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American Payroll May Spur Rate Hike

A guest post written by DAR Wong

Currency Market Observations – 10 September 2018

Fundamental Outlook

The US payroll rises in confidence with strong gains in hourly earnings, sparking expectation of another rate hike in end September. President Trump shocks the world by intention to add another USD267 billion on tariffs on Chinese goods that plummet Apple stock. The EU chief negotiator adds new hope to BREXIT deal.

The US ISM manufacturing index rose 61.3 in August and highest record in more than 7 years. Another report on ISM services index rises in September to 58.3 and higher than consensus and previous month 55.7 reading. The weekly claims for American jobless benefits dropped to almost 49-year low at 203,000 for the week ended 1 September.

Before the weekend, non-farm payroll rose 201,000 in August and beat forecast. Jobless rate at 3.9 percent. Average hourly earnings on year comparison grew 2.9 percent and strongest since 2009, lifting the probability of rate hike in month end.

President Trump hints he may take on Japan as next target for reducing mutual trade imbalance. In addition, he also adds that he could slap another USD267 billion of import tariffs on Chinese goods in addition to the latest USD200 billion imposed.

After Trump’s comments, Apple stock fell on Friday before closed and traders fear of rising trade conflict that will deter global trading ties. However, former Governor of PBoC Zhou comments that the total USD500 billion trade tariffs will be insignificant to China and the Beijing leaders will be sure to retaliate soon.

German factory orders slid 0.9 percent in July, improved from June data but still fell short from forecast. Among The 19 nations, the Eurozone GDP grew 0.4 percent in Q2 season.

Markit reports the British manufacturing index expanded 52.8 in August, lowest since July 2016 and probably affected by threats of BREXIT. Before the weekend, BREXIT chief negotiator Michel Barnier from EU mentioned other deals can be discussed to rout around BREXIT challenges. Sterling rose.

British construction PMI grew at 52.9 in August, lower than expectation and fell from previous month 55.8. Markit reports the UK services index 54.3 in August and beat forecast.

Technical Forecast

USD/JPY traded sideways last week and settled near 111.00 level on Friday. The market is still searching for directional headway while supported above 110.00 region. This week, we reckon the trend will thread from 110.00 – 112.00 range but breaking beyond will lead into a new directional trend.

EUR/USD has been trading in tight range last week. The range is constricted from 1.1500 – 1.1730 region and tend to break in either side this week. In our opinion, there is higher probability of declining since Dollar is prone to rise in coming week. Risk control is advised if the trend moves against your favor.

GBP/USD traded in sideways but supported by some recovery demand on Friday. This week, we forecast the trend is still uncertain and might continue to whipsaw from 1.2800 – 1.3050 until we see clearer fundamental news. BREXIT deal will stay in focus and a lead catalyst in Pound direction in addition to the Dollar demand in-lieu of expected rate hike.

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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