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Sterling performing well, GBP/CHF with solid upside bias

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    ActionForex.com
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    Sterling doing rather well today with GBP/CHF, GBP/NZD and GBP/AUD topping the daily top mover table. These three pairs are also the top 10 movers in the 4 hour and monthly period.

    Upside momentum in GBP/CHF is quite clear as seen in 6H action bias chart.

    Asian stocks tumble as Trump moves to ban TikTok and WeChat, HSI down -2.2%

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      ActionForex.com
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      Asia markets tumble broadly, particularly serious in Hong Kong, after US President Donald Trump issued an executive order to ban China’s TikTok and WeChat apps. The orders will go into effect in 45 days, and block all transactions with TikTok’s owner ByteDance, and transactions involving WeChat. The move was made under the International Emergency Economic Powers Act, which allows the president to declare a national emergency, block transactions and seize assets, in response to “unusual and extraordinary threat”.

      “To protect our Nation, I took action to address the threat posed by one mobile application, TikTok. Further action is needed to address a similar threat posed by another mobile application, WeChat,” Trump said. “This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information — potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage”.

      At the time of writing, Hong Kong HSI is down -566 pts or -2.27%. It’s still holding above a near term channel support nevertheless. If HSI could rebound from the current level and break through 25201.43 resistance, near term bullish would be retained for another rise through 26782.61. However, sustained trading below the channel support will argue that the corrective rise from 21139.26 has completed and bring deeper fall to 22519.73 support to confirm.

      UK retail sales picture bleak on Brexit uncertainty

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        ActionForex.com
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        UK BRC like-for-like sales dropped -1.6% yoy in June, below expectation of -1.5% yoy. Total sales dropped -1.3% yoy. The data were worst in record for June since 1995. Helen Dickinson, Chief Executive of BRC, noted, “overall, the picture is bleak: rising real wages have failed to translate into higher spending as ongoing Brexit uncertainty led consumers to put off non-essential purchases.”

        She added: “Businesses and the public desperately need clarity on Britain’s future relationship with the EU. The continued risk of a No Deal Brexit is harming consumer confidence and forcing retailers to spend hundreds of millions of pounds putting in place mitigations – this represents time and resources that would be better spent improving customer experience and prices. It is vital that the next Prime Minister can find a solution that avoids a No Deal Brexit on 31st October, just before the busy Black Friday and Christmas periods.”

        Full release here.

        Fed stands pat, but projections two more hikes this year, on stronger growth and core inflation

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          ActionForex.com
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          Fed keeps interest rate unchanged at 5.00-5.25% as widely expected, by unanimous vote. The new economic projections are rather hawkish, with 2023 median rate projections raised to 5.6% (two more 25bps hikes). GDP growth and core PCE inflation were revised higher while unemployment rate was revised lower.

          FOMC leaves the door open for more tightening, as “the Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.:

          Fed added that the assessments will take into account information including “readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”.

          In the new economic projections, median federal funds rates for 2023 is raised from 5.1% to 5.6%, indicating two more 25bps hike. Median projections for 2024 was raised from 4.3% to 4.6%, for 2025 raised from 3.1% to 3.4%.

          Regarding 2023 median economic projections, real GDP growth was raised sharply higher from 0.4% to 1.0%, unemployment rate sharply lower from 4.5% to 4.1%, core PCE inflation from 3.6% to 3.9%.

          In the new dot plot, twelve members penciled in rate hikes to 5.50-5.75% this year, with four expecting rate at 5.25-5.50%, and only two at the current 5.00-5.25%.

          Full FOMC statement here.

          Full economic projections here.

          Sterling surges broadly as UK PM May delivers uninspiring statement in Commons on Brexit

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            ActionForex.com
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            Sterling overtakes Yen as the strongest major currency for today for now. Renewed buying emerges as UK Prime Minster Theresa May delivers her uninspiring statement in the Commons.

            Technically, GBP/USD hits as high as 1.2930 so far. Rebound from 1.2391 is on track to 1.3174 resistance, which is close to 38.2% retracement of 1.4376 to 1.2391 at 1.3149.

            EUR/GBP dives to as low as 0.8875. We now consider 0.8927 support firmly broken. And EUR/GBP is on track to 61.8% retracement of 0.8655 to 0.9101 at 0.8825 and below.

            GBP/JPY, however, despite breaching 139.88 resistance to 140.05, it couldn’t sustain above this resistance yet. We’ll holding on to the expectation that upside of the rebound from 131.51 should be limited by 139.88 and bring reversal. Break of 137.35 minor support will turn bias to the downside for 131.51.

            UK CPI surged from 2% to 3.2% yoy in Aug, largest monthly leap on record

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              ActionForex.com
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              UK CPI surged to 3.2% yoy in August, up from 2.0% yoy, above expectation of 2.9% yoy. That sharp 1.2% jump in CPI was the highest leap recorded, but ONS said “this is likely to be a temporary change. CPI core rose to 3.1% yoy, up from 1.8% yoy, above expectation of 2.9% yoy. RPI also rose to 4.8% yoy, up from 3.8% yoy, above expectation of 4.6% yoy.

              Also released, PPI input came in at 0.4% mom, 11.0% yoy, versus expectation of 0.2% mom, 10.3% yoy. PPI output was at 0.7% mom, 5.9% yoy, versus expectation of 0.4% mom, 5.4% yoy. PPI core output was at 1.0% mom, 5.4% yoy.

              Full CPI release here.

              Eurozone PMI composite finalized at 55.5, commensurate with GDP growth in excess of 0.6%

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                ActionForex.com
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                Eurozone PMI Services was finalized at 55.8 in February, up from January’s 51.1. PMI Composite was finalized at 55.5, up from January’s 52.3. That’s also the strongest reading since last September.

                Looking at some member states, Ireland PMI Composite rose to 59.1, 3-month high. Spain rose to 56.5, 3-month high. Germany rose to 55.6, 6-month high. France rose to 55.5 while Italy rose to 53.6.

                Chris Williamson, Chief Business Economist at IHS Markit said: “The survey data for February depict a eurozone economy that was regaining robust growth momentum ahead of the invasion of Ukraine. Business activity accelerated to a pace commensurate with GDP growth in excess of 0.6%, buoyed by a relaxation of virus restrictions…

                “Though it remains early days to be assessing the impact of the war, growth prospects are also likely to have been hit by heightened risk aversion and new sanctions, dampening the rebound from the pandemic. With inflation risks rising and growth prospects waning, the Ukraine conflict adds to business and household headwinds for the coming months, and exacerbates the difficult juggling act of the ECB in controlling inflation while sustaining a robust economic recovery.”

                Full release here.

                BoJ Kuroda: Likely to take longer to achieve inflation target

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                  ActionForex.com
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                  In the post meeting press conference, BoJ Governor Haruhiko Kuroda admitted that “Japan’s exports and output are being affected by lean overseas growth”. However, he also pointed out “domestic demand continues to grow.” Hence, BoJ maintained the baseline view that “economy is expanding moderately”. Though, regarding inflation he said “it is likely to take longer to achieve our target”.

                  Kuroda also defended BoJ’s policy and noted “We are not saying that we only care about achieving our price target.” Instead, BoJ’s goal is that “prices should rise gradually, reflecting an improvement in corporate profit and job growth rate”. For now, there is no need to make any change to the price target.

                  Australia Westpac consumer sentiment dropped to 100.8, elevated pressures on finances

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                    ActionForex.com
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                    Australia Westpac-Melbourne Institute consumer sentiment dropped -1.3% to 100.8 in February, down from 102.2. The “economy, next 12 months” sub-index increased by 2.4% and the “economy, next 5 years” sub-index was up by 1.5%.

                    However, the “finances vs a year ago” sub-index slumped by -9.2% (more than reversing the surprise 7.5% lift in January) while the “finances, next 12 months” sub-index fell by -1.5% to be down by -4.3% since December.

                    Westpac said, “the most likely explanations for these elevated pressures on finances relate to: Omicron-related disruptions to activity and earnings at the start of the year; the rising cost of living; and the prospect of rising interest rates.”

                    Also, “Westpac does not expect the first rate hike by the RBA until August and it will be very interesting to observe how resilient this surprising recovery in confidence will be in the lead up to the first move.”

                    Full release here.

                    US Empire State manufacturing rose to 30.9, employees and price paid surged

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                      ActionForex.com
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                      US Empire State Manufacturing Survey general business conditions jumped to 30.9 in November, up from 19.8, above expectation of 20.2. 43% of respondents reported improved conditions while 12% reported worsened conditions.

                      New orders rose 5 pts to 28.8. Shipment jumped 19 pts to 28.2. Delivery times dropped -5.8 to 38.0. Number of employees jumped 9 pts to 26.0, a record high. Average workweek also jumped 8 pts to 23.1. Price paid rose 4 pts to 83.0. Price paid rose 7 pts to 50.8, a record high.

                      Full release here.

                      CAD/JPY resumes rally, targeting 55 day EMA

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                        ActionForex.com
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                        Following broad based selloff in Yen, CAD/JPY resumes the rebound from 85.40. The development affirms the case that correction pattern from 91.16 has completed, after depending 85.40 support. Further rise would be seen to 55 day EMA (now at 88.49). Sustained break there will affirm this bullish view and bring stronger rise back to retest 91.16 high.

                        CAD/JPY is kept well above 81.91 resistance turned support, and keeps the up trend from 73.80 alive. Such up trend is in favor to resume through 91.16 at a later stage.

                        China Caixin PMI manufacturing rose to 50.1, but sector under double pressure

                          By
                          ActionForex.com
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                          China Caixin PMI manufacturing rose to 50.1 in March, up from 40.3, above expectation of 45.8. However, demand conditions remained fragile, as highlighted by a second monthly fall in total new business. A number of panel members also mentioned delay or cancellation in orders. New export work declined solidly sue to global spread of coronavirus. Employment data also signalled further headcounts reduction.

                          Dr. Zhengsheng Zhong, Chairman and Chief Economist at CEBM Group said: “To sum up, the manufacturing sector was under double pressure in March: business resumption was insufficient; and worsening external demand and soft domestic consumer demand restricted production from expanding further. Whereas, business confidence was still high and the job market basically returned to the pre-epidemic level, laying a positive foundation for the economy’s rapid recovery after the epidemic.”

                          Full release here.

                          German Gfk consumer climate dropped 0.1 to 10.8. Increasingly insecure state of geopolitics influencing consumer mood

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                            ActionForex.com
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                            German Gfk consumer climate dropped to 10.8 in May, down 0.1 from 10.9, met expectations.

                            Quote from the release:

                            “The increasingly insecure state of geopolitics now also seems to be influencing the mood of consumers. There is a tangible drop in economic expectations in April, while income expectations fell only slightly by comparison. In contrast, propensity to buy is still at a very high level.”

                            “The escalation of the Syrian crisis and the protectionist trade policies of the United States are worrying consumers and could now also affect Germany’s previously excellent economic prospects.”

                            “Further escalation of these conflicts would also have a long-term adverse effect on the consumer climate. Above all, increasing protectionism in international trade would hit Germany, as an export nation, resulting in employees fearing they may lose their jobs and again being more reluctant to buy. In this case, the consumer forecast would certainly be untenable.

                            Full relesae here.

                            UK PMI construction rose to 52.3, but optimism sank

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                              ActionForex.com
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                              UK PMI construction rose from 49.2 to 52.3 in September, above expectation of 48.1. S&P Global said total industry activity rose for the first time three months. Output growth was linked to work on delayed projects. Business optimism was the lowest since July 2020 as new orders stalled.

                              Tim Moore, Economics Director at S&P Global Market Intelligence, said: “Forward-looking survey indicators took another turn for the worse in September, with new business volumes stalling and output growth expectations for the year ahead now the lowest since July 2020. This reflected deepening concerns across the construction sector that rising interest rates, the energy crisis and UK recession risks are all set to dampen client demand in the coming months.”

                              Full release here.

                              US PPI at 0.2% mom, 2.1% yoy in Mar, below expectations

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                                ActionForex.com
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                                US PPI for final demand rose 0.2% mom in March, below expectation of 0.3% mom. PPI final demand services rose 0.3% mom while final demand goods fell -0.1% mom.

                                For the 12-month period, PPI jumped from 1.6% yoy to 2.1% yoy, below expectation of 2.3% yoy. But that was still the highest reading since April 2023.

                                PPI for final demand less goods, energy, and trade services rose 0.2% mom. For the 12-month period, PPI for final demand less foods, energy and trade services rose 2.8% yoy.

                                Full US PPI release here.

                                BoE to stand pat and discuss negative rates, some previews

                                  By
                                  ActionForex.com
                                  -

                                  BoE is widely expected to keep monetary policy unchanged today, with Bank rate held at 0.1% and asset purchase target at GBP 895B. New economic projections will also be released. But the major focus will be on rhetorics regarding negative interest rates.

                                  Governor Andrew Bailey has recently noted that it might be premature to implement negative rates. For instance he suggested that there are “lots of issues” with negative rates and policymakers have “not actually discussed” the issue yet. Chief Economist Andy Haldane expected the economy to recover at “a rate of knots” from Q2. Brexit risks were also cleared. The hurdle for the divided committee to reach a consensus on using negative rates seem too high.

                                  Here are some BoE previews:

                                  Sterling’s rally has been losing much momentum ahead of BoE rate decision, even against the weak Euro. We’ll see if more sell-on-news movement would happen after BoE affirms its stance on negative rates. In particular, break of 0.8917 minor resistance in EUR/GBP confirm short term bottoming and bring stronger rebound, probably dragging Sterling down elsewhere too.

                                  ECB Panetta: Absent of common coronavirus action would dilute public support for EU

                                    By
                                    ActionForex.com
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                                    ECB Executive Board member Fabio Panetta criticized that Eurozone’s fiscal response to the coronavirus pandemic has been insufficient. He emphasized, “only if all economies act with the necessary force to contain the recession will the loss in output for the entire eurozone be minimized.”

                                    He warned, “any perception that common action is absent in times of desperate crisis would dilute public support for the European Union — an effect that is already visible in countries on the frontline of the health crisis.” And, “the threat to the single market is clear: uneven fiscal support implies that a firm’s location, rather than its business model, will be the decisive factor in determining whether it survives this crisis.”

                                    Australia unemployment rate dropped to 4.9%, lowest since 2010

                                      By
                                      ActionForex.com
                                      -

                                      Australia employment grew 29.1k in June, or 0.2% mom, above expectation of 20.3k. Full time jobs grew 51.6k while part-time jobs dropped -22.5k. Over the year, employment grew 777.9k, or 6.3% yoy. Unemployment rate dropped -0.2% to 4.9%, better than expectation of 5.0%. Participation rate was unchanged at 66.2%.

                                      Bjorn Jarvis, head of labour statistics at the ABS, said June saw the eighth consecutive monthly fall in the unemployment rate. “The unemployment rate fell to 4.9 per cent in June. This was 0.4 percentage points below March 2020 (5.3 per cent) and the lowest it has been since December 2010. The declining unemployment rate continues to coincide with employers reporting high levels of job vacancies and difficulties in finding suitable people for them,” Jarvis said.

                                      Full release here.

                                      ECB officials signal rate cut prospects, eyeing Spring for initial move

                                        By
                                        ActionForex.com
                                        -

                                        Several ECB policymakers vocalized today their anticipation of impending rate cuts, pinpointing spring—likely June—as the probable period for the first reduction.

                                        Governing Council member Francois Villeroy de Galhau, in an interview with BFM Business television, conveyed a “very probable” outlook for an inaugural rate cut within the spring months. Villeroy indicated there is “large consensus” among officials on the inevitability of rate reductions, albeit with ongoing discussions about the precise timing. He elaborated on the spring timeframe, suggesting it encompasses April to June, thus leaving a window open for an earlier adjustment.

                                        Further adding to the conversation, Governing Council member Gediminas Šimkus acknowledged the prevailing conditions that pave the way for a shift to a less restrictive monetary stance. While not dismissing an April rate cut entirely, Šimkus posited a low likelihood for such an early move, aligning more with expectations for action in the subsequent months.

                                        Compounding these sentiments, another Governing Council member Olli Rehn, expressed his viewpoint through a blog post. Rehn’s assessment, grounded in the latest forecasts, indicates that “the risks of too early a decrease in interest rates from the perspective of inflation control have significantly decreased,”

                                        UK CPI slowed to 3.1% in Sep, core CPI dropped to 2.9% yoy

                                          By
                                          ActionForex.com
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                                          UK CPI slowed to 3.1% yoy in September, down from 3.2% yoy, below expectation of 3.2% yoy. Core CPI also dropped to 2.9% yoy, down from 3.1% yoy, below expectation of 2.9% yoy. RPI, on the other hand rose to 4.9% yoy, up from 4.8% yoy, above expectation of 4.7% yoy.

                                          Also released, PPI input came in at 0.4% mom, 11.4% yoy, versus expectation of 0.8% mom, 11.6% yoy. PPI output was at 0.5% mom, 6.7% yoy, versus expectation of 0.9% mom, 6.8% yoy. PPI output core was at 0.5% mom, 5.9% yoy, versus expectation of 0.9% mom, 5.8% yoy.

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