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NFP Expectation: 189k growth, unemployment to drop to 4.0%, wage growth at 0.3%

    By
    ActionForex
    -

    While the trade war drama continues, with intention of escalation from Trump, there are other issues that’s worth a look. Non-farm payroll report is still a major focus of the day.

    Markets are expecting NFP to show 189k growth in March, down from February’s 313k. Unemployment rate is expected to drop further to 4.0%. Wage growth remains the key for Fed’s tightening path. Average hourly earnings are expected to grow 0.3% mom in March.

    Here is a summary of preceding job data:

    • ADP private sector jobs grew a solid 241k
    • ISM manufacturing employment dropped to 57.3, down fro 59.7
    • ISM non-manufacturing employment rose to 56.6, up from 55.0
    • Conference board consumer confidence dropped to 127.7, down from 130.0

    The data were solid even though they don’t point to that stellar 313k job growth in February. But 189k should be easy to achieve.

    Here are some other NFP previews that’s worth a look:

    Eurozone CPI finalized at 1.3%, revised up, core CPI at 1.1%

      By
      ActionForex
      -

      Eurozone CPI was finalized at 1.3% yoy in June, revised up from 1.2%, up from May’s 1.2% yoy. Core CPI was finalized at 1.1% yoy, unrevised, up from May’s 0.8% yoy. EU 28 CPI was finalized at 1.6% yoy, stable compared to May.

      The lowest annual rates were registered in Greece (0.2%), Cyprus (0.3%), Denmark and Croatia (both 0.5%). The highest annual rates were recorded in Romania (3.9%), Hungary (3.4%) and Latvia (3.1%). Compared with May, annual inflation fell in seventeen Member States, remained stable in one and rose in nine.

      In June, the highest contribution to the annual euro area inflation rate came from services (0.73%), followed by food, alcohol & tobacco (0.30%), energy (0.17%) and non-energy industrial goods (0.07%).

      Full release here.

      US non-farm payroll grew 263k, strong wage growth

        By
        ActionForex
        -

        US non-farm payroll employment grew 263k in November, above expectation of 200k. Average job growth was 282k over the prior three months, and 392k thus far in 2022. Unemployment rate was unchanged at 3.7%, matched expectations. Participation rate dropped -0.1% to 62.1%. Wage growth was strong with average hourly earnings up 0.6% mom, versus expectation of 0.3% mom.

        Full release here.

        China exports rose 8.5% yoy in Apr, exports to Russia surged 153% yoy

          By
          ActionForex
          -

          China’s April exports outperformed expectations, growing by 8.5% yoy to reach USD 295.4B. This marked the second consecutive month of growth, exceeding anticipated 8.0% yoy. However, imports dropped by -7.9% yoy to USD 205.2B, falling short of expected 0.0% yoy. As a result, trade surplus widened from USD 88.2B to USD 90.2B, significantly surpassing the forecasted USD 69.0B.

          Breaking down the numbers, exports to EU experienced a modest growth of 3.7% yoy, while imports from the bloc saw a slight decrease of -0.12% yoy. Trade with the US reflected a downturn, with exports dropping by -6.5% yoy and imports declining by -3.1% yoy.

          Trade relations with ASEAN region were mixed, with exports increasing by 4.49% yoy, while imports fell by -6.25% yoy. Meanwhile, trade with Russia exhibited a significant surge. Chinese exports to Russia skyrocketed by a staggering 153.09% yoy, and imports also rose, though at a more modest rate of 8.06% yoy.

          BoC Poloz: Recent data suggests below-potential growth just temporary

            By
            ActionForex
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            BoC Governor Stephen Poloz sounded confident in his speech yesterday. He noted that Canada is adjusting the challenges in the domestic and global economies. And after taking into account the structural adjustments to oil prices, he said “we can see many area of encouraging economic growth”.

            He added that the global economy is performing less well than expected and “Canada is feeling the effects”. Housing markets is also taking longer to “digest the combined effect of stricter mortgage guidelines and higher interest rates”.

            However, Poloz said “recent economic data have been generally consistent with our expectation that the period of below-potential growth will prove to be temporary.”

            More on Poloz’s speech.

            Japan Tankan large manufacturing dropped to -8, worst since 2013

              By
              ActionForex
              -

              Japan’s Tankan large manufacturing index dropped to -8 in Q1, down from 0.That’s the first negative reading in seven years, lowest since March 2013, and the fifth straight decline. Large manufacturing outlook dropped from 0 to -11. Large non-manufacturing index also dropped from 20 to 8 while outlook dropped from 18 to -1. Large all industry capex rose 1.8%, better than expectation of -1.1%.

              Also from Japan, PMI manufacturing was finalized at 44.8 in March, down from February’s 47.8. Manufacturing output contracted at the sharpest rate since aftermath of 2011 tsunami. Production volumes slumped at the fastest rate for almost nine years, with sharpest drop in demand since April 2011. Supply chain issues also intensified further.

              Joe Hayes, Economist at IHS Markit said, “the cascading impact of COVID-19 on the global economy is diminishing the chances of a V-shaped recovery.”

              Takaichi victory spurs Yen selloff; EUR/JPY targets 180

                By
                ActionForex
                -

                Yen tumbled sharply in the Asian session as Nikkei 225 soared over 2,000 points, or 4%, to a new record high, after the Liberal Democratic Party elected Sanae Takaichi as its new leader. Markets quickly priced in expectations that Japan’s first female prime minister will pursue aggressive fiscal stimulus and stronger coordination with the private sector to revive growth.

                A Takaichi administration is widely expected to overhaul Japan’s economic framework, emphasizing investment expansion and demand creation through public–private partnerships. Her longstanding support for Abenomics-style fiscal expansion has fueled optimism for renewed spending momentum, particularly in infrastructure and industrial policy.

                Traders also anticipate that Takaichi will urge the BoJ to maintain its accommodative stance, dampening expectations for further tightening in the near term. Despite recent data supporting a mildly hawkish case, policymakers may tread carefully amid heightened political and fiscal uncertainty during the leadership transition.

                Technically, EUR/JPY broke decisively above 175.41 (2024 high), confirming the resumption of its long-term uptrend. The next target lies at 38.2% projection of 161.06 to 173.87 from 172.24 at 177.13. Firm break there will open the path to 61.8% projection at 180.15.

                In the medium term, EUR/JPY’s rise from 114.42 (2020 low) should now be heading to 61.8% projection of 124.37 to 175.41 from 154.77 at 186.31.

                 

                New Zealand CPI dropped -0.5% qoq in Q2, affirming more RBNZ easing, NZD/JPY steady

                  By
                  ActionForex
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                  New Zealand CPI dropped -0.5% qoq in Q2, matched expectations. That’s the first quarterly fall in inflation since December 2015 quarter. Petrol prices dripped -12% qoq, biggest quarterly decline since December 2008 quarter. Annually, CPI slowed to 1.5% yoy, down from 2.5% yoy, matched expectations too. Stats NZ prices senior manager Aaron Beck said “the COVID-19 pandemic has created a lot of volatility and uncertainty. These have resulted in some large price fluctuations as well as several measurement challenges.”

                  The data suggests that inflation could move back to target slower than RBNZ is expecting. The development reaffirms the easing case for the central bank ahead. It’s generally expected to expand the asset purchase program in the coming months. As RBNZ is also preparing the financial system for, negative rate is still a likely option to be adopted next year.

                  NZD/JPY is steadily in range after the release, hovering around 4 hour 55 EMA. The rebound from 68.19 is seen as the second leg of the pattern from 71.66. This view is affirmed by the corrective structure, as well as the weak momentum as seen in 4 hour MACD. Even in case of another rise, upside should be limited by 71.66 high. Meanwhile, break of 69.66 support should confirm the start of the third leg to 68.19 support and below.

                  BoE Vlieghe: Probably take until Q1 to see when a rate hike is appropriate

                    By
                    ActionForex
                    -

                    BoE policymaker Gertjan Vlieghe said in a speech that, his central scenario for the economy sees “somewhat more slack” that the MPC’s central projection. He worried that “the transition out of furlough does involve a modest rise in the unemployment rate”. But even in that case, “the first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter.”

                    On the upside, “the transition out of furlough happen more smoothly” with unemployment at or at little below current levels by year end, and with associated signs of upward inflation and wage pressure beyond the temporary and base effect. Then, “a somewhat earlier rise in Bank Rate would be appropriate”.

                    Still, “It would probably take until the first quarter of next year to have a clear view of the post-furlough unemployment and wage dynamics, so a rise in Bank Rate could be appropriate soon after, along a slightly steeper path than in my central case.”

                    Full speech here.

                    ECB minutes show majority support for 50bps hike despite market uncertainty

                      By
                      ActionForex
                      -

                      In ECB’s minutes of its March 15-16 meeting, it was revealed that “a very large majority” of members agreed with Chief Economist Philip Lane’s proposal to raise key interest rates by 50 basis points. This decision was made “in line with the intention the Governing Council had communicated at its last monetary policy meeting.”

                      The minutes noted that “following the announced intended interest rate path was seen as important to instil confidence and avoid creating further uncertainty in financial markets.” However, “some members would have preferred not to increase the key rates until the financial market tensions had subsided and to conduct a comprehensive re-evaluation of the stance at the Governing Council’s next monetary policy meeting, in May.”

                      Looking ahead, members concurred on the importance of a data-dependent approach for future policy rate decisions amid the “elevated level of uncertainty.” In this context, the minutes stated that “it was underlined that if the inflation outlook embedded in the March ECB staff projections were confirmed, the Governing Council would have further ground to cover in adjusting the monetary policy stance to ensure a timely return of inflation to target.”

                      Full ECB minutes here.

                      Eurozone PMI manufacturing finalized at 46.5, monetary policy could do little to address headwinds

                        By
                        ActionForex
                        -

                        Eurozone PMI Manufacturing is finalized at 46.5 in July, revised up from 46.4, down from June’s final of 47.6. Markit said output and orders were both down markedly as confidence hit lowest since December 2012. Also, there was sharpest recorded reduction in employment for over six years.

                        Looking at the member states, Germany PMI manufacturing hit 84-month low at 43.2. Austria hit 57-month low of 47.0. Italy and Spain recovered slightly to 48.5 and 48.2 respectively. Ireland hit 75-month low of 48.7. France hit 7 month low of 49.7.

                        Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

                        “The Eurozone PMI dashboard is a sea of red, with all lights warning on the deteriorating health of the region’s manufacturers. July saw production and jobs being cut as the fastest rates for over six years as order books continued to decline sharply. Prices fell at the sharpest rate for over three years as firms increasingly competed via discounting to help limit the scale of sales losses.

                        “Forward indicators also deteriorated. Input buying fell to an extent not seen since 2012 as firms prepared for weaker production in the short term, and expectations for the year ahead likewise fell to the lowest in over six-and-a-half years.

                        “The downturn is being led by Germany, reflective of a further worsening conditions in the auto sector and falling global demand for business equipment. However, output is also falling in Italy, France, Spain, Ireland and Austria and is close to stalling in the Netherlands. Greece notably bucked the deteriorating trend.

                        “Rising geopolitical concerns, including trade wars and Brexit, and worries about slower economic growth both domestically and internationally were all widely reported as having subdued current demand and hit confidence in the outlook. The concern is that, while policymakers have become increasingly alarmed at the deteriorating conditions, there may be little that monetary policy can do to address these headwinds.”

                        Full release here.

                        UK CPI slowed to 0.2% yoy, core CPI down to 0.9% yoy

                          By
                          ActionForex
                          -

                          UK CPI slowed sharply to 0.2% yoy in August, down from 1.0% yoy, but above expectation of 0.1% yoy. Core CPI dropped to 0.9% yoy, down form 1.8% yoy, also above expectation of 0.9% yoy. RPI dropped to 0.5% yoy, down from 1.6% yoy, below expectation of 2.2% yoy.

                          Also released, PPI input came in at -0.4% mom, -5.8% yoy, versus expectation of 1.3% mom, -4.3% yoy. PPI output was at 0.0% mom, -0.9% yoy, versus expectation of -0.1% mom, -1.0% yoy. PPI core output was at 0.1% mom, 0.2% yoy, versus expectation of 0.0% mom, -0.2% yoy.

                          Eurozone Sentix investor confidence dropped sharply to 9.3 as expectation collasped

                            By
                            ActionForex
                            -

                            Eurozone Sentix Investor confidence dropped sharply to 9.3 in June, down from 19.2 and well below expectation of 18.6. And, for the fifth time in a row, overall index for GErmany dropped to its lowest level since July 2016. Expectation “collapsed” to -13.3, hitting the lowest level since August 2012.

                            Quote from the release:

                            “Now they are here, the American punitive tariffs. So far, this has done less harm than one might think to global economic expectations. It appears that investors still hope that the world’s trade dispute with the US will not get out of control. Investors, on the other hand, are far less lenient with developments within the euro zone. The new government in Rome is very sceptical. This is so strong that economic expectations in the euro zone are downright tilting.”

                            Full release here.

                            US CPI slowed to 7.1% yoy in Nov, core CPI down to 6.0% yoy

                              By
                              ActionForex
                              -

                              US CPI rose 0.1% mom in November, lower than expectation of 0.3% mom. Food index rose 0.5% mom while energy index decreased -1.6% mom. CPI core (all items less food and energy) rose 0.2% mom, below expectation of 0.3% mom.

                              Over the last 12 months, CPI slowed from 7.7% yoy to 7.1% yoy, below expectation of 7.3% yoy. CPI core slowed from 6.3% yoy to 6.0% yoy, below expectation of 6.1% yoy. Energy index rose 13.1% while food index rose 10.6% yoy.

                              Full release here.

                              Dollar rebounds despite Fed’s dovish economic projections

                                By
                                ActionForex
                                -

                                Dollar rebounds after Fed’s rate hike, in particular against Aussie Yen also strengthens together against Euro and Swiss Franc. Meanwhile, Stock pares back some initial gains. The driving force for Dollar’s rebound is to be investigated. But overall, Fed’s new projections are quite dovish. (Yet, a possible reason might be….. Fed is not stopping after today’s hike yet).

                                First and most important on longer run federal funds rate, seen as Fed’s view on neutral:

                                • Median – revised to 2.8%, down from 3.0%
                                • Central tendency – revised to 2.5-3.0%, somewhat down from 2.8-3.0%
                                • Range – unchanged at 2.5-3.5%

                                For 2019

                                • Median – revised to 2.9%, down from 3.1%
                                • Central tendency – revised to 2.6-3.1%, down from 2.9-3.4%

                                Overall, the revision argues that Fed might have one or at most two more rate hikes in 2019, rather than three as implied in September projections.

                                On growth:

                                • 2019 median growth projection was revised to 2.3%, down from 2.5%
                                • 2020 median growth projection was unchanged at 2.0%

                                On unemployment:

                                • 2019 median unemployment rate projection was unchanged at 3.5%
                                • 2020 median unemployment rate projection was revised to 3.6%, up from 3.5%

                                On core inflation:

                                • 2019 median core PCE projection was revised to 2.0%, down from 2.1%
                                • 2020 median core PCE projection was revised to 2.0%, down from 2.1%

                                China Xi’s speech at Boao Forum may disappoint

                                  By
                                  ActionForex
                                  -

                                  Chinese President Xi Jinping’s speech at the Boao Forum for Asia on Tuesday will be a key focus this week. Xi has so far been quiet regarding the trade tensions with US President Donald Trump. There are expectations for Xi to make use of the occasion to push back and defend. Or, Xi could say something consistent with China’s theme of blaming US for unilaterialism and protectionism,

                                  However, Xi’s leadership and communication style is clearly very different from Trump’s. And it’s, to us, unlikely for Xi to suddenly change his style to adopt a confrontational way like Trump. That is, the way that Trump tripled down on the tariff proposals to USD 150b immediately after Chinese response. Nor would Xi adopt a way like Trump, who could say “President Xi and I will always be friends” right after raising the threat to China. We’ve never heard Xi saying that Trump is his friend (haven you?). It’s more likely for Xi to just reiterate the push for globalization, compliance with then WTO and its own commitment in opening up the markets. Xi, as self-envisaged emperor, will just let his officials do the barking.

                                  Australia AiG PMI improved to 54.8, but employment and wage indices dropped

                                    By
                                    ActionForex
                                    -

                                    Australia AiG Performance of Manufacturing Index rose 3.8 pts to 54.8 in April, indicating faster growth. All subsectors except machinery & equipment, and metal products improved. Top concerns for manufacturers in April included the upcoming Federal election, high energy prices, high input costs (due to drought, a low dollar and high commodity prices) and tighter credit conditions.

                                    Employment index dropped sharply by -5.1 pts to 51.5. The release also noted ABS data indicated that total manufacturing employment fell dramatically over summer, with a reduction in employment of 41,600 over the three months to February 2019 (-6.3% q/q, trend). Average wage index dropped -3.5 to 57.7, indicating lower wage pressures across the manufacturing sector. Also, this wage index has been trending down since peaking at September 2018.

                                    Full release here.

                                    JPY is strong, but USD is not bad

                                      By
                                      ActionForex
                                      -

                                      While JPY is strong after US NFP miss, USD’s performance is not bad. It’s closely following JPY as the second strongest one for the day. And indeed, USD is trading above yesterday’s high against EUR, GBP, CHF.

                                      Looking at USD Action Bias table, D Action Bias show USD is in uptrend against EUR, GBP, CHF, CAD. 6H Action Bias, being neutral, suggest that these pairs were in consolidation. And H Action Bias argues that the trend might be resuming.

                                      Of course, we’ll have to look at the individual pairs too. There isn’t much problem with the bearish view as seen in EURUSD action bias table. Now, we just have to wait for 6H Action Bias to turn red to confirm return of downside momentum.

                                      ECB Lagarde: Even in the bleakest scenario, there is no stagflation

                                        By
                                        ActionForex
                                        -

                                        ECB President Christine Lagarde said that Russia invasion of Ukraine will have “consequences” for growth. However, “even in the bleakest scenario, with second-round effects, with a boycott of gas and petrol and a worsening of the war that goes on for a long time — even in those scenarios we have 2.3% growth.” Hence, “we are not seeing elements of stagflation now,” she said.

                                        Lagarde also reiterated that the US and Eurozone are in “difference universes”, at a “different stage” in the economic cycle, with “different starting points”. “We in the euro area are at negative rates, while the U.S. never went below zero.”

                                        Eurozone PMI composite finalized at 49.1, worse may be yet to come

                                          By
                                          ActionForex
                                          -

                                          Eurozone PMI Services was finalized at 46.4 in December, up from November’s 41.7. PMI Composite was finalized at 49.1, up from November’s 45.3. Looking at some member states, Ireland PMI Composite rose to 53.4, a 4-month high. Germany rose to 52.0, 2-month high. France rose to 49.5, 4-month high. Spain rose to 48.7, 5-month high. Italy rose to 43.0, 2-month high.

                                          Chris Williamson, Chief Business Economist at IHS Markit said: “The eurozone economy contracted for a second successive month in December, deteriorating at a slightly faster rate than previously thought at the end of the year due to intensifying COVID-19 restrictions… Worse may be yet to come before things get better, especially as the latest survey data were collected before the news of the new – more contagious – strain of the virus…. The risk of a technical recession, with GDP also falling in the first quarter has therefore risen.

                                          Full release here.

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