Tue, Aug 06, 2024 @ 00:20 GMT
Facebook Mail RSS Twitter
Live Comments Page 116

Live Comments

Latest

BoC expected to hold steady: Loonie’s fate lies in oil prices and US data

    By
    ActionForex.com
    -

    Bank of Canada (BoC) is widely anticipated to maintain its pause this week, leaving interest rates unchanged at a 15-year high of 4.50%. Governor Macklem has emphasized that there’s no need for additional rate hikes if the economy unfolds according to central bank’s projections, which forecast stalling growth for the rest of the year, subsequently cooling inflation. Macklem also stated that an “accumulation of evidence” would be required before considering resuming tightening.

    Consequently, it’s unlikely that BoC’s announcement on Wednesday or Macklem’s speech on Thursday will trigger significant volatility in Canadian Dollar. Instead, Loonie is expected to be more reactive to developments in oil prices, as WTI crude remains stuck around 80 mark. Additionally, the currency could be influenced by US CPI data and the release of FOMC minutes when paired against the greenback.

    From a technical perspective, USD/CAD appears to be in the third leg of the corrective pattern from 1.3967. Deeper decline is expected as long as 1.3563 minor resistance holds. However, robust support is anticipated around 1.3224, which should contain the downside and complete the pattern. On the other hand, a sustained break of 1.3563 and 55-day EMA (now at 1.3562) would likely result in a stronger rally back towards 1.3860 resistance level. Ultimately, the larger uptrend is envisaged to resume through 1.3976 at a later stage.

    Gold falls below 2000 as expectations of anther Fed hike firm up

      By
      ActionForex.com
      -

      Gold dipped below 2000 as near-term pullback extended into Asian session, with many markets still on holiday. Shift appears to be driven by growing market conviction that Fed will implement another 25bps hike in May, as fed fund futures now indicate a 66% probability. This sentiment follows last week’s robust US non-farm payroll report. However, expectations could still change after release of March CPI data and FOMC minutes on Wednesday.

      Technically, a short-term top for Gold may have formed at 2032.05, evidenced by a bearish divergence in 4-hour MACD. Rally from 1084.48 might have completed a five-wave sequence and stalled just ahead of key resistance zone between 2070.06 and 2074.84 record high.

      Considering this, a deeper pullback is now anticipated. Crucial near-term support level can be found at 38.2% retracement of 1804.48 to 2032.05 at 1945.11 which is in proximity to 1949.55 support level. As long as this support zone holds, current price action from 2032.05 should be regarded as a brief corrective phase, and a rally to new record highs is expected sooner rather than later.

      However, sustained break of 1945.11/1949.55 support zone could signal a deeper fall in underway, possibly extending the long-term consolidation pattern from 2074.84 with another downward leg. In this scenario, gold prices could decline to 61.8% retracement of 1804.48 to 2032.05 at 1894.41 or even further towards 1084.48.

      US NFP grew 236k in Mar, unemployment rate ticked down to 3.5%

        By
        ActionForex.com
        -

        US non-farm payroll employment rose 236k in March, above expectation of 228k. That’s compared to average monthly gain of 334k over the prior 6 months.

        Unemployment rate dropped from 3.6% to 3.5%, below expectation of 3.6%. Participation rate rose 0.1% to 62.6%.

        Average hourly earnings rose 0.3% mom, matched expectations. Over the past 12 months, average hourly earnings rose 4.2% yoy. Average workweek edged down by -0.1% hours.

        Full US non-farm payroll release here.

         

        US initial jobless claims rose to 228k, continuing claims highest since late 2021

          By
          ActionForex.com
          -

          US initial jobless claims dropped -18k to 228k in the week ending April 1, above expectation of 200k. Four-week moving average of continuing claims dropped -4k to 238k.

          Continuing claims rose 6k to 1823k in the week ending March 25, highest level since December 11, 2021. Four-week moving average continuing claims rose 10.5k to 1804k, highest since November 13, 2021.

          Full US jobless claims release here.

          Canada employment grew 34.7k in Mar, unemployment rate unchanged at 5%

            By
            ActionForex.com
            -

            Canada employment grew 34.7k in March, well above expectation of 10.2k. Employment gains in March were concentrated among private sector employees (+35,000; +0.3%). There was little change in the number of public sector employees and self-employed workers.

            Unemployment rate was unchanged at 5.0%, better than expectation of 5.1%. That’s just above the record low of 4.9% recorded in June and July of 2022. Total hours worked rose 0.4% mom, 1.6% yoy. Average hourly wages rose 4.% yoy.

            Full Canada employment release here.

            ECB Lane: Appropriate to hike further if baseline holds up

              By
              ActionForex.com
              -

              In an interview with Cyprus News Agency, ECB Chief Economist Philip Lane stressed the importance of being data-dependent and scientific in deciding on a potential interest rate hike at the May meeting. He explained, “if the baseline we developed before the banking stress holds up, it will be appropriate to have a further increase in May. However, we need to be data-dependent about the assessment of whether that baseline still holds true at the time of our May meeting.”

              Lane highlighted three factors that will influence the May decision: the inflation outlook, assessing the underlying dynamic of inflation, and the speed at which interest rate increases are restricting the economy and bringing down inflation. He urged focusing on understanding every data point instead of predicting the decision, stating, “rather than asking me what the next interest rate decision will be, the focus should be on understanding every data point that comes in.”

              Responding to a question regarding OPEC’s production, the ECB Chief Economist note that the movement in oil prices should be weighed against the context of a large drop in recent months and a significant ongoing reduction in gas prices. Lane emphasized the importance of monitoring how the rest of the economy responds to the energy dynamic and analyzing the incoming data until the day of the May meeting.

              Full interview of ECB Philip Lane here.

              UK PMI construction dropped to 50.7, mixed fortunes in the sector

                By
                ActionForex.com
                -

                UK PMI Construction dropped from 54.6 to 50.7 in March, below expectation of 53.6, indicating a mixed picture for the industry.

                Tim Moore, Economics Director at S&P Global Market Intelligence, explained that civil engineering and commercial projects saw a sustained rebound in output levels and improved tender opportunities, leading to the strongest rate of job creation in five months.

                However, a sharp decline in house building raised concerns, as subdued demand and rising interest rates contributed to the steepest fall in housing activity in almost three years.

                Despite these challenges, overall expectations for construction output in the coming year remain positive, with survey respondents citing improved availability of construction inputs and expectations for moderating purchasing price inflation.

                Full UK PMI construction release here.

                US 10-year yield plunges to 7-month low on worries of sharper slowdown

                  By
                  ActionForex.com
                  -

                  Following weaker-than-expected private job data and services PMI, US 10-year yield dropped to its lowest level in seven months overnight. Despite these signs of a potential cooling in the economy, which could prompt the Fed to ease up on tightening measures, major stock indexes closed mixed, suggesting that investors may be more concerned about a sharper slowdown on the horizon.

                  Technically, 10-year yield is approaching a critical support level at 55 week EMA (now at 3.237). A rebound around the EMA, followed by a break of 3.61 resistance, would initially signal a short-term bottoming. More importantly, this would argue that price fluctuations from 4.333 are merely a medium-term corrective pattern.

                  However, firm break of the 55 week EMA could indicate that 10-year yield is already correcting the whole uptrend that began at 0.398 (2020 low). In this scenario, a deeper decline through the 3% handle to 38.2% retracement of 0.398 to 4.333 at 2.829 could occur before finding sufficient support for a sustainable bounce.

                  China Caixin PMI services rose to 57.8, highest since Nov 2020

                    By
                    ActionForex.com
                    -

                    China’s Caixin PMI Services index exceeded expectations in March, rising from 55.0 to 57.8, marking the highest level since November 2020. The data revealed sharp increases in activity, sales, and employment, with the services sector showing stronger expansion compared to the manufacturing sector. Business confidence remained historically strong, while input price inflation reached a seven-month high. The PMI Composite also experienced a slight increase from 54.2 to 54.5, reaching its highest point since June 2022.

                    Wang Zhe, Senior Economist at Caixin Insight Group said: “Production, demand and employment all grew, with the services sector showing a stronger expansion, whereas manufacturing activity turned comparatively sluggish. Input costs and prices charged remained stable, and businesses were highly optimistic.”

                    Full China Caixin PMI services release here.

                    US ISM services dropped to 51.2, sharp decline in new orders

                      By
                      ActionForex.com
                      -

                      US ISM Services PMI dropped from 55.1 to 51.2 in March, below expectation of 54.5. Looking at some details, business activity/production dropped from 56.3 to 55.4. New orders tumbled sharply from 62.6 to 52.2. New export orders dived from 61.7 to 43.7. Employment dropped from 54.0 to 51.3. Prices dropped from 65.6 to 59.5.

                      Anthony Nieves, Chair of ISM Services Business Survey Committee: “There has been a pullback in the rate of growth for the services sector, attributed mainly to (1) a cooling off in the new orders growth rate, (2) an employment environment that varies by industry and (3) continued improvements in capacity and logistics, a positive impact on supplier performance. The majority of respondents report a positive outlook on business conditions.”

                      “The past relationship between the Services PMI and the overall economy indicates that the Services PMI for March (51.2 percent) corresponds to a 0.5-percent increase in real gross domestic product (GDP) on an annualized basis.”

                      Full ISM Services release here.

                      US ADP employment rose only 145k, signals economy is slowing

                        By
                        ActionForex.com
                        -

                        US ADP private sector employment increased by 145k jobs in March, well below expectation of 200k. By industry sector, goods-producing jobs increased 70k while service-providing jobs increased 75k. By establishment size, small company jobs rose 101k, medium companies rose 33k, and large companies rose 10k.

                        “Our March payroll data is one of several signals that the economy is slowing,” said Nela Richardson, chief economist, ADP. “Employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down.”

                        Full ADP employment release here.

                        UK PMI services finalized at 52.9, composite at 52.2

                          By
                          ActionForex.com
                          -

                          UK PMI Services was finalized at 52.9 in March, down from February’s 53.5. PMI Composite was finalized at 52.2, down from prior month’s 53.1.

                          Tim Moore, Economics Director at S&P Global Market Intelligence, noted that the UK service sector returned to growth in Q1 2023 due to improved business and consumer confidence, as well as a sustained rebound in new orders. Export sales also boosted the service economy, with the fastest rise in new orders from abroad in over eight years.

                          Moore highlighted that prices charged by service sector businesses increased at the weakest rate in 19 months, signaling that competitive pressures and improved supply conditions would likely reduce consumer price inflation in the coming months.

                          Full UK PMI services release here.

                          Eurozone PMI composite finalized at 10-month high, but growth varies across countries

                            By
                            ActionForex.com
                            -

                            Eurozone PMI Services was finalized at 55.0 in March, up from Februar’s 52.7. PMI Composite was finalized at 53.7, up from prior month’s 52.0. Both indexes were at their 10-month highs.

                            Looking at PMI Composite of some member states, improvements were seen in Spain (58.2, 16-month high), Italy (55.2, 16-month high), France (52.7, 10-month high), and Germany (52.6, 10-month high). Ireland dropped to 52.8, 2-month low.

                            Joe Hayes, Senior Economist at S&P Global Market Intelligence said eurozone economy is rebounding from the slowdown seen in late 2022, and for now, appears to be clear of a recession.

                            He noted that March’s economic activity increase was driven by strong growth in the service sector, but highlighted that growth varies across countries, with significant contributions from Spain and Italy. However, modest activity levels in Germany and France suggest a more conservative outlook for the eurozone’s overall economic health.

                            Hayes also mentioned that the case for further interest rate hikes remains strong, as inflation rates, though cooling from their peaks, continue to run high, especially in the service sector.

                            Full Eurozone PMI composite release here.

                            RBA Lowe: To hold doesn’t imply tightening is over

                              By
                              ActionForex.com
                              -

                              RBA Governor Philip Lowe, in a speech today, clarified that the decision to keep interest rates unchanged yesteday does not mark the end of tightening measures.

                              “The decision to hold rates steady this month does not imply that interest rate increases are over. Indeed, the Board expects that some further tightening of monetary policy may well be needed to return inflation to target within a reasonable timeframe,” he said.

                              Acknowledging that monetary policy is now in restrictive territory, Lowe said it was time to hold interest rates steady and gather more information. He also mentioned that RBA will review its monetary policy stance at the next meeting, taking into account updated forecasts and scenarios.

                              Full speech of RBA Philip Lowe here.

                              Powerful downside breakout in AUD/NZD, 1.0534 next

                                By
                                ActionForex.com
                                -

                                AUD/NZD powered through 1.0672 support to resume the decline from 1.1085 after larger than expected rate hike by RBNZ. Tightening is not finished with RBNZ yet, another 25bps hike could be delivered to bring the OCR from today’s 5.25% to 5.50 within first half of the year. Any movements in the OCR beyond that point will be data-dependent. Meanwhile, RBA has started the pause yesterday by holding cash rate target unchanged at 3.60%. There are talks that this level could be RBA’s peak rate in the current cycle.

                                From technical point of view, near term outlook will now stay bearish as long as 1.0789 resistance holds in AUD/.NZD. Next target is 61.8% projection of 1.1085 to 1.0672 from 1.0789 at 1.0534. In the larger picture, the down trend from 1.1489 (2022 high) could be ready to extend through 1.0469 if monetary policies diverge further.

                                RBNZ hikes 50bps after considering a 25bps move too

                                  By
                                  ActionForex.com
                                  -

                                  In an unexpected move, RBNZ raised the Official Cash Rate by 50bps to 5.25%, doubling the anticipated 25bps hike. This bold step reflects the central bank’s concerns about persistently high inflation and employment levels.

                                  The RBNZ statement highlighted that “inflation is still too high and persistent, and employment is beyond its maximum sustainable level.” Despite lower-than-expected economic activity in the December quarter, demand continues to outstrip supply, exerting further pressure on annual inflation.

                                  The statement also noted that severe weather events in the North Island have contributed to higher prices for some goods and services. This increased near-term CPI inflation poses a risk of inflation expectations remaining above the target range.

                                  In the meeting minutes, the Committee emphasized the need to continue raising the OCR to bring inflation back to the 1-3% target and fulfill their remit. They discussed both 25 and 50 basis point increases, ultimately opting for the more aggressive 50 basis point hike. This decision aims to maintain current lending rates for businesses and households while supporting an increase in retail deposit rates, countering the downward pressure on lending rates caused by falling wholesale interest rates since the February Statement.

                                  Full RBNZ statement here.

                                  Fed Mester sees monetary policy turning more restrictive this year

                                    By
                                    ActionForex.com
                                    -

                                    In a speech yesterday, Cleveland Federal Reserve President Loretta Mester highlighted her expectation that monetary policy will move “somewhat further into restrictive territory this year,” with the fed funds rate surpassing 5% and the real fed funds rate remaining in positive territory for an extended period.

                                    Mester explained that the precise extent and duration of the federal funds rate hike will depend on how inflation and inflation expectations are affected by demand slowing, supply challenges being resolved, and price pressures easing. She noted that her forecast aligns with the modal forecasts of FOMC participants released two weeks ago, although she sees “somewhat more persistent inflation pressures than the median forecast among participants.”

                                    According to Mester, inflation will show a substantial improvement, as price pressures are expected to decline from their current 5% YoY increase to 3.75% by the end of 2023 and 2% by 2025. She also anticipates a slowdown in economic growth this year, followed by a rebound in 2023. In terms of unemployment, Mester projects a rise from the current 3.6% to a range of 4.5% to 4.75% by the conclusion of 2023.

                                    BoE Pill emphasizes need for enough tightening to see the job through

                                      By
                                      ActionForex.com
                                      -

                                      BoE Chief Economist Huw Pill, in a speech, highlighted the importance of delivering enough monetary tightening to “see the job through” and return inflation to target levels on a sustainable basis. He acknowledged the significant policy lag in monetary policy transmission but maintained that a cautious approach was still required.

                                      Pill noted that while headline inflation is set to decline substantially during the year due to base effects and falling energy prices, it’s crucial to remain vigilant regarding domestically generated inflation. He stated, “caution is still needed in assessing inflation prospects on account of the potential persistence of domestically generated inflation.”

                                      Full speech of BoE Huw Pill here.

                                      ECB Makhlouf: Must remain steadfast and ready to act as required

                                        By
                                        ActionForex.com
                                        -

                                        ECB Governing Council member Gabriel Makhlouf emphasized the need for vigilance regarding the lagging effects of monetary policy on growth and inflation.

                                        He said today, “We must remain alert to the longer lags in the transmission of monetary policy to growth and inflation.” He highlighted the importance of evaluating the impact of past monetary policy decisions on the economy when determining further action.

                                        Makhlouf also stressed that the ECB “must remain steadfast and ready to act as required” to ensure that inflation returns to its target level over the medium-term.

                                        He added that interest rates must be maintained at a restrictive level to dampen demand, implying a continued cautious approach by the ECB in managing inflation expectations and economic growth.

                                        BoE’s Tenreyro foresees need for looser monetary policy

                                          By
                                          ActionForex.com
                                          -

                                          BoE Monetary Policy Committee member Silvana Tenreyro, a known dove, remarked in a speech that the data sinve November has evolved most like her downside scenario, noting a sharp decline in high-frequency private-sector regular pay growth.

                                          She explained that with the Bank Rate at 4.25%, the restrictive policy is likely to “drag demand well below its potential, loosening the labour market and pulling down on inflation.” As a result, she believes that “inflation is likely to fall well below target.”

                                          Tenreyro voted for no change in the Bank Rate in recent months, instead of further tightening, as she believes a looser stance is necessary to achieve the inflation target in the medium term.

                                          She expressed her expectation that the current high level of the Bank Rate “will require an earlier and faster reversal, to avoid a significant inflation undershoot.”

                                          Full speech of Silvana Tenreyro here.

                                           

                                          Load more

                                          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.