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American Payrolls Adds 223,000 in Strong Growth

A guest post written by DAR Wong

Currency Market Observations – 14 May 2018

Fundamental Outlook

The US adds higher payroll in May while GDP grows. The coming FOMC meeting in mid-June yields high chance for another rate hike. Eurozone climbs in consumer prices while Italy sinks into sovereign debt after political risk erupts. UK steps up manufacturing with higher lending to consumers.

The US Conference Board of Consumer Confidence grew 128.0 in May and matched forecast. Another report on prelim GDP grew 2.2 percent ended March on quarterly basis.

The US jobless claims for the week ended 26 May slid to 221,000 and better than forecast. Consumer spending rose 0.6 percent in April and best in 5 months’ record. The ISM manufacturing index grew 58.7 in May and highest in 3 months.

On Friday, American non-farm payroll added 223,000 jobs in May and way above forecast, giving signals of possible rate hike in mid-June. Unemployment rate fell to 18-year low at 3.8 percent.

President Trump administration says the government will release before 15 June on a list of Chinese imported goods worth USD50 billion to be imposed with 25 percent tariff.

China’s Government reports the manufacturing index remained strong at 51.9 in May while services index rose 54.9, both in steadfast pace. Another private report on Caixin manufacturing index grew to 51.1 in May and stayed on growing track.

German retail sales rose 2.3 percent in April and positive for the first time in 5 months. The prelim consumer prices grew 0.5 percent in May and best in 3 months’ record.

Eurozone flash estimate for consumer prices over 19 nations rose 1.6 percent in May from a year ago. Core prices grew 1.1 percent on annual basis. Both are above forecast and higher than previous month.

Political crisis in Italy might render the country to go for another poll on 29 July. Waning investors’ confidence in Italy has unwrapped the national debt at USD2.4 trillion that is larger than Greek debt.

UK net lending to consumer borrowers rose GBP5.7 billion in April and better than revised GBP4.4 billion in previous month. Markit reports the UK manufacturing index at 54.4 in May and higher than 53.9 in April.

Technical Forecast

USD/JPY rebound after the support at 108.00 remained strong last week. The trend will likely trade from 108.50 – 110.50 region in coming week amid sideways trend. We reckon traders will consolidate their positions for a while before deciding into making a new directional trend.

EUR/USD reversed after hitting 1.1509 bottom last week. Market has been dropping for 7 weeks amid rising Dollar and might continue higher. This week, we foresee the trend will trade from 1.1550 – 1.1850 region in mixed sentiment. Short-covering is expected for some profit-taking.

GBP/USD slows down in falling but will still be suppressed at 1.3450 level in case of recovery. The trend is rather uncertain as the dual forces will struggle from 1.3200 – 1.3450 this week. Breaking beneath 1.3200 support will slide to 1.3050 region before real bargain-hunting will emerge.

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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