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American Payroll Triggers Rate Hike Speculation

A guest post written by DAR Wong

Currency Market Observations – 8 June 2015

Fundamental Outlook

The U.S manufacturing improves while export expedites in narrowing trade gap. Job market advances progressively with lower claims and rising payroll created. Rate hike topic returns to U.S. market as jobs climb. Eurozone moves in steadfast pace as central bank Draghi assures continuity in stimulus program. U.K. strives for more austerity measures to upkeep the recovery in property markets.

The U.S. consumer spending was flat in April by showing unchanged data after an upwardly revised 0.5 percent increase in March. The factory orders slipped 0.4 percent after a slightly upwardly revised 2.2 percent increase in March, probably due to rising Dollar.

The Institute of Supply and Management reports the April manufacturing index rose to 52.8 after falling for 5 straight months. Another report on U.S. trade deficit narrowed in April as exports hit a record high while imports fell. Trade gap shrank to USD40.9 billion in April, down from revised deficit of USD50.6 billion in March.

Another report by Institute for Supply Management said its services index fell to 55.7 from 57.8 in April. Jobless claims dropped 8,000 to a seasonally adjusted 276,000 for the week ended May 30, showing moderate growth. International Monetary Fund (IMF) warns FED that rate hike should delay till 2016.

The monthly widely expected job reports added optimism into American recovery after 280,000 jobs were created in May. Unemployment rate is slightly higher at 5.5 percent compared to 5.4 percent in April. Market traders widely speculate a rate hike over later of this year.

Eurozone reports the estimate for consumer prices for June to rise 0.3 percent on annual basis, while core prices estimate at 0.9 percent gains. Both data are higher than last month.

Eurostat reports that retail sales in 18 Euro countries grew 0.7 percent in April after it contracted 0.6 percent in prior month. Unemployment dropped to 11.1 percent against 11.2 percent in March.

European Central Bank (ECB) President Mario Draghi quells market fears of early exit to stimulus program. He reiterates that policymakers will maintain EUR60 billion monthly purchase in bond program and there is still a long way to achieve inflation near to 2 percent target.

Markit in London says U.K. manufacturing climbed to 52.0 after it was revised at 51.8 in March. Another report on services index fell to 56.5 in May and lower than 59.5 in previous month.

Another report on the construction index in U.K. developers industry has done better at 55.9 in May after it rose to 54.2 in previous month. Bank of England (BOE) reports the new mortgage approvals increased to 68,000 in April and higher than 62,000 in March.

The newly re-elected Conservative government has a strong mandate and it is expected to push for further budget cuts as part of its austerity agenda. Bank of England policymakers have maintained monetary policy unchanged at 0.5 percent in benchmark rate and quantitative easing program at GBP375 billion.

Technical Forecast

USD/JPY has reached above 125.00 targets as predicted last week. The market attained 125.72 that was created in December 2002 before it closed slightly lower for the weekend. This week, we expect the bulls will climb higher to 127.00 with 125.00 based as strong support. Falling below 125.00 supports need exercise risk control.

EUR/USD pulled up to 1.1380 highs last week and fell again. This week, we foresee the trend will hover sideways at 1.1000 regions while buying interest will emerge at 1.0920 regions. Market should not break above 1.1350 resistances again, otherwise a new pull up may reach beyond 1.1400 levels.

GBP/USD closed around 1.5250 regions for the weekend. We reckon the trend will thread sideways from 1.5050 – 1.5400 areas for coming week. Trend is still in consolidation phase till we see new fundamental factors. Trade cautiously in case the trend extends beyond the aforementioned range.

Dar Wong

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

DAR Wong is an approved fund manager in Singapore with 25 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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