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BoE Pill: We have done some, still more to do

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    ActionForex.com
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    BoE Chief Economist Huw Pill said at a conference that recent market turmoil in the UK led to some “de-anchoring” of inflation expectations. “What we’re most concerned about is whether this self-sustaining inflation will persist,” he said.

    He added that officials at BoE have “more to digest” about how the government’s plan will impact the economy. They will look carefully at the budget due November 17.

    Regarding interest rates, “we have done some, and I think there is still more to do,” Pill said. “At some point you have to think what level of rate is appropriate.”

    Eurozone retail sales rose 0.4% mom in Sep, EU up 0.4% mom

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      ActionForex.com
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      Eurozone retail sales rose 0.4% mom in September, better than expectation of 0.0% mom. Volume of retail trade increased by 1.0% for non-food products and by 0.4% for food, drinks and tobacco, while it decreased by -0.6% for automotive fuels.

      EU retail sales rose 0.4% mom. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in Austria (+3.9%), Malta (+1.7%) and Poland (+1.4%). The largest decreases were observed in Slovenia (-3.7%), Ireland and Portugal (both -2.0%) and Slovakia (-1.3%).

      Full release here.

      SNB Jordan: Determined action is necessary

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        ActionForex.com
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        SNB Chairman Thomas Jordan, said in a conference, “In an environment such as the one we face today, mixed signals on the persistence of inflation might tempt policymakers to postpone further reaction to inflationary pressures until uncertainty about future inflation has receded”.

        “Yet uncertainty must not mean indecision. A risk management approach to policy-making sometimes calls for decisive action,” he added

        “When faced with large shocks that increase the risk of persistent movements of inflation away from the range, determined action is necessary, irrespective of whether these movements are below or above the range,” Jordan said.

         

        ECB de Guindos: We will start QT sooner or later, for sure in 2023

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          ActionForex.com
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          ECB Vice President Luis de Guindos said in an interview, “we will continue raising rates to a level that ensures inflation will come back into line with our definition of price stability”. The level will depend on ” data that we receive, the evolution of inflation, economic conditions, demand, and energy prices.”

          He expected inflation to hover around its present level of 10.7% “hover the next few months”. Inflation will then “start to decline in the first half of next year”. Quarterly GDP growth in Q4 will be “negative”, and to continue in Q1. This “technical recession” is not expected to be “very profound”.

          On the topic of quantitative tightening, de Guindos said ECB will start it “sooner or later, for sure in 2023”. It must be implemented with “a lot prudence”. He expects to start with a “passive QT by not fully reinvesting the maturing securities in our portfolio.”. The “characteristics and the timing” of QT will be discussed in December. QT may overlap or not with normalization of interest rates.

          Full interview here.

          BoJ opinions: Undesirable to make premature changes to monetary policy

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            ActionForex.com
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            In the Summary of Opinions at BoJ’s October 27-28 meeting, it’s noted that it’s wages increase in a “sustainable and stable manner” to achieve the inflation target. Inflation could “deviate upward” form the baseline scenario but it’s still “uncertain” whether the rises in prices will be “sustainable”. It is “undesirable” to “make premature changes” to monetary policy for the “risk of disrupting the formation of a virtuous cycle between prices and wages.”

            Nevertheless, on member noted, “it is necessary to examine the impact of high prices on household behavior and wages humbly and without any preconceptions while paying attention to the side effects of monetary easing.

            Another member noted, “it is also important to continue to examine how future exit strategies will affect the market and whether market participants will be well prepared for them.”

            Full Summary of Opinions here.

            RBNZ 2-yr inflation expectations rose to 3.62%

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              ActionForex.com
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              In RBNZ’s Survey of Expectations, businesses expect interest rate to rise 65bps to 4.15% a quarter ahead. In a year’s time, they saw interest rates rose further to 4.67%.

              Mean one-year ahead GDP growth decreased from prior survey’s 1.49% to 1.27%. One year ahead inflation expectations rose from 4.86% in last quarter to 5.08%. Two year ahead inflation expectations rose sharply from 3.07% to 3.62%.

              Full releases here.

              Australia NAB business confidence dropped to 0, conditions dropped to 22

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                ActionForex.com
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                Australia NAB Business Confidence dropped from 5 to 0 in October. Business Conditions dropped slightly from 23 to 22. Trading conditions dropped from 37 to 31. Profitability conditions rose from 21 to 22. Employment conditions dropped from 17 to 14.

                NAB Chief Economist Alan Oster said, “Conditions remained strong in October with demand still very elevated and profitability holding up… Despite the strength in conditions, confidence has been falling for several months as headwinds have weighed on the outlook for the global economy and Australia.”

                Full release here.

                Australia Westpac consumer sentiment dropped to 78, just slightly above pandemic low

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                  ActionForex.com
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                  Australia Westpac Consumer Sentiment dropped -6.9% to 78.0 in November. The reading was below the low point of the Global Financial Crisis in 2008, and was just slightly higher than pandemic low at 75.6.

                  Westpac said that inflation and interest rates are weighing heavily on family finances. Nearly 40% of consumers, a record high, look to cut Christmas spending. Confidence in house prices is heading towards 2018.19 lows.

                  Regarding RBA policy, Westpac expects it to hike by a further 25bps on December 6. Westpac also expects RBA to hike by an additional 0.75% out to May next year.

                  Full release here.

                  Australia AiG services dropped to 47.7, second month of contraction

                    By
                    ActionForex.com
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                    Australia AiG Performance of Services Index dropped slightly from 48.0 to 47.7 in October, staying in contraction for a second month. Looking at some details, sales dropped -0.5 to 41.3. Employment rose 1.3 to 53.9. New orders rose 4.3 to 54.5. Input prices rose 4.2 to 77.6. Selling prices rose 3.9 to 62.2. Average wages dropped -1.1 to 64.8.

                    Innes Willox, Chief Executive of Ai Group, said: “Australia’s service sector faces weakening conditions. Chronic labour shortages have dragged on the supply-side of the sector for most of this year. And now the effects of cumulative interest rate rises are weakening demand conditions as well. Conditions particularly deteriorated for retail & hospitality and business & property, which are most exposed to consumer sentiment.”

                    Full release here.

                    Eurozone Sentix investor confidence rose to -30.9, concerns of catastrophic gas shortage fading

                      By
                      ActionForex.com
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                      Eurozone Sentix Investor Confidence rose from -38.3 to -30.9 in November, above expectation of -35. Current situation index rose from -35.5 to -29.5. Expectations index rose from -41.0 to -32.3, highest since June this year.

                      Sentix said: “At the beginning of November, the sentix economic indices in Euroland surprise on the positive side. The overall index rises by 7.4 points to -30.9, which is still not a trend reversal signal. But the rise in situation and expectation values shows how sensitively investors react in their economic expectations to signals from the energy market.

                      “For this is the cause of the hopeful changes. October showed higher temperatures than usual and this means that gas storage facilities in Germany, for example, are full to the brim, more than expected for November. Spot market gas prices collapsed in response. Concerns about a catastrophic gas shortage are fading.”

                      Full released here.

                      ECB Villeroy: Hiking pace more flexible, possibly slower beyond neutral rate

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                        ActionForex.com
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                        ECB Governing Council member Francois Villeroy de Galhau said in an interview, “as long as underlying inflation has not clearly peaked, we shouldn’t stop on rates,”

                        “It’s too early to tell where the end point in interest rates, or the so-called terminal rate, could be,” Villeroy said. “That said we are not far from the neutral rate, beyond which our hiking pace could be more flexible and possibly slower.” 

                        “We can raise interest rates without provoking significant unemployment,” Villeroy said. “To determine the level of growth next year, energy is more important than monetary policy. Our aim is not to provoke a recession but to tame inflation.”

                        China exports dropped -0.3% yoy in Oct, imports down -0.7% yoy

                          By
                          ActionForex.com
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                          In USD term, China’s exports dropped -0.3% yoy to USD 298.37B in October, well below expectation of 4.3% yoy. That’s the worst performance since May 2020.

                          Imports dropped -0.7% yoy to USD 213.22B, below expectation of 0.1% yoy. That’s the the worst since August 2020.

                          The simultaneous contraction in both exports and imports was the first since May 2020.

                          Trade surplus widened slightly from USD 84.74B to USD 85.15B, short of expectation of USD 95.95.

                          Canada employment grew 108k in Oct, unemployment rate steady at 5.2%

                            By
                            ActionForex.com
                            -

                            Canada employment grew strongly by 108k in October, well above expectation of 11k.

                            Unemployment rate held steady at 5.2%. Labor forecast participation rate rose 0.2% to 64.9%.

                            Year-over-year growth in the average hourly wages of employees remained above 5% for a fifth consecutive month in October, rising 5.6% yoy. Total hours worked increased 0.7% mom.

                            Full release here.

                            US NFP rose 261k in Oct, unemployment rate rose to 3.7%

                              By
                              ActionForex.com
                              -

                              US non-farm payroll employment grew 261k in October, well above expectation of 200k. Prior month’s figure was also revised sharply higher from 263k to 315k. Monthly job growth has averaged 407k thus far in 2022.

                              Unemployment rate rose from 3.5% to 3.7%, above expectation of 3.6%. Number of unemployed persons rose 306k to 6.1m. Labor force participation rate, dropped -0.1% to 62.2%. Average hourly earnings rose 0.4% mom, above expectation of 0.3% mom.

                              Full release here.

                              ECB Lagarde: Withdrawing accommodation may not be enough to bring inflation back to target

                                By
                                ActionForex.com
                                -

                                ECB President Christine Lagarde said in a speech that after increasing interest rates by 200bps, “we expect to raise rates further”. He added that, “withdrawing accommodation may not be enough to bring inflation back to our target”. But how much further to go, and how fast, will be determined by a few factors.

                                The first and most important factor is “inflation outlook”. The second factor is “corresponding policy stance and its transmission lags into demand and inflation”.With the lag in transmission and prevailing uncertainty, “the rate path ahead will look different depending on the contingencies we face.”

                                Full speech here.

                                BoE Pill: Interest rates don’t need to rise as high as markets are pricing

                                  By
                                  ActionForex.com
                                  -

                                  BoE Chief Economist Huw Pill told CNBC, “Our current assessment is that we don’t think interest rates would need to rise as high as markets are pricing precisely because it would produce a slowdown in the economy that is bigger than we need to get these prices under control.”

                                  “That is why the message has been, yes, maybe the market was pricing in too aggressively over this period of turmoil where bank rate is headed. What we are seeking, are always seeking is to find that balance that gets us back to the 2% inflation target without generating unnecessary and costly problems in the real economy,” he said.

                                  He added that the challenge is to “ensure that inflation, particularly this domestically generated inflation, is evolving consistent with our target in a sustainable way”. At the same time, “also to avoid that we overshoot in the opposite direction and generate a slowdown that is not required.”

                                  The question for us is, even as headline inflation begins to fall, have we done enough with monetary policy to contain those underlying or persistent dynamics on inflation to ensure that they end up consistent with our target over time? And I think the answer to that is, we still think there’s more to do to control that domestically driven wage-price cost dynamic.”

                                  Eurozone PPI up 1.6% mom, 41.9% yoy in Sep

                                    By
                                    ActionForex.com
                                    -

                                    Eurozone PPI rose 1.6% mom, 41.9% yoy in September, below expectation of 1.7% mom, 42.0% yoy. For the month, industrial producer prices in Eurozone increased by 3.3% in the energy sector, by 0.9% for non-durable consumer goods, by 0.4% for capital goods and for durable consumer goods and by 0.1% for intermediate goods. Prices in total industry excluding energy increased by 0.4%.

                                    EU PPI rose 1.5% mom, 41.4% yoy. The highest monthly increases in industrial producer prices were recorded in Bulgaria (+9.2%), Slovakia (+8.9%) and Italy (+3.5%), while the largest decreases were observed in Ireland (-18.9%), Estonia (-3.9%) and Greece (-2.4%).

                                    Full release here.

                                    Eurozone PMI Composite finalized at 47.3, headed for a winter recession

                                      By
                                      ActionForex.com
                                      -

                                      Eurozone PMI Services was finalized at 48.5 in October, down from September’s 48.8, a 20-month low. PMI Composite was finalized at 47.3, down from prior month’s 48.1, a 23-month low. Looking at some member states, Germany PMI Composite dropped to 45.1 (29-month low), Italy to 45.8 (22-month low), Spain to 48.0 (9-month low), France to 50.2 (19-month low), and Ireland to 52.1, (2-month low).

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

                                      “After a weak third quarter of PMI and official GDP data, the latest survey results for the start of the fourth quarter suggest the eurozone economy is now headed for a winter recession. High inflation is dampening demand and hurting business confidence. Fears that the energy crisis could intensify over the winter period are also feeding uncertainty and weighing on decision-making.

                                      “Nonetheless, the ECB will want to continue with monetary tightening to contain inflation. October PMI data suggest inflationary pressures remained extremely elevated across the eurozone. We did, however, see some dovish tones in the rhetoric surrounding the ECB’s October policy decision, clearly showing that the Governing Council are concerned by the rapidly deteriorating economic outlook. A substantial worsening of economic conditions in the coming months may give policymakers a difficult decision to make with regards to the path of monetary tightening, for fear of being too aggressive and prolonging the downturn.”

                                      Full release here.

                                      NFP in focus, USD/CAD forming head and shoulder top?

                                        By
                                        ActionForex.com
                                        -

                                        US non-farm payroll employment data is the major focus of the day. Markets are expecting the job market to grow 200k in October. Unemployment rate is expected to tick up from 3.5% to 3.6%.

                                        Looking at related data, ADP report showed solid 239k growth in private employment. ISM manufacturing employment also improved from 48.7 to 50.0. However, ISM services employment dropped notably from 53.0 to contractionary reading of 49.1. Four-week moving average of initial jobless claims rose slightly from 207k to 219k. The set of data overall suggests that job market should remain tight.

                                        As per market reaction, USD/CAD would be an interesting one to watch considering that Canada will also release job data. For now, near term outlook stays bullish for another rise through 1.3976 to resume larger up trend. However, break of 1.3494/3501 support will complete a head and should top pattern (ls: 1.3832; h:1.3976; rs: 1.3807). In the case, deeper correction would likely be seen back to 1.3207 resistance turned support, before USD/CAD find renewed buying.

                                        RBA downgrades 2023, 2024 growth forecast, raised inflation

                                          By
                                          ActionForex.com
                                          -

                                          In the Statement on Monetary Policy, RBA noted that after a sequence of 50bps and 24bps rate hikes, “the Board recognised that interest rates had already been increased significantly in a short period of time”.

                                          “In an uncertain environment, slowing the adjustment of policy allows time to assess the effects of the increases to date and the evolving economic outlook,” it added.

                                          The Board expects that “interest rates will need to increase further”, but “monetary policy is not on a pre-set path”. The size and timing of future interest rate hikes will be determined by incoming data and assessment of the outlook of inflation and labor market.

                                          In the new economic projections, year-average GDP growth forecast for:

                                          • 2022 was left unchanged at 4%.
                                          • 2023 was downgraded from 2.25% to 2.00%.
                                          • 2024 was downgraded from 1.75% to 1.50%.

                                          Year-end forecasts for headline CPI for:

                                          • 2022 was revised up from 7.75% to 8.00%.
                                          • 2023 was revised up from 4.25% to 4.75%.
                                          • 2024 was revised up from 3.00% to 3.25%.

                                          Year-end forecasts for trimmed mean CPI for:

                                          • 2022 was revised up from 6.00% to 6.25%.
                                          • 2023 was left unchanged at 3.75%.
                                          • 2024 was revised up from 3.00% to 3.25%.

                                          Year-end forecasts for unemployment rate for:

                                          • 2022 was revised up from 3.25% to 3.50%.
                                          • 2023 was revised up from 3.50% to 3.75%.
                                          • 2024 was revised up from 4.00% to 4.25%.

                                          Full SoMP here.

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