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NAB on RBA: Next rate move could be down rather than up

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    Australia NAB Business Condition staged a moderate rebound in January up from 2 to 7 and beat expectation of 4. That came after the sharp decline from 11 to 3 in December. Business Confidence also rose slightly from 3 to 4. NAB noted that even after the recovery, “conditions and forward orders continue to trend lower and still show a sizeable decline over the past 6 months.”

    Alan Oster, NAB Group Chief Economist noted that “Based on the confirmation that conditions have deteriorated further and our current set of forecasts we now see the RBA staying in neutral for the foreseeable future, though think the next move could be down rather than up based on the current trajectory of growth and growing downside risks”.

    Media release here.

    China MOFCOM: Consumption faces more challenges in 2019 after slowdown last year

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      Chinese Commerce Department’s Deputy Director of the Market Operation Wang Bin admitted that consumption growth in 2018 has slowed down. In particular, growth in products related to automobiles and housing have been weak. Additionally, there will be more challenges for consumption growth in 2019 than expected.

      Wang added that there will be measures to boost consumption in five aspects. Those include polices on urban consumptions, rural consumptions, service consumptions, product circulations and consumption environments.

      MOFCOM’s briefing here (in simplified Chinese).

      EU Barnier and UK Barclay held constructive meeting on next step for Brexit

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        EU chief Brexit negotiator Michel Barnier had a meeting with UK Brexit Minister Stephen Barclay in Brussels on Monday evening. A UK government spokesman said the two had a “constructive” meeting.

        And they met to “discuss the next steps in the UK’s withdrawal from the EU and explore whether a way through can be found that would be acceptable to the UK Parliament and to the European Union”.

        UK Prime Minister Theresa May is scheduled to make a statement on Brexit today. Without any progress, there will not be another meaningful vote on her withdrawal agreement. Instead, debate will resume on Thursday in the Commons, with some lawmakers pushing for shift control of the negotiation from the government to the parliament.

        Tentative deal reached to avert another US government shutdown, with border fencing

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          A tentative deal was agreed yesterday between the Republicans and Democrats to avert another partial government shutdown this Saturday. But the agreement does not include the USD 5.7B funding for the border wall that Trump demanded.

          No detail is provided for the deal yet. But based on unnamed source, there would be USD 1.375B in funding for new fencing along the southern border of the US. That is around the same amount the Congress allocated last year.

          Also, it’s reported that only currently deployed design could be used for 90km of additional barriers, which might include steel bollard fencing.

          White House Conway: Trump wants to meet Xi very soon

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            Mid-level trade negotiations between US and China continue in Beijing today. That’s supposed to lead up to high level meeting between USTR Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He on Thursday and Friday. So far, little news is reported regarding the actual talks. It’s believed that the teams are only in the stage of drafting a common document that addresses the issues. But they’re still struggling to find concrete ways on the main issue, enforcement of the agreement.

            White House adviser Kellyanne Conway said yesterday that Trump “wants to meet with President Xi very soon.” She added that This president wants a deal. He wants it to be fair to Americans and American workers and American interests.” Also, Trump has “forged a mutually respectful relationship with President Xi,” and “they will meet again soon.” However, Conway also noted that no deal will be final until the Trump-Xi meeting happens.

            As the March 1 trade truce deadline is approaching, time is running out for the talks. It’s reported that an option for the US is to extend the period. However, to maintain pressure on China and urgency on the negotiations, any extensions won’t be open-ended. And based on unnamed sources, the US side intend not to let the Trump-Xi meeting slip much past end of March.

            US update: Dollar marches on, US stocks indecisive despite global rally

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              US stocks opened higher today but quickly turn mixed. Despite positive words from White House senior counselor Kellyanne Conway, investors see the result of US-China trade talk as highly uncertain. Also, sentiments could be weighed down by a report that Apple’s iphone shipment to China dived -20% in Q4.

              At the time of writing:

              • DOW is down -0.13%
              • S&P 500 is up 0.07%.
              • NASDAQ is up 0.20%
              • US 10-year yield is up 0.22 at 2.654.

              In Europe:

              • FTSE rose 0.87%.
              • DAX rose 1.03%.
              • CAC rose 1.09%.
              • German 10-year yield is up 0.032 at 0.121.

              In the forex markets, Dollar is the strongest one for today and the strength is rather convincing. USD/CHF and USD/JPY resumed recent rise by taking out 1.0028 and 110.16 resistances earlier today. EUR/USD’s break of 1.1289 support also argues that recent consolidation from 1.1215 low has completed. Focus will be on whether 1.2854 support in GBP/USD, 0.7060 support in AUD/USD and 1.3329 resistance in USD/CAD would be taken out before the end of the US session.

              Meanwhile, Sterling is the weakest one after poor data today. UK GDP grew only 0.2% qoq in Q4, below expectation of 0.3% qoq. In December, GDP contracted -0.4% mom , much worse than expectation of 0.0% mom. Industrial and manufacturing production also missed expectations. Yen and Swiss Franc are next weakest, mainly because of rebound in Asian and European stock markets.

              GBP/USD is the top mover for today so far, but USD/JPY is not that far away. We’re holding on to the view that rebound from 1.2391 has completed at 1.3217 already. Break of 1.2854 will affirm this bearish case and pave the way to retest 1.2391 low.

              Into US session: Yen & Swiss weakest as stocks rebound, Sterling down on GDP

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                Entering into US session, Yen and Swiss Franc are trading as the weakest one for today on easing risk aversion. At the time of writing, major European indices are trading higher, following 1.36% gain in China SSE. Sterling also softens after poor GDP data, which showed contraction in December. 2018 overall was also the worst year in UK since 2012. But weakness in the Pound is so far limited. Meanwhile, Canadian, New Zealand and Dollar are the three strongest ones.

                Technically, USD/CHF’s rally resumed by taking out 1.0028 and is on track to retest 1.0128 high. USD/JPY also broke out of tight range, through 110.16, to resume recent rebound. EUR/USD edges lower today and is eyeing 1.1289 support. Break there will bring retest of 1.1215 low next. AUD/USD weakens today, thanks to Dollar’s strength mainly, and it main challenge 0.7060 temporary low later in the session.

                In European markets, currently:

                • FTSE is up 0.77%.
                • DAX is up 1.02%.
                • CAC is up 1.09%.
                • German 10-year yield is up 0.0241 at 0.114.

                Earlier in Asia:

                • Hong Kong HSI rose 0.71%.
                • China Shanghai SSE was back from holiday and rose 1.36%.
                • Singapore Strait Times rose 0.13%.
                • Japan was on holiday today.

                UK Fox: Brexit is not the only reason for slowdown

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                  UK Trade Minister Liam Fox said today that Brexit is not the only reason for growth slowdown. He said in a news conference that “clearly there are those who believe that Brexit is the only economic factor applying to the UK economy.”

                  But he argued that “the predicted slowdown in a number of European economies is not disconnected from the slowdown, for example, in China”. And, “the idea that Brexit is the only factor affecting the global economy is just to miss the point.”

                  Meanwhile, even with Brexit impasse, “the chances of having a second referendum are as close to nil as I could imagine.”

                  UK PM May to update parliament on Brexit on Tuesday

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                    UK Prime Minister Theresa May’s spokesman said she will make a statement in the parliament tomorrow. And, “that will be an update on Brexit talks and is in advance of the debate taking place on Thursday.”

                    That was a day ahead of market expectations. But anyway, parliament debate on February 14 will be a major focus this week. Attention would be on any motions that could shift the control of Brexit from the government to the parliament. And if so, that would open up the route for lawmakers to renegotiate, delay, or even block Brexit.

                    Bank of France: GDP to growth 0.4% in Q1

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                      ActionForex.com
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                      Bank of France said today that according to the monthly index of business activity (MIBA), the country’s GDP is expected to grow 0.4% qoq in Q1 this year.

                      The business sentiment indicator in manufacturing dropped to 99 in January, down from 102. in December. Services indicator dropped to 100, down from 101. Construction indicator was unchanged at 105.

                      Also, BoF said for February, Business leaders expect industrial production to pick up, service sector activity to accelerate and construction sector activity to continue to grow.

                      Full survey report here.

                      ECB de Guindos: Wage growth increasingly broad-based, inflation to rise over medium term

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                        ActionForex.com
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                        ECB Vice President Luis de Guindos sounded confidence in his comemnts on inflation today. He sid that “wage growth has become increasingly broad-based in recent years.”

                        And, “this, together with our monetary policy measures and the ongoing economic expansion, is expected to translate into higher underlying inflation over the medium term.”

                        UK GDP contracted -0.4% in Dec, Q4 growth slowed to 0.2%

                          By
                          ActionForex.com
                          -

                          The batch of economic data from UK is all the way poor. GDP grew only 0.2% qoq in Q4, below expectation of 0.3% qoq, and a sharp slowdown from Q3’s 0.6% qoq. In December, GDP contracted -0.4% mom , much worse than expectation of 0.0% mom. Annually, GDP growth slowed to 1.4%, lowest since 2012.

                          ONS Head of GDP Rob Kent-Smith said in the release that ” manufacturing of cars and steel products seeing steep falls and construction also declining.” Also, “declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy.” Full release here.

                          Also from UK,

                          • Industrial production dropped -0.5% mom, -0.9% yoy in December versus expectation of 0.1% mom, -0.5% yoy.
                          • Manufacturing production dropped -0.7% mom, -2.1% yoy in December versus expectation of 0.2% mom, -1.1% yoy.
                          • Construction output dropped -2.8% in December versus expectation of 0.1% mom.
                          • Trade deficit narrowed to GBP -12.1B in December versus expectation of -12.0B.

                          Pound’s reaction to the data is mild though. Despite a dip, GBP/USD is currently kept well above 1.2854 temporary low.

                          Asian update: Yen mildly lower as Chinese stocks rise after holiday

                            By
                            ActionForex.com
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                            Yen trades generally lower today as Chines stocks are back from holiday opening mildly higher. Canadian Dollar follows as the second weakest and dragged down by oil prices. Sterling is also heavy on Brexit uncertainty. Australian and New Zealand Dollar are paring some of last week’s losses. But upside momentum is rather weak so far. Overall, trading is subdued with Japan on holiday.

                            Though, activity will likely surge again in European session. A batch of important economic data will be released from the UK, including GDP, trade balance and productions.

                            In Asia:

                            • Hong Kong HSI is up 0.23%.
                            • China Shanghai SSE is up 0.83%.
                            • Singapore Strait Times is down -0.48%.
                            • Japan is on holiday.

                            White House Mulvaney: Absolutely cannot rule out another government shutdown after border talks collapsed

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                              ActionForex.com
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                              In the US, the talks between Republican and Democratic lawmakers appeared to have collapsed over the week end. Nine federal departments and related agencies could be facing another shutdown if there is no breakthrough this week. The special congressional negotiating panel over border security is still aiming to reach a deal on Monday.

                              The government just had a historic partial shutdown earlier this year after Trump failed to get support from the Democrats on funding for the border wall. Now, it’s believed that in return for some funding for physical barriers at the border, Democrats requested to lower the cap of detention beds for undocumented migrants. Democrats believed that would force ICE agents to focus on arresting and deporting serious criminals.

                              White House Acting Chief of Staff Mick Mulvaney warned that he “absolutely cannot” rule out another shutdown. And he added Trump “cannot sign everything they put in front of him. There’ll be some things that simply we couldn’t agree to.”

                              UK and Swiss signed agreement to protect GBP 32B trade relationship after Brexit

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                                ActionForex.com
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                                UK and Switzerland signed an agreement on Sunday that will protect GBP 32B trade relationship between the two countries. With the agreement, both countries will continue to trade on preferential terms after Brexit. That is, the two countries could continue to trade freely without new tariffs. But financial services are not included in the deal.

                                UK Trade Minister Liam Fox hailed that “”Switzerland is one of the most valuable trading partners that we are seeking continuity for.” And, “this is of huge economic importance to UK businesses so I’m delighted to be here in Bern ensuring continuity for 15,000 British exporters. ”

                                Fox added that “not only will this help to support jobs throughout the UK but it will also be a solid foundation for us to build an even stronger trading relationship with Switzerland as we leave the EU.”

                                EU Barnier: Will not reopen Brexit agreement, but open to rework political declaration

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                                  ActionForex.com
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                                  EU Chief Brexit negotiator Michel Barnier is going to meet UK Brexit Minister Steve Barclay on Monday. Ahead of that, Barnier reiterated that EU will no re-open withdrawal agreement negotiation.

                                  Barnier tweeted: “I am looking forward to meeting @SteveBarclay in Brussels on Mon evening. I will listen to how the UK sees the way through. The EU will not reopen the Withdrawal Agreement. But I will reaffirm our openness to rework the Political Declaration in full respect of guidelines.”

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                                  Canada added 67k jobs in January, CAD surges

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                                    ActionForex.com
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                                    Canadian Dollar rebounds strongly in early US session after stellar employment data. The job market grew 67k in January, way above expectation of 6.5k. Employment gains were driven entirely by private sector, which grew 112k. Unemployment rate rose to 5.8%, up from 5.6%, higher than expectation of 5.7%. But that was because “more people looked for work.”

                                    Full release here.

                                    USD/CAD’s focus is back on 1.3229 minor support after the dive. As long as 1.3229 holds, we’d still expect another rise to 1.3375 resistance. However, break could indicate completion of rebound from 1.3068 and bring deeper fall back to this short term bottom.

                                    Into US session: Stocks in risk aversion, forex in range

                                      By
                                      ActionForex.com
                                      -

                                      Entering into US session, the forex markets are relatively calm today with major pairs and crosses are back inside Thursday’s ranges. Though, risk aversion is clearly seen in other markets. Worries over US-China trade tension escalation resurfaced after Trump said he will not meeting Chinese President Xi this month. This came despite Trump’s schedule to meet North Korean leader Kim Jong-Un on February 27-28 in Vietnam, just next to China. Re-escalation in trade tension would drag on the already weakened global recovery.

                                      For today so far, Australian Dollar is the weakest one after dovish RBA economic projections. But there is no follow through selling yet. Dollar also weakens mildly as it’s paring this week’s gain. Sterling is the strongest one, followed by Swiss France. Both are consolidating this week’s moves. Canadian Dollar is also steady but some volatility is envisaged after job data release.

                                      For the week, Dollar is overwhelmingly the strongest one, followed by Yen and then Swiss Franc. Commodity currencies are the weakest, led by Aussie.

                                      In other markets:

                                      • DOW futures are down more than -100 pts right now.
                                      • FTSE is down -0.25%.
                                      • DAX is down -0.51%.
                                      • CAC is down -0.25%.
                                      • German 10-year yield is down -0.0149 at 0.102. Decline in German yield is quite serious this week.

                                      Earlier in Asia:

                                      • Nikkei closed down -2.01%.
                                      • Hong Kong HSI dropped -0.16%.
                                      • Singapore Strait Times rose 0.04%.
                                      • Japan 10-year JGB yield dropped -0.0185 to 0.027.

                                      UK PM May to meet Irish PM Varadkar to seek legally binding change to Brexit deal

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                                        UK Prime Minister Theresa May will meet Irish Prime Minister Leo Varadkar in a dinner today. May would make use of the opportunity to press for legal binding changes to Irish backstop arrangement in the Brexit withdrawal agreement.

                                        May’s spokesman said “This is about building on the discussions that she had in Northern Ireland and in Brussels yesterday. She will be emphasizing what we are looking for – seeking the legally binding changes to the Withdrawal Agreement that parliament says it needs to approve the deal.”

                                        German FM Scholz: Irish backstop is not a trick to trap UK in EU

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                                          ActionForex.com
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                                          German Finance Minister Olaf Scholz emphasized today that Irish backstop is not a “trick” to keep UK trapped in the European Union. He said “anyone who trusts the agreement, it is not invented to avoid Brexit.. It is just done to keep the peace.” And, the backstop could be taken without thinking this is a trick how to keep them in the European Union for all time. This is not true… no one is trying to cheat someone here.”

                                          Also Scholz said Germany doesn’t want to engage in a trade war with the US. He criticized that “increasing tariffs is not a good idea” and “I hope things like this could be avoided.” He added that “The best thing we can do for growth and wealth is rules-based free trade. I hope that we will have a better situation so that we can get again more global trade agreements.”

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