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German Gfk consumer climate rises to -21.2, stabilizing at low level

    By
    ActionForex
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    Germany’s GfK Consumer Climate index for October showed a marginal improvement, rising from -21.9 to -21.2, though falling short of the expected -21.0. Despite the slight uptick, overall consumer sentiment remains weak. Economic expectations dipped from 2.0 to 0.7 in September, while income expectations saw a stronger rise, from 3.5 to 10.1. The willingness to buy also improved, increasing from -10.9 to -6.9, while the willingness to save climbed from 10.7 to 12.0.

    Rolf Bürkl, consumption expert at NIM, cautioned against overinterpreting this minor improvement. He stated, “After the severe setback in the previous month, the slight improvement in consumer climate can be interpreted more as a stabilization at a low level.”

    He further added, “The consumer climate has not improved since June 2024, and the slight increase cannot be seen as the start of a noticeable recovery.” In addition to the ongoing challenges of wars, crises, and inflation, the labor market has emerged as a new source of concern in recent months, weighing on consumer sentiment.

    Full German Gfk consumer climate release here.

    SNB Decision: Conservative 25bps cut or aggressive 50bps?

      By
      ActionForex
      -

      SNB is set to announce its rate decision today, and the financial markets are rife with speculation. A significant gap has emerged between market expectations and those of economists regarding the magnitude of the rate cut. While a majority of economists are forecasting a 25 bps cut, market pricing suggests a nearly even split between the likelihood of a 25 bps cut and a more aggressive 50 bps reduction.

      Several compelling arguments support the case for SNB to “front-load” its policy easing with a larger cut. First and foremost is the sharp decline in inflation. Last month, inflation dropped to 1.1%, well below the SNB’s estimate of 1.5% for Q3, and far below the upper limit of its 0-2% target range. The government projects inflation to drop further to just 0.7% next year, suggesting that inflationary pressures are diminishing faster than anticipated. This may compel SNB to act decisively to counter deflationary risks.

      Additionally, weak economic performance in the Eurozone, compounded by the strength of the Swiss Franc, is placing considerable strain on Swiss industries. The poor performance of Eurozone purchasing managers’ indices adds weight to the argument for a 50 bps cut to support economic activity in Switzerland.

      However, SNB faces constraints. With policy rate currently at 1.25%, there is limited room for rate cuts before reaching zero. Some economists argue that SNB should hold back some policy measures for future flexibility.

      According to a Bloomberg survey, only one out of 32 economists expects a 50 bps cut, while two predict no change. The remaining 29 economists anticipate a 25 bps reduction to bring the rate to 1.00%. Similarly, a Reuters poll found that 30 out of 32 economists expect a 25 bps cut, with one forecasting a 50 bps reduction and another expecting rates to hold steady. Looking ahead to the end of the year, opinions are split: 16 economists believe the rate will be at 1.00%, 15 predict it will drop to 0.75%, and one expects it to remain at 1.25%.

      Technically, GBP/CHF’s rally stalled after hitting 61.8% projection of 1.0741 to 1.1235 from 1.1022 at 1.1327. But further is expected as long as 1.1235 resistance turned support holds. Sustained trading above 1.1327 will pave the way to 100% projection at 1.1516 next.

      BoJ minutes show divided views on rate hike timing

        By
        ActionForex
        -

        Minutes from BoJ’s July meeting reveal a split among policymakers on the pace of future rate hikes. While BOJ raised its short-term interest rate to 0.25% by a 7-2 vote, differing opinions emerged on how quickly further increases should occur.

        One member argued that if price trends follow the bank’s outlook, it would be “necessary” to proceed with further tightening. Another suggested that with inflation projected to reach its target by H2 of fiscal 2025, the policy rate should gradually rise toward the neutral rate, estimated at around 1%. This member cautioned against rapid rate increases and favored a “timely and gradual” approach to avoid shocks to the economy.

        However, some members expressed concerns about the risks of moving too quickly. One warned that monetary policy normalization should not be an end in itself and urged caution in monitoring the risks tied to policy shifts. Another highlighted that inflation expectations were “not being anchored at 2 percent”, suggesting the need to avoid excessive market speculation about future rate hikes.

        The minutes also reflect “high uncertainties regarding the level of the neutral interest rate” about Japan’s neutral interest rate, given the long period without rate hikes. One member noted the difficulty of setting policy based on estimates of the neutral rate, calling for flexibility in adjusting policy based on evolving economic conditions.

        Full minutes of BoJ’s July meeting here.

        Fed’s Kugler backs more rate cuts as focus shifts to employment

          By
          ActionForex
          -

          Fed Governor Adriana Kugler expressed “strong” support for last week’s 50bps rate cut, signaling her inclination toward “additional cuts” in the federal funds rate.

          In her speech overnight, Kugler emphasized that while the focus remains on bringing inflation down to the 2% target, attention should now begin to “shift attention to the maximum-employment side” Fed’s dual mandate.

          The labor market “remains resilient,” she noted, but stressed that FOMC must now carefully balance its objectives. Fed should aim to maintain progress on disinflation while avoiding “unnecessary pain and weakness” in the broader economy.

          Full speech of Fed’s Kugler here.

          OECD sees 3.2% global growth in 2024 and 2025

            By
            ActionForex
            -

            In the Economic Outlook Interim Report, OECD raised its global GDP growth forecast for 2024 by 0.1% to 3.2%, while keeping the 2025 projection steady at 3.2%.

            In the US, growth forecasts remain unchanged at 2.6% for 2024 but have been downgraded by 0.2% to 1.6% for 2025. Eurozone’s GDP growth forecast is unchanged at 0.7% for 2024 and revised down by 0.2% to 1.3% for 2025. Japan faces a significant downgrade for 2024, with growth reduced by -0.6% to -0.1%, but 2025 forecast is upgraded by 0.3% to 1.4%.

            The UK sees a notable upward revision, with growth forecasts increased by 0.7% to 1.1% in 2024 and by 0.2% to 1.2% in 2025. Canada’s GDP growth is slightly upgraded by 0.1% to 1.1% in 2024, remaining unchanged at 1.8% in 2025. Australia faces a sharp downgrade, with 2024 growth reduced by -0.4% to 1.1% and 2025 growth also cut by -0.4% to 1.8%.

            As inflation trends toward central bank targets, OECD projects that Fed’s main interest rate could ease to 3.5% by the end of 2025 from the current range of 4.75%-5%. Similarly, ECB is expected to reduce its rate to 2.25% from 3.5% now. In contrast, Japan may see “further mild increases in policy interest rates,” with gradual withdrawal of policy accommodation, provided inflation stabilizes at the 2%.

            Full OECD report here.

            BoE’s Greene warns of higher neutral Rate, supports measured easing approach

              By
              ActionForex
              -

              BoE MPC member Megan Greene emphasized the need for a “gradual approach” to easing monetary policy in her speech today. She highlighted that her recent vote to hold the Bank Rate at 5% in September, following a 25bpps cut in August, aligns with this stance.

              Greene outlined three key economic scenarios influencing inflation and policy decisions.

              In the first scenario, global shocks fade, allowing inflation pressures to ease with “less restrictive” policy. In the second, some “economic slack” is needed to bring inflation back to the target sustainably. In the third, structural changes affecting wage and price-setting could require monetary policy to remain “tighter for longer”.

              Greene sees the second scenario as the most likely, where slack in the economy will be needed to tame inflation. However, she warned that there is a “higher risk” of the third scenario playing out, suggesting that the neutral interest rate could be higher than previously thought, meaning that current policy may not be as restrictive as anticipated. Greene noted, “I believe the risks to activity are to the upside,” which could require maintaining higher rates for longer.

              She will monitor data to confirm whether the third scenario risk is decreasing and the second is becoming more likely. Until then, “steady-as-she goes approach to monetary policy easing is appropriate,” she added.

              Full speech of BoE’s Greene here.

              Australia’s monthly CPI falls to 2.7%, lowest since 2021

                By
                ActionForex
                -

                Australia’s monthly CPI slowed from 3.5% yoy to 2.7% yoy in August, marking the lowest reading since August 2021. Core inflation measures also eased, with CPI excluding volatile items and holiday travel declining to 3.0% yoy from 3.7% yoy, and the annual trimmed mean falling to 3.4% yoy from 3.8% yoy. Both underlying inflation indicators are now at their lowest levels in two and a half years.

                Significant price increases were observed in Housing (+2.6%), Food and non-alcoholic beverages (+3.4%), and Alcohol and tobacco (+6.6%). These gains were “partly offset” by a -1.1% decrease in Transport costs.

                Notably, electricity prices plummeted by -17.9% over the 12 months to August—the largest annual fall since the early 1980s—driven by Commonwealth and State Government rebates that led to a -14.6% drop in August following a -6.4% decline in July. Excluding these rebates, electricity prices would have risen 0.1% in August and 0.9% in July.

                Full Australia monthly CPI release here.

                BoC’s Macklem signals more rate cuts as inflation progress continue

                  By
                  ActionForex
                  -

                  BoC Governor Tiff Macklem, in a speech overnight, suggested that more interest rate cuts are likely, contingent on incoming economic data. He acknowledged, “With the continued progress we’ve seen on inflation, it is reasonable to expect further cuts in our policy rate.”

                  However, he emphasized that the timing and pace of such cuts would be determined by the assessment of future inflation and broader economic conditions.

                  Macklem noted that economic growth had picked up in H1, but some recent indicators suggest it may not be as robust as previously anticipated. “We will be closely watching consumer spending, as well as business hiring and investment,” he said.

                  He also expressed the need to see core inflation ease further. Shelter cost inflation remains elevated but is beginning to decline, and BoC is looking for this trend to continue. “Continued progress on inflation will be crucial to ensure our policy remains effective,” Macklem added.

                  Full speech of BoC’s Macklem here.

                  ECB’s Knot: Likely to continue rate cuts into H1 2025

                    By
                    ActionForex
                    -

                    In an interview on Dutch television overnight, ECB Governing Council member Klaas Knot emphasized that interest rates across Europe are poised for continued gradual reductions. Knot affirmed that as ECB gains confidence in achieving its 2% inflation target, “interest rates will simply keep falling.”

                    Looking ahead, “I would expect us to continue to gradually reduce interest rates in the coming time, also in the first half of 2025,” Knot added.

                    However, he cautioned against expectations of a return to the ultra-low rates seen before the pandemic. Instead, he suggested that rates are likely to settle at a “more natural level” within a range starting with a 2.

                    US consumer confidence falls to 98.7, largest slump since 2021

                      By
                      ActionForex
                      -

                      US Conference Board Consumer Confidence Index experienced a sharp drop in September, falling from 103.3 to 98.7, significantly below market expectations of 103.5. This marks the largest decline in consumer confidence since August 2021. Present Situation Index, which assesses current economic conditions, plunged by -10.3 points to 124.3, while Expectations Index, which gauges consumers’ outlook on future conditions, also dropped by -4.6 points to 81.7.

                      Dana M. Peterson, Chief Economist at The Conference Board, commented, “Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years.” She further highlighted that the decline affected all five components of the Index, with consumers’ outlook on current business conditions turning negative. Furthermore, views on the labor market continued to soften, with growing pessimism about both future employment prospects and income expectations.

                      Full US consumer confidence release here.

                      ECB’s Muller cautious on Oct rate decision, eyes Dec for clearer outlook

                        By
                        ActionForex
                        -

                        ECB Governing Council member Madis Muller struck a cautious tone in comments to Bloomberg, noting that it is “too early to express a clear position” regarding the upcoming October rate decision. While a rate cut cannot be entirely ruled out, Muller suggested that the December meeting would provide a clearer picture, supported by updated economic forecasts.

                        Muller emphasized that recent data signals downside risks for the Eurozone, highlighting a “weaker near-term outlook” for economic growth. He stated, “There’s a bigger probability that economic growth will be lower, not higher, than the expected number outlined in the ECB’s base-case scenario.”

                        Despite some positive developments, such as the recent slowdown in wage growth, Muller remained concerned about persistently high services inflation. “On the one hand, wage growth has slowed, which implies that inflationary pressures could be lower looking ahead,” he said. “On the other hand, services inflation was very fast according to the latest data. I’d like to see that slow down further.”

                        Germany’s Ifo falls to 85.4 as economic pressure mounts

                          By
                          ActionForex
                          -

                          Germany’s Ifo Business Climate Index dropped from 86.6 to 85.4 in September, falling below market expectations of 86.1. This decline signals rising concerns for the German economy as key sectors show signs of strain. Current Assessment Index also fell, from 86.5 to 84.4, missing forecasts of 86.0. However, Expectations Index, which reflects sentiment about future economic conditions, remained relatively stable, easing only slightly from 86.8 to 86.3, in line with expectations.

                          Sectoral data shows widespread weakness. The manufacturing sector posted a significant drop from -17.8 to -21.6, while the services sector also deteriorated, falling from -1.3 to -3.5. The trade sector saw a deeper contraction, with the index dropping from -27.4 to -29.8. On the other hand, construction provided a rare positive, showing a slight improvement from -26.8 to -25.2.

                          According to the Ifo Institute, “The German economy is coming under ever-increasing pressure.” With multiple sectors showing increasing strain, the data suggests the German economy could remain in a precarious position, adding to recession concerns as the Eurozone’s overall economic prospects look uncertain.

                          Full German Ifo release here.

                          BoJ’s Ueda signals no rush to hike rates amid global uncertainties

                            By
                            ActionForex
                            -

                            In a speech today, BoJ Governor emphasized that the central bank will need to thoroughly assess factors such as financial and capital market developments both domestically and internationally, as well as the broader global economic environment. Importantly, Ueda indicated that there is “enough time” to make these evaluations, suggesting that BoJ is not in a hurry to raise interest rates again.

                            Ueda reaffirmed BoJ’s commitment to adjusting its policy based on its economic and inflation outlook, stating that if the projections in the Outlook Report are met, the BoJ would indeed raise the policy interest rate. However, he also stressed the unpredictability of the current environment.

                            “Given the high uncertainties surrounding economic activity and prices, unexpected situations may occur,” Ueda noted, adding that policy actions will need to be timely and flexible rather than adhering to any “fixed schedule.”

                            Ueda further commented on Yen, noting that the recent one-sided depreciation has been partially retraced since August. This, along with a slowdown in the rise of import prices, has reduced the upside risk to inflation driven by higher import costs.

                            Full speech of BoJ’s Ueda here.

                            RBA holds rates at 4.35%, remains vigilant on inflation risks

                              By
                              ActionForex
                              -

                              RBA kept the cash rate target unchanged at 4.35% today, as widely anticipated by markets. The central bank stated that data since the August Statement on Monetary Policy have “reinforced the need to remain vigilant to upside risks to inflation.” Maintaining its stance of “not ruling anything in or out,” RBA emphasized its determination to return inflation to target levels and affirmed it will “do what is necessary.”

                              Regarding the inflation outlook, RBA noted that headline inflation is expected to “fall further temporarily” due to federal and state cost-of-living relief measures. However, it does not foresee inflation returning sustainably to the 2–3% target range until 2026. This suggests that while short-term relief is expected, underlying inflationary pressures remain a concern over the medium term.

                              Full RBA statement here.

                              Japan’s PMI manufacturing dips to 49.6, services rises to 53.9

                                By
                                ActionForex
                                -

                                Japan’s PMI manufacturing index ticked down from 49.8 to 49.6, marking its third consecutive month in negative territory. On the other hand, services sector offered some relief as its PMI edged higher, rising from 53.7 to 53.9. Composite PMI slipped from 52.9 to 52.5, indicating a slight softening in growth momentum.

                                Usamah Bhatti, Economist at S&P Global Market Intelligence, noted that Japan’s private sector expansion carried on through Q3, though at a slower pace. The expansion remained services-led, with the sector showing its strongest growth in five months, while manufacturing output fell back into contraction for the second time in three months.

                                Bhatti also highlighted that input cost inflation has eased to a six-month low, with both manufacturing and services firms reporting softer cost pressures. However, service providers are increasingly passing higher costs onto customers, as output price inflation ticked up slightly in September. Confidence in the future remains positive, but the overall sentiment has weakened to its lowest level since April 2022.

                                Full Japan PMI release here.

                                Fed’s Goolsbee signals multiple rate cuts ahead as focus shifts to employment

                                  By
                                  ActionForex
                                  -

                                  Chicago Fed President Austan Goolsbee suggested at an event overnight that Fed will likely implement “many more rate cuts over the next year” as it shifts its focus from inflation to employment concerns.

                                  Goolsbee further noted that a proactive approach is necessary to avoid potential disruptions in the labor market. “It’s just not realistic to wait until problems show up,” he said, highlighting the need for Fed to avoid being “behind the curve” in managing economic risks.

                                  While the timing of the initial rate cut may be less critical, Goolsbee stressed the importance of a “longer-arc view” to ensure favorable conditions for both inflation and employment. He pointed out that “rates need to come down significantly going forward” to maintain economic stability.

                                  US PMI indicates 2.2% annualized GDP growth, inflation remains a concern

                                    By
                                    ActionForex
                                    -

                                    US PMI Manufacturing fell from 47.9 to 47.0, marking a 15-month low. PMI Services slipped slightly from 55.7 to 55.4, while Composite PMI edged down from 54.6 to 54.4, indicating continued economic growth but at a slower pace.

                                    Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted, “The data points to an economy growing at an annualized rate of 2.2% in the third quarter, driven by the robust service sector.”

                                    However, rising inflationary pressures are cause for concern, with prices charged for goods and services increasing at the fastest rate in six months. Input costs in services, particularly wages, have surged to their highest in a year.

                                    “FOMC may need to move cautiously in implementing further rate cuts,” Williamson added.

                                    Full US PMI release here.

                                    Fed’s Bostic justifies 50bps rate cut amid faster inflation progress, labor market weakness

                                      By
                                      ActionForex
                                      -

                                      In a speech today, Atlanta Fed President Raphael Bostic shed light on his support for last week’s 50bps rate cut, citing faster-than-expected improvements in inflation and labor market cooling.

                                      “Progress on inflation and the cooling of the labor market have emerged much more quickly than I imagined at the beginning of the summer,” Bostic remarked. He now sees a path to normalizing monetary policy sooner than anticipated.

                                      Bostic acknowledged that his “residual concern” about inflation could have led him to favor a smaller reduction. However, a 25bps cut “would belie growing uncertainty about the weakening of the labor market,” he added.

                                      Full speech of Fed’s Bostic here.

                                      Fed’s Kashkari backs 50bps cut, shifts focus to labor market weakness

                                        By
                                        ActionForex
                                        -

                                        In an essay, Minneapolis Fed President Neel Kashkari provided insight into his support for last week’s 50bps rate cut, despite not having a vote on the decision.

                                        “We have made substantial progress bringing inflation back down toward our 2 percent target, and the labor market has softened,” he said. Kashkari noted that the balance of risks has “shifted away from higher inflation” and toward risk of further weakening of the labor market, justifying the need for a lower federal funds rate.

                                        He acknowledged that even after the substantial 50bps reduction, “the overall stance of monetary policy remains tight.”

                                        Kashkari further pointed out that the economy’s unexpected resilience despite high policy rates might indicate a temporary or even structural rise in the neutral rate. “The longer this economic resilience continues, the more signal I take that the temporary elevation of the neutral rate might in fact be more structural,” he explained.

                                        Looking ahead, Kashkari highlighted that future policy decisions would depend on incoming data related to economic activity, labor markets, and inflation.

                                        Full essay of Fed’s Kashkari here.

                                        UK PMI composite falls slightly to 52.9, soft landing and further BoE cut in sight

                                          By
                                          ActionForex
                                          -

                                          UK’s economic growth showed signs of moderation in September, with PMI Manufacturing slipping from 52.5 to 51.5, while PMI Services declined from 53.7 to 52.8. Consequently, PMI Composite also dropped to 52.9 from 53.8, indicating a slight deceleration in overall activity.

                                          Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that the data brings “encouraging news,” pointing to robust economic growth alongside a cooling in inflationary pressures. He highlighted that the UK economy appears to be heading for a “soft landing” as inflation seems to be easing without the need for further significant rate hikes by BoE.

                                          While output growth slowed in both manufacturing and services, Williamson downplayed concerns, stating that the survey data is still consistent with GDP growth of around 0.3% in Q3, aligning with BoE forecasts. The cooling in services inflation, now at its lowest level since February 2021, is particularly notable. This progress brings the BoE’s 2% inflation target closer within reach and supports the possibility of further rate cuts before the end of 2024.

                                          Full UK PMI release here.

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