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Australia AiG services rose to 61.2, highest since 2003

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    ActionForex.com
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    Australia AiG Performance of Services Index rose 0.2 pts to 61.2 in May. That’s the highest monthly result since October 2003, indicating a stronger expansion. Four of the five services sectors indicated expansion while the other was broadly stable. Four of the five activity indicators, sales, ne orders, employment and deliveries, showed positive results.

    Ai Group Chief Executive, Innes Willox, said: “Australia’s services sector maintained its momentum in May…. With existing capacity well utilised, and with reports of labour shortages becoming more common, conditions were in place for a substantial lift in investment in the sector.”

    Full release here.

    UK wage growth disappoints, caps GBP gains

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      ActionForex.com
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      UK unemployment rate dropped to 4.2% in February, down from 4.3% and beat expectation of 4.3%. That’s also the lowest level since 1975.

      Employment also rose to a record high between December and February, adding 55k jobs.

      However, average weekly earnings grew only 2.8% 3moy, unchanged from January’s reading. That’s a disappointing to markets who expected 3.0% 3moy growth.

      GBPUSD clearly pares back some gains after the release.

      GBPJPY continues to be held below 153.84 temporary top.

      EURGBP also recovers as bounded in tight range.

      GBP bulls will probably need to wait for tomorrow’s CPI before making another strike.

      NZD/USD range bound after non-eventful RBNZ rate decision

        By
        ActionForex.com
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        NZD/USD trades steadily in range after RBNZ kept OCR unchanged at 1.75% as widely expected and delivered no surprise to the markets. Governor Adrian Orr reiterated in the statement that “we expect to keep the OCR at this level through 2019 and into 2020.” He also kept the options open and indicated the next move could be “up or down”. Economic projections are “little changed” from the August MPS. Even though Q2 GDP was stronger than anticipated, Orr noted “downside risks to the growth outlook remain”. He concluded the statement by repeating “we will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation.”

        NZD/USD’s rebound from 0.6500 lost momentum after hitting 0.6698 and turned sideway. While further rise still be seen, we’d expect strong resistance from 0.6726 to limit upside to complete the corrective rebound. On the downside, break of 0.6607 will bring retest of 0.6500 low.

        In the bigger picture, with 0.6726 resistance in tact, outlook in NZD/USD stays bearish. Medium term down trend from 0.7436 is still in progress to 161.8% projection of 0.7557 to 0.6779 from 0.7436 at 0.6177. Nonetheless, considering bullish convergence condition in daily MACD, sustained break of 0.6726 will indicate medium term bottoming and bring stronger rebound.

        Trump: China trade deal could happen sooner than you think

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          ActionForex.com
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          Trump indicated that US and China are “having some very good conversations” on trade. And China want to make deal “very badly” and “it could happen sooner than you think.” He added that’s “because they’re losing their jobs, because their supply chain is going to hell and companies are moving out of China and they’re moving to lots of other places, including the United States.” Additionally, China is “starting to buy our agricultural product again… starting to go with the beef and all of the different things, pork, very big on pork.”

          The comments came just a day after Trump’s harsh criticism on China at the United Nations General Assembly. He said “not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale”. And, “as far as America is concerned, those days are over.”

          Fed Kashkari: The wrinkle now is Delta

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            ActionForex.com
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            Minneapolis Fed President Neel Kashkari said yesterday, “if we see a very strong labor market this fall, the way I’ve been expecting, then I think we could say we probably have made ‘substantial further progress.'”

            However, the “wrinkle, now, is Delta”. He added, “if Delta causes the labor market to heal much more slowly, then that’s going cause me to step back”

            “It’s so frustrating for all of us that the Delta variant is surging the way that it is,” Kashkari said. “I was cautiously optimistic a month ago that it seemed like we had the light at the end of the tunnel … and could return to normal.”

            Canada CPI rose to 3.6% yoy in May, highest since 2011

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              ActionForex.com
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              Canada CPI accelerated to 3.6% yoy in May, up from 3.4% yoy, above expectation of 3.5% yoy. That’s the largest increase since May 2011. Excluding gasoline, CPI rose 2.5% yoy. Looking at some details, prices rose in every major component on a year-over-year basis. Shelter prices rose 4.2% yoy, largest since September 2008. Durable goods prices rose 4.4% yoy, largest since 1989.

              CPI common rose to 1.8% yoy, up from 1.7% yoy, matched expectations. CPI median rose to 2.4% yoy, up from 2.3% yoy, matched expectations. CPI trimmed rose to 2.7% yoy, up from 2.3% yoy, above expectation of 2.4% yoy.

              Full release here.

              ECB Panetta: Resolute in the right direction, but not drive like crazy at night

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                ActionForex.com
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                ECB Executive Board member Fabio Panetta said in a speech “as policy rates move more firmly into restrictive territory and the energy shock abates, the risks to the inflation outlook have become more balanced.”

                “The outlook for the economy and inflation has become increasingly uncertain, both globally and in the euro area.”

                In this environment, we no longer need to overweight upside risks to avoid worst-case scenarios. We now need to take into account the risk of overtightening alongside the risk of doing too little.” he said.

                A “data-dependent calibration of monetary policy” offers the best way forward while “smoothing our policy moves we ensure that their cost to the economy is minimal.”

                “This doesn’t mean we will not be resolute in the fight against inflation. It means being resolute in the right direction. What we do not want is “to drive like crazy at night with our headlights turned off” – as Italian singer Lucio Battisti once put it.”

                Full speech here.

                Fed Brainard warns against premature withdrawal of fiscal support

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                  ActionForex.com
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                  Fed Governor Lael Brainard said in a speech that “strong support from monetary policy – if combined with additional targeted fiscal support – can turn a K-shaped recovery into a broad-based and inclusive recovery that delivers better outcomes overall.”

                  However, “premature withdrawal of fiscal support would risk allowing recessionary dynamics to become entrenched, holding back employment and spending, increasing scarring from extended unemployment spells, leading more businesses to shutter, and ultimately harming productive capacity,” she warned.

                  Full speech here.

                  Into US session: Yen strongest, Aussie weakest, AUDJPY medium term view

                    By
                    ActionForex.com
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                    Entering into US session, Yen remains the strongest one for today on risk aversion, followed by Dollar. Australian dollar suffers most, partly due to RBA minutes. And more important due to its close trade tie with China and the US, Australia is inevitable to suffer as casualty in trade war between the two countries.

                    For now, AUD/JPY is staying above 80.48 support. But this level is rather vulnerable. Both H and 6H action bias showed persistent downside red bars, indicating solid downside momentum.

                    More importantly, D action bias has also turned downside red today, with W action bias staying neutral. A look at D and W action bias charts should the cross was in a short-to-medium term consolidation pattern since March. And it’s probably ready for a break out.

                    The regular OHLC weekly chart also showed clear rejection by 55 week EMA, which is medium term bearish. We’d expect a break of 80.48 low soon, to 61.8% retracement of 72.39 to 90.29 at 79.26. This level could be taken out without much hesitation based on current momentum. AUD/JPY would target 100% projection of 89.08 to 80.48 from 84.52 at 75.92 later in the year.

                    Australia AiG construction rose to 61.8, record high

                      By
                      ActionForex.com
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                      Australia AiG Performance of Construction rose 4.4 pts to 61.8 in Mar ch, hitting a record high. Also, the indexes for new orders, employment and supplier deliveries all hit record highs.

                      HIA Economist, Angela Lillicrap, said: “Activity is being driven to new heights by a combination of the HomeBuilder program, record low interest rates and shifts in population away from apartments and capital cities towards detached housing and regional areas. The record volume of work will see home building absorb workers from across the economy in 2021 and into 2022. The outlook for multi-units, unfortunately, will remain poor in the absence of overseas migrants, students and tourists.”

                      Full release here.

                      Fed Evans: New policies needed to address this unique recession

                        By
                        ActionForex.com
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                        Chicago Fed President Charles Evans said the current recession is “unique in its swiftness severity and scope”, without modern precedent. He added that not all businesses could survive even after the coronavirus subsides. New policies are required to help the people affected through the downturn.

                        “Tragically, the most affected are our most vulnerable neighbors – those who don’t enjoy paid sick leave, can’t work from home or don’t have much cushion in their savings accounts. Their future is highly uncertain and will require new policies to help them through this difficult transition,” he said.

                        NZD/USD pressing channel support, could it bounce from here?

                          By
                          ActionForex.com
                          -

                          In recent weeks, the antipodean currencies have encountered turbulent waters, contending for the title of the month’s poorest performers. Reserve Banks of both Australia and New Zealand are widely perceived to have reached the peaks of their ongoing tightening cycles. In contrast, ECB and BoE (and less certaintly Fed) seem poised for further rate hikes. Also, the broader sentiment, underpinned by belief that global interest rates may remain elevated longer than previously anticipated, has notably dampened risk appetites.

                          However, recent economic concerns stemming from China have played a pivotal role in the accelerated depreciation of these currencies in the last fortnight. China’s less-than-stellar economic recovery post its stringent Covid lockdowns, coupled with looming deflation risks and challenges in its property and finance sectors, have further intensified the pressure on the antipodean currencies. Additionally, PBoC milder than anticipated rate cut today further dampened sentiments towards these currencies.

                          Technically speaking, however, there is prospect of a near term bounce in NZD/USD, given that it’s now pressing a medium term channel support on oversold condition. Break above 0.5995 resistance will trigger a rebound to 55 D EMA (now at 0.6117). However, deeper decline and firm break of 100% projection of 0.6537 to 0.5984 from 0.6410 at 0.5857 could prompt downside acceleration to 161.8% projection at 0.5515, which is close to 0.5511 long term support (2022 low).

                          BIS: Policymakers need to set a solid foundation for long-term growth

                            By
                            ActionForex.com
                            -

                            The Bank for International Settlement said in its Annual Economic Report that “swift and forceful action from central banks and governments has limited the economic damage from the Covid-19 pandemic”. But in the coming year, “issues such as corporate insolvencies and capital and labour reallocation will come to the fore.”

                            Agustín Carstens, General Manager, said: “The whole world entered this crisis suddenly and as one, but the exit is proving to be slower and staggered. While the recovery has been faster and stronger than anyone would have imagined a year ago, we are not out of the woods yet. Policymakers need to carefully manage the risks arising from this economic and policy divergence and set a solid foundation for long-term growth.”

                            He added: “As we exit the pandemic, we see higher public debt, lower interest rates and larger central bank balance sheets. Normalising monetary and fiscal policy over the longer term will provide a necessary safety margin to cope with unexpected events such as the pandemic or future recessions. And securing a durable recovery will require addressing the more lasting consequences of the pandemic.”

                            Full release here.

                            UK CBI manufacturer output dropped to historical low in June

                              By
                              ActionForex.com
                              -

                              UK CBI manufacturer output volume dropped to -57 in the three month to June, down from -54. That’s the fastest pace of decline on record since July 1975. Output dropped in 15 out of 17 sub-sectors. Nevertheless, total order books improved slightly to -58, up from May’s -62, even though it remained poor by historical standard. Export order books dropped sharply to -79, down from May’ -55, lowest on record since 1977.

                              Anna Leach, CBI Deputy Chief Economist, said: “The UK manufacturing sector remained in a deep downturn in June due to the ongoing COVID-19 crisis. Output volumes declined at a new record pace and export order books fell to an all-time low, reflecting the significant fall in demand in the UK and abroad. Firms are again hoping that this will ease somewhat in the next three months.

                              Full release here.

                              Australia AiG construction dropped to 38.4, from healthy expansion to steep contraction

                                By
                                ActionForex.com
                                -

                                Australia AiG Performance of Construction Index dropped sharply by -10.3 pts to 38.4 in August. Activity dropped -7.5 to 32.9. Employment dropped -11.8 to 49.0. New orders dropped -13.1 to 364. Input prices eased slightly by -5.4 to 91.8. Selling prices dropped -11.6 to 69.6.

                                Ai Group Head of Policy, Peter Burn, said: “Australia’s construction sector has shifted from healthy expansion to steep contraction in a flash as restrictions in the face of COVID-19 outbreaks have closed sites and disrupted supply chains.

                                “The impacts were concentrated in the south-east corner of the country although border closures by other states also contributed to supply chain disruptions and prevented the movement of construction personnel.”

                                Full release here.

                                Ifo Spring Forecast: German economy to contract slightly in 2023

                                  By
                                  ActionForex.com
                                  -

                                  According to the Spring 2023 economic forecast released by Germany’s Ifo, the country’s economy is expected to contract by -0.1% in 2023 before growing 1.7% in 2024. Headline inflation is projected to slow slightly to 6.2% in 2023 before dropping to 2.2% in 2024. However, core inflation, which excludes energy prices, is expected to rise further to 6.3% in 2023 and then decline to 2.8% in 2024.

                                  Ifo stated that the “subdued performance of the global economy is dampening German exports,” while high inflation rates are “depressing consumer spending and construction activity through declining purchasing power and significantly increased financing costs.” The report also noted that inflation has become increasingly broad-based over the past year, remaining at historic highs for several months. While the direct contribution of energy prices has weakened, inflation in all other goods and services has increased steadily, reaching 7.6% in February.

                                  The report added, “In addition to higher production costs passed on by companies to consumers, a noticeable widening of profit margins in some, particularly consumer-related, areas of the economy also contributed to this.”

                                  Full release here.

                                  UK PMIs: Economic returns to modest growth in Q1

                                    By
                                    ActionForex.com
                                    -

                                    UK PMI Manufacturing dropped from 49.3 to 48.0 in March. PMI Services dropped from 53.5 to 52.8. PMI Composite dropped from 53.1 to 52.2. All three were two-month lows.

                                    Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, indicated that the UK economy has shown signs of growth in the first quarter, with the flash PMI surveys indicating a second consecutive month of rising output in March. The data suggests a modest quarterly GDP growth rate of 0.2%, which is a welcome change from the stagnation seen in the second half of the previous year.

                                    Despite concerns over the banking sector, businesses remain optimistic about growth possibilities, and the improvement in order book growth suggests that a near-term recession has been averted. The upturn in companies’ expectations for the year ahead indicates that firms are more focused on growth opportunities rather than banking sector challenges.

                                    Full UK PMI release here.

                                    San Francisco Fed: It’s 10-yr 3-mth spread that predicts most accurately, not 10-yr 2yr spread

                                      By
                                      ActionForex.com
                                      -

                                      The San Francisco Fed released an interesting economic letter titled “Information in the Yield Curve about Future Recessions” yesterday.

                                      There it’s noted that yield curve inversion has been a “reliable predictor of recessions”. However, the difference between ten-year and three-month Treasury rates is the most useful term spread for forecasting recessions. That is, not the ten-year and two-year yield spread that’s most referred to.

                                      Also, the letter noted that currently, the ten-year and three-month spread is still at a “comfortable distance from a yield curve inversion.” If the paper reflects the norm of FOMC member’s thoughts, the yield curve flattening shouldn’t be much of a curve for keeping rate hikes continue.

                                      Full article here.

                                      10-year yield resume medium term down trend, 2.292 fib level next

                                        By
                                        ActionForex.com
                                        -

                                        US 10-year yield opens sharply lower today and hits as low as 2.352 so far. Breach of 2.356 short term bottom suggests that recent down trend from 3.248 is ready to resume.

                                        Outlook is rather bearish too as TNX was rejected twice by falling 55 day EMA. Next target is 50% retracement of 1.336 to 3.248 at 2.292.

                                        In the bigger picture, current fall is so far, seen as a correction to the up trend from 1.336 (2016 low). Rejection by long term channel support suggests it’s far from over. We’d expect a test on 61.8% retracement at 2.066 before forming a bottom for sustainable rebound.

                                        US oil inventories dropped -1.7m barrels, WTI retreating

                                          By
                                          ActionForex.com
                                          -

                                          US commercial crude oil inventories dropped -1.7m barrels in the week ending May 21, versus expectation of -1.0m barrels. At 484.3m barrels, crude oil inventories are about 2% below the five year average for this time of year. Gasoline inventories dropped -1.7m barrels. Distillate dropped -3.0m barrels. Propane/propylene dropped -0.4m barrels. Total commercial petroleum inventories dropped -7.7m barrels.

                                          WTI crude dropped to 61.51 last week, but drew support from 55 day EMA and rebounded strongly. Nevertheless, WTI lost momentum ahead just ahead of 66.98/67.83 resistance zone. Consolidation pattern from 67.83 could still extend with another falling leg. Break of 61.51 will target 57.31 support and below. But even in that case, downside should be contained by 38.2% retracement of 33.80 to 67.83 at 54.83. Nevertheless, break of 67.83 will resume larger up trend for 70 handle next.

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