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BoJ Kuroda: Retail level CBDC is an option

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    ActionForex.com
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    BoJ Governor Haruhiko Kuroda said in an online seminar that the central bank has not decided on central bank digital currency (CBDC) yet. But he noted it could be an option for securing a seamless and safe infrastructure.

    “CBDC is not the only way, so a national discussion is needed as to how to achieve this goal,” Kuroda said, adding, “retail level CBDC is an option.”

    BoJ started the second phase of the CBDC experiments in April. The process will last for around a year.

    Eurozone PMI composite dropped to 16-mth low, just 0.2% GDP growth and worse to come

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      ActionForex.com
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      Eurozone PMI Manufacturing dropped from 54.6 to 52.0 in June, below expectation of 53.0. That’s the lowest level in 22 months. PMI Services dropped from 56.1 to 52.8, below expectation of 55.5, a 5-month low. PMI Composite dropped from 54.8 to 51.9, lowest in 16-months.

      Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Eurozone economic growth is showing signs of faltering … Excluding pandemic lockdown months, June’s slowdown was the most abrupt recorded by the survey since the height of the global financial crisis in November 2008…. The slowdown means the latest data signal a rate of GDP growth of just 0.2% at the end of the second quarter, down sharply from 0.6% at the end of the first quarter, with worse likely to come in the second half of the year.”

      Full release here.

      Fed Kashkari: We should really live the symmetric inflation target

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        ActionForex.com
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        Minneapolis Fed President Neel Kashkari noted that Fed “officially have a symmetric target” on inflation. Actual inflation has “averaged around 1.7%” for the past seven years, which was below the 2% target. Therefore, “if we were at 2.3% for several years that shouldn’t be concerning.” He also emphasized that “we should really live the symmetric target and not tap the brakes prematurely.” Thus, “this is why I’ve been arguing for more accommodative monetary policy.

        Kashkari also said he’s “concerned” with yield curve inversion. However, he added: “I don’t necessarily believe it causes recessions but i believe it’s giving feedback that monetary policy is close to neutral today. We don’t want contractionary monetary policy unless we have good reason. We should be careful not to end the expansion.”

        BoE Inflation Report shows slowing conditioning rate path

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          ActionForex.com
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          The new projections in the Inflation report suggests that after this rate hike, there would be a lot of room for BoE to wait and see. And, there could be only one more hike within the forecast horizon through Q3 2021.

          In the quarterly Inflation Report, the rate path as condition by BoE for economic forecasts is slow than May’s.

          In the current conditioning path, the Bank rate will hit 0.9% in Q4 2019 1.1% in Q4 2020 and stay there till Q3 2021.

          In May’s conditioning path, the Bank rate will reach 1.0% already in Q3 2019, and then 1.2% in Q3 2020 and stays there till Q2 2021.

          That is, the current path argues that the next hike could happen in Q1 2020, instead of Q3 2019. And there could be no more rate hike in the forecast horizon.

          With such conditioning path, GDP (exclude backcast) is projected to growth faster by 1.5% in the four-quarter to Q3 2018, and 1.8% in the four-quarter to Q3, 2019. But GDP growth in the four-quarter to Q3 2020 is unchanged at 1.7%. Inflation will return to target later at 2.0% in Q3 2021, instead of Q3 2020. But, at 2.2% in Q3 2019 and 2.1% in Q3 2020, it’s reasonably close to target.

          Full inflation report.

          China’s coronavirus death rose to 1113, US warns of supply chain disruption

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            According to China’s National Health Commission, on February 11, there were 2015 new confirmed coronavirus cases, bringing the accumulated total to 44653. Death tolls increased 97 to 1113. There are currently 8204 serious cases, 16067 suspected cases and 451462 people tracked.

            US White House national security adviser Robert O’Brien warned “there’s no doubt that the virus could have an impact on the US economy and also on the world economy”. The coronavirus could have disruptive impact on the global supply chain, and “We’ll have to wait and see how it plays out and whether alternate suppliers can be found.”

            O’Brien also noted, “we expect the Phase 1 deal will allow China to import more food and open those markets to American farmers, but certainly as we watch this coronavirus outbreak unfold in China it could have an impact on how big, at least in this current year, the purchases are.”

            Euroarea Q4 GDP finalized at 0.6% qoq, unrevised

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              ActionForex.com
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              Euroarea (EA19) Q4 GDP: 0.6% qoq, 2.7% yoy, 2.3% over 2017

              EU28 Q4 GDP growth: 0.6% qoq, 2.6% yoy, 2.4% over 2017

              In Q4, Estonia ranked top at +2.2%, followed by Slovenia at +2.0% and Lithuania at +1.4%

              Greece and Croatia were both at bottom at +0.1%, followed by Italy and Latvia at +0.3%

              Regarding the components:

              • EA19: Household consumption expenditure +0.2%, gross fixed capital formation +0.9%, exports +1.9%, imports +1.1%
              • EU28: Household consumption expenditure +0.2%, gross fixed capital formation +0.9%, exports +1.7%, imports +1.3%

              EU: UK will still need to elect MEP if it leaves after July 2

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                ActionForex.com
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                European Commission spokesman Margaritis Schinas once again told a regular news briefing that there is no request for Article 50 extension from the UK yet. But he pointed out that if the UK is going to leave after July 2, Britons will need to elect their representatives to the next European Parliament.

                He said, “We … as the guardian of EU treaties, suggest caution with any suggestion that the right of EU citizens to vote in the European Parliament elections, according to the rules that are applicable, could be called into question”.

                And, “we have a legally composed European Parliament which requires directly elected MEPs from all member states at the latest on the first day of the new term of the new parliament, which this time is the second of July.”

                AUD/CAD dives after RBA, AUD/NZD steady

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                  ActionForex.com
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                  Australian Dollar is trading generally lower after RBA easing announcement, including against other commodity currencies. AUD/CAD’s decline is one of the more apparent. Rebound from 0.9247 might be slightly stronger than expected. Yet, the cross is held comfortably below falling 55 day EMA, keeping near term outlook bearish. The corrective fall from 0.9696 should resume sooner or later as long as 0.9433 resistance holds. Break of 0.9247 will target 38.2% retracement of 0.8066 to 0.9696 at 0.9073.

                  AUD/NZD is holding in very tight range so far today. Downside momentum is somewhat diminishing, yet there is no sign of bottoming yet. As long as 1.0717 support turned resistance holds, further decline remains in favor. 1.0565 structural support is the key trend defining level. Strong rebound from there will keep the rally form 0.9994 intact, and retain the prospect of another rise through 1.1043 at a later stage. But Sustained break of 1.0565 will argue that such rise has completed. Deeper fall would be seen to 61.8% retracement of 0.9994 to 1.1043 at 1.0395 and below.

                  Fed Evans: We have to be patient and bolder on inflation

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                    ActionForex.com
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                    Chicago Fed President Charles Evans said, “we are going to have to go months and months into the higher inflation experience before I’m going to even have an opinion on whether or not this is sustainable or not, and that’s going to be uncomfortable.”

                    “We really have to be patient and be willing to be bolder than most conservative central bankers would choose to be if we are going to actually get inflation expectations to move up in a sustainable fashion,” he added.

                    US consumer confidence rose to 108.0, second month of improvement

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                      ActionForex.com
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                      US Conference Board Consumer Confidence rose from 103.2 to 108.0 in September, above expectation of 104.5. Present Situation index rose from 145.3 to 149.6. Expectations Index also rose from 75.8 to 90.3.

                      “Consumer confidence improved in September for the second consecutive month supported in particular by jobs, wages, and declining gas prices,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

                      “The Present Situation Index rose again, after declining from April through July. The Expectations Index also improved from summer lows, but recession risks nonetheless persist. Concerns about inflation dissipated further in September—prompted largely by declining prices at the gas pump—and are now at their lowest level since the start of the year.”

                      Full release here.

                      Mid-US update: Dollar rebound may not sustain as stocks strength fades

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                        ActionForex.com
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                        It’s a relatively slow day in the forex markets today, in terms of both news and movements. At this point, Yen and Swiss Franc remain the weakest ones for today on stocks rebound. But at the same time, Dollar is having a rebound, has risk aversion eased and US yields strengthen too. However, as the rally in US stocks seem to be fading, it remains to be seen whether treasury yields and US Dollar could maintain the gains before daily close.

                        In the US, DOW reached as high as 25040.58 earlier today but it’s now at 24745, up only 0.23%. S&P 500 is up 0.78% and NASDAQ is now flat. 10 year yield is up 0.023 at 3.340, after hitting 3.355 earlier today.

                        In Europe:

                        • FTSE closed up 1.25% at 7026.32
                        • DAX closed up 1.20% at 11335.48
                        • CAC closed up 0.44% at 4989.35
                        • German 10 year yield rose 0.0221 to 0.38, capped well below 0.4
                        • Italian 10 year yield dropped -0.0901 to 3.34. It’s a good sign that, at least, spread with German is below 300 for now.

                        CBI expects BoE hikes in Q3 2018, Q1 2019 and Q4 2019

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                          ActionForex.com
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                          The Confederation of British Industry projects UK growth to lag well behind peers in 2018 and 2019. UK real GDP growth is forecast to be at 1.4% in 2018 and 1.3% in 2019 only. Eurozone growth is forecast to be at 2.2% in 2019 and 1.7% in 2019. US growth is forecast to be at 2.% in 2018 and 2.3% in 2019.

                          Though, UK would still be better than Japan at 1.1% growth in both 2018 and 2019. India is projected to stay strong with 7.3% growth in 2018 and 7.1% in 2019. China’s growth is expected to slow notably to 6.3% in 2018 and 5.8% in 2019.

                          On monetary policy, CBI expects 25bps BoE hike in Q3 2018, Q1 2019 and Q4 2019. Inflation is projected to slow to 2.1% at the end of 2019.

                          CBI Chief Economist Rain Newton-Smith said that there is no disguising that UK is in “slow lane” for growth. And, “productivity weakness is a structural challenge for the UK economy and a drag on living standards.” She also urged firms to work with the Government to “nurture a pro-enterprise environment to drive growth and create wealth.” Also, “business and government must work together to drive competitiveness at home so firms can make the most of opportunities overseas” after Brexit.

                          Full release here.

                          Sterling jumps on rumor that DUP offer conditional support to May’s Brexit deal

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                            ActionForex.com
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                            Sterling surges broadly again on hope that UK Prime Minister Theresa May inches closer to getting enough support for an amended Brexit deal. The Sun reported that North Ireland’s DUP is having delicate deliberations with May. And it’s privately agreed that DUP will support the Brexit plan if there is a time-limit of the Irish backstop. That came on DUP’s concern that pro-Remain Tories and Labour are pushing for a significantly softer Brexit.

                            However, it should first be noted that such a time-limit is likely not enough to win over Brexit hardliners. ERG chair Jacob Rees-Mogg is clear in his demand for complete removal. More importantly, EU’s Chief Brexit negotiator Michel Barnier has blunted rejected the idea of time limit already. He said yesterday that “we have to maintain the credibility of this reassurance … it cannot be time-limited… It’s not just about Ireland.”

                            Gold resumes rally, targets 1946 next

                              By
                              ActionForex.com
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                              Gold’s rally resumed after brief consolidation and hits as high as 1931.07 so far. In any case, outlook will stay bullish as long as 1889.42 support holds. Next target is 100% projection of 1682.60 to 1877.05 from 1752.12 at 1946.57. Sustained break there, as well as the channel resistance, could prompt some strong upside acceleration ahead.

                              It should also be noted again that sustained break of 1916.30 should confirm that whole correction from 2074.84 (2020 high) has completed at 1682.60, after defending 38.2% retracement of 1046.27 to 2074.84. Further decisive break of 1946.57 would quickly shot Gold up to 161.8% projection at 2066.74, which is close to 2074.84 high.

                              BoE Carney warns of financial stability risks originating beyond the UK shores

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                                ActionForex.com
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                                The Bank of England published the latest Financial Stability Report today. In the opening remarks of the press conference, BoE Governor Mark Carney warned that “events of the past few months are a reminder that many of the most important risks to financial stability in the United Kingdom originate beyond our shores.”

                                The risks include “recent tightening in global financial conditions” that could be a “‘precursor to a much more substantial snapback in world interest rates”. There could be “more challenging bank, corporate and sovereign funding conditions.”

                                Besides, “Rising protectionist sentiment could sap some of the current strength of the global economy and reduce the size of sustainable external imbalances.”

                                In addition, “the complete set of mitigants to the risks of a cliff-edge Brexit also rely on the efforts of EU authorities”. Lastly, “cyber risks to UK financial services could originate from anywhere on the planet.”

                                Here is Carney’s remarks.

                                Here is the report.

                                Below is the press conference.

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                                UK Johnson to seek high quality FTA by Autumn at high level talks with EU

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                                  ActionForex.com
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                                  A “high-level” meeting on Brexit is scheduled for today, involving top officials from UK and EU. But expectations are relatively low regarding the meeting. It’s reported that UK Prime Minister Boris Johnson would push for a post Brexit agreement by Autumn at the latest. He would demand a high quality FTA that is consistent with what EU have agreed with others. Meanwhile, he would also insist on not seeking an extension to the transition period, and leave the EU on December 31.

                                  Last Friday, the UK government laid out a three-phased plan for Brexit border checks. Full border controls on goods entering the UK will not be implemented until July 2021.  Duchy of Lancaster, Michael Gove also noted that “”We have informed the EU today that we will not extend the transition period. The moment for extension has now passed. “

                                  WTI crude oil defending 38.45 support for now, but looks vulnerable

                                    By
                                    ActionForex.com
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                                    WTI crude oil drops sharply to as low as 38.58 overnight, but recovery ahead of 38.45 support. Though there is no following buying for further recovery above 40 handle. 38.45 support now looks rather vulnerable. Sustained break of 38.45 should confirm rejection by 42.05 key resistance. Deeper fall should then be seen back towards structure support level at 31.23, to correct the rebound from April’s spike low.

                                    US U of Michigan consumer sentiment surged to 72.6, inflation expectation ticked up

                                      By
                                      ActionForex.com
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                                      US U of Michigan Consumer Sentiment index jumped from 64.4 to 72.6 in July, well above expectation of 65.5, that’s also the highest level since September 2021. Current Economic Conditions rose from 69.0 to 77.5. Consumer Expectations Index also surged from 61.5 to 69.4.

                                      “As seen in the chart, sentiment is now about halfway between the all-time historic low of 50 from June 2022 and the February 2020 pre-pandemic reading of 101.”

                                      Year-ahead inflation expected inched up from 3.3% to 3.4%. Long-run inflation expectation was virtually unchanged at 3.1%.

                                      Full U of Michigan consumer sentiment release here.

                                      Eurozone PMI composite dropped to 47.5, double-dip recession increasingly inevitable

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                                        ActionForex.com
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                                        Eurozone PMI Manufacturing dropped to 54.7 in January, down from 55.2, missed expectation of 55.0. PMI Services dropped to 45.0, down from 46.4, above expectation of 44.8. PMI Composite dropped to 47.5, down from 49.1.

                                        Chris Williamson, Chief Business Economist at IHS Markit said: “A double-dip recession for the eurozone economy is looking increasingly inevitable as tighter COVID- 19 restrictions took a further toll on businesses in January…. Some encouragement comes from the downturn being less severe than in the spring of last year, reflecting the ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year…

                                        “The roll out of vaccines has meanwhile helped sustain a strong degree of confidence about prospects for the year ahead, though the recent rise in virus case numbers has caused some pull-back in optimism. The survey data therefore add to the view that t he eurozone will see a soft start to 2021, but that the economy should pick up momentum again as the vaccine roll out gathers pace.”

                                        Full release here.

                                        EU: China tops the list of trade and investment barriers

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                                          ActionForex.com
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                                          In a report released today, European Commission said, in 2018, China had the highest stock of recorded barriers, with 37 obstacles hindering EU export and investment opportunities. Russia was a close second with 34 barriers in place. India (25), Indonesia (25) and US (23) followed. On new barriers, Algeria and India topped with five new measures. US and China followed with four new measures each.

                                          Commissioner for Trade Cecilia Malmström said: “In the complex context we have today with a growing number of trade tensions and protectionist measures, the EU must keep defending the interests of its companies in the global markets. Making sure that the existing rules are respected is of utmost importance. Thanks to our successful interventions, 123 barriers hindering EU exports opportunities have been removed since I took office in late 2014. Working on specific problems reported by our companies we manage to deliver economic benefits equivalent in value to those brought by the EU’s trade agreements. Those efforts certainly must continue.”

                                          Full report here.

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