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US initial jobless claims dropped to 206k, better expectation

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    ActionForex.com
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    US initial jobless claims dropped -10k to 206k in the week ending July 20, below expectation of 220k. Four-week moving average of initial claims dropped -5.75k to 213k.

    Continuing claims dropped -13k to 1.676m in the week ending July 13. Four-week moving average of continuing claims dropped -4.5k to 1.697m.

    Full release here.

    ECB stands pat, indicates possibility of lower rates, stands ready to act

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      ActionForex.com
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      ECB keeps monetary policy unchanged as widely expected. Main refinancing rate is kept at 0.00%. Marginal lending facility and deposit facility rates are held at 0.25% and -0.40% respectively.

      Forward guidance is changed to reflect the possibility of lower interest rates. That is, interest rates are expected to “remain at their present or lower levels at least through the first half of 2020”.

      Also ECB “stands ready to adjust all of it instruments” if “medium-term inflation outlook continues to fall short of its aim”

      Full statement here.

      Monetary Policy Decisions

      At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to its aim over the medium term.

      The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

      The Governing Council also underlined the need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, have been persistently below levels that are in line with its aim. Accordingly, if the medium-term inflation outlook continues to fall short of its aim, the Governing Council is determined to act, in line with its commitment to symmetry in the inflation aim. It therefore stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.

      In this context, the Governing Council has tasked the relevant Eurosystem Committees with examining options, including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.

      The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

      German Ifo dropped to 95.7, economy is navigating troubled waters

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        ActionForex.com
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        German Ifo Business Climate dropped to 95.7 in July, down from 97.5 and missed expectation of 97.0. Expectations Index dropped to 92.2, down from 94.0, missed expectation of 94.0. Current Assessment Index dropped to 99.4, down from 101.1, missed expectation of 100.4.

        Clemens Fuest, President of the ifo Institute, said “the mood in German C suites is growing uneasy… Companies were less satisfied with their current business situation and are also looking ahead with increased skepticism. The German economy is navigating troubled waters.”

        Manufacturing index was in “freefall” and dropped from 1.3 to -4.3. “Such a major decline was last seen in February 2009” and, “no improvement is expected in the short term, as businesses are looking ahead to the next six months with more pessimism.” Services Sector index dropped from 20.3 to 17.7, with expectations slightly pessimistic for the first time since July 2009. Trade index “slid sharply” from 7.9 to 1.4. “Companies are assessing their current situation as considerably less positive, and their outlook for the coming months is markedly more skeptical.” Construction Index dropped rose from 23.0 to 23.3.

        Full release here.

        China MOFCOM: Some Chinese firms willing to continue to buy US farm products

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          ActionForex.com
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          Chinese Ministry of Commerce spokesman Geo Feng confirmed that next round of US-China trade negotiation will happen in Shanghai for two days on July 30-31.

          It’s reported that China has already agreed on unspecified purchases of US agricultural production. Gao said in a regular press conference that “Some Chinese firms are willing to continue to buy some U.S. agricultural goods, and they have asked for prices from their U.S. suppliers and will sign commercial contracts soon.”

          But Gao also clarified that the purchases will be decided by companies themselves according to market functioning. Such purchases bear no direct relationship to restart of trade talks.

          ECB to stand pat but set the stage for Sept easing, some previews

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            ActionForex.com
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            ECB rate decision is the major focus today. It’s widely expected to keep monetary policy unchanged for now. That is, main refinancing, marginal lending and deposit facility rates will be held unchanged at 0.00%, 0.25% and -0.40% respectively. Nevertheless, president Mario Draghi should provide explicit dovishness in the press conference that set the stage for policy easing in September. In particular, focuses will be on issues including rate floor, restart of QE, and emphasis on “symmetric” inflation target.

            Suggested readings:

            Euro is currently among the weakest ones for the week on dovish ECB expectations. EUR/CHF is now pressing 61.8% projection of 1.2004 to 1.1173 from 1.1476 at 1.0962. Sustained break there will likely bring downside acceleration to 100% projection at 1.0645 next.

            EUR/USD is set to take on 1.1107 low. For, we’re not expecting a solid break there yet. However, the pair is starting build up downside momentum, as seen in daily MACD. Firm break of 1.1107 would resume the down trend from 1.2555.

            RBA Lowe: Prepared to provide additional easing, extended period of low interest rates expected

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              ActionForex.com
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              In a speech delivered today, RBA Governor Philip Lowe reiterated the dovish stance that, “the Board is prepared to provide additional support by easing monetary policy further.” At the same time, “whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates.”

              Lowe also noted, “on current projections, it will be some time before inflation is comfortably back within the target range”. And, it’s “highly unlikely that we will be contemplating higher interest rates until we are confident that inflation will return to around the midpoint of the target range.”

              He also defended current inflation target a said it has “stood the test of time”. He warned that lowering the target could “hardly seems a good way to build long-term credibility”. ” Lowe said. “Shifting the goal posts could also entrench a low inflation mindset.” Thus, “this brings me back to the question: is inflation targeting still appropriate? The short answer is yes.” And, ” the evidence does not support the idea that a change to our inflation target would deliver better economic outcomes than achieved by our current flexible inflation target,” he noted.

              Lowe’s full speech here.

              Johnson: Ports, banks, factories, businesses ready for no-deal Brexit

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                ActionForex.com
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                New UK Prime Minister Boris Johnson executed a “brutal”, as some described, cabinet reshuffle after taking the top job. 18 of 29 ministers were dumped out. Instead, some Brexit hardliners are brought into the cabinet. New cabinet include Sajid Javid as chancellor of the exchequer, Dominic Raab as foreign secretary and first secretary of state, Priti Patel as home secretary, Michael Gove as chancellor of the Duchy of Lancaster, Liz Truss as international trade secretary, etc.

                Johnson also said, “the doubters, the doomsters, the gloomsters — they are going to get it wrong again. We are going to fulfill the repeated promises of Parliament to the people and come out of the EU on Oct. 31, no ifs or buts, and we will do a new deal, a better deal.”

                He added, “We can do a deal without checks at the Irish border. It is of course vital at the same time that we prepare for the remote possibility that Brussels refuses any further to negotiate and we are forced to come out with no deal.”

                He also insisted the economy is ready for no-deal. “The ports will be ready, the banks will be ready, the factories will be ready, business will be ready,” he said. “The British people have had enough of waiting.

                UK PM Johnson: Don’t forget the extra lubricaiton of GBP 39B in no-deal Brexit

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                  ActionForex.com
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                  Boris Johnson is formally appointed by Queen Elizabeth II as UK Prime Minister today. In the remarks outside 10 Downing Street, he said to “fulfil the repeated promises of parliament to the people and come out of the EU on October 31, no ifs or buts.”

                  On the possibility of no-deal Brexit, he emphasized “don’t forget that in the event of a no-deal outcome we will have that extra lubrication of the 39 billion pounds.”

                  Oil inventory dropped -10.8m barrels, WTI rises mildly

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                    ActionForex.com
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                    US commercial crude oil inventories dropped sharply by -10.8m barrels in the week ending July 19, much larger than expectation of -4.2m barrels. At 445.0m barrels, crude oil inventories are about 2% above the five year average for this time of year. Full release here. WTI oil strengthens just mildly after release.

                    WTI’s fall to 54.79 was deeper than expected and broke 56.05 support. For now price actions from 60.93 are seen as correcting the rise from 50.64 to 60.69. Such correction should extend further for a while. Hence, current recovery from 54.79 should be limited below 60.93. Another fall through 54.79 is in favor but should be contained well above 50.64 low.

                    US PMI manufacturing dropped to 118-mth low, disappointing start to Q3

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                      ActionForex.com
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                      US PMI manufacturing dropped to 50.0 in July, down from 50.6, missed expectation of 51.0. That’s the lowest level in 118 months. PMI services, however, rose to 52.2, up from 51.5, beat expectation of 51.8. PMI composite rose to 51.6, up from 51.5, a 3-month high.

                      Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

                      “The survey data indicated that the economy started the third quarter on a disappointingly soft footing. The PMIs for manufacturing and services collectively point to annualized GDP growth of just 1.6%, up only very marginally from a lacklustre 1.5% indicated by the survey in the second quarter.

                      “The overall picture of modest growth conceals a two-speed economy, with steady service sector growth masking a deepening downturn in the manufacturing sector. The survey’s gauge of factory production has slumped to its lowest since August 2009, and indicates that manufacturing output is falling at a quarterly rate of over 1%, led by an increasing rate of loss of export sales.

                      “The survey’s employment gauge has meanwhile fallen to a level consistent with 130,000 jobs being added in July, down from an average of 200,000, in the first quarter and 150,000 in the second quarter, as firm became increasingly cautious in relation to hiring. Manufacturers are shedding workers at the fastest rate since 2009 and service sector job creation is now down to its lowest since April 2017.

                      “Future prospects have also darkened to the gloomiest since comparable data were first available in 2012, suggesting that companies may look to tighten their belts further in coming months, dampening spending, investment and jobs growth. Geopolitical worries, trade wars and increasingly widespread expectations of slower economic growth at home and internationally have all pulled business optimism lower.”

                      Full release here.

                      US Mnuchin confirms to travel to Shanghai for trade negotiations next week

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                        ActionForex.com
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                        US Treasury Secretary Steven Mnuchin confirmed to CNBC that he will travel to China for a trade meeting with Trade Representative Robert Lighthizer next week. Mnuchin noted “there are a lot of issues” but he expected another meeting would follow in Washington afterwards. And, “hopefully we’ll continue to progress”.

                        The two-day meeting that starts on Tuesday will be held in Shanghai. Mnuchin noted the symbolism of the location, the Shanghai Communique of 1972 was considered an important step in normalizing relations between the U.S. and China.

                        Eurozone PMIs: Economy relapsed, GDP growth to slow further to 0.1% in Q3

                          By
                          ActionForex.com
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                          Eurozone PMI manufacturing dropped to 46.4 in July, down from 47.6 and missed expectation of 47.6. That’s also the lowest level in 79 months. PMI services dropped to 53.3, down from 53.6, matched expectations. PMI Composite dropped to 51.5, down from 52.2, a 3-month low.

                          Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

                          “The eurozone economy relapsed in July, with the PMI giving up the gains seen in May and June to signal one of the weakest expansions seen over the past six years. The pace of GDP growth looks set to weaken from the 0.2% rate indicated for the second quarter closer to 0.1% in the third quarter.

                          “The manufacturing sector has become an increasing cause for concern. Geopolitical worries, Brexit, growing trade frictions and the deteriorating performance of the autos sector in particular has pushed manufacturing into a deeper downturn with the survey indicative of the goods-producing sector contracting at a quarterly rate of approximately 1%.

                          “The more domestically-focused service sector remained the main driver of expansion, though even here the rate of growth has slowed, likely in part due to signs of weaker labour market trends. Hiring was close to a three-year low in July.

                          “Germany has been especially hard hit by the manufacturing and autos sector downturns, and is at risk of GDP contracting marginally in the third quarter. France appears more robust, albeit with growth likely to ease slightly from 0.3% to 0.25% in the third quarter.

                          “With growth slowing, job creation fading and price pressures having fallen markedly compared to earlier in the year, the survey will give added impetus to calls for more aggressive stimulus from the ECB.”

                          Full release here.

                          Germany PMI manufacturing dropped to 84-mth low, from bad to worse

                            By
                            ActionForex.com
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                            Germany PMI manufacturing dropped to 43.1 in July, down from 45.0 and missed expectation of 45.2. That’s also the lowest level in 84 months. PMI services dropped to 55.4, down from 55.8, beat expectation of 55.2, a 2-month low. PMI Composite dropped to 51.4, down from 52.6, a 4-month low.

                            Commenting on the flash PMI data, Phil Smith, Principal Economist at IHS Markit said:

                            “The health of German manufacturing went from bad to worse in July, according to the flash PMI data, raising the risk of the euro area’s largest member state entering a mild technical recession.

                            “The performance from Germany’s goods producers in July is the worst recorded by the survey in seven years, with the renewed weakness mainly stemming from an accelerated drop in export orders – the most marked seen in over a decade.

                            “Still solid growth in the service sector means that the German economy is just about keeping its head above water for now, but even here there are signs of increased worries among companies as optimism hit a three-and-a-half year low.

                            “In a further sign of the slowdown in new orders and gloomier outlook affecting firms’ hiring decisions, July’s flash data showed employment rising at the slowest rate for over four years, with factory job losses accelerating.”

                            Full release here.

                            France PMIs: Softer growth in July dents hopes of swift recovery to long-run rate

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                              ActionForex.com
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                              Franc PMI manufacturing dropped to 50.0 in July, down from 51.9, missed expectation of 51.6. PMI services dropped to 52.2, down from 52.9, missed expectation of 52.8. PMI Composite dropped to 51.7, down from 52.7.

                              Commenting on the Flash PMI data, Eliot Kerr, Economist at IHS Markit said:

                              “Following a seven-month high in June, growth of the French private sector eased at the start of the third quarter. The slowdown was driven by softer new order growth, as sales at manufacturers slipped back into contraction territory at a time of ongoing geopolitical tensions.

                              “Notably, the rate of expansion in overall business activity remains historically subdued and far weaker than the averages registered during 2017 and 2018. Moreover, softer growth in July dents hopes of a swift recovery to the long-run rate, which were beginning to materialise after June’s solid performance.”

                              Full release here.

                              Asian update: AUD tumbles as RBA forecast to cut more, earlier

                                By
                                ActionForex.com
                                -

                                Australian Dollar is sold off deeply in Asian session after poor PMI data. In particular, unemployment component of the PMI dropped sharply to the lowest level since survey began in 2016. Additionally, in a report published today, Westpac brought forward the timing of forecast on next RBA rate cut, from November to October. It noted that the path of unemployment will be “sufficiently contrary” to RBA’s plan. Further more, Westpac’s “terminal rate forecast” was lowered from 0.75% to 0.50%. That is, it expect another cut in February 2020.

                                Staying in the currency markets, Swiss Franc is the second weakest for today so far, retreating some of yesterday’s gains. New Zealand Dollar is the third weakest, after trade surplus widened to NZD 365M in June. On the other hand, Yen is the strongest one, followed by Sterling and then Dollar. The Pound is mixed after Boris Johnson finally confirmed winning Conservative leadership. Leaving the EU with a deal remains our base scenario. Nonetheless, Johnson’s hardliner rhetoric has inevitably increased the chance of a no deal Brexit. More in Brexit Update – New PM, Old Challenge

                                In Asia, currently:

                                • Nikkei closed up 0.34%.
                                • Hong Kong HSI is up 0.71%.
                                • China Shanghai SSE is up 0.87%.
                                • Singapore Strait Times is up 0.08%.
                                • Japan 10-year JGB yield is down -0.0016 to -0.0147.

                                Overnight:

                                • DOW rose 0.65%.
                                • S&P 500 rose 0.68%.
                                • NASDAQ rose 0.58%.
                                • 10-year yield rose 0.031 to 2.074.

                                Australia PMI composite dropped to 51.8, sharp fall in employment

                                  By
                                  ActionForex.com
                                  -

                                  Australia CBA PMI manufacturing dropped to 51.4 in July, down from 52.0. PMI services dropped to 51.9, down from 52.6. PMI composite dropped to 51.8, down from 52.5.

                                  CBA noted that “Slower growth fed through to staffing levels, which decreased for the first time in three months.” More importantly, employment decreased for the greatest extent since the survey began in May 2016. Reduction in jobs were centered of service sector.

                                  Commenting on the Commonwealth Bank Flash PMI data, CBA Senior Economist, Belinda Allen said:

                                  “A slight retreat in growth momentum in business activity in July, although the index does sit comfortably above the critical 50 level that separates expansion and contraction”.

                                  “Overall the “flash” PMI does suggest business activity should continue to expand in Q3. A combination of monetary policy stimulus, tax rebates currently hitting household bank accounts and early signs of a recovery in the housing market should see the Australian economy stabilise, if not pick up over the 2H 2019. The sharp fall in employment intentions underlines the importance of the tax cuts now filtering into the economy and calls for more policy stimulus via infrastructure spending and microeconomic reform. Input costs continued to lift and is worth watching if businesses can pass it on, we could see some impact on consumer inflation over 2H 2019 and into 2020″.

                                  Full release here.

                                  Japan PMIs: Fastest expansion in 7 months on services, but manufacturing sector’s plight continued

                                    By
                                    ActionForex.com
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                                    Japan PMI manufacturing improved to 49.6 in July, up from 49.3, but missed expectation of 49.7. PMI services rose to 52.3, up from 51.9. PMI composite rose to 51.2, up from 50.8.

                                    Commenting on the latest survey results, Joe Hayes, Economist at IHS Markit, said:

                                    “Trends witnessed in the Japanese private sector so far in 2019 were more-or-less maintained at the start of the third quarter. Composite ‘flash’ data for Japan show a modest improvement in private business output in July, with consumption of services supporting the economy, as it has done in the year-to-date. Overall private sector output expanded at the fastest pace in seven months on the back of faster growth in services activity.

                                    “The manufacturing sector’s plight continued, however, where production was cut in July for the seventh successive month. Weak demand from China remained a key factor behind sluggish demand for Japanese goods. Heightened frictions between Japan and South Korea also add downside risk to the manufacturing supply chain in Japan, creating additional slack that services may once again have to compensate for.”

                                    Full release here.

                                    US Kudlow hopeful on China trade talks, Perdue reveals new farmer aids

                                      By
                                      ActionForex.com
                                      -

                                      White House economic adviser Larry Kudlow indicated yesterday that US trade team could travel to China to restart trade negotiations. Meanwhile, China could re-start agricultural purchases soon. He said, “as I read it, it looks like there will be a trip to China and we expect, we hope strongly that China will very soon start buying agriculture products, No. 1 as part of an overall deal and No. 2 as a goodwill gesture.”

                                      Kudlow also sounded positive and added, “I wouldn’t be surprised if we saw a lot of positive news on that coming up… I’m going to strike a note of hopefulness.” However, Commerce Secretary Wilbur Ross sounded more cautious and said “I’m not aware that the gate has opened to any significant degree.”

                                      Separately, Agriculture Secretary Sonny Perdue announced new aid package to help farms hurt by Trump’s trade war with China. The government will pay a minimum of USD 15 per acre to farmers. He said, “we’re anticipating right now three tranches; probably 50 percent … or minimum there of $15 an acre initially.” The second and third tranches would be dependant on market conditions.

                                      IMF: Global growth sluggish and precarious on some self-inflicted reasons

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                                        ActionForex.com
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                                        IMF downgrades global growth forecasts to 3.2% in 2019 and 3.5% in 202, down from April projections of 3.3% and 3.6% respectively. The revision for 2019 reflects “negative surprises for growth in emerging market and developing economies that offset positive surprises in some advanced economies”.

                                        The report added, “global growth is sluggish and precarious but it does not have to be this way because some of this is self-inflicted”. “Dynamism in the global economy is being weighed down by prolonged policy uncertainty as trade tensions remain heightened despite the recent US-China trade truce, technology tensions have erupted threatening global technology supply chains, and the prospects of a no-deal Brexit have increased.”

                                        IMF also urged monetary policy to remain “accommodative”, especially “where inflation is softening below target”. Though, it should accompanied by “sound trade policies”. Fiscal policy should “balance growth, equity and sustainability concerns”. Also, ” the need for greater global cooperation is ever urgent”, including resolving trade and technology tensions, climate change, international taxation, corruption, cybersecurity, and digital payment technology.

                                        Looking at some details:

                                        • US growth in 2019 revised up by 0.3% to 2.6%.
                                        • US growth in 2020 unchanged at 1.9%.
                                        • Eurozone growth in 2019 unchanged at 1.3%.
                                        • Eurozone growth in 2020 revised up by 0.1% to 1.6%.
                                        • Germany growth in 2019 revised down by -0.1% to 0.7%.
                                        • Germany growth in 2020 revised up by 0.3% to 1.7%.
                                        • UK growth in 2019 revised up by 0.1% to 1.3%.
                                        • UK growth in 2020 unchanged at 1.4%.
                                        • Japan growth in 2019 revised down by -0.1% to 0.9%.
                                        • Japan growth in 2020 revised down -0.1% to 0.4%.
                                        • China growth in 2019 revised down by -0.1% to 6.2%.
                                        • China growth in 2020 revised down by -0.1% to 6.0%.

                                        Full report here.

                                        EU Malmstrom: Retaliation tariffs on US basically prepared

                                          By
                                          ActionForex.com
                                          -

                                          European Trade Commissioner Cecilia Malmstrom said today that EU is ready to retaliate with extra tariff on EUR 35B in US imports, if the latter goes ahead with tariffs on EU cars.

                                          She added, “we will not accept any managed trade, quotas or voluntary export restraints and, if there were to be tariffs, we would have a rebalancing list.”

                                          And, “it is already basically prepared, worth 35 billion euros. I do hope we do not have to use that one.”

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