11thApril 2024Thursday The upcomingThursday promises to be a...

11^thApril 2024

Thursday

The upcomingThursday promises to be a vital day for global financial markets, highlightedby a series of significant economic announcements. From the East, China is setto release its year-over-year Consumer Price Index (CPI) and Producer PriceIndex (PPI), providing crucial insights into the country's inflationarypressures and industrial health. Meanwhile, in Europe, the financial communityeagerly anticipates the European Central Bank's decision on its RefinancingRate, an event that will be complemented by a detailed press conferenceshedding light on the bank's monetary policy outlook. Across the Atlantic, theUnited States will not be left behind in shaping market dynamics, as it gearsup to disclose its monthly Producer Price Index (PPI) and Core PPI figures,alongside the latest Unemployment Claims data, offering a comprehensivesnapshot of the nation's economic resilience and labor market conditions.

CNY - CPI y/y

In a significantassessment of consumer spending trends in China, the National Bureau ofStatistics reports that the composition of the Consumer Price Index (CPI), acrucial measure of inflation and economic health, is dominated by Food,accounting for 31.8% of the total weight, followed by Residence at 17.2%. Othernotable components include Recreation, Education, and Culture Articles at13.8%, with Transportation and Communication, Healthcare, Clothing, HouseholdFacilities, and items like Tobacco and Liquor making up the rest. Updated everyfive years based on comprehensive household surveys, the latest revision in2011 underscores the CPI's adaptability to new spending behaviors and economicadvancements. This index is vitalfor traders and policymakers alike, as fluctuations in consumer prices drive central bank decisions on interest rates, directly impacting currency valuation and broader economic strategies.

In a significanteconomic development, China's Consumer Price Index (CPI) recorded a 0.7%year-on-year increase in February, marking the first rise since August andending a period of contraction that had raised concerns about the growthtrajectory of the world's second-largest economy. This uptick, as reported bythe National Bureau of Statistics, surpassed analyst expectations which hadanticipated a more modest 0.3% rise. The resurgence in consumer prices, notablyinfluenced by the Lunar New Year festivities which traditionally stimulatespending, particularly in the travel sector, signals a potential shift in thenation's economic dynamics. This increase is particularly noteworthy given thebackdrop of a sustained decline in producer prices, which fell by 2.7%,continuing a trend of industrial slowdowns. The recent CPI data arrives amidstbroader economic measures by Beijing to bolster growth, including the issuanceof substantial sovereign bonds and setting a target inflation rate of 3%.Despite this positive turn, experts like Zhang Zhiwei from Pinpoint AssetManagement urge caution, highlighting ongoing weaknesses in domestic demand andthe challenges in translating fiscal stimuli into tangible economic recovery.Additionally, core inflation, excluding the volatile food and energy sectors,showed a notable increase to 1.2%, the highest in over two years, furthercomplicating the economic landscape. This development, while offering a glimmerof hope against deflationary pressures, underscores the complexities of China'seconomic recovery path in the post-pandemic era.

TL;DR

	Aspect	Detail
1	CPI Increase	0.7% year-on-year in February, first rise since August
2	Expectations	Surpassed analyst expectations of a 0.3% rise
3	Influencing Factors	Lunar New Year festivities, which traditionally increase spending especially in the travel sector
4	Economic Context	Marks a potential shift in China's economic dynamics against a backdrop of declining producer prices (-2.7%)
5	Producer Prices	Continued decline by 2.7%, indicating industrial slowdowns
6	Broader Economic Measures	Issuance of substantial sovereign bonds, setting a target inflation rate of 3%
7	Expert Caution	Zhang Zhiwei from Pinpoint Asset Management highlights weaknesses in domestic demand and fiscal stimulus challenges
8	Core Inflation	Excluding food and energy sectors, rose to 1.2%, the highest in over two years
9	Economic Recovery	Development offers hope against deflationary pressures but underscores recovery complexities

The CPI y/y forecast shows anexpected 1.2%, an increase from the previous result of 0.7%.

The upcoming CPI y/y is set to bereleased on Thursday at 1:30 AM GMT.

CNY - PPI y/y

The ProducerPrice Index (PPI), as reported by China's National Bureau of Statistics, servesas a key gauge of inflation at the producer level, reflecting the average pricechanges Chinese producers face for commodities across different processingstages. It's a critical indicator, as shifts in the PPI can signal changes incommodity inflation, with significant increases potentially leading to economicinstability and prompting the People's Bank of China to adjust monetary andfiscal policies. For traders and investors, the PPI is a vital measure since itcan forecast consumer inflation trends; higher production costs often translateto increased consumer prices. Consequently, a rising PPI is generally viewedpositively for the Chinese Yuan (CNY), indicating economic strength, whereas adeclining PPI is seen negatively, suggesting bearish prospects for the CNY.

In a recentupdate from the National Bureau of Statistics, China's Producer Price Index(PPI) experienced a downturn, continuing a trend of declines with a 2.7% dropin February compared to the same month last year. This ongoing decrease inproducer prices marks the most extended period of reduction since 2016,underscoring persistent challenges within the industrial sector of the world'ssecond-largest economy. The drop in PPI contrasts with a slight uptick in theConsumer Price Index (CPI), which saw a 0.7% year-on-year increase in February,the first rise since August, spurred partly by seasonal demand during the LunarNew Year holiday. However, the decline in producer prices, attributed toreduced industrial activities during the holiday period, reflects broaderissues of weak domestic demand and the slow transmission of fiscal policies tostimulate economic recovery, as noted by Zhang Zhiwei, chief economist atPinpoint Asset Management. The persistent fall in PPI comes amid Beijing'sbroader economic measures, including the issuance of 1 trillion yuan in specialsovereign bonds and setting a target inflation rate of 3%, to bolster economicgrowth targeted at around 5% for the year. The PPI's sustained decrease raisesconcerns about the deflationary pressures in the economy, contrasting withinflation struggles in other countries, and highlights the nuanced challengesChina faces in revitalizing economic growth post-pandemic.

TL;DR

	Aspect	Detail
1	PPI Decrease	2.7% drop in February year-on-year, continuing a trend of declines
2	Historical Context	Longest period of reduction since 2016, highlighting challenges in the industrial sector
3	Contrast with CPI	CPI saw a 0.7% year-on-year increase in February due to seasonal demand during the Lunar New Year
4	Factors for PPI Decline	Reduced industrial activities during the holiday period, weak domestic demand
5	Economic Measures	Issuance of 1 trillion yuan in special sovereign bonds, target inflation rate of 3%, economic growth target of around 5%
6	Expert Insight	Zhang Zhiwei notes slow transmission of fiscal policies to stimulate economic recovery
7	Concerns	Sustained decrease in PPI raises concerns about deflationary pressures in the economy
8	Economic Challenges	Highlights nuanced challenges in revitalizing economic growth post-pandemic

The projected PPI y/y shows adecrease of -1.9%, an improvement from the previous decline of -2.7%.

The nextPPI y/y is set to be released on Thursday at 1:30 AM GMT.

EUR – Interest Rate

In a significantpolicy shift, the European Central Bank (ECB) has adjusted the frequency of itsinterest rate announcements, a crucial indicator for liquidity in the bankingsector. Previously conducted on a monthly basis, the ECB will now unveil itsdecisions on the main refinancing operations eight times a year, starting fromJanuary 2015. These refinancing operations are vital as they supply themajority of liquidity to the banking system. The change underscores theimportance of the ECB's Press Conference, which follows 45 minutes after therate decision and often garners more attention as the initial rate announcementis typically anticipated by the market. For traders, short-term interest ratesremain a key determinant of currency value, with many using other economicindicators to forecast potential rate adjustments. The decision-making processinvolves a rotating vote among the six members of the ECB Executive Board and15 of the 19 Euro area central bank governors, though the distribution of votesremains confidential. This mechanism underscores the collaborative yet opaquenature of the ECB's monetary policy decisions.

In its latestmeeting, the European Central Bank's Governing Council has opted to keep itskey interest rates steady amidst declining inflation rates since January,signaling cautious optimism. The ECB has notably revised its inflation forecastfor 2024 down to 2.3%, attributing the adjustment to lessening energy pricepressures. Despite a relaxation in some inflation components, the persistingdomestic price pressures, fueled particularly by wage increases, suggest thatinflation may only gradually ease. This decision comes against a backdrop oftighter financing conditions and the economic cooling effects of prior ratehikes. Additionally, the ECB has tempered its economic growth expectations for2024, projecting a modest uptick of 0.6%, with hopes for a steadier recovery inthe subsequent years. The Council has reiterated its dedication to reaching its2% inflation target in the medium term, underscoring its readiness to fine-tunemonetary policies, including adjustments to its Asset Purchase Programme andthe pandemic emergency purchase programme, to maintain price stability andbolster the euro zone's economic health.

TL;DR

	Aspect	Detail
1	Interest Rates Decision	Kept steady, reflecting cautious optimism amid declining inflation rates since January
2	Inflation Forecast for 2024	Revised down to 2.3%, due to lessening energy price pressures
3	Inflation Components	Relaxation in some components but persisting domestic price pressures, particularly from wage increases
4	Economic Context	Tighter financing conditions and economic cooling from previous rate hikes
5	Economic Growth Expectations	Projected growth of 0.6% for 2024, with hopes for a steadier recovery in subsequent years
6	Inflation Target	Reiterated commitment to 2% inflation target in the medium term
7	Monetary Policy Adjustments	Readiness to fine-tune policies, including Asset Purchase Programme and pandemic emergency purchase programme
8	Goal	Maintain price stability and bolster the euro zone's economic health

The anticipated interest rate for theECB remains steady at 4.5%, consistent with the previous outcome.

The next Interest Rate Decision isscheduled for release on Thursday at 12:15 PM GMT.

The last time,the ECB Interest Rate Decision wasannounced on the 7^th of March, 2024. You may find the marketreaction chart (DE30 M5) below:

USD - Core PPI m/m

The CoreProducer Price Index (PPI), also known as Core Finished Goods PPI or Core PPIfor Final Demand, is a monthly metric issued approximately 13 days followingthe conclusion of each month. It gauges the variation in selling pricesreceived by domestic producers for their goods and services, excluding thetypically volatile sectors of food and energy. This exclusion, which accountsfor around 40% of the overall PPI, aims to provide a more stable measure ofproducer price changes. In February 2014, the methodology for calculating thisseries was revised to enhance its accuracy. Published by the Bureau of LaborStatistics within the Department of Labor, the Core PPI offers insights intoinflationary trends at the production level, excluding food and energy. Ahigher Core PPI is generally interpreted as a positive indicator for the USdollar, reflecting bullish market sentiments, while a lower figure is seen asbearish, potentially indicating weaker economic conditions.

In February,prices for final demand services saw a modest increase of 0.3 %, following aslightly higher rise of 0.5 %in January. The uptick was led by a 0.5 % growthin the index for services excluding trade, transportation, and warehousing.Specifically, the sector of final demand transportation and warehousingservices experienced a notable rise of 0.9 %. However, there was a downturn inthe area of trade services, where margins for wholesalers and retailers fell by0.3 %, indicating a mixed performance across different service sectors.

TL;DR

	Service Sector	Price Change
1	Overall Final Demand Services	+0.3%
2	Services Excluding Trade, Transportation, and Warehousing	+0.5%
3	Final Demand Transportation and Warehousing Services	+0.9%
4	Trade Services (Wholesalers and Retailers Margins)	-0.3%

The Core PPI m/m suggests 0.2%,slightly below the prior month's 0.3%.

The next Core PPI m/m is set to bereleased on Thursday at 12:30 PM GMT.

The last time, the US Core PPI m/m was announced on the 14^th of March,2024. You may find the market reaction chart (US100 M5) below:

USD - PPI m/m

The ProducerPrice Index (PPI) for Final Demand in the United States tracks month-over-monthchanges in the prices of commodities sold for personal consumption, capital investment,government, and export. It's a critical gauge composed of several keycomponents: final demand goods, including food and energy, account for 33% ofthe index; final demand trade services make up 20%; transportation andwarehousing services represent 4%; services excluding trade, transportation,and warehousing contribute 41%; and construction comprises 2%, rounding out theindex. As a leading indicator of consumer inflation, the PPI for Final Demandis closely monitored by traders since an increase in producer prices oftenleads to higher costs for consumers. This index is also known as the FinishedGoods PPI or Wholesale Prices.

In a significanteconomic development, the United States witnessed its Producer Price Index(PPI) for final demand climb by 0.6% in February 2024, marking the mostpronounced rise since the previous August and eclipsing analyst projections ofa modest 0.3% increase. This surge was primarily fueled by a notable 1.2%escalation in goods prices, the steepest in half a year, with energy costsleading the charge by soaring 4.4% and food prices experiencing a 1.0% rise.The service sector also saw growth, albeit at a more moderate pace of 0.3%,down from a 0.5% increment in the preceding month. This included a notable 0.9%jump in transportation and warehousing services, contrasted by a 0.3% dip intrade services.

Furthermore, thecore PPI, which strips out the more volatile elements such as food and energy,witnessed a 0.3% rise. This represents a deceleration from January's 0.5%uptick, yet still slightly outpaced the anticipated 0.2% consensus. On anannual scale, the pace of producer price inflation accelerated, reaching 1.6%up from January's 0.9%, and substantially outperforming the forecasted 1.1%.This data underscores a dynamic shift in the cost landscape for producers,hinting at underlying inflationary pressures within the economy.

TL;DR

	Metric	February 2024 Change	Context/Additional Details
1	Overall PPI for Final Demand	+0.6%	Highest rise since the previous August, above analyst expectations of +0.3%
2	PPI for Goods	+1.2%	Steepest increase in half a year, led by energy (+4.4%) and food (+1.0%) prices
3	PPI for Services	+0.3%	Growth slowed from +0.5% in the previous month; transportation and warehousing services up by +0.9%, trade services down by -0.3%
4	Core PPI (Excluding Food and Energy)	+0.3%	Deceleration from +0.5% in January, but above the anticipated +0.2%
5	Annual Producer Price Inflation	+1.6%	Accelerated from January's +0.9%, surpassing forecasts of +1.1%

The projection for the PPI m/m isset at 0.3%, compared to the previous result of 0.6%.

The upcoming PPI m/m is set to bereleased on Thursday at 12:30 PM GMT.

The last time, the US PPI m/m was announced on the 14^th of March, 2024. Youmay find the market reaction chart (US100M5) below:

USD - Unemployment Claims

The InitialJobless Claims report, released weekly on Thursdays, records the number ofpeople filing for unemployment insurance for the first time in the precedingweek, serving as one of the nation's earliest economic indicators. While itsmarket impact varies week to week, it gains particular attention during periodsof economic uncertainty or when the figures reach unusual highs or lows.Although often considered a lagging indicator, the data is a crucial barometerof economic health, reflecting labor market conditions that are closely tied toconsumer spending. This makes it a key point of interest for traders andpolicymakers alike, particularly because it provides insights into new andemerging unemployment trends, unlike continued claims data which tracks ongoingunemployment benefits claims.

In the weekending on March 30, the United States witnessed a slight uptick in the numberof initial jobless claims, with the seasonally adjusted figure reaching221,000, marking an increase of 9,000 from the prior week's revised figure.This adjustment reflects a modest revision upwards from the initially reported210,000 to 212,000. Concurrently, the four-week moving average, a metric thatsmooths out weekly volatilities, edged higher by 2,750 to settle at 214,250,also subject to a minor upward revision. On a more stable note, the insuredunemployment rate held steady at 1.2 percent for the week ending March 23, mirroringthe unchanged rate from the week before. The total number of people receivingunemployment benefits saw a decrease, dropping by 19,000 to 1,791,000. Thisreduction aligns with a slight downward adjustment in the figures from thepreceding week, and the four-week moving average for insured unemploymentsubtly declined by 750, further indicating a resilient labor market amidstfluctuating weekly claim numbers.

TL;DR

	Metric	Most Recent Data	Previous Week's Data	Change	Notes
1	Initial Jobless Claims	221,000	212,000 (revised from 210,000)	+9,000	Slight increase in the latest week
2	Four-Week Moving Average (Initial Claims)	214,250	211,500	+2,750	Minor upward revision and slight increase
3	Insured Unemployment Rate	1.2%	1.2%	No change	Remains steady
4	Total Receiving Unemployment Benefits	1,791,000	1,810,000	-19,000	Decrease in total recipients
5	Four-Week Moving Average (Insured Unemployment)	N/A	N/A	-750	Four-week moving average shows a slight decline

The projecteddata for Unemployment Claims suggests a figure of 218,000, whichreflects a slight decrease from the prior figure of 221,000.

The next Unemployment Claims report is scheduled for release on Thursday at 12:30 PM GMT.

The last time, the USUnemployment Claimsreport was announced on the 4^th of April, 2024. You may find themarket reaction chart (XAUUSD M5) below:

EUR - ECB Press Conference

The ECB PressConference, featuring the ECB President and Vice President, is an importantevent for traders, given its significant impact on currency values. A morehawkish stance than expected generally bolsters the currency. The conference,which lasts about an hour, comprises two segments: an initial preparedstatement followed by a Q&A session with the press, where unscriptedresponses can lead to substantial market fluctuations. Since January 2015, thefrequency of these conferences has been adjusted from monthly to eight times ayear. This conference is the ECB's principal avenue for communicating withinvestors about monetary policy, detailing the rationale behind recent interestrate and policy decisions against the backdrop of the economic outlook andinflation trends. Crucially, it offers insights into potential future monetarypolicy directions, making it a closely watched event in financial circles.

The next ECB Press Conference isscheduled for release on Thursday at 12:45 PM GMT.