Daily market moving news - page 2
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Switzerland Remains Stuck Deep in Deflation in January Switzerland remained deep in deflation in January, as the Alpine country struggles with its strong currency and weak economic growth.
The CPI in the country shrank by 0.4% on a monthly basis, in line with expectations, and by 1.3% on a year-on-year basis, also as expected, the Federal Statistics Office said on Thursday. The same contraction in prices was also seen last month.
Switzerland has had significant problems with deflation and slow economic growth since the Swiss National Bank (SNB) suprisingly abandonded its cap of ₣1.20 per euro last January. This resulted in a boost to the Swiss franc, which in turn curbed exports and created pressure on sales at home as shopping abroad became cheaper.
Since then, the SNB has cut interest rates to -0.75% in a not-so-successful attempt to jumpstart the economy and inflation. Rates this deep in negative territory make borrowing costs in the Alpine country the lowest in the world.
read more
Japan Back Friday, China Monday; Market Eyes Event Risk - Analysis In the wake of the fast paced yen gains seen this week, along with the fierce erosion of risk appetite that saw global stocks tumble, market players Thursday looked ahead to Friday and Monday, when Japan returns from a one-day holiday and China a week-long holiday.
Ministry of Finance and Bank of Japan officials were likely to be frustrated to see that dollar-yen, which had already slipped below a red-flag level of Y115 earlier in the week, had fallen to a low of Y110.99 earlier Thursday, low levels last seen Oct. 31, 2014, when the pair bottomed at Y109.18.
Just ahead of the U.S. open, dollar-yen spiked from Y111.35-40 to Y113.15-20 on unsubstantiated talk of BOJ intervention. There was a similar spike higher in the pair Wednesday, traders reminded.
The sharp rise in the yen has market players debating whether the Japanese officials will intervene to weaken the yen, whether verbally or physically or both.
As a reminder, if it is physical, the MOF would ask the BOJ to intervene.
Into the Chinese Lunar New Year holiday and ahead of the upcoming G-20 meeting in Shanghai on February 26-27, the market expected the People's Bank of China to keep yuan trading relatively becalmed.
With this G-20 meeting looming, the BOJ may also be reluctant to intervene, analysts said.
The latest G-20 statement, from Ankara, Turkey on Sept. 5, 2015, reiterated "We reiterate our commitment to move toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments."
"We will refrain from competitive devaluations, and resist all forms of protectionism," the G20 statement said.
While the market would not be surprised to see the BOJ step in, intervention is not a given.
Osamu Takashima, G-10 strategist at CitiFX, saw BOJ intervention as unlikely for three main reasons.
First, such FX action could do damage to U.S. and Japan relations.
If the BOJ intervenes, "the Treasury Department will criticize the whole framework of Japan's economic policy more severely," he said.
"It will make the BOJ's monetary policy decisions more difficult, which could result in additional JPY appreciation," Takashima said.
read more
USD/CHF, EUR/CHF, USD/CAD, EUR/CAD - Drivers & Targets - Goldman Sachs FX Forecasts: We maintain our forecast for EUR/CHF of 1.09, 1.09 and 1.10 in 3, 6 and 12 months, which we adopted on December 7. This implies USD/CHF at 1.05, 1.09 and 1.16.
Motivation for Our FX View: We expect the SNB to follow a reactive policy vis-a-vis the ECB, implying that it will likely try to match further potential easing steps by the ECB. The current low level of policy rates limits its room to move somewhat, but more aggressive moves from the ECB will likely force the SNB to respond. We therefore forecast EUR/CHF to be essentially flat on a 12-month horizon.
Monetary Policy and FX Framework: The SNB targets inflation, with a ceiling on CPI set at less than 2% p.a. The SNB typically uses 3-month Libor as its policy instrument. Since January 15, 2015, when the SNB abandoned its minimum rate for EUR/CHF at 1.20, the CHF is an effective managed float, where “opportunistic interventions” will remain the main policy tool for the SNB.
Growth/Inflation Outlook:Swiss inflation has also turned sharply negative again on the back of the strengthening of the CHF. We expect inflation to rebound to -0.1% in 2016 mostly on the back of base effects. The underlying inflation dynamics, however, will remain relatively weak. We expect growth to rebound to 1.5% in 2016 from 0.8% in 2015 as the effect of the CHF appreciation shock wanes.
Monetary Policy Forecast: We think the SNB's increased tolerance for subdued inflation rates reflects in part the limited room to manoeuvre in achieving its price stability mandate, as the remaining set of (un)conventional monetary policy measures often come with a potentially high cost. Nevertheless, owing to Switzerland's status as a small, open 'safe-haven' economy, the SNB's stance will continue to be highly sensitive to exchange rate fluctuations. That said, absent a swift and/or persistent appreciation of the CHF, we expect the SNB to respond only to sufficiently aggressive easing actions from other central banks.
Fiscal Policy Outlook: Switzerland has a low debt-to-GDP ratio; the 2015 budget should show a surplus.
Balance of Payments Situation: The Swiss current account surplus remains strong, owing to a surplus on all components. As a result, the BBoP remains in surplus despite negative net FDI flows. Switzerland’s portfolio flow data are complicated by its position as an international financial centre.
read more
GBP/USD, EUR/GBP: Drivers & Targets - Goldman Sachs FX Forecasts: We maintain our forecast for EUR/GBP of 0.71, 0.70 and 0.68 in 3, 6 and 12 months, which we adopted on December 7. This implies GBP/$ at 1.46, 1.43 and 1.40.
Motivation for Our FX View: Sterling appreciated notably for much of 2015 as activity remained strong relative to the Euro area. However, Sterling has weakened by around 8% on a trade-weighted basis since November. This recent decline comes as global growth worries have weighed most noticeably on rates in the UK, with the timing of rate hikes pushed back substantially. In addition, some signs of a ‘Brexit’ risk premium may be starting to appear. Our base case assumes the UK will remain in the EU and that cyclical strength should ultimately allow the BoE to hike rates sooner than markets are currently pricing and, as a result, we see GBP as stronger vs EUR over the next year, with GBP/$ slightly lower.
Monetary Policy and FX Framework: In the February 2014 Inflation Report, the MPC modified its forward guidance to place a broader focus on the outlook for inflation and spare capacity, while emphasising that increases in Bank Rate will be gradual and limited. More recent Inflation Reports have shown some increased willingness on the part of the BoE to look through transitory inflation developments owing to currency moves. Sterling operates under an entirely free float, although the BoE occasionally comments on exchange rate developments.
Growth/Inflation Outlook: We expect the UK economy to expand by 2.6% in 2016. Overall, our relatively optimistic outlook is driven by our expectation for ongoing support from the consumer. We anticipate a benign inflation picture, with core CPI rising only gradually and remaining below 2% until 2018Q4. Monetary Policy Forecast: We expect the first increase in Bank Rate in 2016Q4. Subsequently, we expect the pace of further hikes to be steeper than current market pricing. Given the BoE’s focus on the disinflationary impact of exchange rate strength, external shocks that affect Sterling – particularly US data and policy developments – are being transmitted to the UK curve.
Fiscal Policy Outlook: The government still plans to reduce the deficit gradually, albeit at a slower pace than initially projected. The deficit is expected to turn into a surplus in 2017-18, mostly due to spending cuts.
Balance of Payments Situation: We forecast a current account balance of -5.4% of GDP in 2015. Portfolio flows remain difficult to assess given the large cross-border flows linked to London as a financial centre.
Things to Watch: The impact of the cyclical acceleration on capital inflows remains a key factor, as well as financial spillovers from the Euro area. Over the next year, the UK’s in/out referendum on continued membership in the EU will likely be a key source of volatility.
February 2016 German ZEW economic sentiment 1.0 vs 0.0 exp February 2016 German ZEW economic sentiment survey data 16 February 2016
Expectations drop to next to zero and current conditions are deteriorating rapidly
ZEW says;
The euro is uninterested at 1.1180
source
EU Summit: Leaders Likely to Shake Hands on UK Reforms Package UK Prime Minister David Cameron is in Brussels on Thursday for a two-day marathon of meetings and negotiations with his European counterparts. The aim of the summit should be a new deal on Britain's future existence within the common bloc.
Cameron has been drumming up support across Europe since November last year, trying to push through a set of four legislative changes to the functioning of the common bloc that should help keep Britain inside the 'reformed EU'. If the deal is done this week, the UK's EU referendum could take place as early as June this year.
"It will be a crucial moment for the unity of our Union and for the future of the United Kingdom's relations within Europe … Therefore I urge you to remain constructive," the EU Council President Donald Tusk wrote in an invitation letter to the members of the Council.
"The negotiations are very advanced and we must make use of the momentum. There will not be a better time for a compromise. It is our unity that gives us strength and we must not lose this. It would be a defeat both for the UK and the European Union, but a geopolitical victory for those who seek to divide us," Tusk pledged in his letter.
On his official Twitter account, Tusk wrote ahead of the summit: "There is still no guarantee that we will reach an agreement. But it's my goal to do the deal this week."
read more
Reuters survey shows vast majority of firms in Japan expect wage rises of less than 2% Headlines from the Reuters Corporate Survey
Goldman Sachs on the when & what to expect from the next ECB easing Comments from Goldman Sachs on the next round of easing coming up from the European Central Bank
GS expects more easing at the March 10 meeting
GS expect these actions will increase volatility and there is potential to lead to unintended tighter financial conditions:
China says it will further open up domestic interbank bond market to foreign investors News over the wires on the latest Chinese reforms
Preview: US Trade Balance, GDP, PCE, UMich Sent The trade deficit likely widened slightly in January to $61.8B, led by a drop in the value of petroleum product exports. We see a 2.5% drop in exports and a 1.5% decline in imports, causing a net widening in the trade gap. The good news is that since prices are the key driver of the data, the real trade balance probably widened by a smaller margin, suggesting a limited impact on GDP.
In the second release of 4Q GDP, we expect a downward revision to 0.4% qoq saar from the initially reported 0.7%. Data since the last report revealed a weaker result from residential and structures investment, as well as government spending. The inventory drawdown was also bigger, which is supportive of growth ahead. Conversely, trade and equipment investment were less of a drag during the quarter, and consumption was likely revised slightly higher. We expect GDP prices to have risen by 0.8% qoq saar in 4Q, with the core personal consumption expenditure deflator increasing by 1.2%. We expect no revisions to the GDP or PCE deflators in the second release of 4Q GDP data.
read more