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ECB Lagarde: No evidence of significant second-round effects of inflation

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    ActionForex.com
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    ECB President Christine Lagarde repeated today, “we continue to view this upswing as being largely driven by temporary factors. The impact of these factors should fade out of annual rates of price changes in the course of next year, dampening annual inflation.”

    “So far, there is no evidence of significant second-round effects through wages and inflation expectations in the euro area remain anchored, but we continue to monitor risks to the inflation outlook carefully,” she added.

    On the other hand, Governing Council Member Olli Rehn said, “due to persistent production bottlenecks, it is possible that an increase in energy prices has a longer-lasting impact on consumer price. We analyze this development carefully at the Governing Council and at the Bank of Finland.” He noted that medium-term inflation expectations have increased to around 1.9%, which is in line with the European Central Bank’s strategy.

    BoE Tenreyro: Self-defeating to try to respond to short-lived effects on inflation

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      ActionForex.com
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      BoE MPC member Silvana Tenreyro said, “part of increasing inflation we have seen so far is arithmetic base effects compared to a low level of prices last year.” And that in part has seen “driven by global prices in energy and other commodities which push up on inflation”. And, “these effects in general tend to be short-lived.

      Additionally, there were “temporary supply disruptions caused by the various imbalances in the global economy as it recovers from Covid”, with some countries still in lockdown. Demand was also boosted “far more by fiscal stimulus in some countries than others”, like the US.

      “So typically, for short-lived effects on inflation, such as the big rises in the prices of semiconductors or energy prices, it would be self-defeating to try to respond to their direct effects,” she said. “By the time interest rates were having a major effect on inflation the effects of energy prices would already be dropping out of the inflation calculation. If some effects were to prove more persistent it would be important to balance the risks from a period of above target inflation with the cost of weaker demand.”

      CAD/JPY upside breakout, pressing 91.62 long term resistance

        By
        ActionForex.com
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        CAD/JPY’s rally continues this week and the break of 91.16 resistance should confirm resumption of medium term up trend from 73.80 (2020 low). Current development argues that whole down trend from 106.48 (2014 high) has completed with three waves down to 73.80. That is, rise from 73.80 is developing into the third wave of the pattern from 68.38 (2009). It’s itself a medium to long term up trend that has the prospect of surpassing 106.48 eventually.

        Of course, CAD/JPY will have to sustain above 91.62 resistance first, and then accelerate further up through 61.8% projection of 73.80 to 91.16 from 84.65 at 95.37, to give us more confidence on this long term bullish case. By anyway, for now, further rise is expected as long as 88.99 support holds, in case of retreat.

        Australia employment dropped -138k in Sep, back below pre-pandemic levels

          By
          ActionForex.com
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          Australia employment dropped -138k in September, worse than expectation of -120k. Full-time jobs grew 26.7k while part-time jobs lost -164.7. Unemployment rate rose 0.1% to 4.6%, better than expectation of 4.8%. Participation rate dropped sharply by -0.7% to 64.5%.

          Bjorn Jarvis, head of labour statistics at the ABS, said: “Extended lockdowns in New South Wales, Victoria and the Australian Capital Territory have seen employment and hours worked both drop back below their pre-pandemic levels.

          “There were large falls in employment in Victoria (123,000 people) and New South Wales (25,000 people, following the 173,000 decline in August). This was partly offset by a 31,000 increase in Queensland, as conditions there recovered from the lockdown in early August.”

          “The low national unemployment rate continues to reflect reduced participation during the recent lockdowns, rather than strong labour market conditions.”

          Full release here.

          BoJ Noguchi: Economic recovery will become clearer at the end of year

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            ActionForex.com
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            BoJ board member Asahi Noguchi said the central bank should continue with the currency easing “patiently” because it takes a long time to achieve the 2% inflation target. But he’s optimistic that economic recovery will become clearer at the end of the year and onwards, as vaccinations help to ease the pandemic impacts.

            Separately, Governor Haruhiko Kuroda said in a G20 finance meeting that some emerging economies are still facing downward pressure form the pandemic. But the overall impact on the global economy will “gradually subside”.

            Fed Bowman: Asset purchases have essentially served their purpose

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              ActionForex.com
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              Fed Governor Michelle Bowman said in a speech yesterday that she’s “mindful that the remaining benefits to the economy from our asset purchases are now likely outweighed by the potential costs.”

              “Provided the economy continues to improve as I expect, I am very comfortable at this point with a decision to start to taper our asset purchases before the end of the year and, preferably, as early as at our next meeting in November,” she added.

              Bowman also noted that the asset purchases have “essentially served their purpose.” She’s particularly concerned that “asset purchases could now be contributing to valuation pressures, especially in housing and equity markets.” The loose monetary policy could now “pose risks to the stability of longer-term inflation expectations.”

              Full speech here.

              Gold extends rebound, heading back to 1833 resistance

                By
                ActionForex.com
                -

                Gold rises strongly today after Dollar failed to ride on strong consumer inflation data to rally. The break of 1787.02 resistance now argues that pull back from 1833.79 has completed at 1721.46 already. The break above 55 day EMA is also a near term bullish signal.

                Further rise is now in favor back to 1833.79 resistance. That’s a key near term level to overcome and firm break there would resume the rise from 1682.60 to 1916.30 resistance. That, if happens, could be a signal of deeper pull back in Dollar. We’ll pay very close attention to the reaction from 1833.79.

                NIESR expects UK GDP to grow 1.5% in Q3, 0.8% in Q4

                  By
                  ActionForex.com
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                  NIESR said supply constraints are growing and likely to persist through in Autumn. It forecasts UK GDP to grow 1.5% in Q3, followed by 0.8% in Q4. That included an estimated 0.4% mom growth in GDP in September.

                  Rory Macqueen Principal Economist, NIESR: “The reopening of the economy continued to support growth in August, with the popularity of domestic holidays contributing to 23 per cent month-on-month growth for hotels and campsites in particular. The fact that consumer-facing services remain 5 per cent below their peak suggests ample room for future catch-up in future too. Elsewhere a further fall in construction output may have been down in part to a reported increase in input costs: something likely to affect the economy more broadly if shortages lead to more generalised price rises over the autumn. The coming months could see something of a two-speed recovery, with sectors most affected by shortages in decline while others continue to recover.”

                  Full release here.

                   

                  US CPI ticked up to 5.4% yoy in Sep, CPI core unchanged at 4.0% yoy

                    By
                    ActionForex.com
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                    US CPI rose 0.4% mom in September, above expectation of 0.3% mom. CPI core rose 0.2% mom, matched expectations. For the 12-month period, CPI ticked up to 5.4% yoy, above expectation of 5.3% yoy. It’s back at the highest level since January 1991. CPI core was unchanged at 4.0% yoy, matched expectations.

                    Full release here.

                    Eurozone industrial production dropped -1.6% mom in Aug, EU down -1.5% mom

                      By
                      ActionForex.com
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                      Eurozone industrial production dropped -1.6% mom in August, matched expectations. Production of capital goods fell by -3.9%, durable consumer goods by -3.4%, intermediate goods by -1.5% and non-durable consumer goods by -0.8%, while production of energy rose by 0.5%.

                      EU industrial production dropped -1.5% mom. Among Member States for which data are available, the largest monthly decreases were registered in Malta (-6.3%), Germany and Estonia (both -4.1%) and Slovakia (-3.8%). The highest increases were observed in Denmark (+3.5%), Lithuania (+2.9%) and Luxembourg (+2.1%).

                      Full release here.

                      UK GDP grew 0.4% mom in Aug, still -0.8% below pre-pandemic level

                        By
                        ActionForex.com
                        -

                        UK GDP grew 0.4% mom in August, slightly below expectation of 0.5% mom. Services grew 0.3%. Production rose 0.8% mom. Construction contracted by -0.2% mom. In the three months to August, GDP grew 2.9% 3mo3m, mainly due to the performance of services, largely reflects gradual reopening.

                        Comparing to pre-pandemic levels in February 2020, overall GDP was still down -0.8%. Services was down -0.6%. Production was down -1.3%. Manufacturing was down -2.4%. Construction was down -1.5%.

                        Full GDP release here.

                        Also from the UK, goods trade deficit widened to GDP -14.9B in August, versus expectation of GBP -11.9B.

                        New Zealand ANZ business confidence dropped slightly to -8.6 in Oct

                          By
                          ActionForex.com
                          -

                          New Zealand ANZ business confidence dropped slightly to -8.6 in October’s preliminary reading, down from September’s -7.2. Own activity outlook rose strongly from 18.2 to 26.2. Export intentions rose from 7.4 to 9.2. Investment intentions rose from 9.2 to 14.3. Employment intentions dropped from 14.1 to 12.1. Cost expectations rose form 84.2 to 84.9. Inflation expectations also ticked up from 3.02% to 3.04%.

                          ANZ said the survey is telling a story of “remarkable resilience”, with most forward-looking activity indicators holding up or improving. Inflation pressures remain “intense” and cost pressures are “extreme”.

                          Full release here.

                          Australia Westpac consumer sentiment dropped to 104.6, still more optimists

                            By
                            ActionForex.com
                            -

                            Australia Westpac-Melbourne Institute consumer sentiment dropped -1.5% to 104.6 in October, down from September’s 106.2. There continued to be a clear majority of optimists nationally, even at state level – NSW (103.4); Victoria (105.4); Queensland (105.3) and Western Australia (105.4).

                            Westpac expects RBA to “almost certainly maintain its policy settings” at November 2 meeting. Instead, the next change is likely to be another round of tapering in February. Looking forward, Westpac expects a rate hike in Q2 of 2023, while RBA has repeated said the conditions of hike won’t be met until 2024.

                            Full release here.

                            Fed Bullard advocates starting tapering in Nov, finishing it in Q1

                              By
                              ActionForex.com
                              -

                              St. Louis Federal Reserve President James Bullard told CNBC, “I’d support starting the taper in November.” He added, “I’ve been advocating trying to get finished with the taper process by the end of the first quarter next year because I want to be in a position to react to possible upside risks to inflation next year as we try to move out of this pandemic.”

                              But he also emphasized “there’s no reason for us to commit one way or another at this point,” regarding interest rate hike. “I just want to be in a position in case we have to move sooner that we’re able to do so next year in the spring or summer if we have to do so.”

                              He noted that a supply shock alone cannot cause inflation”. But, “a supply shock being accommodated by very easy monetary policy, it’s those two things that lead to the inflation.” Yet, he’s not concerned with the risk of a 1970s-style stagflation since “the probability of recession is exceptionally low at this point.”

                              Fed Bostic comfortable to start tapering in November

                                By
                                ActionForex.com
                                -

                                Atlanta Fed President Raphael Bostic said the job markets had made “sufficient” gains to allow tapering the USD 120B per month asset purchases. He “would be comfortable starting tapering of asset purchase program in November.”

                                Nevertheless, he noted that “there is significant uncertainty about how long inflationary pressures will last.”

                                IMF lowers 2021 growth forecast slightly to 5.9%

                                  By
                                  ActionForex.com
                                  -

                                  IMF lowered 2021 growth forecast slightly by -0.1% to 5.9% , reflecting “a downgrade for advanced economies—in part due to supply disruptions—and for low-income developing countries, largely due to worsening pandemic dynamics.”

                                  That’s “partially offset by stronger near-term prospects among some commodity-exporting emerging market and developing economies.”

                                  IMF also warned, “rapid spread of Delta and the threat of new variants have increased uncertainty about how quickly the pandemic can be overcome. Policy choices have become more difficult, with limited room to maneuver.”.

                                  Full release here.

                                  Germany ZEW dropped to 22.3 in Oct, outlook dimmed noticeably

                                    By
                                    ActionForex.com
                                    -

                                    Germany ZEW Economic Sentiment dropped from 26.5 to 22.3 in October, below expectation of 20.4. That’s the fifth decline in a row. Germany Current Situation Index tumbled sharply from 1.9 to 21.6, well below expectation of 29.5, and the first decline since February.

                                    Eurozone ZEW Economic Sentiment dropped from 31.3 to 21.0, below expectation of 26.5. Eurozone Current Situation dropped -6.6 pts to 15.9. Eurozone inflation expectations indicator dropped -3.0 pts to 17.1. But 49.1% of experts still expect inflation to rise further in the next six months.

                                    ZEW President Professor Achim Wambach said: “The economic outlook for the German economy has dimmed noticeably. The further decline of the ZEW Indicator of Economic Sentiment is mainly due to the persisting supply bottlenecks for raw materials and intermediate products. The financial market experts expect profits to go down, especially in export-oriented sectors such as vehicle manufacturing and chemicals/pharmaceuticals.”

                                    Full release here.

                                     

                                    UK employment back to pre-pandemic level in Sep

                                      By
                                      ActionForex.com
                                      -

                                      UK number of payroll employees rose 207k to record 29.2m in September, returning to pre-coronavirus pandemic level in February 2020. For the three months to August, unemployment rate dropped to 4.5% in August, down from 4.6%, matched expectations. Employment rate rose 0.5% on the quarter to 75.3%. Average earnings including bonus rose 7.2% 3moy. Average earnings excluding bonus rose 6.0% 3moy.

                                      Full release here.

                                      Australia NAB business confidence jumped to 13, but condition tumbled to 5

                                        By
                                        ActionForex.com
                                        -

                                        Australia NAB Business Confidence jumped sharply from -6 to 13 in September. Strong improvement was seen in New South Wales (up 52 pts to 27) and Victoria (up 16 pts to 5). Business Conditions, however, dropped from 14 to 5. Trading condition dropped from 20 to 10. Profitability condition dropped from 15 to 2. Employment confidence dropped from 9 to 1.

                                        NAB said, “Interpreting this month’s results really depends if you are an optimist or a pessimist. Businesses are really looking forward to reopening, and confidence increased markedly on the back of NSW and Victoria’s reopening roadmaps. The rise in confidence suggests they see the roadmaps that have been announced as sufficient to allow activity to really rebound in the coming months.”

                                        “Still, confidence is more about hope for the future than what is happening in the present. On that front, conditions really deteriorated which shows that lockdowns are taking a toll, despite the resilience the economy has shown through this period.”

                                        Full release here.

                                        Japan wholesale prices rose 6.3% yoy in Sep, highest in 13 years

                                          By
                                          ActionForex.com
                                          -

                                          Japan corporate goods price index, a PPI equivalent, rose 6.3% yoy in September, above expectation of 5.9% yoy. That’s also the highest level in 13 years. Yen based wholesale import prices rose a record 31.3% yoy. Petroleum and coal costs rose 32.4% yoy. Wood products spiked 48.3% yoy.

                                          Some analysts noted that the surge in wholesale prices would be absorbed mainly by businesses, with little impact on consumers. But according to a BoJ survey published on Monday, 68.2% of Japanese households are expecting prices to rise a year from now, up from 66.8% three months ago. Median projection of inflation a year from now rose to 3.0%, up from June’s 2.0%.

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