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German industrial production dropped -0.6% mom, below expectation of 0.3% mom

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    ActionForex.com
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    German industrial production dropped -0.6% mom in July, well below expectation of 0.3% mom. Over the year, production dropped -4.2% yoy. Looking at some details, production in industry excluding energy and construction was down by -0.8%. Within industry, the production of intermediate goods decreased by -0.7% and the production of capital goods by -1.2%. The production of consumer goods showed an increase by 0.6%. Outside industry, energy production was down by -1.3% and the production in construction increased by 0.2%.

    Full release here.

    Asian stocks lower on US-China trade worries, HSI heading back to 25000 handle

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      ActionForex.com
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      Asian stocks opened generally lower today and worries over US-China trade tension weighed on sentiments. The deputy-level meeting in Washington “appeared” to be fruitful based on statements from both sides. the US Trade Representative Office said the talks were “productive” and a principal-level meeting would be held next month as planned. China’s Ministry of Commerce also said the meetings were “constructive” with good discussion on “detailed arrangements” for the high-level talks in October.

      However, the biggest problem was that Chinese officials cut short term trip and cancelled the planned visit to farms in Montana and Nebraska this week. The abrupt announcement raised question over progress of the trade meetings. Additionally, US President Donald Trump told reporter that he’s looking for a “complete deal”, not a “partial deal”. He added that he didn’t need trade agreement with China to happen before the 2020 presidential election. Chance of an interim trade deal of some sort in the near term was lowered by such developments.

      Hong Kong HSI is currently down -0.77% while China Shanghai SSE is down -1.16%. It looks like HSI’s corrective rebound from 24899.93 has completed at 27366.44 already. And further fall would be seen back through 25000 handle to 24540.63 key support.

      BoE Ramsden: CPI inflation remains much too high

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        ActionForex.com
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        BoE Deputy Governor Dave Ramsden said yesterday, “CPI inflation has begun to fall significantly but remains much too high. The Monetary Policy Committee has consistently stressed that monetary policy decisions will address the risk of more persistent strength in domestic wage and price settling.”

        He went on to warn, “If there is evidence of more persistent pressures, then further tightening in monetary policy would be required.”

        Ramsden also mentioned BoE’s efforts in reducing its holdings of gilts and corporate bonds, which he expects to decrease by a total of GBP 100B by October. However, he pointed out that the central bank has almost completely run off its portfolio of corporate debt, possibly paving way for it to sell more government bonds.

        In light of these factors, Ramsden stated, “These factors support a carefully considered increase in the pace of reduction in the stock of gilts in the 12 months ahead.” However, he also stressed caution, noting, “I emphasize careful — like the MPC, I want Quantitative Tightening (QT) to set a gradual and predictable pace for unwind and to let it operate in the background, after all.”

        China data disappoints, PBoC cuts MLF rate

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          ActionForex.com
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          China industrial production rose 3.8% yoy in July, below expectation of 4.6% yoy, slowed from 3.9% yoy. Retail sales rose 2.7% yoy, below expectation of 5.0% yoy, slowed from 3.1% yoy. Fixed asset investment rose 5.7% ytd yoy, below expectation of 6.2%.

          “The national economy maintained strong recovery momentum,” the NBS said in a statement. But it warned of rising stagflation risks globally and said “the foundation for the recovery of the domestic economy has yet to be consolidated.”

          Separately, PBoC cut a key interest rate for the second time this year and withdrew some cash from the banking system on Monday The rate on one-year medium-term lending facility (MLF) loans is lowed by 10 bps to 2.75%. The PBOC attributed its move to “keep banking system liquidity reasonably ample”.

          BoJ stands pat, forecasts deeper contraction in 2020

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            ActionForex.com
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            BoJ left monetary policy unchanged as widely expected. Under the Yield Curve Control framework, short term policy interest rate is held at -0.1%. BoJ will also continue to purchase unlimited JGBs to keep 10-year yield at around 0%. It maintained the pledge to continue with QQE “as long as it is necessary” for achieving 2% price target in a stable manner. The decision was made by 8-1 vote, as Kataoka Goushi dissented again, pushing for more stimulus by lowering short and long term interest rates. He also pushed for revising the forward guidance to relate it to price stability target.

            In the Outlook for Economic Activity and Prices, BoJ said the economy is “likely to improve gradually from the second half of this year” But the pace is expected to be “only moderate while the impact of the novel coronavirus remains worldwide”. Year-on-year CPI less fresh food is “likely to be negative for the time being”. The projected growth rates and projected CPI in the report are “broadly within the range” or prior forecasts. Nevertheless, outlook is “extremely unclear” with risks “skewed to the downside”.

            In the new forecasts:

            • GDP to contract -5.7% to -4.5% in fiscal 2020 (versus prior -5.0% to -3.0%).
            • GDP to grow 3.0% to 4.0% in fiscal 2021 (vs prior 2.8% to 3.9%).
            • GDP to growth to grow 1.3% to 1.6% in fiscal 2022 (vs prior 0.8% to 1.6%).
            • Core CPI at -0.6% to 0.4% in fiscal 2020 (vs prior -0.7% to -0.3%).
            • Core CPI at 0.2% to 0.5% in fiscal 2021 (vs prior 0.0% to 0.7%).
            • Core CPI at 0.5% to 0.8% in fiscal 2022 (vs prior 0.4% to 1.0%).

            UK May: Not far apart with EU; EU Tusk: No-deal Brexit more likely than ever

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              ActionForex.com
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              UK Prime Minister Theresa May told the parliament yesterday that they’re not “far apart” with the EU. And she urged not to let the disagreement on Irish backstop “derail the prospects of a good deal” and leave the UK with no-deal Brexit. But at the same time, she insisted that Northern Ireland must not be treated differently from the rest of the UK.

              European Council President Donald Tusk, however, warned that the remaining 27 states “must prepare the EU for a no-deal scenario, which is more likely than ever before.” And he added the Brexit negotiation has “proven to be more complicated than some may have expected.”

              May will meet other EU leaders in Brussels at the summit on Wednesday and hopes to resolve a few “critical issues”. EU leaders will then listen to the recommendation by chief negotiator Michel Barnier for the way forward.

              Eurozone CPI ticked up to 7.5% yoy in Apr, core CPI rose to 3.5% yoy

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                ActionForex.com
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                Eurozone CPI ticked up from 7.4% yoy to 7.5% yoy in April, matched expectations. CPI core rose from 2.9% yoy to 3.5% yoy, above expectation of 3.1% yoy. Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in April (38.0%, compared with 44.4% in March), followed by food, alcohol & tobacco (6.4%, compared with 5.0% in March), non-energy industrial goods (3.8%, compared with 3.4% in March) and services (3.3%, compared with 2.7% in March).

                Full release here.

                Australian Dollar rebounds on election results, upside capped by RBA and trade

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                  ActionForex.com
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                  Australian Dollar spikes higher today after the central-right coalition’s surprising victory in the elections over the weekend, securing an outright majority too. The Liberal-Party led coalition is seen by some economists as better manager of the economy. Also, returning to power, the coalition will continue with their promised tax cuts on July 1. That’s seen by some as stimulus equivalent to a 25bps rate cut, without the cut of course.

                  Nevertheless, upside in Aussie is so far limited. There are two major factors that’s clouding the outlook. Firstly, RBA Governor Philip Lowe Philip Lowe will deliver a speech on Tuesday. After surprised jump in unemployment rate in April, there are speculations that Lowe could make use of the occasion to chart out the course for rate cuts in the second half of the year. Secondly, after recent escalations in US-China trade war, there is only one way to go in tensions between the two countries. Relationships will only worsen.

                  German PMI manufacturing hits 30-month high, but services contract

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                    ActionForex.com
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                    Germany PMI Manufacturing rose to 58.0 in October, up from 56.4, above expectation of 55.5. That’s also the highest level in 30 months. However, PMI Services dropped to 48.9, down from 50.6, missed expectation of 49.0. PMI Composite hit a 2-month low at 54.5, down from 54.7.

                    Phil Smith, Associate Director at IHS Markit said: “Encouragingly, the German economy is showing a degree of resilience in the face of a second wave of coronavirus cases, October’s flash PMI data suggests. While some services firms in Germany have been hit by new restrictions and increased uncertainty around a ‘second wave’, the decline in service sector activity has so far been quite limited, whilst at the same time the country’s economic performance is being buoyed by a strong showing from manufacturing.”

                    Full release here.

                    Fed Daly favors gradual pace of monetary policy normalization

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                      ActionForex.com
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                      New San Francisco Fed President Mary Daly expressed her support to continued gradual rate hikes in her first remarks as monetary policy maker. She said the labor market is “booming” and inflation at the at 2% target. And, she explained that Fed might not want to go too slowly on rates and risking falling behind the curve. Her approach is consistent with Fed’s and she favors “a gradual pace of normalization.”

                      Daly also used the analogy that “you put a toe in the water and see how much of a ripple it makes”. And, “the FOMC just raised rates in September, and we’re now in the watching phase — what’s going on in the economy, how does it react.”

                      She also tried to talk down last week’s stock market crash. She said “a correction in the stock market where it comes down a little bit is not necessarily a worrisome thing.”

                      Fed Bullard: Health crisis will wane in the months ahead

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                        ActionForex.com
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                        St Louis Fed President James Bullard said in a presentation that “early arrival of vaccines suggests the health crisis will wane in the months ahead”. With vaccine distribution directed towards the most vulnerable, fatalities would also decline. Additionally, business have already learned to “produce at normal levels despite health restrictions”, contributing to rapid economic growth.

                        “Market-based inflation expectations have recovered from lows reached during March 2020,”he added. “TIPS-based breakeven inflation, based on CPI inflation measures, could move considerably higher and still be consistent with a PCE inflation outcome modestly above the 2% target.”

                        Bullard also told reporters, “the ingredients for higher inflation are in place”, with “very powerful fiscal policy”, a Fed that “wants to temporarily have inflation above target”, and the “economy poised to boom at the end of the pandemic”

                        Full presentation here.

                        Eurozone PMI services finalized at 41.7, composite at 45.3

                          By
                          ActionForex.com
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                          Eurozone PMI Services was finalized at 41.7 in November, down from October’s 46.9. PMI Composite was finalized at 45.3, down from prior month’s 50.0. Looking at some members states, Germany PMI Composite dropped to 51.7, Ireland dropped to 47.7, Italy dropped to 42.7, Spain dropped to 41.7, France dropped to 40.6.

                          Chris Williamson, Chief Business Economist at IHS Markit said: “The eurozone economy slipped back into a downturn in November as governments stepped up the fight against COVID-19, with business activity hit once again by new restrictions to fight off second waves of virus infections… However, this is a decline of far smaller magnitude than seen in the spring… The fourth quarter will nevertheless likely see the eurozone economy take another major step backwards, with especially steep downturns suffered in France, Spain and Italy.”

                          Full release here.

                          Gold bounded in range, more upside still in favor through 1214

                            By
                            ActionForex.com
                            -

                            Gold continues to gyrate in range of 1187.58/1214.30. More sideway trading could still be seen. But as long as 1187.58 minor support holds, rebound form 1160.36 is in favor to extend higher. Break of 1214.30 will 38.2% retracement of 1365.24 to 1160.36 at 1238.62.

                            For now, such rebound from 1160.36 is seen as a corrective move. Hence, we’d expect strong resistance from 1238.62 to limit upside. On the downside, break of 1187.58 will suggest that the rebound is completed and bring retest of 1160.36 low.

                            ECB Lane: The parameters of Europe’s fiscal debate moved with US stimulus

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                              ActionForex.com
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                              ECB chief economist Philip said there will be “positive spillovers” from the USD 1.9T pandemic relief package from the US. The significant package will “boost global GDP, will boost exports from the euro area”.

                              “Of course, the initial impact was visible more in the financial market, but over time, as this stimulus gets rolled out, it will be a significant engine for the world economy,” he added.

                              In Europe, “we have 19 fiscal policies and then we have the joint fiscal action,” Lane said. “The parameters of the fiscal debate have clearly moved with the US decision. And it is an important issue for European policymakers to reflect upon.”

                              German BDI projects growth to slow to 0.5% in 2020

                                By
                                ActionForex.com
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                                Germany’s BDI association expected growth to slow further in 2020 to 0.5%. After calendar adjustment, growth could be as low as 0.1%. President Dieter Kempf said “industry remains stuck in recession, there are no signs for the sector bottoming out.”

                                He called for the government to lower corporate taxes to push averaged burden from the current 31% to 24%. He also urged massive public infrastructure investment over the next 10 years to boost the economy.

                                Released earlier, Germany CPI was finalized at 0.5% mom, 1.5% yoy in December.

                                Germany ZEW dropped to 22.3 in Oct, outlook dimmed noticeably

                                  By
                                  ActionForex.com
                                  -

                                  Germany ZEW Economic Sentiment dropped from 26.5 to 22.3 in October, below expectation of 20.4. That’s the fifth decline in a row. Germany Current Situation Index tumbled sharply from 1.9 to 21.6, well below expectation of 29.5, and the first decline since February.

                                  Eurozone ZEW Economic Sentiment dropped from 31.3 to 21.0, below expectation of 26.5. Eurozone Current Situation dropped -6.6 pts to 15.9. Eurozone inflation expectations indicator dropped -3.0 pts to 17.1. But 49.1% of experts still expect inflation to rise further in the next six months.

                                  ZEW President Professor Achim Wambach said: “The economic outlook for the German economy has dimmed noticeably. The further decline of the ZEW Indicator of Economic Sentiment is mainly due to the persisting supply bottlenecks for raw materials and intermediate products. The financial market experts expect profits to go down, especially in export-oriented sectors such as vehicle manufacturing and chemicals/pharmaceuticals.”

                                  Full release here.

                                   

                                  China announces additional tariffs on 5207 US imports, valued at USD 60B, rates from 5% to 25%

                                    By
                                    ActionForex.com
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                                    More from China, the Finance Ministry announced the counter measures to US threat of imposing 25% products on USD 200B in Chinese goods. The State Council’s Customs Tariff Commission decided to impost additional levies on 5207 US products, totalling around USD 60B in value.

                                    Additional 25% tariff will be imposed on 2493 products, additional 20% on 1078 products, additional 10% on 974 products and additional 5% on 662 products. The effect date is to be determined.

                                    Here is the official statement in simplified Chinese.

                                    Hawkesby: RBNZ has genuine neutral bias, rates could stay low for a long time

                                      By
                                      ActionForex.com
                                      -

                                      RBNZ Assistant Governor Christian Hawkesby said in a Bloomberg interview that the central bank has a “genuine neutral bias” on rates, and “a genuine openness about where things go from here.” For now, “we can stay on hold, keep rates low for a long time”.

                                      Regarding the impact of China’s coronavirus outbreak, disruptions to New Zealand economy could last just six weeks and save only 0.3% off Q1 growth. “If things are a lot worse, then the projections will look different and the policy response will look different,” he said. “At the moment the markets are probably more relaxed than they were earlier in the month. But equally we know that it’s asymmetric. If the median is six weeks it can’t be a whole lot shorter than that but it could be quite a lot longer.”

                                      On the idea of rate hike, RBNZ is currently adopting a wait and see approached. He said, “When you’re in a period when there is no spare capacity left and we haven’t had inflation below target for a long time then you are in an environment where it’s safer to start lifting interest rates. We’re not close to that time. We’ve still got a long period when we can wait and watch.”

                                      Gold resumes rebound, targeting 1861 next

                                        By
                                        ActionForex.com
                                        -

                                        Lagging behind Silver a little bit, Gold also resumes rebound from 1752.32 by breaking through 1831.66 and hits as high as 1837.12 so far. Further rally should now be seen as long as 1805.59 support holds. Next target is 100% projection of 1752.32 to 1831.66 from 1782.48 at 1861.82.

                                        But the main question is whether it’s ready to break out from the medium term range set at 1676.65. We’ll monitor the reaction to 1861.82. Sustained break there could trigger upside acceleration through 1877.05 to 161.8% projection at 1910.85, and set the stage for breakout. However, rejection by 1861.82, or failure to even hit it, will keep medium term outlook neutral for more sideway trading.

                                        China exports rose 7.2% in July, imports dropped -1.4%

                                          By
                                          ActionForex.com
                                          -

                                          In USD term, China’s exports rose 7.2% yoy to USD 237.6B in July. Imports dropped -1.4% yoy to USD 175.3B. Trade surplus came in at USD 62.3B, widened from June’s USD 46.4B, beat expectation of USD 42.5B.

                                          Year-to-July, overall:

                                          • Exports dropped -4.1% yoy to USD 1336B.
                                          • Imports dropped -5.7% yoy to USD 1106B.
                                          • Trade surplus was at USD 230B.

                                          Year-to-July, with EU:

                                          • Exports rose 0.7% yoy to USD 209.2B.
                                          • Imports dropped -8.5% yoy to USD 133.5B.
                                          • Trade surplus was at USD 75.7B.

                                          Year-to July, with US

                                          • Exports dropped -7.3% yoy to USD 221.3B.
                                          • Imports dropped -3.5% yoy to USD 67.7B.
                                          • Trade surplus was at USD 153.6B.
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