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Canada retail sales rose 0.5% mom in Dec

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    ActionForex.com
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    Canada retail sales rose 0.5% mom to CAD 62.1B in December. Sales increased in 7 of 11 subsectors, representing 75.1% of retail trade. Higher sales at motor vehicle and parts dealers (+3.8%) and general merchandise stores (+1.7%) led the increase. Ex-gasoline and auto sales rose 0.4% mom. In volume term, retail sales increased 1.3% mom.

    Advance estimate suggests that retail sales rose further by 0.7% mom in January.

    Full release here.

    Canada CPI slowed to 5.9% yoy in Jan, Ex food and energy down to 4.9% yoy

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      ActionForex.com
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      Canada CPI slowed from 6.3% yoy to 5.9% yoy in Jan. StatsCan noted that “Prices for cellular services and passenger vehicles contributed to the deceleration in the all-items CPI. However, mortgage interest cost and prices for food continue to rise.” Excluding food and energy, CPI also slowed to 4.9% yoy while ex-mortgage CPI slowed to 5.4% yoy.

      CPI median was unchanged at 5.0% yoy. CPI trimmed slowed form 5.3% yoy to 5.1% yoy. CPI common was unchanged at 6.6% yoy.

      On a monthly basis, CPI rose 0.5% mom. Higher gasoline prices contributed the most to the month-over-month increase, followed by a rise in mortgage interest cost and meat prices.

      Full release here.

      German ZEW rose to 28.1, but current situation still unfavorable

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        ActionForex.com
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        Germany ZEW Economic Sentiment rose form 16.9 to 28.1 in February, above expectation of 22.8. Current Situation index rose from -58.6 to -45.1, above expectation of -50.0.

        Eurozone ZEW Economic sentiment rose form 16.7 to 29.7, above expectation of 22.3. Current Situation Index rose 13.2 pts to -41.6.

        ZEW President Professor Achim Wambach said: “Meanwhile a large fraction of the survey participants expects the economic situation to improve in six months’ time. However, the current situation is still assessed as relatively unfavourable.

        “As in the previous month, the increase in expectations can be traced back to higher profit expectations in the energy- and export-oriented sectors as well as the consumer-related parts of the economy. Expectations for long-term interest rates are also rising and the banking sector indicator has reached its highest level since 2004.”

        Full release here.

        UK PMI composite jumped to 53, near-term recession odds fallen considerably

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          ActionForex.com
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          UK PMI Manufacturing rose from 47.0 to 49.2 in February, a 7-month high. PMI Services rose sharply from 48.7 to 53.3, an 8-month high. PMI Composite jumped from 48.5 to 53.0, an 8-month high.

          Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Much better than anticipated PMI data for February indicate encouraging resilience of the economy in the face of headwinds which include rising interest rates, the ongoing cost of living crisis, labour shortages and strikes…

          “However, while the data suggest that near-term recession odds have fallen considerably, elevated inflation pressures clearly remain a concern, especially in the service sector. As such, the resilience of the economy and the stickiness of the survey’s inflation gauges add to the likelihood of the Bank of England tightening policy further, and potentially more aggressively, which may dampen future growth expectations and suggests that the possibility of recession later in the year should not be ruled out.”

          Full release here.

          Eurozone PMI composite rose to 52.3, accelerating growth and stubbornly elevated price pressures

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            ActionForex.com
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            Eurozone PMI Manufacturing dropped from 48.5 to 48.8 in February. PMI Services rose from 50.8 to 53.0, an 8-month high. PMI Composite rose from 50.3 to 52.3, a 9-month high.

            Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

            “Business activity across the eurozone grew much faster than expected in February, with growth hitting a nine-month high thanks to resurgent service sector activity and a recovering manufacturing economy. February’s PMI is broadly consistent with GDP rising at a quarterly rate of just under 0.3%….

            “However, although inflationary pressures have continued to moderate in February, the survey hints at persistent elevated price trends in the service sector, linked in part to higher wage growth, which will concern ECB policymakers….

            “The combination of accelerating growth and stubbornly elevated price pressures will naturally encourage a bias towards further policy tightening in the months ahead.”

            Full release here.

            Germany PMI composite rose to 561.1, return to growth after eight months

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              ActionForex.com
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              Germany PMI Manufacturing dropped from 47.3 to 46.5 in February. PMI Services rose from 50.7 to 51.3, an 8-month high. PMI Composite rose from 49.9 to 51.1, also an 8-month high.

              Phil Smith, Economics Associate Director at S&P Global Market Intelligence said:

              “February’s flash PMI survey showed the German private sector economy return to growth territory for the first time eight months, alongside continued resilience in the labour market and a further slight recovery in business confidence.

              “Encouragingly, the increase in business activity was broad-based by sector. However, whereas the upturn in services activity was at least partly demand-related, higher manufacturing output owed almost exclusively to a substantial easing of supply-chain bottlenecks, which merely allowed goods producers to catch up on backlogs of work. With manufacturing new orders still in contraction territory, goods producers remain only cautiously optimistic about the year-ahead outlook, and they will likely need to see demand revive for that to change.

              “The cooling of demand in the goods-producing sector and subsequent easing of supply-chain pressures has seen factory input costs start to fall. Still, like their service sector counterparts who once again highlighted particularly strong wage demands, manufacturers continued to raise their output prices at a robust rate during February, signalling that core inflationary pressures remain elevated. However, the rate of increase in average prices charged for goods and services continued to slow, down to its lowest since May 2021.”

              Full release here.

              France PMI composite rose to 51.6, economy back in growth territory

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                ActionForex.com
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                France PMI Manufacturing dropped notably from 50.5 to 47.9 in February. PMI Services, on the other hand, rose from 49.4 to 52.8. PMI Composite rose from 49.1 to 51.6, hitting a 7-month high.

                Joe Hayes, Senior Economist at S&P Global Market Intelligence said:

                “At face value, the February ‘flash’ PMI survey results for France are positive, showing the economy was in growth territory for the first time since October 2022. More encouragement could be taken from the underlying sector data, which showed the expansion was driven by services, a sector which has been under pressure due to the negative demand impact of eroding real incomes.

                “However, it’s difficult to say for certain if we’re at an inflexion point and the French economy is now on its path to recovery. The manufacturing sector downturn intensified in February, and demand conditions within this sector are clearly still fragile. Factory export orders fell at the sharpest rate since May 2020, providing a downbeat assessment of broader global economic conditions.

                “The likelihood of further increases in interest rates also remains, and this poses a risk to demand and activity. Inflation remained stubborn in the service sector, with rates of input cost and output price inflation holding close to their peaks. How much needs to be done by monetary policymakers to push this lower is uncertain, although sustained resilience in the labour market suggests more needs to be done to take heat out of the French economy.”

                Full release here.

                Japan PMI manufacturing dropped to 47.4, services rose to 53.6

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                  ActionForex.com
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                  Japan PMI Manufacturing dropped from 48.9 to 47.4 in February, below expectation of 49.3. It’s also the worst reading in over two-and-a-half years. Manufacturing Output dropped sharply from 47.2 to 44.9. PMI services, on the other hand, rose from 52.3 to 53.6. PMI Composite was unchanged at 50.7.

                  Andrew Harker, Economics Director at S&P Global Market Intelligence, said:

                  “The modest, stable growth signalled by the au Jibun Bank Flash Japan Composite PMI in February masked widely differing trends between the manufacturing and service sectors midway through the first quarter of the year.

                  “Service providers posted sharper rises in activity and new business as the latest wave of the COVID-19 pandemic faded, providing a boost to demand.

                  “The picture was much less positive in the manufacturing sector, however, where new orders and production dropped to the greatest extents in just over two-and-a-half years.”

                  Full release here.

                  RBA minutes: 25bps and 50bps hike considered at Feb meeting

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                    ActionForex.com
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                    Minutes of RBA’s February 7 meeting revealed that both the options of 25bps and 50bps hike were considered. But the case for a 25bps hike was stronger, with “the monthly meetings provided the Board with frequent opportunities to assess how these uncertainties were being resolved and to adjust policy if needed”.

                    The minutes also noted, “members agreed that further increases in interest rates are likely to be needed over the months ahead to ensure that inflation returns to target and that the current period of high inflation is only temporary.”

                    Full minutes here.

                    Australia PMI composite rose to 49.2, on the narrow path to achieve soft landing

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                      ActionForex.com
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                      Australia PMI Manufacturing ticked up from 50.0 to 50.1 in February. PMI Services rose from 48.6 to 49.2. PMI Composite also rose from 48.5 to 49.2.

                      Warren Hogan, Chief Economic Advisor at Judo Bank said: “Australian business activity improved in February 2023 with a second consecutive small rise in the flash composite output index to 49.2. The economy has slowed from the strong rates of growth in 2022 to be on a more sustainable footing in early 2023. We still appear to be on the narrow path to achieve a soft landing for the economy in 2023…

                      “At this stage the Judo Bank PMIs are pointing to a welcome slowdown in the economy that may help take upward pressure off interest rates. While this will do little to alter the RBA’s intentions to raise interest rates further over the months ahead, it does indicate that we may be close to the point where the RBA Board can pause the current tightening cycle.”

                      Full release here.

                      SNB Schlegel: Still willing to intervene in the currency markets

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                        ActionForex.com
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                        Vice Chairman Martin Schlegel said yesterday that SNB is “still willing” to be active in currency intervention. “If the Swiss franc depreciates we are ready to sell foreign exchange, if the Swiss franc appreciates strongly we are willing to buy foreign exchange,” he said.

                        He also noted that SNB had to “react forcefully” to fight inflation, which peaked at 3.5% last year. “The most important contribution we can do for society is to have stability-orientated policy and maintain price stability.”

                        BoJ Amamiya: Difficult challenge is to determine whether exit conditions are in place

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                          ActionForex.com
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                          BoJ Deputy Governor Masayoshi Amamiya told the parliament that the central bank has already shifted to a “sustainable monetary easing framework”. Thus, it is “appropriate to maintain current policy given underlying price moves.”

                          But he also noted that BoJ has “sufficient operational tools” to achieve a smooth exit from ultra-loose monetary policy.

                          “The difficult challenge for the BOJ is to determine whether conditions have fallen in place to exit, and how to communicate (its policy intention) to the market,” Amamiya added.

                          USD/CNH extending rebound towards 6.9559 fibonacci level

                            By
                            ActionForex.com
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                            Chinese Yuan weakened notably last week as the dispute with US over “spy balloons” continued. The meeting between US Secretary of State Antony Blinken and China’s top diplomat Wang Yi in Munich yielded no results.

                            In a separate statement, China warned “If the U.S. insists on taking advantage of the (spy balloon) issue, escalating the hype, and expanding the situation, China will follow through to the end, and the U.S. will bear all the consequences.”

                            In an interview with NBC, Blinken said “there was no apology” from China. “I told him quite simply that that was unacceptable and can never happen again,” he said.

                            USD/CNH’s down leg from 7.3745 should have completed at 6.6971. Further rebound should be seen to 38.2% retracement of 7.3745 to 6.6971 at 6.9559. Reaction from there would reveal whether USD/CNH is heading for another down leg through 6.6971, or stronger rise to 61.8% retracement at 7.1157.

                            A look at AUD/NZD, NZD/USD ahead of this week’s RBNZ

                              By
                              ActionForex.com
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                              New Zealand Dollar is trading with a soft tone in Asian session today. While a rate hike is expected from RBNZ this week, there are chatters of the possibility of smaller hike, or even a pause, in response to the damage done by cyclone Gabrielle. There are also some speculations of a slight dovish twist which might signal a lower terminal rate. But traders will still need to wait for RBNZ Governor Adrian Orr’s statement before making adjustment on their bets.

                              For now, AUD/NZD is extending the rally from 1.0469 despite loss of upside momentum. Further rise is expected as long as 1.0961 support holds. Sustained trading above 61.8% projection of 1.0469 to 1.0935 from 1.0735 at 1.1023 could prompt upside re-acceleration to 100% projection at 1.1201.

                              As for NZD/USD, it’s still extending the fall from 0.6537, which is seen as the third leg of the consolidation pattern from 0.6512. Deeper decline is expected as long as 0.6308 minor resistance holds, for 38.2% retracement of 0.5511 to 0.6512 at 0.6130. But strong support should be seen there to bring rebound. However, sustained break of 0.6130 will raise the change of near term reversal and target 61.8% retracement at 0.5893.

                              ECB Villeroy: Interest rate would probably peak in summer

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                                ActionForex.com
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                                ECB Governing Council member Francois Villeroy de Galhau said that interest rate would probably peak in the summer, which technically ends in September. Meanwhile, a rate cut this year is out of question.

                                But he also emphasized there is no “automatic moves” at each meeting. the central criteria is a “shift in the inflation path”, especially underlying inflation.

                                He also noted that interest rate will be kept at the peak level as long as necessary to bring inflation back to 2% target.

                                ECB Schnabel: We may have to act more forcefully

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                                  ActionForex.com
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                                  ECB Executive Board member Isabel Schnabel said in a Bloomberg interview, “we are still far away from claiming victory”, adding that “we may have to act more forcefully.” She also noted that a broad disinflation process has not even started.” Meanwhile, “wage growth has picked up substantially” and could be “more persistent.

                                  Schnabel also indicated that market pricing of a terminal rate of 3.50% may be too optimistic. “Markets are priced for perfection,” she said. “They assume inflation is going to come down very quickly toward 2% and it is going to stay there, while the economy will do just fine. That would be a very good outcome, but there is a risk that inflation proves to be more persistent than is currently priced by financial markets.”

                                  A 50 basis-point hike next month is “necessary under virtually all plausible scenarios,” she said. “There is no inconsistency between our principle of data-dependency and these intentions because it’s very unlikely that the incoming data is going to put this intention into question.”

                                  UK retail sales volume rose 0.5% mom in Jan, value up 0.6% mom

                                    By
                                    ActionForex.com
                                    -

                                    UK retail sales volume rose 0.5% mom in January, much better than expectation of -0.2% mom decline. Ex-fuel sale volume rose 0.4% mom, above expectation of 0.0% mom.

                                    Compare with a year ago, retail sales volume dropped -5.1% yoy, versus expectation of of -5.5% yoy. Ex-fuel sales volume dropped -5.3% yoy, matched expectations.

                                    In value term, retail sales rose 0.6% mom, 4.1% yoy. Ex-fuel sales rose 0.5% mom, 3.7% yoy.

                                    Full release here.

                                    RBA Lowe: We need to make clear to the community we were not done yet

                                      By
                                      ActionForex.com
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                                      In the second parliamentary grilling today, RBA Governor Philip Lowe said, “based on the currently available information, the board expect that further increases will be needed over the months ahead to ensure that inflation returns to target.”

                                      “Given there is a significant demand element to inflation, we need to respond to that with further monetary policy and we need to make that clear to the community that we were not done yet,” Lowe said.

                                      “The RBA and many other central banks are managing two risks,” he said. “One is the risk of not doing enough, which would result in high inflation persisting and then later proving very costly to get down. The other is the risk that we move too fast, or too far.”

                                      Fed Bullard: Continued policy rate increases can lock in disinflationary trend

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                                        ActionForex.com
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                                        St. Louis Fed President James Bullard said yesterday, “I was an advocate for a 50-basis-point hike and I argued that we should get to the level of rates the committee viewed as sufficiently restrictive as soon as we could.”

                                        Bullard said “inflation remains too high but has declined,” adding that “continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets.”

                                        BoE Pill: MPC needs to ensure it does either too much or too little

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                                          ActionForex.com
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                                          BoE Chief Economist Huw Pill said in a speech yesterday, “recognising that its earlier actions are now gaining traction, the MPC needs to ensure that it does enough to return inflation to target, while guarding against the possibility that it does either too much or – for that matter – too little.”

                                          “Finding that balance is the central challenge for monetary policy at present,” he said.

                                          Pill also noted, “continuing to raise rates at the pace and magnitude seen over the past year would eventually – and perhaps soon – imply that monetary policy had cumulatively been tightened too much.”

                                          Yet, “the MPC’s need to be watchful for signs of greater-than-expected persistence in inflationary pressure,” he emphasized. “I would flag the need for the Committee to maintain a readiness to act to address any such persistence should it emerge.”

                                          On the economy, Pill said Tuesday’s labor market data “pointed to signs that the UK labour market loosened a little in the fourth quarter”. But, “these indicators suggest the labour market remains tight in an absolute sense relative to historical experience.”

                                          CPI data showed inflation fell to 10.1% in January, from 10.5% in December. “On the month, this mainly owed to an easing in services and fuel price inflation, although developments in historically very volatile components such as airfares counted for a large part of the former.”

                                          Full speech here.

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