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German ZEW economic sentiment rose to 31.7, but current situation dropped to 12.5

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    ActionForex.com
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    Germany ZEW Economic Sentiment rose to 31.7 in November, up from 22.3, well above expectation of 20.3. That’s also the first rise since May. Current Situation, however, worsened again and dropped sharply from 21.6 to 12.5, well below expectation of 19.4.

    Eurozone ZEW Economic Sentiment rose from 21.0 to 25.9, above expectation of 20.6. Current situation dropped -4.3 pts to 11.6. Inflation expectations for Eurozone dropped very sharply by -31.4 pts to -14.3. This shows that the experts expect the inflation rate in the eurozone to decline over the next six months.

    “Financial market experts are more optimistic about the coming six months. However, the renewed decline in the assessment of the economic situation shows that the experts assume that the supply bottlenecks for raw materials and intermediate products as well as the high inflation rate will have a negative impact on the economic development in the current quarter. For the first quarter of 2022, they expect growth to pick up again and inflation to fall both in Germany and the eurozone,” comments ZEW President Professor Achim Wambach on current expectations.

    Full release here.

    Oil and safe havens rally amid new Middle East conflict

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      Oil prices surges sharply in Asian session and there was a significant influx into safe-haven assets such as Gold, Dollar, Swiss Franc, and Japanese Yen.

      This market reaction was triggered by escalating tensions in the Middle East, following a report by ABC News on a retaliatory missile strike by Israel against Iran. Meanwhile, Iran’s Fars news agency also reported that explosions were heard near the Isfahan airport,m even though the causes were unknown.

      The missile launches are continuation of hostilities following last Saturday when Iran targeted Israel with over 300 drones and missiles, a majority of which were intercepted by Israel and its allies.

      WTI oil’s strong rebound today suggests that corrective pullback from 87.84 has completed at 81.62 already. Further rise would be seen to retest 87.84 resistance first. Decisive break there will resume whole rally from 67.79 and target 61.8% projection of 71.32 to 87.84 from 81.62 at 91.82 next.

      Also, note that rise from 67.79 is seen as the third leg of the pattern from 63.67 (2023 low). Hence, break of 95.50 is possible in the medium term, depending on whether WTI could sustain its upside momentum.

      UK GDP contracted -0.1% mom in Mar, up 0.8% qoq in Q1

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        ActionForex.com
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        UK GDP contracted -0.1% mom in March, worse than expectation of 0.1% mom growth. That came after no growth in February (revised down from 0.1%). For the month, services dropped -0.2%. Production dropped -0.2%. Construction grew 1.7%. Monthly GDP is still 1.2% above pre-coronavirus levels, with services 1.5% above, construction 3.7% above and production -1.6% below.

        For Q1, GDP grew 0.8% qoq, below expectation of 1.0% qoq. Services rose 0.4% qoq. Production rose 1.2% qoq. Construction rose 3.8% qoq. Quarterly GDP was 0.7% above pre-coronavirus level.

        Also released, manufacturing production came in at -0.2% mom, 1.9% yoy in March, versus expectation of 0.0% mom, 2.3% yoy. Industrial production was at -0.2% mom, 0.7% yoy, versus expectation of 0.1% mom, 0.4% yoy. Goods trade deficit widened to GBP -23.9B, versus expectation of GBP -18.5B.

        CAD/JPY rejected by channel resistance, heading back to 95.83

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          ActionForex.com
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          CAD/JPY is one of the top moves today, following Yen’s recovery, as well as weakness in oil prices. Recovery from 95.83 might have completed at 99.28, after rejection by near term falling channel and 99.46 support turned resistance. Deeper decline is now in favor back to retest 95.83 low first. Firm break there will resume whole fall from 110.33.

          Nevertheless, break of 99.28 will now be a sign of stronger rebound ahead. Further rally would likely be seen through 110.24 resistance to 55 day EMA (now at 103.32) instead.

          RBA Minutes: Recovery is underway but uneven and protracted

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            ActionForex.com
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            In the minutes of December 1 monetary policy meeting, RBA said economic recovery in Australia was “under way” and and recent data had “generally been better than expected”. Employment rate was “likely to peak lower than the 8 per cent rate expected”. Though, recovery was still expected to be “uneven and protracted”, dependent on “significant policy support and favorable health outcomes”. High unemployment rate and excess capacity were expected to result in “subdued wages growth in inflation over coming years”.

            RBA reiterated, “the Bank remained prepared to purchase bonds in whatever quantity required to achieve the 3-year yield target”. The size of bond purchases is kept “under review” and it’s “prepared to do more if necessary. Also, RBA ” remains committed to not increasing the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range”. No increase in cash rate is expected for “at least 3 years”. Also, ” it would be appropriate to remove the yield target before the cash rate itself were increased.”

            Full minutes here.

            Eurozone Sentix investor confidence dropped to -22.6, war only knows victims

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              Eurozone Sentix Investor Confidence dropped from -18.0 to -22.6 in May, worse than expectation of -20.8. The’s the third decline in a row, and the lowest reading since June 2020. Current Situation index dropped from -5.5 to -10.5, worst since March 2021. Expectations index dropped from -29.8 to -34.0, worst since December 2008.

              Germany Sentix Investor Confidence dropped from -17.1 to -20.5, lowest since May 2020. Current Situation index dropped from -4.8 to -7.3, lowest since March 2021. Expectations index dropped from -28.8 to -32.8, all-time low.

              Sentix said: “War only knows victims. The traces of the Ukraine conflict are also becoming increasingly visible in the economy. The sanctions against Russia are having an effect, on enemies and friends alike. Last month, the “first mover” economic index clearly pointed the way towards recession. At the beginning of May, the downturn deepened further. Europe is hit particularly hard. The overall Eurozone index drops to -22.6 points. And for Germany we report an all-time low in economic expectations. In other words: it’s coming thick and fast.”

              Full release here.

              Australia employment grew 12.9k driven by part-time jobs, hours worked fell

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                Australia employment grew 12.9k in January, better than expectation of 0k. Full-time jobs dropped -17k but part-time jobs rose 30k.

                Unemployment rate was unchanged at 4.2%, but participation rate rose 0.1% to 66.2%. Monthly hours worked, however, dropped -8.8% mom.

                Bjorn Jarvis, head of labour statistics at the ABS, “While we again saw higher than usual numbers of people taking annual leave – even more so than last year – the 8.8 per cent fall in hours worked in January 2022 also reflected much higher than usual numbers of people on sick leave.”

                “As with earlier rapid changes in the labour market during the pandemic, hours continue to be much more affected than employment. This reflects people working reduced or no hours, without necessarily losing their jobs.”

                Full release here.

                US initial jobless claims rose to 353k, slightly below expectation

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                  ActionForex.com
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                  US initial jobless claims rose 4k to 353k in the week ending August 21, slightly below expectation of 355k. Four-week moving average of initial claims dropped -11.5k to 366.5k, lowest since March 14.

                  Continuing claims dropped -3k to 2862k in the week ending August 14, lowest since March 14, 2020. Four-week moving average of continuing claims dropped -108.5k to 2901.5k, lowest since March 21, 2020.

                  Full release here.

                  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.”

                    New Zealand manufacturing index rose to 53.2 before coronavirus impacts

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                      ActionForex.com
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                      New Zealand Business NZ Performance of Manufacturing Index rose 3.4 to 53.2 in February. Executive director for manufacturing Catherine Beard said, “while the sector has not been hit hard by Covid-19 as yet, offshore experiences show how rapidly the situation can change, especially for those manufacturers who source materials offshore and cater for particular markets”.

                      BNZ Senior Economist, Craig Ebert said that “The most encouraging aspect of the PMI – considering the global ructions beginning to emerge in February – was arguably its new orders.  These gained to 55.3, from 50.9 in January. And with widespread reports of supply-chain disruptions around the world, it was also interesting to see the PMI’s Deliveries of Raw Materials index had picked up to 53.1, from 47.7”.

                      Full release here.

                      Australia AiG services dropped to 56.6, outlook weak for another month or two

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                        ActionForex.com
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                        Australia AiG Performance of Services Index dropped sharply from 51.7 to 45.6 in August. That’s the lowest level since September 2020. Looking at some details, sales dropped -13.2 to 40.0. Employment rose 2.4 to 53.4. New orders dropped -9.3 to 47.4. Supplier deliveries dropped -1.3 to 44.0. Finished stocks dropped -9.3 to 37.7. Input prices dropped -2.6 to 71.5. Selling prices dropped -11.4 to 55.3.

                        Ai Group Chief Executive, Innes Willox, said: “Increased COVID-19 cases and the lockdowns aimed at constraining the spread of the virus saw the performance of the services sector slump in August… With lockdowns in Victoria, the ACT and NSW set to continue this month and with new orders down on previous levels, the immediate outlook is for another weak month or two. In the meantime, a lot hinges on the healthy supply of vaccines, success in overcoming hesitancy about vaccination and clear and convincing leadership from across the National Cabinet.”

                        Full release here.

                        BoJ Ueda highlights importance of strong inflation projections in monetary policy decisions

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                          ActionForex.com
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                          BoJ Governor Kazuo Ueda emphasized today that the central bank’s inflation forecasts must be “quite strong and close to 2%” within the coming year for the bank to consider adjusting its yield curve control policy.

                          Speaking to parliament, Ueda said that as “trend inflation is below 2%,” BoJ must maintain its current monetary easing stance. However, he noted that when trend inflation is projected to reach 2% target, the central bank must normalize monetary policy.

                          When asked about the specifics of how BoJ might phase out YCC, Ueda opted not to provide explicit details, clarifying that such a decision would hinge on a variety of factors, encompassing the economy, inflation pace, and other elements at the time of the verdict.

                          “At this moment, I cannot provide a definitive answer regarding how this could be executed,” he said, touching upon BoJ’s exit strategy. Nonetheless, Ueda reassured that ” BOJ has actively been conducting numerous evaluations on the potential impact of a monetary policy normalization on its financial situation.”

                           

                          US retail sales and import price missed expected, Dollar shrugs

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                            ActionForex.com
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                            US headline retail sales rose 0.1% mom in August, below expectation of 0.4% mom. Ex-auto sales rose 0.3% mom, below expectation of 0.5% mom. Also from US, import price index dropped -0.6% mom versus expectation of -0.2% mom.

                            Dollar is unbothered by the data misses. Instead it’s trying pare back some of the losses in the past two days.

                            China pledges to figh US unilateralism and protectionism “to the end, and at any cost”

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                              The Ministry of Commerce issued a quick response to Trump’s intention to add tariffs to additional USD 100b of Chinese imports, while they’re on holiday.

                              In a statement, China pledged to fight US unilateralism and protectionism “to the end, and at any cost”. And China will “firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people.”

                              The MOFCOM blamed that the the US “single-handedly started the trade conflicts”. And it added that it’s “provocation of unilateralism of the US to global free trade”.

                              This is sort of the expected response from China.

                              Here is the statement from MOFCOM (in Simplified Chinese).

                              UK Johnson to seek high quality FTA by Autumn at high level talks with EU

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                                A “high-level” meeting on Brexit is scheduled for today, involving top officials from UK and EU. But expectations are relatively low regarding the meeting. It’s reported that UK Prime Minister Boris Johnson would push for a post Brexit agreement by Autumn at the latest. He would demand a high quality FTA that is consistent with what EU have agreed with others. Meanwhile, he would also insist on not seeking an extension to the transition period, and leave the EU on December 31.

                                Last Friday, the UK government laid out a three-phased plan for Brexit border checks. Full border controls on goods entering the UK will not be implemented until July 2021.  Duchy of Lancaster, Michael Gove also noted that “”We have informed the EU today that we will not extend the transition period. The moment for extension has now passed. “

                                China trade surplus widened to record USD 62.9B as both exports and imports plunged

                                  By
                                  ActionForex.com
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                                  In May, in US term, China’s exports dropped -3.3% yoy to USD 206.8B, better than expectation of -7.0% mom decline. Imports dropped -16.7% yoy to USD 143.9B, worst than expectation of -9.7% yoy. Trade surplus widened to USD 62.9B, up from USD 45.3B. That’s also a record monthly trade surplus, with much help from decline in prices of crud oil and commodities like soy beans.

                                  Year-to May, total exports dropped -7.7% yoy to USD 885.0B. Total imports dropped -8.2% to USD 763.6B. Trade surplus for the first give months of the year was at USD 121.4B.

                                  USD/CNH recovers mildly today but there is no sign of near term bottoming yet. Further decline is expected as long as 7.1333 minor resistance holds. Fall from 7.1961 is seen as the third leg of the consolidation form 7.1953. Break of 7.0523 support will pave the way to retest 6.8452/9040 support zone.

                                  Italian bond yield jumps on budget deficit target, 5-star Maio not worried

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                                    ActionForex.com
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                                    European markets respond rather negatively to Italy’s budget, which it targets deficit at 2.4% of GDP for the next three years. Italian 10 year yield is up 0.268 to 3.161 for now, back above 3.000 handle. It’s also back at the level in the beginning of the month. German 10 year bund yield losses -0.06 to 0.472, back below 0.5 handle. DAX is currently down -0.68%, CAC own -0.32%.

                                    European Commission said today that it would assess the draft budget plan of Italy before end of November. But it’s spokesman emphasized it’s just “part of the normal European Semester process, the EU’s economic policy coordination cycle, and happens each year.” European Economics Commissioner Pierre Moscovici noted that nothing would be gained from a clash with Italy but added “we don’t have any interest either that Italy does not respect the rules and does not reduce its debt, which remains explosive.”

                                    5-Star Movement leader Luigi Di Maio, also Deputy Prime Minister of Italy, said he was not worried by market reaction and will meet investors soon.

                                    Low level US and China officials clashed at WTO

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                                      Reuters reported that two rather low level US and China officials clashed at the WTO today in closed-door talks. US Ambassador to WTO Dennis Shea accused China of doing “outright steal” technology of the US and said “this is not acceptable”.

                                      China’s envoy said US administration’s “reckless actions” were the root cause of the crisis in global multilateral trade system. And he hoped that both countries can “move in the same direction with mutual respect to contribute to the stability of world economic and trade environment”.

                                      DIW expects -6% contraction in German GDP this year, more optimistic overall than in summer

                                        By
                                        ActionForex.com
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                                        Germany’s economic institute projected a much less severe GDP contraction of -6% this year, revised from June’s estimate of -9.4%. For 2021 and 2022, grow is expected come back with 4.1% and 3.0% rise respectively. But the forecasts are based on assumption that there will not be renewed lockdown as another wave of coronavirus infections.

                                        Marcel Fratzscher, DIW President: “The economic slump this year is likely to be a little less than feared. It would be wrong to think now that the crisis will be over quickly. We have to admit that there can and will be setbacks, for example corporate bankruptcies and an increase in unemployment. It is therefore right that the federal government has extended many aid measures.”

                                        Claus Michelsen, DIW Economic Director: “So far, the German economy has come through the crisis better than feared. The historic slump in gross domestic product in the spring will be followed by an extremely strong third quarter, so we can be more optimistic overall than we were in the summer. Politicians reacted correctly to the crisis with their stabilizing measures – the federal government’s economic stimulus program is also helping to get demand going again. Nevertheless, the bottom line is that economic output this year is likely to decline significantly compared to the previous year.

                                        “And for the further process, at least skepticism is appropriate. Many important German trading partners have been hit even harder, which means that the export industry in this country can look to an uncertain future. And in Germany, too, much of the economic damage will only gradually become apparent. So the crisis will keep us busy for a long time. ”

                                        Full release here.

                                        White House: Progress made in candid and construction trade discussions with China

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                                          In a very short statement, White House noted delegations of the US and China “continued to make progress” on trade negotiations in Beijing this week. And there were “candid and constructive discussions on the negotiations and important next steps”. US “looks forward to the meetings planned with Vice Premier Liu He and the Chinese delegation in Washington next week.”

                                          There are no details again on what those progress is and what those important next steps are.

                                          Full statement here.

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