Euro Shrugs Poor German GDP, But Overall Markets Tread Water

Overall, the forex markets are pretty quiet today. Euro rises broadly despite poorer than expected German GDP. Yet, there is no breakout from familiar range. Swiss Franc is tracking Euro closely, followed by Dollar. Australian Dollar is so far the worst performer, without follow through downside momentum. Yen is following and then Canadian. Sterling and Kiwi are mixed for now. Traders are clearly holding their bet ahead of the main events of Fed, BoE and ECB later in the week.

Technically, GBP/CHF continued to lose upside momentum even though rebound from 1.1094 is still trying to extend. Judging from the structure, such rebound is likely the fourth leg of the triangle pattern from 1.1574. That is, there should be another falling leg before larger rise from 1.0183 resumes. Break of 1.1339 minor support will indicate the start of the fifth leg, with opportunity to go long as this envisaged decline completes.

In Europe, at the time of writing, FTSE is up 0.05%. DAX is down -0.58%. CAC is down -0.51%. Germany 10-year yield is up 0.0645 at 2.308. Earlier in Asia, Nikkei rose 0.19%. Hong Kong HSI lost -2.73%. China Shanghai SSE rose 0.14%. Singapore Strait Times dropped -0.47%. Japan 10-year JGB yield dropped -0.0037 to 0.481.

Eurozone economic sentiment rose to 99.9 in Jan, EU up to 98.0

Eurozone Economic Sentiment Indicator rose from 97.1 to 99.9 in January. Employment Expectation Indicator rose from 107.4 to 110.1. Economic Uncertainty Indicator dropped from 27.5 to 26.2. Industry confidence rose from -0.6 to 1.3. Services confidence rose from 7.7 to 10.7. Consumer confidence rose from -22.1 to -20.9. Retail trade confidence rose from -2.7 to -0.8. Construction confidence dropped from 3.6 to 1.3.

EU Economic Sentiment Indicator rose from 95.7 to 98.0. Employment Expectation Indicator rose from 106.2 to 108.5 Economic Uncertainty Indicator dropped from 27.0 to 25.9. Amongst the largest EU economies, the ESI increased markedly in France (+4.4), Spain (+2.7), Germany (+2.5), Italy (+1.7) and, to a lesser extent, the Netherlands (+0.5), while it was unchanged in Poland (±0.0).

Germany GDP contracted -0.2% qoq in Q2, worst than expectations

Germany GDP contracted -0.2% qoq in Q2, worse than expectation of 0.0% qoq. Comparing to the same quarter a year ago, GDP rose 0.5% in price adjusted term, or 1.1% in price and calendar adjusted term. For 2022 as a whole, GDP grew 1.8% (price adjusted), or 1.9% (price and calendar adjusted).

DeStatis said, After the German economy managed to perform well despite difficult conditions in the first three quarters, economic performance slightly decreased in the fourth quarter of 2022.

Swiss KOF jumped to 97.2 in Jan, outlook considerably less gloomy

Swiss KOF Economic Barometer rose from 91.5 to 97.2 in January, well above expectation of 93.3. That’s the second month of rise in a row, but the index remains below its medium term average. KOF said, “the outlook for the Swiss economy at the beginning of the year is considerably less gloomy than it was in autumn last year.”

KOF also noted: “All bundles of indicators contribute to the improvement. They are developing particularly favourably in manufacturing, hospitality and the services sector. Nevertheless, the indicator bundles for manufacturing and services are below their medium-​term average. The indicators for the hospitality sector, on the other hand, jump above the average, so the prospects here are now better than average.”

NZ goods exports rose 11% yoy in Dec, imports rose 1.8% yoy

New Zealand goods exports rose 11% yoy or NZD 640m to NZD 6.7B in December. Goods imports rose 1.8% yoy or NZD 125m to NZD 7.2B. Monthly trade deficit narrowed to NZD -475m, comparing to November’s NZD -2180m and expectation of NZD -1750m.

The US leads monthly expect rise, up 40% yoy, while exports to all trade partners were up, including China (up NZD 4.2m), Australia (up 17% yoy), EU up (9.8% yoy), and Japan (up 14% yoy).

The US also leads monthly import rise up 80% yoy. Others were mixed with China down -11% yoy, EU up 3.8% yoy, Australia up 7.0% yoy and Japan up 3.4% yoy.

BoJ Kuroda: Inflation trend likely to gradually accelerate, but takes some more time

BoJ Governor Haruhiko Kuroda told the parliament today,
“Japan’s trend inflation is likely to gradually accelerate … but that will take some more time.”

“Uncertainty regarding Japan’s economy is extremely high. It’s therefore important now to support the economy, and create an environment where companies can raise wages,” he said.

Separately, a panel of academics and business executives urged BoJ to make the 2% inflation target a long-term goal, to make monetary policy more flexible.

“The way the BOJ conducts monetary policy must be revamped,” Yuri Okina, a candidate for the next BOJ deputy governor.”By making 2% inflation a long-term goal, the BOJ can make its monetary policy more flexible.”

Daily Pivots: (S1) 1.0838; (P) 1.0869; (R1) 1.0900; More

EUR/USD recovers mildly today but stays in range below 1.0928. Intraday bias remains neutral for the moment. With 1.0765 support intact, further rally remains in favor. On the upside, break of 1.0928 will resume larger rise to 61.8% projection of 0.9630 to 1.0733 from 1.0482 at 1.1164 next. On the downside, though, break of 1.0765 support should now confirm short term topping, and turn bias back to the downside for 55 day EMA (now at 1.0601).

In the bigger picture, current development suggests that the rally from 0.9534 low (2022 low) is a medium term up trend rather than a correction. Further rise is in favor to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 next. This will remain the favored case as long as 1.0482 support holds.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:45 NZD Trade Balance (NZD) Dec -475M -1750M -1863M -2180M
08:00 CHF KOF Leading Indicator Jan 97.2 93.3 92.2 91.5
09:00 EUR Germany GDP Q/Q Q4 P -0.20% 0.00% 0.40%
10:00 EUR Eurozone Economic Sentiment Jan 99.9 94.6 95.8 97.1
10:00 EUR Eurozone Industrial Confidence Jan 1.3 -1.7 -1.5 -0.6
10:00 EUR Eurozone Services Sentiment Jan 10.7 4.3 6.3 7.7
10:00 EUR Eurozone Consumer Confidence Jan F -20.9 -20.9 -20.9
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