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New Zealand ANZ business confidence improved to -32.0

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    ActionForex.com
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    New Zealand ANZ Business Confidence rose to -32.0 in May, up from -37.5. But all sectors remained deeply negative, with agriculture confidence worst at -63.9. Activity Outlook also improved to 8.5, up from 7.1. Manufacturing scored best in activity at 21.5.

    ANZ noted that “how quickly the economy will bounce back is a key question. If the forward indicators start to suggest that the Reserve Bank’s relatively sharp V-shaped recovery is overly optimistic, it will be game on for further OCR cuts this year.”

    Full release here.

    BoJ Kuroda: Best to manage inflation expectations with flexible targeting framework

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      ActionForex.com
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      In academic conference organized by BoJ, Governor Haruhiko Kuroda expressed his openness to flexible inflation targeting. Former ECB President Jean-Claude Trichet also emphasized that medium- to long-term inflation expectations are what really matter.

      Kuroda said “If missing inflation comes from structural factors such as globalization and digitalization, central banks should continue examining how best to manage inflation expectations .. within the flexible inflation targeting framework.” He also noted the need to expand the policy tools to fight the next downturn. “While policy makers have developed a wide range of unconventional policy tools, their effectiveness and transmission mechanisms may differ depending on financial conditions and economic structure,” Kuroda said.

      Trichet also said it’s not necessary for central banks to target exactly the same level of inflation in a set period of time. Instead, “there is a consensus among central banks that real success is to solidly anchor inflation expectations in the medium- to long-term in line with their definition of price stability.”

      EU to decide next Commission and ECB Presidents in June

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        ActionForex.com
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        EU28 leaders agreed to have swift process on choosing the next European Commission and ECB Presidents in a meeting overnight. The decision would be made at a June 20-21 summit. But for now, Germany and France seem to be at odds over the choices. German Chancellor Angela Merkel is standing by the center-right German lawmaker Manfred Weber to succeed Jean-Claude Juncker and Commission President. But Weber is seen as is failing to gain traction. French President Emmanuel Macron appeared to be pushing for Brexit negotiator Michel Barnier as a compromise.

        Macron told reporters after the summit that “the key for me is for the people at the most sensitive positions to share our project and be the most charismatic, creative and competent possible.” On the other hand, Merkel bluntly said “I am warning against telling the EU Parliament that somebody who has only made experiences in parliament is not experienced… And that somebody who has made experiences in the Commission, is experienced. We shouldn’t deal with each other in this currency.”

        Meanwhile, at least five candidates are believed to be running to succeed Mario Draghi as ECB Presidents. Contenders include Bank of France Governor Francois Villeroy de Galhau, Finland’s Olli Rehn and Erkki Liikanen, and Bundesbank President Jens Weidmann. Chances of Weidmann and de Galhau will depend on who takes the Juncker’s job.

        US Treasury said limited Yuan intervention seen, but urges China to avoid a persistently weak currency

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          ActionForex.com
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          US Treasury announced that nine countries are put in the “monitoring list” on currency manipulation, but no major trading partner is named as manipulator. The nine countries include China, Germany, Ireland, Italy, Japan, Korea, Malaysia, Singapore, and Vietnam. That conclusion was made even after the Treasury revised and updated the thresholds it uses to assess where unfair currency practices or imbalanced macroeconomic policies may be emerging.

          In the statement, US Treasury Secretary Steven Mnuchin singled out China and said “Treasury will continue its enhanced bilateral engagement with China regarding exchange rate issues, given that the RMB has fallen against the dollar by eight percent over the last year in the context of an extremely large and widening bilateral trade surplus.”

          US Treasury also estimated that “direct intervention by the People’s Bank of China in the last year has been limited.” But it surged China to “take the necessary steps to avoid a persistently weak currency”. Also, it urged China to aggressively address market-distorting forces, including subsidies and state-owned enterprises, enhance social safety nets to support greater household consumption growth, and rebalance the economy away from investment.

          Full statement here.

          10-year yield breaks 2.27, Dollar shrugs though

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            ActionForex.com
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            Recent decline in US 10-year yield resumes today and hits as low as 2.264 so far, breaking even 2.27 handle. Though, much like the fall in German yield earlier today, the move is not much reflected in the forex markets yet. Dollar remains steady for now, even against Yen. Indeed, USD/CHF is extending this week’s recovery from 1.0008 and is heading back towards 1.0119 resistance.

            We’ll continue to keep an eye on the developments of 10-year yield. For now, based on currently momentum, we’d expect further decline to 61.8% retracement of 1.336 to 3.248 at 2.066, which is close to 2.034 support as well as 2.0 psychological level. Strong support could only be seen around that level to bring sustainable rebound.

            EU Juncker: Crystal clear, no Brexit renegotiation

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              ActionForex.com
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              European Commission President Jean-Claude Juncker reiterated EU’s stance that Brexit agreement is not open for renegotiation. He said before a meeting of EU leaders in Brussels, “I will have a short meeting with Theresa May, but I was crystal clear. There will be no renegotiation.”

              That’s in complete opposite of what some UK ministers believe in. Foreign ministers Jeremy Hunt wrote in Tuesday’s Daily telegraph. He noted “trying to deliver no deal through a general election is not a solution; it is political suicide… “A different deal is, therefore, the only solution – and what I will pursue if I am leader.”

              Trade Minister Liam Fox also said “If the EU doesn’t want to negotiate any changes – which I think would be unfortunate and I think would be quite surprising – then I think that of course does increase the chance of a no-deal exit.”

              US consumer confidence rose to 134.1, no significant pull back in spending ahead

                By
                ActionForex.com
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                Conference Board Consumer Confidence for US rose to 134.1 in May, up from 129.2 and beat expectation of 130.0. Present Situation Index rose to 175.2, up from 169.0. Expectations Index rose to 106.6, up from 102.7.

                “Consumer Confidence posted another gain in May and is now back to levels seen last Fall when the Index was hovering near 18-year highs,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The increase in the Present Situation Index was driven primarily by employment gains. Expectations regarding the short-term outlook for business conditions and employment improved, but consumers’ sentiment regarding their income prospects was mixed. Consumers expect the economy to continue growing at a solid pace in the short-term, and despite weak retail sales in April, these high levels of confidence suggest no significant pullback in consumer spending in the months ahead.”

                Full release here.

                Into US session: German yield dives on Italy concern, US yield follows

                  By
                  ActionForex.com
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                  Concerns over Italy’s fiscal health is the major focus for today. Deputy Prime Minister Matteo Salvini’s comments confirmed that European Commission is considering to fine the country EUR 3B for breaking EU fiscal rules. European Economic Commissioner Pierre Moscovici was said to be in favor of “dialogue than sanctions”, but there was no confirmation on such position.

                  Italian 10-year yield surges strongly today and is up 0.1284 at 2.713. On the other hand, German 10-year yield down -0.015 at -0.144, after hitting as low as -0.16. US 10-year yield is dragged down through 2.3 handle too.

                  Reactions in other markets are muted though. Entering into US session, Yen is so far the strongest one but it’s held above last week’s lows against all major currencies. There is no strength seen in Swiss Franc too, arguing that risk aversion is not totally back yet. For now, Australian Dollar follows Yen as the second strongest. Canadian is the weakest one for today, followed by Franc.

                  In Europe, currently:

                  • FTSE is up 0.05%.
                  • DAX is down -0.28%.
                  • CAC is down -0.42%.
                  • German 10-year yield is down -0.015 at -0.144.

                  Earlier in Asia:

                  • Nikkei rose 0.37%.
                  • Hong Kong HSI rose 0.38%.
                  • China Shanghai SSE rose 0.361% to 2.909.91, regained 2900.
                  • Singapore Strait Times dropped -0.17%.
                  • Japan 10-year JGB yield dropped -0.0038 to -0.07.

                  Eurozone economic sentiment jumped to 105.1, driven by industry and France

                    By
                    ActionForex.com
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                    Eurozone Economic Sentiment rose to 105.1 in May, up from 103.9 and beat expectation of 103.9. The improvement of euro-area sentiment resulted from higher confidence in industry and, to a lesser extent, in services and among consumers, while confidence remained virtually flat in retail trade and cooled down significantly in construction.

                    Amongst the largest euro-area economies, the ESI increased sharply in France (+4.0), markedly also in Italy (+1.7) and Spain (+1.3) and mildly in Germany (+0.4). Sentiment eased only in the Netherlands (-1.3).

                    Industrial Confidence rose to -2.9, up from -4.3 and beat expectation of -4.2. Services Confidence rose to 12.2, up from 11.8 and beat expectation of 11.0. Consumer Confidence was finalized at -6.5.

                    For EU28, ESI was muted, up 0.2 to 103.8 only. That was mostly due to a strong deterioration in the largest non-euro area EU economy, the UK (-4.8).

                    Also released, Business Climate dropped -0.12 to 0.30, below expectation of 0.40. Managers’ views on the past production, as well as export order books deteriorated sharply, as did, to a lesser extent, their assessments of overall order books, while the production expectations and appraisals of the stocks of finished products improved.

                    Italy Salvini: Let’s see if EU will fine us EUR 3B

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                      ActionForex.com
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                      Italian Deputy Prime Minister Matteo Salvini said today that European Commission could impose a EUR 3B penalty on the country, for breaking EU fiscal rules. This is in line with other reports that the Commission is ready to start disciplinary steps against Italy on June 5. The actions will likely be confirmed should the Commission send a warning letter to Rome this week.

                      Salvini said, “let’s see if we get this letter where they give us a fine for debt accumulated over the past and tell us to pay 3 billion euros.” He also pledged earlier, after his far-right League party triumphed in European elections on Sunday , to use “all my energies” to fight his perceived outdated and unfair European fiscal rules.

                      German GfK consumer confidence dropped to 10.1, downward spiral of economic outlook continued

                        By
                        ActionForex.com
                        -

                        Germany GfK consumer confidence for June dropped to 10.1, down from 10.2 and missed expectation of 10.4. That’s also the lowest level in more than two years. GfK noted that following a period of stability, the consumer climate was forced to take a small hit once more.

                        In particular, the steep downward spiral of the economic outlook has continued. The indicator dropped -1.3 to 1.7. It lost almost 32 points within just a 12-month period. GfK added, “The global cooling off of the economy, the endless discussions around Brexit, and the risk of an escalation of the trade conflict with the USA have also put a noticeable brake on the economic outlook of consumers. Persistent trade conflicts pose a particular threat to the export nation of Germany. Weak periods of economic activity have a similar effect on export markets.”

                        Full release here.

                        Also from Germany, import price rose 0.3% mom in April, below expectation of 0.5% mom.

                        Swiss GDP grew 0.6% in Q1, driven by strong domestic demand

                          By
                          ActionForex.com
                          -

                          Swiss GDP grew 0.6% qoq in Q1, accelerated from prior 0.3% qoq and beat expectation of 0.4% qoq. SECO noted that “Growth was driven primarily by increasing domestic demand. Foreign trade also provided positive impetus. Value added grew in most sectors.”

                          On the positive side, private consumption grew slightly above average for the first time in six quarters, at 0.4%. The increase in consumption expenditures were also broad-based, in almost all segments. Additionally, most service sectors development positively in Q1. Manufacturing saw dynamic growth at 1.5%. Production stepped up in the pharmaceutical industry as well as in watchmaking and precision instruments.

                          Full release here.

                          Japan Motegi: Trade deal in August just Trump’s hopes, two sides still narrowing the gap

                            By
                            ActionForex.com
                            -

                            Japan Economy Minister Toshimitsu Motegi said today that Trump’s comment regarding a trade deal in August just reflects his own hope for quick progress in the negotiations. For now, the two sides are still working on “narrowing the gap”.

                            Motegi told reporters, “When you look at the exact wording of his comments, you can see that the president was voicing his hopes of swift progress in talks toward something that is mutually beneficial.” He also reiterated the differences between US and Japan, and no timetable had yet be set for more meetings. He noted, “we’ve agreed that we’ll strive to narrow the gap, including through possibly holding working-level talks.”

                            Trump said on Monday, after meeting Japanese Prime Minister Shinzo Abe in Japan, that he expected the two countries to be “announcing some things, probably in August, that will be very good for both countries” on trade.

                            Canada kicks start process to ratify USMCA

                              By
                              ActionForex.com
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                              Canadian Foreign Minister Chrystia Freeland formally introduced a Ways and Means motion in the House of Commons yesterday, to kick start ratification process of USMCA. She noted the lifting of US steel and aluminum tariffs on Canadian imports, as announced on May 17, has paved the way for formal approval of the new North American trade agreement.

                              However, Freeland also emphasized, “the entry into force of this agreement does not depend solely on Canada… Insofar as possible, we intend to move in tandem with the United States.” Prime Minister Justin Trudeau indicated last week he’s eager to ratify the deal. Freeland also said the government is “full steam ahead”. But She didn’t indicate whether the government would push to get it done before parliament goes into recess, in four weeks.

                              UK Corbyn: Brexit deadlock should go back to people through election or public vote

                                By
                                ActionForex.com
                                -

                                UK opposition Labour Party leader Jeremy Corbyn said today that Brexit could only be revolved by either a general election or a public vote.

                                He said in a statement: “With the Conservatives disintegrating and unable to govern, and parliament deadlocked, this issue will have to go back to the people, whether through a general election or a public vote.

                                “We will not let the continuing chaos in the Conservative Party push our country into a no deal exit from the EU. Parliament can and will prevent such a damaging outcome for jobs and industry in the UK.”

                                Trump to China: We’re not ready to make a deal, tariffs could go up very substantially, very easily

                                  By
                                  ActionForex.com
                                  -

                                  Trump said the US isn’t ready to make a trade deal with China yet. He added “I think they probably wish they made the deal that they had on the table before they tried to renegotiate it”. And, “They would like to make a deal. We’re not ready to make a deal.”

                                  Trump also threatened that tariffs on Chinese goods “could go up very, very substantially, very easily.” Though, “I think sometime in the future China and the United States will absolutely have a great trade deal, and we look forward to that,” Trump said. “Because I don’t believe that China can continue to pay these, really, hundreds of billions of dollars in tariffs. I don’t believe they can do that.”

                                  Comments from China remained hard-line over the weekend, a commentary published by the official Xinhua News Agency accused the US of “scapegoating” China for its trade imbalance and domestic economic issues. And, “the United States is attempting to squeeze an unequal trade deal out of China, using measures such as tariff hikes and targeting its tech companies.”

                                  Yuan recovers after China warns of short selling

                                    By
                                    ActionForex.com
                                    -

                                    Chinese Yuan stages on strong rebound today, with USD/CHN breaching below 6.9 handle. Guo Shuqing, head of China’s banking and insurance regulator warned i a speech over the weekend that “shorting the yuan will inevitably suffer from a huge loss.”

                                    He criticized that Trump’s administration is worried about Yuan’s depreciation as that could reduce the impact of higher tariffs imposed on China. At the same time,developed countries have long asked for more currency flexibility. It was “ridiculous” that as Yuan’s exchange rate becomes more market oriented, some people in the US showed fear.

                                    At the moment, we’re not seeing any determination by the Chinese government to block USD/CNH breaking through the psychologically important 7 handle. There might be more verbal interventions. But the aim is seen as for slowing Yuan’s decline, rather than giving it a floor. USD/CNH’s could have formed a short term top at 6.9488. But we’d expect further rise through 6.9800 high after some brief consolidations.

                                    Trump pushes for Japan trade deal very soon, Japan announces new rules to limit foreign investment in tech

                                      By
                                      ActionForex.com
                                      -

                                      Trump was in a trade summit with Japanese Prime Minister Shinzo Abe today, as part of his four-day trip to Japan. In the post meeting joint press conference, Trump said he hoped to announce a trade deal with Japan very soon. He described trade imbalance with Japan as “unbelievable large”. He added “they are brilliant business people, brilliant negotiatiors and have put us in a tough spot but I think we will have a deal with Japan.” Earlier on before the meeting, Trump said: “Trade-wise, I think we’ll be announcing some things, probably in August, that will be very good for both countries… We’ll get the balance of trade, I think, straightened out rapidly.”

                                      Abe said the two leaders had agreed to accelerate two-way tarde talks. Earlier today, the Japanese government announced new rules to limit foreign ownership of high-tech corporations, effective August 1. The government said that the rule aims at preventing leakage of technology deemed important for national security or damage to defense output and technological foundation.

                                      The new rule is believed to be targeted at China, which was widely accused of the IP theft. However, there is no mention of specific countries or companies that will be affected by such foreign ownership restrictions. Thus, based on the principle of reciprocity, if Japanese steel is security risks to the US, American companies could be risks to Japan too. It’s all up to bilateral relationship and interpretations.

                                      Bundesbank Weidmann: Economic outlook is good and no need to change monetary policy

                                        By
                                        ActionForex.com
                                        -

                                        Bundesbank President Jens Weidmann reiterated over the weekend that there was no need for change in ECB policy. He noted despite recent uncertainties, “the economic outlook is good”. And, “we are assuming a rise in price pressures and that’s the condition for monetary policy to normalize.” Also, “this isn’t a situation where prices are falling and we have to react now.”

                                        ECB is set to meet again on monetary policy on June 5/6. Eurosystem staff macroeconomic projections will be released Also, details are expected on the third round of cheap loans to banks, the TLTRO III.

                                        EUR/CHF recovers as populist attack on EU fails in elections

                                          By
                                          ActionForex.com
                                          -

                                          Euro firms up notably against Swiss Franc in Asian session today. Official projections of European elections showed that efforts from anti parties are failing in the elections. And after the elections, policies of EU will remain largely unchanged.

                                          That is, within the bloc, there will be further gradual integration, in particular in Eurozone. Externally, EU will continue to defend multilateral, rule-based global trade system and reject protectionism of the US. Also, there will be no renegotiation of Brexit Withdrawal agreement.

                                          The two large alliances of central-right and center-left lost ground and could only make up 44% of the seats. That’s down from 56% back in 2014. However, pro-business Liberals and the Greens and had a clear surge to 14% and 9% respectively, up from 9% and 7%. That is, together, these pro-EU groups will have around 67% of seat, enough for outright majority, even though it’s down from around 72% in 2014.

                                          Technically, we’re seeing the fall from 1.1476 as a corrective move only. Thus, while it’s deep, we do not expect a break of 1.1162 low. Rebound should be due considering bullish convergence condition in 4 hour MACD. But Decisive break 1.1162 will carry larger bearish implications.

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