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Fed Bostic: People are getting nervous again

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    Atlanta Fed President Raphael Bostic said “people are getting nervous again” on coronavirus development. “Business leaders are getting worried. Consumers are getting worried. There is a real sense that this might go on longer than we had hoped and we had expected and we had planned for.”

    Bostic added that the next three to six weeks could be critical for the strength of the economic recovery. The rebound could plateau sooner and at a lower pace than expected.

    Clarida: Fed could do more with forward guidance and balance sheet

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      Fed Vice Chairman Richard Clarida told CNN yesterday that “”we have a lot of accommodation in place. There is more that we can do. There is more that we will do if we need to”. He added that “additional forms of forward guidance that the Fed has used in the past and we would consider using in the future”. Additionally, “there’s more that we could do in terms of our balance sheet as needed.”

      He also noted he increase in coronavirus cases in certain large states and Fed officials are following it closely. “The course of the economy is going to depend on the course of the virus.”

      Johnson: UK could leave EU on Australia term if no trade deal is reached

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        UK Prime Minister Boris Johnson told Germany Chancellor Angela Merkel that the country is prepared to leave the EU on the said term as Australia is a future trade deal couldn’t be reached. Johnson’s spokesman said, “on the future relationship, the prime minister underlined the UK’s commitment to working hard to find an early agreement out of the intensified talks process”. “He also noted that the UK equally would be ready to leave the transition period on Australia terms if an agreement could not in the end be reached.”

        Formal Brexit negotiations will resume on Wednesday. Ahead of that, EU negotiator Michel Barnier said “The EU wants an agreement – and we are doing everything to succeed – but not at any price.”

        Japan Nishimura: No need to declare new state of emergency

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          ActionForex.com
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          Japan Economy Minister Yasutoshi Nishimura warned today that “untraceable” coronavirus cases among older people are “gradually rising”. He emphasized it’s “necessary to respond with a sense of crisis.” Yet, he reiterated that there is no need to declare a new state of emergency as the serious cases remained low, without strain on the medical system.

          Released from Japan, banking lending rose 6.2% yoy in June, below expectation of 7.2% yoy. Current account surplus widened to JPY 0.82T in May, larger than expectation of JPY 0.71T.

          Gold resumes up trend for 1800, then 1864 projection level

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            ActionForex.com
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            Gold’s up trend resumes today and hits as high as 1795.72 so far. Further rise should be seen to 1800 psychological level first. Sustained break will extend the larger up trend to 61.8% projection of 1451.16 to 1765.25 from 1670.66 at 1864.76. Meanwhile, break of 1773.42 minor support will delay the bullish case and bring more consolidations first.

            EU forecasts deeper contraction of -8.7% this year, on slow lockdown easing

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              In the Summer Economic Forecasts released today, European Commission projects a deeper recession in Eurozone and EU in 2020, due to coronavirus pandemic. Because “lifting of lockdown measures is proceeding at a more gradual pace than assumed” in the Spring forecast, impact on the economy will be “more significant than anticipated.

              Some highlights:

              • Eurozone GDP to contract -8.7% in 2020 (down from Spring forecast of -7.7%).
              • Eurozone GDP to grow 6.1% in 2021 (down from 6.3%).
              • EU GDP to contract -8.3% in 2020 (down from -7.4%).
              • EU GDP to grow 5.8% in 2021 (down form 6.1%).
              • Germany GDP to contract -6.3% in 2020 (down form -6.5%).
              • Germany GDP to grow 5.3% in 2021 (down from 5.9%).
              • France GDP to contract -10.6% in 2020 (down from -8.2%).
              • France GDP to grow 7.6% in 2021 (up from 7.4%).

              Valdis Dombrovskis, Executive Vice-President for an Economy that works for People, said: “The economic impact of the lockdown is more severe than we initially expected… If anything, this forecast is a powerful illustration of why we need a deal on our ambitious recovery package, NextGenerationEU, to help the economy.”

              Paolo Gentiloni, Commissioner for the Economy, said: “The policy response across Europe has helped to cushion the blow for our citizens, yet this remains a story of increasing divergence, inequality and insecurity. This is why it is so important to reach a swift agreement on the recovery plan proposed by the Commission – to inject both new confidence and new financing into our economies at this critical time.”

              Full report here.

              RBA stands pat and pledged not to raise interest rate until progress is made

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                RBA kept monetary policy unchanged as widely expected. The cash rate is held at 0.25% and target of 3-year AGS yield at 0.25% too. The central bank also pledged to maintain the accommodative approach for “as long as it is required”. Also, “the Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.”

                RBA also said the employment conditions have “stabilised” recently and the economic downturn has been “less severe than earlier expected”. However, the “nature and speed” of economic recovery remains “highly uncertain”. Uncertainty is also ‘affecting consumption and investment plans”. The pandemic is prompting many firms to “reconsider their business models”.

                Full statement here.

                Japan labor cash earnings dropped -2.1%, household depending dropped record -16.2%

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                  Japan labor cash earnings dropped -2.1% yoy in May, well below expectation of -1.1% yoy. That’s also the steepest decline since the -2.8% fall recorded back in June 2015. A labor ministry official was quoted by Reuters saying that “the impact from the coronavirus led to a reduction in overtime pay which caused real wages to fall a lot.”

                  Household spending dropped -16.2% yoy, also much worse than expectation of -12.2% yoy. That’s a record decline since comparable data first became available in January 2001. It also followed a prior record of -11.1% yoy decline reported a month ago in April.

                  Despite the poor data, BoJ could likely keep at economic assessment unchanged in the post statement meeting next week. It’s believed that the economy had already hit the bottom in Q2, like many other countries in the world. The question now is on the pace and sustainability of recovery.

                  Australia AiG services dropped back slightly to 31.5, employment shrank further

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                    ActionForex.com
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                    Australia AiG Performance of Services Index dropped -0.1 to 31.5 in June. The reading indicates “another serious contraction in activity” at a pace similar to May. That’s also the second lowest record reading next to April’s. Looking at some details, all indicates remains firmly below series average despite lockdown easing. In particular, employment dropped a further -4.3 pts to 30.9.

                    Full release here.

                    New Zealand NZIER business confidence improved, but stays low on pre-election and pandemic uncertainty

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                      NZIER Quarterly Survey of Business Opinion showed a net 37% of businesses reported decline in activity during Q2. That’s the worst level since March 2009 due to tight trading restrictions under Alert Level 4 lockdown. Also, a net 25% of businesses expect weaker demand in Q3.

                      There was a slight improvement in headline business confidence, from -70 to -63. But the reading suggests that businesses remain pessimistic over the coming months, and they could be holding off on major spending decisions. Pre-election uncertainty is compounded by how the coronavirus pandemic will play out.

                      Full release here.

                      US ISM non-manufacturing rose to 57.1, back in expansion after 2 months of contraction

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                        ActionForex.com
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                        US ISM non-manufacturing index rose to 57.1 in July, up from 45.4, well above expectation of 49.5. It’s back in expansion region after just two consecutive months of contraction readings. That’s also the highest level since February’s 57.33.

                        Looking at some details, production rose 25 pts to 66.6. New orders rose 19.7 pts to 61.6. Employment rose 11.3 to 43.1, but remained below 50. Prices rose 6.8 to 62.4.

                        Anthony Nieves Chair ISM Non-Manufacturing Business Survey Committee also noted, “respondents remain concerned about the coronavirus and the more recent civil unrest; however, they are cautiously optimistic about business conditions and the economy as businesses are beginning to reopen.”

                        Full release here.

                        EU Hogan pledged to act decisively and strongly if US doesn’t want to settle airbus dispute

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                          EU Trade Commissioner Phil Hogan told European Parliament’s that the US had twice rejected EU’s proposal to settle the 15-year old dispute regarding Airbus subsidies. He added that the commission will take decisive actions against the US.

                          He said, “I want to reassure people that we are ready to act decisively and strongly on the European Union side if we don’t get the type of outcome that we expect from the United States in relationship to finalizing this 15-year-old dispute.”

                          “It’s not appreciated the number of 232 investigations that have been launched in recent weeks, perhaps this is political, perhaps it’s more real,” Hogan added. “This is totally unacceptable … and if these investigations go further the European Union will have to stand together and act as well.”

                          Separately, he also told RTE that “I still believe there will be a deal” with the UK on post Brexit relationship. “The ambition of that deal on the European Union side is real.” However, “I don’t see the same ambition at the moment on the UK’s side so, the ball is in the UK’s court, if they want a deal, there is a deal to be done.

                          Eurozone retail sales rose 17.8% in May, above expectation

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                            ActionForex.com
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                            Eurozone retail sales rose 17.8% mom in May, above expectation of 15.0% mom. Volume of retail trade increased by 38.4% mom for automotive fuels, by 34.5% mom for non-food products and by 2.2% mom for food, drinks and tobacco.

                            EU retail sales rose 6.4% mom. volume of retail trade increased in all Member States for which data are available, except in Bulgaria, where it remained unchanged. The highest increases were registered in Luxembourg (+28.6% mom), France (+25.6% mom) and Austria (+23.3% mom).

                            Full release here.

                            UK PMI construction rose to 55.3, return to growth has been achieved

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                              ActionForex.com
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                              UK PMI construction rose sharply to 55.3 in June, up from May’s 28.9, well above expectation of 47.0. While new orders stabilized, employment fell again. Also, lack of materials availability pushed up input costs.

                              Tim Moore, Economics Director at IHS Markit: “As the first major part of the UK economy to begin a phased return to work, the strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period. While it has taken time for the construction supply chain to adapt and rebuild capacity after widespread business closures, there is now clear evidence that a return to growth has been achieved…

                              “…Looking ahead, construction firms are more confident than at any time since the start of the COVID-19 pandemic. However, the ongoing reductions in staffing numbers seen in June provide a stark reminder that underlying conditions across the sector are a long way off returning to those seen before the public health emergency.”

                              Full release here.

                              Eurozone Sentix investor confidence rose to -18.2, but upswing could run out of steam in summer

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                                ActionForex.com
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                                Eurozone Sentix Investor Confidence rose to -18.2 in July, up from -24.8, but missed expectation of -11. That’s the third increase nonetheless. Current Situation index rose to -49.5, up from -61.5. Expectations index, however, dropped to 19.5, down from 21.8.

                                Sentix Said: “Behind this development is apparently the expectation of investors that the recovery after the ‘lock-down’ will continue but will not lead to a complete ‘recovery’ of the economy…. This means that there has been no improvement in the long-term outlook for investors over the past four weeks. The falling expectations are thus a sign that there is a danger that the ‘upswing’ could run out of steam as early as the summer.”

                                Full release here.

                                Germany Ifo: We could see a wave of insolvencies in the coming months

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                                  ActionForex.com
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                                  Ifo said 21% of Germany companies surveyed said the adverse effects of the coronavirus crisis put their very survival in danger. Researcher Stefan Sauer warned “we could see a wave of insolvencies in the coming months. Service sector is the most affected with 27% saying they’re at risk. 21% in retail, 17% in manufacturing, 15% in wholesale and 2% in construction said coronavirus is threatening their survival.

                                  Full release here.

                                  German factory orders rose -10.4% in May, still 30% lower from pre-crisis level

                                    By
                                    ActionForex.com
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                                    Germany factory orders rose 10.4% mom in May, below expectation of 15.0% mom. Excluding major orders, real new orders in manufacturing rose 8.9% mom. Comparing with February, the month before coronavirus restrictions, new orders were -30.8% lower.

                                    Look at some details, domestic orders rose 12.3% mom. Foreign orders rose 0.8% mom. New orders from Eurozone rose 20.9% mom. New orders from other countries rose 2.0% mom. Intermediate goods rose 0.4% mom. Capital goods rose 20.3% mom. Consumer goods rose 4.7% mom. Automotive rose

                                    Full release here.

                                    BoE Bailey: Negative rates were one of the potential tools under active review

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                                      ActionForex.com
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                                      The Sunday Times reported that BoE Governor Andrew Bailey has sent a letter to bankers telling them “negative rates were one of the potential tools under active review”. It’s one of the options if more stimulus was needed to lift inflation back to 2% target. And it would be a “significant operational undertaking for firms” as a year could be needed to alter computer systems and update contracts.

                                      Additionally, it’s said that Bailey emphasized “every tool they have is on the table” at a meeting with bankers at the end of June.

                                      ECB Lagarde: Transformation toward digitization and automation disinflationary

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                                        ActionForex.com
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                                        ECB President Christine Lagarde said the coronavirus pandemic could accelerate the economy’s transformation towards further digitization and automation, with shorter supply chain. The transition to new economic model will be “disruptive”. “They will probably be more disruptive in the first two years, obviously hitting employment and production,” she added.

                                        “So the inflation dynamic will necessarily be impacted, probably with a disinflationary, deflationary aspect at first, and then an inflation dynamic.” ECB will need to keep monetary policy exceptionally loose in the mean time.

                                        She added that ECB estimated supply chain to shrink by around 35%, with use of robots increased by 70% to 75%.

                                        ECB Villeroy: Non-conventional becomes the quasi-conventional

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                                          ActionForex.com
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                                          ECB Governing Council member Francois Villeroy de Galhau said the European economic policy was permanently changed by the coronavirus pandemic. Firstly, the “exceptional, provisional weapons will be long-lasting”. Secondly, “the non-conventional becomes the quasi-conventional. The exceptional measures like negative interest rates, quantitative easing and long-term bank loans are here to stay.

                                          The Bank of France Governor also said separately that things are going “at least as well as we forecast at the start of June, and even a bit better” in France. Economic contraction in 2020 may not be as sharp as the -10% projected. “If households have more confidence and dip into savings to feed their consumption, the recovery could be quicker and we could get to pre-covid levels of activity at the end of 2021,” Villeroy said.

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