Monday
The PBoC left the
LPR rates unchanged as expected:
- 1-year LPR 3.45%.
- 5-year LPR 3.95%.
The SNB raised the
minimum Reserve Requirement Ratio (RRR) from 2.5% to 4.0% with the change going
into effect from 1 July 2024:
“Liabilities
arising from cancellable customer deposits (excluding tied pension provision)
will in future be included in full in the calculation of the minimum reserve
requirement, as is the case with the other relevant liabilities. This revokes
the previous exception whereby only 20% of these liabilities counted towards
the calculation.”
That
is a change to the National Bank Ordinance. On the move, the SNB says that
“the adjustments will ensure that implementation of monetary policy
remains effective and efficient” and that it “will not affect the
current monetary policy stance”.
The Canadian March PPI
came in line with expectations:
- PPI M/M 0.8% vs.
0.8% expected and 1.1 prior (revised from 0.7%). - PPI Y/Y -0.5% vs.
-1.4% prior (revised from -1.7%). - Raw materials price
index Y/Y -0.5% vs. -4.7% prior. - Raw materials price
index M/M 4.7% vs. 2.1% prior.
Tuesday
The Australian April PMIs
showed Manufacturing almost jumping back into expansion while the Services PMI ticked
slightly lower:
- Manufacturing PMI
49.9 vs. 47.3 prior. - Services PMI 54.2
vs. 54.4 prior.
The Japanese April PMIs
showed Manufacturing PMI almost jumping back into expansion while the Services
PMI increased further into expansion:
- Manufacturing PMI
49.9 vs. 48.0 expected and 48.2 prior. - Services PMI 54.6
vs. 54.1 prior.
BoJ Governor Ueda didn’t
add anything new on the monetary policy front as the central bank remains data
dependent with particular focus on the inflation trend and wage growth:
- Don’t have any
preset idea on timing, pace of future rate hike. - If trend inflation
accelerates in line with our forecast, we will adjust degree of monetary
support through interest rate hike. - If our price
forecast changes, that will also be a reason to change policy. - Future monetary
policy guidance will depend on economy, price, market development at the
time. - Didn’t say anything
new on BoJ policy last week in Washington. - Trend inflation is
still somewhat below 2%, so need to maintain accommodative monetary
conditions for the time being. - If geopolitical
risks, weak domestic demand cause disruptions in markets, BoJ will respond
through flexible, nimble liquidity provisions. - Annual wage
negotiations have been, and always will be, among important economic
variables we look at in setting policy. - We decide on policy
looking not just at wage talks, but various other economic variables. - We decided to change
policy in March because strong wage talk outcome came on top of fairly
solid readings in other sectors of economy. - Whether we will set
policy with same emphasis on wage talk outcome will depend on conditions
at the time. - It’s hard to say
beforehand how long the BoJ should wait in gathering enough data to change
policy. - We would like to
leave some scope for adjustment by not pre-committing to a certain policy
too much. - Our basic stance is
that we will look at moves in trend inflation to achieve our price goal,
and take a data-dependent approach in setting policy.
The Eurozone April PMIs
showed Manufacturing PMI slipping further into contraction while the Services
PMI continues to tick higher:
- Manufacturing PMI
45.6 vs. 46.6 expected and 46.1 prior. - Services PMI 52.9
vs. 51.8 expected and 51.5 prior.
The UK April PMIs showed
the Manufacturing PMI falling back into contraction while the Services PMI
continue to expand:
- Manufacturing PMI
48.7 vs. 50.4 expected and 50.3 prior. - Services PMI 54.9
vs. 53.0 expected and 53.1 prior.
BoE’s Haskel (hawk –
voter) warned that inflation is unlikely to reach sustainably the target unless
there’s a weakening in the labour market:
- High inflation to
remain unless labour market weakens. - UK labour market is
extremely tight. - Labour market
tightness has been easing rather slowly.
BoE’s Pill (neutral –
voter) didn’t add anything new on the monetary policy front although he did say
that a rate cut is “still some way off”:
- Seeing signs of a
downward shift in inflation persistency. - Policy outlook has
not changed substantially since March. - There has been
little news in recent months on inflation persistence. - Now seeing signs of
a downward shift in the persistent component of inflation dynamic. - A cut in the bank
rate would not entirely undo the restrictive policy stance. - Will need to
maintain a degree of restrictiveness in policy stance to squeeze out
inflation persistency. - Absence of news and
passage of time have brought a bank rate cut somewhat closer. - The timing for a
rate cut is still some way off. - No reason for BoE to
move rates in lockstep with either Fed or ECB.
The US April PMIs missed
expectations across the board:
- Manufacturing PMI
49.9 vs. 52.0 expected and 51.9 prior. - Services PMI 50.9
vs. 52.0 expected and 51.7 prior.
Highlights:
- April saw an overall
reduction in new orders for the first time in six months. - Companies responded
by scaling back employment for the first time in almost four years. - Business confidence
fell to the lowest since last November. - Rates of inflation
generally eased at the start of the second quarter, with both input costs
and output prices rising less quickly at the composite level. - However,
manufacturing input cost inflation hit a one-year high. - Some service
providers suggested that elevated interest rates and high prices had
restricted demand during the month.
Wednesday
The Australian Q1 CPI
beat expectations across the board:
- CPI Y/Y 3.6 vs. 3.4%
expected and 4.1% prior. - CPI Q/Q 1.0% vs.
0.8% expected and 0.6% prior. - Trimmed Mean CPI Y/Y
4.0% vs. 3.8% expected and 4.2% prior. - Trimmed Mean CPI Q/Q
1.0% vs. 0.8% expected and 0.8% prior. - Weighted Mean CPI
Y/Y 4.4% vs. 4.1% expected and 4.4% prior. - Weighted Mean CPI
Q/Q 1.1% vs. 0.9% expected and 0.9% prior.
ECB’s Nagel (hawk –
voter) warned that a rate cut in June does not mean that more rate cuts will
follow suit:
- June rate cut not
necessarily followed up by a series of rate cuts. - Services inflation
remains high, driven by continued strong wage growth. - Not fully convinced
that inflation will actually return to target in a timely, sustained
manner. - Given the
uncertainty, we cannot pre-commit to a particular rate path.
The German April IFO
Business Climate Index beat expectations:
- IFO 89.4 vs. 88.8
expected and 87.9 prior (revised from 87.8). - Current conditions
88.9 vs. 88.7 expected and 88.1 prior. - Expectations 89.9 vs.
88.7 expected and 87.7 prior (revised from 87.5).
The Canadian February
Retail Sales missed expectations across the board:
- Retail sales M/M
-0.1% vs. 0.1% expected and -0.3 prior. - Retail sales Y/Y
1.2% vs. 0.2% prior (revised from 0.9%). - Ex autos M/M -0.3%
vs. 0.0% expected and 0.4% prior (revised from 0.5%). - Ex auto and gas M/M 0.0%
vs. 0.4% prior - Sales down in 5 of 9
subsectors led by fuel stations. - Advance March retail sales 0.0%.
The US March Durable
Goods Orders beat expectations:
- Durable goods orders
M/M 2.6% vs. 2.5% expected and 0.7% prior (revised from 1.3%). - Nondefense capital
goods orders ex air M/M 0.2% vs. 0.2% expected and 0.4% prior (revised
from 0.7%). - Ex transportation M/M
0.2% vs. 0.3% expected and 0.1% prior (revised from 0.3%). - Ex-defense M/M 2.3% vs.
1.5% prior (revised from 2.1%).
The BoC released the
Minutes of its April Monetary Policy Meeting:
- Agreed that any
monetary policy easing would probably be gradual. - There were different
views on how much more assurance was needed to be confident that inflation
was on a sustainable path back to target. - Some members felt
there was a risk of keeping policy more restrictive than needed. - Governing Council
was split over when to cut rates. - Felt rapid
population increase and coming decline in non-permanent residents
complicated outlook for activity and inflation. - Was more confident
that inflation would continue to ease even as growth picked up. - Still more concerned
about upside risks to inflation but viewed both upside and downside as
less acute.
Thursday
The US Jobless Claims
beat expectations:
- Initial Claims 207K
vs. 215K expected and 212K prior. - Continuing Claims
1781K vs. 1814K expected and 1796K prior (revised from 1812K).
The US Advance Q1 GDP
missed expectations with a surprisingly hot Core PCE print:
- Advance Q1 GDP 1.6% vs.
2.4% expected and 3.4% prior. - Weakest since Q1 2023.
Details:
- Consumer spending 2.5% vs. 3.3% prior.
- Consumer spending on
durables -2.1% vs. 3.2% prior. - GDP final sales 2.0%
vs. 3.9% prior. - GDP deflator 3.1% vs.
3.0% expected and 1.7% prior). - Core PCE 3.7% vs.
3.4% expected and 2.0% prior). - Business investment 3.2% vs. 0.7% prior.
Percentage point changes:
- Net trade pp -0.86
vs. 0.32 pp prior. - Inventories -0.37 pp vs. -0.47 pp prior.
- Govt 0.21pp vs. 0.79 pp prior.
ECB’s Panetta (dove –
voter) didnt’ say anything new as he just prefers to gradually cut rates to
counter weak demand:
- We must weigh the
risk of monetary policy becoming too tight. - Timely, small rate
cuts would counter weak demand, and would be paused at no cost. - Hesitations in
adjusting rates would hurt investment productivity. - Rate cuts could
create a credibility issue.
Friday
The Tokyo April CPI
missed expectations across the board by a big margin, although it was
attributed to a one-off factor as high school tuition was eliminated in Tokyo
and took effect in April:
- CPI Y/Y 1.8% vs. 2.6%
expected and 2.6% prior. - Core CPI Y/Y 1.6%
vs. 2.2% expected and 2.4% prior. - Core-Core CPI Y/Y
1.4% vs. 2.7% expected and 2.9% prior.
The BoJ left interest
rates unchanged at 0.00-0.10% as expected:
- Removes reference
from statement that it currently buys about 6 trillion yen of JGBs per
month. - Vote was 9-0.
- Prior vote was 7-2.
- Risks to the economy
are generally balanced. - There are extremely
high uncertainties on Japan’s economic and price outlook. - Japan’s economy has
recovered moderately although there is some weakness. - Output gap
improving, likely to gradually expand. - Medium and long term
inflation expectations heightened moderately. - Financial conditions
have been accommodative. - More firms starting
to pass on rising wages to sales prices. - Expect positive
cycle of rising wages and inflation to continue. - Vigilance needed for
currency and market movements and their impact on the economy and prices. - Consumption likely
to gradually increase. - Expect accommodative
monetary conditions to continue for the time being.
Moving on to the BoJ
Governor Ueda’s Press Conference:
- Will adjust degree
of monetary easing if underlying inflation rises. - Easy financial
conditions will be maintained for the time being. - Monetary policy
conduct from now on will depend on state of economy, prices at the time. - Will not judge
policy based on one single indicator. - Economy outlook,
risk overshoot may also be a reason for policy change. - Japanese economy has
recovered moderately but some weakness is still seen. - Must pay attention
to financial, FX market moves and their impact on economy, prices. - Monetary policy not
aimed to control exchange rate directly. - If FX fluctuations
affect underlying inflation, that could be a consideration for monetary
policy. - Weak yen is not
having a big impact on trend inflation so far. - But weak yen did
have some impact to an extent on higher inflation forecasts. - Likelihood of
achieving 2% inflation target is gradually rising. - Chance of a
prolonged weakness in the yen is not zero. - We can pre-emptively
judge if weak yen affects inflation, spring wage talks next year. - But FX impact on
inflation is usually tentative. - If our forecasts
materialise, achievement of 2% inflation target is extremely close. - Underlying inflation
has been gradually rising. - Inflation is not
necessarily weak if you look at other service prices. - If prices move in
line with our forecasts, it would be reasonable to adjust policy and hike
rates further.
The US March PCE came in
line with expectations:
- PCE Y/Y 2.7% vs.
2.6% expected and 2.5% prior. - PCE M/M 0.3% vs.
0.3% expected and 0.3% prior. - Core PCE Y/Y 2.8%
vs. 2.7% expected and 2.8% prior. - Core PCE M/M 0.3% vs.
0.3% expected and 0.3% prior.
Consumer
spending and consumer income for March:
- Personal income 0.5% vs. 0.5% estimate. Prior month 0.3%.
- Personal consumption
0.8% vs. 0.6% estimate. Prior month 0.8%. - Real personal
spending 0.5% vs. 0.5% last month (revised from 0.4%).
The
highlights for next week will be:
- Tuesday: Japan Industrial
Production and Retail Sales, Australia Retail Sales, China PMIs, Eurozone
CPI, Canada GDP, US ECI, US Consumer Confidence. - Wednesday: New Zealand Jobs
data, Canada Manufacturing PMI, US ADP, US ISM Manufacturing PMI, US Job
Openings, FOMC Policy Decision. - Thursday: Switzerland CPI,
Swiss Manufacturing PMI, US Jobless Claims. - Friday: Eurozone
Unemployment Rate, US NFP, Canada Services PMI, US ISM Services PMI.
That’s all folks. Have a
nice weekend!
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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