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ECB Holzmann: We may be able to normalize monetary policy sooner than most expect

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    ActionForex.com
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    ECB Governing Council member Robert Holzmann, Bank of Austria head, said in an Eurofi Magazine article, “there is the possibility that we may be able to normalize monetary policy sooner than most financial market experts expect.” He pointed to upward price pressures which could turn into inflation expectations.

    Holzmann added, “this does not mean that we will withdraw accommodation prematurely, but rather that accommodation will be needed for a shorter period than what markets expect.”

    BoC likely a non-event, EUR/CAD to continue sideway consolidation

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      ActionForex.com
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      BoC is generally expected to keep monetary policy unchanged today. In particular, the weekly asset purchases pace will be held at CAD 2B. Interest rate will be maintained at 0.25%. It’s clearly in a wait-and-see mode due to conflicting developments of disappointing economic activities and rising inflation, as well ass higher vaccination but worsening Delta infections. Additionally, a major risk event of federal election is less than two weeks away.

      The central bank should wait for new economic projections next month before making a move. Also, there is no press conference after the meeting today. Overall, it could be a non-event.

      Some previews on BoC:

      EUR/CAD is a pair to watch for the rest of the week with BoC and ECB meeting featured. Price actions from 1.4580 low are seen as a corrective pattern and hence, medium term outlook is staying bearish for now. While a downside breakout is slightly favored, we’d not seeing any indication of it yet. Hence, range trading will likely continue for a while. Medium term, any rally attempt could face strong resistance from 38.2% retracement of 1.5991 (2020 high) to 1.4580 (2021 low) at 1.5119.

      Japan Q2 GDP growth upgrade to 0.5% qoq, 1.9% annualized

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        ActionForex.com
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        Japan GDP growth was finalized at 0.5% qoq, 1.9% annualized in Q2. It’s upgraded from initial estimate of 0.3% qoq, 1.3% annualized. Capital expenditure grew 2.3% qoq, upgraded from preliminary reading of 1.7% qoq. Private consumption grew 0.3% qoq, upgraded from 0.8% qoq.

        Also released, bank lending rose 0.6% yoy in August, below expectation of 1.0% yoy. Eco watcher sentiment dropped from 48.4 to 34.7 in August. Current account surplus narrowed to JPY 1.41T in July.

        Fed Bullard: Taper will get going this year

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          ActionForex.com
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          In an FT interview, St Louis Fed President James Bullard maintained the view that “the big picture is that the taper will get going this year and will end sometime by the first half of next year.”

          The weak August NFP report didn’t alter his view on job market recovery. “There is plenty of demand for workers and there are more job openings than there are unemployed workers”, he said. “If we can get the workers matched up and bring the pandemic under better control, it certainly looks like we’ll have a very strong labour market going into next year.”

          He also said there is “also a case” that inflation wont moderate into 2022, and may go higher, due to ” additional supply constraints coming from international sources now because of the Delta variant.”

          Germany ZEW dropped sharply to 26.5, global chip shortage caused significant reduction in profit expectations

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            ActionForex.com
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            Germany ZEW Economic Sentiment dropped sharply from 40.4 to 26.5 in September, well below expectation of 30.2. It’s also the fourth consecutive decline. Germany Current Situation index improved form 29.3 to 31.9, below expectation of 33.1. Eurozone ZEW Economic Sentiment also tumbled from 42.7 to 31.3, below expectation of 35.3. Eurozone Current Situation index rose 7.9 pts to 22.5.

            “Expectations fell markedly once more in September 2021. Although financial market experts expect further improvements of the economic situation over the next six months, the expected magnitude and the dynamics of the improvements have decreased considerably. Global chip shortage in the automobile sector and shortage of building material in the construction sector have caused a significant reduction in profit expectations for these sectors. This may have had a negative effect on economic expectations,” comments ZEW President Professor Achim Wambach.

            Full release here.

            Eurozone GDP grew 2.2% qoq in Q2, -2.5% below pre-pandemic level

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              ActionForex.com
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              Eurozone GDP grew 2.2% qoq in Q2, revised up from prior estimate of 2.0% qoq. Comparing with same quarter of previous year, GDP grew 14.3% yoy. GDP was -2.5% below the pre-pandemic level of Q4, 2019. Household final consumption expenditure rose 3.7% qoq. Government final consumption expenditure rose 1.2% qoq. Gross fixed capital formation rose 1.1% qoq. Exports rose 2.2% qoq. Imports rose 2.3% qoq.

              EU GDP grew 2.1% qoq, 13.8% yoy. Ireland (+6.3%) recorded the sharpest increase of GDP compared to the previous quarter, followed by Portugal (+4.9%), Latvia (+4.4%) and Estonia (+4.3%). Declines were observed in Malta (-0.5%) and Croatia (-0.2%).

              Full release here.

              BoE Saunders concerned with continuing with asset purchases

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                ActionForex.com
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                BoE hawk Michael Saunders said he believed that the economy was now close to the pre-pandemic level. He’s worried that continuing with the asset purchase program would cause rise in medium-term expectation.

                “I also worry that continuing with asset purchases, when CPI inflation is 4% and the output gap is closed – that is the likely situation later this year – might well cause medium-term inflation expectations to drift higher,” he said.

                “Such an outcome could well require a more substantial tightening of monetary policy later, and might limit the committee’s scope to respond promptly the next time the economy needs more stimulus,” he added.

                RBA tapers but extends QE, Delta to delay but not derail recovery

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                  ActionForex.com
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                  RBA kept with its tapering plan and announced to lower purchase of government securities at AUD 7B a week. But the program is extended until at least mid-February 2022, from mid November. At the same time, cash target rate is held at 0.10%. Target for April 2024 Australian government bond yield was also kept at 0.10%.

                  The central bank said the economy has been “interrupted by the Delta outbreak and the associated restrictions on activity”. GDP is expected to “decline materially” in Q3 with unemployment rate moving high over coming months. But the setback to economic expansion is “expected to be only temporary”. The Delta outbreak is expected to “delay, but not derail” the recovery. Economy will be growing again in Q4 and back to pre-Delta path in H2 of next year.

                  The decision to “extend” the asset purchases “reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak”. RBA pledged o continue to review on the program. Also, it maintained that the condition for rate hike “will not be met before 2024”.

                  Full statement here.

                  China exports rose 25.6% yoy in Aug, imports up 33.1% yoy, trader surplus at USD 58.3B

                    By
                    ActionForex.com
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                    In August, in USD term, China’s total trade rose 28.8% yoy to USD 530.3B. Exports rose 25.6% yoy to USD 294.3B. Imports rose 33.1% yoy to USD 236.0B. Trade surplus came in at USD 58.3B, above expectation of USD 52.3B.

                    Year-to-August, total trade rose 34.2% yoy to USD 3827.8B. Exports rose 33.7% yoy to USD 2095.1B. Imports rose 34.8% yoy to USD 1732.7B. Trade surplus came in at USD 362.5B.

                    Australia AiG services dropped to 56.6, outlook weak for another month or two

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                      ActionForex.com
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                      Australia AiG Performance of Services Index dropped sharply from 51.7 to 45.6 in August. That’s the lowest level since September 2020. Looking at some details, sales dropped -13.2 to 40.0. Employment rose 2.4 to 53.4. New orders dropped -9.3 to 47.4. Supplier deliveries dropped -1.3 to 44.0. Finished stocks dropped -9.3 to 37.7. Input prices dropped -2.6 to 71.5. Selling prices dropped -11.4 to 55.3.

                      Ai Group Chief Executive, Innes Willox, said: “Increased COVID-19 cases and the lockdowns aimed at constraining the spread of the virus saw the performance of the services sector slump in August… With lockdowns in Victoria, the ACT and NSW set to continue this month and with new orders down on previous levels, the immediate outlook is for another weak month or two. In the meantime, a lot hinges on the healthy supply of vaccines, success in overcoming hesitancy about vaccination and clear and convincing leadership from across the National Cabinet.”

                      Full release here.

                      Nikkei closed up 1.83%, heading to 30714 high

                        By
                        ActionForex.com
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                        Nikkei closed up strongly by adding 531.78 pts or 1.83% today, and the near term development is looking rather bullish. The corrective pattern from 30714.52 has likely completed at 26954.81. Further rise is now expected as long as this week’s gap is not covered. Next target is 30714.52 high.

                        Medium term development is also bullish with strong support seen from 55 week EMA. A market friendly result of next week’s leadership election of the ruling Liberal Democratic Party of Japan would probably pop Nikkei through 30714.53 high. In that case, the long term up trend would extend to 38.2% projection of 16358.19 to 30714.52 from 26954.81 at 32438.92 next.

                        Eurozone Sentix investor confidence dropped to 19.6, glowing global recovery

                          By
                          ActionForex.com
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                          Eurozone Sentix Investor Confidence dropped to 19.6 in September, down from 22.2, slightly below expectation of 19.7. That’s the fourth decline in a row and the lowest reading since April, 2021. Current situation index was unchanged at 30.8. Expectations index dropped from1 4.0 to 9.0, lowest since May 2020.

                          Sentix said: “The momentum of the global economy is slowing. The expectation scores of most regions in the sentix business cycle indices are falling for the fourth or fifth time in a row. The expectation values are still positive, but the zenith of the economic recovery since the lockdowns last autumn has been passed. This is also evident in the assessments of the economic situation, which have only improved slightly in a few regions. In the important region of Asia ex Japan, on the other hand, we measure a noticeable decline”.

                          Full release here.

                          UK PMI construction dropped to 55.2 in Aug, begins to feel the impact of supply chain disruption

                            By
                            ActionForex.com
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                            UK PMI Construction dropped to 55.2 in August, down from July’s 58.7, below expectation of 56.9. Markit said new order growth eased to a five-month low. All three monitored segments recorded softer rise in activity. But rise in input prices was second-fastest amid severe supply chain disruption.

                            Usamah Bhatti, Economist at IHS Markit: “Evidence that the UK construction sector began to feel the impact of ongoing supply chain disruption was widespread midway through the third quarter of 2021. Growth rates for overall activity as well as the three monitored subsectors eased further from the recent highs earlier in the summer. Similarly, new business inflows have continued to increase at a marked pace, yet even here the rate of growth has eased to a five-month low.

                            Full release here.

                            Nikkei accelerates up, extending Suga rally

                              By
                              ActionForex.com
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                              Japan Nikkei 225 extended rises sharply today, up more than 1.7% or 500 pts at the time of writing, overpowering other Asian markets. It’s indeed on track to 30k handle again in the next few day, if the momentum could sustain.

                              The upside acceleration started last week, after Prime Minister Yoshihide Suga surprisingly declared he would not run for leadership of the ruling Liberal Democratic Party in September 29.

                              Suga explained that he’d like to focus on coronavirus measures, as “doing both takes enormous energy”. But it’s believed that his light pandemic restrictions and the spread of the infections prompted much grieve among both consumers and business owners. Stepping down as party leader, and prime minister now would lower LDP’s chance of losing badly in the upcoming general election later in the year. The development gave extra support to the Japanese stock markets.

                              EU Gentiloni: A mistake for ECB to make conclusions too soon

                                By
                                ActionForex.com
                                -

                                EU Economy Commissioner Paolo Gentiloni urged ECB to monitor Eurozone inflation “very accurately”, without making conclusions too soon on scaling back monetary stimulus. He added, “I think it would be a big mistake, because the mainstream consensus is on the fact that this inflation is still a temporary phenomenon.”

                                He said Europe must avoid the “mistakes” of going “too soon back to normal”, as they did during the global financial crisis.

                                US ISM services dropped to 64.1, still corresponds to 4.4% annualized GDP growth

                                  By
                                  ActionForex.com
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                                  US ISM Services PMI dropped from 64.1 to 61.7 in August, slightly above expectation of 61.3. Looking at some details, business activity/production dropped from 67.0 to 60.1. New orders dropped from 63.7 to 63.2. Employment dropped slightly from 53.8 to 53.7. Prices dropped from 82.3 to 75.4.

                                  ISM said: “The past relationship between the Services PMI and the overall economy indicates that the Services PMI for August (61.7 percent) corresponds to a 4.4-percent increase in real gross domestic product (GDP) on an annualized basis.”

                                  Full release here.

                                  US NFP grew only 235k, unemployment rate dropped to 5.2%

                                    By
                                    ActionForex.com
                                    -

                                    US non-farm payroll employment grew only 235k in August, well below expectation of 750k. Notable job gains occurred in professional and business services, transportation and warehousing, private education, manufacturing, and other services. Employment was still down by -5.3m from pre-pandemic level in February 2020.

                                    Unemployment rate dropped from 5.4% to 5.2%, matched expectations. Number of unemployment persons edged down to 8.4m. Both measures remain far above their levels prior to the pandemic (unemployment rate at 3.5% and unemployed at 5.7m). Labor force participation rate was at 61.7%, staying in the 61.4% to 61.7% since June 2020.

                                    Average hourly earnings rose 0.6% mom, above expectation of 0.4%.

                                    Full release here.

                                    Eurozone retail sales dropped -2.3% mom in Jul, EU down -1.9% mom

                                      By
                                      ActionForex.com
                                      -

                                      Eurozone retail sales dropped -2.3% mom in July, well below expectation of 1.2% mom rise. For the month, the volume of retail trade decreased by -3.5% for non-food products, by -1.6% for automotive fuels and by -0.7% for food, drinks and tobacco.

                                      EU retail sales dropped -1.9% mom. Among Member States for which data are available, the largest monthly decreases in total retail trade were registered in Ireland (-5.9%), Germany (-5.1%) and Austria (-3.9%). The highest increases were observed in Croatia (+2.5%), Malta (+2.3%) and Luxembourg (+2.2%).

                                      Full release here.

                                      UK PMI services finalized at 55.0, staff shortages, self-isolation rules and stretched supply chain capacity

                                        By
                                        ActionForex.com
                                        -

                                        UK PMI Services was finalized at 55.0 in August, down from July’s 59.6, and way below May’s record high of 62.9. PMI Composite was finalized at 54.8, down from July’s 59.2. Markit said recovery in business activity eased further from May’s peak. Employment numbers rose at fastest rate since survey began in July 1996. Business optimism also climbed to three-month high.

                                        Tim Moore, Economics Director at IHS Markit, which compiles the survey: “The service sector lost momentum for the third consecutive month as the impact of looser pandemic restrictions faded in August. Many businesses suffered constraints on growth due to staff shortages, self-isolation rules and stretched supply chain capacity…

                                        “Tight labour market conditions pushed up wages as service sector companies sought to attract and retain employees. The overall rate of input cost inflation remained steep, but eased from the record high seen in July…

                                        “Business optimism edged up to a three-month high during August, suggesting that service providers have become slightly more confident about longer-term prospects for demand and supply availability.”

                                        Full release here.

                                        Eurozone PMI composite finalized at 59.0, strong GDP rise on cards for Q3

                                          By
                                          ActionForex.com
                                          -

                                          Eurozone PMI Services was finalized at 59.0 in August, down from July’s 59.8. PMI Composite was finalized at 59.0, down from 60.2. Looking at some member states, PMI composites were generally strong: Ireland (62.6), Spain (60.6), Germany (60.0), Italy (59.1), France (55.9).

                                          Joe Hayes, Senior Economist at IHS Markit said: “It was another solid result for euro area businesses in August, according to the PMI numbers, which still point to rapid rates of expansion in output and demand…. but a step down since the preliminary ‘flash’ number tells us that this growth momentum is fading… Regardless, another strong quarter-on-quarter rise in GDP is on the cards for the third quarter, and we’re certainly on track for the eurozone economy to be back at pre-pandemic levels by the end of the year, if not sooner.”

                                          Full release here.

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