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US personal income rose 0.4% mom, spending rose 0.4% mom, core PCE accelerated to 1.9% yoy

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    ActionForex.com
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    US personal income rose 0.4% mom in March, below expectation of 0.4%. Personal spending rose 0.4%, in-line with consensus. Headline PCE accelerated to 2.0% yoy in March, up from 1.7% yoy in February, matched expectations. Core PCE accelerated to 1.9% yoy, up from 1.6% yoy, also met expectations.

    From Canada, IPPI rose 0.8% mom in March, above expectation of 0.2% mom. RMPI rose 2.1% mom, above expectation of 0.6%.

    Also German CPI was unchanged at 1.6% yoy in April, above expectation of slowing to 1.5% yoy.

    Dollar is steady after the release. Firm, but limited below Friday’s low except versus Sterling.

    EU Malmström to talk to US Ross on steel tariff exemptions

      By
      ActionForex.com
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      Regarding the US steel tariffs, EU Trade Commissioner Cecilia Malmström will speak with US Commerce Wilbur Ross today. Malmström will try to get last minute consent from the US to exempt the tariffs on EU, which temporary exemption expires tomorrow. However, it’s reported that EU officials are concerned with impossible demands from the US.

      European Commission spokes Margaritis Schinas said in a news conference calmly that “we are patient but we are also prepared.” EU’s stance was made clear after German Chancellor spoke with French President Emmanuel Macron and UK Prime Minister Theresa May on Sunday. Merkel said Europe was “resolved to defend its interests within the multilateral trade framework”.

      On April 16, EU has already submitted a request to WTO to determine how the US can compensate if trade flows into the EU are affected by the new tariffs. That’s request was under TWO’s Safeguard Agreements. EU also plans to join another separate WTO complaint against the US, arguing that the steel tariffs violate the most-favored nation principle, which forbid discrimination between their trading partners. In addition, it’s reported that EU could retaliate by imposing levies on EUR 2.8b of American goods. And that could start as soon as on June 21, 90 days after the US steel tariffs took effect.

      Into US session: USD strong, GBP weak, a look at AUDCAD

        By
        ActionForex.com
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        USD is trading as the strongest one heading into US session. But except versus GBP, USD is limited below Friday’s high against all others. It’s technical in consolidations for the moment. CHF is trading as the second strongest, followed by CAD.

        NZD and AUD are trading as the two weakest ones. But to us, it’s GBP’s weakness that’s more worth noting. It took out Friday’s low against all others except AUD and NZD and is staying below that level. That is, GBP is extending recent decline.

        Nonetheless, the AUD is trading below Friday’s low against CAD. And indeed, AUDCAD is also extending recent decline. AUDCAD action bias table shows that it’s still staying in near term down trend. But from the D chart, its looks like the fall is slowing. There could be some support around 0.96 support level.

        Fresh selling in GBP as led by EURGBP, then GBPUSD

          By
          ActionForex.com
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          Fresh selling is seen in GBP as it breaks Friday’s low against all but AUD and NZD.

          EUR/GBP led the way higher earlier as rebound from 0.8620 resumed. 6H action bias turned upside blue earlier after stabilizing above 0.8790 resistance. H action bias is a bit slower in response to today’s rise. H action bias turning upside blue later in European session will affirm affirm underlying momentum.

          GBP/USD 6H action bias remains all the way downside red, together with downside red D action bias. Clearly, the near term decline is in healthy state to 1.3711 support.

          Swiss KOF Economic Barometer rose to 105.3, “tiny” but “broadly visible” improvements

            By
            ActionForex.com
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            Swiss KOF Economic Barometer rose to 105.3 in April, up from 105.1 but missed expectation of 106.0.

            KOF noted in the release that “although the Barometer currently does not reach the positive values seen at the turn of the year 2017/2018, the current value is clearly above long-term average.” And, “the Swiss economic outlook remains favourable.”

            Also KOF said that even though the 0.2 pts rise was “tiny”, “it is broadly visible in the economic sectors included.” It noted that “the indicator bundles for manufacturing, accommodation and food service activities, banking, construction and consumption all showed slight increases in April.”

            However, “an exception is the indicator set for export prospects; it deteriorated in April.”

            China official PMI manufacturing at 51.4, PMI non-manufacturing at 54.8 in April

              By
              ActionForex.com
              -

              The official China manufacturing PMI dropped 0.1 to 51.4 in April, slightly above expectation of 51.3. Non-manufacturing PMI rose 0.2 to 54.8, above expectation of 54.5.

              In its quick China Data Response note, Capital Economics noted that “the official manufacturing PMI points to economic conditions having remained healthy in April. However, it warned of ” headwinds from the property sector and slower credit growth building.” Additionally, it’s also noted that the official PMIs have history of providing “false signals” in the past.

              Instead, the Caixin manufacturing PMI to be released on Wednesday “tends to be better correlated with cyclical trends in the sector and will give us a better idea of how the economy has performed recently”.

              Updates on Fed funds futures pricings ahead of FOMC

                By
                ActionForex.com
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                Fed is widely expected to keep federal funds rate unchanged at 1.50-1.75% this week. But the tightening path will continue with another hike in June, to 1.75-2.00%. Fed fund futures are pricing in 100% chance of that. Markets will look into FOMC statement to confirm such expectations, but they actually don’t really need it.

                The expectation for another hike in September also grew notably this week. Fed fund futures are pricing in 77.5% chance of a hike ito 2.00-2.25%. That’s up from prior month’s 57%.

                One more in December? The markets are unsure. Expectations did grew but Fed fund futures are still pricing in less than 50% chance of one more hike to 2.25-2.50% in December.

                RBA to stand pat and lower GDP growth forecast this week

                  By
                  ActionForex.com
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                  RBA is going to announce rate decision again tomorrow. And, it’s widely expected the it would keep the cash rate unchanged at 1.50%, and maintain a neutral stance. The message has been delivered repeatedly, while the next move is a hike, there is no pressing need to act in the near term.

                  The more interest part could be the new economic forecasts. Back in February, RBA projected GDP to grow 3.25% in both 2018 and 2019. And, they were above the government’s forecasts released back in December. The government projected growth to be at 3.0% in fiscal 2018/19 and fiscal 2019/20. There are some expectations for RBA to lower 2018 growth forecast this week, while the government may raise it as it delivers the May Budget.

                  Also, RBA projected underlying inflation (in February) to hit 1.75% in 2018 and 2.00% in 2019. But there is sofar no sign of any up trend in inflation yet. It’s more likely for RBA to keep inflation projections unchanged.

                  US steel tariff temprary exemptions to end on May 1

                    By
                    ActionForex.com
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                    The temporary exemptions on US steel and aluminum tariffs will expire tomorrow on May 1. There is little progress made on trade negotiation between the US and other countries. Commerce Secretary Wilbur Ross was quoted saying that some countries will have their exemptions extended, but not all. But there is no more information from the White House regarding the pressing issue.

                    So far, only South Korea is granted permanent exemptions after revising the bilateral free trade agreements with the US. There, South Korea agreed to a quota of around 2.7 million tons of steel exports to the US. And, the quota for US car imports was doubled to 50,000, without the requirement to meet local safety standards.

                    NAFTA negotiations made some progress last week after intensive work, but it’s not ready to be wrapped up before May 1 target. Talks will instead resume on May 7 after US Trade Representative Robert Lighthizer returns from his China trip. It’s believed that Canada and Mexico will have their exemptions extended but it’s only confirmed when it’s announced.

                    Canadian Foreign Minister Chrystia Freeland reiterated her stance that NAFTA is a “completely separate track” from the steel tariffs. And, “there is no justification whatsoever for tariffs or quotas on Canadian steel or aluminum as a national security consideration.” Mexican Economy Minister Ildefonso Guajardo warned of retaliation and said “ambassador Lighthizer knows very clearly our position and how we have to react if any measure is imposed on Mexico.” It’s reported that Mexico already has a list of American products that it would tax in retaliation.

                    German Chancellor Angela Merkel also warned of retaliation. She issued a statement after dialogue with French President Emmanuel Macron and UK Prime Minister Theresa May. Merkel said the three leaders “agreed that the U.S. ought not to take any trade measures against the European Union,” which is “resolved to defend its interests within the multilateral trade framework.”

                    This topic will make some headlines in the early part of the week.

                    US GDP grew 2.3% in Q1, beat expectations. USDJPY and USDCAD still holding in tight range

                      By
                      ActionForex.com
                      -

                      USD buying is picking up again after stronger than expected data. US GDP grew 2.3% annualized in Q1. While that was a slowdown from 2.9% growth in Q4, it beat expectation of 2.0%. The figure is also realistically well that could be sustained. Price index rose 2.0%, below expectation of 2.2%. Employment cost index rose 0.8%, above expectation of 0.7%.

                      EUR/USD is on track for 1.2 handle while USD/CHF is also heading to parity. GBP/USD is within touching distance to 1.3711 key support after post UK GDP selloff.

                      But it should also be noted that USD/JPY and USD/CAD are somewhat stuck in very tight range despite rally attempt. 109.50 in USD/JPY and 1.2900 in USD/CAD will now be the focus in the current US session.

                      SNB Jordan: Premature tightening would risk unnecessarily jeopardizing the positive economic momentum

                        By
                        ActionForex.com
                        -

                        SNB Chairman Thomas Jordan said today that recent surge in EUR/CHF just represents “a reduction in the significant overvaluation” of the Swiss Franc. But he maintained that “our currency nevertheless remains highly valued”. And he maintained that SNB should continue with an expansionary monetary policy with negative interest rate. In addition, “our continued willingness to intervene in the foreign exchange market as necessary”.

                        Jordan further explained that “both instruments remain essential as the situation is still fragile. While the foreign exchange market has largely shrugged off recent equity market turbulence, circumstances in the financial markets – and thus by extension monetary conditions for the economy – could rapidly deteriorate again.”

                        Also, he pointed out that “inflation remains low and inflationary pressure is modest despite our expansionary monetary policy. Tightening monetary conditions would be premature at this juncture, and would risk unnecessarily jeopardizing the positive economic momentum that has been established.”

                        ECB Mersch: Inflation to rise gradually, contingent on highly accommodative monetary policy

                          By
                          ActionForex.com
                          -

                          ECB Executive Board member Yves Mersch said today that inflation will rise only gradually. He said in Sofia “overall, the underlying strength in the euro area economy continues to support our confidence that inflation will converge towards our aim over the medium term.” But he added that ” inflation convergence will likely proceed only gradually, and remains contingent on a highly accommodative monetary policy stance.”

                          Also, Mersch added that “the transition towards policy normalization will begin once the Governing Council assesses there has been sustained adjustment in the path of inflation.”

                          Separately, ECB Governing Council member Benoit Coeure said Eurozone growth isn’t just recovery but an expansion. He added that there is solid and broad based expansion in the region.

                          Comments from both are strikingly similar to President Mario Draghi’s yesterday.

                          UK Chancellor Hammond blamed weak GDP on weather. ONS Kent-Smith said impact was limited

                            By
                            ActionForex.com
                            -

                            The 0.1% qoq growth in UK in Q1 not only missed market expectations, it’s also the weakest quarterly growth figure in five years.

                            Chancellor of the Exchequer Philip Hammond blamed the weak data on weather. He said in an email statement that “today’s data reflects some impact from the exceptional weather that we experienced last month, but our economy is strong and we have made significant progress.” He added that “our economy has grown every year since 2010 and is set to keep growing, unemployment is at a 40 year low, and wages are increasing.”

                            On the other hand, Rob Kent-Smith, the ONS’ head of national accounts said in a statement that “our initial estimate shows the UK economy growing at its slowest pace in more than five years with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly.” And, “while the snow had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited with the bad weather actually boosting energy supply and online sales.”

                            GBP dives as UK Q1 GDP grew only 0.1% qoq

                              By
                              ActionForex.com
                              -

                              Now it’s Sterling’s turn. GBP dives sharply as Q1 GDP grew merely 0.1% qoq much worse than expectation of 0.3% qoq and prior quarter’s 0.4% qoq. Annual rate was unchanged at 1.4% yoy. Index of services rose 0.4% 3mo3m below expectation of 0.6%. Now, it could be the final nail to close the case of a May BoE rate hike.

                              Some selling was seen in GBP/USD prior to the release, but it quickly accelerates down after the disappointment. GBP/USD is now on course for 1.3711 key support level. Decisive break there will be a strong indication of bearish medium term reversal. But remember, US will release Q1 GDP later today too.

                              Fresh selling in Euro as France Q1 GDP missed, rose 0.3% qoq only

                                By
                                ActionForex.com
                                -

                                Fresh selling seen in Euro after French data miss. French GDP growth slowed to 0.3% qoq in Q1, down from prior quarter’s 0.7% qoq and missed expectation of 0.4% qoq. Annual rate decelerated to 2.1% yoy, down from 2.6% yoy, and missed expectation of 2.3% yoy.

                                The title of this report ECB: Wondering Rather than Worrying summed up yesterday’s ECB press conference rather well. And with French GDP miss, dovish expectation on next week’s Eurozone GDP release could pile up. We’ll see if the coming data clear up the picture for ECB so that policymakers don’t need to wonder any more, but start to worry.

                                For now, EUR/USD is on course for 1.2 handle. Selling in EUR/USD also spill over to other pairs and lifted the USD. USD/CHF takes out 0.99 and would now be heading back to 1.000. GBP/USD breaks yesterday’s low at 1.3894, just ahead of UK GDP data, an hour away.

                                BoJ raised 2018, 2019 GDP growth forecasts, lowered 2018 inflation forecast

                                  By
                                  ActionForex.com
                                  -

                                  In the outlook for economic activity and prices report, BoJ noted that the economy is “likely to continue growing at a pace above its potential in fiscal 2018.” For 2019 and 2020, “the economy is expected to continue on a expanding trend supported by external demand. Ex-fresh food CPI continued to show “relatively weak developments” when excluding the effects of energy prices.

                                  Below are the updated economic forecasts of BoJ:

                                  • Forecast of fiscal 2018 real GDP was raised to 1.6%, up from January’s estimate of 1.4%.
                                  • Forecast of fiscal 2019 real GDP was raised to 0.8%, up from 0.7%.
                                  • Forecast of fiscal 2020 real GDP was at 0.8%
                                  • Forecast of fiscal 2018 core CPI was lowered to 1.3%, down from 1.4%.
                                  • Forecast of fiscal 2019 core CPI (ex sales tax hike) was unchanged at 1.8%
                                  • Forecast of fiscal 2020 core CPI was at 1.8%.

                                  BoJ also highlighted four major risks to the outlook. First is overseas developments including US economic policies and Brexit. Secondly is the impacts of the planned consumption tax hike in October 2019. Third is change in firms and households medium- to long-term growth expectations. Fourth is fiscal sustainability in the medium term to long term.

                                  There re also three main risks identified to price developments. First is change in firms and households medium- to long-term inflation expectations. Second is items’s prices that are not response to output gap. Third is the developments in exchange rates and commodity prices.

                                  Here is the full report.

                                  BoJ stands pat, Kataoka dissented again, calling for further easing

                                    By
                                    ActionForex.com
                                    -

                                    BoJ announced to keep monetary policy unchanged by 8-1 vote. Short term interest rate is held at -0.1%. The central bank will also continue with JGB purchases to keep 10 year yield at around 0%. The current pace of JPY 80T annual purchase is also maintained

                                    BoJ also maintained the pledge to continue with the “Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control” until year-on-year core CPI stay above 2% target in a “stable manner”.

                                    Goushi Kataoka dissented again. It’s noted in the statement that “taking account of risk factors through fiscal 2020 such as the consumption tax hike and a possible economic downturn in the United States”, Kataoka believed it’s desirable to “further strengthen monetary easing”.

                                    Here is BoJ’s full statement.

                                    Dollar index targeting 91.90 projection level, building up trend reversal

                                      By
                                      ActionForex.com
                                      -

                                      Dollar index surged sharply overnight, thanks to the selloff in EUR/USD. The case of medium term reversal continued to build up after breaking of the trend line resistance as well as 91.01 medium term support turned resistance. Focus is now on 100% projection of 88.25 to 90.93 from 89.22 at 91.90. Decisive break there will add to the case that rise from 88.25 is an impulsive move. And thus, affirm the case of medium term trend reversal. However, rejection from 91.90 could make the rise corrective. For, we’re favoring the former case.

                                      There are a couple of events that could help unveil the development including today’s Q1 GDP, next week’s ISMs and NFP, and certainly treasury yields too.

                                      JPY recovers ahead of BoJ, ignores mixed data

                                        By
                                        ActionForex.com
                                        -

                                        A batch of data is released from Japan today. Tokyo CPI slowed to 0.6% yoy in April, down from 0.8% yoy and missed expected of 0.8% yoy. Industrial production rose 1.2% mom in March, well above expectation of 0.5% mom. Retail sales rose 1.0% yoy in March, below expectation of 1.5% yoy. Unemployment rate was unchanged at 2.5%.

                                        JPY showed little reaction to the set of mixed data and recovers broadly today.

                                        While JPY remains the third weakest for the week, today’s recovery can be attributed to the retreat in US yields. 10 year yield closed down -0.034 at 2.990 overnight. back below 3% handle.

                                        BoJ will announce rate decision today and there is no expectation of any changes. Here are some previews:

                                        New Zealand recorded first March trade deficit in 10 years

                                          By
                                          ActionForex.com
                                          -

                                          New Zealand trade balance unexpectedly show NZD -86m deficit in April, versus expectation of NZD 200m surplus. That was also the first March deficit 10 years since 2008. Goods exports rose 5.8%, or NZD 265m while imports rose 14%, or NZD 612m.

                                          From Australia, PPI rose 0.5% qoq, 1.7% Yoy in Q1 versus expectation of 0.4% qoq, 1.2% yoy.

                                          NZD and AUD are the weakest major currencies this week, followed by EUR.

                                          Comparing the two, AUD/NZD is in recovery mode since early April. For now, the rise from 1.0486 is seen as a correction and could target 38.2% retracement of 1.1289 to 1.0486 at 1.0793. But we’ll start to look for topping signal around there.

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