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Fed stands pat, notes economic activity and employment have picked up somewhat

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    ActionForex.com
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    Fed kept federal funds rate unchanged at 0-0.25% as widely expected. It also maintain the pledge to use its “full range of tools to support the  U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.” Also, Fed will continue to ” increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace”.

    Fed acknowledged that “economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”

    Otherwise, the statement was largely unchanged from the prior one.

    Full FOMC statement here.

    BoC stands pat, launches new bond purchase programs

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      ActionForex.com
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      BoC left overnight rate target unchanged at 0.25% as widely expected. It noted that this is the “effective lower bound” of the overnight rate already. BoC will continue to purchase at least CAD 5B in government securities per week in the secondary market. It’s also temporarily increasing the amount of treasury bills acquired at auctions to up to 40%.

      Additionally, BoC launches today a new Provincial Bond Purchase Program of up to CAD 50B, to supplement the Provincial Money Market Purchase Program. Further there is a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment grade corporate bonds in the secondary market. Both programs will be put in place in the coming weeks. Term repo facility is enhanced to permit funding for up to 24 months.

      While it’s “too uncertain” to provide a complete economic forecasts, BoC analyzed alternative scenarios. GDP was down 1-3% in Q1 and will be 15-30% lower in Q2 this year, comparing with Q4 2019. CPI inflation is expected to be close to 0% in Q2, primarily due to lower gasoline prices.

      Full statement here.

      Australia NAB business confidence dropped to -11 in Q1

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        ActionForex.com
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        Australia NAB Business Confidence dropped from -2 to -11 in Q1. Current Business Conditions dropped from 6 to -3. Conditions for the next 3 months dropped from 8 to -4. Conditions for the next 12 months dropped from 16 to 7.

        Alan Oster, NAB Group Chief Economist: “While the bulk of the survey was collected prior to the introduction of the more significant containment measures, the spread of the coronavirus and international developments has clearly impacted confidence. Business conditions were also weaker – and this was before activity saw a significant disruption”.

        “Unsurprisingly, the forward indicators point to ongoing weakness in the business sector. While there was clearly a large amount of uncertainty at the time of the survey, it was clear that looming lockdowns and an escalation in social distancing measures would materially impact economic activity”.

        Full release here.

        US CPI rose 0.4% mom in Sep, core CPI up 0.3% mom

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          ActionForex.com
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          In September, US CPI rose 0.4% mom, above expectation of 0.3% mom. CPI core (ex-food and energy) rose 0.3% mom, matched expectations. Energy index rose 1.5% mom. Food index rose 0.2% mom.

          Over the last 12 months. CPI was unchanged at 3.7% yoy, above expectation of 3.6% yoy. CPI core slowed from 4.3% yoy to 4.1% yoy , matched expectations. Energy index was down -0.5% yoy while food index was up 3.7% yoy.

          Full US CPI release here.

          EU releases proposals on WTO reforms, defend multilateral trade system

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            ActionForex.com
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            European Commission released their comprehensive approach for the modernisation of the World Trade Organisation today.

            In presenting the ideas, Commissioner for Trade Cecilia Malmström said: “The multilateral trading system has for the past decades provided a stable, predictable and effective framework for companies across the world, helping many economies to grow rapidly. Also today, the WTO is indispensable in ensuring open, fair and rules-based trade. But despite its success, the World Trade Organisation has not been able to adapt sufficiently to the rapidly changing global economy. The world has changed, the WTO has not. It’s high time to act to make the system able to address challenges of the today’s global economy and work for everyone again. And the EU must take a lead role in that.”

            The ideas in the proposal are related to three key ares:

            • updating the rule book on international trade to capture today’s global economy
            • strengthening the monitoring role of the WTO
            • overcoming the imminent deadlock on the WTO dispute settlement system.

            EU also noted that the US and Japan are engaged in the framework of trilateral discussions. A dedicated workgroup was set up during the latest EU-China summit. And EU pledged to discuss the ideas with other WTO partners in the coming weeks.

            Here is the press release. And a 17-page document detailing the proposals.

            Earlier today, the European Union Chamber of Commerce in China released an annual position paper. The 33-page paper detailed 14 common concerns faced by European companies in China, and listed out a accumulative total of 828 recommendations.

            This is how adults work!

            New Zealand BNZ services dropped to 45.9, lowest since Oct

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              ActionForex.com
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              New Zealand BusinssNZ Performance of Services index dropped -3.9 to 45.9 in January. That was the lowest result since October 2021. Looking at some details, activity/sales dropped sharply from 50.7 to 44.1. Employment ticked down from 49.1 to 48.1. New orders/businesses dropped deeply from 52.0 to 41.8. Stocks/inventories dropped from 51.0 to 47.6. Supplier deliveries also tumbled from 49.8 to 43.6.

              BNZ Senior Economist Craig Ebert said that “the PSI can jag around quite a lot from month to month – upwards and downwards. However, it’s also worth pointing out that the long-term average of the PSI is 53.6, which is starting to feel some distance away. So much for the new traffic light system releasing the brakes on activity.”

              Full release here.

              France PMI manufacturing revised up to 53.8, growth rate broadly unchanged after three months of softening

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                ActionForex.com
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                France PMI manufacturing was finalized at 53.8 in April, revised up from 53.4. Markit noted that overall growth broadly unchanged having slowed in previous three months. Rates of expansion in output and employment quicken. And, inflationary pressures remain elevated.

                Comments from Alex Gill, Economist at IHS Markit:

                “Having softened in the previous three months, the rate of growth in the French manufacturing sector was broadly unchanged at the start of the second quarter. Encouragingly, output and employment rose at sharper rates than in March.

                “On a less positive note, the pace of expansion in new orders continued to moderate, in turn leading to the weakest degree of business confidence for seven months.

                “The slowdown in client demand growth seen since the start of 2018 can be partially linked to poor weather conditions, while the recent train strikes may also have played a part. The degree to which these factors can explain the slowdown or whether the cause is something of greater concern will become more apparent in the coming months.”

                Full release here.

                China’s exports jump 7.1% yoy in Jan-Feb, imports rise 3.5% yoy

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                  ActionForex.com
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                  China’s trade figures for the combined period of January and February have remarkably exceeded expectations, with exports rising by 7.1% yoy , surpassing the anticipated 1.9% increase. Imports also showed a robust performance, climbing 3.5% yoy, which beat the forecast of 1.5% growth.

                  This led to trade surplus of USD 125.2B, not only exceeding the expected USD 110.3B but also marking an increase from last year’s USD 103.8B during the same period.

                  Separately, Pan Gongsheng, PBoC, pointed out yesterday that there was room for further reductions in banks’ reserve requirement ratios the percentage of reserves banks are required to hold against deposits. Such a move would free up additional liquidity for lending and investment, potentially stimulating economic activity.

                  China production, retail sales, investment all missed expectations

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                    ActionForex.com
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                    The batch of October economic data released from China today is way below expectations. Industrial production growth slowed to 4.7% yoy, below expectation of 5.5% yoy. Fixed asset investment slowed to 5.2% ytd yoy, below expectation of 5.4%. That’s also the worst January-October growth since record began in 1996. Retail sales grew 7.2% yoy, missed expectation of 7.8% yoy, matching the more than 16 year low hit in April.

                    The chance of a recovery in growth momentum hinges on the results of the trade negotiations with US. Tariff rollbacks would be the key for the “easier” phase one deal. Without removing some of the imposed tariffs, in particular the September ones, the deal would be rather meaningless to the real Chinese economy. Of course, the biggest challenges come in the second phase of negotiations when core and fundamental issues, like subsidies to state-owned enterprises, would be addressed.

                    The Hong Kong HSI drops sharply today in response to the poor Chinese data. It’s also following the steep selloff this week as unrest in the city escalates abruptly. Current development affirms our view that corrective rebound from 24899.93 has completed with three waves up to 27894.56. Deeper fall should be seen back to retest 24899.93 low next.

                    ECB Vasle: Things are under control at the moment

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                      ActionForex.com
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                      ECB Governing Council member Boštjan Vasle said “I do not see any reason for a further change in growth prospects” of Eurozone. The economy is “developing in a way which was predicted in our latest projections; at the moment things are under control, going in a direction which is not unexpected.”

                      He added, “we are in a situation where the business cycle is in the late phase, the economic situation is deteriorating and our monetary policy is quite stretched at the moment”. Nevertheless, “if the situation changes, there is still room to go in that direction” of more policy easing.

                      For now, “it’s been too short of a time to judge the impact since we adapted the package” back in September.

                      UK PMI composite ticked lower to 61.7, expansion rate appears peaked

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                        ActionForex.com
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                        UK PMI Manufacturing dropped to 64.2 in June, down from 65.6, above expectation of 64.0. PMI Services dropped to 61.7, down from 62.9, below expectation of 63.0. PMI Composite dropped to 61.7, down from 62.9.

                        Chris Williamson, Chief Business Economist at IHS Markit, said: “There are some signs that the rate of expansion appears to have peaked, as both output and new order growth cooled slightly from May’s record performances, but full order books and a further loosening of virus-fighting restrictions should nevertheless help ensure growth remains strong as we head through the summer.

                        “However, inflation worries have continued to intensify. Record levels of the survey’s price gauges and the further development of capacity constraints hint strongly that consumer price inflation has much further to rise after already breaching the Bank of England’s 2% target in May.

                        Full release here.

                        China’s Caixin PMI manufacturing rises to 50.7, back to growth amidst challenges

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                          ActionForex.com
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                          China’s Caixin PMI Manufacturing index climbed from 49.5 to 50.7 in November, surpassing the expected 49.3. According to Caixin’s release, this improvement is attributed to sustained rise in total new work, which helped push production back into growth territory. Additionally, there was softer reduction in employment and uptick in business confidence, reaching a four-month high.

                          Wang Zhe, Senior Economist at Caixin Insight Group, noted, “Overall, the manufacturing sector improved in November.” He cited several factors contributing to this improvement: expansion in supply and demand, stable prices, improved logistics, increased purchasing quantities, and a more optimistic outlook among manufacturers. However, he also pointed out some ongoing challenges, such as sluggish external demand, weak employment, and cautious inventory management by manufacturers.

                          Wang also commented on the broader macroeconomic context, stating, “The macro economy has been recovering.” He observed improvements in household consumption, industrial production, and market expectations. Despite these positive signs, he cautioned that both domestic and foreign demand remain insufficient, employment pressures are high, and the economic recovery is still searching for a solid footing.

                          Full China Caixin PMI Manufacturing release here.

                          Eurozone PMI manufacturing finalized at 47.3, remains in troubled waters

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                            ActionForex.com
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                            Eurozone PMI Manufacturing was finalized at 47.3 in March, down from February’s 48.5, a 4-month low. Looking at some member states, Greece (52.8, 10-month high) and Spain (51.3, 9-month high) improved. Others deteriorated including Italy (51.1, 2-month low), Ireland (49.7, 3-month low), France (47.3, 5-month low), the Netherlands (46.4, 4-month low), Germany (44.7, 34-month low), and Austria (44.7, 34-month low).

                            Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted that Eurozone manufacturing “remains in troubled waters” as factories report an eleventh consecutive month of falling demand due to factors such as surging living costs, tighter monetary policy, inventory destocking, and low customer confidence.

                            He also pointed out that the lack of demand has shifted pricing power from sellers to buyers, and lower energy prices have helped reduce costs. As a result, “prices paid for inputs by factories are now falling sharply on average,” and slower increases in selling prices should eventually lead to lower consumer prices for goods.

                            Full Eurozone PMI manufacturing release here.

                            EU: No-deal Brexit is not our preferred option, but current deal is best possible

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                              ActionForex.com
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                              A European Commission spokesperson said today that the bloc was still hoping to avoid no-deal Brexit. But EU is prepared for such an outcome. She noted that “a no-deal scenario is not our preferred option,” but reiterated that the current withdrawal agreement was the “best possible” one. And, “our no-deal preparedness protects the EU 27 and the interests in the case of a no-deal Brexit,”

                              She also noted that the Commission does remain available over the coming weeks should the United Kingdom wish to hold talks and clarify its position in more detail, whether by phone or in person.”

                              Earlier, The Guardian reported that no-deal Brexit is now UK government’s central scenario. An unnamed EU official was quoted saying the UK has ““no intention to negotiate, which would require a plan”.

                              Bitcoin breaks 45k barrier, eyeing 50k

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                                ActionForex.com
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                                Bitcoin soars notably today, and breaks 45k mark for the first time in nearly two years, signaling a resurgence in its medium-term uptrend. The flagship cryptocurrency could be gathering momentum to extend its medium term up trend at the start of the year.

                                Two key events are driving this optimism: the pending SEC approval for spot Bitcoin ETF products, with 14 applications currently under review, and the much-anticipated Bitcoin halving event, a code-embedded process that occurs every four years.

                                From a technical perspective, break of 44727 short term top indicates resumption of whole up trend from 15452 (2022 low). Near term outlook will stay bullish as long as 41511 support holds. Next target is 161.8% projection of 15452 to 31815 from 24896 at 51371.

                                In the bigger picture, upside acceleration as seen in W MACD suggests that rise from 15452 is an impulsive move. Hence, sustained break of 51371 would solidify the case that Bitcoin is ready to resume the long term up trend through 68986 historical high at a later stage.

                                Eurozone PPI up 1.6% mom, 41.9% yoy in Sep

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                                  ActionForex.com
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                                  Eurozone PPI rose 1.6% mom, 41.9% yoy in September, below expectation of 1.7% mom, 42.0% yoy. For the month, industrial producer prices in Eurozone increased by 3.3% in the energy sector, by 0.9% for non-durable consumer goods, by 0.4% for capital goods and for durable consumer goods and by 0.1% for intermediate goods. Prices in total industry excluding energy increased by 0.4%.

                                  EU PPI rose 1.5% mom, 41.4% yoy. The highest monthly increases in industrial producer prices were recorded in Bulgaria (+9.2%), Slovakia (+8.9%) and Italy (+3.5%), while the largest decreases were observed in Ireland (-18.9%), Estonia (-3.9%) and Greece (-2.4%).

                                  Full release here.

                                  US durable goods orders dropped -0.2%, ex-transport orders rose 0.9%

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                                    ActionForex.com
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                                    US durable goods orders dropped -0.2% in January to USD 246.2B, better than expectation of -1.5% decline. Ex-transport orders rose 0.9%, above expectation of 0.2%. Ex-defense orders rose 3.6%.

                                    The second estimate of US Q4 GDP showed 2.1% annualized growth, unrevised, unchanged from Q3’s reading. PCE price index was revised down from 1.6% to 1.3%. PCE core index was also revised down from 1.3% to 1.2%.

                                    Japan industrial production dropped -7.2% mom in may, worst in two years

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                                      ActionForex.com
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                                      Japan industrial production dropped -7.2% mom in May, much worse than expectation of -0.3% mom. That was also the worst contraction in two years, since the -10.5% mom decline in May 2020.

                                      The index of production at factories and mines stood at 88.3 against the 2015 base of 100. Index of industrial shipments dropped -4.3% mom to 89.0. Inventories dropped -0.1% mom to 98.5.

                                      Nevertheless, manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to rebound 12.0% in June, followed by a 2.5% expansion in July.

                                      Fed Bullard: No need to do more on monetary policy normalization

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                                        ActionForex.com
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                                        St. Louis Fed President James Bullard said “with respect to the (monetary policy) normalization, we have already reached a point when policy rates are in a good position.” And he suggested that Fed policymakers “don’t need to do much more to normalize policy.”

                                        Separately, he also welcomed the USMCA North America trade agreement. He said “this is very good news, because it shows that despite the ups and down of negotiations, you can reach a conclusion …on trade relations.” And he hope the US “can get deals like this elsewhere and we might get the uncertainty down on this issue.”

                                        Eurozone industrial production rose 0.7% mom in June, EU up 0.6% mom

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                                          ActionForex.com
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                                          Eurozone industrial production rose 0.7% mom in June, above expectation of 0.0% mom. Production of capital goods rose by 2.6% mom and energy by 0.6% mom, while production of intermediate goods fell by -0.1% mom, durable consumer goods by -0.6% mom and non-durable consumer goods by -3.2% mom.

                                          EU industrial production rose 0.6% mom. Among Member States for which data are available, the highest monthly increases were registered in Ireland (+6.7%), Malta (+4.8%) and Greece (+3.4%). The largest decreases were observed in Romania (-3.9%), Belgium (-2.2%), Italy and Latvia (both -2.1%).

                                          Full release here.

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