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

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    ActionForex.com
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    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

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      ActionForex.com
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      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.

       

      Eurozone PPI at -0.5% mom, 13.2% yoy in Feb

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        ActionForex.com
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        Eurozone PPI came in at -0.5% mom, 13.2% yoy in February below expectation of -0.3% mom, 13.2% yoy. For the month, industrial producer prices decreased by -1.6% in the energy sector and by 0.1% for intermediate goods, while prices increased by 0.3% for capital goods, by 0.4% for durable consumer goods and by 0.6% for non-durable consumer goods. Prices in total industry excluding energy increased by 0.2%.

        EU PPI stood at -0.6% mom, 14.5% yoy. The largest monthly decreases in industrial producer prices were recorded in Bulgaria (-7.9%), Greece (-3.3%) and Belgium (-3.2%), while the highest increases were observed in Slovakia (+11.5%), Slovenia (+2.7%) and Portugal (+2.5%).

        Full Eurozone PPI release here

        ECB survey: Moderating inflation expectations, improved growth outlook

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          ActionForex.com
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          ECB has released its Consumer Expectations Survey results for February 2023, which demonstrate a continuing moderating inflation expectations and uptick in growth outlook. The results suggest that consumers may be regaining some confidence in the Eurozone’s economic recovery prospects.

          Median inflation expectations for the coming year dropped from 4.9% in January to 4.6%, compared to 5.0% in December. In addition, expectations for inflation three years ahead also saw a slight decrease, from 2.5% to 2.4%, in contrast to December’s 3.0%.

          On a positive note, mean economic growth expectations for the next 12 months experienced an improvement. The figure rose from January’s 1.2% to -0.9%, a better outcome when compared to December’s -1.5%.

          Full ECB Consumer Expectations Survey here.

          AUD/NZD falling back towards 1.0672 after RBA

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            ActionForex.com
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            AUD/NZD falls notably after RBA announced to leave interest rates unchanged. Yesterday’s rebound was primarily driven by speculation of a hawkish surprise from RBA. However, with RBA’s decision now public, market focus shifts to RBNZ upcoming rate hike and whether the statement would be hawkish enough to push AUD/NZD below 1.0672 short-term bottom.

            From a technical perspective, the near-term outlook for AUD/NZD remains bearish as the 1.0802 resistance level remains intact, further supported by the currency pair’s rejection by the 55 day EMA. The decline from 1.1085 is expected to resume sooner rather than later, and a firm break below 1.0672 level would confirm resumption of the fall. This could ultimately lead the currency pair towards 61.8% projection of 1.1085 to 1.0672 from 1.0789 at 1.0534.

            RBA holds cash rate steady, maintains tightening bias

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              ActionForex.com
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              RBA has decided to keep the cash rate target unchanged at 3.60% amid ongoing uncertainty, but maintained its tightening bias. The central bank stated that some further tightening might be necessary, depending on developments in the global economy, household spending, inflation, and the labor market outlook.

              In the official statement, RBA noted, “The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target.”

              RBA’s central forecast anticipates inflation to decline over the next couple of years, reaching around 3% by mid-2025. The statement highlighted that “medium-term inflation expectations remain well anchored, and it is important that this remains the case.”

              Despite the slowing growth in the Australian economy, labor market remains very tight. However, as economic growth slows, RBA expects unemployment to increase. The Board remains alert to the risk of a “price-wages spiral”, given the limited spare capacity in the economy and the historically low rate of unemployment.

              Full RBA statement here.

              SNB Schlegel reiterates commitment to price stability and willingness to intervene

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                ActionForex.com
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                SNB Vice Chairman Martin Schlegel emphasized the central bank’s commitment to price stability in an interview with Swiss broadcaster SRF yesterday. He stated, “Our mandate is crystal clear, and that is price stability,” adding that SNB will do everything possible to bring inflation back to the target range of 0 to 2%.

                Although Schlegel refrained from making any forecasts, he noted that SNB’s inflation forecasts are higher now than they were in December, adding that the central bank is prepared to “continue to raise interest rates” if necessary.

                Schlegel also addressed SNB’s willingness to sell foreign currencies in order to strengthen Swiss franc. He said, “We said quite clearly at the last assessment that we are also prepared to sell foreign currencies, to actually strengthen the franc.”

                He revealed that SNB had already sold CHF 27B worth of foreign currencies in the last quarter, asserting that the bank will continue to monitor the exchange rate and intervene if necessary.

                Fed Cook weighs economic momentum against headwinds

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                  ActionForex.com
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                  In a speech yesterday, Fed Governor Lisa Cook discussed her considerations for the future path of monetary policy, weighing the implications of stronger economic momentum against potential headwinds from recent banking developments.

                  Cook explained, “On the one hand, if tighter financing conditions restrain the economy, the appropriate path of the federal funds rate may be lower than it would be in their absence. On the other hand, if data show continued strength in the economy and slower disinflation, we may have more work to do.”

                  Regarding Fed’s strategy on rate hikes, Cook mentioned that FOMC has been raising rates in smaller increments, aiming for a sufficiently restrictive monetary policy to return inflation to 2% over time. She emphasized the benefit of taking smaller steps, as it allows Fed to observe economic and financial conditions and evaluate the cumulative effects of their policy actions.

                  Cook also touched on FOMC’s recent adjustments to its forward guidance on the path of the policy rate in its March statement. The committee shifted from anticipating “ongoing increases” to stating that “some additional policy firming may be appropriate.” Cook believes this communication is suitable as Fed seeks to calibrate monetary policy amid uncertainty about the economic outlook.

                  Full speech of Fed Cook here.

                  Fed Bullard: Lasting impact of OPEC production cut a question

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                    ActionForex.com
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                    St. Louis Fed President James Bullard told Bloomberg TV that OPEC’s production cut was “a surprise.” But he added, “whether it will have a lasting impact I think is an open question.”

                    He noted the challenges in tracking oil prices, admitting that fluctuations “might feed into inflation and make our job a little bit more difficult.”

                    Regarding the current state of the global economy, Bullard pointed out that he had already expected higher oil prices given China’s faster-than-anticipated recovery and Europe narrowly avoiding a recession. He also cited strong US data as a bullish factor for the oil market.

                    US ISM manufacturing dropped to 46.3, fifth month of contraction

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                      ActionForex.com
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                      ISM Manufacturing PMI dropped from 47.7 to 46.3 in March, below expectation of 47.5. This is the fifth month of contraction and continuation of a downward trend that began in June 2022. The Manufacturing PMI is at its lowest level since May 2020, when it registered 43.5 percent.

                      Looking at some details, new orders dropped from 47.0 to 44.3. Production rose from 47.3 to 47.8. Prices dropped from 51.3 to 49.2. Employment dropped notably from 49.1 to 46.9.

                      The past relationship between the Manufacturing PMI and the overall economy indicates that the March reading (46.3 percent) corresponds to a change of minus-0.9 percent in real gross domestic product (GDP) on an annualized basis.

                      Full ISM manufacturing release here.

                      UK PMI manufacturing finalized at 47.9, fell back into contraction

                        By
                        ActionForex.com
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                        UK PMI Manufacturing was finalized at 47.9 in March, down from February’s 7-month of 49.3. The index has stayed below the neutral 50 mark for eight successive months.

                        Rob Dobson, Director at S&P Global Market Intelligence, highlighted that UK manufacturing production “fell back into contraction” at the end of the first quarter due to subdued market conditions. While total new orders saw a slight increase after a nine-month contraction, order book levels remain low. New export order declines continue to impact demand, despite a modest recovery in the domestic market.

                        However, Dobson pointed to positive developments in pricing and supply during March. Input price inflation reached its lowest level since June 2020, and although selling prices decelerated, they remained higher than input costs, offering some relief for manufacturers’ margins. Supply chains continued to recover, with March witnessing the greatest improvement in average vendor lead times in the survey’s 31-year history. Dobson noted that this development “should hopefully filter through to further cost reductions and lessen the disruption to production workflows in the coming months.”

                        Full UK PMI manufacturing release here.

                        Eurozone PMI manufacturing finalized at 47.3, remains in troubled waters

                          By
                          ActionForex.com
                          -

                          Eurozone PMI Manufacturing was finalized at 47.3 in March, down from February’s 48.5, a 4-month low. Looking at some member states, Greece (52.8, 10-month high) and Spain (51.3, 9-month high) improved. Others deteriorated including Italy (51.1, 2-month low), Ireland (49.7, 3-month low), France (47.3, 5-month low), the Netherlands (46.4, 4-month low), Germany (44.7, 34-month low), and Austria (44.7, 34-month low).

                          Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted that Eurozone manufacturing “remains in troubled waters” as factories report an eleventh consecutive month of falling demand due to factors such as surging living costs, tighter monetary policy, inventory destocking, and low customer confidence.

                          He also pointed out that the lack of demand has shifted pricing power from sellers to buyers, and lower energy prices have helped reduce costs. As a result, “prices paid for inputs by factories are now falling sharply on average,” and slower increases in selling prices should eventually lead to lower consumer prices for goods.

                          Full Eurozone PMI manufacturing release here.

                          Swiss CPI slowed to 2.9% yoy in Mar, core CPI down to 2.2% yoy

                            By
                            ActionForex.com
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                            Swiss CPI rose 0.2% mom in March, below expectation of 0.4% mom. Core CPI (excluding fresh and seasonal products, energy and fuel) rose 0.2% mom. Domestic products prices dropped -0.1% mom. Imported products prices rose 0.9% mom.

                            Compared with the same month of the previous year, CPI slowed from 3.4% yoy to 2.9% yoy, below expectation of 3.2% yoy. Core CPI slowed from 2.4% yoy to 2.2% yoy. Domestic products prices slowed from 2.9% yoy to 2.7% yoy. Imported products prices slowed from 4.9% yoy to 3.8% yoy.

                            Full Swiss CPI release here.

                            China Caixin PMI manufacturing dropped to 50, slowdown of recovery

                              By
                              ActionForex.com
                              -

                              China Caixin PMI Manufacturing dropped from 51.6 to 50.0 in March, below expectation of 51.7. It signalled stable business conditions at the end of the first quarter.

                              Wang Zhe, Senior Economist at Caixin Insight Group said: “In a nutshell, the economy saw a marginal slowdown of recovery in March as the expansion in both manufacturing supply and demand significantly weakened from the previous month.

                              “Overseas demand dragged, employment worsened, inventories dropped slightly, prices remained largely stable, logistics was gradually restored to normal, and businesses were still highly confident in the economic outlook.”

                              Full China Caixin PMI manufacturing release here.

                              Japan PMI manufacturing finalized at 49.2, signs of improvement at the end of Q1

                                By
                                ActionForex.com
                                -

                                Japan PMI Manufacturing was finalized at 49.2 in March, up from prior month’s 47.7.

                                Economist Usamah Bhatti from S&P Global Market Intelligence highlighted that the Japanese manufacturing sector showed signs of improvement at the end of Q1 2023, despite marking a fifth consecutive contraction.

                                Output and new orders experienced their softest declines in five months, but subdued market demand persisted in both domestic and international markets.

                                The lack of new incoming business led to firms preparing for an eventual rise in demand, with backlogs of work falling sharply for the sixth consecutive month. Additionally, manufacturers were increasingly stockpiling finished goods.

                                While input cost inflation slowed to its lowest rate since August 2021, selling price inflation remained high and accelerated, as Japanese goods producers partially passed on higher cost burdens to clients.

                                Full Japan PMI manufacturing release here.

                                Japan Tankan: Manufacturing deteriorates while non-manufacturing improves

                                  By
                                  ActionForex.com
                                  -

                                  In Q1, Japan’s Tankan large manufacturing index dropped for the fifth consecutive quarter, falling from 7 to 1, below the expected 3, and marking the lowest level since December 2020. The large manufacturing outlook also tumbled from 6 to 3, missing the anticipated 4. This decline was attributed to rising raw material and fuel costs, slowing overseas growth, and slumping chip demand.

                                  Conversely, the non-manufacturing index improved for the fourth straight quarter, ticking up from 19 to 20, in line with expectations. The non-manufacturing outlook rose from 11 to 15, although it fell short of the expected 16.

                                  Despite these mixed results, large Japanese firms plan to increase capital expenditure by 3.2% in the fiscal year that began in April, which is lower than the market’s forecast for a 4.9% gain. The Tankan survey also revealed that Japanese firms anticipate inflation to reach a record 2.8% a year from now and remain above the BoJ’s target for the next three to five years.

                                  ECB’s Villeroy: Battle Against Inflation Not Over

                                    By
                                    ActionForex.com
                                    -

                                    ECB Governing Council member Francois Villeroy de Galhau stated that ECB’s mission to bring inflation back towards 2% by between end-2024 and end-2025 would only be considered successful when underlying inflation, excluding energy and food prices, is under control.

                                    Villeroy emphasized that the ECB would not give up prematurely, saying, “Although we have completed most of our rate-hiking journey, we may possibly still have a little way to go.”

                                    He added that since it takes an estimated one to two years for rate hikes to impact inflation, the 3.5 percentage points in increases implemented by ECB since July would have a “fairly powerful impact” in the future.

                                    US PCE price index slowed to 5% yoy, core PCE down to 4.6% yoy

                                      By
                                      ActionForex.com
                                      -

                                      US personal income rose 0.3% mom or USD 72.9B in February, matched expectation. Personal spending rose 0.2% mom or USD 27.9B below expectation of 0.3% mom.

                                      PCE price index rose 0.3% mom, above expectation of 0.2% mom. Core PCE price index, excluding food and energy, rose 0.3% mom, below expectation of 0.4% mom. Prices for goods increased 0.2% mom and prices for services increased 0.3% mom. Food prices increased 0.2% mom and energy prices decreased -0.4 mom.

                                      From the same month one year ago, PCE price index slowed from 5.3% yoy to 5.0% yoy, below expectation of 5.3% yoy. Core PCE price index slowed from 4.7% yoy to 4.6% yoy, below expectation of 4.7% yoy.

                                      Full US personal income and outlays release here.

                                      Canada GDP grew 0.5% mom in Jan, to grow further 0.3% mom in Feb

                                        By
                                        ActionForex.com
                                        -

                                        Canada GDP grew 0.5% mom in January, above expectation of 0.3% mom. Goods-producing industries grew 0.4% mom while services-producing industries grew 0.6% mom. 17 of 20 industrial sectors posted increases.

                                        Advance information indicates that real GDP increased 0.3% mom in February. Increases in the mining, quarrying, and oil and gas extraction, manufacturing, and finance and insurance sectors were slightly offset by decreases in construction, wholesale trade, and accommodation and food services.

                                        Full Canada GDP release here.

                                        Eurozone CPI slowed to 6.9% yoy in Mar, core CPI ticked up to 5.7% yoy

                                          By
                                          ActionForex.com
                                          -

                                          Eurozone CPI slowed from 8.5% yoy to 6.9% yoy in March, below expectation of 7.2% yoy. CPI core (all item ex energy, food, alcohol & tobacco) roes from 5.6% yoy to 5.7% yoy, matched expectations.

                                          Looking at the main components , food, alcohol & tobacco is expected to have the highest annual rate in March (15.4%, compared with 15.0% in February), followed by non-energy industrial goods (6.6%, compared with 6.8% in February), services (5.0%, compared with 4.8% in February) and energy (-0.9%, compared with 13.7% in February).

                                          Full Eurozone CPI release here.

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