Weekly Market Outlook (01-05 April) 0 (0)

UPCOMING EVENTS:

  • Monday: China
    Caixin Manufacturing PMI, US ISM Manufacturing PMI, BoC Business Outlook
    Survey.
  • Tuesday: RBA
    Minutes, Switzerland Retail Sales, Switzerland Manufacturing PMI, German
    Inflation data, US Job Openings.
  • Wednesday: China
    Caixin Services PMI, Eurozone CPI and Unemployment Rate, US ADP, Canada
    Services PMI, US ISM Services PMI.
  • Thursday:
    Switzerland CPI, Eurozone PPI, US Challenger Job Cuts, US Jobless Claims.
  • Friday:
    Eurozone Retail Sales, Canada Jobs data, US NFP.

Monday

The US ISM Manufacturing PMI is expected
at 48.4 vs. 47.8 prior. The recent S&P
Global US Manufacturing PMI
beat expectations
rising for the third consecutive month highlighting a pickup in activity in the
Manufacturing sector in Q1 2024. The commentary in the report was generally
upbeat, but there were also some worrying signals on the inflation part saying
that “A steepening rise in costs, combined with strengthened pricing power
amid the recent upturn in demand, meant inflationary pressures gathered
pace again in March. Costs have increased on the back of further wage growth
and rising fuel prices, pushing overall selling price inflation for goods
and services up to its highest for nearly a year.

Tuesday

The US Job Openings are expected at 8.790M
vs. 8.863M prior. This will be the first major US labour market report of
the week and, although it’s old (February data), it’s generally a market
moving release. The last
report
we got a miss with negative
revisions to the prior readings highlighting a resilient although weakening
labour market. The market will also focus on the hiring and quit rates as they
both fell below the pre-pandemic trend.

Wednesday

The Eurozone CPI Y/Y is expected at 2.6%
vs. 2.6% prior, while the Core Y/Y measure is seen at 3.0% vs. 3.1% prior. The
market is fully pricing the first rate cut in June and given the consensus
within the ECB itself, we will likely need a huge miss in the data to see
the market pricing in an April move. We got a miss in the French CPI
readings last Friday and we will get the German figures the day before, which
should guide the expectations for the Eurozone CPI. We will also see the latest
Unemployment Rate which is expected to remain unchanged at the record low of
6.4%.

The US ISM Services PMI is expected at
52.6 vs. 52.6 prior. The recent S&P
Global US Services PMI
missed expectations
slightly falling to a three-month low although the commentary in the report was
generally good saying that “Service providers reported a slower pace of
expansion linked in part to ongoing cost of living pressures. However,
service providers have also become increasingly optimistic about the outlook,
with confidence striking a 22-month high in March.” The most important
data to watch will be the price and employment sub-indexes.

Thursday

The Switzerland CPI Y/Y is expected at
1.4% vs. 1.2% prior, while the M/M measure is seen at 0.3% vs. 0.6% prior. As a
reminder, the SNB
decided to cut rates
by 25 bps at the March
meeting given the steady easing in inflation and the rate being well within
the 0-2% target since last summer. Further easing in the data should see
the market fully pricing in another rate cut in June from the current 60%
probability.

The US Jobless Claims continue to be one
of the most important releases every week as it’s a timelier indicator on the
state of the labour market. This is because disinflation to the Fed’s target is
more likely with a weakening labour market. A resilient labour market though
will make the achievement of the target much more difficult. Initial Claims
keep on hovering around cycle lows, while Continuing Claims remain firm around
the 1800K level. There’s no consensus at the time of writing although the last
week
we saw Initial Claims beating
expectations at 210K vs. 212K expected and Continuing Claims rising slightly to
1820K from the prior positively revised 1790K figure.

Friday

The US NFP report is expected to show 200K
jobs added in March vs. 275K in February
with the Unemployment Rate seen unchanged at 3.9%. The Average Hourly Earnings
Y/Y is expected at 4.1% vs. 4.3% prior, while the M/M measure is seen at 0.3%
vs. 0.1% prior. The general expectation into the report is positive
given the strong Jobless Claims and the Present Situation Index, which might
further be consolidated by the employment components in the ISM PMIs. Fed Chair
Powell said that an “unexpected” weakening in the labour market could warrant a
policy response but that will likely require the Sahm Rule to be triggered,
which would need the Unemployment Rate to jump to 4.4%.

The Canadian Labour Market report is
expected to show 25K jobs added in March vs. 40.7K in February
with the Unemployment Rate ticking higher to 5.9% vs. 5.8% prior. The market
will be particularly focused on the wage growth data as that’s what the BoC is
most concerned with.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

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China March 2024 Official Manufacturing PMI 50.8 (expected 50.1) Services 53.0 (exp 51.5) 0 (0)

China has two primary Purchasing Managers‘ Index (PMI) surveys – the official PMI released by the National Bureau of Statistics (NBS) and the Caixin China PMI published by the media company Caixin and research firm Markit / S&P Global.

  • The official PMI survey covers large and state-owned companies, while the Caixin PMI survey covers small and medium-sized enterprises. As a result, the Caixin PMI is considered to be a more reliable indicator of the performance of China’s private sector.
  • Another difference between the two surveys is their methodology. The Caixin PMI survey uses a broader sample of companies than the official survey.
  • Despite these differences, the two surveys often provide similar readings on China’s manufacturing sector.
  • The Caixin manufacturing PMI will follow on Monday, services on Wednesday

***

Today we have had data for the official PMIs. March manufacturing PMI comes in at a solid beat, 50.8

  • expected 50.1, prior 49.1

Services beats also at 53.0

  • expected 51.5, prior 51.4

Composite 52.7

  • prior 50.9

***

China’s Economy kicked off 2024 on a reasonably strong note. Stimulus measures were recently announced during the Two Sessions, and analysts have begun to upgrade GDP forecasts. For example

January – February data has surprised to the upside. Industrial Production, Retail sales, Fixed asset investment all beat in this recent data:

An additional 1 trillion yuan in special treasury bonds this year should help infrastructure and manufacturing investment accelerate further. China’s economy is still, of course, hamstrung by the deep debt troubles of the property sector. Real estate investment is expected to drag on growth in 2024.

This article was written by Eamonn Sheridan at www.forexlive.com.

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Heads up – EU, UK, Switzerland change to daylight saving time this weekend 0 (0)

If you are trading markets in the EU, UK and/or Switzerland note the change of time zones this weekend.

Clocks go forward 1 hour in those locations early on Sunday morning.

Check your local times for an earlier opening to markets in impacted countries!

And if you do glance at the economic calendar you’ll also note official Chinese PMIs are due soon:

  • 0130 GMT, which is 2130 US Eastern time … stay tuned!

This article was written by Eamonn Sheridan at www.forexlive.com.

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Newsquawk Week Ahead: US NFP, ISMs, EZ & Swiss CPI, Minutes from ECB & RBA 0 (0)

Week Ahead 1-5th April

  • Mon: BoJ Tankan Survey (Q1), South Korea Prelim Trade Balance (Mar), Chinese Caixin Manufacturing PMI Final (Mar), US ISM Manufacturing PMI (Mar), US S&P Global Manufacturing PMI Final (Mar)
  • Tue: RBA Minutes (Mar), CNB Minutes (Mar), South Korean CPI (Mar), EZ/UK Manufacturing PMI Final (Mar), German Prelim CPI (Mar), US Non-Durable Goods R (Feb), Chilean Central Bank Announcement
  • Wed: OPEC+ JMMC Meeting, EZ Flash CPI (Mar), US Services and Composite Final PMI (Mar), US ISM Services PMI (Mar), US ADP National Employment
  • Thu: ECB Minutes (Mar), Riksbank Minutes (Mar), Swiss CPI (Mar), EZ/UK Services and Composite Final PMI (Mar), US Goods Trade Balance R (Feb)
  • Fri: RBI Announcement, German Industrial Orders (Feb), EZ/UK Construction PMI (Mar), EZ Retail Sales (Feb), US Labour Market Report (Mar), Canadian Labour Market Report (Mar)

Note: Previews are listed in day order

BoJ Tankan Survey (Mon):

The BoJ Tankan business survey is expected to show a decline in Large Manufacturers’ sentiment to +10 from +12, according to a Reuters poll, whilst the Large Non-Manufacturers Index is seen rising to +33 from +30 last quarter. Capex is expected to print at 9.2% vs 13.5% in Q4 2023. Desks suggest large manufacturers’ sentiment will likely be hampered by auto production disruptions in the quarter, with some also citing the vehicle certification issues which resulted in the suspension of shipments of some models. The survey also comes as the BoJ ended 17 years of negative interest rate policy in March, although cautiousness is expected from the Bank, whilst the annual wage negotiations saw the largest pay rise in 33 years. Using the Reuters Tankan survey as a proxy for the BoJ’s release, March manufacturers‘ sentiment index printed at +10 vs -1 from Feb while the Service-sector index came in at +32 vs +26 from Feb. The Reuters release surveyed 240 manufacturers and 258 non-manufacturers, with some 237 firms responding during the March 6-15 period.

US ISM Manufacturing PMI (Mon):

Analysts expect the ISM manufacturing PMI to rise a touch to 48.0 in March, from 47.8 in February. S&P Global’s flash US PMI data for March saw the manufacturing index rise to a 21-month high of 52.5 from 52.2, which S&P said points to a solid improvement in the health of the sector. „Further expansions of both manufacturing and service sector output in March helped close off the US economy’s strongest quarter since the second quarter of last year,“ the data compiler said, „the survey data point to another quarter of robust GDP growth accompanied by sustained hiring as companies continue to report new order growth.“ In the manufacturing sector, production is now growing at the fastest pace since May 2022, with production gains linked to improving demand for goods both at home and abroad, driving a further upturn in business confidence in the outlook.“ Analysts will also be attentive to the prices paid sub-indices in the ISM data; S&P Global’s composite flash PMI data warned, however, that inflationary pressures showed signs of picking up. „Input costs rose at the fastest pace in six months, while firms increased their selling prices to the largest extent since April last year.“

RBA Minutes (Tue):

The RBA will publish the minutes from its March 18th-19th meeting where the central bank provided no major surprises as it kept the Cash Rate Target at 4.35%, as unanimously forecast, while it reiterated that the Board remains resolute in its determination to return inflation to the target and inflation continues to moderate but remains high. RBA stated that the “Board is not ruling anything in or out on interest rates” which was a slight adjustment to the previous statement that “a further increase in interest rates cannot be ruled out”, although Governor Bullock had made a similar comment during last month’s press conference. The RBA also noted that higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy and the Board expects that it will be some time yet before inflation is sustainably in the target range, while it added there are encouraging signs that inflation is moderating although the economic outlook remains uncertain. Furthermore, RBA Governor Bullock refrained from any hawkish surprises during the post-meeting press conference where she noted they are making progress in the fight against inflation and that recent data suggests they are on the right track but added the war isn’t won yet on inflation, while she also commented that the board sees risks on both sides for policy and needs to be much more confident on inflation coming down to consider a rate cut.

US ISM Services PMI (Wed):

Analysts expect the ISM services PMI to rise a touch to 52.7 in March, from 52.6 in February. S&P Global’s flash US PMI data for March saw the services business activity index ease to a 3-month low at 51.7 in March from the 52.3 in February. The survey compiler said that service providers reported a slower pace of expansion than factories, with the rate of increase also moderating slightly vs February, linked in part to ongoing cost of living pressures. „However, service providers have also become increasingly optimistic about the outlook, with confidence striking a 22-month high in March to suggest the broad-based economic expansion seen in March will persist into the summer,“ S&P said. On prices, the survey noted that the steepening rise in costs and firms‘ strengthened pricing power amid the recent upturn in demand, meant that inflationary pressures picked-up again in March. „Costs have increased on the back of further wage growth and rising fuel prices, pushing overall selling price inflation for goods and services up to its highest for nearly a year,“ S&P said, „the steep jump in prices from the recent low seen in January hints at unwelcome upward pressure on consumer prices in the coming months.“

JMMC Meeting (Wed):

The non-decision-making and market-analysing committee of OPEC, the JMMC, will convene to discuss market dynamics on April 3rd. No policy recommendation is expected at this meeting, according to desks and sources. Reuters sources on Tuesday also suggested that OPEC+ is unlikely to change output policy before the decision-making June meeting. That being said, Reuters recently reported that OPEC+ has a tendency to announce off-meeting policy changes if the group deems it necessary. Furthermore, recently Russia reportedly told oil companies to cut output to 9mln BPD by the end of June, in line with its OPEC+ pledges. The expectations for no changes in policy could stem from expectations of a slight oil market deficit forecast for later this year (all things equal). The latest IEA oil market report raised its 2024 oil demand growth forecast by 110k BPD to 1.3mln BPD and said if OPEC+ voluntary cuts remain in place through 2024, the market is seen in a slight deficit rather than a surplus. The importance of compliance could be reaffirmed in commentary from the JMMC – the latest OPEC oil market report was framed by Bloomberg as „OPEC oil supply cuts stall as Iraq keeps pumping above quota”, although Reuters then reported that Iraq pledged to cut exports by 130k BPD in the coming months (to 3.3mln BPD) to compensate for exceeding its OPEC+ quota since January.

EZ Flash CPI (Wed):

Expectations are for headline Y/Y HICP to tick lower to 2.5% from 2.6% with no consensus at the time of writing for the core metrics. As a reminder, the prior report saw headline inflation slip to 2.6% from 2.8% with the super-core reading declining to 3.1% from 3.3% with ING noting that “base effects did most of the heavy lifting”. Furthermore, ING stated that, using its own seasonal adjustment, “we see that monthly core inflation ticked up for the third month in a row on the back of services inflation accelerating”. This time around, analysts at Deutsche Bank (who are in line with the consensus for the headline rate and expect core to remain unchanged at 3.1%) note that “an early Easter this year should boost tourism-related services more than usual in March”, whilst “components other than tourism are expected to remain relatively sticky”. The desk adds that “services inflation momentum has been picking up lately, and the strength seems to be broad-based”, as such its forecasts are “consistent with an underlying pace of around 3.5% saar”. From a policy perspective, a hawkish outturn could see a pullback in some of the recent conviction in a June rate cut which is now priced at around 92%, and see the market also scale back expectation of easing later in the year which has three cuts fully priced in and a roughly 50% chance of a fourth.

ECB Minutes (Thu):

As expected the ECB opted to stand pat on rates as policymakers continue to monitor progress towards the Bank’s inflation mandate. Furthermore, guidance on rates was reaffirmed as stating that „rates will be set at sufficiently restrictive levels for as long as necessary“. This served as a disappointment to some who had been hoping that policymakers would insert some language suggesting that discussions on the policy normalisation process had begun. However, the accompanying macro projections did offer something to the doves with the 2024 and 2025 inflation forecasts lowered, leaving the latter matching the Bank’s 2% target. From a growth perspective, 2024 was cut to 0.6% from 0.8% with next year’s forecast held at 1.5%. At the follow-up press conference, Lagarde noted that the Bank is not yet „sufficiently confident“ when it comes to meeting its target. In terms of the policy path beyond the March meeting, Lagarde stated the Bank will know a little more in April but a lot more in June. When it comes to the discussions held during the meeting, Lagarde stated that the policy decision was unanimous, there was not a discussion over rate cuts but the GC has begun discussing dialling back its restrictive stance with the view that the Bank will not wait until the 2% inflation target is reached in order to cut rates. Subsequently, source reporting via Reuters noted that policymakers overwhelmingly favour June for the first rate cut; something which has been reaffirmed via subsequent rhetoric from Governing Council members. As such, any mention of this in the account of the meeting will not be new information for the market. That being said, reporting from Reuters also noted that some policymakers floated the idea of a second cut in July to win over a small group still pushing for an April start; any discussion on this will be of note for the market.

Swiss CPI (Thu):

February’s print came in at 1.2%, marginally above the consensus 1.1% but still cooler than the 1.3% prior reading. A metric which helped cement the SNB’s decision to kick off the G10 central bank easing cycle at their March meeting. Within the March gathering, inflation forecasts were trimmed across the board and CPI is forecast to remain well within the 0-2% band for the entire horizon. For Q1 2024, the view has been cut to 1.2% from 1.4%; a forecast which implies the March CPI Y/Y number will come in at around 1.1%. Assuming this is the case, pricing for another cut at the June meeting will likely increase from the current 60% implied probability; however, a cut is unlikely to be fully priced at this point given there are another two inflation numbers due before June. Equally, the SNB could elect to leave policy on hold in June and see how inflation progresses over Q2 & Q3, periods of focus as CPI is expected to tick up incrementally then. Overall, March’s number is of course noteworthy but is unlikely to meaningfully/lastingly move the dial on June’s pricing.

RBI Announcement (Fri):

The RBI is expected to keep the Repurchase Rate unchanged at 6.50% and maintain its stance of remaining focused on the withdrawal of accommodation when it concludes its 3-day policy meeting next week with all 56 forecasters surveyed by Reuters unanimously expecting rates to be kept unchanged. Furthermore, a Reuters poll showed the RBI is expected to keep the repo rate unchanged at least until the end of Q2 and then cut by 25bps in Q3 with a total of 50bps cut expected this year to lower the repo rate to 6.00% by year-end. As a reminder, the RBI kept rates unchanged at the previous meeting in February and maintained the policy stance of remaining focused on the withdrawal of accommodation in which 5 out of 6 members voted in favour of the rate decision and policy stance with MPC external member Varma the lone dissenter who voted for a 25bps cut and for a change in stance to neutral. The language from RBI Governor Das during the policy address remained hawkish and suggested the unlikelihood of any near-term policy tweaks as he stated that growth in India is accelerating and inflation is on a downward trajectory in India, as well as noted that multi-pronged policies have worked well to maintain and strengthen macro and financial stability. Furthermore, Das said the job on inflation is not yet finished as headline inflation remained high and has seen considerable volatility, while he also commented the CPI inflation target of 4% is yet to be reached and monetary policy has to remain vigilant. The recent data releases also support the case to remain on hold as GDP data for the December quarter was stronger than expected with Y/Y growth at 8.4% vs. Exp. 6.6% (Prev. 7.6%) and although the latest Industrial Production reading missed forecasts for January, this remained in line with the previous reading at 3.8% vs. Exp. 4.1% (Prev. 3.8%). In addition, CPI Inflation was above target and slightly firmer than expected in February at 5.09% vs. Exp. 5.02% (Prev. 5.10%), but remained within the 2%-4% tolerance range which suggests a lack of urgency to tweak policy.

US Jobs Report (Fri):

The consensus view is for 200k nonfarm payrolls to be added to the US economy in March, a slowdown vs the prior 275k; that would also be lower than recent averages (3-month average 265k, 6-month average 231k, 12-month average 229k). The unemployment rate is expected to be unchanged at 3.9%. The rate of average hourly earnings is set to pick-up, with analysts forecasting +0.3% M/M (prior +0.1%). The data will be framed in the context of Fed policy, given officials are looking to incoming data to steer its policy reaction. At his post-meeting press conference in March, Fed Chair Powell said that the labour market has remained strong, and despite the tightness easing, it is still relatively tight. He said that strong job creation has been accompanied by an increase in the supply of workers (reflecting increases in participation among individuals aged 25-54 years old, and a continued strong pace of immigration). And although the jobs-to-workers gap has narrowed, labour demand still exceeds the supply of available workers. Accordingly, Powell argued that the risks to achieving the Fed’s employment and inflation goals were coming into better balance. Still, he said that any unexpected weakening in the labour market could warrant a policy response, and could be a reason for the Fed to begin the process of reducing rates (he placed great emphasis on „unexpected“). Powell was also asked if continued strength in the labour market might be a reason for the Fed to hold off on rate cuts; the Fed Chair said that given the labour force is growing, and that continued supply side activity and with growth in the size of the labour force, strong jobs numbers may not be inflationary (and by implication, would not necessarily derail rate cuts).

This article originally appeared on Newsquawk.

This article was written by Newsquawk Analysis at www.forexlive.com.

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Forexlive Americas FX news wrap: Powell says PCE report „pretty much in line“ 0 (0)

Markets:

  • Markets closed for Good Friday
  • FX essentially unchanged

A holiday throughout global markets usually makes for a quiet news day but that wasn’t the case today with US PCE, Powell and some other odds-and-ends.

The PCE report had something for everyone but there was some US dollar selling in the aftermath. I suspect some of that was a sigh of relief that it wasn’t hot and some was due to the m/m core unrounded at +0.261% compared to +0.3% expected. Now some of that might have been because of an upward revision to January to +0.5% from +0.4% but the market will take the help where it can get it.

Powell himself struck me as incrementally more hawkish, though he did say that today’s PCE report was „pretty much in line with our expectations“ and „good to see“. At the same time, he said the Fed wants to see more inflation reports like last year, which indicates it’s not enough.

What struck me was that he didn’t highlight the opportunity to cut rates this year, though he wasn’t really asked about it. In the longer term, he said that if inflation stays sticky for longer, they will hold for longer (importantly, he didn’t say they would hike).

In any case, the early US dollar selling was slowly faded and we’re winding down the day exactly where it began. Monday is also a holiday in parts of the world (Europe in particular) so we might not be back to full throttle in markets. Watch Asia though with the BOJ’s Tankan and China’s manufacturing PMI.

Have a happy Easter.

This article was written by Adam Button at www.forexlive.com.

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Bitcoin falls below $70,000 as selling picked up after Powell 0 (0)

Traditional markets are closed today but bitcoin continues to tick over. Crypto often offers a view into risk sentiment and the 2% fall in BTC today might indicate some bearishness creeping in, particularly as the selling accelerated after Powell’s comments in San Francisco.

The Fed Chairman mostly stuck to the recent script.

„The economy is strong, we see very strong growth,“ he said, adding that risks are two-sided and that they will be watching data. Notably, he didn’t highlight that the Fed plans to cut rates this year as he previously had; though he wasn’t asked directly about it.

BTC was trading right at $70,000 before the comments and fell afterwards, though some of that might have been stops as the big figure and the European lows gave way.

For what it’s worth, I don’t think this move in BTC means too much, given where liquidity is and the size of the move (which is entirely within the range of the past 4 days).

This article was written by Adam Button at www.forexlive.com.

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Goldman Sachs: Anticipated Fed and ECB policy trajectories through 2025 0 (0)

Goldman Sachs outlines its projections for the monetary policy paths of both the Federal Reserve and the European Central Bank (ECB) over the coming years. The firm expects the Fed to initiate a series of rate cuts starting in June 2024, eventually reaching a terminal rate range of 3.25-3.5%. In contrast, the ECB is forecasted to begin cutting rates in June 2024, with a series of reductions leading to a policy rate of 2.25%.

Key Points:

  • Federal Reserve Outlook:

    • Holding Pattern: Anticipated to maintain the current fed funds rate range (5.25-5.5%) until June.
    • Rate Cuts: Projected to cut rates by 25 basis points in June, September, and December 2024, followed by four additional cuts in 2025, and one final cut in 2026.
    • Balance Sheet Adjustment: Expected reduction of the Treasury runoff cap from $60 billion to $30 billion monthly post-May FOMC meeting.
  • European Central Bank Forecast:

    • Steady Stance: Predicted to hold the policy rate at 4.00% until a June cut.
    • Rate Reductions: Foreseen series of 25 basis point cuts per meeting, reducing the policy rate to 2.25% with a total of five cuts in 2024 and two more in 2025.

Conclusion:

Goldman Sachs provides a detailed forecast for the future actions of the Fed and ECB, suggesting a cautious approach towards easing monetary policy. While both central banks are projected to start cutting rates in June 2024, the pace and extent of these cuts differ, reflecting divergent economic conditions and policy considerations. This analysis offers valuable insights for market participants navigating the evolving interest rate environment.

For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.

This article was written by Adam Button at www.forexlive.com.

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Why US inflation numbers need to start falling soon 0 (0)

Here is a great chart today from Jim Bianco who illustrates what will happen to year-over-year core PCE if it runs at 0.33% m/m, which is the two-year average.

It also highlights that a series of lower numbers will roll off, particularly in June, July and August.

The good news is that today’s PCE core number was +0.261%, which is already putting downward pressure on this projection.

It also shouldn’t be too big of a surprise that inflation will be high with 0.33% monthly inflation. That’s a pace that would imply 4% annual inflation.

Digging through the details of today’s inflation report, much of it is focused in health care. Could those be one-off increases? Or will they be persistent as they work their way through different providers?

Meanwhile, there has been some helpful disinflation in autos and food. But will that run out before the inflation in healthcare and auto repair does?

This article was written by Adam Button at www.forexlive.com.

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Dallas Fed February trimmed mean PCE price index +3.4% vs +5.7% prior 0 (0)

The question here is: Do you take comfort in the step down from January or do you worry that core inflation is still above 3%?

  • One month annualized trimmed mean 3.4% vs 5.7% prior
  • Six month 3.1% vs 3.0% prior
  • 12 month 3.1% vs 3.2% prior

One of the drivers of inflation (and a 5.15% weigh in the index) was a 1.4% m/m rise in ‚other purchased meals‘, which highlights how tough it is to eat out.

Other notable components included:

  • Physician services +1.8%
  • Financial service charges, fees, and commissions +3.5%
  • Nonprofit hospitals‘ services to households +3.8%
  • Government hospitals+3.8%
  • Electricity +4.0%
  • Motor vehicle maintenance and repair+4.8%
  • Other purchased meals +4.1%
  • Dental services +5.3%

Note the preponderance of rising health care costs.

Some sources of inflation trimmed out:

  • Computer software and accessories +52.6%
  • Shoes and other footwear +21.6%
  • Net health insurance +15.5%
  • Tenant-occupied stationary homes and landlord durables+5.7%

This article was written by Adam Button at www.forexlive.com.

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AUDUSD Technical Analysis 0 (0)

USD

  • The Fed left interest rates unchanged as
    expected at the last meeting with basically no change to the statement. The Dot
    Plot still showed three rate cuts for 2024 and the economic projections were
    upgraded with growth and inflation higher and the unemployment rate lower.
  • Fed Chair Powell
    maintained a neutral stance as he said that it was premature to react to the
    recent inflation data given possible bumps on the way to their 2% target.
  • The US CPI and
    the US PPI beat
    expectations for the second consecutive month.
  • The US Jobless Claims beat
    expectations.
  • The latest US Manufacturing
    PMI

    beat expectations while the Services PMI missed slightly. Both the measures
    remain in expansion though.
  • The US Consumer
    Confidence
    missed expectations although the labour
    market details improved.
  • The market expects the first rate cut in June.

AUD

  • The
    RBA left interest rates unchanged as expected at the last meeting and
    finally dropped the tightening bias.
  • The
    last Monthly CPI report came in line with
    expectations although the underlying inflation measure increased from the prior
    month.
  • The
    latest labour market report missed expectations by a big
    margin.
  • The
    wage price index surprised to the upside as wage
    growth in Australia remains strong.
  • The
    latest Australian PMIs showed the Manufacturing PMI falling
    further into contraction while the Services PMI continue to increase and remain
    in expansion.
  • The
    market expects the first rate cut in August.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that AUDUSD has
tested the key support zone
around the 0.65 level several times in the last couple of weeks, and yesterday
finally fell below it. The sellers should now have even more conviction for a
drop into the 0.6443 low and will likely increase the bearish bets. The buyers,
on the other hand, will want to see the price getting back above the key
support to invalidate the bearish setup and position for a rally into the
0.6623 resistance.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have the
red 21 moving average acting
as dynamic resistance and the black minor trendline defining
the current downtrend. If the price were to pull back into the trendline, we
can expect the sellers to lean onto it to position for a drop into the 0.6443
level with a better risk to reward setup. The buyers, on the other hand, will
want to see the price breaking higher to invalidate the bearish setup and
position for a rally into the 0.6623 resistance.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action with the price yesterday breaking below the key
support and coming back to retest it. We will likely see some consolidation
here as we head into the US PCE report.

Upcoming Events

Today we conclude the week with the US PCE and Fed
Chair Powell.

This article was written by FL Contributors at www.forexlive.com.

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