Eurozone headline CPI slowed from 2.6% yoy to 2.4% yoy in March, below expectation of 2.5% yoy. CPI core (ex energy, food, alcohol & tobacco) slowed from 3.1% yoy to 2.9% yoy, below expectation of 3.0% yoy.
Looking at the main components services is expected to have the highest annual rate in March (4.0%, stable compared with February), followed by food, alcohol & tobacco (2.7%, down from 3.9%), non-energy industrial goods (1.1%, down from 1.6%) and energy (-1.8%, up from -3.7%).
Germany Ifo business climate dropped to 90.1 in January, down from 92.2, below expectation of 92.0. Current assessment index dropped to 89.2, down from 91.3, missed expectation of 90.7. Expectations index dropped to 91.1, down from 93.0, below expectation of 93.2.
Looking at the sectors, manufacturing index dropped from 9.1. to 8.8, first decline after eight straight rises. Services dropped from -0.4 to -4.4. Trade nose-dived sharply from 0.3 to -17.2, steepest fall since April 2020. Construction dropped from -0.8 to -5.1.
Clemens Fuest, President of the ifo Institute: “The second wave of coronavirus has brought the recovery of the German economy to a halt for now.”
In line with broad expectations, RBNZ keeps OCR unchanged at 5.5%, as tightening cycle has finally entered in to a pause phase.
RBNZ expressed its confidence in the current restrictive interest rate level, stating, “consumer price inflation will return to within its target range of 1 to 3% per annum, while supporting maximum sustainable employment.”
When discussing their Remit objectives, the Committee noted that it still expects inflation to fall within the target band by the second half of 2024. Risks surrounding the inflation projection as being “broadly balanced”. While employment remains above its maximum sustainable level, recent indicators suggest that “labour market conditions are easing.”
RBNZ also acknowledged the slight contraction in economic activity in Q1. It added that “growth is likely to remain weak in the near term.”
In an interim COVID-19 flash report, Gfk said UK consumer confidence index has dropped sharply by -25pts to -34, between March 16 and 27. That’s the biggest fall since record began in January 1974.
Joe Staton, GfK’s Client Strategy Director, says: “Our COVID-19 ‘flash report’ shows a dramatic result with consumer confidence falling off the cliff in the last two weeks of March. The last time we saw such a decline was during the 2008 economic downturn. Our falling confidence in our personal financial situation and the wider economy reflects the new concern for many across the UK. Despite record grocery sales, and recent peaks for purchases of freezers, TVs and home office equipment as people prepared for a long period in the home, the Major Purchase Index is down 50 points – a stark picture for some parts of the retail industry in the short to medium term.”
US initial jobless claims jumped 3341k to 6648k in the week ending March 28, making another historical high. Four-week moving average of initial claims rose 1608k to 2612k.
Continuing claims rose 1.245m to 3.029m in the week ending March 21. That’s the highest level since July 6, 2013. Four-week moving average of continuing claims rose 327k to 2.054m, highest since January 2017.
ECB President Christine Lagarde told Bloomberg that there will at “some interesting variations and changes” in the upcoming July 22 meeting. “It’s going to be an important meeting,” she added. “Given the persistence that we need to demonstrate to deliver on our commitment, forward guidance will certainly be revisited.”
The immediate task for the Governing Council to align the statement and forward guidance with the result of the strategic review. “We’re going to look at the circumstances, we’re going to look at what forward guidance we need to revisit, we’re going to look at the calibration of all the tools we are using to make sure that it is aligned with our new strategy,” she said.
Regarding the PEPP program, she expected it to continue until “at least” March 2022, then followed by a “transition into a new format”, without elaboration. She emphasized, “we need to be very flexible and not start creating the anticipation that the exit is in the next few weeks, months.”
US Conference Board Consumer Confidence rose to 127.3 in June, up from 120.0, above expectation of 119.3. That’s also the highest level since March 2020. Present Situation Index rose from 148.7 to 157.7. Expectations Index rose from 100.9 to 107.0.
“Consumer confidence increased in June and is currently at its highest level since the onset of the pandemic’s first surge in March 2020,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
“Consumers’ assessment of current conditions improved again, suggesting economic growth has strengthened further in Q2. Consumers’ short-term optimism rebounded, buoyed by expectations that business conditions and their own financial prospects will continue improving in the months ahead. While short-term inflation expectations increased, this had little impact on consumers’ confidence or purchasing intentions. In fact, the proportion of consumers planning to purchase homes, automobiles, and major appliances all rose—a sign that consumer spending will continue to support economic growth in the short-term. Vacation intentions also rose, reflecting a continued increase in spending on services.”
Australia Westpac Consumer Sentiment dropped -4.5% to 107 in January, down from 112.0. The fall came in where there was domestic border closures, emergence of coronavirus clusters in some states and the sharp upswing in infections globally. Overall, “it still points to healthy consumer sentiment”.
Regarding RBA’s next meeting on February 2, Westpac said the board “seems almost certain to maintain its current policy stance”. The central bank decided in November the intention to purchase AUD 100B in government and semi-government bonds. Markets would be interested in any guidance in respect to the program, which is set to end at the end of April. Westpac expects a second program of AUD 100B afterwards.
China’s industrial profits in January-February period slumped -14.0% yoy to CNY 708B. It’s the biggest contraction since 2011. National Bureau of Statistics (NBS) said the contract was mainly due to distortions caused by the timing of Lunar New Year.
Meanwhile, there were notable declines in profits in auto, oil processing, steel and chemical industries. Ex-factory prices of Auto, oil processing, steel and chemicals dropped -0.4%, -1.3%, -2.5% and -2.3% respectively. Profits dropped CNY 37B, CNY 32B, CNY, 29B and CNY 19B respectively. Combined the contributed to -14.2% contraction in profits. Excluding them, industrial profits rose 0.2%.
While the set of data is largely ignored by the stock markets, it’s putting some more weight to the upcoming round of trade talks. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will visit Beijing on March 28-29. Even though an eventual trade might might not help reverse the slowdown in China, at least, the drag on exports will likely be eased.
As seen in the D heat map, CAD is the strongest one today while JPY is the weakest one.
A look at the top mover chart also sees CADJPY as the biggest mover. It’s natural to have a look at how CADJPY is performing.
In CADJPY action bias table, H action bias momentum is very apparent, not so in the 6H row.
But the 6H action bias chart clearly shows that CAD/JPY was in a consolidation pattern since hitting 85.75 back in April. And the strong H action bias momentum suggests that it’s possibly completed at 83.88 earlier this week. A long trade in CADJPY should be in place for position trading.
And, recalling a short note here, CAD/JPY formed a bottom at 80.52 in March, after drawing support from 80.55 key support. Rise from 80.52 is seen as at the same degree as fall from 91.56 to 80.52. Pull back from 85.75 was contained above mentioned 83.52 support and thus maintained bullishness.
Hence, for a long trade, one could buy at a dip or break of 85.75 resistance. First target is 61.8% projection of 80.52 to 85.75 from 83.88 at 87.11. Second target is 100% projection at 89.11.
White House trade adviser Peter Navarro warned that China is in a “zero-sum game” with the rest of the world on trade. And he emphasized that “we have to defend ourselves,” as China is “attacking our crown jewels” with technology intellectual property theft.
But at the same time, he downplayed the impact of trade war with China. He said that “we got two economies that add up to around $30 trillion in annual GDP. The amount of trade we’re affecting with the tariffs is a rounding error compared to that.”
And, he added that “it’s much less disruptive than these headlines would suggest, and it’s much more constructive as we see the adjustments made in terms of where investment is going to go and where we’re going to build.”
So that means, Navarro admitted that Trump’s trade policy is disruptive.
Canada building permits dropped -13.0% mom to CAD 8.2B in May, worse than expectation of -10.0% mom. Permits increased in six provinces and all territories. But they’re not enough to offset the decreased in British Columbia.
Housing starts rose to 246k in June, up fro 197k and beta expectation of 209k. The national trend in housing starts increased primarily due to higher trending row and apartment starts, in urban areas.
New Zealand ANZ Business Confidence dropped to -53.5 in September, down from -52.3. That’s also the worst reading since April 2008. Agriculture scored weakest confidence at -75.6 while manufacturing was best at -46.2. Activity outlook also dropped to -1.8, down from -0.5. Activity outlook was worst in construction at -7.1, best at services at -0.6.
ANZ noted that RBNZ will be “disappointed that its unexpectedly large 50bp cut in the Official Cash Rate last month does not appear to have had much impact on business’ sentiment or investment and employment intentions.” And, “prolonged lack of confidence is starting to feed its way through the economy and is threatening the tight labour market.” Also, “this gradual but prolonged economic slowdown is at risk of ceasing to be about the data and starting to become about the people.
Today’s decline in NZD/JPY the release suggests the corrective recovery from 67.20 has completed at 68.26, after failing to sustain above 4 hour 55 EMA. Focus is immediately back on 67.20 and break will target a test on 66.31 low. Overall, NZD/JPY is clearly staying in near term down trend, held well by falling 55 day EMA. Next target is 61.8% projection of 73.24 to 66.31 from 69.68 at 65.39, and then 100% projection at 62.75.
Eurozone CPI was finalized at 10.1% yoy in November, down from October’s 10.6% yoy. CPI core was finalized at 5.0%, unchanged from prior month’s reading. The highest contribution came from energy (+3.82%), followed by food, alcohol & tobacco (+2.84%), services (+1.76%) and non-energy industrial goods (+1.63%).
EU CPI was finalized at 11.1% mom, down from October’s 11.5% yoy. The lowest annual rates were registered in Spain (6.7%), France (7.1%) and Malta (7.2%). The highest annual rates were recorded in Hungary (23.1%), Latvia (21.7%), Estonia and Lithuania (both 21.4%). Compared with October, annual inflation fell in sixteen Member States, remained stable in three and rose in eight.
ECB Executive Board member Isabel Schnabel said in a speech that despite decline in headline inflation, largely due to unwinding of previous supply-side shocks, “underlying price pressures remain stubbornly high,” with domestic factors now becoming the main drivers of inflation.
Given this backdrop, Schnabel emphasized the necessity of maintaining “sufficiently restrictive monetary policy” to steer inflation back to target. She advocated for a data-dependent approach, stating that the bank will continually assess whether current policy is effective in ensuring “a sustained and timely return of inflation to our 2% target.”
To guide this assessment, Schnabel pointed to the need for a comprehensive risk analysis that looks beyond baseline inflation forecasts. This approach accounts for an “exceptionally large degree of uncertainty” in medium-term inflation projections, with risks on both the upside and downside.
Upside risks include stronger-than-expected growth in unit labor costs, firmer corporate pricing power, and the potential for new adverse supply-side shocks. Conversely, downside risks include possibility that impact of current monetary policy may become more pronounced over the medium term.
Notably, Schnabel also raised the issue of real risk-free rates, which have declined recently as investors reassess their expectations for economic growth and inflation. She warned that this decline could potentially “counteract” the ECB’s efforts to control inflation effectively.
US durable goods orders dropped -0.4% mom to USD 261.3B in September, better than expectation of -1.1% mom. Ex-transport orders rose 0.4% mom, matched expectations. Ex-defense orders dropped -2.0% mom. Transportation equipment dropped -2.3% to USD 77.7B.
Also released, goods trade deficit came in at USD -93.6B in September, smaller than expectation of USD -88.2B. Goods exports dropped USD -7B to USD 142.2B. Goods imports rose USD 1.1B to USD 238.4B. Wholesale inventories rose 1.1% mom to USD 739.5B. Retail inventories dropped -0.2% mom to USD 602.9B.
Swiss CPI dropped -0.2% mom in December, due to several factors including falling prices for fuels and heating oil, fruiting vegetables and medicines. On the other hand, rents for holiday flats and the hire of private means of transport increased.
Annually, CPI slowed from 3.0% yoy to 2.8% yoy in December, below expectation of 2.9% yoy. Core inflation (excluding fresh and seasonal products, energy and fuel), accelerated from 1.9% yoy to 2.0% yoy.
Domestic products inflation rose from 1.8% yoy to 1.9% yoy. Imported products inflation slowed notably from 6.3% yoy to 5.8% yoy.
BoC kept monetary policy unchanged as widely expected. Overnight Rate is held at the effective lower bound of 0.25%. Bank Rate is kept at 0.25% correspondingly, deposit rate at 0.25%. BoC will also continue the QE program with large-scale asset purchases of at least CAD 5B per week of government bonds. BoC also pledge to “provide further monetary stimulus as needed.”
In the accompanying statement, BoC said global and Canadian outlook is “extremely uncertain, given the unpredictability of the course of the COVID-19 pandemic”. It expects global economy to contract by -5% in 2020, then grow by 5% on average in 2021 and 2022. But the timing and pace of recovery varies among regions.
Canadian economic activity in Q2 is estimated to be 15% lower than the level at the end of 2019. But there are “early signs” that reopening and pent-up demand are leading to an “initial bounce-back” in employment and out put. In BoC’s central scenario, roughly 40% of H1’s contraction is made up in Q3. Real GDP would still decline -7.8% in 2020, with 5.1% growth in 2021 and 3.7% in 2022.
New Zealand Treasury said in its monthly report that economic growth was “weaker than forecast” in the June quarter. Business activity “remained weak” in the September quarter and is expected to have weighed on domestic growth. Inflation was “stronger than expected” but a “slowing economy poses downside risk to forecasts”.
Treasury also said the nominal neutral interest rate (NIR) has been falling over time in many developed nations, including New Zealand. It revised down the terminal nominal NIR assumption from 3.75% to 3.0%. And, “a lower NIR assumption implies low interest rates have less stimulatory power than previously assumed”.
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for over a decade. Empowering the individual traders was, is, and will always be our motto going forward.
Contact us: contact@actionforex.com
© ActionForex.com © 2024 All rights reserved.
Eurozone CPI finalized at 4.1% yoy in Oct, EU at 4.4%
Eurozone CPI was finalized at 4.1% yoy in October, up from September’s 3.4%. The highest contribution came from energy (+2.21%), followed by services (+0.86%), non-energy industrial goods (+0.55%) and food, alcohol & tobacco (+0.43%).
EU CPI was finalized at 4.4%, up from September’s 3.6% yoy. The lowest annual rates were registered in Malta (1.4%), Portugal (1.8%), Finland and Greece (both 2.8%). The highest annual rates were recorded in Lithuania (8.2%), Estonia (6.8%) and Hungary (6.6%). Compared with September, annual inflation rose in all twenty-seven Member States.
Full release here.