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Eurozone exports rose 14.0% yoy in Mar, imports rose 35.4% yoy

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    Eurozone exports of goods rose 14.0% yoy to EUR 250.1B in March. Imports rose 35.4% yoy to EUR 266.5B. Trade deficit came in at EUR 16.4B. Intra-Eurozone trade rose 21.2% yoy to EUR 236.8B.

    In seasonally adjusted terms, Eurozone exports rose 0.9% mom to EUR 225.3B. Imports rose 3.5% mom to EUR 242.8B. Trade deficit widened from EUR -11.3B to EUR -17.6B, versus expectation of EUR 2.3B surplus. Intra-Eurozone trade rose from February’s EUR 207.2B to EUR 210.3B.

    Full release here.

    ECB Villeroy: A too weak Euro goes against price stability objective

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      ECB Governing Council member Francois Villeroy de Galhau said in a Bank of France conference, “let me stress this: we will carefully monitor developments in the effective exchange rate, as a significant driver of imported inflation”. He added, “a euro that is too weak would go against our price stability objective.”

      Villeroy said a “decisive” governing council meeting would be expected in June, followed by an “active summer” on policy. “The pace of the further steps will take into account actual activity and inflation data with some optionality and gradualism,” he said. Policymakers should “at least move towards the neutral rate”, he added.

      BoJ Kuroda: Excess exchange rate volatility recently is undesirable

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        BoJ Governor Haruhiko Kuroda told the parliament today that “excess (exchange rate) volatility in a short term as seen recently is undesirable.” He pledged to keep a close watch of the impact of the currency moves on the economy and prices. He also added that exchange rate moves should be stable and reflecting economic fundamentals.

        On monetary policy, “it’s important to back the economic activity with powerful monetary easing,” Kuroda reiterated. “It will take time for sustainable, stable inflation to take hold in Japan.”

        China retail sales down -11.1% yoy in Apr, industrial production down -2.9% yoy

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          China retail sales dropped -11.1% yoy in April, worse than expectation of -6.0% yoy. Industrial production dropped -2.9% yoy, versus expectation of 0.7% yoy. Fixed asset investment rose 6.8% ytd yoy, also below expectation of 7.0%.

          The “increasingly grim and complex international environment and greater shock of [the] Covid-19 pandemic at home obviously exceeded expectation, new downward pressure on the economy continued to grow.” The NBS said in a statement. But it added, “with progress in Covid controls and policies to stabilize the economy taking effect, the economy is likely to recover gradually.”

          Yuan’s decline has somewhat slowed a little last week. USD/CNH is now close to 61.8% retracement of 7.1961 to 6.3057 at 6.8560. Considering bearish divergence condition in 4 hour MACD, USD/CNH could be about to top for the near term. Break of 6.730 support will confirm the turn into a corrective phase in the uptrend.

          New Zealand BNZ services dropped to 51.4, disappointing in context of easing restrictions

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            New Zealand BNZ Performance of Services Index ticked down from 51.5 to 51.4 in April. Looking at some details, activity/sales dropped from 53.5 to 52.7. Employment rose from 49.2 to 51.2. New orders/business dropped from 59.0 to 53.6. Stocks/inventories rose from 52.8 to 54.8. Supplier deliveries dropped from 40.5 to 40.1.

            BNZ Senior Economist Doug Steel said that “for large parts of the service sector that have been through the ringer over recent times, we suspect any result above breakeven would be welcomed. But, on the other hand, April’s result also looks somewhat disappointing in the context of easing COVID restrictions (from Red to Orange) halfway through the month.”

            Full release here.

            Gold pressing 1800 as decline continues

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              Gold’s decline resumes after brief support from 100% projection of 2070.06 to 1889.79 from 1998.23 at 1817.86. It’s now taking on 1800 handle and there is no clear sign of bottoming yet. Further fall is expected as long as 1858.57 resistance holds. Next target is 161.8% projection at 1706.55.

              Also, the whole fall from 2070.06 is seen as the third leg of the consolidation pattern from 2074.84 (2020 high). It would eventually target 1682.60 support to complete the pattern.

              ECB Centeno: Necessary and desirable to normalize monetary policy

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                ECB Governing Council member Mario Centeno said normalization of monetary policy was “necessary and desirable”. But such normalization must be done gradually. He urged not to “over-react” to inflation rising across Europe or risk penalizing economic growth.

                “Although inflation remains high in 2022, there are no structural reasons why it should not converge towards the medium-term objective as imbalances are gradually resolved and uncertainty dissipated,” Centeno said. “There are currently no structuring signs of de-anchoring inflation,” even though the balance of risks around inflation is skewed upward” after Russia’s invasion of Ukraine.

                Second-order effects of wage pressures was “an additional risk which needs close and continued monitoring”, he added.

                BoJ Kuroda: Important to underpin economic activity with powerful monetary easing

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                  BoJ Governor Haruhiko Kuroda told the parliament, “it’s important for currency rates to move stably reflecting economic and financial fundamentals… The recent sharp, short-term fluctuations in the yen are undesirable, as it heightens uncertainty and makes it harder for companies to set business plans.”

                  “The economy is in the midst of a recovery and now faces headwinds from rising commodity prices,” Kuroda said. “It’s therefore important to underpin economic activity with powerful monetary easing.”

                  Separately, Kuroda also said in a speech, “the coronavirus pandemic is a major risk that could further hurt Japan’s economy.” As such, “it’s appropriate to maintain … the dovish bias of our guidance for the time being.”

                  “For inflation to heighten as a trend, Japan must see a shift from inflation caused by energy prices, to one that is driven by increasing corporate profits and wage growth,” he said.

                  Eurozone industrial production dropped -1.8% mom in Mar, EU down -1.2% mom

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                    Eurozone industrial production dropped -1.8% mom in March, slightly worse than expectation of -1.7% mom. Production of capital goods fell by -2.7%, non-durable consumer goods by -2.3%, intermediate goods by -2.0% and energy by -1.7%, while production of durable consumer goods rose by 0.8%.

                    EU industrial production dropped -1.2% mom. Among Member States for which data are available, the largest monthly decreases were registered in Slovakia (-5.3%), Germany (-5.0%) and Luxembourg (-3.9%). The highest increases were observed in Lithuania (+11.3%), Estonia (+5.1%), Bulgaria and Greece (both +5.0%).

                    Full release here.

                    Fed Powell: Appropriate for 50bps increases at the next two meetings

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                      Fed Chair Jerome Powell said in an interview that “what we were actively considering, and this is just a factual recitation of what happened at the meeting, was a 50-basis point increase… if the economy performs about as expected, that it would be appropriate for there to be additional 50-basis point increases at the next two meetings”.

                      Powell also said that a “soft landing”, getting back to 2% inflation while keeping the labor market strong, is “quite challenging to accomplish that right now”. Unemployment is “very, very low”, the labor market’s “extremely tight”, and inflation is “very high”.

                      “What we can control is demand, we can’t really affect supply with our policies. And supply is a big part of the story, here. But more than that, there are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so. So the question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control,” he explained.

                      Full interview here.

                      Fed Daly: Going up in 50bps increments makes quite a bit of sense

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                        San Francisco Federal Reserve President Mary Daly said yesterday she’d like to Would like to see continued tightening of financial conditions to help bring down inflation. Yet, 75bps rate hike is “not a primary consideration”.

                        “Going up in 50-basis-point increments to me makes quite a bit of sense and there’s no reason right now that I see in the economy to pause on doing that in the next couple of meetings,” she added.

                        BoC Gravelle: We need higher interest rates, the economy can handle it

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                          BoC Deputy Governor Toni Gravelle said yesterday, “our policy rate, at 1%, is too stimulative, especially when inflation is running significantly above the top of our control range. We need our policy rate to be at more neutral levels.”

                          “Simply put, with demand running ahead of the economy’s capacity, we need higher interest rates to cool domestic inflation. And as we’ve said before, the economy can handle it,” he said.

                          Still he noted that outlook remained unusually uncertain and therefore it’s not easy to hike by 75bps in one go.

                          NIESR: UK growth to be largely flat in Apr, close to flatlining in Q2

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                            NIESR expects UK economic growth to be “largely flat” in April, and “close to flatlining” in Q2 overall. it

                            Rory Macqueen Principal Economist, NIESR, said:

                            “March’s deterioration in consumer confidence translated into a sharp fall in retail and wholesale, which was exacerbated by continuing supply-chain problems in the motor industry. Offsetting this, the continuing normalisation of GP and hospital activities cancelled out falling Covid-related activity to mean that the health sector returned to month-on-month growth. Falling business investment in the first estimate for the first quarter is a concern: with the government’s tax ‘super-deduction’ expiring in under a year we still see little sign of a recovery from the Covid shock.”

                            Full release here.

                            US PPI up 0.5% mom, 11.0% yoy in Apr, above expectations

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                              US PPI for final demand rose 0.5% mom in April, matched expectations. PPI final demand for goods rose 1.3% mom, for construction dropped -4.0%, while for services was unchanged. For the 12-month period, PPI rose 11.0% yoy, down from 11.2% yoy, above expectation of 10.7% yoy.

                              PPI less foods, energy, and trade services rose 0.6% mom. For the 12-month period, PPI for less foods, energy, and trade services rose 6.9% yoy.

                              Full release here.

                              US initial jobless claims rose to 203k, continuing claims dropped to 1.343m

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                                ActionForex.com
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                                US initial jobless claims rose 1k to 203k in the week ending May 7, above expectation of 190k. Four-week moving average of initial claims rose 4k to 193k.

                                Continuing claims dropped -44k to 1343k in the week ending April 30, lowest since January 3, 1970 when it was 1332k. Four-week moving average of initial claims dropped -33k to 1385k, lowest since January 31, 1970 when it was 1374k.

                                Full release here.

                                ECB Makhlouf: The era of negative rates is reaching its conclusion

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                                  ActionForex.com
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                                  ECB Governing Council member Gabriel Makhlouf said today, ECB has reached the point “act”. And, “the balance of advantage has tilted decisively towards the need for further action, albeit not necessarily at a similar pace to that of other central banks”.

                                  “Our objective is for inflation to be at 2% over the medium term – levels are significantly above that now, and it is time for the Council to move to end net asset purchases under the asset purchase programme next month or in July,” he said.

                                  Makhlouf added, it’s “realistic to expect that the first move in the ECB’s interest rates will happen soon after net asset purchases end and that rates are likely to be in positive territory by early next year.” But he didn’t specify when the rate hike would occurs.

                                  “The era of negative rates is reaching its conclusion,” he said.

                                  BoE Ramsden: I don’t think we’ve gone far enough yet on bank rate

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                                    ActionForex.com
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                                    BoE Deputy Governor Governor Dave Ramsden told Bloomberg that stronger than expected job market could push inflation further higher from current 7% to 10% before year end. “Given what we know about the UK labor market, I wouldn’t be surprised if it turned out to be a bit tighter,” he said. “I think there are upside risks on inflation the medium term.”

                                    “Certainly on the basis of my current assessment of prospects, we’re not there yet in terms of how far monetary policy has to tighten,” he said. “I’m still very, very supportive of the forward guidance that there may well need to be further tightening in the coming months.”

                                    June “will be a chance to take stock — in this extraordinary period we really are learning things everyday,” he said. “I don’t think we’ve gone far enough yet on bank rate, but I do think that what we’ve already done is having an impact.”

                                    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.

                                      BoJ: Necessary to continue with current powerful monetary easing

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                                        ActionForex.com
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                                        In the Summary of Opinions of the April 27-28 meeting, BoJ noted that “as Japan is a commodity importer, the rise in commodity prices leads to an outflow of income from Japan and thus exerts downward pressure on the economy.” And, “it is necessary for the Bank to continue with the current powerful monetary easing and thereby firmly support the economy”

                                        One opinion noted that “one reason for the yen’s recent depreciation is that economic conditions in Japan have been different from those in the United States and Europe, and it is not appropriate that the Bank change its policy with the aim of controlling foreign exchange rates.”

                                        “With a view to clarifying the Bank’s stance to date of not accepting the long-term interest rate exceeding 0.25 percent and to avoiding a situation where daily operations are unnecessarily factored in by the market, it is appropriate for the Bank to announce in advance that it will conduct fixed-rate purchase operations at 0.25 percent every business day, unless it is highly likely that no bids will be submitted. ”

                                        Full Summary of Opinions here.

                                        Fed Bullard: We can proceed on a plan of 50bps per meeting

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                                          ActionForex.com
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                                          In a Yahoo Finance interview, St. Louis Fed President James Bullard said that a 75bps rate hike is “not my base case”, and he gave a nod to the 50bps per meeting plan.

                                          “We’ve got a good plan in place and the committee is, based on public comments anyway from my colleagues, has coalesced around a plan of 50 basis points per meeting. So I think we can proceed on that,” he said.

                                          Bullard added that whether there would be 50bps hike at each of the upcoming meeting, to bring interest rate to 3.5% by year end, would be data-dependent. “It’s possible inflation could moderate a lot. It’s possible the real economy could take twists and turns. And so I don’t think we want to be promising today what we’re going to do in December,” he said.

                                          Full interview here.

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