CFD Markets News and Forecasts — 09-09-2021

The U.S. Energy Information Administration (EIA) reported on Thursday that crude inventories declined by 1.529 million barrels in the week ended September 3, following a drop of 7.169 million barrels in the previous week. Economists had forecast a fall of 4.612 million barrels.

At the same time, gasoline stocks plunged by 7.215 million barrels, while analysts had expected a decrease of 3.390 million barrels. Distillate stocks tumbled 3.142 million barrels, while analysts had forecast a decline of 2.617 million barrels.

Meanwhile, oil production in the U.S. plummeted 1.500 million barrels a day to 10.000 million barrels a day.

U.S. crude oil imports averaged 5.8 million barrels per day last week, decreased by 0.5 million barrels per day from the previous week. averaged 5.8 million barrels per day last week, decreased by 0.5 million barrels per day from the previous week.

Carsten Brzeski, the Global Head of Macro for ING Research, discusses the outcomes of today's meeting of the European central Bank (ECB).

"The only tangible change at today’s ECB meeting was an end to the front-loading of asset purchases under the Pandemic Emergency Purchase Programme or, as ECB President Christine Lagarde called it, ‘a recalibration’. Instead of the ‘significantly higher pace’ of purchases than at the start of the year, the ECB will now conduct the purchases at ‘a moderately lower pace than in the previous two quarters’. As latest figures had shown that the ECB had already bought less (around 65bn euro) in recent months, today’s announcement is probably more about catching up with reality than any sign of coming tapering. What a ‘moderately lower pace’ will actually mean in practice remains unclear. "

"The press conference today brought, in our view, interesting insights; namely a very subtle but clear shift from the ECB on inflation. In our view, they are preparing the ground for a grand recalibration between the PEPP and Asset Purchase Programme next year."

"The ECB’s growth projections did not deliver any big changes. On the back of a stronger second quarter number, the ECB revised upwards GDP growth for this year to 5%, from 4.6%  in June. For 2022 and 2023, the ECB expects eurozone GDP growth to come in at 4.6% and 2.1%. Regarding inflation, the ECB expects headline inflation to come in at 2.2% in 2021, 1.7% in 2022 and 1.5% in 2023, from 1.9%, 1.5% and 1.4%, respectively. An upward revision across the board."

"The upward revision to the ECB’s inflation projections over the entire forecast horizon illustrates that the Bank has started to think differently about inflation. While Lagarde first stressed that higher inflation was still mainly temporary and transitory, she concluded that underlying inflation pressures had edged up. Moreover, contrary to the July meeting, Lagarde pointed out that price pressure could be more persistent than previously thought."

"What's also new in the ECB’s communication is that asset purchases are no longer only conditional on financing conditions and in turn their impact on inflation but now equally important in both financing conditions and the ECB’s inflation outlook."

"All in all, today’s meeting can be best summarised as the ECB finally catching up with reality, on asset purchases and more importantly on inflation. ECB watchers can take a break in October. It's the December meeting which will be the mother of all ECB meetings."

FXStreet reports that the Credit Suisse analyst team notes that the S&P 500 continues to lose near-term momentum and has seen a test and hold for now from key support from its 13-day exponential average at 4503, and suggests that a close below here is needed to confirm a deeper corrective setback is underway.

“We continue to watch the VIX closely which has risen from the lower end of its two-month range and is now approaching its key resistance from its 200-day average at 20.04. A close above here would suggest strength can extend to the top of the range at 24.50, but would importantly also suggest the S&P 500 can see a deeper setback, reinforcing the current poor momentum picture.” 

“A close below the 13-day exponential average at 4503 should confirm a corrective phase lower is indeed underway for a test of the 4469 recent low, with scope then for the potential uptrend from July and price support at 4452/42.”

According to Bloomberg, "Biden will sign an executive order Thursday requiring the vaccinations, said the person, who spoke on on condition of anonymity. The move marks a significant hardening of the administration’s position on vaccine mandates amid the surge in the delta variant that’s threatening to overwhelm hospitals in parts of the U.S."

• "The choice of words is relevant. It is moderately lower than what we have done in Q2 and Q3"
• Stimulus has been re-calibrated for three months
• We are clearly seeing an improvement on many fronts
• PEPP decision was unanimous
• The day when PEPP is over, the job is not finished
• We have not discussed what will come after PEPP ends
• When PEPP comes to its end, we clear have all our other tools available

U.S. stock-index futures traded flat on Thursday, as investors digested the better-than-expected U.S. weekly jobless claims report and the ECB’s changes to the pace of its pandemic bond-buying program, and implications they could have for the Federal Reserve's decision on stimulus.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

• Sees 2021 GDP growth at 5.0% versus 4.6% in June
• Sees 2022 GDP growth at 4.6% versus 4.7% in June
• Sees 2023 GDP growth at 2.1% versus 2.1% in June
• Sees 2021 inflation at 2.2% versus 1.9% in June
• Sees 2022 inflation at 1.7% versus 1.5% in June
• Sees 2023 inflation at 1.5% versus 1.4% in June

Walt Disney (DIS) initiated with a Buy at Arete; target $263

Netflix (NFLX) initiated with a Buy at Arete; target $735

Cisco (CSCO) downgraded to Equal-Weight from Overweight at Morgan Stanley; target raised to $59

• Rebound in recovery increasingly advanced
• Sees economic activity at pre-pandemic levels at year-end
• Delta spread could delay full reopening
• Current inflation increase is largely temporary
• Underlying inflation price pressures building up slowly
• Inflation outlook revised up slightly
• Favourable financing conditions essential for recovery
• Labour market improving rapidly
• Improving business optimism is supporting business investment
• Eurozone on track for a strong growth in Q3; manufacturing to perform strongly
• Shortages are holding back production

The data from the Labor Department showed on Thursday the number of applications for unemployment declined more than forecast last week, hitting a new pandemic-era low.

According to the report, the initial claims for unemployment benefits fell by 35,000 to 310,000 for the week ended September 4. This was the lowest reading since mid-March of 2020, when the COVID-19 pandemic struck.

Economists had expected 335,000 new claims last week.

Claims for the prior week were revised upwardly to 345,000 from the initial estimate of 340,000.

Meanwhile, the four-week moving average of jobless claims dropped to 339,500 from an upwardly revised 356,250 in the previous week.

As for continuing claims, they declined to 2,783,000 from an upwardly revised 2,805,000 in the previous week. This was the lowest reading since March 2020.

FXStreet reports that economists at MUFG Bank expect CAD to remain under pressure near-term.

“The BoC provided a largely unchanged policy signal and only acknowledged that the Canadian economy unexpectedly contracted in Q2.” 

“The BoC remains optimistic though that the economy will rebound strongly in the second half of this year supporting a further scaling back of QE purchases as soon as at their next meeting.”

“We still believe risks remain tilted to the downside in the near-term for the loonie although we don’t expect recent weakness to be sustained.”

The European Central Bank (ECB) left its main refinancing rate unchanged at 0.00 percent on Thursday, as widely expected. Its interest rates on the marginal lending facility and the deposit facility were also kept unchanged at 0.25 percent and -0.50 percent, respectively.

In its policy statement, the ECB said:

• Governing Council expects key ECB interest rates to remain at their present or lower levels until it sees inflation reaching 2 percent well ahead of the end of its projection horizon and durably for rest of projection horizon;
  
• Net purchases under asset purchase programme (APP) will continue at a monthly pace of EUR20 billion;
• Governing Council continues to expect monthly net asset purchases under APP to run for as long as necessary to reinforce accommodative impact of its policy rates, and to end shortly before it starts raising key ECB interest rates;
• Governing Council will continue to conduct net asset purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of EUR1,850 billion until at least the end of March 2022;
• Based on joint assessment of financing conditions and the inflation outlook, Governing Council judges that favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under PEPP than in the previous two quarters;
• Governing Council will purchase flexibly according to market conditions and with view to preventing tightening of financing conditions that is inconsistent with countering downward impact of the pandemic on projected path of inflation;
• Envelope can be recalibrated if required to maintain favourable financing conditions to help counter negative pandemic shock to path of inflation;
• Governing Council will continue to provide ample liquidity through its refinancing operations (TLTROs);
• Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilises at its 2 percent target over medium term

FXStreet notes that AUD/USD is still holding above short-term support at 0.7355/44. Economists at Credit Suisse look for the market to turn higher from here, with resistance seen at 0.7470/85.

“We still look to hold above 0.7355/44 given the bullish momentum divergence into the lows and the daily MACD cross into positive territory.” 

“First intraday resistance is seen at 0.7405/07, with a subsequent break above the downtrend from May at 0.7470/85 reinforcing our upside bias and confirming that the 2021 downtrend is over, opening up a move to 0.7499/7504 next, then 0.7557.” 

“We even see scope for a recovery to the cluster of resistances around 0.7600/7642, which includes the ‘neckline’ to the 2021 top, 200-day average and series of price highs.”

FXStreet reports that economists at Westpac believe that the prospect of the European Central Bank (ECB) reducing the pace of PEPP bond-buying and improving data could lift EUR/USD to retest the 1.20-1.21 area.

“The unwinding of lockdown restrictions and accelerated vaccination programs should now support regional activity into year-end.” 

“If this month’s staff projections reflect recent firm data and lift the end of forecast period CPI from the lowly 1.4% in June, then ECB may also outline its proposed ending in March 2022. That would still leave the ECB purchasing some EUR20 B bonds per month through its APP (Asset Purchasing Program) but would signal a marked tightening despite the recent policy review.”

“A solid base has formed below 1.17, but a firm reduction in the PEPP pace and a lift in CPI projections will likely be needed to trigger a EUR/USD move to retest 1.21.”

• As prime minister, I would like to pave the way back to normal life
• We will ease virus restrictions with vaccine certificates

EUR traded mixed against other major currencies in the European session on Thursday, as investors focused on today’s ECB policy meeting, the outcome of which could be the decision to reduce emergency asset purchases.

The single European currency rose against USD and CAD, declined against JPY, CHF and GBP, and changed little against AUD and NZD.

The European central bank will announce the outcomes of its September meeting today at 11:45 GMT, including its decisions on the interest rates and the pace of the pandemic emergency bond-buying (PEPP) purchases for the fourth quarter. 

Analysts polled by Reuters forecast the pace of the PEPP purchases are likely to be reduced to EUR60 billion a month from the current EUR80 billion, before a further decrease early next year and the program's end in March. At the same time, the interest rates are widely seen to remain unchanged. It is also expected that the ECB will signal ample support for years to come, even after PEPP expires. Investors also will pay attention to the ECB’s updated economic projections, which are expected to be revised upwards.

The ECB’s policymaker Robert Holzmann stated on Wednesday that he sees significant inflation risks and that policy could be normalized sooner than expected.

• But believes Fed will be able to taper later this year
• Recent data and resurgence of the coronavirus pandemic call for more time before a decision to be made
• But still thinks tapering some time this year will be appropriate
• When it is time to do so, "faster is better than slower"

FXStreet reports that FX Strategists at UOB Group note that USD/CNH is seen within the 6.4300/6.4800 range for the time being.

24-hour view: “Yesterday, we expected USD to ‘consolidate and trade between 6.4540 and 6.4660’. Our view was not wrong even though USD traded within a narrower range than expected (6.4544/6.4633). The quiet price actions offer no fresh clues and further consolidation would not be surprising. Expected range for today; 6.4530/6.4680.”

Next 1-3 weeks: “As highlighted, the outlook for USD is mixed and it could trade within a 6.4300/6.4800 range for a period of time.”

FXStreet reports that economists at Westpac suggest that GBP/USD should test the upper bounds of its recent 1.36-1.40 range. 

“The return of Parliament this week has seen a swift move to increase taxes to start paying for pandemic costs. These increases mean that the UK will now have the highest level of tax take as a proportion of national income in over 70 years. However, the BoE stated that the tax increase is not fiscal tightening due to broad increases in spending.”

“Further comments from almost all MPC members this week suggest that the UK is set not only to reduce its Asset Purchasing but also to line up rate increases in the coming year.”

“Despite interim pullbacks, GBP/USD still looks set to test the upper bounds of its recent 1.36-1.40 range into the BoE meeting.”

• Inflation picture broadly unchanged from summer

FXStreet reports that FX Strategists at UOB Group note that USD/JPY now faces the likelihood of extra gains beyond the key 110.55 level in the next weeks.

24-hour view: “We expected USD to ‘strengthen further’ yesterday but we were of the view that ‘overbought conditions suggest that a break of the major resistance at 110.55 is unlikely’. Our view was not wrong as USD rose to 110.44 before easing off quickly. USD is unlikely to strengthen further, for today, USD is more likely to consolidate and trade between 110.00 and 110.40.”

Next 1-3 weeks: “As highlighted, upward momentum is beginning to improve and the risk of a break of 110.55 has increased. On the downside, if 109.95 is breached within these few days, it would indicate that USD is still ‘caught’ in a 108.30/110.55 range.”

FXStreet reports that economists at Mizuho Bank suggest that the pound will move with a lack of direction at the start of September, though it will probably fall on the UK political and economic trends from mid-September onwards.

“There is the covid situation and the shortage of EU workers as a result of Brexit, for example. There is also the ‘pingdemic,’ with people having to self-isolate if they have been in contact with someone who contracted covid. These factors led to a labor shortage and logistical chaos in the UK this summer.”

“The furlough scheme (whereby the state pays of portion of wages in order to keep people in work) is set to wind down at the end of September.”

“Prime Minister Boris Johnson’s political base is shaky in the wake of the resignation of the health secretary Matt Hancock and the attacks by former special advisor Dominic Cummings, for example. This could potentially become an unstable factor for the pound.”

FXStreet reports that Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, notes that AUD/USD is set to remain under pressure while capped by the four-month resistance line at 0.7467.

“AUD/USD recently failed at the four-month downtrend at 0.7467. We would allow for a pullback to the 20-day ma at 0.7308. Below the 20-day ma lies 0.7289, the 21st July low and this guards 0.7106, the August low."

“A close above the resistance line would target the 2021 resistance line at 0.7693.”

USD traded mixed and little changed against other major currencies in the Asian session on Thursday as lingering concerns about the spread of the Delta coronavirus variant and its impact on the global economic recovery subdued risk sentiment, while the latest remarks from several Federal Reserve’s officials indicated that the U.S. central bank might push ahead with its plans to scale back stimulus this year, despite a sharp slowdown in the U.S. jobs growth in August. 

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, stood at 92.65.

In an interview with the Financial Times, the St. Louis Fed president James Bullard said that the Fed should begin reducing its bond-buying program soon, despite weak U.S. jobs growth in August that was impacted by the Delta variant’s spread. “When you’re in a crisis, you have to be prepared for twists and turns,” Bullard noted, adding that he is looking for job gains to average out around 500,000 a month this year.

Dallas Fed president Robert Kaplan in a separate appearance stated that, if there is no fundamental change to the outlook by the September Fed’s meeting, then he would support starting to taper the Bank’s asset purchases in October.

In his turn, New York Fed president John Williams said that if the economy continues to improve as anticipated, “it could be appropriate to start reducing the pace of asset purchases this year.”

In addition, the Fed's Beige Book, which was released Wednesday afternoon, indicated that “economic growth downshifted slightly to a moderate pace in early July through August” due to the Delta variant, but “businesses in most Districts remained optimistic about near-term prospects."

FXStreet reports that UOB Group’s FX Strategists note that further consolidation looks the most likely scenario in NZD/USD for the time being.

24-hour view: “We expected NZD to ‘trade sideways between 0.7080 and 0.7135’ yesterday. NZD subsequently traded within a narrower range than expected (0.7076/0.7115) before closing little changed at 0.7102 (+0.02%). The underlying tone has weakened somewhat and this could lead to NZD edging lower but any weakness is expected to encounter strong support at 0.7065.”

Next 1-3 weeks: “As highlighted, the recent NZD strength has run its course and NZD is likely consolidate and trade between 0.7040 and 0.7160. Looking ahead, a clear break of 0.7040 would indicate that the start of a deeper pullback in NZD.”

ECB to maintain PEEP, EUR/USD seen weaker - Morgan Stanley

FXStreet reports that analysts at Morgan Stanley discuss what they expect from the European Central Bank's (ECB) monetary policy decision and what’s in store for the euro.

"We expect the September ECB meeting to maintain the current PEPP purchase pace. We then expect an active autumn debate on QE after PEPP, leading to PEPP wind up on schedule in return for a larger, more flexible APP."

"In FX, we remain bearish on EUR/USD into Q4 as a dovish ECB contrasting with a hawkish Fed pushes Eurozone-US real yield differentials lower.”

Japan Machine Tool Builders' Association (JMTBA) reported on Thursday its preliminary estimates showed that the country's machine tool orders soared 86.2 percent y-o-y in August, following a 93.4 percent y-o-y surge in July.

According to the report, the total value of machine tool orders in August was JPY126.587 billion, which was down 6.2 percent from July’s reading of JPY134.983 billion and represented the lowest reading in three months.

In August, domestic orders amounted to JPY46.219 billion, while foreign orders totaled JPY 80.368 billion.

The Federal Statistical Office (Destatis) reported on Thursday that Germany's trade surplus (non-adjusted) expanded to EUR18.1 billion in July from an unrevised EUR16.3 billion in June, but was lower than a surplus of EUR 19.2 billion recorded in the same month a year earlier. The July reading was the highest since March.

According to the report, German exports fell 3.1 percent m-o-m and imports decreased 5.5 percent m-o-m in July. In y-o-y terms, exports jumped 12.4 percent y-o-y and imports soared 16.6 percent y-o-y in July.

On a seasonally adjusted basis, the trade surplus rose to EUR17.9 billion in July from EUR13.6 billion in June. Economists had expected a surplus of EUR13.0 billion for July. Exports increased 0.5 percent m-o-m on a seasonally adjusted basis, while imports fell 3.8 percent m-o-m. Compared to February 2020, the month before coronavirus restrictions were imposed in Germany, exports were up 1.6 percent and imports were up 5.9 percent.

The current account of the balance of payments posted a surplus of EUR17.6 billion in July compared to EUR22.5 billion in the previous month and EUR20.2 in the corresponding period of 2020.

The National Bureau of Statistics (NBS) reported Thursday that China’s consumer price index (CPI) increased 0.8 percent y-o-y in August, decelerating from July's 1.0 percent y-o-y increase. That was the lowest inflation rate since March and below economists’ forecast for a 1.0 percent y-o-y gain.

The weaker August inflation reflected slowed growth of non-food prices (+1.9 percent y-o-y, compared with +2.1 percent y-o-y in July) and accelerated decline in food prices (-4.1 percent y-o-y, compared with -3.7 percent y-o-y in July).

China’s core CPI, excluding volatile food and energy prices, went up 1.2 percent y-o-y in August after a 1.3 percent y-o-y advance in July.

In m-o-m terms, the CPI edged up 0.1 percent in August, following a 0.3 percent gain in the previous month.

Meanwhile, China’s producer price index (PPI) surged 9.5 percent y-o-y in August, accelerating from July’s climb of 9.0 percent y-o-y. This represented the fastest pace of growth in factory-gate prices since August 2008. Economists had forecast a 9.0 percent y-o-y increase.

The NBS attributed the August jump in PPI mainly to soaring prices of products such as coal, chemicals and steel. Output prices in the coal mining industry rose the most, up 57.1 percent y-o-y in August.

The PPI rose 0.7 percent m-o-m in August, accelerating from 0.5 percent m-o-m in July.