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Euro yawns after soft German confidence dataThe standoff in Ukraine continues to escalate, but the financial markets remain calm for now. The US and other western nations have slapped further sanctions on Russia after Moscow sent troops to two breakaway regions in eastern Ukraine. Despite this, investor risk appetite recovered on Tuesday, and the euro, which is extremely sensitive to the conflict in its backyard, is trading sideways. The US has canceled a meeting between the US Secretary of State and the Russian Foreign Minister, and a Biden-Putin summit will not take place, given the volatile situation in Ukraine. Nonetheless, there is a sliver of hope that the diplomatic door has not been shut completely, although the prevailing mood is still that Russia will invade and perhaps conquer the capital Kyiv. German GfK consumer sentiment expects confidence to weaken in March, with a reading of -8.1, down from -6.7 in February. This was lower than the consensus of -6.3 and marked a third straight month of negative readings, as consumers continue to feel pessimistic about economic conditions. The survey was conducted in mid-February, and the Omicron wave and high inflation were the primary factors which impacted on the mood of consumers. The Federal Reserve is widely expected to raise rates at its March meeting. The most likely scenario is a traditional hike of 25 basis points, but just a week ago there was a reasonable likelihood of a 50-basis point move. However, the Ukraine crisis and the surge in oil prices could trigger stagflation, which could prod central bankers to hold off on any rate increases. Even if the Fed pushes ahead with a rate hike in March, the Ukraine standoff could well slow down the Fed's plans to raise rates, especially if there is a Russian invasion and oil prices rise to USD 120 a barrel or higher. EUR/USD faces resistance at the 100-MA at 1.1391. Above, there is resistance at 1.1449 There is support at the 61.8 fibo at 1.1264, followed by 1.1217
by OANDA
New Zealand dollar powers higherThe New Zealand dollar has climbed above the 0.68 level on Wednesday. In the North American session, NZD/USD is trading at 0.6816, up 0.65% on the day. The currency has jumped 1.09% this week. Volatility is the name of the game, at least in the month of December. With market participants eyeing Christmas and the markets marked by illiquidity, we have been seeing volatility in the currency markets, particularly in minor currencies such as the New Zealand dollar, which are barometers of risk sentiment. The currency has been moving up and down like a yoyo. Last week, the explosion of Omicron cases across Europe sent risk appetite lower, and NZD/USD fell 0.84%. The currency has rebounded with gains this week of 1.0%, buoyed by reports that Americans and Brits are rushing to get Covid shots while the US and UK governments are securing millions of Covid vaccines. There are conflicting reports as to whether Omicron is as severe as the Delta variant, but it's clear that Omicron is much more contagious, and there are growing concerns that hospital resources could be stretched past the limit as Omicron spreads in Europe and the US. The New Zealand dollar's erratic moves have been due to headline-derived volatility rather than any market trends. Care should be exercised, as this could continue right up to the New Year. The lockdowns may have been lifted, but the initial relief has dissipated and New Zealanders are feeling a sense of pessimism as we head into 2022. The Westpac Consumer Sentiment Index fell below the 100 level in Q3, which indicates a majority of surveyed consumers were pessimistic about economic conditions. New Zealand has again closed its borders, in an attempt to keep a tight lid on the few Omicron cases that have been detected in the country. Will the island nation manage to stave off another wave of Covid? Only time will tell.
by OANDA
July PMI For 4 Major Economies (26 July 2021)Last Friday, IHS Markit released the preliminary PMI data for four major economies. Below are the key points from the individual reports. United States Services sector slowed down to a 5-month low pace due to labour shortages. Manufacturing sector expanded at record high pace. Prices of goods and services remained steep as firms pass on the high costs to consumers. Total employment growth eased to 4-month low. Business confidence declined to 7-month low mainly due to rising inflation, labour and material shortages, as well as rising concerns over the pandemic. Europe Services sector expanded at the fastest pace in 15 years due to reopening of economy from the lifting of COVID restrictions. Manufacturing sector expanded at a slightly reduced pace due to supply constraints, which led to an increase in backlogs of work. Employment continues to rise sharply. Prices for goods and services rose as demand surpassed supply. Business confidence declined to 5-month low as concerns over the COVID Delta variant grow. United Kingdom Business activities in the UK slowed down considerably due to shortages of workers and raw materials. Backlogs declined due to a slowdown in business activities. Business and consumer confidence fell due to the pandemic and Brexit-related difficulties with export sales. Employment growth eased to the slowest level since March. Australia Services sector slipped into contraction for the first time in 11 months. Renewed COVID restrictions caused by the spread of Delta variant affected demand and output in Australia. Decline in demand in the services sector led to a decline in work outstanding. Manufacturers continue to report shortages of supply, leading to an increase in work outstanding. Employment in both the services and manufacturing sectors continue to grow.
TVC:DXY
by GH_Lee
Aussie slides on soft consumer confidenceThe Australian dollar has reversed directions on Wednesday and recorded considerable losses. In the European session, AUD/USD is trading at 0.7750, down 0.52% on the day. Investors gave the Aussie a thumbs down on Wednesday after Westpac Consumer Sentiment fell 4.8% in May. The trend of improving consumer confidence over the past three months was broken. Still, a review of the Westpac report shows a "glass half full" approach, as the report notes that the index dropped from 118.8 to 113.1, its second-highest print since April 2010. The RBA will hold a policy meeting on June 1, and the central bank will announce its plans for Yield Curve Control (YCC) and QE. The Westpac report says that the bank remains committed to monetary stimulus and this means that QE will be extended for a further A$100 billion in September, and YCC policy will shift from April 2024 to November 2o24. The bank has repeatedly said that it has no plans to tighten policy prior to 2024. The market will be treated to a dump of Australian data on Thursday. Consumer Inflation Expectations is first up (1:00 GMT), with a consensus of 3.6%, up from 3.2%. This indicator is closely watched as inflation expectations can translate into actual inflation, so a strong gain would be a signal that inflationary pressures are growing. The highlight will be Employment Change (1:30 GMT), with a small gain of 15.0 thousand expected, down from 70.7 thousand. Australia also releases Manufacturing and Services PMIs (23:00 PMI). Both sectors are in good shape, a testament to the strong Australian economy. Manufacturing PMI is projected at 59.8 and Services at 58.9, which are well into expansionary territory. The 50-level separates contraction from expansion. AUD/USD faces resistance at 0.7887 and 0.7990. On the downside, there are support levels at 0.7684 and 0.7584.
by OANDA
CAD edges higher, US confidence data nextThe Canadian dollar is slightly higher on Friday. Currently, USD/CAD is trading at 1.2513, down 0.25% on the day. On the fundamental front, Canada will release tier-2 data, including Housing Starts. In the US, today's highlight is UoM Consumer Sentiment, which is expected to accelerate to 88.9 points. Canada's ADP job report has been bleak in recent months, with triple-digit declines in the past two months. However, the indicator roared back in March, with an impressive gain of 634.8 thousand new jobs. ADP attributed the strong rebound in the labour market, which was based in all sectors, to relaxed health restrictions in some provinces. However, the picture could be significantly worse in the April data, as Ontario, the most populous province, imposed a 4-week lockdown at the end of March. Canada's Covid rate per capita is now outpacing the US, and this is likely to take a toll on the economy. The news was far less positive in the manufacturing sector. Manufacturing Sales suffered a decline of 1.6%, worse than the forecast of -1.1%, and its weakest showing in six months. In the US, retail sales surged in March, as consumers loosened their purse strings. Headline retail sales sparkled at 9.8%, while Core Retail Sales rose 8.4%. Both releases easily beat their estimates of 5.8% and 5.1%, respectively. The catalyst for the surge in consumer spending was the latest batch of government stimulus, with US households receiving stimulus cheques of 1400 dollars, as well as many states relaxing health restrictions. US consumers were only too happy to hit the stores and purchase big-ticket items, including cars, electronics and furniture. Somewhat surprisingly, the explosive retail sales release failed to push the US dollar higher, as the currency markets appeared more focused on other matters, such as the vaccine rollout in Germany and France. There is weak support at 1.2478. Below, there is support at 1.2423. Below, there is a pivot point at 1.2556. On the upside, we have resistance at 1.2611 and 1.2689
by OANDA
1
US consumer confidence surges in March to one year highThe consumer confidence index increased to 109.7 in March from 90.4 in February, which beat the economists' forecast at 96.9 Consumers’ assessment of short term outlook on salaries, employment rate and commercial activities increased , with an optimism view on the domestic consumption market MM Analysis The consumer confidence index reached 109.7 in March, which echo with the increased number of University of Michigan Consumer Sentiment Survey. Consumer's optimism derived from 3 main factors. 1. Increased vaccinations, which indicates a rebound on commercial activities 2. Labor market on the mend, i.e. decreasing Unemployment Insurance Weekly Claims, increasing US Non-farm Payrolls, which would boost the retail and personal consumption growth 3. Transfer income from the American Rescue Plan In conclusion, strong consumption confidence and high saving rate would provide a strong support on economic recover, pushing up the US GDP
TVC:DXY
by MacroMicro_Global
The myth of hyperinflation series #6-Consumer debt & consumptionIn my last post, I talked about the liquidity trap (Banks not lending out enough despite being flooded with cash by Fed) . For loans to households, banks tightened standards across all categories of residential real estate (RRE) loans and across all three consumer loan categories—credit card loans, auto loans, and other consumer loans—over the second quarter of 2020. Banks reported stronger demand for all categories of RRE loans and weaker demand for all categories of consumer loans. Despite the massive increase in money supply, there was no visible increase in inflation lvl because the money probably went to equity and housing market. M2 growth percentage was near 10% in 1998, 2001, 2008 and 2011, yet the CPI lvl at those years were 1.6%, 1.6%, 0.1% and 3.0% respectively. Hardly any sign of inflation to me, let alone hyperinflation. US is a retail oriented and consumer-driven/trickle up economy with consumer spending accounts for nearly 70% of the GDP. Therefore, overheated consumer debt, consumption and demand usually precede the high inflation. However, ever since the height of sub-prime mortgage crisis, household debt outstanding, household indebtedness ratio (ratio of household debt outstanding to disposable personal income), household debt service ratio and net borrowing have all declined. The only related measure that has been going up is personal saving rate. In most cases, consumer demand and consumption will not go up fast enough to cause the inflationary risk if personal saving rate goes up or household debt service ratio goes down faster than disposal personal income goes up. Personal saving rate has been unprecedented in recent months and reached peak of 33.5% in April as household income has been lifted by stimulus check while spending opportunities have been restricted. As a result, credit card balances fell by $76 billion in the second quarter, the steepest decline in the history of the data. In total, non-housing balances (including credit card, auto loan, student loan, and other debts) saw the largest decline in the history with an $86 billion decline. According to estimates released by the Bureau of Economic Analysis in June 2020, personal income decreased 1.1percent, real disposable personal income decreased 1.8 percent and real personal consumption expenditures increased 5.2 percent (probably the effect of stimulus check). If stimulus check doesn't keep coming in, it is hard not see consumer spending not being affected as the disposable income drops. Let's take a look at the consumer sentiment- According to the conference board, Consumer Confidence is down 6.9 pts According to the preliminary result of University of Michigan's index of consumer sentiment in July, the score of 73.2 is way lower than that of 98.4 in July 2019. Next, I will examine the producer/supply's relationship with hyperinflation.
FRED:PCEPILFEEducation
by Libratus
2