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RBA stands pat, upgrades GDP forecasts further

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    ActionForex.com
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    RBA maintained monetary policy settings as widely expected. Cash rate and 3-year yield target are held at 0.10%. Parameters of the Term Funding Facility and bond purchases are held unchanged too. It also maintained that the condition for raising the cash rate is unlikely to be reached until 2024 at the earliest.

    At its “July meeting”, RBA will consider whether to retail April 2024 bond as the 3-year yield target, or shift to next maturity, “at its July meeting”. But the board is “not considering a change to the target of 10 basis points”. At the meeting, RBA will also consider future bond purchases after current program completes in September.

    Central scenario for GDP growth was “revised up further”. RBA now sees 4.75% GDP growth over 2021, 3.50% over 2022. Unemployment rate is projected to decline to around 5% at the end of this year and further to 4.5% at the end of 2022.

    But CPI data “confirmed that inflation pressures remain subdued” in most parts of the economy. Underlying inflation is expected to be 1.5% in 2021 and 2% in mid-2023, even though CPI inflation might rise temporarily to above 3% in June quarter.

    Full statement here.

    Fed Williams: Don’t overreact to volatility in prices

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      ActionForex.com
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      New York Fed President John Williams said in a a speech that as the economy further reopens, “I expect inflation to run somewhat above our 2 percent longer-run goal for the remainder of this year.” But he emphasized “not to overreact to this volatility in prices resulting from the unique circumstances of the pandemic”, but focus on the “underlying trends”.

      “My expectation is that once the price reversals and short-run imbalances from the economy reopening have played out, inflation will come back down to about 2 percent next year,” he added.

      Williams also said the economy is now “positioned to grow quickly”. “I expect that the rate of economic growth this year will be the fastest that we’ve experienced since the early 1980s. And that’s not only a forecast—we are already seeing signs of this pivot to strong growth in the economic statistics,” he added.

      Full speech here.

      Fed Barkin: We will see price pressure this year

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        ActionForex.com
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        Richmond Fed President Thomas Barkin told CNBC yesterday, “we will see price pressure this year”, with a “very strong demand situation” and “constraints in supply”. “When those things happen, you’re definitely going to see price pressure,” he added.

        “Inflation is a recurring phenomenon. Prices go up this year, prices go up next year,” he said. “I think it’s fair to argue the question of whether the combination of supply chain constraints and stimulus-driven price increases actually revert next year.”

        Fed Powell: Economy outlook has clearly brightened

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          ActionForex.com
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          Fed Chair Jerome Powell said in a speech, while the US economy is “not out of the woods yet”, “real progress” was being made and economic outlook has “clearly brightened”. The economy is “reopening, bringing stronger economic activity and job creation.”.

          But at “street level”, lives and livelihoods have been affected in ways that vary from “person to person, family to family, and community to community”. “The economic downturn has not fallen evenly on all Americans, and those least able to bear the burden have been the hardest hit,” Powell added.

          Full speech here.

          US ISM manufacturing dropped to 60.7, still points to 5% annualized increase in real GDP

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            ActionForex.com
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            US ISM Manufacturing PMI dropped to 60.7 in April, down from 64.7, below expectation of 65.0. The details also generally weakened. New orders dropped from 68.0 to 64.3. Production dropped from 68.1 to 62.5. Employment dropped from 59.6 to 55.1. However, prices rose from 85.6 to 89.6.

            ISM said: The Manufacturing PMI continued to indicate strong sector expansion and U.S. economic growth in April. Four of the five subindexes that directly factor into the Manufacturing PMI were in growth territory. All of the six biggest manufacturing industries expanded.”

            “The past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI for April (60.7 percent) corresponds to a 5-percent increase in real gross domestic product (GDP) on an annualized basis.”

            Full release here.

            Eurozone PMI manufacturing finalized at record 62.9

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              ActionForex.com
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              Eurozone PMI Manufacturing was finalized at 62.9 in April, up from March’s 62.5, highest since record began in 1997. Markit noted considerable increases in out and new orders. But supply delivery times lengthened at unsurpassed rate, helping to driver rapid price increases.

              Looking at some countries, the Netherlands (67.2), Austria (64.7) and Italy (60.7) were at record highs. Readings for Germany (66.2), France (58.9) and Spain (57.7) were also strong.

              Chris Williamson, Chief Business Economist at IHS Markit said: “The consequence of demand running ahead of supply is higher prices being charged by manufacturers, which are now also rising at the fastest rate ever recorded by the survey. “The big uncertainty is how long these upward price pressures will persist for, and the extent to which these higher charges for goods and services will feed-though to consumers.”

              “Encouragement comes from the sharp increase in employment and investment in machinery and equipment signalled by the survey, which suggests firms are scaling up capacity to meet resurgent demand. This should help bring supply and demand more into line, taking some pressure off prices. But this will inevitably take time.”

              Full release here.

              German PMI manufacturing finalized at 66.2, second highest on record

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                ActionForex.com
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                Germany PMI Manufacturing was finalized at 66.2 in April, just slightly down from March’s record high of 66.6. It’s nonetheless still the second-highest on record since 1996. Markit noted that pace of job creation accelerated as expectations hit new peak. Supply bottlenecks continued to push up costs and factory gate charges.

                Phil Smith, Associate Economics Director at IHS Markit, said: “The PMI continues to send positive signals for the health of the German manufacturing sector… but supply issues remain a risk to the sector’s growth prospects.. .. Despite showing some concerns for the current supply issues, manufacturers generally maintain a strongly positive outlook for the year ahead with expectations at a record high, hinting they believe the bottlenecks to be transitory and that conditions on both the demand and supply side will get better.”

                Full release here.

                France PMI manufacturing finalized at 58.9, continuation of a strong run

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                  ActionForex.com
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                  France PMI Manufacturing was finalized at 58.9, down marginally from March’s 59.3. Markit noted that business conditions improved at “marked, albeit softer, rate”. Output and new orders continued to rise sharply. But there was strongest rate of input cost inflation for a decade.

                  Eliot Kerr, Economist at IHS Markit, said: “The latest PMI figures saw the continuation of a strong run for the French manufacturing sector. Although rates of growth generally eased, the overall increases in key barometers such as output and new orders remained historically marked, and confidence towards the 12-month business outlook remained elevated. “On the other hand, persistent supply-chain disruption remains a worry, with bottlenecks related to COVID-19 continuing to cause delivery delays and drive prices higher.

                  Full release here.

                  ECB de Guindos: Eurozone’s situation is bittersweet

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                    ActionForex.com
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                    ECB President Luis de Guindos said in an interview that the current situation in Eurozone’s economy is “bittersweet”. Q1 was weaker than expected by vaccination is gaining momentum in Europe, which will have a “major impact on the economy”. “We expect the second half of the year to be very positive, even if there is still uncertainty.”

                    On the matter of tapering, “I don’t have any preconceived notions in this respect,” he added. “The way in which the economy develops will be the deciding factor.” If Europe could meet that target of vaccinating 70% of adult population by summer, and economy starts to pick up speed, “we may also start to think about phasing out the emergency mode on the monetary policy side”.

                    But he emphasized he was only “referring to a cautious exit from the emergency programme”, but not about raising interest rates. “it should be managed with a great deal of prudence.”

                    Full interview here.

                    Bitcoin back at 58k as Ethereum hits record

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                      ActionForex.com
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                      Ethereum surged to record high above 3000 handle as recent up trend continues with strong momentum. Fresh buying came last week after European Investment Bank announced to issue its first even digital bond last week, on the ethereum blockchain network.

                      Bitcoin also follows higher and breaches 58000 handle today. As the first leg of the corrective pattern from 64828 has completed at 47112 already, Further rise is now in favor back to retest this high. However, we’d not expecting a firm break there. We’re still viewing price actions from 64828 as a medium term correction, and expect at least another falling leg before it completes.

                      Break of 52377 support will bring another fall to 47112 support, and possibly further to 38.2% retracement of 4000 to 64828 at 41591, which is close to the top of prior range of 20283/41964.

                      Australia AiG manufacturing rose to 61.7, no adverse effect from strong Australian Dollar

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                        ActionForex.com
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                        Australia AiG Performance of Manufacturing Index rose 1.8 pts to 61.7 in April. that’s the seventh straight month of rise, and the strongest reading since March 2018. All six manufacturing sectors expanded, as did all seven activity indicators.

                        Ai Group Chief Executive Innes Willox said: “Australia’s manufacturing industry showed no signs of slowing in the month following the end of the JobKeeper wage subsidy…. There was a large lift in manufacturing production, sales and exports and employment continued to grow solidly – although not at the very rapid pace seen in March. To date the sector as a whole has not been adversely affected by the stronger Australian dollar although a number of businesses are keeping a close eye on where the currency goes from here.”

                        Full release here.

                        US PCE price index surged to 2.3% yoy in Mar, core CPI jumped to 1.8% yoy

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                          ActionForex.com
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                          US personal income rose 21.1% mom, or USD 4.21T, in March, above expectation of 20.0% mom. Spending rose USD 4.2% mom, or USD 616B, above expectation of 3.8% mom.

                          Headline PCE inflation accelerated sharply to 2.3% yoy, up from 1.5% yoy, well above expectation of 1.6% yoy. Core PCE inflation also jumped to 1.8% yoy, up from 1.4% yoy, above expectation of 1.8% yoy.

                          Full release here.

                          Canada GDP grew 0.4% mom in Feb, 10th straight monthly rise

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                            ActionForex.com
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                            Canada GDP grew 0.4% mom in February, slightly below expectation of 0.5% mom. That’s the 10th consecutive month of growth. But total economic activity was still about -2% below pre-pandemic level in February 2020. Preliminary information indicates that growth will continue in March with 0.9% mom rise in real GDP.

                            Looking at some details, services-producing industries were up 0.6%, while goods-producing industries contracted (-0.2%) for the first time since April. Overall, 14 of the 20 industrial sectors expanded in February.

                            Full release here.

                            Eurozone CPI rose to 1.6% yoy in Apr, unemployment rate dropped to 8.1% in Mar

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                              ActionForex.com
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                              Eurozone CPI accelerated to 1.6% yoy in April, up from 1.3% yoy, matched expectations. Looking at the main components of energy is expected to have the highest annual rate in April (10.3%, compared with 4.3% in March), followed by services (0.9%, compared with 1.3% in March), food, alcohol & tobacco (0.7%, compared with 1.1% in March) and non-energy industrial goods (0.5%, compared with 0.3% in March).

                              Eurozone unemployment rate dropped to 8.1% in March, down from 8.2%, better than expectation of 8.3%. EU unemployment dropped to 7.3%, down from 7.4%.

                              Eurozone GDP contracted -0.6% qoq in Q1, EU down -0.4% qoq

                                By
                                ActionForex.com
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                                Eurozone GDP dropped -0.6% qoq in Q1, better than expectation of -0.8% qoq. EU GDP contracted -0.4% qoq. Annually, Eurozone GDP dropped -1.8% yoy while EU contracted -1.7% qoq.

                                Among the Member States for which data are available for the first quarter 2021, Portugal (-3.3%) recorded the highest decrease compared to the previous quarter, followed by Latvia (-2.6%) and Germany (-1.7%), while Lithuania (+1.8%) and Sweden (+1.1%) recorded the highest increases. The year on year growth rates were negative for all countries except for France (+1.5%) and Lithuania (+1.0%).

                                Full release here.

                                Germany GDP dropped -1.7% qoq in Q1, worse than expected

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                                  ActionForex.com
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                                  Germany GDP contracted -1.7% qoq in Q1, worse than expectation of -1.5% qoq. Comparing to Q1 2020, GDP was down a price-adjusted -3.3%, and a price-and-calendar-adjusted -3.0%. Comparing to pre-pandemic Q4 2019, GDP was down -4.9%.

                                  Destatis said, “the coronavirus crisis caused another decline in economic performance at the beginning of 2021”. And, “this affected household consumption in particular, while exports of goods supported the economy.”

                                  Full release here.

                                  Swiss KOF rose to record 134, strong economic boost in near future

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                                    ActionForex.com
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                                    Swiss KOF Economic Barometer rose for the second month in a row, from 117.8 to 134.0 in April. That’s also the highest level on record, surpassing the previous historical high reached after the financial crisis in 2010. KOF said, “unless the virus takes another volte, economic development is likely to get a strong boost in the near future.

                                    Full release here.

                                    France GDP rose 0.4% qoq in Q1, still -4.4% below pre-pandemic level

                                      By
                                      ActionForex.com
                                      -

                                      France GDP rose 0.4% qoq in Q1, much better than expectation of 0.4% qoq. Though, GDP is still -4.4% below the pre-pandemic level in Q4 2019.

                                      Looking at some details, final internal demand (excluding inventory changes) made a positive contribution to GDP growth (+0.9 points after −3.0 points in the previous quarter). Gross fixed capital formation (GFCF) intensified its dynamic (+2.2% after +1.3%) and households’ consumption expenditure picked up slightly (+0.3%), after a strong decline in the previous quarter (−5.7%).

                                      Exports declined (–1.5%) more than imports (–0.1%). Overall, foreign trade made a negative contribution to GDP growth this quarter: –0.4 points, after +1.2 points in the previous quarter. Contribution of inventory changes to the growth of the GDP was null this quarter (+0.0 points after +0.4 points in Q4 2020).

                                      Full release here.

                                      China Caixin PMI manufacturing rose to 51.9, price pressures to limit policy choices

                                        By
                                        ActionForex.com
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                                        China’s official NBS PMI Manufacturing dropped to 51.1 in April, down form 51.9, below expectation of 51.4. NBS PMI Non-Manufacturing dropped to 54.9, down from 56.3, below expectation of 52.6. “Some surveyed companies report that problems such as chip shortages, problems in international logistics, a shortage of containers, and rising freight rates are still severe,” NBS statistician Zhao Qinghe said.

                                        Caixin PMI Manufacturing rose to 51.9, up from 50.6, above expectation of 50.9. Wang Zhe, Senior Economist at Caixin Insight Group said: “Policymakers have expressed concerns about rising commodity prices on several occasions and urged adjusting raw material markets and easing businesses’ cost pressure. In the coming months, rising raw material prices and imported inflation are expected to limit policy choices and become a major obstacle to the sustained economic recovery.”

                                        Japan industrial production rose 2.2% in Mar, PMI manufacturing finalized at 3-yr high in Apr

                                          By
                                          ActionForex.com
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                                          Japan’s Industrial production rose 2.2% mom in March, much better than expectation of -2.0% mom decline. According to survey by the Ministry of Economy, Trade and Industry, output is expected to rise another 8.4% in April, and then 4.3% in May. Unemployment rate dropped to 2.6%, down from 2.9%, better than expectation of 2.9%. Housing start rose 1.5% yoy, versus expectation of -7.4% yoy. Consumer confidence dropped to 34.7, down from 36.1, above expectation of 34.0. In Tokyo, CPI core slowed to 0.0% yoy, down from 0.3% yoy, missed expectation of 0.3% yoy.

                                          PMI Manufacturing was finalized at 53.6 in April, up from March’s 52.7. That’s the strongest reading since April 2018. Usamah Bhatti, Economist at IHS Markit, said: “Japanese manufacturers continued to report a positive outlook for activity in the medium term. Close to 36% of panellists estimated that output levels would rise over the coming year. This was in line with the current IHS Markit forecast for industrial production to grow 7.7% in 2021, although this does not fully recover the output lost to the pandemic in 2020.”

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