ECB Minutes Signal Policymakers Ready To Boost Stimulus In June

Trading 22 mai 2020 Commentaire »

Policymakers are ready to boost stimulus measures as early as June after the coronavirus, or Covid-19, pandemic hurt the euro area economy severely and cast a pall over the near term outlook, minutes of the April 29-30 policy session signaled Friday.

"Looking ahead, and in the light of the high uncertainty surrounding the economic and inflation outlook as shown in the scenarios prepared by ECB staff, it was stressed that the ECB needed to stand ready to adjust its monetary policy stance as appropriate and also to ensure the functioning of transmission across the euro area," the minutes, which the ECB calls 'account' revealed. The Pandemic Emergency Purchase Programme, or PEPP, worth EUR 750 billion that the ECB announced in March to support the euro area economy was essential and limited the likelihood of a "self-reinforcing downward spiral", the minutes said. The Governing Council "was fully prepared to increase the size of the PEPP and adjust its composition, and potentially its other instruments, if, in the light of information that became available before its June meeting, it judged that the scale of the stimulus was falling short of what was needed," the minutes said.

Markets may construe this stance as a strong signal that the bank is ready to boost stimulus to support the euro area economy in its June meeting. "Sure, they could wait until September, when hopefully the real shape of the recovery will have materialized," ING economist Carsten Brzeski said. "However, the fact that - at least at its current pace - the PEPP would be pretty empty by October could quickly lead to unwarranted speculations in financial markets."

However, the latest ruling from the German Constitutional Court that asked ECB to explain its EUR 2.1 trillion worth government debt purchases since 2015 has complicated the picture. Though it is expected that the ruling will not affect the PEPP for now, it will force the ECB to think hard before deciding on future asset purchases. "The court's ruling could actually motivate the ECB to increase the size of the PEPP while the Eurozone is still in the middle of coping with the pandemic and not once the worst might already be behind," Brzeski added. Latest data from Eurostat showed that the Eurozone economy shrunk at a record pace of 3.8 percent in the first quarter and economists are looking forward to much worse figures for the second quarter that saw a major part of the Covid-19 impact.

The worst case scenario projected by the ECB show a 12 percent contraction for the euro area this year and some policymakers have already suggested this may be realistic. The ECB Staff is set to present its latest macroeconomic projections in the June policy session. "As demand was considered likely to recover only gradually, a swift V-shaped recovery could probably already be ruled out at this stage," the minutes said. Further, the minutes said policymakers largely were of the view that of the three scenarios presented, the "mild" scenario, which sees a contraction of around 5 percent, was probably already too optimistic.

"At the same time, the comment was made that it was too early to conclude that the "severe" scenario presented by ECB staff was the most likely," the minutes said. ECB Chief Economist Philip Lane has said that the economy will not return to pre-crisis level at least until 2021. In April, the bank strengthened its non-conventional stimulus measures, but left interest rates unchanged. The next policy announcement is scheduled for June 4.


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Latvia Jobless Rate Rises In Q1

Trading 22 mai 2020 Commentaire »

Latvia's unemployment rate increased in the three months ended March, figures from the Central Statistical Bureau showed Friday.

The jobless rate rose to 7.4 percent in the first quarter from 6.0 percent in the fourth quarter.

In the corresponding period of 2019, the unemployment rate was 6.9 percent.

The number of unemployed people increased to 72,200 in the March quarter from 57,900 in the December quarter. In the same period last year, the number of unemployed persons totaled 66,900.

The number of unemployed seeking job for less than one month doubled and the number of unemployed seeking job for one to two months increased by 1.5 times as the result of crisis caused by Covid-19, the agency said.


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Poland Retail Sales Fall In April

Trading 22 mai 2020 Commentaire »

Poland's retail sales fell sharply in April as restrictions introduced due to coronavirus pandemic hurt demand, figures from Statistics Poland showed on Friday.

Retail sales fell 22.9 percent year-on-year in April versus an 11.9 percent increase in the same month last year. Economists had expected a 16.9 percent fall.

Sales of textiles, clothing, footwear dropped 63.4 percent annually in April.

Sales of motor vehicles, motorcycles, parts declined 54.4 percent. Sales of solid, liquid and gaseous fuels and those of newspapers, books, other sale in specialized stores decreased by 32.9 percent and 28.2 percent, respectively.

On a monthly basis, retail sales decreased 12.3 percent in April.


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Turkey Capacity Utilization Rises In May

Trading 22 mai 2020 Commentaire »

Turkey's manufacturing capacity utilization rate increased in May, figures from the Turkish central bank showed on Friday.

The capacity utilization rate rose to 62.6 percent in May from 61.6 percent in April.

On a seasonally adjusted basis, the capacity utilization rate increased to 62.7 percent in May from 61.9 percent in the prior month.

Separate data from the central bank showed that the manufacturing confidence index rose to 76.9 in May from 66.8 in April.

The seasonally adjusted manufacturing confidence index increased to 73.5 in May from 62.3 in the previous month.


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Lithuania Industrial Production Declines In April

Trading 22 mai 2020 Commentaire »

Lithuania's industrial production declined in April, figures from Statistics Lithuania showed on Friday.

Industrial production decreased a working-day adjusted 11.4 percent year-on-year in April.

Manufacturing output fell 13.0 percent annually in April. Meanwhile, excluding refined petroleum, manufacturing decreased 10.1 percent.

Output in the water supply and waste management decreased 6.4 percent. Meanwhile, production in electricity, gas, steam and air conditioning supply rose 7.3 percent and mining and quarrying output grew 6.4 percent.

Among the major industrial groupings, production of durable goods declined 37.9 percent yearly in April. Energy production capital goods output fell by 16.9 percent and 9.9 percent.

On a monthly basis, industrial production fell a seasonally adjusted 8.3 percent in April.

Output of intermediate goods decreased 5.4 percent and those of non-durable goods fell by 4.7 percent.

In April, after eliminating the seasonal and working-day effects, production of basic pharmaceutical products and pharmaceutical preparations declined by 62.0 percent.


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Short-term Ichimoku cloud indicator analysis of EURUSD

Trading 22 mai 2020 Commentaire »

EURUSD has broken below the Daily Kumo (cloud) today and has stopped its decline right above the tenkan-sen.The inability to break above the Daily Kumo combined with the break below the cloud is a bearish sign. If this is followed by a close below the kijun-sen at 1.0870 then bulls are in trouble.

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EURUSD has support at 1.0870. Breaking below it will open the way for a push lower towards 1.08 support. Resistance is at 1.09 and next at 1.1065. In order for trend to change to bullish we need to see price above 1.1065. Until now we have one weak bullish signal when the tenkan-sen broke above the kijun-sen. However bulls need to see this signal combined with a price break above the cloud. A double top at 1.10-1.1015 is a sign of weakness. A daily close above this area would be a promising sign for bulls.The material has been provided by InstaForex Company - www.instaforex.com

Gold ends week lower but remains above key support

Trading 22 mai 2020 Commentaire »

Gold price tried to close above $1,750 this week but price came back towards $1,720-10 support. Although our short-term outlook for a move towards $1,770-80 partially played out, we remain cautious as the weekly chart shows warning signs. Although it was expected for Gold price to move above $1,750 after breaking above $1,720, Gold price in the area of $1,750 is oversold while at the same time the RSI is diverging. Traders should not ignore this.

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Black line - resistance broken

In Ichimoku cloud terms Gold price remains above key short-term support indicators. The tenkan-sen has risen to $1,729 while the kijun-sen support is at $1,712. As long as price is above these two levels, short-term trend remains bullish and we continue to expect price to reach $1,770-80. Failure to hold these two levels will increase the chances for a pull back towards $1,650.

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UK Budget Deficit At Record High; Retail Sales Fall At Fastest Pace Ever

Trading 22 mai 2020 Commentaire »

The stimulus measures taken by the British government to shield the economy from the downturn posed by the coronavirus, or Covid-19, have pushed the budget deficit to a record high in April, data published by the Office for National Statistics showed on Friday.

Another report from the ONS showed that high street sales declined at a record pace in April as many stores were temporarily closed to contain the spread of coronavirus, or Covid-19.

Public sector net borrowing excluding public sector banks was GBP 62.1 billion in April, which was GBP 51.1 billion more than in the same period last year. This was the highest borrowing in any month since records began in 1993.

The ONS said the Covid-19 pandemic is expected to have a significant impact on the public sector finances and these are initial estimates. Borrowing in the latest financial year ended March 2020 was estimated to have increased by GBP 22.5 billion from last year to GBP 62.7 billion.

While the small easing of the lockdown on May 13 probably meant the government did not have to borrow quite as much this month as in April, it's clear the government will still have to borrow a few hundred billion pounds this year, Ruth Gregory, an economist at Capital Economics, said.

At the end of April, public sector net debt excluding banks totaled GBP 1,887.6 billion or 97.7 percent of GDP.

The Office for Budget Responsibility said April's public finances data provide an initial taste of the fiscal hit from the coronavirus lockdown and the government support for individuals and businesses.

In April, retail sales volume declined 18.1 percent on a monthly basis, which was the biggest monthly fall on record. Economists had forecast sales to decrease 16 percent after falling 5.2 percent in March.

Excluding auto fuel, retail sales were down 15.2 percent on month, bigger than the economists' forecast of 15 percent and a 3.8 percent decrease seen in March.

Food store sales decreased 4.1 percent, while non-food store sales plunged 41.7 percent.

All sectors reported a monthly fall in April except non-store retailing and alcohol stores. Clothing sales plummeted 50.2 percent.

On a yearly basis, retail sales volume fell 22.6 percent versus March's 5.8 percent decrease and economists' forecast of 22.2 percent.

Excluding auto fuel, retail sales dropped 18.4 percent following a 4.2 percent drop in March. Economists had expected an 18.2 percent decrease.

Earlier in the day, survey from the market research group GfK showed that the consumer confidence weakened to -34 in May from -33 posted in the end half of April.


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#CL oil is too important to cost less than $20

Trading 22 mai 2020 Commentaire »

Dear colleagues. The fall of oil quotes into the negative zone caused a serious commotion not only on world exchanges and the information space, but also in the minds of investors. What until recently was unbelievable has become a reality. However, negative prices cannot be the norm, and on the eve of the car season, oil experienced a rapid recovery and now has good chances to gain a foothold at current values and possibly increase.

Saudi Arabia, which decided to fight on two fronts, suffered a crushing defeat. Initially, it was believed that Russia had declared a price war to the whole world, having decided to withdraw from the OPEC+ deal, but the actions of the Saudis aimed at squeezing out the Russian market share in Europe and at the same time squeezing American shale producers on their territory enraged the executive and US legislature. Crown Prince Muhammad bin Salman, who had previously had a lot of things to do, fell out of favor with the Donald Trump administration, who threatened the Royal House of Saudi with refusal of military support and other punishments, up to the arrest of accounts and property. Thus, the agreement between the US and Saudi Arabia, concluded back in the distant 45th year of the last century, ceased to exist.

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At the end of World War II, U.S. President Franklin Delano Roosevelt and King of Saudi Arabia Abdel Aziz entered into an agreement assuming that the United States would receive the necessary amount of oil, guaranteeing the security of the Saudi ruling house in return. However, the kingdom violated this treaty at least three times, which happened in 1973, 2016 and 2020.

In 1973, during the Arab-Israeli war of Yom Kippur, the Saudis put pressure on OPEC members and the countries that joined them to impose an embargo on oil supplies to the United States, Britain, Japan, Canada and the Netherlands. Then, by March 1974, the price of oil had quadrupled, rising from $3 to $12 per barrel, and despite the truce that followed, seeds of distrust between the allies were sown, which did not prevent them from actively cooperating. Since then, the United States has dreamed of getting rid of energy dependence, and when the American shale industry began working with natural gas in 2006, they got a window of opportunity that they took advantage of.

In 2010, the development of oil sands began, which by the end of the decade made the United States a world leader in producing oil and liquefied gas, in a relatively short time, turning the country from an importer to an exporter of energy resources. Thanks to daily oil production of 13.5 million barrels, the United States took first place in the world in production, most of which, namely 60-70%, accounted for shale producers.

Having freed itself from oil dependence, America finally got the opportunity to impose sanctions against objectionable oil producing countries such as Iran and Venezuela, without fearing for its own energy security. Given this geopolitical component, we can safely assume that, having a printing press at its disposal, the United States will never capitulate to oil quotes in a war. Therefore, it is not surprising that the actions of Crown Prince Salman, who was encroaching on the holy, caused the wrath of the US establishment, and the main culprit of the oil crash was the country's royal house-gas stations.

However, the Saudis, as they say, bit the bit. The Saudi sheikhs did not understand or perhaps did not take seriously the warnings coming from Washington. In early April, they sent an armada of oil tankers to the United States, which was perceived by the White House as a direct threat to the US economy and security, while the country struggled with the COVID-19 epidemic. The US shale industry was too important to be ruined.

US politicians simply cannot allow OPEC to manipulate oil prices, which are critical for the kingdom. According to some reports, the price of oil required by Saudi Arabia to fulfill budgetary obligations is at least $84 per barrel, while Russia needs $42. The problem of the Saudis is that they also started a price war in the year of the presidential election, when the US administration faces a dilemma: where, on the one hand, the shale industry, which provides up to 10% of GDP, and on the other hand, US consumer spending. Where every cent of the gallon of fuel costs takes $1 billion out of citizens' pockets. Thus, the Trump administration cannot allow an increase in oil prices above $70, but nobody is going to bankrupt the shale industry to please the Saudi sheikhs either.

At the most difficult moment, as usual, speculators came to the aid of oil prices, read - private investors. Even before the price of WTI oil became negative, ordinary citizens of the country began to invest in the United States Oil - USO stock exchange fund, which is one of the main holders of futures contracts on the CME exchange. By mid-May, the number of long positions of Money Manger, which are the main buyers of oil, increased by 85%, to 373,000 contracts, which became the highest value since October 2018. This served as a driver for the rapid recovery of oil quotes, which in May reached $35 for the WTI #CL grade. Brent oil quotes soared even higher.

Naturally, recovery is never straightforward, and before the price of oil enters a stable trajectory, quotes may decline under the influence of market negative factors. In this regard, after such a rapid growth, we can very well expect the correction of WTI #CL oil to the level of $29 or even $25. However, it is unlikely that we should again assume a deep drop in oil prices below $ 20.

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Figure 1: Short-term WTI Oil Price Forecast

In its short-term energy forecast published last week, the US Energy Information Agency - USEIA suggested that 2020 Brent crude oil prices would reach $34 per barrel. The EIA expects that prices will average $23 per barrel in the second quarter of 2020, and then increase to $32 in the second half of the year. The EIA predicts that Brent crude oil prices will rise to an average of $48 per barrel in 2021, as the decline in global oil reserves will put increasing pressure on quotes. Pointing to great uncertainty, the agency suggests the restoration of the price of WTI varieties to the level of $34 only in December 2020.

At the same time, speaking about the current oil production in the US, the US EIA assumes a drop in production of only 800,000 barrels per day, which, as we understand it, cannot have a significant impact on shale oil. At the same time, not long ago, there was an opinion in the markets that the break-even price for US shale producers should be about $70 per barrel. However, for promising wells, the cost price can be as low as $30-35, and with the development of technologies it can become even lower.

On the whole, very little time will pass, and if prices reach a stable growth area above $30, the US shale industry will quickly recover. Two or three months is enough for everything to work, as before. In terms of price levels, $25-30 is enough for the industry to come to life.

Now the shale oil market is entering a phase of mergers and acquisitions when large producers such as Exxon, Chevron, BP, Shell and Total, begin to acquire small producers and integrate them into their business model. At the same time, the US is not limited by OPEC++ agreements and can continue to capture markets, relying on a geopolitical strategy of domination, creating problems for its competitors.

Be careful and cautious, follow the rules of money management. Let the coronavirus pass us!

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China Avoids Setting GDP Target; Focus On Labor Market

Trading 22 mai 2020 Commentaire »

The Chinese government dropped setting economic growth target for the first time and placed job creation as top priority as coronavirus, or Covid-19, pandemic has ravaged the outlook.

At the annual session of the National People's Congress in Beijing, Premier Li Keqiang said the country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment.

The novel coronavirus, or Covid-19, pandemic was first detected in the Chinese city of Wuhan late December. Since then, the virus that causes severe respiratory illness has spread to almost every corner of the planet claiming thousands of lives and forcing several countries go into lockdown, pushing the global economy into its worst recession in many decades.

By April, many countries have eased the lockdown restrictions, but containment measures such as social distancing and wearing protective masks are set to remain until a preventive vaccine is developed.

In 2019, the Chinese government had targeted 6-6.5 percent growth and the actual growth was 6.1 percent, the weakest since 1990.

According to an official work report, the government aims to add over 9 million jobs and target the urban unemployment rate at around 6 percent.

The government expects the budget deficit to widen to more than 3.6 percent of GDP from 2.8 percent targeted last year, and plans to issue CNY 1 trillion of government bonds for controlling Covid-19. The report did not provide an upper limit for the budget deficit, Iris Pang at ING said. So it seems the government wants to be flexible on the stimulus amount, the economist added.

The annual budget points to fiscal stimulus this year at least on par with that following the global financial crisis and while monetary policy is likely to remain more constrained than in 2009, the NPC did signal further rate declines and faster credit growth, Julian Evans-Pritchard, an economist at Capital Economics, said.

The work report said the monetary policy will be more flexible and the country will use a variety of tools including reserve requirement ratio cuts and interest rate reductions to enable M2 money supply and aggregate financing to rise at higher rates this year.

The target for consumer price inflation was set at around 3.5 percent.

In order to reduce the corporate burden, the government will cut tax and fees for companies by over CNY 2.5 trillion.

Big commercial banks should increase their lending to small firms by more than 40 percent this year. Further, SMEs were allowed to delay their loan payment and interest by nine months.

Li said China will work with the U.S. to implement the 'phase one' trade deal.

Defence spending is set to increase at a slower pace of 6.6 percent this year.


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