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China denied offer to cut USD 200B in surplus with US

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    ActionForex.com
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    China denied the news that it’s offering to cut trade surplus with US by USD 200B. Chinese foreign ministry spokesman Lu Kang said in a regular news briefing “this rumor is not true. This I can confirm to you”.

    He added, “as I understand, the relevant consultations are ongoing and they are constructive,” regarding the trade talks between the US and Chinese delegates led by Vice Premier Liu He.

    Separately, the Chinese Ministry of Commerce announced to end the “anti-dumping and anti-subsidy investigations of imported sorghum originating in the United States”.

    The MOFCOM noted in the statement that “the imposition of anti-dumping and anti-subsidy measures on imports of sorghum originating from the United States would have a widespread impact on consumer living costs, and does not accord with the public interest.”

    Japan CPI core slowed to 0.7% yoy, missed expectation

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      ActionForex.com
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      Japan national CPI core, ex-food, slowed to 0.7% yoy in April, down from 0.9% yoy and below expectation of 0.8% yoy.

      That’s the second month of decline and it moved further away from BoJ’s 2% target. It’s also the lowest level since September 2017 and off recent cyclical high of 1.0% set in February.

      Overall CPI slowed to 0.6% yoy, down from 1.1% yoy. Ex-food, ex-energy CPI slowed to just 0.4% yoy, down from 0.5% yoy.

      Recently, BoJ just dropped the time frame for meeting the 2% inflation target. And it maintained the stance to continue with ultra loose monetary easing. While recent surge in oil price could help lift overall and ex-food CPI ahead, the core-core CPI remained worryingly weak.

      China to end anti-dumping and anti-subsidy investigations of US sorghum

        By
        ActionForex.com
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        As the first day of US-China trade talk started, there are rumors flying around already. It’s reported that, according to a US official, China is offering to slash its trade surplus with the US by up to USD 200B year. (Btw, is that considered a leak?) It’s unclear for now how the total value was determined. But another source said the package could include Chinese tariffs on around USD 4B worth of US farm products.

        Meanwhile, the Chinese Ministry of Commerce just announced to end the “anti-dumping and anti-subsidy investigations of imported sorghum originating in the United States” in a statement here. Looks like there was some real progress made.

        EU to use Blocking Statute against extraterritorial effects of US sanctions of Iran

          By
          ActionForex.com
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          EU leaders showed unity in clashing with US President Donald Trump on preserving the Iran nuclear deal. European Council President Donald Tusk said after the summit in Sofia that “on Iran nuclear deal, we agreed unanimously that the EU will stay in the agreement as long as Iran remains fully committed to it. Additionally the Commission was given a green light to be ready to act whenever European interests are affected.”

          European Commission President Jean-Claude Juncker added that the “the effects of the US sanctions will be felt” And, “it is the duty of the EU therefore to protect European business and that applies particularly to smaller and medium-size businesses.” He also said in strong words that “we will not negotiate with the sword of Damocles hanging over our heads” and “it’s a matter of dignity, and it’s a matter of principle”.

          Juncker will begin a legal process to prohibit EU companies to comply with US sanctions on Iran. The “blocking statue” process will begin, accord to Juncker, to “neutralise the extraterritorial effects of US sanctions in the EU”. And “we will do it tomorrow [Friday] morning at 10.30.” In addition, Juncker said EU “also decided to allow the European Investment Bank to facilitate European companies’ investment in Iran”

          German Chancellor Angel Merkel noted “All European Union member states are still backing this agreement, despite the fact the United States has decided not to, and we will continue talks with the United States”. She added “we can see whether we can give small and medium-sized companies certain relief. That is being examined … As for compensating all businesses in a comprehensive way for such measures by the United States of America, I think we cannot and must not create illusions.”

          USTR Lighthizer: Nowhere near close to a NAFTA deal

            By
            ActionForex.com
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            US Trade Representative Robert Lighthizer poured cold water after the May 17 deadline for NAFTA negotiation passed without breakthrough. He said “the NAFTA countries are nowhere near close to a deal.” with “gaping differences” on a number of issues. He pledged to work towards the “best possible deal for American farmers, ranchers, workers, and businesses.”

            Just hours before Lighthizer’s comments, Canadian Prime Minister Justin Trudeau said he was “positive” about NAFTA talks. He said “it’s right down to the last conversations. … I’m feeling positive about this, but it won’t be done until it’s done.”

            Mexico’s economy minister Ildefonso Guajardo also said a deal could be reached by the end of May. But he didn’t rule out extending the talks beyond July 1 Mexican presidential election.

            May 17 was a deadline House Speaker Paul Ryan told the NAFTA countries for having the deal approved by the current Congress by the end of this year.

            Falls in World Trade Outlook indicator could be linked to increased trade tensions

              By
              ActionForex.com
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              The World Trade Outlook Indicator of the WTO dropped to 101.8 as of May 17, down from 102.3 back in February.

              WTO noted that the value remains “above the baseline value of 100” which suggests “continued solid trade growth in Q2. However, it’s “probably at a somewhat slow pace” than Q1.

              It also pointed out that the dip in WTOI reflects declines in export orders and air freight. And that “may be linked to rising economic uncertainty due to increased trade tensions.”

              Full release here.

              High-level conversations still going on NAFTA talks

                By
                ActionForex.com
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                Several high level Canadian officials are in Washington today to work out a path for NAFTA negotiation ahead. The delegation include Brian Clow, Prime Minister Office’s coordinator of US affairs.

                Canada’s ambassador to the US, David MacNaughton, also said there are high-level conversations going on. He said “we will do an assessment of where are we and is there a chance of pulling all this together in a fairly rapid fashion or not?” He added that “we’re pretty close” even though there are still “some tough issues to deal with”.

                Also MacNaughton noted that the US objective in the talks was to reduce trade deficit. And, “eighty per cent of that deficit has to do with autos. We’re that close on autos.”

                US initial jobless claims rose 11k, continuing claims dropped 45-year low

                  By
                  ActionForex.com
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                  US initial jobless claims rose 11k to 222k in the week ended May 12, slightly above expectation of 215k. Four week moving average dropped 2.75k to 213.25k, lowest since December 13, 1969. Continuing claims dropped -87k to 1.71m in the week ended May 7, lowest since December 1, 1973.

                  Philadelphia Fed Business outlook rose to 34.4 in May, up from 23.2, better than expectation of 21.1.

                  From Canada, international securities transactions rose to CAD 6.15b in March.

                  German Merkel to Trump: Tariff exemptions first, before reciprocal trade talks

                    By
                    ActionForex.com
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                    Regarding US steel tariffs, German Chancellor Angela Merkel said “we have a common position. We want a permanent exemption and then we are ready to talk how we can reciprocally reduce the barriers to trade.” That’s seen as having a firm stance as US has to concede the steel tariffs before trade talks. And the talks have to be “reciprocally.

                    Separately, French President Emmanuel Macron expressed his backing on the proposals by the European Commission to protect European companies affected by US sanctions for Iran. Macron said arriving a summit of EU in Sofia, Bulgaria that EU must stand by smaller companies which were willing to carry on Iran businesses.

                    He added “international companies with interests in many countries make their own choices according to their own interests. They should continue to have this freedom.”

                    “But what is important is that companies and especially medium-sized companies which are perhaps less exposed to other markets, American or others, can make this choice freely.”

                    PM Theresa May cleared the air: “The United Kingdom will be leaving the customs union”

                      By
                      ActionForex.com
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                      The rumors that UK would stay in the customs union after Brexit triggered a strong rebound in the Pound earlier today. But UK Prime Minister Theresa May was quick to clear up the air.

                      She said, “No, we are not [climbing down]. The United Kingdom will be leaving the customs union, we are leaving the European Union. Of course we will be negotiating future customs arrangements with the European Union and I have set three objectives; the government has three objectives in those.

                      “We need to be able to have our own independent trade policy, we want as frictionless a border [as possible] between the UK and the EU so that trade can continue and we want to ensure there is no hard border between Northern Ireland and Ireland.”

                      GBP pares gains as PM office dismissed staying in customs union

                        By
                        ActionForex.com
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                        GBP was knocked down by a Reuters report that the Prime Minister’s office dismissed the news the UK is ready to stay in the EU customs union beyond 2021.

                        An unnamed source was quoted saying that “we agreed in December and in March to a backstop but the proposal put forward by the EU is completely unacceptable.”

                        “It would mean a border down the Irish sea and we could never agree to that. Negotiations are taking place on what a workable backstop might be.”

                        “The PM and the government are absolutely clear once the implementation period is over in December 2020 we will be able to not only negotiate and sign trade deals with the rest of the world but also implement them.”

                        For now GBP/USD is holding above 1.3450 temporary low, GBP/JPY well above 148.16 minor support. No panic selling in GBP yet. Hopefulling the UK government will come out and say something to answer the question, to stay or not to stay.!

                        CADJPY resumed up trend, targeting 87.11

                          By
                          ActionForex.com
                          -

                          While GBP is the star performer today, the weekly top movers table shows CAD is the real strong one. CADJPY’s break of 86.05 resistance last week confirmed up trend resumption. That’s consistent with our view here on Monday that CAD/JPY was a better choice for trend trading than EUR/JPY.

                          The framework of using just the top movers table, heat map and action bias could be used to identify, or rule out, trend trading candidates. For counter trend trading, the results of the frame work are less accurate, just as our views on GBPCHF and NZDUSD reversals were wrong. But reversals are harder to call anyway.

                          CADJPY Action Bias table and D Action Bias chart are both consistent with the view that rise from 80.52 is extending, and with solid momentum.

                          Back to the regular bar chart, CADJPY is now reading to target 61.8% projection of 80.52 to 85.75 from 83.88 at 87.11. Near term bullishness will remain as long as 85.57 support holds, in case of retreat.

                          Sterling rebounds as UK could stay in customs union beyond 2021

                            By
                            ActionForex.com
                            -

                            The Telegraph reported that UK is preparing to stay in the customs union after Brexit, and beyond 2021. The news came after Prime Minister Theresa May said she’s aiming for a “future customs union” with the EU. And, her top ministers agreed this week on a last-resort plan to avoid a hard Irish border. Foreign Secretary Boris Johnson and Environment Secretary Michael Gove objected the plan but were “outgunned” by other during the meeting.

                            The news gave Sterling a strong lift as it’s trading as the strongest one for today, and the second strongest next to Canadian Dollar.

                            Australia jobs +22.6k, participation rate made another record high

                              By
                              ActionForex.com
                              -

                              Australia employment market grew 22.6k in April (seasonally adjusted), slightly above expectation of 20.0k. Full time employment grew 32.7k while part time jobs dropped -10k. Unemployment rate rose 0.1% to 5.6%, above expectation of being unchanged at 5.5%. Participation rate rose to a further record high of 65.6%. ABS Chief Economist Bruce Hockman said “the labour force participation rate was the highest it has been since the series began in 1978, indicating increasing attachment to the labour force.”

                              Also from Australia consumer inflation expectation rose to 3.7% in May.

                              New Zealand PPI input slowed to 0.6% qoq in Q1 but beat expectation of 0.3% qoq. PPI output slowed to 0.2% qoq, in line with consensus.

                              Japan ready for retaliation against US steel tariffs

                                By
                                ActionForex.com
                                -

                                The NHK reported that Japan is readying retaliation against US tariffs. And it’s completing final arrangements to inform the WTO. It should be noted that Japan is one of the top 10 steel importers to the US who is not even granted a temporary exemption of the steel and aluminum tariffs. Meanwhile, South Korea was given permanent exemptions after updating the trade agreement.

                                Japan is said to be considering to impose tariffs on US imports that are worth USD 409m, equivalent of duties levied by the US through its tariffs. The list of goods was not publicized.

                                No news on NAFTA as May 17 deadline looms

                                  By
                                  ActionForex.com
                                  -

                                  There is so far no positive news out of NAFTA negotiation yet. House Speaker Paul Ryan said today (Thursday) is the last day the Congress has to receive a notification of a deal, if it is to pass it within this year. But it’s believed that the fundamental differences regarding auto contents and sunset clause remain between the US and the other two countries, Mexico and Canada.

                                  BoC Governing Council Member Schembri said yesterday that uncertainty on NAFTA is impacting firms’ investment decisions. And, capacity is being “hindered” by firms’ reluctance to take on investment in face of uncertainty. And some of which is related to NAFTA.

                                  White Hourse Sanders: We’ll continue the maximum pressure if Kim-Trump meting doesn’t take place

                                    By
                                    ActionForex.com
                                    -

                                    In response to North Korea’s threat of cancelling the Kim-Trump summit, White House press secretary Sarah Huckabee Sanders said Trump is still hopeful that the meeting will take place. She said on Fox news that “we’re ready to meet and if it happens, that’s great. And if it doesn’t, we’ll see what happens.”

                                    And she added “we’ve been prepared that these could be tough negotiations. The president is ready if the meeting takes place and if it doesn’t, we’ll continue the maximum pressure campaign that’s been ongoing.”

                                    EU Tusk: Unity needed facing capricious assertiveness of the American administration

                                      By
                                      ActionForex.com
                                      -

                                      European Union Council President Donald Tusk urged unity in EU in his remarks ahead of the EU-Western Balkans summit.

                                      Tusk said a “united European front” is needed after US withdrawal from the Iran nuclear deal. The deal is “good for European and global security” and should be maintained. And officials should also “protect European companies from negative consequences of the US decision.”

                                      Regarding EU-US trade frictions, Tusk emphasized unity as “our greatest strength” and urged Europeans to “stick to our guns”. That is, a permanent exemption from the steel tariffs “if we are to discuss possible trade liberalisation with the US.”

                                      Tusk also named a new phenomenon of “capricious assertiveness of the American administration.” He pointed to latest decisions of Trump and noted “with friends like that who needs enemies.” And thanks to Trump,” Europeans have “got rid of all illusions”. And, ” if you need a helping hand, you will find one at the end of your arm. ”

                                      Full speech here

                                      US housing starts at 1.29m, building permits at 1.35m in April

                                        By
                                        ActionForex.com
                                        -

                                        US housing starts dropped -3.7% to 1.29m annualized rate in April, below expectation of 1.33m. Building permits dropped -1.8% to 1.35m, marched expectations.

                                        Canada manufacturing shipment rose 1.4% mom in March. above expectation of 1.0% mom.

                                        Euro remains the weakest one today as weighed down by Italy concerns, followed by Sterling. Dollar is indeed the third weakest so far, as safe haven flows lifted US treasuries. 10 year yield is back below 3.06 at the time of writing, comparing to yesterday’s high at 3.094. New Zealand Dollar is the strongest one, mainly as it digests recent losses.

                                        Euro drops sharply as Italian populist duo could seek debt forgiveness

                                          By
                                          ActionForex.com
                                          -

                                          Euro drops sharply in European session with EUR/USD taking out 1.1822 support with conviction finally. EUR/JPY also dropped through 129.99 minor support and is heading back to 129.22 low. EUR/CHF’s selloff accelerates and breaks 1.8 handle. Other currencies are relatively steady against each other.

                                          The main trigger of the selloff is Italy. it’s reported that the anti-establishment Five Star Movement and the anti-immigration League are discussing to seek EUR 250B write of in debt from ECB.

                                          From trend following point of view, EUR/USD is a good candidate for short as it just went through a period of consolidation. Action Bias are back in downside red across time frame.

                                          From trend reversal point of view, EUR/CHF could be a candidate for short. It just took out 1.1864 support with downside acceleration. Usually, we won’t jump to call for short when weekly Action Bias is still in upside blue. But as EUR/CHF was just rejected by 1.2 key resistance, selling the cross can be considered.

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