US initial jobless claims dropped -5k to 180k in the week ending April 23, slightly above expectation of 178k. Four-week moving average of initial claims rose 2k to 180k.
Continuing claims dropped -1k to 1408k in the week ending April 16. That’s the lowest level since February 7, 1970, when it was 1397k. Four-week moving average of continuing claims dropped -24.5k to 1455k, lowest since March 14, 1970 when it was 1435k.
BoJ left monetary policy unchanged today as widely expected. Under the yield curve control framework, short term policy rate is held at -0.1%. BoJ will also continue target to keep 10 year JGB yield at around 0%. Annual pace of JGB purchase is kept at around JPY 80T. Goushi Kataoka dissented again in a 8-1 vote. Kataoka pushed to “further strengthen monetary easing” so that “yields on JGBs with maturities of 10 years and longer would broadly be lowered further.”
The description on the economy is largely unchanged. One exception is that CPI is now “in the range of 0.5-1.0%”, comparing to April’s description of moving around 1 percent. On the outlook, BoJ noted that the economy is “likely to continue its moderate expansion.” Domestic demand will follow an uptrend while exports will continue the moderate increasing trend. Risks to the outlook include the following: the U.S. economic policies and their impact on global financial markets; developments in emerging and commodity-exporting economies; negotiations on the United Kingdom’s exit from the European Union (EU) and their effects; and geopolitical risks.
Full statement here.
US ISM non-manufacturing composite dropped to 56.1 in March, down notably from 59.7 and missed expectation of 58.0. Looking at some details, Business Activity Index dropped -7.3 to 57.4. New Orders dropped -6.2 to 59.0. Employment, however, rose 0.7 to 55.9.
ISM noted: “The non-manufacturing sector’s growth cooled off in March after strong growth in February. Respondents remain mostly optimistic about overall business conditions and the economy. They still have underlying concerns about employment resources and capacity constraints.”
Eurozone Sentix Investor Confidence dropped to 8.8 in November, down from 11.4 and missed expectation of 9.9. Sentix noted “The problem areas in Europe and the global economy remain largely the same, which does not make it any better. Germany’s weakness is also weighing on the Euroland economy.” Also, “the Eurozone economy passed its zenith in January. Since then, economic expectations have reversed and since April they have been negative.”
Sentix noted factors such as “US President’s trade policy”, “discussion about the future of the car industry in Germany”, the “weakness of the banking sector” and the “budget question in Italy” are contributing to the development. Additionally, there is an “increasing perception of inflation” as “investors expect inflation to continue to rise. Thus, “central banks can hardly deviate from their current course towards a more restrictive monetary policy, at least not only because of an economic slowdown.”
Eurozone unemployment rate was unchanged at 6.6% in June, matched expectations. EU unemployment rate was also stable at 7.2%.
Eurostat estimates that 12.931 million men and women in the EU, of whom 10.925 million in the euro area, were unemployed in June 2022. Compared with June 2021, unemployment decreased by 2.311 million in the EU and by 1.957 million in the euro area.
SECO downgraded Swiss GDP growth forecasts for 2022 from 2.6% to 2.0%. For 2023, GDP growth projection was also lowered from 1.9% to 1.1%. CPI forecasts for 2022 was raised from 2.5% to 3.0%, and for 2023 up from 1.4% to 2.3%.
It said, “after a positive first half of the year 2022, the Swiss economy now faces a deteriorating outlook. A tense energy situation and sharp price increases are weighing on economic prospects, especially in Europe.”
It also warned of risks from “serious gas or electricity shortages” in Europe, and “large-scale production stoppages and a marked downturn”. Such a negative scenario would likely lead to “high domestic price pressures” and “downward trend in the economy economy. With rising interest rates, ” risks associated with the surge in global debt are intensifying.
Trump finally announce his plan to tariff as much as USD 60b in Chinese imports to safeguard technological development of the US and its future.
Sorry, can you elaborate on what do you mean?
Well, Trump said, “this has been long in the making,” and “we have a tremendous intellectual property theft situation going on” with China affecting hundreds of billions of dollars in trade each year”.
Sorry, but… are you talking about USD 60b tariffs annually?
No. And apparently no. The tariff is only on USD 60b of Chines imports!
So how much is the tariff?
We here don’t know yet. What we only know is that Trump complained that “We’ve lost, over a fairly short period of time 60,000 factories.” And, he complained that China has been steal our jobs, stealing our technology. Yet, Trump said today that he view these thieves “as a friend”?!!
Anyway, reactions from the financial market is clear. USD/JPY recovers ahead of 105.24 near term support, without breaking.
DOW also recovers after after dipping to as low as 24175.49.
The markets’ message is clear. Don’t bother me until you’re doing something significant!
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).
In the Japan Cabinet Office’s monthly report, assessment on exports were revised up to “show movements of picking up”, instead of “bottoming out”. Views on overall economy is unchanged as it is “showing movements of picking up”, together with private consumption. Meanwhile, business investments remained “in a weak tone”.
The government also dropped the reference that industrial production is “decreasing as a whole” and only noted some pick up in some sectors. Employment is “showing weakness” and ” consumer prices are flat, both unchanged.
Spanish Prime Minister Pedro Sanchez said he’s hopeful the agreement on EU’s recovery fund would be reached soon. He said, “it’s clear we need an agreement, I hope in the next hours.” Italian Prime Minister Giuseppe Conte also said “We still have to be cautious but I would say I am cautiously optimistic” regarding the negotiations.
Dollar suffers broad based selloff and stocks surge after WSJ reported that Fed is considering to stop shrinking it’s massive balance sheet earlier. That is, the eventual size of the portfolio of treasury securities could be larger than originally expected. Further discussion on when to stop the roll-off would take place in next week’s FOMC meeting.
This is seen as move in response to the adverse stock market condition back in December. Some policy makers might want to take the balance sheet reduction off autopilot.
At the time of writing, DOW is up more than 1.1% and is heading towards 25000 handle.
AUD/USD’s break of 0.7166 suggests that fall from 0.7235 is merely a corrective pull back and has completed. Rise from 0.6722 might be resuming.
Australia NAB business confidence rose from -2 to -1 in January. Business conditions were unchanged at 3. Looking at some details, Trading conditions dropped from 6 to 5. Profitability conditions rose from 1 to 2. But employment conditions dropped sharply from 4 to 1.
Alan Oster, NAB Group Chief Economist warned: “The concern this month is the decline in employment. It is now below average and a worry given the labour market has been a bright spot in the economic data. That said, there is a risk that ongoing weakness in business activity sees a pull-back in hiring intentions”.
BoE Governor Andrew Bailey said in a EU banking conference that the central bank is “by no means out of firepower”. “In terms of our policy tools, and we will use that firepower as appropriate, properly and strongly in response to second and third waves, where we think it is necessary,” he added.
Bailey also urged the banking sector to tap into the capital buffers. “I understand there is a natural unease to do that. Given the history of this, given the financial crisis, it’s a brave person who says ‘yes, I am going to run my capital ratio down’,” Bailey said. “We have to use the stress test to demonstrate that is a realistic and sensible policy”.
Separately, he also said the impact of the second wave of coronavirus won’t be as damaging as the first. Though, the told Yorkshire Post, “there will be a degree of natural caution… The policy tools will be used to the fullest extent possible to support the businesses and people of this country.”
As noted in a brief statement by European Commission, EU chief Brexit negotiator Michel Barnier held “constructive technical-level talks” with UK over the weekend. However, “a lor of work remains to be done” and technical level discussions will continue on Monday. Barnier is set to brief EU27 minutes at the General Affairs Council on Tuesday.
On the other hand, UK Prime Minister Boris Johnson’s spokesperson said “The Prime Minister said there was a way forward for a deal that could secure all our interests … but that there is still a significant amount of work to get there and we must remain prepared to leave (without a deal) on October 31.”
Reuters quoted a unnamed EU diplomat saying that “differences persist on customs” regarding the Irish border. And, there are “small chances” for a text to be ready for EU summit this week. More time is needed to continue to discussions. European Commission President Jean-Claude Juncker also said in an interview that “it’s up to the Brits do decide if they will ask for an extension… “But if Boris Johnson were to ask for extra time – which probably he won’t – I would consider it unhistoric to refuse such a request.”
US non-farm payroll employment grew 150k in October, below expectation of 172k. That’s well below average monthly gain of 258k over the prior 12 months.
Unemployment rate rose from 3.8% to 3.9%, above expectation of being unchanged at 3.8%. Participation rate dropped from 62.8% to 62.7%.
Average hourly earnings rose 0.2% mom, below expectation of 0.3% mom. Over the 12 months, average hourly earnings rose 4.1% yoy.
According to the July Survey of Consumer Expectations by the New York Fed, median one-year-ahead inflation expectations were unchanged at record 4.8%. Also, 3-year inflation expectation rose further from 3.6% to 3.7%, hitting the highest level since August 2013.
US goods exports fell -1.7% mom to USD 170.8B in October. Goods imports was flat 0.0% mom at 260.7B. Goods trade deficit widened from USD -86.8B to USD -89.8B, larger than expectation of USD -86.7B.
Wholesale inventories fell -0.2% mom to USD 899.4B. Retail inventories was virtually unchanged at USD 796.6B.
BoJ kept monetary policy unchanged today as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.1%. 10-year yield target is maintained at around 0%, with JGB purchases without upper limit. It also reiterated that BoJ will continue with QQE with YCC “as long as it is necessary” for maintaining inflation at 2% target in a stable manner. It will also continue expanding the monetary base core CPI exceeds 2% and stays above in a stable manner.
Economic projections comparing to July forecast:
Eurozone CPI was finalized at 4.1% yoy in October, up from September’s 3.4%. The highest contribution came from energy (+2.21%), followed by services (+0.86%), non-energy industrial goods (+0.55%) and food, alcohol & tobacco (+0.43%).
EU CPI was finalized at 4.4%, up from September’s 3.6% yoy. The lowest annual rates were registered in Malta (1.4%), Portugal (1.8%), Finland and Greece (both 2.8%). The highest annual rates were recorded in Lithuania (8.2%), Estonia (6.8%) and Hungary (6.6%). Compared with September, annual inflation rose in all twenty-seven Member States.
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for over a decade. Empowering the individual traders was, is, and will always be our motto going forward.
Contact us: contact@actionforex.com
© ActionForex.com © 2024 All rights reserved.
BoC stands pat, expects Q3 to recover 40% of H1 economic collapse
BoC kept monetary policy unchanged as widely expected. Overnight Rate is held at the effective lower bound of 0.25%. Bank Rate is kept at 0.25% correspondingly, deposit rate at 0.25%. BoC will also continue the QE program with large-scale asset purchases of at least CAD 5B per week of government bonds. BoC also pledge to “provide further monetary stimulus as needed.”
In the accompanying statement, BoC said global and Canadian outlook is “extremely uncertain, given the unpredictability of the course of the COVID-19 pandemic”. It expects global economy to contract by -5% in 2020, then grow by 5% on average in 2021 and 2022. But the timing and pace of recovery varies among regions.
Canadian economic activity in Q2 is estimated to be 15% lower than the level at the end of 2019. But there are “early signs” that reopening and pent-up demand are leading to an “initial bounce-back” in employment and out put. In BoC’s central scenario, roughly 40% of H1’s contraction is made up in Q3. Real GDP would still decline -7.8% in 2020, with 5.1% growth in 2021 and 3.7% in 2022.