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US NFP employment rose 678k in Feb, but wage growth flat

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    ActionForex.com
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    US non-farm payroll employment rose 678k in February, above expectation of 438k. Employment was still down -2.1m, or -1.4% from its pre-pandemic level in February 2020. Job growth was widespread over the month, led by gains in leisure and hospitality, professional and business services, health care, and construction.

    Unemployment rate dropped from 4.0% to 3.8%, better than expectation of 3.9%. That’s still above pre-pandemic level of 3.5%. Number of unemployed edged down to 6.3m, above pre-pandemic level of 5.7m. Labor force participation rate was little changed at 62.3%.

    Wage growth was a disappointment, however, with average hourly earning rose 0.0% mom, well below expectation of 0.6% mom.

    Full release here.

    BoC to hold, with hawkish untone?

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      ActionForex.com
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      BoC rate decision is today’s market highlight, as the consensus veers towards maintaining interest rate at 5.00%. The potential for a rate hike has dwindled, especially after the September CPI data revealed a more rapid deceleration in inflation than anticipated. Now, speculations swirl regarding the possibility of a “hawkish hold,” which leaves the door open for further tightening.

      Market consensus on the BoC’s next moves, however, isn’t unanimous. A recent Reuters poll showcased a split opinion. A slim majority of 8 of the 18 economists surveyed perceive a a “high” likelihood of another hike. As for rate reductions, opinions stand divided too. 19 economists project rates falling beneath the current benchmark by the end of June, while 11 anticipate maintaining or even exceeding the current level.

      As the BoC is set to unveil its latest growth and inflation forecasts, market participants are keenly awaiting insights that might shed light on the bank’s future monetary stance.

      Amid these discussions, the Canadian Dollar isn’t faring well, even when pitted against the underperforming Yen. Risk is mildly on the downside for CAD/JPY as long as 109.96 resistance holds. Deeper fall is slightly in favor as to 107.51 support and below to extend the corrective pattern from 111.14 high. While a break of 109.96 will resume the rebound from 107.51. Breaking 111.14 to resume larger up trend is not expected. So upside potential is limited for the near term.

      Fed Kaplan expecting rate hike in 2022

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        ActionForex.com
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        Dallas Fed President Robert Kaplan said in a CNBC interview said his economic forecast has “improved meaningfully”. He’s expecting 6.5% GDP growth this year while unemployment rate would fall back to 4.5%.

        He will advocate for scaling back stimulus after “seeing real outcomes, not just forecasts”. But still, he’s forecast for removing accommodation is “more aggressive than the median Fed official. He’s expecting Fed to start hiking interest rates in 2022.

        Eurozone Sentix investor confidence dropped to 16.9, still a mid-cycle slowdown

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          ActionForex.com
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          Eurozone Sentix Investor Confidence dropped to 16.9 in October, down from 19.6, missed expectation of 19.0. That’s the third decline in a row and the lowest level since April. Current Situation Index dropped from 30.8 to 26.3. Expectations index dropped from 9.0 to 8.0, fifth decline in a row, lowest since May 2020.

          Sentix said, “Autumn revival fails to materialize for the time being”. It added, “so far, the criteria for a mere ‘mid-cycle slowdown’ have still been met. It remains crucial that the expectations do not fall below the zero line. For then a stronger slump in economic output would be expected – a trend reversal would then be in the offing.”

          Full release here.

          Canadian Prime Minister Justin Trudeau, Mexican President Pana Nieto and US President Donal Trump sign USMCA deal.

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            ActionForex.com
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            Canadian Prime Minister Justin Trudeau, Mexican President Pana Nieto and US President Donal Trump sign USMCA deal.

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            UK GDP dropped -2% in Q1, worst since 2008, with record contraction in services

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              ActionForex.com
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              UK GDP contracted -2.0% qoq in Q1, matched expectations. That’s the largest decline since Q4 2008. Annually, GDP dropped -1.6% yoy, largest fall since Q4 2009. Services output dropped -1.9% qoq, largest quarterly fall on record. Production output fell by -2.1% qoq, driven by declines in manufacturing. Construction output decreased by -2.6%.

              In March, GDP contracted -5.8% mom, better than expectation of -7.0% mom. Services dropped -6.2% mom, production dropped -4.2% mom, manufacturing dropped -4.6% mom, construction dropped -5.9%, agriculture dropped -0.2% mom.

              Also released, manufacturing dropped -4.6% mom, -9.7% yoy in March. Industrial production dropped -4.2% mom, -8.2% yoy. Goods trade deficit widened to GBP -12.5B.

              Fed to announce tapering, some previews

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                ActionForex.com
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                FOMC monetary policy decision is the major focus today, as Fed should finally make a formal announcement on QE tapering. As the September minutes indicates, the pace would be “monthly reductions in the pace of asset purchases, by US$10B in the case of Treasury securities and US$5B in the case of agency mortgage-backed securities (MBS)”. The would eventually lead to completion of entire asset purchases by mid -2022. But, a hawkish surprise – monthly reduction at a faster pace – cannot be ruled out given the inflationary pressure.

                Also, September’s dot plot revealed that half of the members had anticipated a rate hike in 2022. Meanwhile, the market has priced in futures have priced in over 60% of a rate hike by June next year. But Fed Chair Jerome Powell would likely reiterate that decision on interest rate is complete separated from that of asset purchases. There wouldn’t be any new hint on the timing of rate hike until December’s dot plot.

                Suggested readings on Fed

                Eurozone unemployment rate unchanged at 7.5%, lowest since 2008

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                  ActionForex.com
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                  Eurozone unemployment rate was unchanged at 7.5%, above expectation of 7.4%. That’s still the lowest level since July 2008. EU28 unemployment rate was unchanged at 6.3%, lowest since January 2000.

                  Among the Member States, the lowest unemployment rates in September 2019 were recorded in Czechia (2.1%) and Germany (3.1%). The highest unemployment rates were observed in Greece (16.9% in July 2019) and Spain (14.2%).

                  Full release here.

                  US ISM services rose to 51.9, corresponds to 0.7% annualized GDP growth

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                    ActionForex.com
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                    US ISM Services PMI rose from 51.2 to 51.9 in April, below expectation of 53.1. Looking at some details, business activity/production dropped from 55.4 to 52.0. New orders rose from 52.2 to 56.1. Employment dropped from 51.3 to 50.8. Prices rose from 59.5 to 59.6.

                    ISM said: “There has been a slight uptick in the rate of growth for the services sector, due mostly to the increase in new orders and ongoing improvements in both capacity and supply logistics. The majority of respondents are mostly positive about business conditions; however, some respondents are wary of potential headwinds associated with inflation and an economic slowdown.”

                    “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for April (51.9 percent) corresponds to a 0.7-percent increase in real gross domestic product (GDP) on an annualized basis.”

                    Full ISM services release here.

                    EUR and GBP builds upside momentum, Yen retreats on stablizing market sentiments

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                      ActionForex.com
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                      Yen clearly weakens broadly today with stabilizing market sentiments. Fear of trade war seems to fade mildly on report that the US and China are now in dialogue. At the time of writing, FTSE is trading up 0.3%, DAX up 0.5% and CAC up 0.3%. US futures also point to triple digit gain at open, as markets digest Friday’s steep loss.

                      Euro and Sterling both showing extra strength entering into US session. Both EUR/USD and GBP/USD surges through last week’s high.

                      Meanwhile, for now, both NZD/JPY and GBP/JPY are having more than 1% gain for today.

                      ANZ business confidence dropped to -44.3, risk rising that it becomes self-fulfilling

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                        ActionForex.com
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                        New Zealand ANZ Business Confidence dropped sharply from -44.3 to -52.3 in August. Activity Outlook also turned negative again, down from 5.0 to -0.5. ANZ noted that “employment, investment and export intentions all fell to dismal levels, along with profit expectations.” Also, “inflation indicators were weaker despite higher reported costs.”

                        Just over a third of this month’s survey responses were received after the surprised RBNZ -50bps OCR cut. ANZ noted “there were small differences in the responses before and after” and “none of the differences were statistically significant for any of the data series.” ANZ further said “the outlook for the economy appears to be deteriorating further, with firms extremely downbeat despite easier monetary conditions, fairly robust commodity prices, and positive population growth. Whatever the cause, the risk is rising that it becomes self-fulfilling.”

                        Full release here.

                        NZD/USD drops to as low as 0.6306 today. 100% projection of 0.6938 to 0.6481 from 0.6790 at 0.6333 was broken this week. Next stop will be 161.8% projection at 0.6051 in the medium term, which is slightly below 2015 low at 0.6102.

                        EU keeps Eurozone 2020, 2021 GDP forecast unchanged, raises inflation projection slightly

                          By
                          ActionForex.com
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                          European Commission kept Eurozone GDP growth forecast unchanged at 1.2% in both 2020 and 2021. Eurozone inflation forecasts is raised by 0.1% in both 2020 and 201, to 1.3% and 1.4% respectively. For the EU as a whole, GDP forecast was also left unchanged at 1.4% in both 2020 and 2021. EU inflation forecast was also raised by 0.1% to 1.5% in 202, but 2021 projection remains unchanged at 1.6%.

                          Valdis Dombrovskis, Executive Vice-President, said, “Despite a challenging environment, the European economy remains on a steady path, with continued job creation and wage growth. But we should be mindful of potential risks on the horizon: a more volatile geopolitical landscape coupled with trade uncertainties.”

                          Paolo Gentiloni, European Commissioner for the Economy, said: “The outlook for Europe’s economy is for stable, albeit subdued growth over the coming two years. This will prolong the longest period of expansion since the launch of the euro in 1999, with corresponding good news on the jobs front… But we still face significant policy uncertainty, which casts a shadow over manufacturing. As for the coronavirus, it is too soon to evaluate the extent of its negative economic impact.”

                          Full release here.

                          China Xi to Trump: History has proven cooperation is best for both sides

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                            ActionForex.com
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                            In his New Year address, Chinese President Xi Jinping reminded US President Donald Trump that “history has proved that cooperation is the best choice for both sides.” Xi added that “I attach great importance to the development of China-U.S. relations and am willing to work with President Trump to summarize the experience of the development of China-U.S. relations and implement the consensus we have reached in a joint effort to advance China-U.S. relations featuring coordination, cooperation and stability so as to better benefit the two peoples as well as the people of the rest of the world.”

                            The official Xinhua new agency also echoed in the commentary that “At a time when the world is undergoing unprecedentedly profound changes and is fraught with risks and uncertainties, the global community expects even closer collaboration between the two largest economies.”

                            Trump tweeted on December 29 that “Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!”. China’s state media also said Xi believed both sides wanted “stable progress”, and China-US ties had reached a “vital stage” on its 40th anniversary.

                            It’s believed that Deputy U.S. Trade Representative Jeffrey Gerrish will lead a delegation including Treasury Under Secretary for International Affairs David Malpass, to travel to China in the week of January 7 for face-to-face meeting on trade negotiations.

                            Japan GDP suffered worst contraction in 6 years, sentiments pessimistic

                              By
                              ActionForex.com
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                              Japan GDP contracted -1.6% qoq in Q4, much worse than expectation of -0.9% qoq. In annualized term, GDP contracted -6.3%, biggest contraction in six years. Looking at some details, private consumption dropped -2.9% in response to the sales tax hike in October. Capital expenditure dropped -3.7%. External demand contributed to 0.5% point to GDP growth, in sufficient to offset -2.1% negative contribution from domestic demand. With impact from China’s coronavirus outbreak, contraction might extend into Q1, making it a technical recession.

                              Outlook is pessimistic too based on a Reuters survey that tracks BoJ’s Tankan. The Reuters Tankan manufacturer sentiments index rose from -6 to -5 in February. Services index rose from 14 to 15. Business confidence is not too much lifted by the US-China trade deal. The government might be forced to launch another around of fiscal stimulus soon to support growth.

                              Oil Price Jumped to 4 Years’ High before Profit-taking

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                                ActionForex.com
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                                Brent crude oil price jumped to a fresh 4- year high of US$ 71.34/bbl before settling at US$ 71.04/bbl, up +3.48%. WTI crude oil price also gained +3.3%, ending the day at US$ 65.51/bbl. The rally was driven by the broadly based improvement in risk appetite as Chinese President Xi Jinping’s speech in Boao appeared to have eased US-China trade tensions. Meanwhile, Saudi Arabia’s Energy Ministry indicated that the Kingdom would keep exports below 7M bpd and restore its inventories to “normal” level.

                                Profit-taking in both oil benchmarks on Wednesday was facilitated by the inventory report released after US market close. The industry- sponsored API estimated that crude oil inventory surprisingly increased +1.56 mmb in the week ended April 6. For refined oil products, gasoline stockpile added +2.01 mmb while distillate fell -3.85 mmb for the week. EIA, the US governmental agency, today probably reports a -0.19 mmb draw in crude oil inventory. Gasoline and distillate stockpiles might have dropped -1.43 mmb and -0.03 mmb respectively.

                                Eurozone industrial production down -0.1% mom in Apr, EU up 0.5% mom

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                                  ActionForex.com
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                                  Eurozone industrial production fell -0.1% mom in April, worse than expectation of 0.1% mom growth. Industrial production, decreased by -0.4% for intermediate goods. Production increased by by 0.4% for energy, 0.7% for capital goods, 0.3% for durable consumer goods, and 3.4% for non-durable consumer goods.

                                  EU industrial production rose 0.5% mom. The highest monthly increases were recorded in Denmark (+10.4%), Greece (+7.0%) and Poland (+6.7%). The largest decreases were observed in Luxembourg (-6.7%), Latvia (-4.9%) and Ireland (-3.4%).

                                  Full Eurozone industrial production release here.

                                  White House Navarro insists Mexico should share their responsibility and take asylum seekers

                                    By
                                    ActionForex.com
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                                    Mexican Foreign Secretary Marcelo Ebrard will meet US Vice President Mike Pence at 1900 GMT today on the issue of tariffs and migration flow. The Mexican delegation is expected to use their every efforts to convince the US to avert the tariffs that Trump threatened to impose starting on June 10.

                                    Ahead of the meeting White House economic adviser Peter Navarro said that it’s important to get the US-Mexico border issue solved. And he insisted that the Mexican government must bear their share of the responsibility. And the most important thing is for the Mexican government to take the asylum seekers.

                                    IMF: Germany GDP to grow 1.2% in 2022, persistent shutoff of Russian gas the greatest threat

                                      By
                                      ActionForex.com
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                                      IMF said in a report that Germany’s GDP growth is expected at 1.2% in 2022 and 0.8% in 2023. Unemployment rate is estimated at 3.1% in 2022 and 3.4% in 2023. Headline inflation is projected at 7.7% in 2022 and 4.8% in 2023.

                                      It added, “uncertainty is very high, with risks to the baseline growth forecast skewed downward and risks to the inflation forecast skewed upward.”

                                      The greatest threat is a “persistent shutoff” of the remaining Russian gas exports to Europe, which could cause “sizable reductions in German economic activity and increases in inflation”.

                                      “Prolonged war and resurging COVID-19 infections could also intensify supply chain disruptions. ”

                                      “Persistently-high inflation and fears of a de-anchoring of inflation expectations can prompt major central banks to tighten policies faster than currently expected”.

                                      Full report here.

                                      Eurozone economic sentiment rose to 99.9 in Jan, EU up to 98.0

                                        By
                                        ActionForex.com
                                        -

                                        Eurozone Economic Sentiment Indicator rose from 97.1 to 99.9 in January. Employment Expectation Indicator rose from 107.4 to 110.1. Economic Uncertainty Indicator dropped from 27.5 to 26.2. Industry confidence rose from -0.6 to 1.3. Services confidence rose from 7.7 to 10.7. Consumer confidence rose from -22.1 to -20.9. Retail trade confidence rose from -2.7 to -0.8. Construction confidence dropped from 3.6 to 1.3.

                                        EU Economic Sentiment Indicator rose from 95.7 to 98.0. Employment Expectation Indicator rose from 106.2 to 108.5 Economic Uncertainty Indicator dropped from 27.0 to 25.9. Amongst the largest EU economies, the ESI increased markedly in France (+4.4), Spain (+2.7), Germany (+2.5), Italy (+1.7) and, to a lesser extent, the Netherlands (+0.5), while it was unchanged in Poland (±0.0).

                                        Full release here.

                                        US initial jobless claims dropped to 837k, continuing claims down to 11.8m

                                          By
                                          ActionForex.com
                                          -

                                          US initial jobless claims dropped -36k to 837k in the week ending September 26, below expectation of 850k. Four-week moving average of initial claims dropped -11.8k to 867.3k. Continuing claims dropped -980k to 11767k. Four-week moving average of continuing claims dropped -381k to 12701k.

                                          Full release here.

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