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RBNZ Conway: Probably some more 50 points hikes coming

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    ActionForex.com
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    RBNZ chief economist Paul Conway said today that 50bps rate hikes are the way forward, and he’s confident of soft landing as the labor market is strong.

    “75 wasn’t seriously on the table because we are pretty convinced that we can get to where we need to get with 50-point increments,” he said. Also, the central bank was “signaling there’s probably some more 50 points coming over the next little while.”

    On the economy, Conway said “it’s difficult to engineer a soft landing — typically a significant reduction in inflation is accompanied by negative economic growth — but there’s reasons to believe New Zealand is well placed to pull it off this time around.”

    “The labor market is strong and that’s the underlying reason why the New Zealand economy is well placed to weather the storm,” he added.

    New Zealand unemployment rate surged to 5.3%, most people unemployed in 8 years

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      ActionForex.com
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      New Zealand unemployment rate jumped to 5.3% in Q3, up from Q2’s 4.0%, but was slightly better than expectation of 5.4%.The 1.3% jump was the biggest quarterly increase on record. Labor force participation rate rose 0.2% to 70.1%. Employment dropped -0.8% over the quarter, matched expectations. 37k more New Zealanders were unemployed, bringing the total to 151k, highest in eight years.

      “We are continuing to see the economic effects of COVID-19, and its associated border and business closures,” labour market and household statistics senior manager Sean Broughton said. “Last quarter’s low unemployment rate of 4.0 percent was explained in part by people’s inability to be ‘actively seeking’ and available for work during the national lockdown that was in place for much of the quarter. This quarter’s increase in unemployment reflects a return to more normal job-hunting be ha vi ours.”

      Full release here.

      Canada employment grew 418.5k, unemployment rate dropped to 10.9%

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        ActionForex.com
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        Canada employment grew 418.5k in July, below expectation of 653.3k. Combined with the 953k added in June and 290k in May, employment was brought back to within 1.3m (-7.0%) of pre-pandemic February level.

        Unemployment rate dropped to 10.9%, down form 12.3%, much better than expectation of 12.8%. Labor force participation rate rose back to 64.3%, within 1.2% from February level of 65.5%.

        Full release here.

        IMF sees opportunity for Japan to re-anchoring Inflation Expectations

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          ActionForex.com
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          IMF chief economist, Pierre-Olivier Gourinchas, suggested that a unique opportunity may be presenting itself in Japan to re-anchor inflation expectations to BoJ’s target. However, he cautioned that the process won’t be instantaneous.

          “There’s an opportunity right now,” Gourinchas said, “but it will take time. It won’t happen overnight.” Achieving this re-anchoring requires convincing the public that Japan won’t slide back into deflation – a challenge given the country’s prolonged struggle with price stagnation. Gourinchas believes it’s “too early” for the BoJ to tighten policy, stressing the need for careful handling of the situation.

          Pointing to the global trend of persistent inflation despite initial expectations of transitory dynamics, Gourinchas warned, “Obviously, the history of the last two years is one where inflation that was supposed to be transitory, turned out to be not transitory. We could have similar dynamics in Japan.” Given this possibility, he underscored the need for vigilance and readiness to tighten monetary policy if inflation remains too high.

          Regarding potential strategies for policy tightening, Gourinchas suggested a cautious approach. “It’s probably safer to first move away from the control of long-term yields. And then, if the need arises to tighten monetary policy, it can do so as part of the usual tightening of the policy rate,” he proposed. However, he acknowledged that executing this transition would be technically complex.

          ECB increase PEPP by EUR 600B, extend to at least June 2021

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            ActionForex.com
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            ECB announced to increase the pandemic emergency purchase programme (PEPP)  by EUR 600B to a total of EUR 1350B today. Purchases will continue to conducted in a “flexible manner over time, across asset classes and among jurisdictions”.

            Also, the horizon of PEPP net purchases will be extended to “at least the end of June 2021”. Additionally, “the Governing Council will conduct net asset purchases under the PEPP until it judges that the coronavirus crisis phase is over.” Maturing principal payments will also be reinvested “until at least the end of 2022”.

            Asset purchase programme net purchase will continue at monthly pace of EUR 20B and it’s expected to “run for as long as necessary”. Reinvestments of principal payments will also continue, “for an extended period of time”.

            Interest rates are held unchanged, with main refinancing rate at 0.00%, marginal facility rate at 0.25% and deposit rate at -0.50%.

            Full statement here.

            BoJ opinions: No significant change in the situation in Japan

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              ActionForex.com
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              In the Summary of Opinions of BoJ’s September 21-22 meeting, it’s noted, “since there is no significant change in the situation in Japan where economic activity, such as of firms, has been supported by accommodative financial conditions, it is appropriate for the Bank to maintain the current monetary policy measures”.

              One opinion also noted, “although financial markets have been stable on the whole, it is necessary to be vigilant in closely monitoring economic and financial developments, including the impact of developments in the Chinese real estate sector on global financial markets, and be ready to respond promptly if necessary.”

              Full Summary of Opinions here.

              Australia retail sales flat in Apr, cost-of-living pressures and rising interest rates

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                ActionForex.com
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                Australia retail sales turnover was flat at 0% mom in April, and up 4.2% yoy.

                “Retail turnover has plateaued over the last six months as consumers spent less on discretionary goods in response to cost-of-living pressures and rising interest rates. Spending was again soft in April but was boosted by increased spending on winter clothing in response to cooler and wetter than average weather across the country,” Ben Dorber, ABS head of retail statistics said.

                Full Australia retail sales release here.

                Gold to break 1557 resistance as up trend resumes

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                  ActionForex.com
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                  Gold’s rally accelerates today and reaches as high as 1545.34 so far. Escalation in Middle East tensions is the main driving force behind safe haven flow into gold.

                  Medium term up trend looks ready to resume with focus now on 1557.04 resistance. Break will confirm this bullish case and target 61.8% projection of 1266.26 to 1557.04 from 1445.59 at 1625.29. On the downside, break of 1516.58 support will delay the bullish case and extend the consolidation pattern from 1557.04 with another fall first.

                  Also, as the current rally could be the fifth leg of the five-wave sequence from 1160.17. We’d look for topping signal around 1625.29.

                  BoC Macklem: Vaccines put more certain timeline on global demand resurgence

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                    ActionForex.com
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                    In a speech, BoC Governor Tiff Macklem said the economic recovery from the pandemic is “at a very difficult stage”. For the nears term, rising coronavirus infections will “dampen growth and could even deepen our economic hole” and uncertainty is “elevated”. The recovery is going to be “long and choppy”.

                    Nevertheless, he noted that “trade has bounced back faster than many economists had predicted” and are expected to be strong in 2021. News of vaccines also “puts a more certain timeline on the resurgence of global demand”. “As a country, we need to leverage the broad trade access we have and work with like-minded countries to foster a renewed spirit of open, rules-based trade that works for the 21st century.”

                    Full speech here.

                    Eurozone PPI at 5.4% mom, 21.9% yoy in October, well above expectations

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                      ActionForex.com
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                      Eurozone PPI came in at 5.4% mom, 21.9% yoy in October, well above expectation of 3.2% mom, 19.0% yoy. For the month, industrial producer prices increased by 16.8% mom in the energy sector, by 1.4% mom for intermediate goods, by 0.5% mom for durable and for non-durable consumer goods and by 0.4% mom for capital goods. Prices in total industry excluding energy increased by 0.8% mom.

                      EU PPI rose 5.0% mom, 21.7% yoy. The highest monthly increases in industrial producer prices were recorded in Belgium (+11.2%), Italy (+9.4%) and Romania (+8.6%), while the only decreases were observed in Estonia (-2.1%), Luxembourg (-0.3%) and Sweden (-0.2%).

                      Full release here.

                      US initial jobless claims unchanged at 208k, vs exp 212k

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                        ActionForex.com
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                        US initial jobless claims was unchanged at 208k in the week ending April 27, lower than expectation of 212k. Four-week moving average of initial claims fell -3.5k to 210k.

                        Continuing claims was unchanged at 1774k in the week ending April 20. Four-week moving average of continuing claims fell -4k to 1779k.

                        Full US jobless claims release here.

                        GBP/AUD resuming rally after dovish RBA minutes

                          By
                          ActionForex.com
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                          Australian Dollar trades mildly lower after RBA minutes indicated the possibility of a pause in tightening at next meeting. On the other hand, Sterling (and Euro too) is supported by funds flow from Swiss Franc. But there are some uncertainties for the Pound ahead with UK CPI and BoE rate decisions scheduled later in the week.

                          Technically, GBP/AUD is resuming the near term rise by breaking last week’s high at 1.8316. At the same time, rise from 1.7218 is likely resuming the whole up trend from 1.5925. Near term outlook will stay bullish as long as 1.8074 support holds, even in case of retreat. Next target is 61.8% projection of 1.5925 to 1.8272 from 1.7218 at 1.8668. Nevertheless, break of 1.8074 support will delay the bullish case and bring some consolidations before another rally attempt.

                          BoE Haskel: there will be long-term scarring effects even if vaccine comes

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                            ActionForex.com
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                            BoE policymaker Jonathan Haskel said recent vaccine development offered some light at the end of the tunnel for the UK. However, even if the vaccine comes, there will be “long-term scarring” effects. Such effects are hard to scale for now.

                            Haskel also said the central is not running out of policy tools. It still have plenty that can be down in terms of firepower.

                            Swiss KOF dropped to 100, back at long term average

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                              ActionForex.com
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                              Swiss KOF economic barometer dropped to 100 in May, down from 103.3 and missed expectation of 104.7.

                              KOF noted that the Barometer is back at its “long-term average after over two years of above average values”. And that “indicates a normalization of economic development”.

                              The decline was “mainly driven by the negative development of the indicators for manufacturing and the construction sector.”

                              Full release here.

                              BoE Carney’s post meeting press conference, live stream

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                                Summary on interest rates

                                “With domestically-generated inflation building and the prospect of excess demand in the economy emerging, a modest tightening of monetary policy is now appropriate to return inflation to its 2 percent target, and to keep it there.”

                                “Gradual tightening of monetary policy is likely to be required in order to return inflation sustainably to its target at a conventional horizon.

                                “Structural factors that have pushed down the trend equilibrium real rate are likely to persist.

                                “Domestic short-term factors (particularly headwinds from uncertainty and fiscal drag) will fade slowly.

                                “R* expected to rise gradually. Policy needs to walk – not run- to stand still”.

                                UK Gfk consumer confidence unchanged at -27, little to boost the public’s mood

                                  By
                                  ActionForex.com
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                                  UK Gfk Consumer Confidence came in at -27 in July, up from June’s -30, unchanged from flash reading. Joe Staton, GfK’s Client Strategy Director, says: “There’s been little to boost the public’s mood as the cost of the pandemic to the UK’s economy is becoming apparent. Amidst significant job losses and the end of the furlough scheme, it is perhaps surprising Consumer Confidence has held steady at -27 this month.

                                  “Many people have been savvy and saved money during lockdown, as the most recent GDP figures show. That could explain the one bright spark on the horizon — the three-point uptick in consumer expectations for the financial position of their households in the next 12 months. The way we perceive our ‘future wallets’ is key as it’s the one area over which we have day-to-day control and is a good indicator of our personal financial outlook for the year to come.”

                                  Full release here.

                                  German ZEW improves to -11.4, but situation tumbles to -79.4

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                                    ActionForex.com
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                                    Germany’s ZEW Economic Sentiment for September experienced an uptick, rising from -12.3 to -11.4, surpassing the anticipated drop to -15.0. However, not all was rosy for the nation, as Current Situation index witnessed a downturn, descending from -71.3 to -79.4, which was a more significant dip than forecasted 75.0.

                                    On a broader scale, Eurozone’s ZEW Economic Sentiment slid from -5.5 to -8.9, trailing the predicted -6.2. Current Situation for the zone also decreased marginally, moving by -0.6 to rest at -42.6.

                                    Shedding light on these figures, ZEW President Professor Achim Wambach remarked, “The assessment of the current economic situation in Germany by the financial market experts is even more pessimistic than in August 2023.” While this paints a subdued picture of the present scenario, Wambach highlighted a silver lining, pointing to the “slight improvement in expectations regarding Germany’s economic situation over the next six months.”

                                    Drawing connections to the international arena, Wambach added, “The brighter economic prospects for Germany align with a notably more optimistic view of international stock market developments.” He attributed this, in part, to the growing segment of respondents who foresee stability in interest rates within both Eurozone and US. Furthermore, experts are looking eastwards, projecting a relaxation in China’s interest rate policy.

                                    Full Germany ZEW release here.

                                    US initial jobless claims rose 10k to 227k, Q1 GDP finalized at 3.1% annualized

                                      By
                                      ActionForex.com
                                      -

                                      US initial jobless claims rose 10k to 227k in the week ending June 22, above expectation of 220k. Four-week moving average of initial claims rose 2.25k to 221.25k. Continuing claims rose 22k to 1.688m in the week ending June 15. Four-week moving average of continuing claims rose 6.5k to 1.687m.

                                      Q1 GDP growth was finalized at 3.1% annualized, unrevised. .Upward revisions to nonresidential fixed investment, exports, state and local government spending, and residential fixed investment were offset by downward revisions to personal consumption expenditures (PCE) and inventory investment and an upward revision to imports.

                                      US ADP jobs grew 2369k in Jun, May revised up to 3065k increase

                                        By
                                        ActionForex.com
                                        -

                                        US ADP employment report showed 2369k growth in private sector jobs in June, below expectation of 3000k. Nevertheless, May’s figure was revised sharply higher from -2760k loss to 3065k growth. By company size, small businesses added 937k jobs, medium businesses added 559k, large businesses added 873k. Goods-producing sector added 457k jobs while service-providing sector grew 1912k.

                                        “Small business hiring picked up in the month of June,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “As the economy slowly continues to recover, we are seeing a significant rebound in industries that once experienced the greatest job losses. In fact, 70 percent of the jobs added this month were in the leisure and hospitality, trade and construction industries.”

                                        Full release here.

                                        Today’s top mover: CAD/JPY is a pair to avoid

                                          By
                                          ActionForex.com
                                          -

                                          At the time of writing, CAD/JPY is the biggest mover today, down -53 pips. But it’s a rather tight race. Yen is generally speaking the stronger one on falling global treasury yields. But no currency is decidedly strong.

                                          Meanwhile, the outlook of CAD/JPY is rather mixed and, admittedly, hard to determine. There are two scenarios with equal probability to us. Firstly, the corrective fall from 89.22 has completed with three waves down to 84.61. That is CAD/JPY has bottomed at 84.61 already and the next move is up through 86.98 resistance.

                                          Secondly, such decline is not completed yet. And price actions from 84.84 are merely a sideway corrective pattern that’s skewed to the downside. That is, CAD/JPY should have another decline through 84.61 low.

                                          We won’t object if our readers found the above view as nonsense. They’re actually quite useless for trading the pair. At this point, to us, CAD/JPY is a pair to avoid.

                                          But anyway, break of 85.17 minor support will favor the bearish case and turn bias to the downside for 84.61 support first. Break will target 83.75 and below. On the upside, break of 86.25 will favor the bullish case and turn bias to the upside for 96.98 resistance.

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