GERMAN DATA: GfK Consumer Climate Falls, Wider Picture Remains Subdued
The German GfK consumer climate decreased by 3.5 points to -26.9 in its January advance reading, below consensus expectations which looked for a marginal uptick to -23.0. GfK notes "while economic expectations are stagnating, both income expectations and willingness to buy are declining".
- The consumer climate had lagged improvements in German business sentiment, but that also turned to the downside again in most recent readings. The bigger picture may be that both consumers and businesses are sceptical if the fiscal easing programme from the government will bring a lasting upturn to the country.
- "What is remarkable this month is that the willingness to save has climbed to its highest level since the financial and economic crisis" (from the press release) - the ECB meanwhile continues to assume that the Eurozone-wide savings ratio is set for a cyclical downturn over the coming quarters in their macroeconomic projections released just yesterday.
- Christmas business meanwhile is weak in Germany this year according to current retailer surveys, also signalling consumer caution.
- Recapping, German October retail sales were weaker than expected, even after considering a decent upward revision to the August data. It signalled a weak start to Q4 consumption after what was a very weak -0.3% Q/Q for private consumption in final GDP data released earlier.
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EUROSTOXX50 TECHS: (Z5) Bearish Following Breach Of Support
- RES 4: 5858.59 1.618 proj of the Aug 1 - 22 - Sep 2 price swing
- RES 3: 5825.00 High Nov 13 and the bull trigger
- RES 2: 5744.00 High Nov 14
- RES 1: 5603.68/5662.67 20-day EMA
- PRICE: 5541.00 @ 06:41 GMT Nov 19
- SUP 1: 5512.00 Low Nov 18
- SUP 2: 5503.00 50.0% retracement of the Aug 1 - Nov 13 bull cycle
- SUP 3: 5458.00 Low Sep 26
- SUP 4: 5427.01 61.8% retracement of the Aug 1 - Nov 13 bull cycle
A M/T bull trend in EUROSTOXX 50 futures remains intact, however, the latest sell-off highlights a stronger corrective cycle. The move down this week has resulted in the breach of two key support points; 5603.68, the 50-day EMA, and 5610.00, the base of a bull channel drawn from the Aug 1 low. The breach signals scope for a deeper pullback and opens 5503.00, a Fibonacci retracement. Initial firm resistance to watch is 5662.67, the 20-day EMA.
EURGBP TECHS: Trend Set-Up Remain Bullish
- RES 4: 0.8893 2.000 proj of the Sep 15 - 25 - Oct 8 price swing
- RES 3: 0.8875 High Apr 25
- RES 2: 0.8868 61.8% retracement of the 2022 - 2024 bear leg
- RES 1: 0.8865 High Nov 14
- PRICE: 0.8814 @ 06:49 GMT Nov 19
- SUP 1: 0.8783 20-day EMA
- SUP 2: 0.8769 Low Nov 10
- SUP 3: 0.8740 50-day EMA
- SUP 4: 0.8706 Low Oct 24 and a key support
The trend set-up in EURGBPis unchanged, it remains bullish and the cross is trading closer to its recent highs. A fresh cycle high last week confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Sights are on 0.8868 next, a Fibonacci retracement. On the downside, initial key short-term support to watch lies at 0.8783, the 20-day EMA. A break of the average would signal scope for a deeper retracement.
UK DATA: UK Inflation Data Due at 7:00GMT
For the full MNI UK CPI Preview, click here.
- Governor Bailey’s vote at the December MPC meeting is still far from guaranteed despite last week’s soft labour market data. We still think that assuming data comes in broadly in line with expectations and we don’t have an inflationary Budget that Bailey will vote to support a cut at the December MPC meeting, which would hence see a 5-4 vote for a pre-Christmas 25bp cut.
- The BOE November MPR forecast looks for headline CPI to come in at 3.60%Y/Y – this forecast is 11 hundredths below the August MPR expectation following a 21 hundredth downside surprise in September. The analyst previews that we have read look for a median around a tenth lower at 3.51%Y/Y (although note that most of the analyst forecasts are only to 1dp).
- 13/18 analyst previews that we have read (over 70%) look for headline CPI to round to 3.5%Y/Y (or lower) while only 2/18 look for an upside surprise for the BOE (rounding to 3.7%Y/Y).
- With sellside expectations skewed towards a softer print, and markets pricing in 18bp for the December meeting, we think that an upside surprise to the BOE’s forecast would therefore likely cause a larger market move than a downside surprise.
- For the October print, air fares provide the largest uncertainty while analysts expect food prices to come in lower than the BOE’s forecasts. Education and cultural services are likely to contribute positively to services CPI while rental and accommodation prices are expected to soften. We continue to see restaurant prices as a key barometer of the pricing power of consumer discretionary firms. We look into the details for all of these components in our preview.
- Looking at services CPI forecasts as a whole, the BOE forecasts a 4.6%Y/Y print which would broadly be a tenth softer than the 4.69%Y/Y print seen in September. This effectively sees the full -0.36ppt downside surprise to its September August MPR forecast persist through to October. Analyst expectations range from 4.4%Y/Y to 4.76%Y/Y with the aforementioned air fares expectation a meaningful driver of this spread of expectations, but the median expectation does come in around 4.6%Y/Y, in line with the BOE’s forecast.
