NZ – BusinessNZ Manufacturing PMI for December drops to 49.3 (prior 51.4)

NZ data, PMI back into contraction and the lowest since Sep of last year. 

BusinessNZ’s executive director for manufacturing Catherine Beard

  • “The manufacturing sector averaged 50.9 over 2019, compared with 53.8 for 2018 and 56.2 for 2017.  While the first half of the year managed to just keep its head above water, the second half saw four of the six months in contraction.”

BNZ Senior Economist, Craig Ebert

  • “the December result was disappointing.  After a couple of months flirting with positivity, the PMI dipped back just below the breakeven line again”
NZ data, PMI back into contraction and the lowest since Sep of last year. 


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China December trade data shows exports rise 9% y/y

December trade balance from China, these in ‘yuan terms’ 

Exports for the month +9.0% compared with +2.9% expected

  • For the year exports +5% y/y

Imports beat huge, +17.7% y/y, vs expected at +8.6%

  • for the Jan to Dec year imports +1.6% y/y

As part of the data release, shows trade between the US and China is down 10.7% y/y in 2019. 


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Germany December construction PMI 53.8 vs 52.5 prior

Latest data released by Markit – 7 January 2020


The reading moves up to the highest level since March last year with overall construction activity and new orders seeing a decent recovery. That said, homebuilding is once again the key driver of optimism in the sector but at least there are other signs of improvement.

Markit notes that:

“After a dip in the summer, the construction sector got back on track in the final quarter of 2019 and ended the year on a high note, with activity, new orders and employment all rising at the fastest rate since March last year.

However, as was the case during most of the second half of 2019, growth of activity in December was confined to just homebuilding. Commercial activity stabilised in December on the back of its worst run for more than six years, leaving civil engineering as the main drag on the construction sector. Outside of homebuilding, constructors remain concerned about the outlook for activity, citing the influence of the wider economic slowdown and a lack of tenders for local infrastructure projects.”

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North Rhine Westphalia December CPI +0.5% vs -0.7% m/m prior

Latest data released by Destatis – 3 January 2020

  • Prior -0.7%
  • CPI +1.7% y/y
  • Prior +1.2%


This matches up to the earlier state readings, in that consumer inflation is seen improving in December with a decent increase in annual headline inflation. That said, there needs to be more consistency in the data to reaffirm any return back to ~2% inflation in the region.

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US December Richmond Fed -5 vs +1 expected

Highlights of the December 2019 Richmond Fed:

  • Prior was -1
  • New orders -13 vs -3 prior
  • Employment +7 vs +5 prior
  • Avg workweek -15 vs +3
  • Wages +29 vs +24 prior
  • Shipments -6 vs -2 prior
  • Order backlog -11 vs -11 prior

The Philly Fed was soft last week and this underscores that rate cuts haven’t altered the state of play in the struggling manufacturing sector. Perhaps the US-China trade truce will lead to some fresh activity but we might just be skidding along the bottom for the foreseeable future.


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SNB total sight deposits w.e. 20 December CHF 585.8 bn vs CHF 586.8 bn prior

Latest data released by the SNB – 23 December 2019

  • Domestic sight deposits CHF 498.9 bn vs CHF 499.8 bn prior
Prior week’s release can be found here. Once again, total sight deposits is seen falling as has been the trend over the past few weeks.

It continues to allude to the lack of intervention action by the SNB during the period, notably after a bit of a jump in August – hinting that the SNB did step in – following the move lower in EUR/CHF under 1.09 from ~1.14 back in May.


SNB sight

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Good morning Monday! Early FX price guide 9 December 2019

Welcome to the new forex week, some early indications:

  • EUR/USD 1.1057
  • USD/JPY 108.61
  • GBP/USD 1.3124
  • USD/CHF 0.9911
  • USD/CAD 1.3256
  • AUD/USD 0.6838
  • NZD/USD 0.6561

Not a lot of change from late Friday levels, GBP a few points lower.

Standard caveat on Monday morning markets … market liquidity is very thin as we wait for Asian centres to come on line … prices are liable to swing around on not too much at all, so take care.

I’ll be back soon with a look at the weekend news. 


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Major central bank overview for December

The central bank rundown

The weekend is a perfect time for a quick catch up for where the major central banks are at. The central banks are listed below with the most bearish central bank first and the most bullish central bank last.

European Central Bank, 0.00%. Bearish 

The ECB has undergone a change of guard as the former President, Mario Draghi’s, leaves his post. He has been succeeded by Christine Lagarde and her first impact on monetary policy will now be felt on December 12 with the ECB’s latest rate decision. So far, Christine Lagarde has given little away in terms of her approach. However, the outlook for the eurozone remains tilted firmly to the downside with inflation levels in October remaining below the 2% target at 0.7%. The ECB stated that rates will be at present or lower levels until inflation data has picked up closer to the 2.0% target. The ECB should retain a bearish outlook and December 12 is the key date for the market to properly assess what steer Christine Lagarde is going to give. Personally I am expecting some kind of repeat of Draghi’s appeal for fiscal stimulus as central banks around the world accept that monetary policy can only go so far, especially when rates are so low.The risk is that the ECB are more bearish than the 10bps rate cut currently priced in for 2020.

Reserve Bank of Australia, 0.75%. Bearish

The AUD has whipsawed around lately after Governor Lowe’s latest speech on unconventional policy on Tuesday of this week. Although Governor Lowe said that the RBA’s lower rate level was 0.25% and QE would not be even considered before rates hit that level, the market has taken a bearish outlook on his view. The investment banks Westpac and RBC forecast that the RBA will cut the cash rate to 0.25% by June 2020 and follow that up with QE. So, as the market starts to price in additional cuts from the RBA the focus will be on economic data and speeches that confirm or deny this outlook. A rate cut is not expected for next weeks meeting, but the market will be looking for any signals from the RBA about a coming rate cut for 2020. One final aspect to mention is that the Australian economy is closely tied to China’s fortunes with around 30% of its GDP coming from trade with China. Therefore, AUD will be pushed or pulled along with the US-China trade sentiment too.

Federal Reserve, 1.50%-1.75%. Neutral


The FOMC cut rates by 25bps at their October meeting, but did signal a pause in rate cuts. However, it was also made clear that the Fed was not about to start hiking interest rates either and the Fed was not on a pre-set course. Latest minutes confirmed what Fed speakers had been communicating that the Fed would be on hold for the medium term. The present market pricing is a 94.8% chance of no change for the December meeting. However, the general outlook for US monetary policy is bearish with a 51% chance of a 25bps rate cut by June 2020 and a 72% chance of a 25bps rate cut by December 2020. Latest economic data on Manufacturing and Services PMI have been robust and Durable goods out this week showed a beat at +0.6% vs -0.9% expected with US manufacturing holding up despite the US-China trade concerns. The US Q3 GDP data showed a beat too at 2.1% vs 1.9% expected. However, the main driver of the USD is going to be the US-China trade negotiations.As long as the US domestic economy holds up I sense that President Trump is quite happy with China squirming on the uncertainty of the latest negotiations. Any negative twists will see USD strengthen as its safe haven status comes to the forefront.  

Bank of England, 0.75%. Neutral/dovish

The single cloud which continues to obscure the BoE’s view is Brexit, or more specifically, the chance of a no-deal Brexit. The BoE has slowly shifted to a more dovish stance as the Brexit Withdrawal Agreement has become more and more elusive and investor sentiment has become more reluctant given uncertainties surrounding Brexit. This dovish outlook was recently confirmed when Haskell and Saunders voted for a 25bps rate cut at the last BoE policy meeting.For now the GBP is being moved on election polls. As long as the conservative majority remains heading into the December 12 election, expect GBP buyers. The rationale is that as long as the conservatives have a majority, Boris Johnson’s Withdrawal Agreement bill will pass through UK parliament and in this manner a no-deal Brexit is avoided.

Swiss National Bank, -0.75%. Neutral to bearish

The SNB interest rates are the world’s lowest at-0.75% and haven’t changed at a scheduled meeting since 2009. However, with the strengthening Franc hurting the Swiss export economy a number of large institutions, like UBS Group, Raiffeisen Bank International AG and Bank J. Safra Sarasin, called for a rate cut at the September 19 meeting. This was in response to the Swiss franc increasing more than 4% versus the Euro.These calls were not heeded. As Swiss inflation remains low, in October 2019 it stood at -0.3%, the SNB rate is likely to stay as the world’s lowest interest rate for the foreseeable future.

Bank of Japan, -0.10%. Neutral

Fsderal Reserve

The Bank of Japan is very bearish as a bank. Inflation in Japan continues to miss the 2% target and the BoJ have stated that they will ‘keep very low interest rate levels for an extended period of time’. In October inflation in Japan stood at just 0.2% slowing from its peak in April of 0.9%. The Bank of Japan has been failing to achieve its inflation target for years since it fell from 2.3% to 0.6% in April 2015. The highest reading since then has been 1.5% in February 2018. At their October meeting, in response to low inflation data, the Bank of Japan tweaked their forward guidance to signal a rate cut in the near future by stating that they expect short term and long term rates to stay at current or lower levels for as long as needed. The risks for Japan’s economy are neutral to bearish.

Reserve Bank of New Zealand, 1.00%. Neutral

In early August this year the RBNZ cut interest rates by a surprise 50bps at their rate meeting. Governor Orr was very bearish in his language at the press conference and he didn’t rule out the RBNZ needing to take further action. He saw negative interest rates as an option and even the prospect of QE. So, in November the RBNZ was expected to cut interest rates further from 1.00% to 0.75%.However, the RBNZ surprised markets again, but this time by not cutting interest rates. The RBNZ is now in a wait and see mode. Latest business confidence data out this week showed a decent recovery from recent lows and Goldman Sachs consider the NZD to be one of the biggest potential beneficiaries from Yuan appreciation on a US-China trade deal signing and tariff rollback. Furthermore, GS’s economists are anticipating a moderate recovery in the NZD economy through 2020, so there could be a moderate recovery in NZD and more downside in AUDNZD as the central bank diverge in their outlooks. Certainly AUDNZD is a pair to watch.

Bank of Canada, 1.75%. Neutral/bullish

The Bank of Canada had been the only major central bank to not turn explicitly dovish. However, at their latest rate meeting the BoC highlighted their concern over the US-China trade deal as a potential drag on the Canadian economy and the BoC’s tone was more dovish. However, last week Governor Poioz was more upbeat about the Canadian economy. This week Canada’s September non-farm earnings showed the largest rise in wages since 2014. The Q3 GDP on Friday was as expected at +1.3%, so the BoC should stay on hold at the moment. Adam pointed out that the GDP figure had a chunk taken out by inventory and trade data and if you took those out growth is at +3.4%. So, in short the BoC has enough solid data to maintain rates as they are for the immediate future.

So, ForexLive readers, I hope this is helpful as a quick December rundown on where we are at with the world’s major central banks. Have a great weekend!

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British PM Johnson calls for December 12 election to break Brexit deadlock

© Reuters. Britain's Prime Minister Boris Johnson is seen outside Downing Street in London © Reuters. Britain’s Prime Minister Boris Johnson is seen outside Downing Street in London

By Kate Holton, Elizabeth Piper and Kylie MacLellan

LONDON (Reuters) – Prime Minister Boris Johnson called on Thursday for a general election on Dec. 12 to break Britain’s Brexit impasse, conceding for the first time he will not meet his “do or die” deadline to leave the European Union next week.

Johnson said in a letter to opposition Labour leader Jeremy Corbyn he would hand parliament more time to approve his Brexit deal but that lawmakers must back a December election, Johnson’s third attempt to try to force a snap poll.

Just a week before Britain was due to leave the European Union, the bloc looks set to grant Johnson a Brexit delay, something he has repeatedly said he does not want but was forced to request by the country’s divided parliament.

An election is seen by his team as the only way of breaking the deadlock over Brexit after parliament voted in favor of his deal, but then, just minutes later, rejected his preferred timetable which would have met his Oct. 31 deadline.

But he has twice failed before to win the votes in parliament for an election, where he needs the support of two-thirds of its 650 lawmakers. The main opposition Labour Party has repeatedly said it will only back an election when it is sure that he cannot lead Britain out of the EU without a deal.

“This parliament has refused to take decisions. It cannot refuse to let the voters replace it with a new parliament that can make decisions,” he wrote to Corbyn.

“Prolonging this paralysis into 2020 would have dangerous consequences for businesses, jobs and for basic confidence in democratic institutions, already badly damaged by the behavior of parliament since the referendum. Parliament cannot continue to hold the country hostage.”

In parliament after the government announced the new vote on an election for Monday, Labour’s parliamentary business manager Valerie Vaz did not say whether the party would back the move, saying only it would wait to see what the EU says about a delay on Friday.


More than three years after voting 52%-48% to be the first sovereign country to leave the European project, the future of Brexit is as unclear as ever with Britain still debating when, how or even whether it should go ahead.

Johnson won the top job in July by staking his career on getting Brexit done by Oct. 31, though in the letter he makes clear he is ready to scrap his deadline. Last month, he said he would rather be “dead in a ditch” than ask for a delay.

But several of his aides think he can weather any criticism for failing to meet the deadline at an election by arguing that he was thwarted by lawmakers, doubling down on his team’s narrative of pitting the “people versus the parliament”.

At a meeting of his political cabinet of top ministers, some media reported that there was disagreement over whether the government should try for an early election, fearing that going to the polls before Brexit was settled might damage the governing Conservatives.

But Johnson seems to still hold out hope of securing a deal with Brussels, offering parliament until Nov. 6 to ratify an agreement he settled with the EU last week.

“This means that we could get Brexit done before the election on 12 December, if MPs (members of parliament) choose to do so.”

Labour has long said it cannot back an election until a so-called no deal Brexit is off the table. But if the EU grants an extension until the end of January, that would appear to remove the threat of Johnson taking Britain out of the bloc without an agreement.

By proposing to dissolve parliament on Nov. 6, that would also be beyond the current Oct. 31 deadline.


Earlier, a senior Downing Street source said Britain would ultimately leave the EU with Johnson’s deal despite the likely additional delay, with the EU considering offering London a three-month flexible Brexit extension.

“This ends with us leaving with the PM’s deal,” the Downing Street source said on condition of anonymity. “We will leave with a deal, with the PM’s deal.”

All eyes are now on not whether, but by how long, the EU decides to extend the Brexit process: Berlin supports a three-month delay, while Paris is pushing for a shorter one.

While both German Chancellor Angela Merkel and French President Emmanuel Macron appear to be fatigued by Brexit, they fear a no-deal exit that would almost certainly hurt global growth, roil financial markets and create a potentially deeper EU crisis.

To offer Britain a long extension would take the pressure off British lawmakers to approve Johnson’s deal and open up possibilities such as a referendum on it. A short extension might focus minds in the British parliament.

Brexit was initially supposed to have taken place on March 29 but Johnson’s predecessor Theresa May was forced to delay twice – first to April 12 and then to Oct. 31 – as parliament defeated her Brexit deal by margins of between 58 and 230 votes earlier this year.

Johnson was forced by parliament on Saturday to send a letter to European Council President Donald Tusk requesting a delay until Jan. 31. He did so reluctantly, sending an unsigned photocopied note, but the correspondence was accepted.

“Our policy remains that we should not delay,” Johnson told parliament on Tuesday after parliament defeated his extremely tight legislative timetable for ratifying the deal he clinched in Brussels a week ago.

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