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American Hourly Wages Implies Possible Rate Hike

A guest post written by DAR Wong

Currency Market Observations – 9 October 2017

Fundamental Outlook

The U.S. nonfarm payroll falls beneath forecast but averaging hourly wages surge as a potential signal for possible rate hike. Japan grows in sentiment among large manufacturers before October election. Spain is facing domestic chaos as Catalonia Government proposes to be independent.

The U.S. ISM manufacturing index rose to 60.8 in September and highest record in 6 years. Another separate report on ISM services index rose to 59.8 in September and highest record in 2 years.

The U.S. jobless claims for the week ended 30 September dropped to 260,000 versus 272,000 in previous week. Trade deficits for August steadied at USD42.4 billion and matched forecast.

American non-farm payroll shrank 33,000 in September after being hit by impact Hurricane, below positive consensus and lower than below 169,000 growth in August. Unemployment rate reduced to 4.2 percent.

From the U.S. payroll report, the average hourly wages figure rose by an annualized 2.9 percent and spiked the 2-year Treasury note yield to intraday high 1.52 percent, its highest since 2008. Traders reckon this as an inflation signal for a possible rate hike before year-end.

Japan’s quarterly Tankan report on large manufacturers ended September grew to 22 and best record in past 10 years. Another Tankan report on services offered by large manufacturers expanded 23 in same periodic quarter and maintained steady growth.

Core consumer prices of Japan rose 0.6 percent on year basis in September. Consumer confidence grew 43.9 in steady pace without much change from August.

Spain is facing an internal split as Catalan proposes to go for a referendum to be independent, despite strong object to Spanish government. European Governments are worried that the sentiment may spread to more regions should Spain make a national split.

German factory orders grew 3.6 percent in August and highest record in 6 months. Manufacturing index maintained good growth at 60.6 in September.

Markit reports the U.K. manufacturing expanded at 55.9 in September and lowered than 56.7. Construction PMI fell to 48.1 in September and first time below 50.0 benchmark in 13 months. Another report on services index stayed strong at 53.6 in September after 53.2 in previous month.

Technical Forecast

USD/JPY traded in small sideways around 113.00 level last week. We presume this will continue until election is over on 22the October. This week, the trend may drawdown and reach 111.00 support for correction. Resistance stays robust at 113.00 level.

EUR/USD made small dip last week and supported at 1.1670 level. This week, we predict the trend may rebound in mixed sentiment as the movement might go from 1.1650 – 1.1900 region. Caution is advised in swinging trend as there could be fundamental changes in Spain.

GBP/USD fell last week as Dollar strengthen to counterbalance firm Euro trend. This week, we foresee the trend will be supported at 1.2930 in case of further decline. Market might rebound and trade from 1.2950 – 1.3250 range if bargain-hunting emerges.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is a registered fund manager in Singapore with 26 years of global trading experiences. You may reach him at dar@pwforex.com

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DISCLAIMER: This post is written for general information only. The author, publisher and/or any third party involved in the distribution of this work assume no legal responsibilities and shall have no liability whatsoever for any direct or consequential losses, costs or expenses arising from the use of the information contained herein.

 





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