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G20 said to call for free trade promotion, but refrain to mention protectionism

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    ActionForex.com
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    Japan’s Ashai newspaper reported that G20 leaders would include “promotion of free trade” in the joint communique to be released as the summit in Osaka ends on June 29. The communique will emphasize free trade as as the core element of global growth, along with technological innovation such as economic digitization .

    There are calls from Europe and other countries, for stronger languages against protectionism. However, the group will likely avoid the terms like “resisting protectionism” due to disagreement from US. Instead, Japan is opting for something in the middle as “promotion of free trade”.

    Full Ashai report here.

    RBNZ hints on Aug rate cut, But NZD rebounds on positive references in statement

      By
      ActionForex.com
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      RBNZ left Official Cash Rate unchanged at 1.50% as widely expected. It also adopted an easing bias by repeatedly saying ” a lower OCR may be needed”. It’s taken by a strong signal that another rate cut is underway in August. However, on the brighter side, RBNZ noted that “GDP growth had held up more than projected” in Q1. And “some of the factors supporting growth in the quarter would continue.” Also, while risks are “tilted to the downside”, resolution of trade tensions “could see uncertainty ease”.

      New Zealand Dollar spiked lower after the release by quickly rebounded on the positive references.

      Full statement here.

      Some suggested readings:

      At this point, NZD/USD is staying in consolidation from 0.6481 and more sideway trading could be seen. But with 0.6681 resistance intact, further decline is expected through 0.6481 support to 0.6424. Decisive break there will resume larger down trend form 0.7557 to 0.6102 (2015 low). However, firm break of 0.6681 will extend the consolidation pattern fro 0.6424 with another rising leg, towards 0.6969 resistance, before completion and down trend resumption.

      Dollar rebounds as Fed Bullard dismisses 50bps rate cut, Powell emphasizes independence

        By
        ActionForex.com
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        Dollar rebounds notably after St Louis Fed President James Bullard, the most dovish Fed official, dismissed a 50bps rate cut in July, in a Bloomberg interview. He said “just sitting here today I think 50 basis points would be overdone. And, “I don’t think the situation really calls for that but I would be willing to go to 25. Though, Bullard emphasized that ” I hate to pre-judge meetings – things can change by the time you get there – but if I was just going today that’s what I would do.”

        Separately, Fed Chair Jerome Powell emphasized Fed’s independence in a prepared speech. He said “the Fed is insulated from short-term political pressures—what is often referred to as our ‘independence.’ Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests. Central banks in major democracies around the world have similar independence.”

        On the economy, Powell said “the baseline outlook of my FOMC colleagues, like that of many other forecasters, remains favorable”. But inflation would return to target “at a somewhat slower pace than we foresaw earlier in the year.” And, ” risks to this favorable baseline outlook appear to have grown.” Hence, Fed will now “closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.”

        Powell also emphasized “we are also mindful that monetary policy should not overreact to any individual data point or short-term swing in sentiment. Doing so would risk adding even more uncertainty to the outlook.”

        EUR/USD’s retreat from 1.1412 temporary top extends lower after the comments. But for now, as long as 1.1317 minor support holds, further rise is still in favor.

        US consumer confidence dropped to 121.5, lowest since Sep 2017

          By
          ActionForex.com
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          US Conference Board Consumer Confidence Index dropped to 121.5 in June, down from 131.3 and missed expectation of 131.0. That’s also the lowest level since September 2017. Present Situation Index dropped to 162.6, down from 170.7. Expectations Index dropped to 94.1, down from 105.0.

          Lynn Franco, Senior Director of Economic Indicators at The Conference Board said: “The decrease in the Present Situation Index was driven by a less favorable assessment of business and labor market conditions. Consumers’ expectations regarding the short-term outlook also retreated. The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence. Although the Index remains at a high level, continued uncertainty could result in further volatility in the Index and, at some point, could even begin to diminish consumers’ confidence in the expansion.”

          Full release here.

          Into US session: Yen rises as German yield hits new record, NZD even stronger

            By
            ActionForex.com
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            Entering into US session, New Zealand Dollar remains the strongest one for today. June exports jumped to record high and that solidifies the case for RBNZ to stand pat tomorrow. Yen is trading as the second strongest, as helped by falling treasury yields. German 10-year yield hits record low at -0.33. US 10-year yield could revisit 2% handle again today. On the other hand, Swiss Franc is currently the weakest one, paring back some of recent rally on reduced concern on war in middle east. EUR/CHF also recovers ahead of 1.1056 support. Sterling is the second weakest, and then Euro.

            The main focus in European session session is US consumer confidence. Some housing data will also be released. Additionally, Fed chair Jerome Powell will speak again today and markets are keen to know how close is Fed to rate cut. At the same time, any news regarding US-China trade negotiations ahead of Trump-Xi meeting at G20 will also be watched.

            In Europe, currently:

            • FTSE is up 0.02%.
            • DAX is down -0.06%.
            • CAC is up -0.09%.
            • German 10-year yield is down -0.015 at -0.320.

            Earlier in Asia:

            • Nikkei dropped -0.43%.
            • Hong Kong HSI dropped -1.15%.
            • China Shanghai SSE dropped -0.87%.
            • Singapore Strait Times dropped -0.22%.
            • Japan 10-year JGB yield rose 0.0009 to -0.15.

            US Perdue: Farmers are one of the casualties of Trump’s trade war

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              ActionForex.com
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              US Agriculture Secretary Sonny Perdue admitted that farmers are “one of the casualties” of Trump’s trade war. He told CNN that American farmers “are one of the casualties here with trade disruption”. And, “we knew going in that when you flew the penalty flag on China, the retaliation, if it came, would be against the farmer.”

              Perdue added “I’ve told the President — and the President understands — you can’t pay the bills with patriotism. We know that, and certainly he knows that. That’s why he’s trying to supplement the damage they’re having from trade disruptions with market facilitation.” However, he said he cannot promise any more aids for 2020.

              UK retail sales volume contracted in fastest pace since 2009

                By
                ActionForex.com
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                UK CBI reported sales dropped sharply to -42 in June, down from -27 and way off expectation of -3. That is, 16% of retailers said sales volumes were up in June of a year ago. 58% said they were down. It also indicates that retail sales volumes fell at their fastest pace since March 2009 in the year to June

                CBI said: “Recent data suggests UK economic growth has slowed noticeably in the second quarter of 2019, as the boost from stockpiling activities in Q1 fades. We expect the UK to return to a subdued growth path further ahead, although risks from Brexit uncertainty and global trade tensions remain heightened.”

                Full release here.

                Italy Tria: 2.1% deficit represented a more than prudent fiscal policy

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                  ActionForex.com
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                  According to a prepared speech for delivery today, Italian Economy Minister Giovanni Tria said “for a zero growth economy like Italy” a 2.1% deficit represented “a more than prudent fiscal policy”.

                  He added that the country is targeting to keep deficit low in the coming years. And the government will continue to lower its debt through reducing spending. Thus, “on this basis, we feel that Italy is substantially compliant with European fiscal rules.” Tria is also confidence of reaching an agreement over its budget with the EU.

                  EU leaders are expected to approve the so-called Excessive Deficit Procedure on July 8-9 summit, which would lead to penalty to Italy over its budget. It’s reported that European Commission would give Italy until January to make necessary budget corrections.

                  New Zealand exports jumped to record high, trade surplus at NZD 264M

                    By
                    ActionForex.com
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                    In May, New Zealand good export rose 8.5% yoy to NZD 5.8B, hitting a record high. Import rose 7.6% yoy to NZD 5.5B. Trade surplus came in at NZD 264m, above expectation of NZD 200m. In particular, exports to China rose 29% yoy to NZD 1.5B led by rises in milk powder, beef, food preparations and logs.

                    Strong terms of trade reaffirms RBNZ’s stance to stand pat tomorrow. Yet, the central bank will likely maintain openness to further rate cut later in the year.

                    AUD/NZD dips through last week’s low as Kiwi jumps after the release. Choppy corrective decline from 1.0731 is still in progress for 61.8% retracement of 1.0275 to 1.0731 at 1.0449. We’d pay attention to strong rebound from there to complete the correction from 1.0731. Break of 1.0550 resistance will turn bias back to the upside. However, sustained break of 1.0449 will pave the way to 1.0275 support next.

                    BoJ April Minutes: Clarifications on forward guidance added to strengthen public confidence on persistent easing stance

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                      ActionForex.com
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                      The Minutes of April 24-25 BoJ meeting showed that some members suggested clarifications on the forward guidance, “with the aim of strengthening public confidence in its monetary easing stance”. That came as “many members” recognized the “high uncertainties” regarding economic outlook and prices. And, it was likely to “still take time to achieve 2 percent inflation”.

                      In the statement after that meeting, BoJ added: “The Bank intends to maintain the current extremely low levels of short- and long-term interest rates for an extended period of time, at least through around spring 2020, taking into account uncertainties regarding economic activity and prices including developments in overseas economies and the effects of the scheduled consumption tax hike.”

                      One member said “at least through around spring 2020” as providing a specific time frame with open-ended elements. Some members also noted that clarifying the meaning of “for an extended period of time” implied a fairly long period of time was necessary.

                      Full minutes here.

                      Chinese Liu had phone call with Lighthizer & Mnuchin, agreed to maintain communications

                        By
                        ActionForex.com
                        -

                        The Chinese Ministry of Commerce confirmed that Vice Premier Liu He had a phone call with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Monday. During the call, both sides exchanged opinions on trade and agreed to maintain communications. Works are believed to be carried out ahead of the meeting between Trump and Xi on the second day of the June 28-29 G20 summit in Osaka, Japan. For now, there is no indications on how the two sides could close the wide gap in their bottom lines.

                        Reuters reported, citing an unnamed US senior officials that “it’s really just an opportunity for the president to maintain his engagement as he has very closely with his Chinese counterpart.”. And, Trump is “quite comfortable with any outcome.” Another unnamed official said “the president has been quite clear that he needs to see structural real reform in China across a number of issues and a number of sectors, and nothing about that has changed.” And, “the fact that talks broke down in May hasn’t changed that as the ultimate goal”.

                        Separately, Japanese Economy Minister Toshimitsu Motegi said he’ll meet Lighthizer this week. He’d announce details including the date and location of the talks once they were set.

                        Gold surges as Trump puts sanctions on Iranian supreme leader and officials

                          By
                          ActionForex.com
                          -

                          Trump signed an executive order imposing sanctions on Iranian Supreme Leader Ayatollah Ali Khamenei and other top Iranian officials. He condemned Khamenei as “the hostile conduct of the regime” in the Middle East.

                          The sanctions will “deny the Supreme Leader and the Supreme Leader’s office, and those closely affiliated with him and the office, access to key financial resources and support.” They could lock up billions of dollars more in Iranian assets. They were in part a response to downing of a US drone by Iran last week.

                          Iranian Foreign Ministry responded: “Imposing useless sanctions on Iran’s Supreme Leader Khamenei and the commander of Iran’s diplomacy is the permanent closure of the path of diplomacy. Trump’s desperate administration is destroying the established international mechanisms for maintaining world peace and security.”

                          Gold surges to as high as 1439.23 so far on escalating geopolitical tensions. 100% projection of 1160.17 to 1346.71 from 1266.26 at 1452.80 is now within reach. But the key level is 100% projection of 1046.37 to 1375.17 from 1160.17 at 1488.97. Decisive break will add to the case that current long term rise from 1046.37 (2015 low) is an impulsive move, rather than a corrective move. In that case, gold is likely just in the middle of an up trend, rather than the end of it.

                          GBP/CHF falls on Franc strength, to break 1.2297 support zoon

                            By
                            ActionForex.com
                            -

                            GBP/CHF is a top mover today and Sterling turns soft in early US session. Meanwhile, Swiss Franc is supported by expectations of more US sanctions on Iran.

                            GBP/CHF extends recent decline from 1.3399 to as low as 1.2364. 1.2297 support is next and we’d expect a solid break there to resume whole fall from 1.3854. Next target will be 100% projection of 1.3854 to 1.2297 from 1.3399 at 1.1842.

                            In the longer term picture, GBP/CHF remains held below 55 month EMA. And it has indeed be rejected there twice since 20184. Monthly MACD also looks like it’s rejected by zero line too. Both are rather bearish developments. For now, we’re favoring an eventual break of 1.1701 low at least, subject to downside momentum.

                            WTO: Trade flows hit by historically high new trade restrictions

                              By
                              ActionForex.com
                              -

                              In a report published today, WTO said “turbulence in global trade continued” during the period from October 2018 to May 2019.  New import-restrictive measures introduced by G20 economies during this period was more than 3.5 times the average since May 2012. Total import-restrictive measures stood at USD 335.9B, second highest on record, just after USD 480.9B reported in the previous period. Most importantly, together these two periods represent a “dramatic spike” in the trade coverage of import-restrictive measures.

                              Commenting on the report, Director-General Roberto Azevêdo said: “This report provides further evidence that the turbulence generated by current trade tensions is continuing, with trade flows being hit by new trade restrictions on a historically high level. The stable trend that we saw for almost a decade since the financial crisis has been replaced with a steep increase in the size and scale of trade-restrictive measures over the last year. This will have consequences in increased uncertainty, lower investment and weaker trade growth.

                              “These findings should be of serious concern for the whole international community. We urgently need to see leadership from the G20 to ease trade tensions and follow through on their commitment to trade and to the rules-based international trading system.”

                              Full report here.

                              Trump: Fed sticks like a stubborn child, doesn’t know what it’s doing

                                By
                                ActionForex.com
                                -

                                Trump complains Fed with his tweet again and said it “doesn’t know what it is doing”. He said Fed “raised rates far too far” and “did large scale tightening, $50 Billion/month”, referring to balance sheet wind down. And, if Fed had gotten it right, “thousands of points higher on the Dow, and GDP in the 4’s or even 5’s”.

                                Trump also said Fed policymakers stick “like a stubborn child”. And, “when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it!”

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                                Into US session: German DAX and yield down on Daimler, Euro mixed

                                  By
                                  ActionForex.com
                                  -

                                  German DAX tumbles today together with 10-year bund yield, in otherwise quiet markets. Mercedes-Benz maker Daimler leads the decline with 3% fall after it cuts 2019 earnings outlook on Sunday. 10-year bund yield hit as low as -0.314, not far from-0.326 record low. Investors elsewhere are on the sidelines though, waiting for Trump-Xi meeting at G20 later in the week. Gold is in consolidation below last week’s high of 1411.82. WTI oil edged higher to 58.14 but it’s losing some upside momentum. US is preparing for more sanctions against Iran but the impact is definitely much lower than a war.

                                  In the forex markets, Dollar remains the weakest one for today, followed by Yen and then Sterling. There is no buying in Dollar for sustainable rebound yet. Fed Chair Jerome Powell’s speech on Tuesday might give some clues on how close Fed is to rate cut. But probably he’s doesn’t have a clue himself considering the uncertainty in trade negotiations. Also, Dollar will look into some key economic data, starting from durables and PCE inflation this week, then ISMs and NFP next. On the other hand, Australian Dollar is currently the strongest, followed by Canadian and then New Zealand. Euro is mixed after German Ifo business climate dropped to lowest since November 2014, without serious deterioration.

                                  In Europe, currently:

                                  • FTSE is down -0.06%.
                                  • DAX is down -0.53%.
                                  • CAC is down -0.13%.
                                  • German 10-year bund yield is down -0.0276 at -0.31.

                                  Earlier in Asia:

                                  • Nikkei rose 0.13%.
                                  • Hong Kong HSI rose 0.14%.
                                  • China Shanghai SSE rose 0.21%.
                                  • Singapore Strait Times dropped -0.30%.
                                  • Japan 10-year JGB yield rose 0.0155 to -0.152.

                                  German Ifo business claims dropped to 97.5, lowest since Nov 2014

                                    By
                                    ActionForex.com
                                    -

                                    Germany Ifo Business Climate dropped to 97.5 in June, slightly down from 97.9 and below expectation of 97.5. Though, that’s still the lowest level since November 2014. Ifo Expectation index dropped to 94.2, down fro 95.3 and missed expectation of 04.6. Current Assessment index rose to 100.8, up from 100.6 and beat expectation of 100.3.

                                    Ifo President Clemens Fuest noted: “Companies have grown increasingly pessimistic about the coming months. However, their assessment of the current business situation improved marginally. The German economy is heading for the doldrums.”

                                    Looking at the details, Manufacturing index dropped again from 3.9 to 1.5. It’s been falling for over a year. Services index dropped from 21.0 to 20.0. Construction index dropped from 24.3 to 22.9. But Trade index improved from 5.4 to 7.9.

                                    Full release here.

                                    Euro remains firm against Dollar and Yen after the release. But EUR/CHF is mildly lower. For now EUR/CHF’s consolidation from 1.1056 is still in progress and could extend for a while. But a break of 1.1056 is expected eventually to resume larger down trend.

                                    RBNZ to stand pat this week, NZDUSD & NZDJPY stay near term bearish

                                      By
                                      ActionForex.com
                                      -

                                      RBNZ rate decision is a major focus of the week. After lowering the policy rate by -25 bps to 1.50% in May, the central bank would likely remain on hold this month. Domestic economic developments came in largely consistent with policymakers’ projections. Q1 GDP growth beat RBNZ’s expectations, but breakdowns were mixed. Forward-looking indicators signaled that risks to growth are skewed to the downside.

                                      Global economic outlook remains uncertain and major central banks have recently shifted their stance on the dovish side. It is unlikely that G20 summit this week would resolve US-China trade war. At best, both sides would agree to resume negotiations. All these should lead the RBNZ to adopt a cautious tone this month, while opening the door for reducing interest rates again later this year.

                                      Here are some previews:

                                      NZD/USD recovered ahead of 0.6481 support last week mainly due to Dollar’s weakness. Upside of recovery is so far limited below 0.6681 resistance. Thus, near term outlook stays bearish for another decline through 0.6481 to 0.64245 low. Break will resume larger medium term down trend. Though, on the upside, break of 0.6681 will suggests that consolidation pattern from 0.6424 has started the third leg. Rise from 0.6481 could extend towards 0.6969 resistance before completing such consolidation.

                                      NZD/JPY turned sideway after hitting 70.26. Some consolidations might be seen in near term. But outlook remains bearish as long as 72.25 resistance holds. Current fall from 67.78 is expected to resume sooner or later to retest 69.18 low. Though, break of 72.25 will confirm short term bottoming and bring stronger rebound.

                                      RBA Lowe: It legitimate to ask how effective further monetary easing would be

                                        By
                                        ActionForex.com
                                        -

                                        Australian Dollar is said to be lifted by RBA Governor Philip Lowe’s question on effectiveness of further rate cuts. Lowe said in a panel discussion in Canberra today that “it’s a legitimate question to ask how effective further monetary easing would be”.

                                        Lowe explained that exchange rate is an “important channel” through which easing stimulates growth. And other transmission mechanisms “are weaker at the moment.” However, he added “we trade with one another, we don’t trade with Mars, so if everyone’s easing, the effect that we get from exchange-rate depreciation via the transmission mechanism isn’t there.”

                                        Meanwhile, it’s possible to ease more than other major central banks. But Lowe warned this was “quite a dangerous path to go down.” Instead, he urged the country to switch focus to fiscal policy and structural reforms. Also, “governments here and around the world should have their top drawers full with ideas.”

                                        Lowe also said he didn’t understand why investors were pushing stocks higher while expecting central banks to cut interest rates. He said “there are investors who think the outlook is sufficiently weak that they expect central banks right around the world to cut interest rates but they are not worried about corporate profits or credit risk.”

                                        Currently, markets are expecting RBA to cut interest rates by -50bps from 1.25% by year end. The next move could come as early as in August. To us, we also don’t understand why Lowe’s comments could shoot up the Aussie. He didn’t indicate less need to loosen up monetary policies. Rather, he’s simply suggesting that cutting interests are not enough to lift inflation back to target.

                                        AUD/JPY is consolidating above 73.93 temporary low for the moment. Further recovery might be seen. But outlook remains bearish as long as 76.01 resistance holds. Fall from 80.71 is expected to resume sooner or later to 70.27 low.

                                        China urges US to compromise and make concessions in trade talks

                                          By
                                          ActionForex.com
                                          -

                                          At a news briefing regarding G20 summit, Chinese Vice Commerce Minister Wang Shouwen said talks are underway between China and US teams regarding trade negotiations. He gave no details on the highly anticipated meeting between Xi and Trump ahead. Though, he reiterated China’s stance on mutual respect and urged US to make concessions for compromises.

                                          Wang said, “mutual respect means each side must respect the other’s sovereignty”, apparently referring US demand for China to implement the trade agreement with domestic laws. Wang also said “equality and mutual benefit means the consultations have to happen on an equal basis, the agreement to be reached has to be beneficial for both sides… Meeting each other half way means both sides have to compromise and make concessions, not just one side.”

                                          Wang also noted Xi has asked Trump to treat Chinese companies fairly during last week’s telephone conversation. He added “we hope that the U.S. can remove certain unilateral measures inappropriately taken against Chinese companies, in the spirit of free trade and the World Trade Organization.”

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