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Eurozone retail sales dropped -3.0% mom in Dec, EU down -2.8% mom

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    ActionForex.com
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    Eurozone retail sales dropped -3.0% mom in December, much worse than expectation of -0.5%. Retail trade decreased by -5.2% for non-food products and by -0.3% for food, drinks and tobacco, while it increased by 0.1% for automotive fuels.

    EU retail sales dropped -2.8% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in the Netherlands (-9.2%), Spain (-5.7%) and Germany (-5.5%). The highest increases were observed in Latvia (+7.2%), Slovenia (+2.1%), Bulgaria and Hungary (both +1.0%).

    Full release here.

    UK PMI construction rose to 56.3, overall cost inflation eased

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      UK PMI Construction rose from 54.3 to 56.3 in January, above expectation of 54.3. Markit said the sector gained momentum after subdued end to 2021. Commercial activity helped to offset weaker rise in house building. Cost inflation dipped to 10-month low as supply issues eased.

      Tim Moore, Director at IHS Markit said: “UK construction companies started the year on a strong footing as business activity picked up speed and new orders expanded to the greatest extent since last August… Higher energy, transport and raw material bills led to across the board increases in input prices during January, but fewer supply issues helped ease the overall rate of cost inflation to its lowest since March 2021.”

      Full release here.

      Dollar index shaky as NFP might disappoint

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        ActionForex.com
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        US non-farm payroll report is a major focus today. Markets are expecting 150k job growth in January. Unemployment rate is expected to stay unchanged at 3.90%. Average hourly earnings are expected to grow 0.50% mom.

        Looking at related economic data, ADP private job was a big disappointment with -301k losses. ISM manufacturing employment ticked up from 53.9 to 54.5. ISM services employment dropped from 54.9 to 52.3. Four-week moving average of initial jobless claims rose from 205k to 255k. All in all, there are prospects of downside surprise in today’s NFP readings, except wages growth.

        Dollar index had a steep decline this week, thanks to the strong rebound in EUR/USD. The question now is on whether long term fibonacci level of 61.8% retracement of 102.99 to 89.20 at 97.72 is too much for DXY to overcome.

        Sustained break of trend line support at around 95.00 will argue that a medium term top was formed at 97.44, on bearish divergence condition in daily MACD. In this case, DXY would likely drop through 94.62 towards 93.43 resistance turned support before finding a bottom. Reactions to today’s NFP could guidance the direction for the rest of the quarter.

        BoJ Kuroda: Hard to see inflation sustainably reach target without wages rise

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          ActionForex.com
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          BoJ Governor Haruhiko Kuroda told the parliament today that inflation remains subdued in Japan because of the delay in recovery from pandemic, the public’s deflationary mindset and firms’ assumption that prices won’t rice much.

          “In Japan, nominal wages haven’t risen much. It’s hard to see inflation sustainably reach our 2 per cent target unless wages rise in tandem with prices,” he said.

          “It’s important to maintain powerful monetary easing to support the economy, and help generate steady wage and price growth.”

          Fed Barkin: Interest rates at pre-pandemic levels are place to reassess

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            ActionForex.com
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            Richmond Fed President Thomas Barkin in a Reuters interview, “it is a straightforward call to say we ought to get rates back into better position. It does not feel to me like there is enough information to say holy cow we have to restrain the economy right now.”

            Barkin added that the federal funds rate should be raised back to where it was just before the pandemic, that is, a range of 1.50-1.75%. “Pre-pandemic levels are the place to reassess. Where we were pre-pandemic was under every member of the (Federal Open Market Committee’s) assessment of where neutral was,” he said.

            “Then we can look around and say do you want to then start to move into the range … where we are starting to restrain?”

            US ISM services dropped to 59.9 in Jan, corresponds to 3.5% annualized GDP growth

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              ActionForex.com
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              US ISM Services dropped -2.4 pts to 59.9 in January, above expectation of 58.7. Looking at some details, business activity/production dropped -8.4 to 59.9. New orders dropped -0.4 to 61.7. Employment dropped -2.4 to 52.3. Supplier deliveries rose 1.8 to 65.7. Prices dropped -1.6 to 82.3.

              ISM said: “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for January (59.9 percent) corresponds to a 3.5-percent increase in real gross domestic product (GDP) on an annualized basis.”

              Full release here.

              EUR/GBP u-turns on hawkish ECB lagarde

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                ActionForex.com
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                Euro jumps broadly after ECB President Christine Lagarde turns a bit more hawkish in the post meeting press conference. She said that inflation is likely to remain elevated for longer than previously expected. The governing council will remain attentive to the incoming data and carefully assess the implications for the medium-term inflation outlook.

                Lagarde also indicated that inflation surprises caused unanimous concerns on not to rush into decisions. When pressed on the question of whether a rate hike remain highly unlikely in 2022, she refused to echo what she said before. But she just said she never make pledges without conditionalities. This is an indication that Lagarde is leaving the door open to a change in forward guidance in March to reflect the chance of a rate hike within this year.

                EUR/GBP is staging a u-turn after hitting 0.8282, just ahead of key long term support at 0.8276. The question is whether the rebound is strong enough to push EUR/GBP through 0.8421 resistance to confirm near term bullish reversal.

                US initial jobless claims dropped back to 238k

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                  ActionForex.com
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                  US initial jobless claims dropped -23k to 238k in the week ending January 29, much better than expectation of 264k. Four-week moving average of initial claims rose 8k to 255k.

                  Continuing claims dropped -44k to 1628k in the week ending January 22. Four-week moving average of continuing claims dropped -31k to 1620k, lowest since August 4, 1973.

                  Full release here.

                  ECB Lagarde press conference live stream

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                    ActionForex.com
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                    ECB stands pat, maintains forward guidance

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                      ECB keeps interest rates unchanged today. The main refinancing rate, marginal lending facility rate and deposit facility rate are held at 0.00%, 0.25%, and -0.50% respectively.

                      It maintains the forward guidance that interest rates will “remain at their present or lower levels” until ECB sees inflation “reaching 2% well ahead of the end of tis projection horizon and durably for the rest of the projection horizon”. Also, ECB will need to judges that realized progress in underlying inflation is “sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term.”.

                      ECB also reiterated that it will discontinue net PEPP purchases at the end of march 2022, and reinvests until at least the end of 2024. APP net monthly purchases will amount to EUR 40B in Q2, then EUR 30B in Q3, and back to monthly pace of EUR 20B from October onwards, (for as long as necessary”.

                      Full statement here.

                      BoE Bailey press conference live stream

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                        BoE hikes 25bps to 0.50%, but four members want 50bps

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                          BoE raises Bank Rate by 0.25% to 0.50% today, by a slight majority of 5-4 vote. Four hawks (Jonathan Haskel, Catherine L Mann, Dave Ramsden, Michael Saunders) voted for a more aggressive 50bps hike to 0.75%. The other five (Andrew Bailey, Ben Broadbent, Jon Cunliffe, Huw Pill, Silvana Tenreyro) won the vote.

                          Meanwhile, the MPC voted unanimously to begin to reduce stock of government bonds by ceasing to reinvest maturing assets. It also decided to start reducing stock of corporate bonds by ceasing to reinvest maturing assets and complete a bond sales program no earlier than towards the end of 2023.

                          Going forward, the extent of any further tightening in monetary policy will “depend on the medium-term prospects for inflation”. If the economy develops broadly in line with the February Report central projections, “some further modest tightening in monetary policy is likely to be appropriate in the coming months.”

                          Sterling surges sharply after the release.

                          Full statement here.

                          In the new four-quarter GDP projections:

                          • 2022 Q1 was revised down from 9.5% to 7.8%.
                          • 2023 Q1 was revised down from 2.1% to 1.8%.
                          • 2024 Q1 was revised up from 1.0% to 1.1%.
                          • 2025 Q1 was at 0.9% (new).

                          CPI inflation projections:

                          • 2022 Q1 raised from 4.6% to 5.7%.
                          • 2023 Q1 raised from 3.3% to 5.2%.
                          • 2024 Q1 unchanged at 2.1%.
                          • 2025 Q1 to slow to 1.6%.

                          Unemployment rate projections:

                          • 2022 Q1 lowered from 4.2% to 3.8%.
                          • 2023Q1 raised from 4.0% to 4.2%.
                          • 2024 Q1 raised from 4.2% to 4.6%.
                          • 2025 Q1 to rise to 5.0%.

                          Implied path for Bank Rate:

                          • 2022 Q1 lowered from 0.5% to 0.4%.
                          • 2023 Q1 raised from 1.0% to 1.3%.
                          • 2024 Q1 raised from 1.0% to 1.4%.
                          • 2025 Q1 at 1.3%.

                          Full Monetary Policy Report here.

                          Eurozone PPI rose 2.9% mom, 26.2% yoy in Dec

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                            ActionForex.com
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                            Eurozone PPI rose 2.9% mom, 26.2% yoy in December, slightly below expectation of 3.0% mom, 26.6% yoy. For the month, industrial producer prices increased by 7.0% mom in the energy sector, by 0.7% mom for intermediate goods, by 0.6% mom for non-durable consumer goods, by 0.3% mom for capital goods and by 0.2% mom for durable consumer goods. Prices in total industry excluding energy increased by 0.5% mom.

                            EU PPI rose 2.9% mom, 26.2% yoy. The highest monthly increases in industrial producer prices were recorded in Ireland (+13.3%), Estonia (+12.7%) and Greece (+8.0%), while the only decrease was observed in Czechia (-0.1%).

                            Full release here.

                            UK PMI services finalized at 54.1, goods news about 2022 prospect

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                              ActionForex.com
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                              UK PMI Services was finalized at 54.1 in January, up from December’s 10-month low of 53.6. PMI Composite was finalized at 54.2, up from prior month’s 53.6. Markit said charges had fastest rise on record in more than 25 years. Output and new business picked up at the start of 2022. Growth projections were strongest since May 2021.

                              Tim Moore, Economics Director at IHS Markit: “The latest PMI data provide good news about prospects for the UK economy in 2022 as demand has started to recover from the impact of Omicron restrictions and most businesses expect only a temporary slowdown from cancelled bookings and staff absences at the turn of the year. Growth expectations for the next 12 months picked up in January and are now the highest since last spring, with staff recruitment difficulties often the only major source of anxiety.

                              “However, record price increases in the service economy are set to add to the cost of living crisis for UK households. Input cost inflation accelerated again in January and service providers responded by increasing their prices charged at the fastest rate since the index began in July 1996. Nearly one-in-three survey respondents reported higher average prices charged than in December, with rising salary payments, energy bills and logistics costs the most commonly cited reasons.”

                              Full release here.

                              Eurozone PMI composite finalized at 52.3, economy slowed further

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                                ActionForex.com
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                                Eurozone PMI Services was finalized at 51.1 in January, down from December’s 53.1. PMI Composite was finalized at 52.3, down from prior month’s 53.3. Looking at some member states, Ireland PMI Composite was unchanged at 56.5, Germany dropped to 4-month low at 53.8, France dropped to 9-month low at 52.7, Italy dropped to 12-month low at 50.1, and Spain dropped to 11-month low at 47.9.

                                Chris Williamson, Chief Business Economist at IHS Markit said:

                                “The eurozone economy has slowed further in January after seeing growth weaken in the final quarter of 2021…. Spain has been the hardest hit, falling back into contraction, while Italy has seen business activity stall, in both cases linked to declining service sector output. France is meanwhile recording the weakest expansion since last April. Germany is bucking the slowdown trend, however, providing a welcome ray of light to suggest that the impact of Omicron will be both shorter and less severe than prior virus waves….

                                “A key concern is that inflationary pressures continue to build, with soaring energy prices likely to add further to upward price pressures in coming months. Households are already being squeezed and firms face further cost rises. Tensions in Ukraine also pose a further downside risk to the outlook, with any escalation of the situation likely to further dampen business confidence.”

                                Full release here.

                                BoE and ECB previews, a look at EUR/GBP

                                  By
                                  ActionForex.com
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                                  Two central banks will announce monetary policy decisions today. BoE is generally expected to deliver a back-to-back rate hike and raise Bank Rate by 25bps to 0.50%. The central bank would also reveal the approach to wind down the GBP 895B asset purchases. Looking ahead, more tightening is expected ahead to bring the Bank Rate to 1.00% level by the end of the year. That should be reflected in the new economic projections in the Monetary Policy Summary.

                                  On the other hand, ECB is expected to stand pat and maintain a cautious tone even though inflation surged to another record in January. Markets are seeing the first rate hike, at 10bps, by July. But President Christine Lagarde would likely talk down such expectations.

                                  Here are some previews on ECB and BoE:

                                  EUR/GBP is a pair to watch today. It should be noted that it’s now very close to a key long term support level at 0.8276, with bullish convergence condition in daily MACD. The conditions are there for a trend reversal. Break of 0.8421 resistance will complete a small double bottom pattern (0.8304, 0.8304), and bring stronger rebound. Further break of 0.8598 resistance should confirm medium term bottoming and turn outlook bullish.

                                  However, sustained break of 0.8276 would argue that fall from 0.9499 is developing into a long term down trend rather than a correction. Deeper decline would then be seen for the rest of the year towards 61.8% retracement of 0.6935 to 0.9499 at 0.7917, and possibly below.

                                  EUR/GBP is now at a juncture.

                                  Australia NAB business confidence rose to 18 in Q4

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                                    ActionForex.com
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                                    Australia NAB business confidence jumped from -2 to 18 in Q4. Current business conditions was unchanged at 12. Conditions for the next 3 months rose from 8 to 30. Conditions for the next 12 months also rose from 26 to 34. Capex plans rose from 26 to 34.

                                    “The economy was showing considerable strength prior to the spread of the Omicron variant, and that translated into a positive outlook for the coming months,”Alan Oster, NAB Group Chief Economist. “We now know that Omicron has dampened that recovery somewhat but, fundamentally, we expect that positive trajectory to continue when the current virus outbreak recedes.”

                                    Full release here.

                                    BoJ Wakatabe: Definitely too early to start tightening

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                                      ActionForex.com
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                                      BoJ Deputy Governor Masazumi Wakatabe said in a speech, “given the current situation where Japan’s economy has finally started to pick up from the pandemic, it is definitely too early for the Bank to start tightening monetary policy when the target has not yet been achieved as this could hinder the economic recovery.”

                                      He reiterated the current policy as to continue with QQE with yield curve control, “as long as it is necessary” to maintain 2% inflation target in a “stable manner”. That is, CPI should remain at 2% while medium- to long-term inflation expectations are “anchored”.

                                      Full speech here.

                                      BoC Macklem: It will be a series of increases, not a single increase

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                                        ActionForex.com
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                                        BoC Governor Tiff Macklem told the Senate banking committee yesterday that inflation could stay “uncomfortably high” around 5% over the first half of 2022, and then “coming down fairly quickly in the second half.”

                                        However, “there is some uncertainty about how quickly inflation will come down because we’ve never experienced a pandemic like this before.”

                                        “It’s clear that interest rates need to be on a rising path,” Macklem said. “The slope of that path is going to depend on economic developments, and if consumers spend more, the slope of that path, likely, has to be steeper.”

                                        “It will be a series of increases, not a single increase,” he said.

                                        US oil inventories dropped -1.0m barrels, WTI rejected by 90

                                          By
                                          ActionForex.com
                                          -

                                          US commercial crude oil inventories dropped -1.0m barrels in the week ending January 28, versus expectation of 1.8m rise. At 415.1m barrels, oil inventories are about -9% below the five year average for this time of year.

                                          Gasoline inventories rose 2.1m barrels. Distillate dropped -2.4m barrels. Propane/propylene dropped -4.3m barrels. Total commercial petroleum inventories dropped -5.8m barrels.

                                          Earlier today, OPEC+ decided to raise production by another 400k barrels a day in March, continuing with the monthly plan agreed back in last July.

                                          WTI crude oil hit 90.10 earlier today but failed to sustain above 90 handle and retreated. For now, further rise will remain in favor as long as 86.75 support holds, which is close to 4 hour 55 EMA. Current rally could still target 61.8% projection of 66.46 to 87.70 from 62.42 at 95.54 before topping.

                                          However, considering bearish divergence condition in 4 hour MACD, break of 86.75 support will confirm short term topping and bring deeper pull back to 82.42 support, and possibly below.

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