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ISM manufacturing dropped to 52.8; New orders, prices, employment declined

    By
    ActionForex.com
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    Dollar is suffering more selling pressure after weaker than expected April ISM manufacturing report. The headline index dropped to 52.8, down from 55.3 and missed expectation of 55.0. Price paid index dropped sharply to 50.0, down from 54.3 and missed expectation of 55.7. Employment index dropped to 52.4, down from 57.5. New orders tumbled to 51.7, down from 57.4.

    ISM noted that:

    • Comments from the panel reflect continued expanding business strength, but at the softest levels since the fourth quarter of 2016.
    • Demand expansion continued, with the New Orders Index softening to the low 50s, the Customers’ Inventories Index remaining at a ‘too low’ status, and the Backlog of Orders Index improving its prior month performance.
    • Consumption (production and employment) continued to expand, but at lower levels, resulting in a combined decrease of 8.6 points.
    • Inputs — expressed as supplier deliveries, inventories and imports — were higher this month, primarily due to inventory growth exceeding consumption, resulting in a combined 1.5-percentage point improvement in the Supplier Deliveries and Inventories Indexes.
    • Imports contracted during the period.
    • Overall, inputs reflect a more stable business environment, confirmed by the Prices Index at zero price growth, or unchanged.
    • Exports orders contracted for the first time since February 2016. The PMI® trade elements are in contraction territory. The PMI® has been inching down since November 2018. The manufacturing sector is expanding, but at recent historic lows.

    Full release here.

    Into US session: Europeans higher, commodities lower, Dollar mixed ahead of FOMC

      By
      ActionForex.com
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      Entering into US session, Dollar remains mixed as traders await FOMC statement. The markets were generally quiet today with many centers on holiday. Much stronger than expected ADP job report couldn’t provide any support to the greenback. Instead, the key for Dollar is whether Fed Chair Jerome Powell would dismiss talks of rate cut as premature. Or he’ll sound concerned with sluggish inflation and indicate openness on lowering interest rates.

      At the time of writing, Swiss Franc is the strongest one for today, followed by Sterling. Pound shrugs off decline in PMI manufacturing in April. It’s extending this week’s rebound, in particular against Dollar, Euro and Yen. Euro is the third strongest. Meanwhile, New Zealand Dollar is the weakest one after poor job data, followed by Aussie and then Canadian.

      Some suggested readings on FOMC:

      In other markets:

      • DOW open slightly higher, up around 50 pts at initial trading.
      • FTSE is down -0.07%.
      • German, France, Singapore, Hong Kong, Japan, China markets were all closed

      US ADP employment grew 275k, service sector strong

        By
        ActionForex.com
        -

        US ADP private employment grew strongly by 275k in April, well above expectation of 181k. Looking at the details, jobs in goods-producing sector rose 52k. Jobs in service-providing sector rose 223k.

        “April posted an uptick in growth after the first quarter appeared to signal a moderation following a strong 2018,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.  “The bulk of the overall growth is with service providers, adding the strongest gain in more than two years.”

        Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is holding firm, as businesses work hard to fill open positions. The economic soft patch at the start of the year has not materially impacted hiring.  April’s job gains overstate the economy’s strength, but they make the case that expansion continues on.”

        Full release here.

        ECB de Guindos: Interest rates to stay low even once monetary policy normalizes

          By
          ActionForex.com
          -

          ECB Vice-President Luis de Guindos reiterated the central bank’s accommodative stance in an event in London today. He said “the low interest rate environment is with us for the foreseeable future and is caused in large part by durable structural factors”. He added, “even once monetary policy normalizes, interest rates are likely to remain below levels that were common in previous decades.”

          On Brexit, he said “I hope we will be able to take advantage of the new period of time that British government, parliament have at its disposable to reach an orderly Brexit. On Italy, he said “the main recommendation is to pursue reforms that improve the effectiveness of the economy.”

          EU Katainen: Situation of British in European Parliament before Brexit looks very messy

            By
            ActionForex.com
            -

            European Commission Vice-President Jyrki Katainen complained that the prospects of British candidates getting into European Parliament just months ahead of Brexit creates a “messy” situation. He said “the UK has been given a deadline (to leave the EU) which is later in the autumn but the Commission president might be elected before that … It looks very messy at the moment.”

            He added: “We have to make sure all MEPs have the same rights and responsibilities because we cannot be in a situation where some MEPs have a partial mandate … But a temporary majority may cause lots of questions and troubles.”

            US Mnuchin concluded productive trade meetings with China Liu, next round in Washington

              By
              ActionForex.com
              -

              US Treasury Secretary Steven Mnuchin said he has concluded “productive meetings” with Chinese Vice Premier Liu He in Beijing. And, the discussions will continue in Washington next week. But there is so far no details regarding any progress made. Trade Representative Robert Lighthizer is quiet as usual on the topic.

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              Earlier, China Banking and Insurance Regulatory Commission said it will further open up the banking an insurance sectors. And it plans to issue 12 new measures soon. The measures include dropping the USD 10B asset requirements for foreign companies to set up a legal entity in the country. The USD 20B asset requirements for foreign banks to set up a branch will also be removed. Approval procedures for foreign banks to conduct Yuan businesses will be removed.

              UK PMI manufacturing dropped to 53.1, pre-Brexit stockpiling continues with solid but slower pace

                By
                ActionForex.com
                -

                UK PMI manufacturing dropped to 53.1 in April, down from 55.1 and matched expectation of 53.1. Markit noted that new export business declines. Also, stock-building continues at solid, yet slower, pace.

                Rob Dobson, Director at IHS Markit, which compiles the survey:

                “The upturn in the UK manufacturing sector eased at the start of the second quarter. Growth of output and new orders slowed, leading to job cuts for the third time in the past four months. The trend in new export business was especially weak, as high stock holdings at clients and slower global economic growth led to reduced demand from key markets such as the European Union, the USA and China. There were also reports of overseas clients acting now to re-route their supply chains away from the UK in advance of Brexit.

                “A central theme at UK manufacturers during recent months has been stockpiling activity in advance of Brexit, and this process continued into April. Rates of increase in both inventories of inputs and finished products remained historically rapid, despite cooling from the record highs seen in March. Companies noted that the delay to the scheduled Brexit date meant they had to ensure levels of key inputs remained sufficiently large to cover as broad a range of outcomes as possible in coming months.

                “The stock build has clearly still helped support production growth, with a number of companies attributing increased output in April to Brexit-related stock-building.

                “Manufacturers’ outlook remained relatively upbeat, however, with over 50% forecasting their output will be higher in 12 months’ time. Companies plan to use new product launches, new technologies and improved marketing strategies to drive growth forward in the coming months. However, Brexit uncertainty continues to weigh on plans, as some firms remain concerned about future growth prospects and the likely impact on output and demand from the unwinding of inventory positions later in the year.”

                Full release here.

                Dollar to listen to Powell’s comments on growth in inflation, some previews

                  By
                  ActionForex.com
                  -

                  Dollar is staying generally week today, except versus Kiwi and Yen. But FOMC announcement ahead could change its fortune. There is no chance for Fed to change federal funds rate at 2.25-2.50%. Also, Fed will, without a doubt, maintain its patient stance regarding any monetary policy adjustment.

                  As a reminder, monetary policy normalization is considered largely completed after December’s rate hike. Balance sheet run-off is also on track to completion later this week. Generally speaking, policymakers would need strong evidence of an emerging trend in either inflation or employment to make another move.

                  Yet, an important factor to watch is Fed chairman Jerome Powell’s response to strong growth but sluggish inflation. Dollar bears would like to hear Powell mentioning the downside risks in inflation and the readiness to cut interest rate should outlook worsens. On the other hand, Dollar bulls would like to hear Powell dismissing the talks of rate cut as being premature.

                  Either way, Dollar would pick up its near term direction from there.

                  Here are some suggested previews:

                  Australia AiG PMI improved to 54.8, but employment and wage indices dropped

                    By
                    ActionForex.com
                    -

                    Australia AiG Performance of Manufacturing Index rose 3.8 pts to 54.8 in April, indicating faster growth. All subsectors except machinery & equipment, and metal products improved. Top concerns for manufacturers in April included the upcoming Federal election, high energy prices, high input costs (due to drought, a low dollar and high commodity prices) and tighter credit conditions.

                    Employment index dropped sharply by -5.1 pts to 51.5. The release also noted ABS data indicated that total manufacturing employment fell dramatically over summer, with a reduction in employment of 41,600 over the three months to February 2019 (-6.3% q/q, trend). Average wage index dropped -3.5 to 57.7, indicating lower wage pressures across the manufacturing sector. Also, this wage index has been trending down since peaking at September 2018.

                    Full release here.

                    New Zealand employment dropped -0.2% qoq in Q1, NZD dips

                      By
                      ActionForex.com
                      -

                      New Zealand Dollar drops notably today after weaker than expected job data. Employment contracted -0.2% qoq in Q1, below expectation of 0.5% qoq growth. Unemployment rate dropped to 4.2%, down from 4.3% and matched expectations. But labor force participation rate dropped -0.5% to 70.4%. Labor cost index rose 0.3% qoq, below expectation of 0.5% qoq.

                      Today’s data shouldn’t change RBNZ’s view that New Zealand is current staying at maximum sustainable employment. The reduced momentum in job growth and sluggish wage would provide little support to the already low inflation reading. Weak CPI is a key factor around the case of RBNZ rate cut in near term, probably in May, but the meeting remains live.

                      Full release here.

                      While NZD/USD dipped notably today, it’s staying in range above 0.6580 temporary low. More sideway trading remains in favor. But upside should be limited by 0.6718 resistance. Break of 0.6580 will target 0.6551 support next.

                      China to open up banking and insurance sectors as new round of trade negotiation with US starts

                        By
                        ActionForex.com
                        -

                        New round of US-China trade negotiations started in Beijing today. US Treasury Secretary Steven Mnuchin said he had a “nice working dinner” yesterday and “it’s good to be back here” in Beijing. It widely known that while progress has been made two key sticky points remained unresolved, an enforcement mechanism and the timelines for lifting imposed additional tariffs.

                        Meanwhile, China Banking and Insurance Regulatory Commission said it will further open up the banking an insurance sectors. And it plans to issue 12 new measures soon. The measures include dropping the USD 10B asset requirements for foreign companies to set up a legal entity in the country. The USD 20B asset requirements for foreign banks to set up a branch will also be removed. Approval procedures for foreign banks to conduct Yuan businesses will be removed.

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

                          By
                          ActionForex.com
                          -

                          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.

                          US consumer confidence rose to 129.2, beat expectation of 126.5

                            By
                            ActionForex.com
                            -

                            Conference Board US Consumer Confidence rose to 129.2 in April, up from 124.2 and beat expectation of 126.5. Present Situation Index rose from 163.0 to 168.3. Expectations Index rose from 98.3 to 103.0. Lynn Franco, Senior Director of Economic Indicators at The Conference Board said while consumer confidence “partially rebounded”, it still “remains below levels seen last fall”. But overall, “consumers expect the economy to continue growing at a solid pace into the summer months”.

                            Also released from US:

                            Into US session: GBP and EUR strongest, AUD weakest

                              By
                              ActionForex.com
                              -

                              Entering into US session, Sterling is the strongest one for today followed by Euro. The Pound is apparently lifted by news that Prime Minister Theresa May is targeting to conclude Brexit negotiation with Labour by mid next week. Euro’s rally was more solidly triggered by a string of stronger than expected data. Eurozone GDP grew 0.4% qoq versus expectation of 0.3% qoq. Germany CPI also accelerated sharply to 2.0% yoy in April, up fro 1.3% yoy and beat expectation of 1.5% yoy.

                              On the other hand, Australian Dollar remains the weakest ones for today as weighed down by China PMI misses. Sustainability of post lunar new year seasonal rebound in Chinese economy is in serious doubt. Swiss Franc, New Zealand and Canadian Dollar are among the next weakest. In particular, Loonie is dragged down by unexpected contraction in Canadian GDP in February.

                              In Europe, currently:

                              • FTSE is down -0.23%.
                              • DAX is down -0.19%.
                              • CAC is down -0.29%.
                              • German 10-year yield is up 0.0395 at 0.046.

                              Earlier in Asia:

                              • Hong Kong HSI dropped -0.65%.
                              • China Shanghai SSE rose 0.52%.
                              • Singapore Strait Times dropped -0.2%.
                              • Japan remains in ultra-long 10 days holiday.

                              UK May said to target to complete Brexit negotiation with Labour by mid next week

                                By
                                ActionForex.com
                                -

                                Several British media, including BBC and Guardian, reported today that Prime Minister Theresa May is now targeting to reach a Brexit compromise with opposition Labour Party by the middle of next week.

                                May’s spokesman had declined to set an end date for the talks, and described the latest round of talks as “serious and constructive”.

                                Separately, Labour Party is meeting today to hammer out its position on whether to demand a second referendum on any Brexit deal as part of its campaign for the European parliament election next month.

                                Canada GDP contracted -0.1% mom, missed expectations

                                  By
                                  ActionForex.com
                                  -

                                  Canada GDP unexpected dropped -0.1% mom in February, worse than expectation of 0.0% mom. Looking at some details, mining, quarrying and oil and gas extraction sector declines (-1.6%) for the sixth consecutive month. All subsectors decline. Transportation and warehousing contract as rail transportation drops -1.6%, largest fall since June 2011. That’s largely due to a 10.8% drop in rail transportation. Finance and insurance sector declined -0.6%., Manufacturing sector contracted -0.4%. Though, utilities were up 1.5% due to record-setting cold weather in Western Canada. Construction grew for the second month by 0.2%. Also from Canada, IPPI rose 1.3% mom, RMPI rose 2.8% mom in March.

                                  German CPI accelerated to 2% in April, well above expectation

                                    By
                                    ActionForex.com
                                    -

                                    Euro rebounds further after stronger than expected German inflation data. CPI rose 1.0% mom in April, double of expectation of 1.0% mom. Annually, CPI accelerated to 2.0% yoy, up from 1.3% yoy and beat expectation of 1.5% yoy.

                                    Full release here.

                                    US Mnuchin hopes to make substantial progress in China trade talks

                                      By
                                      ActionForex.com
                                      -

                                      US Treasury Secretary Steven Mnuchin said he hopes to make “substantial progress” on trade negotiations as he arrived in Beijing with Trade Representative Lighthizer today. Mnuchin said “we’ve a meeting here, and then the vice premier and team will be coming back to Washington D.C., and we hope to make substantial progress in these two meetings.”

                                      He added: “I’m not going to comment on specific issues of the discussions… They’ve been quite broad as I’ve said before. We’ve made a lot of progress. We look forward to the meetings here.”

                                      China’s Foreign Ministry said “in recent months, both countries’ economic and trade teams have held many rounds of high-level consultations and achieved much positive progress.” China hopes that both sides can “work hard, exclude disturbances, and reach a mutually beneficial, win-win agreement”.

                                      Eurozone unemployment dropped to 7.7%, lowest since 2008

                                        By
                                        ActionForex.com
                                        -

                                        Eurozone unemployment rate dropped to 7.7% in March, down from 7.8% and beat expectation of 7.8%. It’s also the lowest level since September 2008. EU28 unemployment rate also dropped to 6.4%, down from February’s 6.5%.

                                        Among the Member States, the lowest unemployment rates in March 2019 were recorded in Czechia (1.9%), Germany (3.2%) and the Netherlands (3.3%). The highest unemployment rates were observed in Greece (18.5% in January 2019), Spain (14.0%) and Italy (10.2%).

                                        Full release here.

                                        Eurozone Q1 GDP grew 0.4%, France steady, Spain strong, Italy rebounds

                                          By
                                          ActionForex.com
                                          -

                                          Euro rebounds as Eurozone economy displayed larger then expected strength. Eurozone Q1 GDP grew 0.4% qoq, above expectation of 0.3%, and doubled Q4’s 0.2%. EU 28 GDP grew 0.4% qoq.

                                          Other GDP data released today are also positive. France GDP grew 0.3% qoq in Q1, same as Q4 and matched expectations. Italy GDP grew 0.2% qoq in Q1, much better than expectation of -0.1% qoq. Spain GDP grew 0.7% qoq, accelerated from Q4’s 0.6% and beat expectation of 0.6% qoq.

                                          Also from Eurozone, unemployment rate dropped to 7.7 in April, better than expectation of 7.8%. That’s also the lowest level since September 2008. German import price rose 0.0% mom in March, below expectation of 0.3% mom. German Gfk consumer sentiment for May was unchanged at 10.4, above expectation of 10.3. German unemployment dropped -12k in April, worse than expectation of -6k. German unemployment rate was unchanged at 4.9% in April.

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