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EU Juncker reiterates no re-negotiation, UK May to request short Brexit delay

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    European Commission President Jean-Claude Juncker reiterated the EU’s stance on Brexit with Germany’s Deutschlandfunk radio. He said “there will be no re-negotiations, no new negotiations, no additional guarantees in addition to those already given”. He added “we have intensively moved towards Britain, there can be no more.”

    Juncker also hinted at another EU summit next week and said “my view this morning at quarter past 8 is that we will not get this through this week and we will have to meet again next week”.

    Separately, both BBC and Sky reported that UK Prime Minister Theresa May will request only a short delay to Brexit in her letter to European Council President Donald Tusk today. But the actual length will only be confirmed when the letter is published.

    Education Secretary Damian Hinds also said “I don’t see how a long delay gives certainty. Actually we’ve had long time already… People are a bit tired of waiting for parliament to get our act together and get the deal passed… Unless and until a deal is finalized, there remains the prospect of the risk of no deal.”

    Fed’s Williams: No urgency to cut interest rates

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      At the Semafor World Economy Summit today, New York Fed President John Williams there is no urgency in current monetary policy stance.

      “We’ve got interest rates in a place that is moving us gradually to our goals. So I definitely don’t feel urgency to cut interest rates. I think monetary policy is doing exactly what we would like to see,” he said.

      Williams underscored that while an increase in rates is not the expected course, it remains a possibility should the economic indicators necessitate such action to achieve Fed’s inflation objectives.

      Eurozone economic sentiment ticked down to 99.7 in Feb

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        Eurozone Economic Sentiment Indicator ticked down from 99.8 to 99.7 in February. Employment Expectation Indicator dropped from 109.7 to 109.4. Economic Uncertainty Indicator dropped from 26.2 to 23.3. Industry confidence dropped from 1.2 to 0.5. Services confidence dropped form 10.4 to 9.5. Consumer confidence improved from -20.7 to -19.0. Retail trade confidence rose from -0.7 to -0.1.

        EU Economic Sentiment Indicator was unchanged at 97.8. Employment Expectation Indicator dropped from 108.1 to 107.7. Economic Uncertainty Indicator dropped from 25.8 to 23.3. Amongst the largest EU economies, the ESI decreased in Spain (-2.0) and France (-1.5), while it increased in the Netherlands (+2.9) and stayed broadly flat in Germany (+0.1), Italy (±0.0) and Poland (-0.2).

        Full release here.

        Williams: Fed has to stick to 2% inflation target

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          ActionForex.com
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          New York Fed President John Williams told WSJ that it’s important for Fed to stick to its 2% inflation target. Fed has to make sure inflation expectations don’t slip too far, which will affect actual inflation in the future.

          “There’s been a process of going through the stages of grief about a low neutral rate,” he said. “These factors are basically the hand we’ve been dealt for the next five to 10 years.”

          He warned “if inflation continues to underrun our target levels like it has, this downward trend in inflation expectations will likely continue with inflation expectations falling well below target levels.”

          Gold surges to new record, but anticipates stiff resistance at 2500

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            ActionForex.com
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            Gold’s bullish momentum appears unstoppable for now as it surged to new record high in Asian session, now eyeing 2400 mark. This surge is driven by a confluence of factors that indicate broader market apprehensions, particularly about resurgence of inflation risks, with geopolitical tension in the background.

            This shift in sentiment is evident in the sharp increase in benchmark treasury yields across various regions, including US, Europe, and even Japan. Concurrently, major stock indices are showing signs of a looming correction.

            Judging from these developments, Gold’s rally is more fueled by safe-haven flows, partly as hedge against selloff in stocks and bonds, and partly on geopolitical risks.

            Technically, near term outlook in Gold will stay bullish as long as 2319.18 support holds. Next target is 2500 psychological level. Strong resistance is expected there to limit upside, at least on first attempt, to bring a notable correction.

            Overbought condition, as seen in weekly RSI is a factor that could limit Gold’s momentum ahead. More importantly, 2500 represents a cluster medium and long term projection levels. There lies 161.8% projection of 1614.60 to 2062.95 from 1810.26 at 2535.69, and 100% projection of 1160.17 to 2074.84 at 1614.60 at 2529.27.

            New Zealand BusinessNZ PMI: Weak spot in production

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              ActionForex.com
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              New Zealand BusinessNZ Performance of Manufacturing Index (PMI) dropped -1.1 to 52.2 in March. That’s also the second consecutive decline in 2018 even though it still signaled expansion.

              BusinessNZ’s executive director for manufacturing Catherine Beard:

              • “On a positive note, the proportion of positive comments in March (55.1%) picked up from both February (51.4%) and January (50.7%).  Those who provided negative comments typically noted a lack of finding the right staff, reduced orders (both domestically and offshore) and general uncertainty in the market.”

              BNZ Senior Economist, Craig Ebert:

              • “The weak spot in March’s PMI was its production index.  With a seasonally adjusted outcome of 50.8 this was close to stalling. Compare this to February’s 53.7 and the exceptionally high reading of 61.0 back in November and a sense of sharp deceleration arises”.

              WHO sees potentially positive data regarding coronavirus treatment

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                ActionForex.com
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                The World Health Organization indicated today that there are some “potentially positive data” on coronavirus treatments. Spokesperson Margaret Harris said at a press briefing, “we do have some treatments that seem to be in very early studies limiting the severity or the length of the illness but we do not have anything that can kill or stop the virus.”

                “We do have potentially positive data coming out but we need to see more data to be 100% confident that we can say this treatment over that one,” she added.

                Meanwhile, she sounded cautious regarding expectations for a vaccine. She noted that coronaviruses are in general are “very tricky viruses” that are “difficult to produce vaccines against”.

                UK PMI services rose to 54.3, but risk tilted to the downside

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                  ActionForex.com
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                  UK PMI services rose to 54.3 in August, up from 53.5, and beat expectation of 53.9. Markit noted in the released that there were stronger rises in business activity and new work. At the same time, input cost inflation accelerated, led by fuel prices and wage pressures. However, optimism towards the year-ahead business outlook was at lowest level since March.

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

                  “Faster service sector growth comes as much-needed welcome news after disappointing manufacturing and construction PMI surveys in August. The survey data indicate that the economy is on course to expand by 0.4% in the third quarter, a relatively robust and resilient rate of expansion that will no doubt draw some sighs of relief at the Bank of England after the rate hike earlier in the month.

                  “Faster service sector order book and employment growth also offset slowdowns of both in the manufacturing and construction sectors, but also highlights the extent to which the economy has become more reliant on services to support growth, and in particular an especially strong financial service sector. Financial services have outperformed all other sectors so far this year.

                  “Business expectations for the year ahead meanwhile sank markedly lower, down across all three sectors to one of the lowest levels seen since the EU referendum, largely reflecting increased anxiety over Brexit negotiations.

                  “Given the increasingly unbalanced nature of growth and the darkening business mood, risks to the immediate outlook seem tilted to the downside.”

                  Full release here.

                  Eurozone GDP grew 2.2% qoq in Q2, -2.5% below pre-pandemic level

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                    ActionForex.com
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                    Eurozone GDP grew 2.2% qoq in Q2, revised up from prior estimate of 2.0% qoq. Comparing with same quarter of previous year, GDP grew 14.3% yoy. GDP was -2.5% below the pre-pandemic level of Q4, 2019. Household final consumption expenditure rose 3.7% qoq. Government final consumption expenditure rose 1.2% qoq. Gross fixed capital formation rose 1.1% qoq. Exports rose 2.2% qoq. Imports rose 2.3% qoq.

                    EU GDP grew 2.1% qoq, 13.8% yoy. Ireland (+6.3%) recorded the sharpest increase of GDP compared to the previous quarter, followed by Portugal (+4.9%), Latvia (+4.4%) and Estonia (+4.3%). Declines were observed in Malta (-0.5%) and Croatia (-0.2%).

                    Full release here.

                    Eurozone Sentix dropped to -0.2, EU economy losing touch with other regions of the world

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                      ActionForex.com
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                      Eurozone Sentix Investor Confidence dropped to -0.2 in February, down from 1.3, missed expectation of 4.1. Current situation index dropped slightly to -27.4, down from -26.5. Expectations index dropped to 31.5, down from 33.5.

                      • German Investor Confidence dropped from 9.2 to 8.6. Expectations rose from -15.8 to -15.5, highest since March 2020. Expectations dropped from 37.5 to 35.8.
                      • US Investor Confidence rose from 10.7 to 18.0, highest since February 2020. Current situation rose from -11.3 to -2.8, highest since March 2020. Expectations rose from 35.3 to 41.0, all-time high.
                      • Japan Investor confidence rose from 13.6 to 16.1, highest since October 2018. Current situation rose from -5.0 to -1.8, highest since February 2020. Expectations rose from 34.0 to 35.5, highest since April 2004.

                      Sentix said, “the EU order debacle and the resulting slower pace of vaccination are weighing on the mind and exposing the bureaucratic deficits in Euroland. As a result, the EU economy is losing touch with the other regions of the world, which are continuing their recovery course in the month of February.”

                      It also warned, “a permanent prolongation of the lockdown could become a problem because the difference between expectation and the current situation (the so-called expectation gap) is extremely high! There is a potential for a temporary disillusionment here. Fatal would be in any case a repeated demolition of the expectation component. The consequence would be a renewed recession.”

                       

                      Full release here.

                      NZ ANZ business confidence dropped to -57.1, strain showing for businesses

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                        ActionForex.com
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                        New Zealand ANZ Business Confidence dropped from -42.7 to -57.1 in November. Looking at some details, own activity outlook dropped from -2.5 to -13.7, just 8 pts shy of 2009 lows. Export intentions dropped from -4.3 to -5.4. Investment intentions dropped from 1.1 to -8.1. Employment intentions dropped from 5.0 to -4.0. Pricing intentions dropped from 64.5 to 58.5. Cost expectations ticked up from 88.6 to 88.7. Inflation expectations rose from 6.13 to 6.39.

                        ANZ said, “The strain is showing for kiwi businesses. Cost increases remain relentless and margins are squeezed, firms are chronically understaffed, and they’re waiting for the hammer to fall as the impact of relentless monetary policy tightening eventually kicks in. There are a lot of dark clouds on the horizon, and this month’s survey reflects that.”

                        Full release here.

                        Canada retail sales rose 0.9%, but largely from motor sales

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                          ActionForex.com
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                          Canada retail sales rose 0.9% mom to USD 51.5B in November, well above expectation of 0.6% mom. That also largely offset the -1.1% mom decline in October. However, the growth was primarily attributable to highest sales at motor vehicle and parts dealers. Ex-auto sales grew merely 0.2% mom, below expectation of 0.5% mom. Overall, sales were up in six provinces and all census metropolitan areas.

                          Full release here.

                          ECB announces to continue PEPP at significantly higher pace

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                            ActionForex.com
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                            ECB left main refinancing rate at 0.00% today, while marginal lending rate and deposit rate are held at 0.25% and -0.50% respectively. It maintained that interest rates will “remain at their present or lower levels” until inflation outlook robustly converge to price target of close to but below 2%.

                            The pandemic emergency purchase programme will continue with a total envelope of EUR 1850B, “until at least the end of March 2022”. More importantly, purchases will be conducted over the coming quarter at a “significantly higher pace” than during the first months of the year.

                            Full statement here.

                            Canada GDP grew 0.1% mom in Jun, but to contract -0.1% mom in Jul

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                              ActionForex.com
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                              Canada GDP grew 0.1% mom in June, matched expectations. Services-producing industries grew 0.2% mom while goods- producing industries rose 0.1% mom. 14 of 20 industrial sectors expanded in the month.

                              Advance information indicates that real GDP edged down by -0.1% mom in July. Output was down in the manufacturing, wholesale, retail trade and utilities sectors. Declines were partly offset by increases in the mining, quarrying, oil and gas sector and the agriculture, forestry, fishing and hunting sector.

                              Full release here.

                              Australian CPI eases more than expected to 4.9% in July

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                                ActionForex.com
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                                Australia’s monthly CPI for July registered a deeper than expected slowdown, easing from 5.4% yoy to 4.9% yoy. Analysts had forecasted a milder decline to 5.2% yoy. The underlying inflation measures also indicated a deceleration. CPI excluding volatile items such as holiday travel came in at 5.8% yoy, down from 6.1% yoy. The trimmed mean CPI, which is often regarded as a more accurate reflection of inflationary pressures, slowed from 6.0% yoy to 5.6% yoy.

                                A closer look at the inflation contributors reveals a mixed picture. Housing costs remained a significant upward pressure, climbing 7.3% on an annual basis. Food and non-alcoholic beverages followed closely, rising by 5.6% yoy. However, this was offset by substantial price falls in other areas. Automotive fuel costs dropped by -7.6%, while fruit and vegetable prices declined by -5.4%, thus tempering the overall July increase.

                                The latest CPI data comes on the heels of yesterday’s hawkish comments from incoming RBA Governor Michele Bullock, who emphasized that her first priority is still to maintain a focus on bringing inflation back down to target. Today’s lower-than-expected inflation figures might lend some flexibility to RBA’s policy approach, but with sectors like housing and food still exhibiting strong price pressures, the central bank’s task appears far from straightforward.

                                Full Australia monthly CPI release here.

                                EU Breton: A package of EUR 1.6 trillion needed to support post pandemic recovery

                                  By
                                  ActionForex.com
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                                  European Commissioner for Internal Market and Services Thierry Breton said a package of EUR 1.6 trillion could be needed to help Europe’s economy recover from impact of coronavirus. That would represent some 10% of EU GDP. His top priority is to help small-and-medium businesses while a “Marshall plan” is required to help the tourism industry.

                                  EU leaders are expected to meet on Thursday, by video conference. But it’s doubtful is there would be any conclusion on the way to finance the economic rescue package. It’s reported that the Commission prefers to finance the recovery fund via increased joint budget for 2021-27. Germany is said to support the financing through a larger EU budget and issuance of joint debt. But many details are still missing.

                                  Australia Westpac consumer sentiment falls to 82.4, prolonged pessimism

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                                    ActionForex.com
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                                    Australia Westpac Consumer Sentiment Index marked a decrease of -2.4% mom to 82.4 in April. This downturn extends the index’s streak below the neutral threshold of 100 to nearly two years, underscoring a prolonged period of consumer pessimism.

                                    Westpac’s analysis attributes the lack of recovery in consumer sentiment primarily to the ongoing inflationary pressures that have gripped Australia. Over the past three years, consumer prices have risen significantly, outpacing wage growth by six percentage points. This inflationary trend, coupled with the notable rise in interest rates and increased tax burdens, has significantly strained household incomes, subjecting them to prolonged financial duress.

                                    As attention turns to RBA’s next meeting in May, Westpac anticipates no change to the official cash rate. This forecast hinges significantly on the upcoming March quarter CPI update, due on April 24, which is expected to play a crucial role in shaping the RBA’s stance.

                                    Full Australia Westpac consumer sentiment release here.

                                    US jobless claims to show huge spike on coronavirus impacts

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                                      ActionForex.com
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                                      Initial jobless claims from the US have never been so closely watched before. A massive spike in numbers and record jump are expected, as American are suffering heavy impact from coronavirus pandemic. Estimates currently range from 1 million to 4 millions news claims for the weekending March 21. These forecasts are more academic than anything because there is just no way to gauge the impact so far.

                                      Additionally, today’s number might not be very representative. On the one hand, it could just be the tip of the iceberg with claims capped by how quickly they’re processed. A huge number isn’t more disastrous neither as the claims could be somewhat “front-loaded”. We won’t probably know the real picture after getting at least 4 to 6 weeks of data.

                                      While DOW extends the corrective recovery form 18213.65 this week, it’s starting to feel heavy ahead of 38.2% retracement of 29658.57 to 18213.65 at 22551.11. We’d maintain the view that current rebound is, at best, just the second leg of the three wave corrective pattern from 29568.57. The strength of the rebound could reveal how deep the correction would turn out to be, eventually.

                                      Trump said he will not meet Chinese President Xi this month to seal trade deal

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                                        ActionForex.com
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                                        Stocks are apparently a bit troubled by the development in US-China trade negotiations. When asked whether he will meet Chinese President Xi Jinping this month to seal the trade deal, Trump bluntly said “No”, shaking his head. He went further and said “Not yet. Maybe. Probably too soon. Probably too soon” for a meeting next month.

                                        The current trade-war ceasefire will end on Mar 1 and for now, US maintains the plan to impose tariffs on USD 200B in Chinese goods from 10% to 25% after that. While Trump’s comment triggered concerns of further escalation in trade war, it’s seen not as the most likely scenario.

                                        US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing to resume trade talks next week. Trump’s comment could be just a negotiation tactic. And, more importantly, Trump has scheduled to meet North Korean leader Kim Jong-un in Vietnam on February 27-28. It’s easy for him to travel from Vietnam to China after that. And last but not least, the cease-fire deadline can be extended if there is enough progress in the negotiations.

                                        ECB Panetta: Monetary policy should remain patient

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                                          ECB Executive Board member Fabio Panetta said, “the data suggest the current picture is dominated by a bout of ‘bad’ inflation generated outside the euro area, whereas we are far from seeing abnormally large domestic demand.” “Monetary policy should remain patient. A premature tightening would restrain spending before demand has returned to trend,” he added.

                                          “We should not exacerbate the risk of supply shocks morphing into a demand shock and threatening the recovery by prematurely tightening monetary policy – or by passively tolerating an undesirable tightening in financing conditions,” Panetta warned.

                                          Panetta also urged to continue with asset purchases. “First, the surge in the number of (COVID-19) infections and the renewed introduction of pandemic-related restrictions in some euro area countries mean that the pandemic is not over yet,” he said. “Second, an inappropriate, sharp reduction of purchases would be tantamount to a tightening of the policy stance.”

                                          Separately, Governing Council member Robert Holzmann said, “the statements until now including of my colleagues on the Governing Council all suggest that net PEPP purchases will probably expire in March but that PEPP as such will not be done away with but perhaps be put in a waiting room.”

                                          This will be in order to “save the advantages of flexibility in case they become necessary in the event of economic shocks, which are definitely possible, but we do not expect,” Holzmann said.

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