Forex-novosti i prognoze od 28-02-2020

FXStreet reports that economists at ABN Amro remain of the view that the ECB will announce additional stimulus in the coming months as economic growth and inflation will likely disappoint ECB expectations.

“We now expect a package to be announced in June rather than the upcoming meeting in March. This is because ECB officials have signalled that it is too early to make a judgement about whether the medium-term outlook has changed in the face of the economic shock related to the spread of the coronavirus.” 

“We expect the ECB to cut its deposit rate by 10bp, announce a step-up of net asset purchases to EUR 40bn and increase the maturity of TLTRO loans by another year at the June Governing Council meeting.”

“A full 10bp ECB rate cut is now priced in for the July meeting, while a week ago, only a 60% chance of a cut was priced in by the end of this year. This is only a little later than our updated base case for the ECB.”

FXStreet notes that Q4/2019 GDP growth slowed to 0.3% as 'transitory' factors explain some but not all of the slowing. Early 2020 also likely to be soft, and BoC likely to cut rates, in the opinion of Nathan Janzen from RBC Economics.

“Headline GDP increased just 0.3% in Q4 2019. That was broadly in line with market expectations, and matched the Bank of Canada's last forecast.” 

“Consumer spending was surprisingly solid in Q4 given earlier lackluster retail sales data, but business investment was softer than assumed and net trade was a larger drag on growth than expected.” 

“There were some signs of stabilization in today's data but growing fears about the potential impact of the new coronavirus outbreak abroad, and another bout of disruptions to rail transportation from anti-pipeline protests mean growth is likely to remain weak, at least for the first half of 2020.” 

“We continue to look for the Bank of Canada to cut rates at least once in the months ahead.” 

The final reading for the February Reuters/Michigan index of consumer sentiment came in at 101.0 compared to a preliminary reading of 100.9 and the January final reading of 99.8. That was the highest reading since March 2018.

Economists had forecast the index to be unrevised at 100.9.

According to the report, the index of the current economic conditions edged up to 114.8 from January's final reading of 114.4.

Meanwhile, the index of consumer expectations rose to 2.1 from January's final reading of 90.5.

Richard Curtin, the Surveys of Consumers chief economist, noted that the coronavirus was mentioned by 8 percent of all consumers in February when describing the reasons for their economic expectations, although on the last days of the February survey, 20 percent mentioned the coronavirus due to the sharp decline in equity prices as well as the CDC warnings about the potential domestic threat of the virus. "While too few cases were conducted to attach any statistical significance to the findings, it is nonetheless true that the domestic spread of the virus could have a significant impact on consumer spending", he added.

• Rate cuts "a possibility" if coronavirus outbreak intensifies and turns into a global pandemic
• Investors and policymakers are "wise to worry" about potential impacts
• Base case is that Fed policy is in a good place, with insurance cuts from last year helping buffer against shocks
• The economic impacts of the outbreak will be noticeable in China but will be on a smaller scale elsewhere with temporary disruptions to global supply chains

U.S. stock-index futures fell on Friday as a climb in coronavirus cases, which have already sent the major indexes more than 10% below their record highs, triggered recession fears.

Global Stocks:

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

• It's too soon to comment on FOMC will do in market turmoil
• We need to consider the broader economic policy aside from any possible rate cuts
• Says he is watching credit spreads and liquidity amid downturn
• When global growth is slower it will spill over to some extent to U.S.
• Have seen decline in demand in isolated industries such as travel and energy
• Says uncertainty is causing businesses not to cancel projects altogether but to be judicious

Statistics Canada announced on Friday that the country's gross domestic product (GDP) grew 0.3 percent m-o-m in December, following a 0.1 percent m-o-m advance in November.

That exceeded economists' forecast for a gain of 0.1 percent m-o-m.

In the fourth quarter of 2019, the Canadian GDP rose 0.1 percent q-o-q, following a 0.3 percent q-o-q climb in the third quarter.

According to the report, the q-o-q slowdown in Canada's GDP growth in the fourth quarter was attributable to the decreases in business investment and weak international trade, which, however, were offset by increased household spending. Final domestic demand edged up 0.2 percent q-o-q, after rising 0.8 percent q-o-qin the third quarter.

Expressed at an annualized rate, Canada's GDP grew 0.3 percent in the fourth quarter after a revised 1.1 percent climb in the previous quarter (originally 1.3 percent), matching economists' forecast.

In 2019, annual growth rate of Canada's real GDP was 1.6 percent, a deceleration from the 2.0 percent growth in 2018. The slowdown in annual growth was largely due to weaker international trade and investment declines, the report said.

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Uber (UBER) initiated with an Overweight at KeyBanc Capital Markets; target $48

Facebook (FB) upgraded to Buy from Hold at Edward Jones

The Commerce Department reported on Friday that consumer spending in the U.S. rose 0.2 percent m-o-m in January 2020, following an upwardly revised 0.4 percent m-o-m gain in December 2019 (originally a 0.3 percent m-o-m increase). Economists had forecast the reading to show a 0.3 percent m-o-m growth.

Meanwhile, consumer income climbed 0.6 percent m-o-m in January, following a revised 0.1 percent m-o-m advance in the previous month (originally a 0.2 percent m-o-m gain). That was the largest monthly climb in consumer income since February 2019. Economists had forecast a 0.3 percent m-o-m increase.

The January advance in personal income primarily reflected gains in compensation of employees and social security benefit payments (related to the annual cost of living adjustments), and other government social benefits to the person.

The personal consumption expenditures (PCE) price index, excluding the volatile categories of food and energy, which is the Fed's preferred inflation measure, edged up 0.1 percent m-o-m in January, following a 0.2 percent m-o-m advance in the prior month. Economists had projected the index would rise 0.2 percent m-o-m.

In the 12 months through January, the core PCE increased 1.6 percent, following a downwardly revised 1.5 percent growth in the 12 months through December (originally a 1.6 percent increase). Economists had forecast a gain of 1.7 percent y-o-y.

Germany's Federal Statistical Office reported on Friday the country's consumer price index (CPI) is expected to increase 0.4 m-o-m in February after dropping 0.6 percent m-o-m in the previous month.

On the y-o-y basis, Germany's inflation rate is seen to rise 1.7 percent this month, the same pace as in January.

Economists had predicted inflation would increase 0.3 percent m-o-m and 1.7 percent y-o-y in February.

According to the report, food price growth accelerated to 3.3 percent y-o-y in February from 2.3 percent y-o-y in January, while energy prices rose 2.0 percent y-o-y, decelerating from 3.4 percent y-o-y in the previous month. Services costs rose 1.6 percent y-o-y in February after a 1.5 percent y-o-y jump in January.

Meanwhile, the harmonized index of consumer prices for Germany (HICP), which is calculated for European purposes, is expected to advance 0.4 percent m-o-m and 1.7 percent y-o-y.

EUR traded mixed against its major rivals in the European session on Friday, as new cases of the coronavirus soared in Europe, heightening fears of economic damage. While the European single currency rose against the so-called commodity-currencies, it was little changed against USD and GBP and fell against the rest of major counterparts.

Investors also received Germany's labour market data, which showed a surprise drop in unemployment. According to the Federal Employment Agency, the number of people out of work declined 10,000 in February after a revised 4,000-drop in January, versus economists' expectations for an advance of 3,000. Meanwhile, the seasonally adjusted jobless rate remained unchanged at a near-record low of 5 percent, in line with economists' forecast.

In France, the statistical office Insee reported an upward revision to the 2019 GDP growth estimate due to robust consumption and investment. According to the report, the country's economy grew 1.3 percent in FY2019 instead of 1.2 percent estimated initially. Nonetheless, this was slower than FY2018 advance of 1.7 percent. In the fourth quarter, the French economy contracted 0.1 percent, in line with advance estimate, after expanding 0.3 percent in the third quarter.

A separate report revealed that consumer spending in France fell 1.1 percent m-o-m in January 2020, following a 0.3 percent m-o-m drop in December 2019. That marked the second consecutive decrease in household consumption due to weak spending on car purchases.

FXStreet notes that, as if the slowdown in global trade was not taxing enough on the Eurozone economy, the latter now has to face COVID-19. An already-feeble Eurozone will be among the worst hit by virus-related production shutdowns, therefore, the National Bank of Canada has updated its forecast for the Eurozone and the shared currency. 

“The zone’s tourism sector will also struggle as visitors cancel travel plans amid the virus scare. Trade tensions between the European Union and the U.S. as well as Brexit-related complications threaten to make an already difficult situation worse.” 

“In light of virus-related deterioration in the eurozone’s economic outlook, we have lowered our GDP growth forecast for the common currency area to just 0.6% this year.”

“While there’s room for fiscal stimulus to support growth, particularly in Germany and the Netherlands, we’re not holding our collective breath as European governments have shown little interest in recent years for fiscal boosts.”

“Amid the increased likelihood of ECB intervention, we have lowered our targets for EUR/USD, the latter now expected to reach 1.03 by year-end.”

FXStreet notes that Canada is scheduled to release the Gross Domestic Product Annualized (QoQ) today at 13:30 GMT. Strategists at TD Securities are expecting and increase slightly below the market consensus. USD/CAD trades at 1.3444.

“We look for a 0.2% (annualized) increase for Q4 GDP growth, slightly below the market consensus for 0.3% q/q (saar).”

“The disappointing performance reflects widespread weakness (including in the key household spending segment), which incidentally will bring quarterly growth slightly below the BoC's most recent forecast of +0.3%.”

“Industry-level GDP is expected to increase by 0.2% m/m, above the market consensus for +0.1%, on gains in the services sector, helped by a rebound in rail transportation after the CN strike.”

• We will not accept cherry-picking in negotiations with UK
• UK should not underestimate unity of EU27 members
• We do not accept time pressure
• We cannot let level of ambition be impacted by "artificial" deadlines
• Substance is more important than any deadline
• We will be vigilant to ensure that US does noted degrade Withdrawal Agreement
• It's possible to reach a deal with UK by end of the year

FXStreet notes that the United States of America is set to release some relatively important data at 13:30 GMT regarding personal income and spending, while the Chicago PMI is expected at 14:45 GMT. Economists at TD Securities forecast the data. 

“CPI and PPI data point to an above-trend 0.3% m/m rise in the core PCE index, with the y/y change likely rising to 1.8% from 1.6%. (Core prices rose just 0.04% m/m in January 2019.)”

“We’re also looking for the PCE report to show fairly solid increases in personal income and spending at 0.5% and 0.4% m/m, respectively.” 

“We expect the advance indicators release to show a widening of the trade deficit to USD 69.5bn in Jan from 68.3bn before, while we expect UMich's consumer sentiment index to remain largely unchanged in the survey's final release for Feb.” 

“We look for the Chicago PMI to rebound to 50 in Feb following Jan's drop to 42.9 — a four-year low.”

FXStreet notes that the Reserve Bank Board (RBA) will meet on March 3 next week and Bill Evans, Chief Economist at Westpac Institutional Bank is not expecting the RBA to remain on hold. AUD/USD trades at 0.6532.

“We expect the cash rate to remain on hold. However, we do confirm our call for a cut from the RBA at the following meeting on April 7.”

“The pricing for a rate cut in April  has now reached a 60% probability, however, March pricing is still only around 10% and, given the most recent communications from the RBA, that pricing seems consistent with the likely outcome of the meeting.”

• Coronavirus effect can't be measured yet
• Epidemic in Germany would have direct economic consequences
• Economic growth in Germany could be somewhat lower than estimated in December
• Hard to say if rate cut would have impact on spending
• ECB must not lose sight of exit from loose monetary policy
• Our current inflation target is understandable, forward-looking and realistic

FXStreet reports that haven demand has been the general trend in the FX space. The USD ought to be faring well from a relative macro point of view as the news flow has been worse out of the Euro area but it's not been the case, analysts at Nordea report.

"Going by the latest and official virus numbers, the situation in China is improving from a weak level while Europe is getting worse. Despite this, EUR/USD has been moving higher."

"We think the main driver of this EUR strength is unwind of EUR funded EM carry trades. EUR/USD looks nicely and inversely correlated with the S&P500 future for now."

FXStreet reports that Japan is scheduled to release capital spending data for Q4-2019 on 1 March, to release January household spending data on 5 March and to publish the preliminary Leading Index (LI) for January on 6 March. Economists at Standard Chartered Bank analyze the probable data.

"Excluding software, we believe core capital spending fell 3.3% y/y, roughly in line with the latest business capex reading, which also fell 3% y/y in Q4. Corporate spending likely dropped as Japanese businesses faced weak overseas demand and due to concerns over household spending after the consumption tax hike to 10% (from 8% previously) in October 2019."

"We believe inflation-adjusted household spending fell 5.0% y/y, posting negative growth for a fourth straight month. Of concern, household spending and corporate investment may have remained soft, which is likely to drag down headline GDP growth in 2020."

"We believe the LI fell 1.7% m/m to 90.0, the weakest reading since September 2009. The LI, which tracks key PMI indicators in key markets such as the US, Europe and China, has largely remained in a downward trend since early 2018 on uncertainty over US-China trade tensions and slowing growth in China."

CNBC reports that the United Kingdom is already seeing an economic impact from the coronavirus outbreak, the outgoing Bank of England governor told Sky News.

The outbreak of the new coronavirus, which is believed to have originated in the Chinese city of Wuhan, has spread worldwide and is raising concerns about the global economy.

The British economy, which relies to a large extent on tourism revenues and manufacturing, is already seeing the impact, Mark Carney told Sky News.

"What we are picking up with some of our bigger companies and companies around the world, that is spreading out through the co-called supply chains. So, when they use parts and components to produce goods or, for example, for Jaguar Land Rover in the Midlands, you know, things are getting a little tight," he said.

Data out earlier this month showed that the British economy stagnated at the end of 2019. Car production figures were particularly downbeat in that period, seeing a 1.9% contraction.

Carney, who's due to leave the Bank of England next month, also noted other examples such as a decline in tourism.

"We see it in our streets here in the United Kingdom. That is lower activity as well," he said.

FXStreet reports that until recently gold prices had been rising in tandem with equities and the US dollar, but this week the sell-off in equities has weighed on both the US dollar and gold prices. This positive relationship is quite unusual, according to Georgette Boele from ABN Amro.

"Gold prices have the tendency to weaken when the dollar rises and/or if equity markets rise. This is because gold is non-yielding, i.e. interest on the dollar and dividends from stocks are more attractive than the zero-income alternative of gold."

"The dynamics changed in 2019. Expectations of rate cuts by the Fed and negative yields in the eurozone, Switzerland and Japan have supported gold prices. Not from a safe haven point of view, but because at least gold does not charge a penalty."

"Gold rallied with stocks because at the time it was a risk-on investment. For around 6 months now gold is a crowded trade. Investor positions are around 80% of the annual supply and could come to market at any time when investors change their minds."

"As sentiment has deteriorated, investors have closed some of their open positions in currencies, but most likely also in gold. Therefore, gold prices have failed to make new highs now that equity markets have aggressively sold off. If risk aversion were to result in a market panic, investors will find cash and very liquid assets attractive. They will probably liquidate gold investment positions."

CNBC reports that with cases of the new coronavirus disease rising quickly beyond China, the odds of the outbreak turning into a pandemic have now doubled - from 20% to 40%, Moody's Analytics said in a report.

"Our previous assumption that the virus will be contained in China proved optimistic, and the odds of a pandemic are rising," wrote economists from the research and consultancy arm of Moody's Corporation.

They had earlier predicted a 20% chance of a pandemic, which is defined by the World Health Organization as "the worldwide spread of a new disease."

"The South Korean cases, combined with the spread of new cases in Italy and Iran, indicate that while the spread in China has slowed, the virus is spreading outside of China. And the ease of its spread may bode ill for an acceleration within China as workers return to their jobs and as shops and restaurants begin to reopen," said the Moody's report.

Under Moody's previous assumption that the virus would be contained in China and largely play out by spring, the economists had projected a contraction in the Chinese economy in the first quarter, while the U.S. and global economies will experience a slowdown in growth.

FXStreet reports that the Reserve Bank of Australia (RBA) will have a meeting next month and the Australian Bureau of Statistics will release Q4 GDP data on 4 March. Analysts at Standard Chartered Bank share their forecast.

"We expect the RBA to keep the policy cash rate at 0.75% at its March meeting. Given the RBA's new focus on the unemployment rate and its continued reluctance to cut rates, we expect it to keep rates on hold near-term."

"We still expect two rate cuts, but believe the RBA will wait until April to cut the policy cash rate further, with a second cut in Q3 following the GDP print."

"We maintain our view that the economy requires further stimulus, both monetary and fiscal, to return growth to sustainable trend growth of c.3%."

"Growth likely remained soft at 0.3% q/q, following the 0.4% q/q expansion in Q3; in y/y terms, we estimate a mild improvement to 1.8% y/y."

According to the report from Federal Employment Agency, the number of unemployed fell by 30,000 to 2,396,000 from January to February, which is also due to the mild Winter. Adjusted for seasonal influences, a slight decrease of 10,000 is calculated for February compared to the previous month. Economists had expected an increase by 3,000.

Compared to the previous year, the number of unemployed increased by 23,000. As in January, the unemployment rate is 5.3 percent and has not changed compared to February last year.

Underemployment, which also takes into account changes in labour market policy and short-term incapacity for work, decreased by 10,000 seasonally adjusted on the previous month. Total underemployment in February 2020 was 3,337,000 persons. That was 25,000 more than a year ago.

FXStreet reports that Riksbank and European Central Bank (ECB) are priced to move in tandem over the next two years, strategists at Danske Bank apprise. EUR/SEK is trading at 10.6698.

"There is certainly a resistance in the Riksbank to once again cutting to negative rates. However, we think it is less debatable that the Riksbank has much more room to cut compared to the ECB without significant effects on the banking system and hitting the lower bound."

"The bar for an ECB cut remains very high in our view."

"We think that the RB should be priced more aggressively relative to the ECB."

"We have preferred to express our view on the SEK leg through Ribas rather than in FRAs as 3M forward fixing spreads have tightened and the year-end 3M Stibor fixing in particular remains notoriously volatile."

KOF Economic Research Agency said, the economic barometer rose slightly in February. With the third increase in a row, it now lingers just above its long-​term average. Accordingly, clearly positive growth rates would be expected for the Swiss economy in the near future. However, this is based on the sentiment before the outbreak of the coronavirus in northern Italy.

The KOF Economic Barometer rose by 0.8 points in February, from 100.1 to 100.9. Economists had expected a decrease to 97.5. The normalisation towards the region of its long-​term mean, which has been observed since December 2019, has thus been confirmed. This development was primarily driven by an improvement in sentiment in the manufacturing sector. Only the indicators from the financial sector had a slightly negative impact. The other indicator groups considered in the Barometer (demand for exports, construction, hospitality, other services and domestic consumer demand) show a practically unchanged picture compared to the previous month.

It should be noted, however, that the majority of the responses to the February KOF business tendency surveys, which have the greatest weight in our barometer, were given before the spread of coronavirus infections in northern Italy became known.

According to the report from Insee, in Q4 2019, GDP in volume terms fell slightly: -0.1%, after +0.3% in Q3 2019. On average over the year, activity slowed down in 2019: +1.2% after +1.7% in 2018.

Household consumption expenditures slowed down slightly (+0.2% after +0.4%), and total gross fixed capital formation decelerated in a more pronounced manner (GFCF: +0.3% after +1.3%). Overall, final domestic demand excluding inventory changes slowed down compared with the previous quarter: it contributed to +0.3 points to GDP growth, after +0.7 points.

Imports fell back this quarter (-0.2% after +0.6%) as well as exports (-0.2% after -0.3%). All in all, the contribution of foreign trade balance to GDP growth was zero, after a negative contribution (-0.3 points) in the previous quarter. Changes in inventories contributed negatively to GDP growth (-0.4 points after -0.1 points).

According to the report from Federal Statistical Office (FSO), turnover adjusted for sales days and holidays rose in the retail sector by 0.6% in nominal terms in January 2020 compared with the previous year. Seasonally adjusted, nominal turnover fell by 0.6% compared with the previous month.

Real turnover adjusted for sales days and holidays fell in the retail sector by 0.1% in January 2020 compared with the previous year. Real growth takes inflation into consideration. Economists had expected a 0.3% increase. Compared with the previous month, real, seasonally adjusted retail trade turnover registered a decline of 0.6%.

Adjusted for sales days and holidays, the retail sector excluding service stations showed a 0.6% decrease in nominal turnover in January 2020 compared with January 2019 (in real terms -0.1%). Retail sales of food, drinks and tobacco registered a decline in nominal turnover of 0.7% (in real terms -0.1%), whereas the non-food sector registered a nominal negative of 0.8% (in real terms +0.2%).

Excluding service stations, the retail sector showed a seasonally adjusted decline in nominal turnover of 1.0% compared with the previous month (in real terms -0.8%). Retail sales of food, drinks and tobacco registered a nominal minus of 0.5% (in real terms -0.2%). The non-food sector showed a minus of 1.3% (in real terms -0.9%).

During today's Asian trading, the US dollar was almost unchanged against the euro. At the same time, the yen rose in price as a "safe haven" asset amid increasing concerns about the negative impact of COVID-19 on the global economy.

According to analysts, there are no signs of slowing down the spread of coronavirus outside China, which pushes investors to transfer funds to protective assets, which, among other things, include the Japanese national currency.

Bank of America lowered its forecast for global economic growth this year to 2.8% from the previously expected 3.1%. This is the lowest growth rate since the financial crisis of 2009. At the same time, China expects economic growth of only 5.2% - at least since 1990. Earlier, the Bank's analysts had expected an increase of 5.6%.

The ICE Dollar index, which shows the value of the dollar against six major world currencies, fell by 0.13% compared to the previous day. Yesterday it fell by 0.5%.

According to the report from Nationwide, UK annual house price growth edges up to 2.3%, the strongest rate for 18 months. On a monthly basis, prices rose by 0.3%, after taking account of seasonal factors. Economists had expected a 0.4% increase.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: "UK annual house price growth continued to edge higher in February rising to 2.3%, from 1.9% in January - the strongest rate for 18 months.

"While overall economic growth ground to a halt in the final three months of 2019, labour market conditions remained buoyant and borrowing costs low. The decisive election outcome may have provided a boost to buyer sentiment.

"Recent data releases indicate that the housing market has gathered momentum in recent months and the latest house price figures are in line with that trend. The number of residential property transactions and mortgages approved for house purchase increased around the turn of the year and surveyors have reported an increase in new buyer enquiries.

"Looking ahead, economic developments will remain the key driver of housing market trends and house prices. Business surveys suggest that activity recovered in the New Year, but there are still significant uncertainties that threaten to exert a drag on the economy in the coming quarters.

"The global economic backdrop remains challenging, with the coronavirus outbreak expected to weigh on global activity in the coming quarters. Investment is likely to remain subdued until the UK's future global trading relationships become clearer, which is unlikely until early next year.

"Overall, we expect the UK economy to continue to expand at a modest pace in 2020, with house prices remaining broadly flat in 2020 as a whole"

EUR/USD

Resistance levels (open interest**, contracts)

$1.1076 (4229)

$1.1045 (3268)

$1.1022 (1886)

Price at time of writing this review: $1.1003

Support levels (open interest**, contracts):

$1.0972 (2969)

$1.0953 (3540)

$1.0926 (3530)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date March, 6 is 122319 contracts (according to data from February, 27) with the maximum number of contracts with strike price $1,1200 (6281);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3021 (2005)

$1.2985 (989)

$1.2956 (429)

Price at time of writing this review: $1.2877

Support levels (open interest**, contracts):

$1.2842 (3226)

$1.2814 (2787)

$1.2779 (3878)

Comments:

- Overall open interest on the CALL options with the expiration date March, 6 is 28208 contracts, with the maximum number of contracts with strike price $1,3050 (3797);

- Overall open interest on the PUT options with the expiration date March, 6 is 30241 contracts, with the maximum number of contracts with strike price $1,2800 (3878);

- The ratio of PUT/CALL was 1.07 versus 1.06 from the previous trading day according to data from February, 27

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.