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Germany ZEW economic sentiment dropped to 79.8, current situation surged to -9.1

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    ActionForex.com
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    Germany ZEW economic sentiment dropped from 84.4 to 79.8 in June, below expectation of 85.3. Current situation index improved from -40.1 to -9.1, well above expectation of -28.0. Eurozone ZEW economic sentiment dropped from 84.0 to 81.3, below expectation of 85.5. Eurozone current situation rose 27.0 pts to -24.4.

    “The economic recovery is progressing. Although the ZEW Indicator of Economic Sentiment has experienced a drop in June, it remains at a very high level. The decline in expectations is probably largely due to the considerably better assessment of the economic situation, which is now back at pre-crisis levels. The financial market experts therefore continue to expect a strong economic recovery for the next six months,” comments ZEW President Professor Achim Wambach on current expectations.

    Full release here.

    Fed Daly: No material change to US economy due to coronavirus

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      San Francisco Fed President Mary Daly told CNBC that monetary policy is now in a “really good position”. Uncertainties like US-China trade tensions receded while hard Brexit was avoided. The three rate cuts last year “puts the US economy in a good place to weather these storms” like China’s coronavirus.

      She added that China’s coronavirus “bears further watching and of course we are keeping a close eye, but right now I am not looking for this to do anything material to our economy.” She expected China to has a “couple of quarters perhaps of weaker growth but then bounce back once this has been resolved and then that to have a temporary impact on the US economy and go away once things have been resolved”.

       

      Into US session: Dollar fails to hold gains, Yen stays firm

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        ActionForex.com
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        Entering into US session, Dollar turned weak earlier today and failed to sustain gains. On the other hand, the Japanese Yen is holding broadly firm. Australian Dollar and New Zealand Dollar turned the corner. Much focus will be on US treasury yields and some solid gain there is needed to give the greenback some support. Otherwise, recent correction will likely continue with some more downside potential in the greenback.

        In other markets, Europe indices are trading generally higher, with DAX up 1.34%, CAC up 0.81% and FTSE up 0.81% at the time of writing. That follows the strong rally in Asian equities. China Shanghai Composite jumped 1.61% to 2905.56 as boosted by the governments stimulus policies. While the announce measures are just fine-tunings and are hardly anything dramatic, that’s seen as a sign of the director where the Chinese government is heading towards. That is do more to support growth.

        The SSE’s rebound is set to extend to 55 day EMA (now at 2944.64) and above. But for now, we’re seeing no reason for it to regain 3000 handle.

        Nikkei also rose 0.51% to close at 22510.48 and pared back much of Monday’s loss. However, the day high was seen at the open at 22555.05 and there was no follow through momentum back then. Overall strength of support from the 55 day EMA is rather weak. We’ll keep monitor this level, which will decide whether Nikkei would head for test on 21462.94 support before an upside breakout.

        BoC Macklem: Solid rebound expected in the immediate months ahead

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          In a speech, BoC Governor Tiff Macklem said Canadians “have already climbed a long way back from the very deep economic hole we were in last spring”. Much of Canada emerging from the latest round of pandemic containment measures, “we expect a solid rebound in the immediate months ahead”.

          But he also said “it will be some time before we see a complete economic recovery”. Economic slack won’t be fully absorbed until into 2023. “Even as it recovers, the economy is adapting to structural changes, and some workers will need to shift to jobs in faster-growing sectors”.

          “This all points to an even more protracted recuperation period while the economic potential that was lost over the course of the pandemic is rebuilt,” he added.

          Full speech here.

          BoC Poloz: Couple of negative developments caused detour of the economy’s way home

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            ActionForex.com
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            BoC Governor Stephen Poloz told the House of Commons Standing Committee on Finance that since six months ago, there was a “couple of negative developments” that have caused a “detour for the economy and are delaying its return home.” Nevertheless, he’s confidence that the impacts would be “temporary”, and “stronger economic growth will resume” after associated adjustments.

            On the developments he said, firstly, the global economy slowed as affected by “US-led trade war”. Secondly, there was sharp decline in oil price late in 2018, which put Canada’s oil sector under “considerable stress”. Also, BoC have continued to watch how the housing markets is adjusting to policy measures and past rate hikes. Fourthly, combined impact of adjusted spending plans of federal and provincial governments led to reduction in growth projections.

            Poloz noted that there is good reason to believe that the economy will accelerate in the second half of this year. In this context, the Bank’s Governing Council judges that an accommodative policy interest rate continues to be warranted.

            Full remarks here.

            DIW: German economy to grow 0.1% in Q1 only, risk from coronavirus outbreak

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              German Institute for Economic Research, DIW, said the country’s economy would grew only 0.1% in Q1, nearing stagnation. Economic Director Claus Michelsen warned economic performance could be even worse if global outbreak of China’s coronavirus continue.

              “So far, however, the corona effect has been unclear and cannot be quantified”, he said, “The export-dependent German industry would be particularly affected if coronavirus continued to spread worldwide.” Industry will also be affected in case of supply disruption for wholesale products sourced from China.

              Silver stabilized after initial dive, but more downside still expected

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                ActionForex.com
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                Silver tumbled along with Gold in ultra thin Asian open, and hit as low as 22.36. While it quickly rebounded, near term outlook will stay bearish as long as 25.99 resistance holds. Prior rejection by 55 day EMA also affirmed near term bearishness. Fall from 30.07 is seen as corrective whole up trend from 11.67 low.

                There are various interpretations on the price actions. One way to see them is that a head and shoulder top was formed (ls: 29.84; head: 30.07; rs: 28.73). But in any case, firm break of 100% projection of 30.07 to 23.76 from 28.73 at 22.42 will pave the way to 161.8% projection at 18.52. That is close to 61.8% retracement of 11.67 to 30.07 at 18.69. That’s probably the level where Silver would complete the correction.

                US ADP employment grew 742k in Apr, continues an upward trend of acceleration

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                  ActionForex.com
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                  US ADP employment grew 742k in April, below expectation of 808k. By company size, small businesses added 235k jobs, medium businesses 230k, large businesses 277k. By sector, goods-producing companies added 106k jobs, services-providing companies 636k.

                  “The labor market continues an upward trend of acceleration and growth, posting the strongest reading since September2020,” said Nela Richardson, chief economist, ADP. “Service providers have the most to gain as the economy reopens, recovers and resumes normal activities and are leading job growth in April. While payrolls are still more than 8 million jobs short of pre-COVID-19 levels, job gains have totaled 1.3 million in the last two months after adding only about 1 million jobs over the course of the previous five months.”

                  Full release here.

                  UK Lidington said Brexit deal possible in 24-48 hours, but Hunt doesn’t know when

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                    ActionForex.com
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                    Comments from UK officials regarding Brexit negotiation are rather confusing today. Cabinet Office Minister David Lidington said that “we’re not quite there yet”. But he emphasized “we are almost within touching distance now. ” And, a deal in the next 24 or 48 hours is “possible but not at all definite”. He was “cautiously optimistic”.

                    On the other hand, Foreign Minister Jeremy Hunt said “we don’t have a solution yet”. He added “both sides draw encouragement form the fact that so much has been agreed”. And the figure 95% used was “probably accurate”. The 5% is a “difficult 5 percent though”. Hence, “we don’t know when it’s going to be possible to conclude those negotiations.”

                    French Macron to Johnson: UK’s Destiny is Your Choice Alone

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                      ActionForex.com
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                      French President Emmanuel Macron told UK Prime Minister Boris Johnson, alongside him, that there was not enough time to negotiate a new Brexit Withdrawal Agreement. And, it’s for Johnson alone to choose the UK’s destiny. Macron added that EU is ready for a no-deal Brexit scenario even though it’s not the bloc’s wish. And, Irish backstop was not just a technical mechanism but a guarantor of stability.

                      On the other hand, Johnson said he wanted to make sure works are done on both sides of the Channel to make smooth Brexit, with, or without an agreement. And that’s as ” smooth and pain-free as possible for citizens and businesses on both sides.”

                      German Chancellor Angela Merkel challenged Johnson to come up with alternatives to the Irish backstop within 30 days, which Johnson accepted. So, focus in the upcoming weeks will be on UK’s response.

                      Fed’s Williams foresees interest rate normalization starting this year

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                        ActionForex.com
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                        In an interview with BloombergTV. New York Fed President John Williams suggested that Fed is still on track to start cutting interest rates within the year.

                        “We will need to start a process at some point to bring interest rates back to more normal levels, and my own view is that process will likely start this year,” Williams stated.

                        Regarding the recent inflation data, Williams did not regard it as a decisive shift in economic trends but acknowledged its impact on his assessments and future forecasts.

                        Williams also touched on the topic of the Federal Reserve’s balance sheet management, specifically the ongoing quantitative tightening process. He advocated for a more measured pace in reducing the Fed’s balance sheet, a strategy aimed at allowing more room for evaluation and adjustment.

                        BoJ Kuroda: Retail level CBDC is an option

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                          ActionForex.com
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                          BoJ Governor Haruhiko Kuroda said in an online seminar that the central bank has not decided on central bank digital currency (CBDC) yet. But he noted it could be an option for securing a seamless and safe infrastructure.

                          “CBDC is not the only way, so a national discussion is needed as to how to achieve this goal,” Kuroda said, adding, “retail level CBDC is an option.”

                          BoJ started the second phase of the CBDC experiments in April. The process will last for around a year.

                          Australian Dollar jumps as employment data strong on all front

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                            ActionForex.com
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                            Australian Dollar surges broadly as June employment data came in strong on all front.

                            Headline job grow jumped to 50.9k seasonally adjusted , well above expectation of 16.6k. Prior month’s figure was also revised slightly up by 12k to 13.5k. Full time jobs grew 41.2k while part time jobs also rose 9.7k. Together with the surge in full time jobs, total hours worked rose 0.6%

                            Unemployment rate remained unchanged at 5.4%. But without rounding, it’s actually the at its lowest since November 2012. Labor force participation rate rose 0.2% to 65.7%. Employment to population ratio also rose 0.2% to 62.1%.

                            Also from Australia, NAB Quarterly Business Confidence dropped to 7 in Q2.

                            AUD/NZD rebounded ahead of 1.0844 support and retained near term bullishness in the cross. Price actions from 1.0991 short term top now look more like a consolidation pattern. Focus is back on 61.8% retracement of 1.1289 to 1.0486 at 1.0982. Firm break there will resume the whole rise from 1.0486.

                            Fed Barkin: Is inflation calming? That’s really the core question for this year

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                              ActionForex.com
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                              Richmond Fed President Thomas Barkin said in a podcast that “while the average (inflation) has dropped, the median has still stayed high”.

                              “That’s because the average has been distorted by falling prices for a few goods, like used cars, that escalated unsustainably during the pandemic,” he said.

                              “We have seen three good months on the inflation prints. I’d like to see them continue. Is inflation calming? That’s really the core question for this year,” he said.

                              “I think underneath that, I want to understand the labor market. Is it cooling? What’s happening to wages? What’s happened to employment?” he added. “Underneath that, I want to understand what’s happening to the broader demand, particular for companies who may or may not be thinking about increasing prices.

                              Full podcast here.

                              BoJ March meeting minutes: Not the time to consider stimulus exit yet

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                                ActionForex.com
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                                In the minutes of March BOJ meeting, some members emphasized the need to have the best communications to the markets.

                                To be more specific:

                                • “It was important for the BOJ to thoroughly explain to the public … that the economy had not yet reached a phase where it should consider the timing and measures of a so-called exit from monetary easing,”
                                • “While normalization, or a gradual reduction in the degree of monetary accommodation, could become a topic for consideration in the future, the BOJ needs to explain to markets that normalization … would be different from monetary tightening,”

                                One member warned of the risk of prolonging ultra loose monetary policy, on financial institutions:

                                • “There was a risk financial intermediation would be pulled back if the low-yield environment was further prolonged,”

                                And, one member expressed the concern of weakness in consumption recovery.

                                Full release here.

                                ECB SPF: Inflation forecast from 2019 to 2021 revised down by -0.1%

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                                  ActionForex.com
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                                  According to Q3 ECB Survey of Professional Forecasters, average forecast for HICP inflation is 1.3% for 2019, 1.4% for 2020 and 1.5% for 2021. There were downward revisions of -0.1% for each of those years comparing with Q2 forecast. Average long-term inflation expectation was lowered from 1.8% to 1.7%.

                                  Growth is projected to average 1.2% in 2019, 1.3% in 2020 and 1.4% in 2021. There was no change in expectation of 2019 and 2021. But 2020 figure was revised down by -0.1%. Average longer-term expectations for real GDP growth were unchanged at 1.4%.

                                  Full release here.

                                  RBNZ Orr: Very benign inflation going forward without doubt

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                                    ActionForex.com
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                                    New Zealand CPI slowed notably to 1.1% yoy in Q1, down from prior quarter’s 1.6%, meeting expectation. RBNZ Governor Adrian Orr said in Radio New Zealand interview that he expected “very benign inflation going forward without doubt, as we’ve forecast”.

                                    He added that “what really matters is the confidence and expectation and belief that we are aiming for that midpoint of 2 percent all of the time.” And he pledged that “we are doggedly determined to aim for two percent, but the accuracy around…that is very limited.”

                                    Overall, with CPI now close to bottom of RBNZ’s target band, there is little pressure for the central bank to raise interest rates.

                                    Today’s upside acceleration in AUD/NZD further affirm the case that it’s bottomed in short term at 1.0486. This is supported by bullish convergence condition in daily MACD. Further rise is now likely in near term back to 55 day EMA (now at 1.0683). But the real test will be at 38.2% retracement of 1.1289 to 1.0486 at 1.0793.

                                    China MOFCOM confirms USTR Lighthizer’s visit on Mar 28-29

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                                      ActionForex.com
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                                      China Commerce Ministry spokesman Gao Feng confirmed in a regular press briefing that US delegation is traveling to Beijing next week to continue trade negotiation. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will visit China on March 28-29. After that Vice Premier Liu He will travel to the Washington in early April for more talks.

                                      Gao also noted that the decline is import and expect during the first two months of the year was mainly due to Chinese New Year. He noted the typical pattern of “concentrated export pre CNG, concentrated import post CNY”. Though, he also said trade rebounded strongly during the first half of March. And, Q1 trade will remain stability.

                                      Eurozone GDP grew 0.2% qoq in Q3, employment rose 0.1% qoq

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                                        ActionForex.com
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                                        Eurozone GDP grew 0.2% qoq, 1.2% yoy. Household final consumption expenditure rose 0.5% qoq. Gross fixed capital formation rose 0.3% qoq. Exports rose 0.4% qoq. Imports rose 0.6% qoq. Employment grew 0.1% qoq, 0.9% yoy.

                                        Full release here.

                                        Germany PMI manufacturing finalized at 62.6 in Aug, strong demand

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                                          ActionForex.com
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                                          Germany PMI Manufacturing was finalized at 62.6 in August, down from July’s 65.9. Markit said suvery’s output index fell to its lowest level since August 2020. New orders continued to rise sharply, albeit also at a slower pace. Cost pressures remained historically elevated.

                                          Phil Smith, Associate Economics Director at IHS Markit, said:

                                          “While we continue to see strong demand for German goods, with growth in new orders still among the highest on record, production levels are being constrained as manufacturers grapple with supply chain problems. According to August’s data, growth in output has now fallen behind that of new orders to an extent previously unseen in over 25 years of data collection.

                                          “Supply-demand imbalances continue to push up costs at a historically elevated rate, and concerns that higher prices could discourage customers is one of the factors that has seen manufacturers’ expectations for future output fade to the lowest since last October.

                                          “Still, many goods producers are hopeful that conditions will have improved come next summer, and a further steep rise in employment levels shows that efforts are still being made to expand capacity and prepare for higher output in the future.”

                                          Full release here.

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