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EU continue to negotiate intensively with UK

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    ActionForex.com
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    European Commission Eric Mamer said in a press conference today, “what is clear is that we continue to negotiate intensively with our UK partners and we aim, obviously, to find a deal when the conditions will be there.” But he added, “we are not going to give a blow-by-blow account of what negotiators are working towards.”

    Regarding the relations with US, Mamer said “It is still very, very early days and therefore at the moment … the EU is waiting for the new president-elect to take office before starting to comment on what this will imply when it comes to our relationship.”

     

    BoE Bailey: Covid more likely leads to intra-sectoral changes in the economy

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      ActionForex.com
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      In a speech, BoE Governor Andrew Bailey noted three component of structural changes in the economies in the future, with legacy of Covid too: “How what we buy has changed and the way we buy it; how the way we work has changed; and how what we make may need to change”

      He said, “my best guess is that there will be lasting changes”. Further, there may be a “reversal of the period of low productivity growth”, with Covid as the spur, the change agent. Also, a the change the direction of climate requires investment on a much larger scale.

      Nevertheless, Bailey doesn’t see Covid leading to the soft of inter-sectoral change in 80s and 90s. It’s “more likely to be a case of intra-sectoral change”, which ” may also increase the likelihood that more capital can be redeployed, and more rapidly.”

      Full speech here.

      RBA minutes: Focus ahead would be government bond purchase program

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        ActionForex.com
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        Minutes of the November 3 RBA meeting noted that the board is “prepared to do more if necessary”, after delivering a package of additional stimulus. Though, “focus over the period ahead will be the government bond purchase program”.

        Under the current program to purchase longer-dated bonds, RBA would buy nominal bonds issued by the Australian Government and by the states and territories, with an expected 80/20 split. Purchases would be done through secondary market, but not directly from the government. Also, RBA “remained prepared to purchase bonds in whatever quantity is required to achieve the 3-year yield target.”

        As for interest rate, with cash rate target at 0.10% and exchange settlement rate at 0%, they would have been “lowered as far as it made sense to do so in the current environment”. There is “little to be gained from short-term interest rates moving into negative territory”. Negative policy rate is seen as “extraordinarily unlikely”.

        Full minutes here.

        ECB Lane: European debt levels sustainable in the context of very low interest rates

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          ActionForex.com
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          ECB Chief Economist Philip Lane said that even though debt levels surged due to fiscal spending across Europe to counter pandemic impacts, they would remain sustainable.

          He pointed out, “in the context of very low interest rates, in the context of the macroeconomic environment, the assessment should be that this is something that is sustainable”.

          “There is no reason to believe that this has some kind of intrinsic dynamic that will lead us to a return of the conditions of ten years ago,” Lane added. “The cost of making the payments on this debt in the years to come will be quite contained.”

          US Empire state manufacturing dropped to 6.3, but future conditions steady

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            ActionForex.com
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            US Empire State Manufacturing general business conditions dropped to 6.3 in November, well below expectation of 13.0. Manufacturing activity expanded “only to a small degree” as growth continued to slow. 31% of respondents reported that conditions had improved over the month, while 24% reported worsening. Though, index for futures business conditions held steady at 33.9, suggesting firms “remained optimistic” about future conditions.

            Full release here.

            Bundesbank: German economic recovery interrupted by resurgence of pandemic

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              ActionForex.com
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              Germany’s Bundesbank said in the monthly report that that strong recovery in Q3 will not continue in Q4. “The main reasons for this are the recent resurgence of the pandemic in this country and in neighboring European countries, as well as the additional containment measures that have now been decided on for November.”

              Nevertheless, as the restrictions are “far less than in March and April”, a “similarly severe slump as in Spring is not very likely”. Also, “the international production conditions have so far hardly been affected despite the very high number of new infections throughout Europe”.

              Full report here.

              RBA Lowe outlined four changes on monetary policy front this year

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                ActionForex.com
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                RBA Governor Philip Lowe outlined four changes on the monetary policy front during 2020. Firstly, the nature of RBA” forward guidance has moved to  place much more weight on actual outcomes, rather than forecast outcomes”. An example is seen in the statement, where RBA said “the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.” For this to occur wages growth will have to be “materially higher than it is currently”, which requires “significant gains in employment and a return to a tight labour market.” A second and related change has been a shift in the relative weight given to jobs and inflation.

                The third change is a “strengthening in the gravitational pull of low global interest rates. Ignoring this would have “obvious implications for our exchange rate and our economy.” “Over the medium term, I do expect to see a time when Australia’s strong economic conditions once again justify higher interest rates. But today, during a global pandemic when a lot of people have lost their jobs and many businesses are struggling, is not the time for that.”

                The fourth change was “the return to a world in which quantities, not just prices, matter.”

                Full speech here.

                China industrial production maintained 6.9% growth, fixed investments accelerate

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                  ActionForex.com
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                  In China, industrial production grew 6.9% yoy in October, matched expectations. The figure was unchanged from September’s growth. Fixed asset investment grew 1.8% ytd yoy, above expectation of 1.6%. But retail sales rose only 4.3% yoy, below expectation of 5.0% yoy. That’s nevertheless still the strongest rise this year, as led by 12.5% growth in auto sales.

                  Overall, the set of data suggested that China’s economy maintained broad-based acceleration in October, which could likely continue through the rest of Q4. Policy stimulus continued to had a positive impact on both investment and industrial output. The consumer sectors were also returning to normal.

                  The Chinese Yuan is also maintaining its strong medium term up trend. USD/CNH has taken out 6.6699 key support level last month. 61.8% retracement of 6.2354 to 7.1953 at 6.6020 was also lost. Further decline could be seen back to 6.2354 low next.

                  BoJ Masai cautious on outlook for two reasons

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                    ActionForex.com
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                    BoJ board member Takako Masai reiterated in a speech that the baseline scenario is for that the economy is “likely to follow an improving trend with economic activity resuming and the impact of COVID-19 waning gradually”. Still “the pace is expected to be only moderate while vigilance against COVID-19 continues”. Thereafter, as the impact subsides globally, the economy is projected to “keep improving further with overseas economies returning to a steady growth path.”.

                    However, she had a cautious view on the outlook for two reasons. Firstly, growth in world trade volume had already been slowing since mid-2018, due to US-China trade friction. Japan’s export and production levels “had already been on a downtrend” prior to the pandemic. Secondly, global services sector had a growth presence in Japan’s labor market in recent years, but it’s projected to “recover at only a moderate pace”.

                    Additionally,l she pointed out the risks to outlook, including (1) the impact of COVID-19 on domestic and overseas economies; (2) firms’ and households’ medium- to long-term growth expectations; and (3) developments in the financial system. Additionally, attention should be paid to US-China tensions, Brexit, geopolitical risks and global financial markets developments.

                    Full speech here.

                    Japan GDP grew 5% qoq in Q3, but still JPY 30T in output gap

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                      ActionForex.com
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                      Japan GDP grew 5.0% qoq in Q3, above expectation of 4.4% qoq, a turn around from Q2’s -7.9% qoq contraction. In annualized term, GDP grew 21.4%, above expectation of 18.9%, the first increase in four quarters. It’s also the largest rise since comparable data become available in 1980, following the -28.8% annualized contraction in Q2. The data, while strong, was just seen as a rebound from an extraordinary pandemic contraction only.

                      Economy Minister Yasutoshi Nishimura also sounded cautious as he reminded people of the JPY 30T spare capacity. “We can’t make up for all of the output gap just with public works spending. We also need to spur private investment. But the size (of the output gap) is something we’ll look at” in compiling the new spending package, he said.

                      US PPI at 0.3% mom, 0.5% yoy in Oct

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                        ActionForex.com
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                        US PPI came in at 0.3% mom, 0.5% yoy in October, versus expectation of 0.2% mom, 0.3% yoy. PPI core was at 0.1% mom, 1.1% yoy, versus expectation of 0.3% mom, 0.9% yoy.

                        Full release here.

                        Fed Williams: Growth to slow somewhat in Q4 and early next year

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                          ActionForex.com
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                          New York Fed President John Williams warned that “the very large rise in COVID cases recently clearly puts a question market on the ability of the economy to weather this period.” Thus, he’d “expect the growth in the fourth quarter, and maybe into early next year to slow somewhat.”

                          Williams also noted that the economy is still in a extraordinary situation that needs fiscal support. “The reason the economy is still going is because we know people still have some of the stimulus checks and unemployment checks,” he said. “Those saved benefits are helping people pay rent and put food on the table.”

                          ECB Schnabel: Vaccines puts us back in our baseline scenario

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                            ActionForex.com
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                            ECB board member Isabel Schnabel said new restrictions in Europe “dampened substantially, the outlook for the fourth quarter, and then also for the first quarter of next year.” Though, there was “excellent news” regarding coronavirus vaccine”. And that “puts us back in our baseline scenario”, which sees a strong rebound 2021.

                            Separately, Governing Council member Pablo Hernandez de Cos also said, “the vaccine is very positive news, regarding investor confidence, consumers confidence and economic activity. But I would like to be cautious. In the short term, restrictions will continue across Europe.”

                            Eurozone GDP grew 12.6% qoq in Q3, down -4.4% yoy

                              By
                              ActionForex.com
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                              Eurozone GDP grew 12.6% qoq in Q3, the sharpest rise since the times series started in 1995. Over the year, however, GDP dropped -4.4% yoy. Employment grew 0.9% qoq, dropped -2.0% yoy. EU GDP grew 11.6% qoq, dropped -4.3% yoy. Employment grew 2.7% qoq, dropped -1.8% yoy.

                              Full release here.

                              New Zealand BusinessNZ PMI dropped to 51.7, not getting too carried away with recovery

                                By
                                ActionForex.com
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                                New Zealand BusinessNZ Performance of Manufacturing Index dropped from 54.0 to 51.7 in October. Production dropped from 56.7 to 51.1. New orders dropped from 58.1 to 52.4. But employment rose from 51.7 to 52.6.

                                BusinessNZ’s executive director for manufacturing Catherine Beard said that the sector remains in a state of flux, although still managing to keep in positive territory.

                                BNZ Senior Economist, Craig Ebert said that “October’s PMI serves as a gentle reminder of not getting too carried away with the sense of recovery, even if the worst of COVID’s impacts can be assumed to be behind us”.

                                Full release here.

                                RBNZ Orr: Be careful, be prepared and don’t run around on predictions

                                  By
                                  ActionForex.com
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                                  RBNZ Governor Adrian Orr said the improved growth and inflation projections in the latest Monetary Policy Statement released this week “is a very bod assumption”. The central bank has been “at pains to explain to people that we are creating scenarios, not projections of certainty,” he said.

                                  “If the economy continued to grow and do what it’s doing, well that’s a beautiful world, but that’s a big if,” Orr added. “So today’s news around Covid just puts it back into perspective. Be careful out there, be prepared, don’t run around on predictions.”

                                  Orr has the new FLP is “such an invasive way into the banking sector to provide very low cost of funding”. He’ll be on watch to make sure that’s passed on to borrowers and investors.” As for the further easing, Orr said purchases of foreign assets is “not a preferred option” that would not have a signifi cant impact “really in the long term”.

                                  “We are very comfortable where we are with the funding for lending and the quantitative easing program we’re doing at present.”

                                  ECB Lagarde: We’re not racing to be first on digital currency

                                    By
                                    ActionForex.com
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                                    ECB President Christine Lagarde said her “hunch” was that digital currency” will come”. Nevertheless, “We’re not racing to be first… We are moving ahead diligently, not incautiously. We will be prudent.”

                                    “If it’s cheaper, faster, more secure for the users then we should explore it. If it’s going to contribute to a better monetary sovereignty, a better autonomy for the euro area, I think we should explore it,” she added.

                                    ECB launched a public consultation on digital currencies last month. Policy makers would decide around mid-2021 on whether to initiate a full-fledged project. Lagarde added that it might take two to four years before digital currency could be launched.

                                    Fed Powell: Too soon to assess implications of vaccines to path of economy

                                      By
                                      ActionForex.com
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                                      Fed Chair Jerome Powell said yesterday that recent development in coronavirus vaccine is “certainly good and welcome news for the medium term.” However, “significant challenges and uncertainty remain about timing, production, distribution and the efficacy for different groups” of a vaccine.

                                      “From our standpoint it is too soon to assess with any confidence the implications of the news for the path of the economy especially for the near term,” he added. “The next few months could be challenging.”

                                      “We’ve got new cases at a record level. We’ve seen a number of states begin to reimpose limited activity restrictions, and people may lose confidence that it’s safe to go out,” Powell acknowledged. “We’ve said from the beginning that the economy will not fully recover until people are confident that it’s safe to resume activities involving crowds and people.”

                                       

                                      NEISR expects -12% GDP contraction in Nov in UK, overall -2.2% in Q4

                                        By
                                        ActionForex.com
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                                        NIESR expected UK GDP to contract -2.2% in Q4, with monthly fall of -12% in November due to second lockdown, followed by a return to October levels of activity in December. The forecast for 2020 stand at -11.3%.

                                        Growth in the fourth quarter will be much slower than in the third quarter and is likely to turn negative, due to weaker growth in October and a second lockdown from November. Our expectations for the fourth quarter and beyond will depend on the stringency and duration of ongoing lockdowns; local and national.” Dr Kemar Whyte Senior Economist – Macroeconomic Modelling and Forecasting

                                        “We expect the second lockdown to bring a large monthly contraction in November to be followed by a quick rebound in December provided that the lockdown succeeds in getting infection rates under control without the need for a further extension. The UK economy is likely to contract by around 11.5 percent in 2020.” Dr Hande Küçük Deputy Director – Macroeconomic Modelling and Forecasting

                                        Full release here.

                                        US CPI slowed to 1.2% yoy, core CPI down to 1.6% yoy

                                          By
                                          ActionForex.com
                                          -

                                          US CPI rose 0.0% mom in October, below expectation of 0.2% mom. CPI core was also flat at 0.0% mom, below expectation of 0.2% mom. Annually, headline CPI slowed to 1.2% yoy, down from 1.4% yoy, missed expectation of 1.3% yoy. CPI core slowed to 1.6% yoy, down form 1.7% yoy, missed expectation of 1.7% yoy.

                                          Full release here.

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