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Pound steady after hot UK wage growth, CPI nextThe Canadian dollar continues to lose ground. In the North American session, USD/CAD is trading at 1.4315, up 0.48% at the time of writing. The Canadian dollar has declined 2.2% in December and is trading at its lowest level since mid-March. Canada's inflation eased to 1.9% in November, down from 2% in October and shy of the market expectations of 2%. However, the trimmed-mean core rate remained unchanged at  2.7%, higher than the market estimate of 2.5%. This is above the Bank of Canada's target of 2% and will complicate plans to continue to lower interest rates. The BoC has been the leader among major central banks in lowering rates, with five rate cuts since June for a total of 175 basis points. The central bank chopped the benchmark rate by 50 basis points to 3.25% last week but indicated in the rate statement that it expected a "more gradual approach to monetary policy", which means we can expect 25-bp increments in rate cuts if there are no surprises in inflation or employment data. US retail sales sparkled, another sign that the US economy remains robust. Retail sales jumped 3.8% y/y in November, following an upwardly revised 2.9% in October. This was the highest annual gain since last December. Monthly, retail sales rose 0.7%, above the upwardly revised 0.5% gain in October and the market estimate of 0.5%. US consumers have opened their wallets for the holiday season and motor vehicles and online sales helped drive the gain. The strong retail sales report didn't change expectations for a rate cut on Wednesday, which stand at 99%, according to the CME's FedWatch. US PMIs on Monday pointed to a mixed bag. The Services PMI rose in December to 58.5 from 56.1 in November and above the forecast of 55.7. This was the highest level in over three years as the services economy is showing impressive expansion. The manufacturing sector is in dreadful shape and weakened to 48.3, down from 49.7 in November and below the market estimate of 49.8. Output and new orders are down as the demand for exports remains weak. USD/CAD is testing resistance at 1.4289. Above, there is resistance at 1.4343 1.4191 and 1.4137 are the next support levels
by OANDA
Pound higher as Services PMI rises, job report nextThe British pound has moved higher on Monday, after declining 1% last week. In the  European session, GBP/USD is trading at 1.2747, up 0.30% on the day. The UK Services PMI rose to 51.4 in December, up from 50.8 in November, which was a 13-month low. This beat the market estimate of 51.0, but points to weak business activity as demand for UK exports has been weak and confidence among services providers remains subdued. UK manufacturing is mired in a depression, and the PMI fell to 47.3 in December, down from 48.0 in November and shy of the market estimate of 48.2. This marked the lowest level in eleven months, as production and new orders showed an accelerated decrease. The weak PMI data followed Friday's GDP report, which showed a 0.1% decline for a second straight month in October. This missed the market estimate of 0.1%. GDP rose just 0.1% in the three months to October. The UK releases employment and wage growth numbers on Tuesday. The economy is projected to have lost 12 thousand jobs in the three months to October, after a sparking 200 thousand gain in the previous report. Wages including bonuses is expected to climb to 5% from 4.8%. The Bank of England meets on Thursday and is expected to hold the cash rate at 4.75% after cutting rates by 25 basis points in November. The economy could use another rate cut but inflation remains a risk to upside, with CPI climbing in October to 2.3% from 1.7%. The BoE will be keeping a close eye on wage growth, which has been a driver of inflation. The US releases PMIs later today. Manufacturing remained in contraction territory in November at an upwardly revised 49.7 and there is optimism that the new Trump administration's protectionist stance could benefit US manufacturers. The services sector is in good shape and improved in November to 56.1, up from 55.0 in October. The uncertainty ahead of the US election is over and lower interest rates have contributed to stronger expansion in services. GBP/USD is testing resistance at 1.2638. The next resistance line is 1.2668 1.2592 and 1.2562 are the next support levels
by OANDA
Euro rally ends, Eurozone GDP expected to accelerateThe euro is steady on Friday after jumping 0.7%  a day earlier. In the European session, EUR/USD is trading at 1.0581, down 0.06% at the time of writing. The eurozone wraps up the week with the GDP and job growth reports and the market is expecting an improvement.  Third-quarter GDP is expected to improve to 0.4% q/q from o.2% in the second quarter. Job growth if forecast to tick upwards to 0.2% q/q, up from 0.1% in Q2. In France, the political chaos continues. A no-confidence vote passed this week and has left the country without a functioning government. Prime Minister Michel Barnier resigned on Thursday after just three months in office. President Emmanuel Macron said he will name a new prime minister shortly but the political crisis could push up French interest rates and the country's large debt. Germany, once the powerful locomotive of the eurozone, has faltered badly and has hampered growth in the eurozone. This week's German manufacturing data was dismal. The Manufacturing PMI remains mired in contraction and was unchanged at 43.0 in November. Factory orders for October declined by 1.5% after a 7.2% gain a month earlier. On Friday, industrial production fell 1% in October, after a 2% decline in September and shy of the market estimate of 1.2%. The German Services PMI slipped into contraction in November and there is political instability, as the coalition German government collapsed in November. A snap election has been scheduled for Feb. 23, 2025. The US wraps up the week with the nonfarm payroll report. With inflation largely contained, the employment growth is once again a key release can move the US dollar. The November report is expected to rise to a respectable 200 thousand, after a weak gain of 12 thousand in October, which was driven downwards by hurricanes and work stoppages at Boeing. EUR/USD faces resistance at 1.0615 and 1.0644 1.0562 and 1.0533 are providing support
by OANDA
British retail sales decline, pound extends lossesThe British pound is lower for a straight third trading day on Friday. In the North American session, GBP/USD is trading at 1.2543, down 0.36% on the day. UK retail sales disappointed in October, with a sharp decline of 0.7% m/m. This follows a downwardly revised 0.1% gain in September and missed than the market estimate of 0.3%. Annually, retail sales rose 2.4%, well below the market estimate of 3.2%. The September reading was revised downwards from 3.9% to 3.2%. The sharp drop in retail sales can be attributed to low consumer confidence and the recent Budget. The GfK consumer confidence index showed an improvement, rising from -21 to -18, but this points to a very pessimistic British consumer who is thinking twice before making discretionary purchases. The Reeves Budget on Oct. 31 dampened consumer spending, as the government had warned about “difficult decisions” and proceeded to deliver a Budget with some 40 billion pounds worth of tax increases. Understandably, consumers held back on spending in October and retail sales were down across most categories. The economy has slowed since the July election and services and manufacturing activity have decelerated for three straight months. The UK releases the Services and Manufacturing PMIs later today. The Services PMI is expected to remain unchanged at 52.0, while the Manufacturing PMI if projected to inch up to 50.0, up from 49.9. If the PMIs are weaker than expected, the pound could respond with losses. The US will also publish manufacturing and services PMIs on Friday, with little change expected. The Manufacturing PMI is expected to rise from 45.5 to 45.8, and the Services PMI, which has been showing solid growth, from 55 to 55.2. GBP/USD is testing support at 1.2557, followed by support at 1.2525 There is resistance at 1.2609 and 1.2641
by OANDA
British pound falls to 6-month low, retail sales nextThe British pound has lost ground on Thursday. In the North American session, GBP/USD is trading at 1.2506, down 0.44% on the day. Earlier, the pound dropped as low as 1.2593, its lowest level since mid-May. It’s a busy Friday in the UK, highlighted by the retail sales report. We’ll also get a look at consumer confidence and the services and manufacturing PMIs. The UK releases October retail sales on Friday and the markets are bracing for a downswing. The market estimate stands at 3.4% y/y, compared to 3.9% in September, the highest since Feb. 2022. Monthly, retail sales are expected to decline by 0.3%, following a 0.3% gain in September. The UK consumer remains in a sour mood, as the cost of living and high interest rates continue to squeeze households. The GfK consumer confidence index is expected to remain unchanged in November at -21. The UK manufacturing sector has been struggling. The October PMI was revised downwards to 49.9, which indicates stagnation. The PMI has decelerated for three straight months and the weak global demand will likely continue to weigh on manufacturing in the months ahead. The market estimate for November stands at 50.0. The services sector is in better shape and has shown 12 consecutive months of growth. The PMI has also eased for three straight months, raising concerns about the health of the economy. The market estimate for November is 52.0, unchanged from the October figure. The US will also publish manufacturing and services PMIs on Friday, with little change expected. The Manufacturing PMI is expected to rise from 45.5 to 45.8, and the Services PMI, which has been showing solid growth, from 55 to 55.2. There is resistance at 1.2666 and 1.2702 GBP/USD pushed below support at 1.2618 and tested support at 1.2582 earlier
by OANDA
Euro jumps to 10-day highThe euro has posted strong gains on Monday. EUR/USD is trading at 1.1126 in the North American session at the time of writing, up 0.49% today. The euro is at its highest level since Sept. 6. It’s a quiet day on the data calendar, with no tier-1 events. In the US, the Empire State Manufacturing index rebounded to 11.5 in September, much higher than the August reading of -4.7 and the market estimate of -3.9. This was a shocker as the manufacturer index had contracted nine straight times before today’s reading. Tuesday will be busier, with German ZEW economic sentiment index and US retail sales. German ZEW economic sentiment plunged to 19.2 in August, down from 41.8 in July. The market estimate for September stands at 17.1. US retail sales are expected to fall to 2.2% y/y in August, down from 2.7% in July. This week’s key event is the Federal Reserve meeting on Wednesday, with a 25 basis-point cut practically guaranteed. Will the Fed opt for an oversize 50-bps cut or play it safe with a 25-bps move? The rate cut odds continue to swing wildly. After last week’s producer price index reading, the odds of a 50-bps point cut soared to 41%, up from just 13% before the release, according to the CME’s FedWatch tool. That has increased to 59% today. The uncertainty over what the Fed will do could last right up to the wire. The Fed is in a quandary as it needs to balance the risk of inflation moving higher against the recent weakness in the labor market. A modest 25-bps cut may not be sufficient to improve the employment picture, while a 50 bps cut might send a message that the Fed believes the economy is in deep trouble. EUR/USD is testing resistance at 1.118. Above, there is resistance at 1.1160 There is support at 1.1060 and 1.1018
by OANDA
ISM Manufacturing & ISM Services PMI Combined show trigger levelISM Manufacturing and ISM Services PMI Combined 🪢 This week the ISM PMI's were released as follows: 🚨ISM Manufacturing PMI = 47.2 (contractionary) ✅ISM Services PMI = 51.5 (expansionary) With both metrics offering mixed signals, I decided to make a chart that combines the ISM Manufacturing and ISM Services PMI into one dataset on the chart. Interestingly it provided a clean chart with many patterns to observe, and useful forward looking trigger levels to keep an eye on. Don't forget you can update on this chart data anytime on my TradingView page with one click. At present you can see that the data is compressed into a something resembling a "Darvas Box". I understand this not price but data, however this economic data is clearly in a compressed channel and appears uncertain in terms of a definitive direction. It has also never been in a pattern like this for this long in the past, which could mean a break out up or down is closer than it is further away. Prior patterns have demonstrated that break throughs of both diagonal and horizontal support lines has resulted in significant downward movements. This is evident on the chart and this is something we can watch out for should we break below the box. Consistent with past recession's the Combined PMI dropped below the 50 level (🔴red circles) way back in Dec 2022. Since then we have oscillated around the 50 level in the compressed box in indecisive fashion. Never has the data behaved specifically this way in the past, specifically for this long. There are no other compressed boxes of data lasting this long. At some stage the ISM Data will push the its way out of this box I have drawn and it could be a good indicator to observe for early signals of the direction of the economy in the U.S. as a whole (both services and manufacturing combined) As always, this chart in on my TradingView page, and you can click on it at any stage to get an updated reading on the chart so you can quickly get a visual update on the direction of the U.S. Economy via combined ISM PMI's. Enjoy PUKA
ECONOMICS:USBCOI
by PukaCharts
1
GBP/USD hits 1-month high, UK PMIs nextThe British pound is showing limited movement on Wednesday, after a four-day rally in which it surged 1.7% against the retreating US dollar. GBP/USD is trading at 1.3047 in the North American session at the time of writing, up 0.1% on the day. The annual meeting at Jackson Hole has added significance this year as the Federal Reserve is expected to deliver a milestone rate cut in September. Fed Chair Powell will address the gathering on Friday and investors will be looking for clues about the anticipated September move. The Fed last cut rates in March 2020, early in the Covid pandemic. The Fed has maintained its benchmark rate at 5.25% -5.5% for over a year and all signals point to an initial rate cut at the September 18 meeting. The most likely scenario is a quarter-point cut but earlier this month the financial markets were routed and expectations for a large half-point cut soared. Now that the markets have recovered, a quarter-point cut is once again the most likely scenario. With inflation under control, the Fed is keeping a close eye on the US labor market, which may be cooling too fast for the Fed. The July employment report showed a sharp drop in nonfarm payrolls and a rise in unemployment and the financial markets went into panic mode. Powell is sure to touch upon employment and inflation in his speech on Friday and his take on the economic outlook could move the US dollar. The UK will release the July PMI report on Thursday. The manufacturing and services sectors are both showing growth, as the UK economic picture has improved. The services PMI is expected to inch upwards to 52.9, up from 52.8 in June. Manufacturing has been accelerated for three straight months but the PMI is projected to remain at 52.1. We’ll hear from Bank of England Governor Bailey on Friday at the Jackson Hole symposium. GBP/USD tested support at 1.3020 earlier. Below, there is support at 1.2989 1.3067 and 1.3098 are the next resistance lines.
NYSE:BOE
by OANDA
USD/JPY dips after US services data stumblesThe Japanese yen has rebounded on Thursday and is trading at 161.01, down 0.43% on the day. The yen has been on a slide over the past four weeks and has declined by 3.9% during that time. On Wednesday, the yen fell as low as 161.95, its lowest level since 1986. US markets are closed today for the Fourth of July holiday. The US ISM Services PMI disappointed on Wednesday, dropping to 48.8 in June. This was well below the May reading of 53.8 and the market estimate of 52.6 and marked the weakest reading since May 2020. The 50.0 level separates contraction from expansion. The Federal Reserve won’t mind the weak services data as its looks for signs of a slowdown before it lowers interest rates. The employment component of the Services PMI eased to 46.1 from 47.1 and the US market will be in the spotlight on Friday with the release of nonfarm payrolls for June. The markets are bracing for a gain of 190 thousand, compared to the surprisingly strong gain of 272 thousand in May. If nonfarm payrolls fall below the 200 thousand level, it will lend strong support for a rate cut in September, which currently has a 66% probability, according to the CME’s FedWatch. Japan’s Household Spending reeled off 13 straight declines before ending the streak with a gain of 0.5% m/m for April. The May report will be released early Friday and a weak gain of 0.1% is expected. Japanese consumers have been squeezed by high prices and weak consumer consumption is hampering sustained economic growth, which the Bank of Japan wants to see before it tightens monetary policy. USD/JPY Technical USD/JPY has pushed below the support at 1.6148 and is testing support at 161.00 There is resistance at 162.18 and 162.66
by OANDA
1
GBP/USD steady despite plunge in retail salesThe British pound continues to have a quiet week in which it has stayed close to the 1.27 line. GBP/USD is trading at 1.2715, up 0.13% at the time of writing in the European session. UK retail spending slumped in April with a 2.3% m/m decline. This followed a revised 0.2% decline in March and was much weaker than the market estimate of -0.4%. It was the largest decrease in four months, driven by a sharp fall gasoline and non-food items. Most sectors reported a drop in sales volume as unusually rainy weather put a damper consumer spending. On an annualized basis, retail sales fell 2.7%, after a revised 0.4% gain in March and missing the market estimate of -0.2%. Is the UK economy fading? The economy performed well in the first quarter, with Q1 GDP rising 0.6% q/q, its strongest quarter in over two years. The weak retail sales could be indicative of a weaker second quarter, which would support the BoE lowering the current cash rate of 5.25% which is throttling economic activity. With inflation falling to 2.3% in April, the 2% target is within striking distance and speculation has risen that the BoE will start to lower rates as early as August. In the US, the services and manufacturing sectors showed improvement in May. Services PMI jumped to 54.8 in May, up from 51.3 in April and above the market estimate of 51.3. This was the highest level in a year and pointed to improving business activity despite high interest rates. Manufacturing remains weak but the PMI rose from 50.0 to 50.9, which shows very modest growth. The 50 level separates contraction from expansion. GBP/USD is testing resistance at 1.2710. Above, there is resistance at 1.2736 1.2674 and 1.2648 are the next support levels
by OANDA
USD/JPY steady as Japanese PMIs mixedThe Japanese yen is slightly lower on Thursday. USD/JPY is trading at 156.70, down 0.08% on the day at the time of writing. Japan’s PMIs for April were a mixed bag and the yen didn’t show much reaction. Services PMI dipped to 53.6, down from 54.3 in March and just shy of the forecast of 53.8. This was the smallest growth in services since February. Manufacturing PMI showed improvement and rose to 50.5, up from 49.6 in March and above the market estimate of 49.7. This was the first growth since May 2023 as manufacturing has been in a prolonged slump. The 50 level separates contraction from growth. The Japanese economy is showing signs of improving after first-quarter GDP declined. Inflation has been easing, which could hamper the ability of the Bank of Japan to increase rates without reigniting deflation. With inflation falling around the globe, major central banks have been under pressure to lower interest rates. The central banks remain cautious, however, and the Fed minutes indicated that there was a discussion to raise rates at the May 1st meeting. Other central banks are also unclear about their rate path – the Reserve Banks of Australia and New Zealand held rates at their most recent meetings but also considered hiking rates. The FOMC minutes noted that policy makers are not confident about lowering rates at this stage and want to see more evidence that inflation will continue to drop and remain sustainable around the 2% target. This message is consistent with what we have been hearing from a host of Fed members, although the markets have priced in a September rate cut. USD/JPY tested support at 156.02 earlier. Below, there is support at 156.33 157.07 and 157.32 are the next resistance lines
by OANDA
China Caixin PMI SummaryChina Caixin PMI Summary Surveys completed by 650 SME's in China have indicated that China's smaller manufacturing and service providers remain in expansionary mode in April 2024 with all three data releases coming in as expected or higher than expected with readings >50 = Expansionary. Manufacturing - 51.4 Increased from 51.1 in Mar 2024 to 51.4 in Apr 2024 ✅Above expectations of 51 Services - 52.5 Decreased from 52.7 in Mar 2024 to 52.5 in Apr 2024 ✅In line with expectations of 52.5 Composite - 52.8 Increased from 52.7 in Mar 2024 to 52.8 in Apr 2024 ✅Above expectations of 52.5
ECONOMICS:CNCOMPPMI
by PukaCharts
Macro Monday 45~The China Caixin PMI (Manu, Serv & Composite)Macro Monday 45 The China Caixin PMI (Services and Composite released Today Monday) Last week week we looked at the China Caixin Manufacturing PMI which will revise today with its updated readings that were released last Tuesday. We will also look at the China Caixin Services PMI and the Caixin Composite PMI (a combination of the Services and Manufacturing PMI's) as these will both be released later today. 1.Manufacturing PMI – Already released 2. Services PMI – Released Today 6th May 2024 3. Composite PMI Released Today 6th May 2024 (both 1 + 2 combined) What is the Caixin PMI? ▫️ The is an S&P Global report released monthly. ▫️ The Caixin PMI focuses on small & medium sized enterprises (SME’s) in China. ▫️ Surveys a small sample size of 650 private and state owned manufacturers and service providers. Why Focus on China PMI's? China, the 2nd largest economy in the world at approx. $18 trillion is often referred to as the world’s manufacturing superpower. In 2019, the Chinese manufacturing sector contributed nearly $4 trillion towards the country’s total economic output. Manufacturing accounted for almost 30% of China’s GDP during 2019 demonstrating the importance of manufacturing and the surveys completed by the manufacturers through the Purchaser Managers Index (PMI) surveys. Incredibly, in 2023 China’s manufacturing continued to increase and contributed 31.7% to China GDP, furthermore China’s exports reached record highs of $3.36 trillion. For a country that gets a lot of bad economic press, the economic data from manufacturing and exports suggests China is adaptable and is currently in expansionary territory. This will be further evident from the PMI charts we are about to review also. Like most PMI’s the data will generally be derived from the following sub indicies; New Orders, Output, Employment, Supplier Deliveries and Inventories. Reading both PMI’s: >50 indicates expansion in the manufacturing sector compared to the previous month. < 50 represents contraction A reading of 50 indicates no change. The Charts China Caixin Manufacturing PMI - APR 2024 ✅51.4 = Expansionary (>50 is expansionary) ▫️ Increased from 50.9 in Feb 2024 to 51.1 in Mar 2024 ▫️ Increased from 51.1 in Mar 2024 to 51.4 in Apr 2024 – Figures for April were released on the 30th April 2024 (last week). ✅The Caixin Manufacturing PMI has remained expansionary for 6 consecutive (Nov 2023 – Apr 2024). It has been on a long term recovery since the Feb 2020 lows of 40.3, since then making a series of higher lows and recently sustaining 6 months of expansionary readings. China Caixin Services PMI - Mar 2024 ✅52.7 = Expansionary (>50 is expansionary) ⏳ April Figures released today (pending) ▫️ Increased from 50.2 in Sept 2023 to 52.7 in Mar 2024 ▫️ Increase/decrease from 52.7 in Mar 2024 to ??? in Apr 2024 – Figures for April are released on today Monday 6th April 2024. ✅The Caixin Services PMI has remained expansionary for 15 consecutive months (Jan 2023 – Mar 2024). It has been on a long term recovery since the Feb 2020 lows of 26.5 when services took a huge hit during COVID-19 lockdowns, since then making a series of higher lows and recently sustaining 15 months of expansionary readings. China Caixin COMPOSITE PMI - Mar 2024 ✅52.7 = Expansionary (>50 is expansionary) ⏳ April Figures released today (pending) THIS IS THE SUBJECT CHART AT OUTSET ▫️ Increased from 50 in Oct 2023 to 52.7 in Mar 2024 ▫️ Increase/decrease from 52.7 in Mar 2024 to ??? in Apr 2024 – Figures for April are released on today Monday 6th April 2024. ✅The Caixin Composite PMI has remained expansionary for 5 consecutive months (Nov 2023 – Mar 2024). It has been on a long term recovery since the Feb 2020 similar to Manufacturing and Services PMI charts above. Looking at the composite chart, one can see that we moving sideways since Dec 2023 (Dec 52.6, Jan 52.5, Feb 52.5 & Mar 52.7). We are comfortably in the expansionary green zone on the composite. In Summary (subject to tomorrow’s readings for the Services and Composite PMI but we assume expansionary) China Caixin Manufacturing PM I ↗️ Expansionary The Caixin Manufacturing PMI for April 2024 rose to 51.4, marking the sixth straight month of expansion and the fastest growth since February 2023 China Caixin Services PMI ↗️ Expansionary As of March 2024, the Caixin Services PMI increased slightly to 52.7, indicating growth in the services sector for the 15th consecutive month (April 2024 Figures Release Today) China Caixin COMPOSITE PMI ↗️ Expansionary The Composite PMI reached 52.7 in March 2023, the highest since May 2023, showing the fifth consecutive month of growth in overall private sector activity. (April 2024 Figures Release Today) All the above readings suggest a continued expansion across China’s services and manufacturing sectors, reflecting improvements in demand and business activity across the SME cohort. All these charts are available on my Tradingview Page and you can go to them at any stage over the next 5 - 10 years press play and you'll get the chart updated with the easy visual guide I provided. I hope its helpful Lets get after it again this week 💪🏻 PUKA
ECONOMICS:CNCOMPPMI
by PukaCharts
Pound edges higher as UK Services PMI beats estimateThe British is in positive territory on Friday. GBP/USD is trading at 1.2555, up 0.16% at the time of writing. The service sector accelerated in April, as the Services PMI rose to 55.0, up from 53.1 in April. This was the strongest level since May 2023 and services has shown growth for six straight months, with readings above the 50 level. The PMI survey noted that business and consumer spending were higher in April and reflective of an improving UK economy. The positive report has given the British pound a slight boost on Friday. The US labour market has remained surprisingly strong and has weathered the Federal Reserve’s steep rate hikes. The March nonfarm payrolls report sizzled at 303,000, well above expectations. The April data is unlikely to be as strong, but the market forecast of 243,000 would indicate that the labour market remains tight. The markets will be keeping a close eye on wage growth, which contributes to inflation. Wages rose 0.3% m/m in April and are expected to remain unchanged in the April release. The unemployment rate is also expected to remain unchanged at 3.8%. The Federal Reserve reiterated at this week’s meeting that inflation remained too high to lower rates. Still, the markets were relieved that Fed Chair Powell appeared to rule out the next rate move being a rate hike and that sent the US dollar lower against the major currencies. Just one month ago, the markets had fully priced in a rate cut in September but the probability has fallen to 61%, with a 73% probability of a cut in November. GBP/USD tested resistance at 1.2563 earlier. Above, there is resistance at 1.2590 1.2517 and 1.2490 and providing support
by OANDA
AUD/USD stabilizes after taking a tumble, Fed nextThe Australian dollar has steadied on Wednesday after sliding 1.4% a day earlier. AUD/USD is up 0.19%, trading at 0.6489 at the time of writing in the North American session. Australian dollar slides after soft retail sales Retail sales in Australia fell 0.4% m/m in March, following a downwardly revised 0.2% gain in February and shy of the market estimate of 0.2%. The decrease in sales was felt across all industries, as consumers held tight to the purse strings. On an annualized basis, retail sales grew by just 0.8% in March, the lowest level since August 2021. The Australian dollar responded with sharp losses to the disappointing retail sales release. China posted soft PMIs which also weighed on the Aussie. The manufacturing PMI eased to 50.4 in April, down from 50.8 and just above the market estimate of 50.3. The services PMI fell to 51.2, compared to 53.0 in March and below the market estimate of 52.2. The data indicates that manufacturing and services are showing little growth, another sign of the slowdown in China, which is Australia’s largest export market. Weaker economic activity in China means less demand for Australian exports, which is weighing on the Australian dollar. Will Powell make a hawkish pivot? The Federal Reserve meets later today, with little doubt that it will maintain interest rates for a sixth straight time. The target range for the benchmark rate of 5.25% to 5.5% hasn’t changed since July and the Fed has shown that it is willing to prolong its “higher for longer” stance as long as is needed. Fed Chair Powell is expected to have a hawkish message for the market, which would likely provide the US dollar with a boost. AUD/USD Technical AUD/USD is putting pressure on resistance at 0.6504. Above, there is resistance at 0.6537 0.6439 and 0.6406 are the next support levels
by OANDA
USD/JPY shrugs after US GDPThe Japanese yen has edged lower on Thursday. In the North American session, USD/JPY is trading at 147.62, up 0.08%. The US economy continues to surprise with stronger-than-expected data. On Wednesday, the services and manufacturing PMIs both accelerated and beat the estimates, followed by first-estimate GDP for the fourth quarter earlier today. The economy sparkled with an expansion of 3.3% q/q, blowing past the consensus estimate of 2.0%. This follows the blowout gain of 4.9% in the third quarter. Consumer spending remained strong at 2.8%, compared to 3.1% in the third quarter. The US economy expanded in 2023 at 2.5% y/y, up from 1.9% in 2022. The US dollar's reaction to the positive GDP report has been muted. There were concerns earlier this year that the economy might tip into a recession, as the Fed continued to raise interest rates to beat down inflation. However, solid consumer spending and a resilient labour market have boosted economic growth and the Fed is well on its way to achieving the tricky task of a soft landing for the economy. On the inflation front, the core personal expenditure price index was unchanged at 2% in the fourth quarter, while the headline index rose 1.7%, down sharply from 2.6 in Q3. The week wraps up with the personal consumption expenditures (PCE) price index on Friday, considered the Fed's preferred inflation gauge. The PCE price index and core PCE price index are expected to edge slightly lower in January, which would be an encouraging sign that the inflation is moving lower. Japan releases Tokyo Core CPI, a key inflation indicator, on Friday. The consensus estimate for January stands at 1.9% y/y for January, after a 2.1% gain in December. If the estimate proves correct, it would mark the first time in almost two years that it has fallen below the BoJ's target of 2%. USD/JPY is testing resistance at 147.54, followed by resistance at 148.44 There is support at 146.63 and 145.73
by OANDA
USD/CAD eyes Bank of CanadaThe Canadian dollar is showing limited movement on Wednesday. In the North American session, USD/CAD is trading at 1.3436, down 0.19%. The Bank of Canada will announce its first rate decision of 2024 later today. The BoC has maintained the cash rate at 5.0% for three straight times and barring further acceleration in inflation, the rate-tightening cycle is over. The key question is the timing of a rate cut. The BoC would love to chop rates and kick-start the weak economy, but a rate cut appears unlikely unless inflation moves closer to the 2% target. We've seen the Federal Reserve grapple with the "last mile" of the inflation battle, as inflation remains stubborn in the range of 3-4%, higher than the 2% target. The BoC has managed to push inflation down from a high of 8.1% in mid-2022 but rose slightly in December to 3.4%. Inflation is currently driven by services and housing costs, which are unlikely to fall considerably in the near term. This means that further rate hikes may not be effective in pushing inflation lower. The BoC has little reason to raise rates, but it is reluctant to start cutting rates while inflation remains well above the target and wage growth is still high. That leaves BoC policymakers with a strong reason to continue holding rates and remaining cautious until inflation moves closer to the 2% target. When can we expect the BoC to hit the rate-cut button? Two of Canada's major banks, RBC and BMO, expect a rate cut in mid-2024, while TD Bank is projecting an initial rate cut in the spring. USD/CAD is testing support at 1.3451. Below, there is support at 1.3360 There is resistance at 1.3520 and 1.3611
by OANDA
EUR/USD slips, Eurozone inflation risesThe euro is in negative territory on Friday. In the European session, EUR/USD is trading at 1.0908, down 0.33%. Eurozone inflation has been falling and dropped to 2.4% y/y in November, within striking distance of the 2% target. The downward trend reversed itself in December, as CPI jumped to 2.9%, just below the consensus estimate of 3.0%. This was the first uptick in inflation since April. There was better news from Core CPI, which dropped to 3.4% y/y, matching the consensus estimate and down from 3.6% in November. This marked the lowest level for the core rate since March 2022. The eurozone inflation report should not have come as a surprise, as Germany, the bellwether of the eurozone, posted similar numbers earlier this week. German CPI rose to 3.7% y/y, up from 3.2%, while the core rate fell from 3.7% to 3.5%. I don't expect the European Central Bank to lose much sleep over a spike in one inflation report but policy makers will be on the alert for inflation continuing to rise. The drop in Core CPI is an encouraging sign, as the core rate is considered a more accurate gauge of inflation trends than the headline release. All eyes will be on the US payrolls release later today. The consensus for the December report stands at 199,000, up from 170,000 in November. The markets will be keeping an eye on wage growth, which is projected to ease to 3.9% y/y, compared to 4.0% in October. This would mark the lowest annual gain since mid-2021. The Fed would like to see wage growth decline as it is a driver of inflation. Fed policymakers will be pleased if the releases are within expectations, as it would indicate that the labour market remains solid but is slowly cooling. The US will also release the ISM Services PMI for December. The services sector has expanded for 11 straight months and is expected at 52.7 for December, little changed from 52.6 a month earlier. EUR/USD is testing support at 1.0944. Below, there is support at 1.0917 1.0974 and 1.1001 are the next resistance lines
by OANDA
GBP/USD rises on Services PMI, Construction PMI nextThe British pound has edged higher on Thursday. In the North American session, GBP/USD is trading at 1.2698, up 0.27%. UK Services Final PMI was a bright note on Thursday. The PMI rose to 53.4 in December, up from 50.9 in November and above the preliminary estimate of 52.7. This marked a second straight expansion after posting three consecutive declines. This was the fastest rate of expansion since June, as consumer demand showed improvement and service providers showed increased optimism over business conditions. The British pound retreated after the PMI release but has managed to recover much of these losses. The UK wraps up the week with Construction PMI on Friday. The December PMI is expected at 46.0, which would mark a fourth straight decline. The construction industry has been hit hard by the weak UK economy and house building remains weak in both the residential and commercial sectors. In the US, the FOMC minutes were a disappointment in comparison to all the buzz generated after the Fed's December meeting. The Fed has been hawkish for months but made a surprise pivot at the meeting, saying it expected three rate cuts in 2024. This is much more cautious than the six cuts priced in by the markets, but it nevertheless marked a major shift for the Fed, which sent the US dollar lower and the equity markets higher. The minutes acknowledged that the current benchmark rate was at or near a peak and that members expected to lower rates this year. However, members cautioned there was an “unusually elevated degree of uncertainty” about the rate path, which would depend on economic conditions. The takeaway from the minutes is that the Fed is eyeing rate cuts but hasn't determined when it would start trimming rates. The markets have priced in the probability of a rate cut by March at around 80% and are expecting five or six cuts this year. It will be interesting to see if the Fed continues to try and dampen these expectations. GBP/USD is testing resistance at 1.2689. Above, there is resistance at 1.2714 There is support at 1.2652 and 1.2627
by OANDA
EUR/USD stabilizes after slide, FOMC minutes loomThe euro has steadied on Wednesday after sustaining sharp losses a day earlier. In the European session, EUR/USD is trading at 1.0932, down 0.08% and its lowest level since December 21. The US dollar has been struggling in recent weeks but came flying out of the gates on Tuesday, the first trading day of the New Year. The euro fell 0.88% against the dollar, its worst one-day showing since October. The dollar's spike could be due to profit-taking as the data calendar was light on Tuesday and the dollar gained ground against all of the major currencies. It's a busy day for US releases after a lull during the week of Christmas. The ISM Manufacturing PMI is expected to rise to 47.1 for December, compared to 46.7 in November. The manufacturing sector has been in a miserable slump and hasn't shown expansion since October 2022. Manufacturers have been squeezed by weak demand abroad and high borrowing costs. With the Fed expected to start cutting rates in March, we could see manufacturing respond with increased business activity. The Federal Reserve releases the FOMC meeting of the December meeting later today. The meeting was highly significant as the Fed surprised the markets by failing to push back against rate-cut fever. The Fed signalled that it expected to trim rates three times in 2024, a major pivot from the well-worn script of 'higher for longer'. Investors will be looking for details about the shift in Fed policy which has boosted the equity markets and weighed on the US dollar. Germany and the eurozone will post the December inflation reports on Thursday. Last week, Spain posted lower-than-expected inflation numbers. Inflation has eased to 3.2% in Germany and 2.4% in the eurozone, as the ECB's target of 2% is getting closer. Will the December numbers show inflation continues to fall? If so, the European Central Bank will be under pressure to lower rates. ECB President Lagarde has so far dismissed talk of rate cuts, but she may need to shift her hawkish stance if inflation continues to fall, as the eurozone economy is struggling and could use some relief in the form of rate cuts. There is resistance at 1.1069 and 1.1102 1.0958 and 1.0887 are the next support lines
by OANDA
Euro dips on soft Services PMIsThe euro has snapped a four-day winning streak on Friday. In the European session, EUR/USD is trading at 1.0949, down 0.38%. The euro has enjoyed a strong week, with gains of 1.77%. Eurozone Services PMI eased in December, indicating that the economy continues to struggle. The PMI fell from 48.7 to 48.1 and missed the consensus estimate of 49.0. This marked a fifth straight month of contraction in the services sector, with 50 separating contraction from expansion. Germany, the largest economy in the eurozone, also reported a decline, with the PMI falling to 48.4, down from 49.6 in November and short of the consensus estimate of 49.8. The European Central Bank held the benchmark rate at 4.0% for a second straight time on Thursday. This move was expected, but the central bank pushed back against market expectations for interest rate cuts next year, sending the euro soaring 1.09% against the US dollar after the announcement. ECB President Christine Lagarde reaffirmed that the Bank would continue its "higher for longer" stance, saying that the Bank was not about to let down its guard and lower rates. Lagarde sounded hawkish even though the ECB lowered its inflation forecast at the meeting. Inflation has fallen to 2.4% in the eurozone, within striking distance of the 2% target. Lagarde acknowledged that inflation was easing but said that domestic inflation was "not budging", largely due to wage growth. There is a deep disconnect between the markets and the ECB with regard to rate policy. ECB President Lagarde poured cold water on expectations for rate hikes, arguing that inflation had not been beaten. The markets are marching to a very different tune and have priced in at least in around six rate cuts in 2024 and are confident that Lagarde will have to change her stance, with inflation falling and the eurozone economy likely in recession. EUR/USD is testing support at 1.0957. Below, there is support at 1.0905 1.1044 and 1.1096 are the next resistance lines
by OANDA
British pound shrugs as Construction PMI misses estimateThe British pound is showing limited movement on Wednesday. GBP/USD is trading at 1.2582 in the North American session, down 0.10%. The UK Construction PMI ticked lower to 45.5 in November, compared to 45.6 in October and shy of the consensus estimate of 46.3. The construction sector has been in contraction for most of the year and the November print marked a third straight month in contraction. The weak housing market has resulted in a decrease in house building and chilled activity in the construction industry. There was better news from the UK Services PMI on Tuesday, which was revised higher to 50.9 in November, up from the preliminary estimate of 50.5. The PMI accelerated from the October print of 49.5 and indicated expansion for the first time in four months, with a reading above the 50 level which separates contraction from expansion. The Bank of England has held rates at 5.0% since August, leading to growing speculation that the BoE is done with rate hikes. This has led to expectations of rate cuts in 2024, but Governor Bailey pushed back against such expectations today, stating that interest rates would need to stay at current levels for an "extended period to bring inflation back to target on a sustained basis". This was a very clear message that the central bank plans to stick with the "table mountain" approach (higher for longer) and is not considering rate cuts. Inflation fell to 4.6% in October, a sharp drop from the 6.7% gain in decline. Still, that is more than double the 2% target and the BoE is unlikely to trim rates until inflation is significantly lower. In the US, the ADP employment report showed little change in the November report. ADP is not a very reliable indicator for job growth but is nonetheless closely monitored as it precedes nonfarm payrolls by just two days. ADP eased to 103,000 in November, slightly lower than the downwardly revised 106,000 in October and well off the consensus estimate of 130,000. Nonfarm payrolls is expected to rise to 185,000 in November, up from 150,000 in October. There is resistance at 1.2624 and 1.2678 1.2536 and 1.2482 are the next support levels
by OANDA
EUR/USD - slump continues despite Services PMIs' improvementThe euro has extended its losses on Tuesday. In the North American session, EUR/USD is trading at 1.0792, down 0.41%. The euro has fallen for a fifth straight day, declining 1.9% during that time. Germany and eurozone services PMIs were revised upwards in November but that wasn't enough to stem the euro's nasty slide. The German PMI was revised sharply to 49.6, up from the preliminary reading of 48.7, following the October reading of 48.2. The eurozone services PMI was also revised higher to 48.7 in November, up from a preliminary release of 48.2 and above 47.8 in October. The PMI acceleration is welcome news but let's not forget that the below-50 readings for both PMIs point to contraction. The eurozone services sector has declined for four consecutive months while Germany's has contracted in three of the past four months. The manufacturing sector is in even worse shape, and the bleak economic landscape could add pressure on the ECB to lower rates and help the economy. The ECB hasn't hinted that rate cuts are on the way, although the futures markets have priced in a rate cut in mid-2024, with inflation falling and the economy cooling. On Monday, ECB Vice-President Luis de Guindos said that the drop in the latest inflation report was good news but that future rate decisions would be data-dependent. ECB President Lagarde has repeatedly said that rates will stay in restrictive territory for an extended period and has warned that inflation could pick up in early 2024. In the US, the ISM Services PMI was stronger than expected for November, climbing to 52.7. This was higher than the October reading of 51.8 and the consensus estimate of 52.0. Business activity and employment both accelerated in November. The index has remained in expansion mode (above the 50 line) for all of this year and has been a key factor behind strong US growth. EUR/USD is testing support at 1.0803. Below, there is support at 1.0722 1.0910 and 1.0991 are the next resistance lines
by OANDA