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ECB Hansson talks down Q3 GDP slow down

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    ActionForex.com
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    ECB Governing Council member Ardo Hansson urged not to read too much in to the weaker than expected Q3 GDP figure (0.2% qoq released yesterday). He said, “these were preliminary numbers, maybe they were a bit slower than some expected.” And, “we have to wait and see what was behind this.” Also, he said “as there have been no significant, material change in one way or the other I would not make major conclusions” regarding monetary policy or economic outlook. He also emphasized the need to look at ECB’s own staff projections to be updated in December instead.

    Separately, Daniele Nouy, chair of the Supervisory Board of the ECB, said that Eurozone has “reduced risks enough for the European Deposit Insurance Scheme to start.”. And it’s the right time to set it up and “consider some solidarity”. Nouy also added creating cross border consolidation in the banking said can be a solution to the top risks of low profitability. She said “such cross-border mergers would also create a few large European banks – let us call them `European champions’ – which could then successfully compete on the global stage.”

    Eurozone CPI accelerated to 2.2%, core up to 1.1%, unemployment rate unchanged at 8.1%

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      ActionForex.com
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      Eurozone CPI accelerated to 2.2% yoy in October, up from 2.1% yoy and matched expectations. Core CPI accelerated to 1.1% yoy, up from 0.9% yoy and beat expectation of 1.0% yoy. Among the components, energy jumped 10.6% yoy (accelerated from 9.5%). Food, alcohol & tobacco rose 2.2% yoy (slowed from 2.6%). Services rose 1.5% yoy (accelerated from 1.3%). Non-energy industrial goods rose 0.3% yoy (up from 0.3%).

      Eurozone (EA19) unemployment rate was unchanged at 8.1% in September, matched expectations, staying as the lowest since November 2008. EU28 unemployment rate was unchanged at 6.7%, lowest since January 2000. Among EU member states, lowest unemployment rate is found in Czechia at 2.3%, then Germany and Poland at 3.4%. Highest unemployment rate is observed in Greece at 19.0%, then Spain at 14.9% and then Italy at 10.1%.

      EUR/USD breached 1.1335 temporary low a hour ago. While there is no follow through selling yet, bias is tentatively on the downside for 1.1300 key support.

      Gold selloff accelerates, corrective rise from 1160.36 likely completed

        By
        ActionForex.com
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        Gold drops to as low as 1215.57 so far today, breaking 1219.90 support firmly. The development suggests rejection by 38.2% retracement of 1365.24 to 1160.36 at 1238.62, despite brief breach. And it’s in line with our view that rebound from 1160.36 is a correction only.

        Immediate focus is on 55 day EMA (now at 1215.20). Sustained break will pave the way to retest 1160.36 low. In case of another recovery, we’d expect strong resistance from 1238.62 fibonacci level to limit upside again. Eventually, the down trend from 1365.24 is expected to extend through 1160.36 after the corrective pattern from 1160.36 completes.

        BoJ stands pat, lowers inflation forecasts once again

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          ActionForex.com
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          BoJ left monetary policy unchanged today as widely expected, by 7-2 vote again. Short term policy interest rate is held at -0.1%. On long term interest rate, BoJ will continue with asset purchases to keep 10 year JGB yield at around 0%. G. Kataoka dissented again, pushing for more monetary easing due to “heightening uncertainties regarding development in economic activity and prices”. Y. Harada dissented because “allowing the long-term yields to move upward and downward to some extent was too ambiguous”.

          In the Outlook for Economic Activity and Prices report, BoJ noted that the economy is likely to continue to grow above potential in fiscal 2018. For fiscal 2019 and 2020, the economy is expected to continue on an “expanding trend”, partly supported by “external demand”. But growth is projected to decelerate due to a “cyclical slowdown” in business fixed investments and the scheduled sales tax hike.

          CPI continued to show “relatively weak developments” comparing to growth and labor market. Though, BoJ maintained that “further price rises are likely to be observed widely and then medium- to long-term inflation expectations are projected to rise gradually”. Thus, CPI will gradually increase towards 2% target. On risks, BoJ said both economic and prices risks are “skewed to the downside”.

          In the updated economic projects, fiscal 2018 growth forecast was downgraded from 1.5% to 1.4%. Growth forecasts for 2018 and 2019 were kept unchanged at 0.8%. Fiscal 2018 core CPI projection was lowered notably to 0.9%, down from 1.1%. For fiscal 2019 and 2020, ex-sales-tax-hike core CPI projections were also lowered, to 1.4% and 1.5%, down from 1.5% and 1.6% respectively.

          Also, note that the ex-sales-tax-hike core CPI projections are notably lower than April’s forecasts, at 1.8% in fiscal 2019 and fiscal 2020 respectively.

          Australia CPI slowed to 1.9% yoy in Q3, AUD/USD dips briefly

            By
            ActionForex.com
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            Australia CPI rose 0.4% qoq, 1.9% yoy in Q3, versus expectation of 0.5% qoq, 1.9% yoy. The annual rate slowed quite notably from 2.1% yoy. Trimmed mean CPI was unchanged at 1.8% yoy. Weighted median CPI was also unchanged at 1.7% yoy.

            Chief Economist for the ABS, Bruce Hockman said: “Annual growth in the CPI fell back below 2 per cent in the September quarter 2018. Modest rises in housing costs, including rents, utilities and property rates, and a fall in child care out-of-pocket expenses, saw a subdued rise in the CPI this quarter.”

            Full release here.

            AUD/USD dips after the release but quickly recovered.

            New Zealand ANZ business confidence rose to -37.1, next RBNZ move more likely a cut

              By
              ActionForex.com
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              New Zealand ANZ Business Confidence improved to -37.1 in October, up from -38.3. Confidence is weakest in agriculture (-62.8) and best in construction (-14.8). Activity Outlook index dropped -0.4 to 7.4. Manufacturing (16.2) is the strongest, possibly due to lower New Zealand Dollar exchange rate. Services ranks second (12.6). Retail (-7.8) and agriculture (-2.3) are weakest.

              On monetary policy, ANZ noted that “The Reserve Bank argued in the August Monetary Policy Statement that ticking along wasn’t going to do the job, in terms of getting CPI inflation sustainably back to target. We therefore continue to believe that while the impacts of higher wage growth, higher oil prices, and the weaker currency certainly mean there’s no hurry, it remains the case that an eventual OCR cut is more likely than a hike.

              Full release here.

              Also from New Zealand, building permits dropped -1.5% mom in September.

              BoC Poloz: Interest rate hike to continue to neutral at 2.5-3.5%

                By
                ActionForex.com
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                Bank of Canada Governor Stephen Poloz reiterated the central bank’s stance to continue with rate hike to the House of Commons Standing Committee on Finance yesterday. In his prepared remarks, Poloz noted that there were “some very positive developments” in the Canadian economy, with “solid momentum” and it “continues to operate near its capacity”. Also, growth is “relatively broad-based across sectors and regions”. He expected the economy to “growth at a rate slightly above its potential over the projection horizon”. And “while there could be further volatility in inflation in coming months, our core measures remain firmly around 2 per cent”. He also highlighted “trade and household indebtedness” as two main risks.

                Overall, Poloz said even with last week’s rate hike to 1.75% “monetary remains stimulative”. BoC’s policy rate is “still negative in real terms”. The current estimated neutral is in range of 2.5-3.5%. Poloz said “policy rate will need to rise to neutral to achieve our inflation target.” Though, the ” appropriate pace of increases will depend on our assessment at each fixed announcement date of how the outlook for inflation and related risks are evolving”. BoC will take into account how the economy adjusts to higher rates, as well as global trade policy developments and their implications on inflation outlook.

                His full remarks here.

                Today’s top mover: GBP/AUD again, building up medium term bearish reversal

                  By
                  ActionForex.com
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                  GBP/AUD is once again a top mover today.

                  Sterling’s weakness is not too much of a surprise based on the lack of progress of any form in Brexit negotiation. But Australian Dollar’s resilience is rather impressive, considering that US-China trade war is ready to enter a full-blown stage any time. Nonetheless, Aussie’s strengthen is also somewhat in correlation to resilience in Chinese stocks as well as iron ore prices. So, at least, it’s explainable.

                  With today’s downside acceleration, focus is now, immediately, on 61.8% retracement of 1.7282 to 1.8726 at 1.7863. Based on current downside momentum, this level could be easily taken out. And that will in turn be a stronger sign of medium term trend reversal.

                  That is, whole “corrective” up trend from 1.5626 (2016 low) has completed at 1.8726 on after missing 50% retracement of 2.2382 to 1.5626 at 1.9004. For now, near term outlook will stay bearish as long as 1.8156 resistance holds. Sustained break of 1.7863 will turn focus to 1.7282 key support for confirming this medium term bearish case. GBP/AUD could be a very good candidate for medium term position trading.

                  US consumer confidence rose to 137.9, consumers expect strong growth to carry over into early 2019

                    By
                    ActionForex.com
                    -

                    US Consumer Confidence rose to 137.9 in October, up from revised 135.3, beat expectation of 135.0. That’s also the higest level in 18 years since September 2000. Present Situation Index improved from 169.4 to 172.8. Expectations Index rose from 112.5 to 114.6.

                    Conference Board noted in the release that “Consumers’ assessment of present-day conditions remains quite positive, primarily due to strong employment growth. The Expectations Index posted another gain in October, suggesting that consumers do not foresee the economy losing steam anytime soon. Rather, they expect the strong pace of growth to carry over into early 2019.”

                    Full release here.

                    US stocks appear to be lifted by the stronger than expected release. DOW initially hesitated today but it’s now up 1%.

                    Into US session: Euro soft on weak GDP, Sterling and Yen even worse

                      By
                      ActionForex.com
                      -

                      Entering into US session, Sterling, Yen and Euro are the weakest ones today while commodity currencies are generally firm. Sterling’s weakness is clearly due to Brexit negotiation impasse. And it’s facing more tests from PMIs and BoE’s Super Thursday later in the week. Euro is weighed down by weak economic data. Eurozone GDP growth halved to 0.2% qoq in Q3. Confidence indicators deteriorated more than expected this month. Italy GDP stalled in Q3 too, giving the coalition government more reason to stick with its expansive budget plan for 2019.

                      On the other hand, Australian Dollar leads other commodity currencies higher. US stocks staged a stunning bearish reversal yesterday on talks that Trump is going to impose more tariffs on China. But Chinese stocks somehow shrugged, ended up 1%. European indices are mixed at the time of writing. The calm markets provided support to commodity currencies and weighed down on Yen.

                      In Europe, at the time of writing:

                      • FTSE is up 0.21%
                      • DAX down -0.27%
                      • CAC down -0.21%
                      • German 10 year yield is down -0.0001 at 0.379
                      • Italian 10 year yield is up 0.088 at 3.426. Spread back above 300.

                      Earlier today in Asia:

                      • Nikkei closed up 1.45% at 21457.29
                      • Singapore Strait Times closed down -0.51% at 2966.45
                      • Hong Kong HSI closed down -0.91% at 24585.53
                      • But China Shanghai SSE rose 1.02% to 2568.05

                      Eurozone GDP growth halved to 0.2% qoq, confidence deteriorated

                        By
                        ActionForex.com
                        -

                        Eurozone GDP growth slowed notably to 0.2% qoq in Q3, down from 0.4% qoq and missed expectation of 0.4% qoq. For the year, GDP growth slowed to 1.7% yoy, down from 2.2% yoy and missed expectation of 1.9% yoy. For EU28, Q3 GDP growth slowed to 0.3% qoq, down from 0.5% qoq. For the year, EU 28 GDP growth slowed to 1.9% yoy, down from 2.1% yoy.

                        Also released, Eurozone business climate dropped to 1.01, down from 1.21 and missed expectation of 1.15. Economic confidence dropped to 109.8, down from 110.9, missed expectation of 110.0. Industrial confidence dropped to 2.0, down from 4.7 and missed expectation of 3.9. Services confidence dropped to 13.6, down fro 14.7 and missed expectation of 14.0. Consumer confidence was finalized at -2.7. That is, all confidence indicators deteriorated, and worse than expected.

                        Italy GDP stalled in Q3, 0.0% versus prior 0.2%

                          By
                          ActionForex.com
                          -

                          Italy Q3 GDP stalled, grew 0.0% qoq, slowed from prior 0.2% qoq and missed expectation of 0.2% qoq. There were positive contribution from agriculture, forestry, fishing and services. But there was decrease in industry.

                          With respect to Q3 2017, GDP increased by 0.8% yoy. Carry-over annual GDP growth for 2018 stood at 1.0%.

                          Full release here.

                          Swiss KOF dropped to 100.1, economy to grow with average rates in coming months

                            By
                            ActionForex.com
                            -

                            Swiss KOF Economic Barometer dropped to 100.1 in October, down from 102.2 and missed expectation of 100.8. It sits just above long-term average of 100, and suggests that the Swiss economy is likely to “grow with average rates” in the coming months.

                            KOF noted that the “decline is quite broadly visible in various indicator bundles.” But the fall in manufacturing sector is “particularly striking”. And inside the sector, “downward tendency was led by the machinery and vehicle manufacturers as well as the chemicals, pharmaceuticals and plastics industry”.

                            Full release here.

                            France GDP growth accelerated to 0.4% in Q3, household consumption recovered

                              By
                              ActionForex.com
                              -

                              French GDP rose by 0.4% qoq in Q3, accelrated from Q2’s 0.2% qoq, matched expectations.

                              • GDP in volume terms accelerated slightly: +0.4% after +0.2%.
                              • Household consumption expenditures recovered (+0.5% after −0.1%).
                              • Total gross fixed capital formation grew almost as quickly as in the previous quarter (GFCF: +0.8% after +0.9%).
                              • Overall, final domestic demand excluding inventory changes accelerated: it contributed 0.5 points to GDP growth, after 0.2 points in the previous quarter.
                              • Imports slowed down in Q3 (+0.3% after +0.7%), whereas exports accelerated (+0.7% after +0.1%).
                              • All in all, foreign trade balance contributed positively to GDP growth, +0.1 points, after −0.2 points in Q2.
                              • Conversely, changes in inventories contributed negatively to GDP growth (−0.2 points after +0.2 points).

                              Full release here.

                              Japan unemployment rate dropped to 2.3%, BoJ meeting starts

                                By
                                ActionForex.com
                                -

                                Japan’s unemployment rate dropped for the second month by -0.1% to 2.3% in September, better than expectation of 2.4%. That’s also just 0.1% above May’s low at 2.2%. Unemployment rate has been in steady decline in recent years.

                                BoJ monetary policy meeting starts today. It’s widely expected that the central bank will stand pat in the announcement tomorrow. Interest rate will be held unchanged at -0.1%. A major focus is the new economic forecasts but a majority of economists expect them to be largely unchanged.

                                A major change in BoJ’s communications this year was the explicit allowance of 10 year JGB yield to move in a range of -0.1% to 0.1%. And, JGB is has already moved more than that. Hence, there is possibly unnecessary for BoJ to widen that band further.

                                DOW suffered bearish U-turn on new threat of Trump’s China tariffs, but Asia recovered

                                  By
                                  ActionForex.com
                                  -

                                  US stocks suffered heavy selloff towards the end of the session overnight, single handedly knocked down by Trump’s trade policy. DOW rebounded in early trading to as high as 25040.58 but closed down -0.99% or -245.39 pts at 24442.92. That’s the biggest U-turn in eight months. S&P 500 hit 2706.85 before closing down -0.66% at 2641.25. NASDAQ jumped to 7296.51 and close down -1.63% or -116.92 pts at 7050.29. The U-turn in NASDAQ was the worst in three years.

                                  Selloff emerged as Bloomberg reported that Trump is going to impose additional tariffs on all Chinese imports, should the summit with Chinese President Xi Jinping fail. The two leaders plan to meet at sideline of G20 summit in Buenos Aires in November, but even this arrangement is not finalized yet. The announcement of the new tariffs could come in as early as December. The total amount of imports to be tariffs could add up to USD 257B, in addition to the USD 250B already covered by current tariffs.

                                  White House Press Secretary Sarah Huckabee Sanders declined talked about the specifics of the Xi-Trump meeting. She just said “You have two of the most powerful leaders in the world. I think that’s consequential no matter how you look at it and we’ll see what happens when they sit down.”

                                  In Asia, though, Chinese and Hong Kong stocks reversed early losses after Trump’s comment in an interview with Fox news. He said, “I think we will make a great deal with China, and it has to be great because they’ve drained our country.” At the time of writing, Hong Kong HSI is down -0.17% only, China Shanghai SSE is even up 0.72%.

                                  Separately, according to Gallup polling during the week ended October 28, Trump’s job approval rating dropped steeply by 4% to 40%, sharpest decline since June 24, on the controversy over his policy of separating families apprehended illegally crossing the US-Mexico border. On the other hand, his disapproval rating rose to 54%.

                                  Mid-US update: Dollar rebound may not sustain as stocks strength fades

                                    By
                                    ActionForex.com
                                    -

                                    It’s a relatively slow day in the forex markets today, in terms of both news and movements. At this point, Yen and Swiss Franc remain the weakest ones for today on stocks rebound. But at the same time, Dollar is having a rebound, has risk aversion eased and US yields strengthen too. However, as the rally in US stocks seem to be fading, it remains to be seen whether treasury yields and US Dollar could maintain the gains before daily close.

                                    In the US, DOW reached as high as 25040.58 earlier today but it’s now at 24745, up only 0.23%. S&P 500 is up 0.78% and NASDAQ is now flat. 10 year yield is up 0.023 at 3.340, after hitting 3.355 earlier today.

                                    In Europe:

                                    • FTSE closed up 1.25% at 7026.32
                                    • DAX closed up 1.20% at 11335.48
                                    • CAC closed up 0.44% at 4989.35
                                    • German 10 year yield rose 0.0221 to 0.38, capped well below 0.4
                                    • Italian 10 year yield dropped -0.0901 to 3.34. It’s a good sign that, at least, spread with German is below 300 for now.

                                    UK Hammond: It’s double dividend if Brexit negotiation turns out right

                                      By
                                      ActionForex.com
                                      -

                                      UK Chancellor of Exchequer Philip Hammond raised the total funding for Brexit preparation to GBP 4B. He also emphasized that it’s a “pivotal moment” in Brexit negotiations. If things turn out right, it will be “double Brexit dividend”. Firstly, investments current on hold will come on stream. Secondly, Treasury will no longer have to hold back money for preparations.

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                                      On the economy, he raised growth forecasts for 2019 and 2020. For 2021 and 2022, growth projections are kept unchanged. But growth is expected to pickup again in 2023.

                                      Here is a quick summary on GDP growth projections:

                                      • 2019: 1.6%, up from 1.3% in the spring statement
                                      • 2020: 1.4%, up from 1.3% in the spring statement
                                      • 2021: 1.4%, unchanged from 1.4% in the spring statement
                                      • 2022: 1.5%, unchanged from 1.5% in the spring statement
                                      • 2023: 1.6% (new forecast)
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                                      He also noted that budget deficit has fallen to less that 1.5% this year. And it’s projected to fall further to 0.8% by 2023-24.

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                                      German Merkel confirms to end party leadership

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                                        ActionForex.com
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                                        German Chancellor confirmed the rumor that she is not going to run for leadership of the Christian Democratic Union again in December. Also, she’s stay and carry out my duties as chancellor for the rest of the legislative period till 2021.

                                        She also confirmed that her hand-picked CDU general secretary, Annegret Kramp-Karrenbauer, and conservative rival, Jens Spahn, will both run as party leader. For now, she is not taking a side but rather, she’s looking at the party leadership race “as an opening, a phase of possibilities,” “a nice process”.

                                        US headline PCE slowed to 2.0%, core PCE unchanged at 2.0%

                                          By
                                          ActionForex.com
                                          -

                                          In September, US personal income rose 0.2%, below expectation of 0.3%. Spending rose 0.4%, matched expectations. Headline CPI slowed to 2.0%, down from 2.2%. Core PCE was unchanged at 2.0% yoy.

                                          Dollar is mildly higher after the release but remains mixed for the day. The most notable development today is the selloff in Yen and Swiss Franc as stock markets rebound.

                                          Full release here.

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