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Dollar rally accelerates on super strong ISM manufacturing, highest since 2004

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    ActionForex.com
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    Dollar rally accelerates on much stronger than expected manufacturing data. ISM manufacturing index rose to 61.3 in August, up from 58.1 and beat expectation of 57.8. That’s also the highest level since May 2004. Prices paid index dropped to 72.1, down from 73.2 and missed expectation of 74. Employment component improved 2 points from 56.5 to 58.5.

    ISM noted in the released that

    • Comments from the panel reflect continued expanding business strength.
    • Demand remains strong, with the New Orders Index at 60 percent or above for the 16th straight month, and the Customers’ Inventories Index remaining low.
    • The Backlog of Orders Index continued to expand, at higher levels compared to the previous month.
    • Consumption improved, with production and employment continuing to expand, at higher levels compared to July, despite shortages in labor and materials.
    • Inputs (expressed as supplier deliveries, inventories and imports) expanded strongly due to continuing supply chain inefficiencies, positive increases in inventory levels and a slight easing of imports. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue, but at more manageable levels.
    • Export orders expanded at stable levels.
    • Prices pressure continues, but the index softened for the third straight month and remains above 70.
    • Demand is still robust, but the nation’s employment resources and supply chains continue to struggle.
    • Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations. Panelists are actively evaluating how to respond to these business changes, given the uncertainty.

    Full release here.

    ECB’s Lagarde sets conditions for June rate cut

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      ActionForex.com
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      ECB President Christine Lagarde provided clarity in a speech on the conditions that would lead to a rate cut in June, highlighting reliance on “two important pieces of evidence” as pivotal to the central bank’s confidence on dialing back monetary restrictions. .

      Firstly, ECB anticipates receiving data on negotiated wage growth for Q1 by the end of May. Secondly, by June, ECB will have access to a new set of economic projections, enabling it to verify the validity of the inflation path forecasted in its March projection.

      After the first move, Lagarde emphasized to “confirm on an ongoing basis” that incoming data aligns with its inflation outlook. This approach underscores a commitment to data-driven policy decisions, maintaining a “meeting-by-meeting” stance that eschews any pre-commitment to a fixed rate path.

      Furthermore, Lagarde noted the enduring significance of ECB’s policy framework in processing incoming data and determining the appropriate policy stance. However, she also mentioned that the relative importance of the three criteria guiding these decisions would require regular reassessment.

      Full speech of ECB’s Lagarde here.

      BoE’s Bailey signals next move as rate cut amid expected drop in inflation

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        ActionForex.com
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        BoE Governor Andrew Bailey indicated overnight that he anticipates the next move in monetary policy will be a rate cut. He expects a significant decline in April’s UK inflation data, but questions remain about how long the current level of monetary policy restriction will need to be maintained.

        Bailey addressed the IMF’s suggestion to hold a press conference after each rate-setting meeting, rather than just four times a year. He stated, “We will roll that question that the IMF have given to us into our thinking about implementing Ben Bernanke’s changes.”

         

        Fed Evans: Monetary policy is about where it can be

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          ActionForex.com
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          Chicago Fed President Charles Evans said “monetary policy is about where it can be”. Further monetary easing would only be effective once the situation of coronavirus pandemic is cleared. “At the moment, it’s really fiscal policy that needs to be addressing this.”

          “Fiscal policy is really fundamental for getting us going,” he added. “The ball is in Congress’ court.” “It’s very important that something be done. If we go very long without somehow addressing the reduction and evaporation of that support, I think it’s going to show up in lower aggregate demand, and that would be very costly for the economy.”

          Asian stocks drop broadly after Canada arrests Huawei CEO, Yen Strong

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            Asian markets are staying in selloff mode on global slow down concerns. Additionally, Hong Kong stocks lead decline on news of arrest of Chinese tech giant Huawei’s CFO Meng Wanzhou. The arrest is reported to be in relation to Huawei violating US sanctions by shipping US originated products to Iran and some other countries. Canada also confirmed that Meng is facing extradition to the US. The arrest also prompted concerns over Chinese retaliation on US executives.

            For now, Nikkei is down -1.84% or -404.35 pts. China Shanghai SSE is down -1.28%. Singapore Strait Times is down -1.25%. Hong Kong HSI is down -2.6% or -703 pts. The HSI’s gap down and steep decline today argues that recent recovery from 24540.63 has completed earlier than expected at 27260.43. With strong break of 55 day EMA, deeper fall would be in favor in near term back to retest 24540.63 low. More importantly, the corrective structure of the rebound retains medium term bearishness for new low at a later stage.

            In the current currency markets, Australian leads the way down again on risk aversion and smaller than expected trade surplus data. Canadian Dollar also stays pressured after yesterday’s dovish BoC statement. Yen is the strongest one, followed by Swiss Franc and then Dollar.

            Trump-Kim summit collapsed, it’s all about the sanctions

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              Trump in a press conference that he walked away from the summit with North Korean leader Kim Jong-un. But he emphasized that “it was a friendly walk”. The meeting in Vietnam was cut short and ended without an agreement and not even a joint statement.

              Trump said “it was all about the sanctions”. He added “basically they wanted the sanctions lifted in their entirety, and we couldn’t do that”. On the other hand, Trump said Kim offered to dismantle North Korea’s main nuclear facility at Yongbyon, but “it wasn’t enough” to the US.

              Trump also added that he could’ve signed an agreement today but it wasn’t the right time. He emphasized he’d “rather do it right”.

              RBNZ holds steady at 5.50% but signals potential hike later in 2024

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                ActionForex.com
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                RBNZ kept Official Cash Rate unchanged at 5.50%, as widely anticipated. However, RBNZ surprised markets by raising its projected rate path, suggesting the possibility of another rate hike later this year. Additionally, the timeline for rate cuts has been pushed further into the latter half of 2025. According to key forecast variables, the OCR is expected to rise from the current 5.5% to 5.7% in Q4 2024 before declining to 5.4% in Q3 2025.

                Minutes of the meeting highlighted that members agreed on the “significant upside risk” posed by persistent non-tradable inflation. They noted that the influence of recent inflation outcomes on future inflation expectations is critical for price setting, wage expectations, and the stance of monetary policy. Moreover, slower output growth than currently assumed could reduce the pace at which spending can grow without increasing inflationary pressures.

                “Monetary policy may need to tighten and/or remain restrictive for longer if wage and price setters do not align with weaker productivity growth rates,” the minutes stated.

                Full RBNZ statement here.

                US Empires State Manufacturing index rose 12.9 pts to 4.3

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                  ActionForex.com
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                  US Empires State Manufacturing General Business Outlook improved to 4.3 in July, up 12.9 pts from -8.6. Looking at some details, new orders were little changed, and shipments increased. Unfilled orders and inventories continued to move lower, while delivery times were longer. The employment index remained negative, falling to its lowest level in nearly three years. Input price increases continued to moderate somewhat, while the pace of selling price increases remained modest. Indexes assessing the six-month outlook indicated that firms were fairly optimistic about future conditions.

                  Full release here.

                  Eurozone retail sales rose 2% mom in Dec, EU up 1.4% mom

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                    ActionForex.com
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                    Eurozone retail sales rose 2.0% mom in December, above expectation of 1.3% mom. The volume of retail trade increased by 5.1% mom for automotive fuels, by 1.9% mom for food, drinks and tobacco and by 1.5% mom for non-food products (within this category textile, clothing and footwear increased by 12.4% mom).

                    EU retail sales rose 1.4% mom. Among Member States for which data are available, the highest increases in the total retail trade volume were observed in France (22.3% mom), Belgium (15.9% mom) and Ireland (11.4% mom). The largest decreases were registered in the Netherlands (-10.9% mom), Germany (-9.6% mom) and Denmark (-8.0% mom).

                    Full release here.

                    Dollar selling starts as bears relieved by CPI data

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                      ActionForex.com
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                      US CPI met market expectation. Dollar bears seem to be “relieved” and fresh selling seen after the release

                      US CPI Jan: 0.2% mom vs exp 0.2% mom vs prior 0.5% mom

                      US CPI Jan: 2.2% yoy vs exp 2.2% yoy vs prior 2.1% yoy

                      US CPI core Jan: 0.2% mom vs exp 0.2% mom vs prior 0.3% mom

                      US CPI core Jan: 1.8% yoy vs exp 1.8% yoy vs prior 1.8% yoy

                      Full release here.

                      Markets shrug Trump’s unsubstantiated tax cut for middle class

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                        ActionForex.com
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                        Trump talked about the plan to give middle class 10% tax cut yesterday. He said “we’re putting in a resolution some time in the next week and a half to two weeks [and] we’re giving a middle-income tax reduction of about 10 percent.” He insisted that the plan will go through Congress rather than executive order. And the vote will be done after mid-term election.

                        But the initiative is widely criticized as unsubstantiated as Republican congressional leaders and White House officials were reported to have heard nothing about the plan. Additionally, Congress is in recess ahead of mid-term election and there is no plan to return to Washington for the matter.

                        White House spokeswoman Lindsay Walters clarified yesterday that “as part of Tax Reform 2.0, the first elements of which were passed the House in September, the President would like to see an additional tax cut of 10% for middle-income families.” That effectively confirmed that the idea of 10% tax cut is something entirely new.

                        The three bills of the so called Tax Reform 2.0 was passed in the House in late September. And it’s already facing a tough batter in the Senate. It is seen as nearly impossible to add additional deficit ballooning 10% tax cut to the plan and get through either House or Senate. The claimed 10% tax cut for the middle class is seen as campaign gimmick rather than anything with substance.

                        The US markets shrugged off the news with DOW closing down -0.50% at 25317.41. Consolidation from 24899.77 is in progress but fall from 26951.81 medium term should resume sooner or later.

                        Japan PM Abe agreed bilateral talks with US only on goods

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                          ActionForex.com
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                          Japan and the US agreed to start bilateral trade talks after meeting of Prime Minister Shinzo Abe and Trump. But after the meeting, Abe emphasized that the new framework would only be a Trade Agreement on Goods. It’s not a full Free Trade Agreement that includes investments and services. Both countries pledged in a joint statement to “respect positions of the other government.”

                          However, US Trade Representative Robert Lighthizer ignored the position of Japan. He told reporters he’s aiming for a full free trade deal requiring approval by Congress under the “fast track” trade negotiating authority law. Lighthizer added the talks will be handled in two “tranches” targeting an “early harvest” on reducing tariffs and non-tariffs barriers in goods.

                          In the joint statement, it’s noted that:

                          • For the United States, market access outcomes in the motor vehicle sector will be designed to increase production and jobs in the United States in the motor vehicle industries; and
                          • For Japan, with regard to agricultural, forestry, and fishery products, outcomes related to market access as reflected in Japan’s previous economic partnership agreements constitute the maximum level.

                          Full statement here.

                          RBA Lowe: Interest rates to be low for quite a while yet

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                            RBA Governor Philip Lowe told a parliamentary committee that the central bank was committed to do “everything it reasonably can” to to push the unemployment rate lower and drive wages growth higher. However, even in the most optimistic scenario, inflation won’t be back to its target band before 2023.

                            “The cash rate will be maintained at 10 basis points for as long as is necessary,” Lowe added. “Interest rates are going to be low for quite a while yet.”

                            Australia Westpac consumer sentiment rose 18%, returning to more normal levels

                              By
                              ActionForex.com
                              -

                              Australia Westpac Consumer Sentiment surged 18% to 94.8 in September, up from 79.5. The index is now just -1.6% below the average over the six months prior to the emergence of COVID-19 in March. “Consumer confidence is returning to more normal levels, although the sensitivity to progress in managing the virus and the opening up of economies remains key to the outlook”

                              RBA will next meet on October 6, the same say as the government’s Federal Budget announcement. Westpac said “it is reasonable to expect further initiatives from the Reserve Bank to loosen monetary policy”. That approach will be “entirely appropriate” to complement the stimulatory budget.

                              Full release here.

                              Japan’s CGPI records eighth consecutive month of slowdown in August

                                By
                                ActionForex.com
                                -

                                Japan’s annual wholesale inflation, as measured by Corporate Goods Price Index, registered a slowdown for the eighth consecutive month in August. CGPI eased to 3.2% yoy, aligning with market expectations and continuing its downward trend from the peak of 10.6% yoy recorded in December.

                                Export price index recorded a lesser contraction of -0.8% yoy compared to -2.6% yoy in July. Meanwhile, import price index also demonstrated a slight moderation in its decline, posting a -15.9% yoy compared to -16.0% yoy observed in the preceding month.

                                On a month-on-month basis, PPI saw an uptick of 0.3% mom. Delving into the specifics, export price index witnessed a recovery, improving by 0.5% mom. In contrast, the import price index reported a decline of 0.9% mom. within the same period.

                                Full Japan PPI release here.

                                US Empire State manufacturing rose to 30.9, employees and price paid surged

                                  By
                                  ActionForex.com
                                  -

                                  US Empire State Manufacturing Survey general business conditions jumped to 30.9 in November, up from 19.8, above expectation of 20.2. 43% of respondents reported improved conditions while 12% reported worsened conditions.

                                  New orders rose 5 pts to 28.8. Shipment jumped 19 pts to 28.2. Delivery times dropped -5.8 to 38.0. Number of employees jumped 9 pts to 26.0, a record high. Average workweek also jumped 8 pts to 23.1. Price paid rose 4 pts to 83.0. Price paid rose 7 pts to 50.8, a record high.

                                  Full release here.

                                  BoJ Kuroda: Will make necessary policy adjustments to sustain the economy’s momentum

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                                    ActionForex.com
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                                    BoJ Governor Haruhiko Kuroda told the central bank’s regional branch managers that inflation is still expected to pick up gradually to 2% target. The economy is expected to continue expanding moderately as a trend, even though it’s affected by overseas slowdown. But still, BoJ would maintain easing for as long as needed to hit stable target.

                                    Kuroda reiterated that short- and long-term interest rate will be kept at current very low levels for extended period, “at least through around spring 2020”. Also, monetary base will continue to expand, and QQE will be maintained under the yield curve control framework.

                                    Also, Kuroda pledged that “the BOJ will make necessary policy adjustments to sustain the economy’s momentum towards achieving its inflation target.”

                                    Fed Evans: There’s benefits to adjusting tightening pace soon

                                      By
                                      ActionForex.com
                                      -

                                      Chicago Fed President Charles Evans said yesterday, “there’s benefits to adjusting the pace (of tightening) as soon as we can.”

                                      “I’m hopeful that we’re getting to a point where the dynamics for inflation turning over and returning towards our 2% objective will be put in place, if not very soon, soon, and we’ll actually see it in inflation,” he said.

                                      “If you don’t begin to think about adjusting the pace, taking account of lags, and you just keep increasing rates by a large amount every time you get a disappointing report,” then “next thing you know, you’re at a very high federal funds rate.”

                                      “I’m going to continue to be nervous that, as we go higher than that, it could be that the economy is going to face more challenges, and that that could present risks on the ‘real’ side, the full employment mandate,” he said. “It’s a risk.”

                                      Germany and France jointly urged China to open market with concrete and systematic measures

                                        By
                                        ActionForex.com
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                                        In a rare joint  op-ed  article in Caixin magazine, French Ambassador Jean-Maurice Ripert and German Ambassador Clemens von Goetze  urged China to do more to open its markets. They said “French and German companies are looking forward to China demonstrating that it will not waver and will deepen its opening-up and reform policy in order to create a level playing field for foreign businesses in China.” And, “European businesses should have the same opportunities in China as Chinese industries enjoy in Europe.”

                                        And, China should “go beyond tariff adjustments” but address the issues through “concrete and systematic measures”. For example:

                                        • China should enhance its reputation as an open and reliable export destination for producers, in additional to reducing import taxes.
                                        • China should abolish joint venture requirements across all sectors to stimulate foreign direct investment
                                        • China should ensure implementation of cybersecurity legislation follows the principle of proportionality but not lead to market access barriers or discriminatory practices
                                        • China should  replace provisions in technology import-export and joint venture regulations that restrict foreign ownership and freedom to exert IP rights
                                        • China should continue with reform of state-owned enterprises regarding their preferential treatment they received and competitive disadvantages for private companies.

                                        The article also pledged that “together with China, the European Union is firmly committed to a strong multilateral trading system.”

                                        Full article here.

                                        New Zealand ANZ business confidence off low, offers a glimmer of light

                                          By
                                          ActionForex.com
                                          -

                                          New Zealand ANZ Business Confidence improved to -66.6 in April, up from preliminary reading of -73.1, while down from March reading of -63.5. All sectors are deep in negative with retail at -70.7, manufacturing at -65.3, agriculture at -89.7, construction at -71.8 and services at -60.3. Activity Outlook also improved slightly to -55.1, up from preliminary reading of -43.6, but down from March’s -26.7. All sectors are also deep in negative with retail at -67.2, manufacturing at -52.7, agriculture at -44.8, construction at -57.9, and services at -52.4.

                                          ANZ said, “a glimmer of light at the end of the tunnel emerged over the month, with the country making solid progress in its COVID-19 battle”. However, “the levels of most indicators remain at levels that were frankly unthinkable before COVID-19 reached our shores. Businesses are really hurting. And it’s not just expectations. The proportion of firms that have already seen lower activity and have let staff go continues to rise. That will clearly remain a theme for some time.

                                          Full release here.

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