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Australia NAB business confidence fell to -4, conditions down to 17

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    ActionForex.com
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    Australia NAB Business Confidence dropped sharply from 6 to -4 in February. Business Conditions dropped from 18  to 17. Looking at some details, trading conditions were unchanged at 27. Profitability conditions dropped from 18 to 14. Employment conditions rose from 11 to 12.

    “Overall, the survey confirms the ongoing resilience of the economy through the first months of 2023, though we continue to expect a more material slowdown in demand later in the year when the full effect of rate rises has passed through,” said NAB.

    Full release here.

    France’s Q1 GDP sees modest growth of 0.2% qoq

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      ActionForex.com
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      France’s Q1 GDP growth came in at a modest 0.2% qoq, slightly outperforming market expectations of 0.1% qoq.

      Final domestic demand (excluding inventories) contributed negatively to GDP growth, albeit less so than in the previous quarter (-0.1 points in Q1 2023 after -0.4 points). This was due to household consumption stabilizing (0.0% after -1.0%), while gross fixed capital formation (GFCF) experienced a minor decline (-0.2% after 0.0%).

      In contrast, foreign trade provided a positive contribution to GDP growth (+0.6 points after +0.2 points). Imports decreased this quarter (-0.6% after +0.1%), while exports remained strong (+1.1% after +0.9%).

      Lastly, the contribution of inventory changes to GDP growth was negative this quarter (-0.3 points after +0.2 points in Q4 2022).

      Full France GDP release here.

      Japan Cabinet Office revises 2019 fiscal growth forecast to just 0.9%

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        ActionForex.com
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        Japan’s Cabinet Office projects the economy to grow just 0.9% in the fiscal year ending March 2020. That’s a notable downgrade from prior forecast of 1.3%. For the following year, growth is forecast to pick up to 1.2%, though.

        For the current fiscal year, exports growth is forecast to slow to just 0.5%, sharply lower than January’s projection of 3.0%. That would be the weakest growth since fiscal 2012. On the other hand, robust corporate investment and private consumption should help offset some of the drag from exports.

        On prices, the Cabinet office forecasts over CPI to be at 0.7% in this fiscal yet, and 0.8% next. Both figures are well below BoJ’s 2% target.

        Separately, Economy Minister Toshimitsu Motegi said he would hold ministerial-level talks with US Trade Representative Robert Lighthizer on August 1-2 in Washington for trade negotiations.

        RBNZ Silk warns against premature rate cut expectations

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          ActionForex.com
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          RBNZ Assistant Governor Karen Silk advised caution against pricing in rate cuts too prematurely. In her comments, Silk stressed that RBNZ has reached a juncture where it can “take a pause and watch how this evolves,” ensuring that “you don’t overdo things.”

          However, Silk emphasized that it’s core inflation that the central bank is focused on bringing down, and this will require maintaining the current rate levels for an extended period. “We’ve said we need to hold for an extended period of time to ensure core inflation comes down; it’s core inflation that we need to get down,” she stated.

          She explained the bank’s holistic approach to assessing economic conditions, saying, “We look at economic data, but we also look at transmission,” Silk explained. “If at a wholesale level and most importantly at a retail level we start to see those things come off faster, then that’s one of the things we take into account when we think about where we set the OCR.”

          In terms of the inflationary impact of Cyclone Gabrielle, Silk indicated that its effect has been less severe than initially anticipated. RBNZ had initially projected the storm would add 0.3% to inflation in both the first and second quarters. Still, it has since revised this down to just 0.1%, citing that while the storm led to increased food costs, it didn’t inflate the prices of other goods such as used cars.

          Australia employment rose 17.9k in Mar, unemployment rate unchanged at 4%

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            Australia employment grew 17.9k in March, below expectation of 30.0k. Full-time jobs rose 20.5k while part-time jobs dropped -2.7k. Unemployment rate was unchanged at 4.0%, above expectation of 3.9%. Participation rate was unchanged at 66.4%. Monthly hours worked dropped -0.6% mom.

            Bjorn Jarvis, head of labour statistics at the ABS, said: “With employment increasing by 18,000 people and unemployment falling by 12,000, the unemployment rate decreased slightly in March, though remained at 4.0 per cent in rounded terms.

            “4.0 per cent is the lowest the unemployment rate has been in the monthly survey. Lower rates were seen in the series before November 1974, when the survey was quarterly.”

            Full release here.

            Moody’s affirms US Aaa rating, stable outlook. Economic strength couter balance lower fiscal strength

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              ActionForex.com
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              Moody’s Investor Service affirmed US Aaa rating. Outlook was also maintained as stable. Moody’s noted that “exceptional economic strength” of the US, very high strength of its institution, very low exposure to credit related-shocks. And that “counter balance” the lower fiscal strength.

              The rating agency also noted that “diversity, dynamism, and competitiveness” of the US economy, Dollar’s status as the “pre-eminent international reserve currency” and the “very large size and depth” of the treasury market. These advantages will “offset rising fiscal pressures” from “ageing-related entitlement spending, higher debt service payments”, and recent policy actions that will likely lower revenues and increase expenditures.

              Full release here

              For now, Moody’s expected US and China to reach a trade deal eventually. However, Moody’s Senior Credit Officer William Foster said that “if things ultimately progress in a way that is outside of the base case, that would be negative for both countries and for the global market place, but our expectation is this will be negotiated back from the headlines you’re reading.”

              US NFP rose 339k, unemployment rate rose to 3.7%

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                ActionForex.com
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                US non-farm payroll employment grew 339k in May, well above expectation of 180k. The figure was in line with the average monthly gain of 341k over the prior 12 months.

                Unemployment rate rose from 3.4% to 3.7%, above expectation of 3.5%. Labor force participation rate was unchanged at 62.6%. Number of unemployed persons rose by 440k to 6.1m.

                Average hourly earnings rose 0.3% mom, matched expectations. Average workweek edged down by -0.1 hour to 34.3 hours.

                Full US NFP release here.

                Bundesbank’s Nagel stresses final push to inflation target as toughest hurdle

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                  ActionForex.com
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                  Bundesbank President Joachim Nagel likened the journey toward ECB’s inflation target to an arduous “last mile,” which “may well be the hardest”.

                  Nagel pointed out that a key strategy for businesses would involve absorbing recent wage hikes—a move that will necessitate accepting slimmer profit margins.

                  On the other side, he emphasized the necessity of a more restrained fiscal approach from governments.

                  While wage increases are anticipated to exert some pressure on pricing, Nagel reassured that currently, there’s no sign of a “self-reinforcing spiral” in wage-price dynamics. This suggests a cautious optimism that, while the path forward is steep, runaway inflation is not an imminent threat.

                  Japan CPI core slowed to 0.6%, lowest since July 2017

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                    ActionForex.com
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                    Japan CPI core (ex-fresh food) slowed to 0.6% yoy in June, down from 0.8% yoy and matched expectations. All items CPI was unchanged at 0.7% yoy, while CPI core-core (ex-fresh food and energy) was also unchanged at 0.5% yoy.

                    CPI core was the lowest reading since July 2017. No turnaround is expected in the near term. Instead, CPI core could be further dragged down by policy related factors, including mobile phone charges and education costs.

                    The dim inflation outlook highlights the pressure for BoJ to ramp up monetary stimulus. In particular, both Fed and ECB are expected to loosen up policy again later this week.

                    Full release here.

                    ECB to announce new easing package, some previews

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                      ActionForex.com
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                      ECB rate decision is the mega events today. It’s widely expected to announce a package of stimulus measures. But up till now, it’s unsure what the exact package would be. Opinions are rather divided, leaving much room for disappointments for both sides. Additionally, ECB will release new economic projections which would be closely watched too.

                      Here is our take on the package:. 1. Deposit rate cut by -20bps to -0.60%. 2. Two-tiered system to exempt some backs on paying deposit interests. 3. Restart QE at EUR 30B per month. 4. Adjustments to TLTRO. 5. Change of forward guiance to keep interest rates low well past horizon of QE.

                      More in ECB Preview – Awaiting New Easing Package

                      Suggested readings:

                      BoE to stand pat and discuss negative rates, some previews

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                        ActionForex.com
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                        BoE is widely expected to keep monetary policy unchanged today, with Bank rate held at 0.1% and asset purchase target at GBP 895B. New economic projections will also be released. But the major focus will be on rhetorics regarding negative interest rates.

                        Governor Andrew Bailey has recently noted that it might be premature to implement negative rates. For instance he suggested that there are “lots of issues” with negative rates and policymakers have “not actually discussed” the issue yet. Chief Economist Andy Haldane expected the economy to recover at “a rate of knots” from Q2. Brexit risks were also cleared. The hurdle for the divided committee to reach a consensus on using negative rates seem too high.

                        Here are some BoE previews:

                        Sterling’s rally has been losing much momentum ahead of BoE rate decision, even against the weak Euro. We’ll see if more sell-on-news movement would happen after BoE affirms its stance on negative rates. In particular, break of 0.8917 minor resistance in EUR/GBP confirm short term bottoming and bring stronger rebound, probably dragging Sterling down elsewhere too.

                        Eurozone GDP growth finalized at 2.2% qoq in Q3, EU at 2.1% qoq

                          By
                          ActionForex.com
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                          According to the final revised data, Eurozone GDP grew 2.2% qoq, 3.0% yoy in Q3. GDP volumes remained -0.3% below pre-pandemic level in Q4 2019. Household consumption rose 4.1%. Government final consumption expenditure rose 0.3%. Gross fixed capital formation dropped -0.9%. Exports rose 1.2%. Imports rose 0.7%.

                          Household final consumption expenditure in Eurozone rose 2.1%. Government final expenditure rose 0.1%. Gross fixed capital formation dropped -0.2%. The contributions from external balance were positive while change in inventories was slightly negative.

                          EU GDP grew 2.1% qoq, 4.1% yoy. GDP volumes remained -0.1% below pre-pandemic level in Q4 2019. Austria (+3.8%) recorded the highest increase of GDP compared to the previous quarter, followed by France (+3.0) and Portugal (+2.9%). Lowest growth rates were observed in Romania and Slovakia (+0.4%), while GDP remained stable in Lithuania (0.0%).

                          Full release here.

                          Poll shows May’s Brexit plan overwhelmingly rejected

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                            ActionForex.com
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                            A latest poll showed that UK Prime Minister Theresa May’s current Brexit plan is rejected by the British, in rather overwhelming way. The poll was conducted by YouGov for the Sunday Times between July 19-20. It showed that in case of a new referendum, only 11% would support the so-called “the Chequers deal”. 38% would vote for a “no-deal Brexit”. And 50% would vote for remaining in the EU. Giving a second preference, 54% would vote for “remain” while 46% will vote for a “no-deal Brexit”.

                            May tried to defend the plan and said “this is a principled and practical Brexit that is in the mutual interests of the UK and EU, but it will require pragmatism from both sides.” But as the Sunday Times commented, “the problem for May is that the Chequers plan is viewed as too favourable to Britain by the EU, too unfavourable to Britain by the Brexiteers and unworkable by both.”

                            BoC Previews: One more insurance hike before pausing

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                              ActionForex.com
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                              BoC is expected to deliver an “insurance” rate hike of 25bps today, to bring policy rate to 4.50%. After this eighth consecutive increase, the central bank is expected to pause the tightening cycle.

                              It’s already indicated in the December statement that the bank will be “considering whether the policy interest rate needs to rise further”. BoC should more explicitly indicate that it’s now the time to let pass rate hikes work through the economy.

                              The question would then shift to the time interest rate is going to stay at this level, but no answer is expected any time soon.

                              Here are some previews on BoC:

                              CAD/JPY has been losing downside momentum for some time, as seen in daily MACD and a bounce is overdue. Yet, even in case of a rebound, strong resistance could be seen between 55 day EMA (now at 99.65) and 38.2% retracement of 110.33 to 94.61 at 100.61 to cap upside. Until 100.61 is taken out decisively, any bounce is more of a short opportunity than a turnaround.

                              Bundesbank Nagel: ECB interest rates could rise this year

                                By
                                ActionForex.com
                                -

                                In a Die Zeit interview, new Bundesbank President Joachim Nagel said, “if the (inflation) picture does not change by March, I will advocate normalizing monetary policy.” “The first step is to end net bond purchases during 2022,” he said. “Then interest rates could rise this year.”

                                Nagel also expects inflation in Germany to rise “significantly” above 4% in 2022. He warned that the economic costs of acting too late on inflation are significantly higher than acting early.

                                Fed Rosengren: Don’t use up valuable space, no immediate policy action required

                                  By
                                  ActionForex.com
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                                  Boston Fed President Eric Rosengren said in a speech that the US economy remained “relatively strong”. And he saw not pressing need to cut interest rate s at the upcoming meeting. He said, “If the consumer continues to spend, and global conditions do not deteriorate further, the economy is likely to continue to grow around 2%”.

                                  Also, “with continued gradual increases in wages and prices, then in my view, no immediate policy action would be required.” “I don’t want to use up that valuable space at a time where we actually think prices are pretty stable and the labor markets are pretty tight,” he added.

                                  Nevertheless, Rosengren also admitted that risks are on the rise. “Clearly, there is a downside risk that trade or geopolitical problems could escalate, resulting in a much weaker situation than is currently anticipated in economic forecasts” However, “to date, these elevated risks have not become reality.” “This is a particularly good time to carefully watch incoming data to determine whether any additional policy adjustments are necessary to achieve” the dual mandate.

                                  Rosengren’s full speech here.

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                                  BoE Pill acknowledges disappointing UK GDP data, cautions on inflation path

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                                    ActionForex.com
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                                    BoE Chief Economist Huw Pill commented on today’s UK GDP release at an event hosted by MNI Connect, calling the 0% growth in February “somewhat disappointing from an overall point of view.” However, Pill noted that the current data profile is much better than the Monetary Policy Committee’s forecasts from the second half of last year.

                                    Pill also addressed inflation concerns, stating that “recent releases serve as a reminder that the precise path of inflation may be bumpier than we expect.” Despite this, he anticipates a decline in inflation in the second quarter as last year’s significant energy price increases drop out of the annual comparison.

                                    UK Lidington: Services must diverge from EU after Brexit

                                      By
                                      ActionForex.com
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                                      UK Cabinet Office Minister David Lidington, Prime Minister Theresa May’s effective second-in-command, said the services industry must diverge from EU rules after Brexit.

                                      He said that “the reason why we are proposing to treat services differently is because it is in services where regulatory flexibility matters most for both current and future trading opportunities.”

                                      And, “while the EU acquis on goods has been stable for about 30 years, the EU acquis on services has not been and the risk of unwelcome EU measures coming into play through the acquis on services is much greater.”

                                      Separealy, European Commission Vice President Valdis Dombrovskis said “overall, even after Brexit, the performance of existing obligations can generally continue.” Therefore, existing financial contracts are unlikely to be affected.

                                      Eurozone retail sales flat in May, EU down -0.1% mom

                                        By
                                        ActionForex.com
                                        -

                                        Eurozone retail sales volume was unchanged in May, compared with the prior month. Volume of retail trade decreased by -0.5% mom for food, drinks and tobacco and by -0.3% mom for automotive fuels, while it increased by 0.1% mom for non-food products.

                                        EU retail sales fell -0.1% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in Slovenia (-5.3%), Luxembourg (-4.5%) and Poland (-3.7%). The highest increases were observed in Romania (+3.3%), Portugal (+3.2%) and Sweden (+1.6%).

                                        Full Eurozone retail sales release here.

                                        Eurozone industrial productions falls -0.6% mom in May, EU down -0.8% mom

                                          By
                                          ActionForex.com
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                                          Eurozone industrial production fell -0.6% mom in May, better than expectation of -1.0% mom. Production decreased by -1.0% for intermediate goods, 1.2% for capital goods, and 1.8% for durable consumer goods. Production increased by 0.8% for energy, and 1.6% for non-durable consumer goods.

                                          EU industrial production fell -0.8% mom. The largest monthly decreases were recorded in Slovenia (-7.3%), Romania (-6.2%) and Denmark (-4.9%). The highest increases were observed in Ireland (+6.7%), Luxembourg (+3.9%) and Estonia (+3.8%).

                                          Full Eurozone industrial production release here.

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