US initial jobless claims dropped -111k to 730k in the week ending February 20, below expectation of 820k. Four-week moving average of initial claims dropped -20.5k to 807.8k.
Continuing claims dropped -101k to 4419k in the week ending February 13. Four-week moving average of continuing claims dropped -91.5k to 4547k.
ECB chief economist Philip Lane said in a speech, “ensuring favourable financing conditions is central to restoring inflation momentum and guiding the formation of inflation expectations”. And, “preservation of favourable financing conditions should involve the inspection of indicators along the whole transmission chain of our monetary policy”.
Within the broad-based set of indicators, “the downstream conditions facing the households and firms that rely on bank-based credit play a prominent role,” he said”. “Upstream indicators of risk-free OIS rates and sovereign yields are particularly important”.
Accordingly, “the ECB is closely monitoring the evolution of longer-term nominal bond yields,” Lane added.
Eurozone Economic Sentiment Indicator rose from 91.5 to 93.1 in February. Industrial confidence rose from -6.1 to -3.3. Services confidence dropped from -17.7 to -17.1. Consumer confidence rose from -15.5 to -14.8. Retail trade confidence dropped from -18.5 to -19.1. Employment Expectation Index rose from 89.1 to 90.0.
EU Economic Sentiment Indicator rose 1.9 pts to 93.4. Amongst the largest EU economies, the ESI rose markedly in Poland (+4.7), Italy (+4.4), Germany (+3.0)and, to a lesser extent, in France (+0.9). By contrast, sentiment worsened strongly in Spain (-3.2) and, more mildly so, in the Netherlands (-1.3).
Aussie appears to be taking back the leading role in risk-on rallies now. After some hesitation, GBP/AUD finally breaks through 1.7787 support decisively, indicating completion of corrective rebound from 1.7412 at 1.0821. The cross is possibly now resuming the down trend from 2.0840. Further fall should be seen back to 1.7412 low and then 61.8% projection of 1.8523 to 1.7412 from 1.8021 at 1.7334. Reactions from this projection level will reveal underlying downside momentum for acceleration.
AUD/CAD’s breach of 0.9988 temporary top suggests that consolidation has completed, and up trend is resuming. Further rise is expected as long as 0.9936 minor support holds. Up trend from 0.8058 should target 61.8% projection of 0.9247 to 0.9898 from 0.9713 at 1.0115.
Germany Gfk Consumer Sentiment for March improved to -12.9 in March, up 2.6 pts. For February, economic expectation rose notably from 1.3 to 8.0. Income expectations rose from -2.9 to 6.5. Propensity to buy rose from 0.0 to 7.4.
“Consumers are recovering to some extent from the shock they suffered after the tough lockdown in mid-December. The recent dip in infection rates and the launch of the vaccination program are fueling hopes of a speedy easing of measures,” says Rolf Bürkl, consumer expert at GfK.
DOW surged to new record high overnight as markets took Fed Chair Jerome Powell’s message from the semiannual testimony clearly. That is, Fed is in no way near stimulus exit. The economy is “a long way” from Fed’s employment and inflation targets. He reiterated that Fed “will not tighten monetary policy solely in response to a strong labor market”. Additionally, Fed aims to “achieve inflation moderately above 2% for some time”.
DOW closed up 424.51 pts or 1.35% at 31961.86. Recent up trend has resumed with strong range breakout. For now, near term outlook will remain bullish as long as 31158.76 support holds. Up trend from 18213.65 should target 61.8% projection of 18213.65 to 29199.35 from 26143.77 at 32932.93.
NASDAQ also rose 132.7 pts or 0.99% to close at 13597.96. The rebound came after drawing support from 12985.05 earlier in the week. Note that NASDAQ has indeed led DOW in closing equivalent target at 14184.12 (61.8% projection of 6631.42 to 12074.06 from 10822.57 at 14186.12), earlier in the month. Hence, we might not see NASDAQ following DOW for a new high in the current move, and retake the lead. Let’s see.
New Zealand ANZ Business Confidence dropped to 7.0 in February, down from December’s 9.4, and preliminary reading of 11.8. Confidence was highest in retails at at 15.6, followed by construction at 12.9, services at 10.8 and manufacturing at 3.6. Agriculture confidence was at -38.1.
Own Activity Outlook rose to 21.3, up from 21.7, vs prelim. 22.3. Activity was highest in construction at 41.9, followed by services at 24.7, retail at 13.3, manufacturing at 10.7 and agriculture at 0.
ANZ said, “overshoot in demand resulting from the disruptions of 2020 is beginning to dissipate, and we expect the economy to go broadly sideways for a while as it digests the national income hit from the decimated tourism industry and as the housing market cools to something more sustainable.”
Fed Vice Chair Richard Clarida said in a speech, there have been some weaker than expected data in recent months. Services spending remained “well below pre-pandemic levels”. Improvement tin labor markets has “slowed notably”, with “true unemployment rate” closer to 10% level. Core PCE inflation was just running at 1.5%.
There were also some encouraging data as retail sales “stepped up considerably” in January. Housing sector has “more than fully recovered from the down turn”. Business investment and manufacturing production have “rebounded robustly”.
Overall, vaccine developments, and the new fiscal relief measures indicated that “the prospects for the economy in 2021 and beyond have brightened and the downside risk to the outlook has diminished.”
US commercial crude oil inventories rose 1.3m barrels in the week ending February 19, versus expectation of -6.5m barrels fall. At 463.0m barrels, oil inventories are around 0% below the five year average for this time of the year. Gasoline inventories were virtually unchanged. Distillate inventories dropped -5.0m barrels. Propane/propylene inventories dropped -5.2m barrels. Total commercial petroleum inventories dropped -13.8m barrels.
WTI crude oil shrugs off the data and continues with recent up trend. Current is expected to continue as long as 58.57 support holds. Next target is 65.43 key long term structural resistance.
BoE Deputy Governor Ben Broadbent said in the TSC hearing that “it remains the case, on our central forecast, that UK economy doesn’t return to its pre-pandemic size until early 2022, after the same point for both the US and the Euro area.”
Also, “as the furlough scheme is assumed to close at the end of April while restrictions still exist, “the recovery in demand is expected to be insufficient to prevent a material rise in unemployment”.
BoE’s monetary easing “already anticipates a significant rise in unemployment and spare capacity through the spring and summer of this year.” Still, “there are clearly significant risks around that, not least from the relative timings of the ending of restrictions on the one hand and the closure of the furlough scheme on the other.”
“Those risks are in both directions,” he added.
BoE MPC member Jonathan Haskel said in the Treasury Committee hearing that downside risks to February central economic projections are “much more prevalent”.
“With downside risks to the outlook and taking risk management into consideration, as I have done previously, I remain open to the possibility that the economy might need further support to return inflation to target sustainably.” he added.
While Swiss Franc has been under heavy selling in early part of European session, selling focus is possibly being turned the Japanese Yen. CHF/JPY is recovering after breaching 116.20 support to 116.14 briefly. While there still some way to day, focus will be back on 117.07 minor resistance. Break there will indicate successful defending of 116.20 support, and bring strong rebound back towards 118.84 high. But of course, firm break of 116.20 will indicate near term reversal and turn outlook bearish for 113.73 support. That could trigger another round of selloff in Swiss Franc.
As for Yen crosses, AUD/JPY will continue to be one of the leaders. Further rise is expected as long as 82.89 minor support holds. The up trend from 59.89 low is in progress for 61.8% projection of 59.89 to 78.46 from 73.13 at 84.60. Firm break there will pave the way to 100% projection at 91.70.
BoJ Governor Haruhiko Kuroda told the parliament today that “the BOJ’s various tools, including its ETF buying, will be the target of the March review. We’ll examine how our tools are affecting markets and look at what we can do better.” He added that government bond buying has already slowed substantially as markets are calm. Average duration of the bond holdings also remained stable a around seven years.
Separately, former BoJ deputy governor Hirohide Yamaguchi told Reuters that BoJ’s review is “unlikely” to come up with “an outcome that has a substantial impact on the economy and markets. “The review will probably be just a show of gesture that it’s doing ‘something’ to address the cost,” said Yamaguchi.
“It’s impossible for the BOJ to guide public perceptions at its will,” Yamaguchi added. “It’s time now for the BOJ to conduct a ‘genuine’ policy review and use the findings to modify its policy framework.”
Germany Q4 GDP growth was finalized at 0.3% qoq, revised up from 0.1% qoq. Over the year, on price-adjusted term, GDP dropped -2.7% yoy. In Price and calendar-adjusted terms, GDP dropped -3.7% yoy.
Destatis said, “in the fourth quarter, however, the recovery process slowed due to the second coronavirus wave and another lockdown imposed at the end of the year.”
New Zealand Dollar surged after RBNZ rate decision, as the central bank didn’t sound particularly concerned about recent surge in exchange rate. “The gains from higher export commodity prices have been somewhat offset by the stronger New Zealand dollar” was the only thing that mentioned.
In the key baseline scenario variables, RBNZ raised the trade weighed index of NZD significantly from 71.5 to 74.9, throughout the forecast horizon. CPI inflation variables were raised at the same time while GDP growth variables were kept largely unchanged. The table suggests that NZD’s strength hasn’t altered RBNZ’s outlook much, and the central bank should still be comfortable with it.
NZD/USD surges to as high as 0.7382 so far today. Outlook will stay bullish as long a s0.7280 support holds. Current up trend from 0.5469 is on track to 61.8% projection of 0.6589 to 0.7314 from 0.7156 at 07604.
NZD/JPY also extends recent rally and hits as high as 77.81 so far. Daily MACD suggests that it’s now in re-acceleration mode. Outlook will remain bullish as long as 76.77 support holds. Up trend from 59.49 should target 161.8% projection of 63.45 to 71.66 from 68.86 at 82.14 next.
RBNZ left monetary policy unchanged today as widely expected. OCR is held at 0.25%, Large Scale Asset Purchase Programme at up to NZD 100B and Funding for lending program unchanged. Current monetary policy setting were seen as “appropriate” to achieve the central bank’s inflation and employment remit. But a “prolonged period of time” is needed before meeting the conditions of removing monetary stimulus.
In the Monetary Policy Statement, RBNZ said the economic rebound has been “stronger than expected”. But domestic recovery “has been uneven” while outlook is “highly uncertain”. “Significant stimulus is still required” and “interest rates are assumed to remain at historically low levels for an extended period.”
In a speech, BoC Governor Tiff Macklem said Canadians “have already climbed a long way back from the very deep economic hole we were in last spring”. Much of Canada emerging from the latest round of pandemic containment measures, “we expect a solid rebound in the immediate months ahead”.
But he also said “it will be some time before we see a complete economic recovery”. Economic slack won’t be fully absorbed until into 2023. “Even as it recovers, the economy is adapting to structural changes, and some workers will need to shift to jobs in faster-growing sectors”.
“This all points to an even more protracted recuperation period while the economic potential that was lost over the course of the pandemic is rebuilt,” he added.
In the semiannual testimony, Fed Chair Jerome Powell acknowledged that “the number of new (coronavirus) cases and hospitalizations has been falling, and ongoing vaccinations offer hope for a return to more normal conditions later this year”.
The economy recovery “remains uneven and far from complete, and the path ahead is highly uncertain”. But recent “developments point to an improved outlook for later this year”.
“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell added. “We will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases.”
“We are committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust as possible.”
US Conference Board Consumer Confidence rose to 91.3 in February, up from 88.9, above expectation of 90.2. Present Situation Index rose from 85.5 to 92.0. However, Expectations Index dropped from 91.2 to 90.8.
“After three months of consecutive declines in the Present Situation Index, consumers’ assessment of current conditions improved in February,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. ”
“This course reversal suggests economic growth has not slowed further. While the Expectations Index fell marginally in February, consumers remain cautiously optimistic, on the whole, about the outlook for the coming months. Notably, vacation intentions—particularly, plans to travel outside the U.S. and via air—saw an uptick this month, and are poised to improve further as vaccination efforts expand.”
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US durable goods orders rose 3.4% in Jan, ex-transport orders rose 1.4%
US durable goods orders rose 3.4% mom to USD 256.6B in January, above expectation of 1.1% mom. That’s the ninth straight month of growth. Ex-transport orders rose to 1.4% mom, above expectation of 0.7% mom. Ex-defense orders rose 2.3% mom. Transportation rose 7.8% to USD 85.1B.
Full release here.