Investors are back in risk mode after a week of volatility. The yen is generally higher, followed by the Swiss franc and the dollar. On the other hand, commodity currencies are again under pressure. The euro and the pound are both mixed. The question is whether the sell-off in stocks ahead of the weekend would intensify and push the yen and franc to finish as the stronger.
Technically, the USD / JPY break out of minor support at 113.21 is a sign that it is resuming the corrective decline from 115.51. We will see if it closes below 112.52 support to prepare for further decline next week. At the same time, we will also be watching if the USD / CHF breaks through the support at 0.9156 to align with the outlook as well.
In Europe, as of this writing, the FTSE is up 0.04%. The DAX is down -1.05%. The ACC is down -1.27%. The German 10-year rate is down from -0.030 to -0.378. Earlier in Asia, Nikkei fell -1.79%. Hong Kong’s HSI fell -1.20%. China Shanghai SSE fell -1.16%. Singapore Strait Times fell -0.55%. The Japanese 10-year JGB yield increased from 0.0058 to 0.050.
Ifo business climate in Germany fell to 94.7 in December, sentiment darkens for Christmas
Germany Ifo’s business climate fell from 96.6 to 94.7 in December, below expectations of 95.4. The current valuation index fell from 99.0 to 96.9, below expectations of 97.5. The expectations index fell from 94.2 to 92.6, below expectations of 93.3. Looking at a few more details, the manufacturing went from 16.7 to 17.3. Services went from 11.6 to 4.5. Trade fell from 2.7 to -4.1. Construction went from 11.7 to 7.4.
Ifo said: “Sentiment towards German companies has darkened for Christmas. The deteriorating pandemic situation is hitting consumer-related service providers and retailers hard. The ifo business climate index fell from 96.6 points in November to 94.7 points in December. Companies rated their current business situation as less positive. Pessimism about the first half of 2022 has also increased. The German economy does not receive any gifts this year.
Eurozone CPI finalized at 4.9% in November, EU at 5.2%
The Eurozone CPI was finalized at 4.9% year-on-year in November, down from 4.1% in October. The highest contribution came from energy (+ 2.57%), followed by services (+ 1.16%), industrial goods excluding energy (+ 0.64%), and food, alcohol & tobacco (+ 0.49%).
The EU’s CPI was finalized at 5.2%, down from 4.4% in October. The lowest annual rates were recorded in Malta (2.4%), Portugal (2.6%) and France (3.4%). The highest annual rates were recorded in Lithuania (9.3%), Estonia (8.6%) and Hungary (7.5%). Compared with October, annual inflation was stable in one Member State and increased in twenty-six.
BoE Pill: more rate hikes to come if inflation persists
When asked on CNBC TV if there would be “a lot of more rate hikes to come” if inflation stayed at its current level, BoE chief economist Huw Pill replied: “Well, I think it’s true”.
He added that “core inflation, generated more nationally here in the UK, likely centered on wage pressures in a tightening labor market, will prove to be more persistent over time.”
UK retail sales grew 1.4% mo in November, non-fuel sales increased 1.1% mo
UK retail sales rose 1.4% month-on-month in November, above expectations of 0.8% month-on-month. Sales were 7.2% above their pre-February 2020 coronavirus levels. Non-auto fuel sales were up 1.1% month-on-month. For the 12-month period, overall sales increased 4.7% year-on-year, while non-automotive fuel sales increased 2.7% year-on-year.
However, over the three months ended in November 2021, sales fell by -0.6% compared to the previous three months.
UK consumer confidence Gfk fell to -14, slightly depressed at year-end
UK consumer confidence Gfk fell from -14 to -15 in December. Personal financial situation over the next 12 months decreased from 2 to 1. The general economic situation over the next 12 months decreased from -23 to -24. The index of major purchases also fell from -3 to -6.
Joe Staton, Director of Customer Strategy at GfK, said: “The news regarding the Omicron variant couldn’t have come at a worse time for the festive celebrations… We are ending 2021 on a slightly depressed note and it looks like it will be a dark winter for UK consumer confidence. perhaps with new COVID brakes and little likelihood of a real increase in the first few months of 2022. “
BoJ keeps interest rates unchanged, cuts emergency funding
Under the control of the yield curve, the BoJ kept the key short-term interest rate unchanged at -0.10% and the 10-year JGB target at around 0% with no buy cap. He will continue to buy ETFs and J-REITs with upper limits of JPY 12T and JPY 180B respectively on annual rates.
The special financing support program in response to the novel coronavirus is partly extended by six months until the end of September 2022. The additional purchases of commercial paper and corporate bonds will be finalized at the end of March 2022 as planned with progressively outstanding come down to pre-pandemic levels.
The BoJ said, “The Japanese economy is expected to continue to grow at a rate, albeit slower, above its potential growth rate.” Core CPI is “likely to increase moderately in positive territory in the near term” and “should gradually increase as a trend”.
The evolution of COVID-19 continues to deserve attention ”. There are “strong uncertainties as to whether the recovery in economic activity can proceed smoothly.” Attention should also be paid to the risk that “the effects of supply-side constraints observed in some regions will be amplified or prolonged”.
New Zealand business confidence ANZ fell to -23.2, inflation expectations rose further
New Zealand business confidence ANZ fell further to -23.2 in December, from -16.4 in November. The outlook for own activity fell from 15.0 to 11.8. Export intentions fell from 9.5 to 8.8. Investment intentions fell from 16.3 to 11.4. Hiring intentions fell from 15.8 to 10.5. Price intentions fell from 66.5 to 63.6. Inflation expectations rose further from 4.24% to 4.42%.
ANZ said: “Unfortunately, the cloud of uncertainty hanging over 2022 is not much smaller or more fluid… Labor shortages and cost pressures are high on the list of concerns. businesses, and freight disruptions are getting worse… But struggling to keep up with demand is probably a better problem to have than not having enough demand.
USD / JPY Midday Outlook
Daily Pivots: (S1) 113.42; (P) 113.83; (R1) 114.11; Following…
USD / JPY’s breakout of minor support at 113.21 suggests that the rally from 112.52 has completed at 114.26. The corrective drop to 115.51 may be ready to resume. Intraday bias is back down to 112.52 first. The breakout will confirm this case and target a 100% projection of 115.51 to 112.52 from 114.26 to 111.27. Nonetheless, the breakout of 114.26 will resume the rebound of 112.52 to retest the high of 115.51.
Overall, no change in opinion that goes up from 102.58 is the third step on the uptrend from 101.18 (2020 low). Such a rally should aim for a test of 118.65 (2016 high) on recovery. However, a firm break out of the structural support at 109.11 will support that the trend may have reversed and lead to a deeper fall to the support at 107.47 and possibly below.
Update of economic indicators
|00:01||GBP||Consumer Confidence GfK Dec.||-15||-14|
|03:00||JPY||BoJ decision on interest rates||-0.10%||-0.10%||-0.10%|
|07:00||EUR||Germany PPI H / M Nov||0.80%||1.40%||3.80%|
|07:00||EUR||Germany IPP Y / Y Nov||19.20%||19.80%||18.40%|
|09h00||EUR||Germany IFO Business climate Dec.||94.7||95.4||96.5||96.6|
|09h00||EUR||Germany IFO Current assessment Dec.||96.9||97.5||99|
|09h00||EUR||Germany IFO Expectations Dec||92.6||93.3||94.2|
|10:00 a.m.||EUR||Euro zone CPI Y / Y Nov F||4.90%||4.90%||4.90%|
|10:00 a.m.||EUR||Euro zone CPI Core Y / Y Nov F||2.60%||2.60%||2.60%|
|1:30 p.m.||GOUJAT||Foreign Securities Purchases (CAD) Oct||23.92B||18.50B||20.02B||19.78B|