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US new home sales rose to 692k, highest since Nov 2017

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    ActionForex.com
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    US sales of new single-family houses rose to 692k in March, up from 662k, well above expectation of 647k. That’s also the highest level since November 2017. Also from US, house price index rose 0.3% mom in February, below expectation of 0.6% mom.

    UK claimant count dropped -20k Jan, unemployment edged up to 5.1 in Dec

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      ActionForex.com
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      UK claimant count dropped -20k in January, versus expectation of 35k rise. Total claimant count was relatively unchanged at 2.6m, which was still 109.4% above March 2020’s level.

      Unemployment rate edged up to 5.1% in the three months to December, up from 5.0%, matched expectations. Total actually weekly hours worked rose 53.7 million hours, or 5.8%, to 978.7 million. Average earnings excluding bonus rose 4.1% 3moy, above expectation of 4.0%. Average earnings including bonus rose 4.7% 3moy, above expectation of 4.2% 3moy.

      Full release here.

      AUD/NZD rebounds from 55 day EMA, RBNZ to fuel more upside

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        ActionForex.com
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        AUD/NZD rises strongly today after RBA kept interest rate unchanged at 1.50%, even though some expected a cut. Technically, strong support was seen at 55 day EMA. The development suggests that fall from 1.0731 is merely a correction and has completed at 1.0516. Further rise should now be seen back to 1.0731 resistance. Decisive break will resume whole rise from 1.0107 . In that case, 61.8% retracement of 1.1175 to 1.0107 at 1.0767.

        The above mentioned will very much depends on RBNZ deliver it’s widely expected rate cut tomorrow. Major economic indicators since the last meeting weakened. In particular, disappointing employment report and inflation in the first quarter appear to have increased the odds of a rate cut this week. We’ll know shortly. More on RBNZ in RBNZ Preview – Chance of Rate Cut Increases as Job Market and Inflation Disappoint.

        Today’s top movers: GBP/JPY and GBP/CAD

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          ActionForex.com
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          GBP/JPY and GBP/CAD are the two biggest movers today, thanks to broad based strength in the pound. Nonetheless, considering that they’re up 72 pips and 68 pips only, it’s indeed a very slow day.

          For GBP/JPY, rise from 147.26 is in progress for 1349.70 resistance. Our views as discussed in the daily report is unchanged.

           

          GBP/CAD’s rebound from 1.6643 accelerates higher today and reaches 1.7183 so far. Further rise is likely for 1.7285 resistance. However, for now, we’re viewing price actions from 1.6594 as forming a corrective pattern. That is, rise from 1.6643 is merely a leg inside the pattern. Hence, we’d expect strong resistance from 38.2% retracement of 1.8415 to 1.6594 at 1.7290 to limit upside. Break of 1.6980 minor support should bring retest of 1.6594 low.

          Firm break of 1.7290 fibonacci level could bring stronger rebound to 61.8% retracement at 1.7719. But, we’ll still treat it as part of the correction from 1.6594 unless we see more evidence of trend reversal, in terms of price structure. The down trend from 1.8415 is still expected to resume, just at a later stage.

          Australia’s GDP up 0.2% qoq in Q4, continuing consistent slowdown

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            ActionForex.com
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            Australia GDP grew 0.2% qoq in Q4, slightly below expectation of 0.3% qoq. On an annual basis, the economy expanded by 1.5% yoy.

            The data indicates deceleration in economic momentum as the year progressed, with Katherine Keenan, the head of national accounts at ABS, noting a consistent slowdown across each quarter of 2023.

            The main pillars supporting GDP growth were identified as government spending and private business investment. Government final consumption expenditure saw 0.6% qoq increase , while private business investment grew 0.7% qoq.

            The significant contribution of net trade, which added 0.6 percentage points to the overall GDP growth, was largely attributed to a -3.4% qoq decrease in import.

            Full Australia GDP release here.

            Fed Bullard: Monetary policy seems a little tight

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              ActionForex.com
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              St. Louis Fed President James Bullard said in a CNBC interview that Fed’s monetary policy seems “a little tight”. Though, he wasn’t pushing for a change in monetary policy yet. Bullard said he’s willing to be patient for now.

              Also, lowered expectation of future short-term rate path has brought down 10-year yield. Bullard said “you’ve got to wait and see how big an impact this has on the economy.”

              So far Bullard, said slowdown won’t be as bad as expected. GDP growth could decelerate only to around 2.5% this year, which is stronger than earlier forecasts of 2.0%. Bullard admitted there is upside potential too.

              US Q4 GDP in spotlight: A test for S&P 500 amid profit taking

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                ActionForex.com
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                Financial markets are keenly focused on US GDP data today. Analysts expect GDP to grow at an annualized rate of 2.0% in Q4, marking a slowdown from the previous quarter’s 4.9%, and reaching the lowest rate since Q2 of 2022. This anticipated reading would align with the notion that the US economy, while experiencing a rapid cooling, remains resilient. A key component under scrutiny is the performance of consumption growth, which has been a significant support for the economy.

                Notable profit taking was seen in the US stock markets after initial rally overnight. S&P 500 closed up just 0.08% at 4868.55, after climbing to 4903.68. Technically, there is prospect of a prolonged near-term consolidation given that SPX has just met 100% projection of 3808.86 to 4607.07 from 4103.78 at 4901.99.

                Break of 55 H EMA (now at 4828.70) could trigger deeper correction towards 4682.11 support, which is slightly above 55 D EMA (now at 4658.15), and set the range for sideway consolidations.

                Nevertheless, another rally, as supported by strong GDP data today, and sustained trading above 4901.99 would set the stage for a take on 5000 psychological level quickly.

                US goods trade deficit widened to USD 90.6B in March

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                  ActionForex.com
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                  US goods exports rose USD 11.4B to USD 142B in March. Goods imports rose USD 14.9B to USD 232.6B. Trade deficit widened to USD -90.6B, from USD -87.1B, larger than expectation of USD -87.5B.

                  Wholesale inventories rose 1.4% mom to USD 693.4B. Retail inventories dropped -1.4% mom to USD 613.2B.

                  Full release here.

                  US ISM services falls sharply to 50.6, vs exp 52.7

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                    ActionForex.com
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                    US ISM Services PMI fell from 52.7 to 50.6 in December, below expectation of 52.7. Business activity/production rose from 55.1 to 56.6. New orders fell from 55.5 to 52.8. Employment fell sharply from 50.7 to 43.3. Prices ticked down from 58.3 to 57.3.

                    The past relationship between the Services PMI and the overall economy indicates that the Services PMI for December (50.6 percent) corresponds to a 0.3-percent increase in real gross domestic product (GDP) on an annualized basis.

                    Full US ISM Services release here.

                    IMF downgrade global growth forecasts on Omicron, inflation, China

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                      ActionForex.com
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                      IMF said the global economy enters 2022 in a “weaker position” as the spread of Omicron led to reimposed mobility restrictions. Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies. Also, the ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption also have limited growth prospects.

                      New GDP growth forecasts:

                      • Global: 2022 at 4.4% (downgraded by -0.5%); 2023 at 3.8% (upgraded by 0.2%).
                      • US: 2022 at 4.0% (downgraded by -1.2%; 2023 at 2.6% (upgraded by 0.4%).
                      • Eurozone: 2022 at 3.9% (downgraded by -0.4%); 2023 at 2.5% (upgraded by 0.5%).
                      • Japan: 2022 at 3.3% (upgraded by 0.1%); 2023 at 1.8% (upgraded by 0.4%).
                      • UK: 2022 at 4.7% (downgraded by -0.3%); 2023 at 2.3% (upgraded by 0.4%).
                      • Canada: 2022 at 4.1% (downgraded by -0.8%); 2023 at 2.8% (upgraded by 0.2%).
                      • China: 2022 at 4.8% (downgraded by -0.8%); 2023 at 5.2% (downgraded by -0.1%).

                      Full release here.

                      BoE Bailey not seeing balance sheet returning to pre-financial crisis levels

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                        ActionForex.com
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                        In his remarks to the Treasury Committee, BoE Governor Bailey commented that he does not foresee the BoE’s balance sheet returning to pre-financial crisis levels. Instead, he envisages a more proactive adjustment strategy, stating, “The Bank wants to adjust its balance sheet so that it has headroom to do whatever it might need to do in the future. It does not want its balance sheet to simply get larger after every economic shock.”

                        In a rebuttal to critics linking the UK’s inflation surge to QE policies, Bailey downplayed the connection, suggesting that the impact of COVID-19 supply chain disruptions was likely time-limited. “If the only shock that the world had experienced was that one [the Covid-19 supply chain disruption] then I think the evidence now suggests it had a limited time period. Unfortunately, of course, Ukraine came along, and there was no gap between these shocks,” he explained.

                        Deputy governor Ben Broadbent supported Bailey’s perspective, noting that the UK, along with other regions such as the US and the Eurozone, had engaged in a decade of QE without witnessing an inflation problem or robust money growth.

                        Addressing concerns about housing prices, Bailey refuted suggestions that the BoE’s policies had contributed to a surge. “Actually, the period in which the house price to income ratio rose most was the period of 10 years before 2007. That was the period when it rose most substantially. It hasn’t done the same thing since then,” he noted.

                        ECB Kazaks: The size of PEPP package is not an absolute truth

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                          ActionForex.com
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                          ECB Governing Council member Martins Kazaks said that “flexibility is at the very core of PEPP”, referring to the central bank’s Pandemic Emergency Purchase Program. “If financial conditions remain favorable, in June we can decide to buy less.”

                          He added that there is not reason to believe that PEPP program will extend beyond the March 2022. ECB might even complete the program without using up the entire envelop of EUR 1.85T, depending on economic developments. “The size of the package is not an absolute truth,” he said. “If the economy performs nicely, it’s quite likely that we will not need to spend everything.”

                          Still,he emphasized that it’s “premature” to talk about stimulus exit due to high uncertainty. “If the inflation outlook remains like the current forecast when PEPP ends, I think we would certainly discuss increasing APP,” Kazaks said.” Monetary policy will remain very accommodative. If necessary we can also devise new instruments.”

                          China Caixin PMI manufacturing rose to 51.9, price pressures to limit policy choices

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                            ActionForex.com
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                            China’s official NBS PMI Manufacturing dropped to 51.1 in April, down form 51.9, below expectation of 51.4. NBS PMI Non-Manufacturing dropped to 54.9, down from 56.3, below expectation of 52.6. “Some surveyed companies report that problems such as chip shortages, problems in international logistics, a shortage of containers, and rising freight rates are still severe,” NBS statistician Zhao Qinghe said.

                            Caixin PMI Manufacturing rose to 51.9, up from 50.6, above expectation of 50.9. Wang Zhe, Senior Economist at Caixin Insight Group said: “Policymakers have expressed concerns about rising commodity prices on several occasions and urged adjusting raw material markets and easing businesses’ cost pressure. In the coming months, rising raw material prices and imported inflation are expected to limit policy choices and become a major obstacle to the sustained economic recovery.”

                            German ZEW: US withdrawal from Iran deal, trade conflicts and oil price had negative impact on economic expectations

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                              ActionForex.com
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                              German ZEW Economic Sentiment was unchanged at -8.2 in May, in line with expectation. German Assessment of Current Situation dropped -0.5 to 87.4, above expectation of 85.2.

                              Eurozone ZEW Economic Sentiment rose 0.5 to 2.4, above expectation of 2.0. Assessment of Current Situation dropped -1.6 to 56.1.

                              Quote from the release by ZEW President Achim Wambach:

                              “The effects of relatively positive values for German exports and production in March 2018 have been overshadowed in the most recent survey by uncertainty motivated by recent political events. The US decision to back out of the nuclear treaty with Iran and fears of a further escalation of the international trade conflict with the US, as well as a further rise of crude oil prices, have had an overall negative impact on economic expectations in Germany.”

                              UK PMI composite rises to 54, sustainable path to target inflation not achieved yet

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                                ActionForex.com
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                                UK PMI Manufacturing fell from 50.3 to 48.7 in April, below expectation of 50.2. PMI Services rose from 53.1 to 54.9, above expectation of 50.2, and an 11-month high. PMI Composite rose from 52.8 to 54.0, also an 11-month high.

                                Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that UK economy’s rebound from last year’s recession “continued to gain momentum”. He noted that GDP is now growing at an increased quarterly rate of 0.4%, up from 0.3% in the first quarter.

                                This economic upturn has led to increased hiring, driven further by the rise in the National Living Wage in April. However, these factors have also escalated cost pressures significantly. Although the inflation of selling prices has moderated slightly, the combination of rising costs and solid demand could lead businesses to hike prices in the near future.

                                “While the improving economic recovery picture is welcome news, the upward pressure on inflation will add to concerns that a sustainable path to below target inflation has not yet been achieved,” he added.

                                Full UK PMI release here.

                                UK economic growth slows as services PMI hits 7-month low

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                                  ActionForex.com
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                                  UK’s PMI data for June presents a mixed picture. Manufacturing PMI slightly increased from 51.2 to 51.4, surpassing the expectation of 51.0 and marking a 23-month high. However, Services PMI fell from 52.9 to 51.2, below expected 53.2, reaching a 7-month low. Consequently, Composite PMI also declined from 53.0 to 51.7, hitting its lowest point in seven months.

                                  Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that the Flash PMI survey data for June signals a slowdown in the pace of economic growth, with GDP now growing at a “sluggish” quarterly rate of just over 0.1%. This slowdown is partly due to uncertainty in the business environment ahead of the general election, causing many firms to pause decision-making while awaiting clarity on future policies.

                                  From an inflation perspective, the survey highlights persistent inflation in the service sector, which remains a significant barrier to lowering interest rates. This stubborn inflation is currently at a 5.7% pace but is expected to cool further in the coming months.

                                  In summary, while the current economic slowdown may be temporary, contingent on business reactions to new government policies, the persistent underlying inflationary pressures above BoE’s target remain a concern.

                                  Full UK PMI release here.

                                  Fed signals three rate cuts in 2024, policy easing on discussion table

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                                    ActionForex.com
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                                    US stocks surged, with DOW hitting new record, while treasury yields and the Dollar tumbled following Fed’s decision to leave interest rates unchanged at 5.25-5.50%. This decision, widely anticipated by the markets, was overshadowed by the Fed’s indication of potential rate cuts in 2024. Fed suggested that three 25 bps cuts could be implemented next year, to bring federal funds rate back to 4.50-4.75%.

                                    Fed Chair Jerome Powell, in the post-meeting press conference, acknowledged the emerging discussion within about reducing policy restraint. Powell stated, “The question of when it will be appropriate to begin dialing back the amount of policy restraint in place begins to come into view, and is clearly a topic of discussion out in the world and also of discussion for us at our meeting today.” He further noted the general expectation that this issue will be a key focus for Fed going forward.

                                    The new economic projections present a detailed outlook. The median forecasts indicate that federal funds rate will decrease from the current 5.4% to 4.6% in 2024, further reducing to 3.6% in 2025, and eventually to 2.9% in 2026. The longer-run federal funds rate is held steady at 2.50%. The central tendency for 2024 is at 4.4-4.9%, suggesting a relatively narrow range, and stable rate expectation.

                                    The projections for GDP growth show a slowdown from 2.6% in 2023 to 1.4% in 2024, followed by a rebound to 1.8% in 2025 and 1.9% in 2026. The unemployment rate is expected to increase from 3.8% in 2023 to 4.1% in 2024 and then stabilize at this level through 2026.

                                    Regarding inflation, headline PCE inflation is forecasted to decrease from 2023’s 2.8% to 2.4% in 2024, 2.1% in 2025, and 2.0% in 2026. Similarly, core PCE inflation is projected to slow down from 3.2% in 2023 to 2.4% in 2024, and then to 2.2% in 2025 and 2.0% in 2026.

                                    Some FOMC reviews here.

                                    Gold breaches key resistance, resuming up trend?

                                      By
                                      ActionForex.com
                                      -

                                      Gold’s rally today suggests that larger up trend is possibly resuming. Sustained trading above 1765.25 resistance will confirm and pave they way to 61.8% projection of 1451.16 to 1765.25 from 1670.66 at 1864.76. However, break of 1747.31 minor support will suggest rejection by 1765.25 resistance. In this case, consolidation pattern from 1765.25 could extend with another falling leg before completion.

                                      SNB Maechler: Negative interest rate remains indispensable for Switzerland

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                                        ActionForex.com
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                                        Swiss National Bank Governing Board member Andrea Maechler said in newspaper Le Matin Dimanche interview that current monetary policy remains appropriate. She noted the fragility in the financial markets, with risks surrounding Brexit, Italy and trade war. Also, the exchange rate of the Swiss Franc remained high.

                                        Therefore, Maechler said, “In the current context, the negative interest rate remains indispensable for Switzerland. It enables us to restore, at least partially, a difference between Swiss interest rates and those abroad, thus reducing the franc’s attractiveness.”

                                        Also, “our monetary policy based on the negative interest rate and our capacity to intervene on the currency market if needed is appropriate.”

                                        Fed Rosengren: US still in the depths of a recession

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                                          ActionForex.com
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                                          Boston Fed Bank President Eric Rosengren said the US is “still in the depths of a recession” and he hoped, “over the course of the spring we’re really talking about a significant recovery.”

                                          “The first thing we can do is do everything in our power to get back to full employment as quickly as possible,” he added.” “I don’t want to say that the burden is all on monetary policy. Most of the burden is actually on fiscal policy when interest rates are as low as they are.”

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