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Eurogroup urged Italy to comply to EU budget rules

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    ActionForex.com
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    In a statement released today, the Eurogroup said Italy’s 2019 Draft Budget Plan (DBP) was breaking EU rules and urged Italy to rectify it.

    It said “The Eurogroup recalls that in its opinion issued on 23 October 2018 the Commission identified a particularly serious non-compliance with the recommendation addressed to Italy by the Council on 13 July 2018 and requested a revised DBP. Italy submitted a revised DBP on 13 November, on which the Commission issued another opinion on 21 November, confirming the existence of a particularly serious non-compliance with the Council recommendation.”

    And, “we support the Commission assessment and recommend Italy to take the necessary measures to be compliant with the SGP. We also support the ongoing dialogue between the Commission and the Italian authorities.”

    Also, the Eurogroup noted that five member states’ DBP are “deemed to be at risk of non-compliance with the SGP”, including  Belgium, France, Portugal, Slovenia and Spain.

    Eurogroup’s statement here.

    New Zealand GDP contracted -1.0% qoq in Q4, a mixed picture at industry level

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      ActionForex.com
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      New Zealand GDP dropped -1.0% qoq in Q4, much worse than expectation of 0.1% qoq. Goods-producing industries dropped -3.2% qoq. Services industries rose a mere 0.1% qoq. Primary industries dropped -0.6% qoq. GDP per capital dropped -1.2% qoq. Over the year to December 2020, annual GDP declined -2.9%.

      “Activity in the December quarter shows a mixed picture – some industries are down, but others have held up or risen, despite the ongoing impact of COVID,” national accounts senior manager Paul Pascoe said. At the industry level 7 out of 16 industries declined. The two largest contributors to the drop were construction, and retail trade and accommodation.

      Full release here.

      US initial jobless claims dropped to 1.48m, continuing claims at 19.5m

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        ActionForex.com
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        US initial jobless claims dropped -60k to 1480k in the week ending June 20, above expectation of 1300k. Four-week moving average of initial claims dropped -160.75k to 1621k.

        Continuing claims dropped to 767k to 19522k in the week ending June 13. Four-week moving average of continuing claims dropped -330k to 20421k.

        Full release here.

        BoJ Ueda: No time frame to achieve inflation target, but not so long as 10 years

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          ActionForex.com
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          In a parliamentary address today, BoJ Governor Kazuo Ueda said “The time it takes for the impact of monetary policy to appear on the economy could move around a lot depending on circumstances.”

          “We therefore do not have any time frame in mind” in achieving the inflation target, he added.

          “Having said that, our baseline view is that it won’t take so long as over 10 years. We’ll still seek to hit the target at the earliest date possible,” he remarked.

          Ueda reiterated that the Bank of Japan’s purchases of Real Estate Investment Trusts (REITs) form part of their expansive monetary easing strategy. He noted, “We are conducting the purchases (of REITs) as part of our massive monetary easing program. Given it will take more time to achieve our price target, we will maintain the easy policy.”

          US bans travelers from Europe for 30 days, excluding goods

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            ActionForex.com
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            US President Donald Trump announced a ban on travelers to the US from Europe for 30 days, in a step to slow down the spread of coronavirus pandemic. The ban would apply to countries in the Schengen economic and travel zone, while UK and Ireland would be exempted. Also, goods are not included in the ban.

            Trump said he would ask Congress for legislative action for measures to counter the economic impact of the coronavirus, including payroll tax relief. The Small Business Administration is also instructed to provide capital and liquidity to companies in need.

            Separately, NBA said it will suspend its season after a played was tested positive for the coronavirus. Famous action Tom Hanks has been tested positive too while he’s in Australia. Total cases in the US surged to 1322, with 38 deaths, as of the time of writing.

            FOMC forward guidance and balance sheet reduction plan watched

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              ActionForex.com
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              The economic calendar is rather busy today. French GDP, Swiss KOF, Eurozone confidence indicators, Germany CPI and US ADP employment will also be watched. But the major focus will be on FOMC rate decision and press conference.

              Fed is widely expected to keep federal funds rate unchanged at 2.25-2.50%. Since December, following extreme market volatility and cautious turn in Fedspeaks, pricing of Fed’s rate path changed drastically. Fed funds futures are now only pricing in around 20% chance of a 25bps hike by the December meeting. Dollar then started weakening broadly. The greenback suffered another round selloff last week after a WSJ report suggesting that the Fed members are considering to end the balance sheet reduction plan earlier than previously expected.

              The first focus today will be on forward guidance in the statement. Back in December, FOMC noted that “the Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.”

              But since then, Fed officials sung a chorus, saying that Fed can afford some patience before another rate move. And Fed chair Jerome Powell even indicated that Fed is flexible to move in either direction if necessary. Any change in the forward guidance that hints at a pause could give Dollar more pressure.

              And secondly, Powell will need to indicate if there is any change in Fed’s balance sheet reduction plan.

              Here are some previews on FOMC:

              US 10-year yield tumbled on delta concerns

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                ActionForex.com
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                US benchmark treasury yields dropped sharply overnight on concern of the spread of delta variant in the country. According to latest CDC data, There were more than 72k new COVID cases a day on average in the US in the last seven days. That’s a level not seen since February. The fall in treasury yield lifted Yen generally higher, in particular against Dollar.

                10-year yield dropped -0.065 to close at 1.174, after dipping to as low as 1.151. The development suggests that corrective fall from 1.765 is probably resume to resume through 1.128 low. Still, we’d continue to expect strong support between 0.985/1.134 (50% and 61.8% retracement of 0.504 to 1.765) to contain downside to finish off the correction eventually.

                Eurozone PMIs: Unevenly distributed growth but same optimism

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                  ActionForex.com
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                  Eurozone PMI Manufacturing declined from 47.3 to 45.5 in April, hitting a 35-month low. On the other hand, PMI Services rose from 55.0 to 56.6, a 12-month high. PMI Composite rose from 53.7 to 54.4, an 11-month high.

                  Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: “The HCOB Purchasing Managers’ Indices for the euro zone show a very friendly overall picture of an economy that continues to recover. However, a closer look reveals that growth is very unevenly distributed…”

                  “For the further, companies are rather positive not only in the services sector but also for the manufacturing sector. According to the companies surveyed, the reasons for this optimism include a diminishing fear of a resurgence of the energy crisis, supply chains that are functioning better again, and the expectation that inflation has passed its zenith. The latter is coupled with the hope that the ECB will pause its interest rate hikes soon.”

                  Full Eurozone PMI release here.

                  Also released, Germany PMI Manufacturing fell from 44.7 to 44.0, a 35-month low. PMI Services rose from 53.7 to 55.7, a 12-month high. PMI Composite rose from 52.6 to 53.9, a 12-month high.

                  France PMI Manufacturing dropped from 47.3 to 45.5, a 35-month low. PMI Services rose from 53.9 to 56.3, an 11-month high. PMI Composite rose from 52.7 to 53.8, also an 11-month high.

                  WTI oil eyes critical resistance zone at 90 amid supply constraints

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                    ActionForex.com
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                    Oil prices climbed to their highest level in 10 months today, as robust demand coupled with supply restrictions imposed by the top members of OPEC+ significantly tightened global fuel markets. WTI crude oil is now facing an important resistance zone at 90.

                    OPEC’s Monthly Oil Market Report underscored a looming supply crunch that threatens to eclipse anything seen in over a decade, indicating a daily shortfall exceeding 3 million barrels. On the other hand, OPEC maintained its upbeat forecasts of daily global oil demand increase of 2.25m barrels in 2024, just slightly less than growth of 2.44m barrels expected in 2023.

                    Technically, WTI crude oil is now heading very close to an important resistance around 90 psychological level, with 38.2% retracement of 131.82 to 63.67 at 89.70. Decisive break of level raise the chance that the rally from 63.67 is developing into a more sustainable medium term up trend. Next target would be 100% projection of 66.94 to 84.91 from 77.95 at 95.20. Meanwhile, outlook will only be neutral at worst as long as 84.91 resistance turned support holds, even in case of rejection by 90.

                    BoE Haskel: Rate hike from emergency level it not a bug, but a feature

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                      ActionForex.com
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                      BoE MPC member Jonathan Haskel said in a speech that “much of the variation in inflation is due to global factors such as imported goods and energy prices.” He expected much of that variation to be “transitory”.

                      “The latest data continues to indicate a tight labour market, putting upward pressure on wages,” he said. “From a living standards point of view, this is of course excellent news, but from an inflation point of view this has to be matched by increased productivity and so we have to be vigilant.”

                      The prospective rise in Bank Rate from its emergency level – when that comes – is not a bug, but a feature,” he added. “It reflects the success of the policies, mostly fiscal, health and science that have supported the economy over the pandemic.”

                      Full speech here.

                      Bank of Franc MIBA indicates 0.3% GDP growth in Q3

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                        ActionForex.com
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                        According to its monthly index of business activity (MIBA), Bank of Franc said GDP is expected to grow 0.3% in Q3. Manufacturing indicator rose from 96 to 99 as industrial production gained ground. Services indicator was unchanged at 100, picked up slightly. Construction indicator was unchanged at 104 as activity was almost stable in August in both structural and finishing works.

                        Full report here.

                        EU considering unscheduled summit in November to handle Brexit

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                          ActionForex.com
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                          UK Brexit Minister Dominic Raab is meeting with EU chief Brexit negotiator Michel Barnier in Brussels today. Reuters reported that the EU is definitely having a real push for concluding the negotiation by October 18-19 EU summit. But it’s not optimistic base on current progress. In particular, there is no concrete proposal, from EU’s point of view, that would work on the Irish border issue.

                          The next scheduled summit on December 13-14 is seen as too late by EU. That would leave too little time for ratification of an agreement before formal Brexit in March 2019. Also, that’s too hard for businesses to start implementing contingency plans. Hence, an idea of a interim, unscheduled summit in November to handle the issue is floating around. It’s seen as the last moment for the negotiations.

                          German factory orders dropped -2.2%, foreign orders plunged

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                            ActionForex.com
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                            German factory orders dropped sharply by -2.2% mom in May, much worse than expectation of -0.1% mom. Looking at some details, domestic orders increased by 0.7% mom but foreign orders plunged -4.3% mom. New orders from Eurozone dropped -1.7% mom while orders from other countries dropped -5.7% mom.

                            The contraction was also broad-based. Intermediate goods orders dropped -1.5% mom. Capital goods orders dropped -2.8% mom. Consumer goods orders dropped -0.7%.

                            EUR/USD trades mildly lower in European session today but that’s mainly due to Dollar’s pre-NFP recovery. German 10-year bund yield breached ECB’s deposit rate (-0.4%) for the first time yesterday. It’s recovering mildly today, at -0.394 for the moment. But -0.4 level remains vulnerable.

                            AUD/JPY slaughtered again in thin panic market, still heading to 60 anyway

                              By
                              ActionForex.com
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                              AUD/JPY suffered another wild ride in thin, panic, early Asian session again today. It’s a move that resembles what happened early last year. On January 3, 2013, AUD/JPY hit as low as 70.2 (depending which chart you’re reading), but recovered strongly to close at 76.05. The fate of the cross, however, will likely be different considering the material risks the world is facing.

                              From a technical point of view, outlook with remain bearish as long as 71.50 resistance holds. 100% projection of 80.71 to 69.96 from 76.54 at 65.78 will remain the focus after today’s “false break”. Sustained trading below this level will pave the way to 161.8% projection at 59.13.

                              That will coincide with 100% projection of 102.83 to 72.39 from 90.29 at 59.85, as well as 60 round number. We’d expect enough support only from there to bring sustainable rebound.

                              ECB Villeroy: Desirable to reach terminal rate by summer, and stay there

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                                ActionForex.com
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                                ECB Governing Council member Francois Villeroy de Galhau said yesterday, “it would be desirable to reach the right ‘terminal rate’ by next summer, but it is too early to say at what level.”

                                “We’ll then be ready to remain at this terminal rate as long as necessary,” Villeroy said. “The sprint of rate increases in 2022 becomes more of a long-distance race, and the duration will count at least as much as the level.”

                                “We need to be pragmatic and guided by observed data, including underlying inflation, without fetishism for increases that are too mechanical,” he added.

                                “Our forecast, and our commitment, is to bring inflation toward 2% between now and the end of 2024 to the end of 2025,” Villeroy said.

                                Japan CPI core rises to 2.8% in Feb, above BoJ’s target for 23rd month

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                                  ActionForex.com
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                                  Japan’s CPI core (ex-fresh food) rises from 2.0% yoy to 2.8% yoy in February, matched expectations. This increase marks the first acceleration in four months and maintains the index above BoJ’s 2% target for the 23rd consecutive month.

                                  The uptick in the core CPI was primarily due to a less pronounced decline in energy prices, reflecting diminishing impact of government subsidies introduced to mitigate energy costs. Specifically, energy prices saw a decrease of -1.7% yoy, a significant moderation from -12.1% yoy drop recorded in January.

                                  The overall headline CPI also showed an uptick, accelerating from 2.2% yoy to 2.8%yoy. However, when examining CPI core-core, which excludes both food and energy, there was a slight slowdown from 3.5% yoy to 3.2% yoy.

                                  Australia monthly CPI slowed to 6.8% yoy in Aug on fuel costs

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                                    ActionForex.com
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                                    In its first monthly release, Australia CPI rose 6.8% yoy in June, accelerated to 7.0% yoy in July, and slowed to 6.8% yoy in August

                                    Monthly CPI excluding fruit, vegetables and fuel rose 5.5% yoy in June, accelerated to 6.1% yoy in July, then 6.2% yoy in August.

                                    David Gruen, Australian Statistician, said: ” The slight fall in the annual inflation rate from July to August was mainly due to a decrease in prices for Automotive fuel. This saw the annual movement for Automotive fuel fall from 43.3 per cent in June to 15.0 per cent in August.”

                                    Full release here.

                                    UK Labour said conditions for election are met

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                                      ActionForex.com
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                                      As EU has confirmed Brexit extension till January 31, UK opposition Labour indicated that the conditions for supporting a snap election was met. Liberal Democrats and the Scottish National party have already offered support to Prime Minister Boris Johnson’s one-line bill to trigger early election in December. Though, the date was not confirmed yet. Based on current development, the bill will like be passed today. Johnson will refrain from pushing forward with his Brexit bill until a new parliament is formed.

                                      Labour leader Jeremy Corbyn said in a statement,” I have consistently said that we are ready for an election and our support is subject to no-deal Brexit being off the table. We have now heard from the EU that the extension of article 50 to 31 January has been confirmed, so for the next three months, our condition of taking no deal off the table has now been met. We will now launch the most ambitious and radical campaign for real change our country has ever seen.

                                      ECB Lagarde: Uncertainty requires careful assessment of information including exchange rate

                                        By
                                        ActionForex.com
                                        -

                                        ECB President Christine Lagarde said in a speech the central bank’s pandemic response measures has stabilized the markets, protected the supply of credit and support the recovery. That should in turn support the return of inflation towards target.

                                        But at the same time, “the uncertainty of the current environment requires a very careful assessment of the incoming information, including developments in the exchange rate, with regard to its implications for the medium-term inflation outlook.. ECB stands ready to adjust all of its instruments as appropriate.

                                        Lagarde’s full speech here.

                                        Nikkei hit new 30-yr high, up trend back in force

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                                          ActionForex.com
                                          -

                                          After a few weeks of consolidation in tight range, Nikkei finally followed strong global risk appetite and staged an upside break out today. It closed up 714 pts, or 2.66%, at 27568.15, a new 30-year high. Next near term target is 100% projection of 16358.19 to 23178.10 from 21710.00 at 28529.91.

                                          Much more importantly, it has now taken out a key multi-decade fibonacci level. That is 61.8% retracement of 39260 (1989 high) to 6994.89 (2009 low) at 26934.72. The long term up trend from 6994.89 should now have the potential to extend to a new record high, in medium term long term. Japan is heading back to its glory days, after a few lost decades.

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