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Australia CPI jumps to 4%, trimmed mean rises to 4.4%

    By
    ActionForex.com
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    Australia’s monthly CPI accelerated from 3.6% yoy to 4.0% yoy in May, well above expectation of a fall to 3.5% yoy. The last time it was higher was last November, when it was sitting at 4.3%.

    CPI excluding volatile items and holiday travel ticked down from 4.1% yoy to 4.0% yoy. Annual Trimmed Mean CPI, on the other hand, surged from 4.1% yoy to 4.4% yoy.

    The most significant contributors to the annual rise to May were Housing (+5.2%), Food and non-alcoholic beverages (+3.3%), Transport (+4.9%), and Alcohol and tobacco (+6.7%).

    Full Australia monthly CPI release here.

    BoJ Kuroda: Core CPI to gradually accelerate toward 2 percent

      By
      ActionForex.com
      -

      BoJ Governor Haruhiko Kuroda maintained his view on the economy in a speech at a quarterly meeting of regional branch managers. He said Japan’s economy was expected to continue expanding moderately, even though slowdown overseas is affecting exports.

      Also, “core consumer inflation is expected to gradually accelerate toward 2 percent as the output gap remains positive, and medium- to long-term inflation expectations heighten.”

      But for now, BoJ will continue to expand monetary base until consumer inflation exceeds 2% target stably. And, short- and long-term interest rates will be kept at current very low levels for an extended period of time.

      Aussie drops after CPI miss, AUD/CAD heading to 0.9488 support first

        By
        ActionForex.com
        -

        Australian Dollar dips notably after weaker than expected consumer inflation data. AUD/CAD’s recovery from 0.9488 could have already completed at 0.9757. Deeper fall could be seen back towards 0.9488 support. Break there will resume the whole decline from 0.9991.

        But overall, the fall from 0.9991 is seen as a correction to the up trend from 0.8058 only. Hence, in case of downside extension, strong support should be seen from 0.9247 cluster support level to contain downside and bring rebound. This level coincides with 38.2% retracement of 0.8058 to 0.9991 at 0.9253, as well as 100% projection of 0.9991 to 0.9488 from 0.9757 at 0.9254.

        Japan machine orders rose 17.1% mom in Oct, largest monthly jump since 2005

          By
          ActionForex.com
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          Japan machine orders rose 17.1% mom in October, well above expectation of 2.8% mom. That’s also the largest month-on-month rise on record since 2005. By sectors, manufacturing orders rose 11.4% mom while non-manufacturing rose 13.4% mom.

          The data affirmed the improving trend in capital expenditure. Investments could be further boosted ahead by the government’s Fresh JPY 40T stimulus. Yet, the volatile series is up for revision while the exporters might continue to struggle to gain momentum due to global weakness.

          Germany Gfk consumer sentiment rose to -41.9, too early to speck of a trend shift

            By
            ActionForex.com
            -

            Germany Gfk Consumer Sentiment for November improved from -42.8 to -41.9, slightly below expectation of -41.8. In October, economic expectations dropped from -21.9 to -22.2. Income expectations rose from -67.7 to -60.5. Propensity to buy also rose from -19.5 to -17.5.

            “It is certainly too early to speak of a trend shift at this time. The situation remains very tense for consumer sentiment,” explains Rolf Bürkl, GfK consumer expert. “Inflation has recently risen to ten percent in Germany, and concerns about the security of energy supplies continue to rise. Therefore, it remains to be seen whether the current stabilization will last or whether, considering the upcoming winter, there is reason to fear a further worsening of the situation.”

            Full release here.

            China’s Caixin PMI services rises to 52.9, businesses express confidence

              By
              ActionForex.com
              -

              China’s Caixin PMI Services marked a significant rise to 52.9 in December from 51.5, achieving its highest level since July. Concurrently, PMI Composite, which combines both manufacturing and services, also saw an improvement, climbing from 51.6 to 52.6.

              Wang Zhe, Senior Economist at Caixin Insight Group, noted that businesses are “expressing confidence” in an improved economic outlook for the coming year. This optimism is reflected in the business expectations gauge, which, despite being “about 3 points below” the 2023 average for the first 11 months, still aligns with the “historical mean” from 2012 to 2022.

              Full China Caixin PMI Services release here.

              USD won’t stay noncommittal for long, as Dollar Index breakout imminent

                By
                ActionForex.com
                -

                The forex markets is rather steady today so far. As seen in the D heatmap, most pairs are staying inside Friday’s range. AUD is trading as the strongest one while JPY is the weakest. This is a reflection of risk appetite in the Asian markets, with Nikkei and HSI trading up as the week starts. USD is mixed for now, up against EUR, JPY and CHF, but down against GBP, CAD, AUD and NZD.

                Movements in USD has been somewhat noncommittal recently, EUR/USD broke 1.2238 support last week but quickly recovered after hitting 1.2214. USD/CHF breached 0.9626 key fibonacci resistance but couldn’t found any follow through buying. Momentum in USD/JPY was also weak even though it extended recent rebound to 107.48. AUD/USD is staying in range above 0.7642 support. The clearer movements were seen in GBP/USD’s rebound after hitting 1.3982 support, but that mainly due to GBP’s strength. USD/CAD’s break of 1.2814 also suggests bearish reversal.

                Nonetheless, we might be seen some decisive moves in USD soon. The index is now approaching medium term trend line resistance, and a breakout is likely imminent. For now, there is no sign of a trend reversal yet. And the fall from 103.82 (2017 high) is more likely to extend than not. Break of 88.25 will pave the way to 61.8% retracement of 72.69 to 130.82 at 84.58. We maintain the view that fall from 103.82 is a corrective move. And strong support is expected from 84.58/75 to contain downside and bring sustainable rebound finally.

                Fed minutes show majority leaning towards further rate hike

                  By
                  Federal Reserve
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                  In the minutes from Fed’s September 19-20 meeting, while “a majority of participants” believed another rate increase might be in order, a contrasting view was held by “some” who deemed no further hikes necessary.

                  A unanimous consensus was evident among all attendees that the existing policy stance needs to “remain restrictive for some time”. The chief rationale behind this unified sentiment is to ensure that inflation trends downwards in a sustained manner to Fed’s target.

                  An interesting shift in communication strategy was proposed by “several participants”. They emphasized that discussions and subsequent messaging should transition from deliberating the potential height of rate hikes to determining the duration for which rates should be maintained at these elevated, restrictive levels.

                  In terms of gauging risks, participants “generally judged” that challenges to fulfilling the Fed’s mandates had become “more two sided”. However, a lingering concern persists. Despite this balanced view of risks, “most participants” continued to see upside risks to inflation.

                  Full FOMC minutes here.

                  Canada GDP contracted -0.1% mom, matched expectations

                    By
                    ActionForex.com
                    -

                    Canada GDP contracted -0.1% mom in November, matched expectations. Looking at the details, decreases in wholesale trade, finance and insurance, manufacturing and construction more than offset gains in 13 of 20 industrial sectors. Goods-producing industries were down 0.3%, the third decline in four months, while services-producing industries were essentially unchanged.

                    Full release here.

                    Also from Canada, RMPI rose 3.8% mom in December versus expectation of 3.9% mom. IPPI dropped -0.7% mom versus expectation of 0.1% mom.

                    EU de Montchalin: Any tariffs on UK is economically rational position not revenge

                      By
                      ActionForex.com
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                      EU is expected to approve today the negotiation mandate on future relationship with UK after the Brexit transition period. It’s widely believed that EU will guard against any distortions of trade and unfair competitive advantages as the basis of tariffs and quota free trade agreement.

                      France’s Europe Minister Amelie de Montchalin said that “we can have an agreement with zero tariffs and zero quotas if we can be sure … we will have common norms …regulatory proximity on the basis of EU rules.” And, “If we cannot maintain this regulatory proximity, then we must … apply tariffs or quotas,” she said. “It’s not a position of revenge, it’s an economically rational position.”

                      The time frame to complete a deal by year end is seen as extremely challenging by EU officials. German Europe Minister Michael Roth warned “this is an extremely ambitious timetable.” “The time pressure is immense, the interests are huge, it’s a very complicated treaty, so it will be very hard work.”

                      UK, on the other hand, is expected to publish its own negotiation guidelines on Thursday. It’s believed that the economic and political independence will remain the primary bottomline in the talks.

                      USTR Lighthizer: Nowhere near close to a NAFTA deal

                        By
                        ActionForex.com
                        -

                        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.

                        New Zealand ANZ business confidence dropped to -42.2, post-lockdown rebound run its course

                          By
                          ActionForex.com
                          -

                          August’ preliminary reading of New Zealand ANZ Business Confidence dropped back to -42.4, down form -31.8. It’s still above lockdown low of -55, though. Own Activity Outlook also dropped to -17.0, down from -8.9.

                          ANZ said the reading “adds to the evidence that the post-lockdown rebound may have run its course.” “There are three prongs to this economic crisis: lockdown, closed borders, and an incredibly synchronised global slowdown that will hit exports.”

                          Full release here.

                          EU Malmstrom urges US to do an industrial trade agreement to rebuild trust first

                            By
                            ActionForex.com
                            -

                            EU Trade Commissioner Cecilia Malmstrom said she had productive meetings with US Trade Representative Robert Lighthizer in Washington this week. She noted that both sides have agreed on a problem as “China is dumping the market, China is subsidizing their industry, this creates global distortions”.

                            However, there was obvious disagreement in the solution. Malmstrom complained that “the solution to these problems is not imposing tariffs on the European Union. Why is that so hard to understand?” And, she added “if you want an ally and partner, this is not the way to go about it.”

                            She emphasized that “we should work on common threats and common challenges and not impose tariffs on each other.” If US imposes auto tariffs to EU cars, Malmstrom pledged to, “with a very heavy heart”, retaliate against EUR 20b US imports.

                            On EU-US trade agreement, Malmstrom noted there is “no support” for a full comprehensive trade agreement in the EU right now. She reiterated EU’s stance that “if we start with industrial goods, which is much less complicated, and which will be beneficial from both sides, we maybe can rebuild that trust and then maybe we’ll see later” about agriculture”.

                            USD/CHF could be ready to resume recent rally

                              By
                              ActionForex.com
                              -

                              Taking a look at the D heat map for today, we can see that Euro is trading broadly lower. A surprise is that Swiss Franc is even weaker despite risk aversion. That prompts us to have a look at USD/CHF to see if there is some underlying weakness in the Franc.

                              From USD/CHF action bias table, we can see that the pair is maintaining solid upside W action bias. D action bias stayed neutral for more than nine bars, arguing that it’s in a shallow consolidation pattern. This consistent with the “look” in D action bias chart.

                              6H action bias chart showed that there were downside attempts but failed. But there is no clear sign of rally yet. Now, with H action bias turned upside blue for in the last four bars there is “prospect” of rally resumption. USD/CHF is worth a watch now. There will be more confidence on a bullish view if 6H action bias turns upside blue too.

                              Taking a look at the regular OHLC chart, it’s early to tell if the pull back from 1.0056 has completed. But when that’s confirmed, there is potential to extend recent rise fro 0.9186 to 1.0342 key resistance. So, a way to trade this is, buy on a break of 0.9980 (slightly above 0.9977 minor resistance). Stop would be put at 0.9880, below today’s low. Target will be 1.0342. Ideally, we should see 6H action bias turns blue too on next rise.

                              ECB Villeroy de Galhau: Ending asset purchase in September or December not “a deep existential question”

                                By
                                ActionForex.com
                                -

                                ECB Governing Council member, Bank of France Governor Francois Villeroy de Galhau said today that “the time when our net asset purchases will end is approaching”. Currently, ECB’s EUR 30B per month asset purchase program is set to end after September. Villeroy de Galhau said whether it will end in September, or December is not “a deep existential question”.

                                Regarding interest rates, he added that “we could give additional guidance on its timing–well past meaning at least some quarters but not years–and its contingency on the inflation outlook.”

                                US House Republicans released Tax Reform 2.0 as political move

                                  By
                                  ActionForex.com
                                  -

                                  In the US, House Republicans released the so called “Tax Reform 2.0” yesterday, aiming to put it to committee-level vote this Thursday, and a full House vote on October 1. There are three major elements in the new package. Firstly, the temporary individual rates lowered in the December tax cut plan would be make permanent. Secondly, maximum age for some contributions to retirement accounts would be eliminated. Thirdly, new businesses would be allowed to write-off more start-up costs.

                                  But some analysts saw the new tax plan as merely a political move ahead of mid-term elections. There is no chance of passing the Congress in short term. However, it will put Democrats in the position of opposing the tax cuts just ahead of November 6 elections. And there are also criticisms on adding another several billion dollars to the deficit.

                                  UK CPI slowed to 10.7% yoy in Nov, core CPI down to 6.3% yoy

                                    By
                                    ActionForex.com
                                    -

                                    UK CPI rose 0.4% mom in November, below expectation of 0.6% mom. In the 12 months to November, CPI slowed from 11.1% yoy to 10.7% yoy, below expectation of 10.9% yoy. Core CPI also slowed from 6.5% yoy to 6.3% yoy, below expectation of 6.5% yoy.

                                    ONS said: “The easing in the annual inflation rate in November 2022 reflected, principally, price changes in the transport division, particularly for motor fuels and second-hand cars. There were also downward effects from tobacco, accommodation services, clothing and footwear, and games, toys and hobbies. The largest, partially offsetting, upward effect came from price rises for alcohol in restaurants, cafes and pubs.”

                                    Full release here.

                                    ECB Schnabel: Time plan to end PEPP in March still valid

                                      By
                                      ActionForex.com
                                      -

                                      ECB Executive Board member Isabel Schnabel said in an interview, rising COVID-19 infections and containment measures is “likely to have a moderating effect on activity in the short run”, and it will not derail the overall recovery. Supply-side disruptions “do not diminish growth potential” but “merely shift activity over time”. Hence, her baseline is that “some growth deceleration in the short run, but then a continued strong recovery in the medium term.”

                                      Schnabel expected ECB staff’s inflation projections to be “revised upwards for next year”. But inflation is “going to decline over the course of next year”. “It’s plausible to assume that inflation is going to drop below our target of 2% in the medium term,” she said. “however, the risks to inflation are skewed to the upside.”

                                      She also noted the “time plan is still valid” for ending the PEPP purchases in March. “But we will have to see how this evolves until our December meeting.” She added, ” it has become clear that it’s very unlikely that a rate hike is going to happen next year. But it’s also clear that the uncertainty remains very high and this is reflected in markets.”

                                      Full interview here.

                                      Swiss KOF dropped to 105 in Feb, primarily on manufacturing

                                        By
                                        ActionForex.com
                                        -

                                        Swiss KOF Economic Barometer dropped from 107.2 to 105 in February, below expectation of 108.5. KOF said, “the indicators from the manufacturing sector are primarily responsible for the decline, followed by those from the financial sector. The signals for the Swiss exporters are somewhat more favourable than before. ”

                                        Full release here.

                                        Australia business confidence dragged down by employment, wage growth constrained

                                          By
                                          ActionForex.com
                                          -

                                          Australia NAB Business Confidence dropped 2pts from 6 to 4 in October. Business Conditions also dropped 2pts from 14 to 12. Alan Oster, NAB Group Chief Economist noted that “the decline in the month was driven by weakness in the employment component – though at these levels the survey still suggests ongoing employment growth at around 20k per month. At this rate we should see recent labour market gains maintained”.

                                          Also, it’s noted in the release that “surveyed wage bill measures and the official wage price index suggest that enough spare capacity has remained in the labour market to constrain a significant pickup in wage growth”. Hence, “September quarter wage data to be released later this week will show a small rise in the pace of growth but that overall wage growth will remain low relative to history.”

                                          The data certainly supports the “no rush” stance of RBA.

                                          Full release here.

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