our nerve and deliver Brexit on time

                  By
                  ActionForex
                  -

                  UK Prime Minister Theresa May is going to make a statement on Brexit in the parliament today. According to her office, May is expected to say “the talks are at a crucial stage.” And she’ll urge that “we now all need to hold our nerve to get the changes this House has required and deliver Brexit on time.”

                  Also, May will say “By getting the changes we need to the backstop; by protecting and enhancing workers’ rights and environmental protections; and by enhancing the role of Parliament in the next phase of negotiations I believe we can reach a deal that this House can support.”

                  But just yesterday, EU chief Brexit negotiator Michel Barnier reiterated that “It’s clear from our side that we are not going to reopen the withdrawal agreement but we will continue our discussion in the coming days.”

                  Into European Session: Aussie strongest, lifted by stock rebound and improving business confidence

                    By
                    ActionForex
                    -

                    Entering into European session, Australian Dollar is so far the best former for today. It’s partly helped by another day of rebound in Chinese stock markets. Japanese Nikkei also came back from holiday with a rebound. Additionally, better than expected NAB business condition and confidence also give Aussie a pop. But upside momentum is rather weak as the current recovery should be corrective in nature.

                    For now, Canadian Dollar follows as the second strongest one. WTI crude oil drew support from 51.37 support and is recovering, back at 52.8. Euro is the third strongest, paring some of yesterday’s losses. On the other hand, Yen, New Zealand Dollar and Dollar are the weakest ones so far.

                    The economic calendar is rather light ahead today. Main focus will be on UK Prime Minister Theresa May’s Brexit statement in the Commons. The US Congress has reached a tentative deal to avert another partial government shutdown. So, focus will turn back to any news regarding US-China trade negotiation.

                    In Asia:

                    • Nikkei closed up 2.61%.
                    • Hong Kong HSI is up 0.09%.
                    • China Shanghai SSE is up 0.53%.
                    • Singapore Strait Times is down -0.01%.
                    • Japan 10-year JGB yield is up 0.0113 at -0.017, staying negative.

                    Overnight:

                    • DOW closed down -0.21%.
                    • S&P 500 rose 0.07%.
                    • NASDAQ rose 0.13%.
                    • 10-year yield rose 0.029 to 2.661.
                    • 30-year yield rose 0.023 to 2.999, just failed to reclaim 3% handle.

                    RBNZ survey: Inflation, house price and GDP expectations dropped

                      By
                      ActionForex
                      -

                      RBNZ quarterly survey showed inflation expectation for a year ahead dropped from 2.09% to 1.82%. One-year house price expectations dropped sharply from 2.86% to 1.91%. One-year rolling annual GDP expectation dropped slightly from 2.44% to 2.38%. Regarding RBNZ monetary policy, a net 75.6% of respondents believe monetary conditions in one year’s time will be easier than neutral.

                      Full survey report here.

                      NAB on RBA: Next rate move could be down rather than up

                        By
                        ActionForex
                        -

                        Australia NAB Business Condition staged a moderate rebound in January up from 2 to 7 and beat expectation of 4. That came after the sharp decline from 11 to 3 in December. Business Confidence also rose slightly from 3 to 4. NAB noted that even after the recovery, “conditions and forward orders continue to trend lower and still show a sizeable decline over the past 6 months.”

                        Alan Oster, NAB Group Chief Economist noted that “Based on the confirmation that conditions have deteriorated further and our current set of forecasts we now see the RBA staying in neutral for the foreseeable future, though think the next move could be down rather than up based on the current trajectory of growth and growing downside risks”.

                        Media release here.

                        China MOFCOM: Consumption faces more challenges in 2019 after slowdown last year

                          By
                          ActionForex
                          -

                          Chinese Commerce Department’s Deputy Director of the Market Operation Wang Bin admitted that consumption growth in 2018 has slowed down. In particular, growth in products related to automobiles and housing have been weak. Additionally, there will be more challenges for consumption growth in 2019 than expected.

                          Wang added that there will be measures to boost consumption in five aspects. Those include polices on urban consumptions, rural consumptions, service consumptions, product circulations and consumption environments.

                          MOFCOM’s briefing here (in simplified Chinese).

                          EU Barnier and UK Barclay held constructive meeting on next step for Brexit

                            By
                            ActionForex
                            -

                            EU chief Brexit negotiator Michel Barnier had a meeting with UK Brexit Minister Stephen Barclay in Brussels on Monday evening. A UK government spokesman said the two had a “constructive” meeting.

                            And they met to “discuss the next steps in the UK’s withdrawal from the EU and explore whether a way through can be found that would be acceptable to the UK Parliament and to the European Union”.

                            UK Prime Minister Theresa May is scheduled to make a statement on Brexit today. Without any progress, there will not be another meaningful vote on her withdrawal agreement. Instead, debate will resume on Thursday in the Commons, with some lawmakers pushing for shift control of the negotiation from the government to the parliament.

                            Tentative deal reached to avert another US government shutdown, with border fencing

                              By
                              ActionForex
                              -

                              A tentative deal was agreed yesterday between the Republicans and Democrats to avert another partial government shutdown this Saturday. But the agreement does not include the USD 5.7B funding for the border wall that Trump demanded.

                              No detail is provided for the deal yet. But based on unnamed source, there would be USD 1.375B in funding for new fencing along the southern border of the US. That is around the same amount the Congress allocated last year.

                              Also, it’s reported that only currently deployed design could be used for 90km of additional barriers, which might include steel bollard fencing.

                              White House Conway: Trump wants to meet Xi very soon

                                By
                                ActionForex
                                -

                                Mid-level trade negotiations between US and China continue in Beijing today. That’s supposed to lead up to high level meeting between USTR Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He on Thursday and Friday. So far, little news is reported regarding the actual talks. It’s believed that the teams are only in the stage of drafting a common document that addresses the issues. But they’re still struggling to find concrete ways on the main issue, enforcement of the agreement.

                                White House adviser Kellyanne Conway said yesterday that Trump “wants to meet with President Xi very soon.” She added that This president wants a deal. He wants it to be fair to Americans and American workers and American interests.” Also, Trump has “forged a mutually respectful relationship with President Xi,” and “they will meet again soon.” However, Conway also noted that no deal will be final until the Trump-Xi meeting happens.

                                As the March 1 trade truce deadline is approaching, time is running out for the talks. It’s reported that an option for the US is to extend the period. However, to maintain pressure on China and urgency on the negotiations, any extensions won’t be open-ended. And based on unnamed sources, the US side intend not to let the Trump-Xi meeting slip much past end of March.

                                US update: Dollar marches on, US stocks indecisive despite global rally

                                  By
                                  ActionForex
                                  -

                                  US stocks opened higher today but quickly turn mixed. Despite positive words from White House senior counselor Kellyanne Conway, investors see the result of US-China trade talk as highly uncertain. Also, sentiments could be weighed down by a report that Apple’s iphone shipment to China dived -20% in Q4.

                                  At the time of writing:

                                  • DOW is down -0.13%
                                  • S&P 500 is up 0.07%.
                                  • NASDAQ is up 0.20%
                                  • US 10-year yield is up 0.22 at 2.654.

                                  In Europe:

                                  • FTSE rose 0.87%.
                                  • DAX rose 1.03%.
                                  • CAC rose 1.09%.
                                  • German 10-year yield is up 0.032 at 0.121.

                                  In the forex markets, Dollar is the strongest one for today and the strength is rather convincing. USD/CHF and USD/JPY resumed recent rise by taking out 1.0028 and 110.16 resistances earlier today. EUR/USD’s break of 1.1289 support also argues that recent consolidation from 1.1215 low has completed. Focus will be on whether 1.2854 support in GBP/USD, 0.7060 support in AUD/USD and 1.3329 resistance in USD/CAD would be taken out before the end of the US session.

                                  Meanwhile, Sterling is the weakest one after poor data today. UK GDP grew only 0.2% qoq in Q4, below expectation of 0.3% qoq. In December, GDP contracted -0.4% mom , much worse than expectation of 0.0% mom. Industrial and manufacturing production also missed expectations. Yen and Swiss Franc are next weakest, mainly because of rebound in Asian and European stock markets.

                                  GBP/USD is the top mover for today so far, but USD/JPY is not that far away. We’re holding on to the view that rebound from 1.2391 has completed at 1.3217 already. Break of 1.2854 will affirm this bearish case and pave the way to retest 1.2391 low.

                                  Into US session: Yen & Swiss weakest as stocks rebound, Sterling down on GDP

                                    By
                                    ActionForex
                                    -

                                    Entering into US session, Yen and Swiss Franc are trading as the weakest one for today on easing risk aversion. At the time of writing, major European indices are trading higher, following 1.36% gain in China SSE. Sterling also softens after poor GDP data, which showed contraction in December. 2018 overall was also the worst year in UK since 2012. But weakness in the Pound is so far limited. Meanwhile, Canadian, New Zealand and Dollar are the three strongest ones.

                                    Technically, USD/CHF’s rally resumed by taking out 1.0028 and is on track to retest 1.0128 high. USD/JPY also broke out of tight range, through 110.16, to resume recent rebound. EUR/USD edges lower today and is eyeing 1.1289 support. Break there will bring retest of 1.1215 low next. AUD/USD weakens today, thanks to Dollar’s strength mainly, and it main challenge 0.7060 temporary low later in the session.

                                    In European markets, currently:

                                    • FTSE is up 0.77%.
                                    • DAX is up 1.02%.
                                    • CAC is up 1.09%.
                                    • German 10-year yield is up 0.0241 at 0.114.

                                    Earlier in Asia:

                                    • Hong Kong HSI rose 0.71%.
                                    • China Shanghai SSE was back from holiday and rose 1.36%.
                                    • Singapore Strait Times rose 0.13%.
                                    • Japan was on holiday today.

                                    UK Fox: Brexit is not the only reason for slowdown

                                      By
                                      ActionForex
                                      -

                                      UK Trade Minister Liam Fox said today that Brexit is not the only reason for growth slowdown. He said in a news conference that “clearly there are those who believe that Brexit is the only economic factor applying to the UK economy.”

                                      But he argued that “the predicted slowdown in a number of European economies is not disconnected from the slowdown, for example, in China”. And, “the idea that Brexit is the only factor affecting the global economy is just to miss the point.”

                                      Meanwhile, even with Brexit impasse, “the chances of having a second referendum are as close to nil as I could imagine.”

                                      UK PM May to update parliament on Brexit on Tuesday

                                        By
                                        ActionForex
                                        -

                                        UK Prime Minister Theresa May’s spokesman said she will make a statement in the parliament tomorrow. And, “that will be an update on Brexit talks and is in advance of the debate taking place on Thursday.”

                                        That was a day ahead of market expectations. But anyway, parliament debate on February 14 will be a major focus this week. Attention would be on any motions that could shift the control of Brexit from the government to the parliament. And if so, that would open up the route for lawmakers to renegotiate, delay, or even block Brexit.

                                        Bank of France: GDP to growth 0.4% in Q1

                                          By
                                          ActionForex
                                          -

                                          Bank of France said today that according to the monthly index of business activity (MIBA), the country’s GDP is expected to grow 0.4% qoq in Q1 this year.

                                          The business sentiment indicator in manufacturing dropped to 99 in January, down from 102. in December. Services indicator dropped to 100, down from 101. Construction indicator was unchanged at 105.

                                          Also, BoF said for February, Business leaders expect industrial production to pick up, service sector activity to accelerate and construction sector activity to continue to grow.

                                          Full survey report here.

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