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Bank of England Cuts Growth Forecast

A guest post written by DAR Wong

Currency Market Observations – 18 May 2015

Fundamental Outlook

The US economy shows sign of continual growth in workforce with dropping claims. Producer prices still stays weak in tandem with stagnated retail sales that interpret a possible delay in rate hike by policymakers. Eurozone stays flat while UK policymakers also cut down in their forecast for annual growth.

The US small business confidence increased in April. National Federation of Independent Business reported its Small Business Optimism Index rose 1.7 points to 96.9 from previous month 95.2.

American retail sales remained unchanged in April as households cut back on spending in purchasing large items. March data has been revised higher to 1.1 percent gains. Excluding automobiles, core retail sales climbed 0.1 percent and below forecast.

The US Labor Department says import prices fell 0.3 percent last month after slipping 0.2 percent in March. Another report on jobless claims for the week ended 9 May dropped to 264,000 and lesser than forecast. Producer prices for April slid 0.4 percent while core prices down 0.2 percent. Both were below forecast and indicated sliding cost in manufacturing, thus might be a sign of delay in rate hike.

Before the weekend, industrial production released by US Commerce Department declined 0.3 percent in April against a positive consensus, showing slowdown in output. The University of Michigan reports its prelim consumer sentiment 88.6 for this month versus 95.9 in March, probably due to slowdown in consumer spending and manufacturing.

Japan’s consumer confidence in April was reported at 41.6 after it was read at 41.7 in prior month. Data is almost unchanged but not showing huge jump due to stagnation in Yen currency. The prelim machinery tool order gained 10.4 percent in April from a year ago and lower than the annualized rate of 14.9 percent growth in March.

German prelim estimate for the growth in Q1 marked 0.3 percent gains in Gross Domestic Product (GDP). The final consumer prices in April stayed unchanged and signaled stagnation.

UK manufacturing production increased 0.4 percent in March after February month was revised to 0.5 percent gains. Industrial output rose 0.5 percent and much better than forecast.

Claims for jobless benefits in UK workforce dropped 12,600 in April versus 16,700 revised in March. Unemployment declined to 5.5 percent in March and lowest since 2008. Due to weakening productivity, central bank’s forecasts for GDP growth in 2015 have been cut from 2.9 percent to 2.5 percent, while 2016 predictions also bring down from 2.9 percent to 2.6 percent.

Technical Forecast

USD/JPY continues to thread sideways after unable to close above 120.00 benchmarks last week. The market is trapped from 118.50 – 120.50 ranges as the trend gets into narrower end. We reckon to take close observation on this imminent breakout in order to fund new profitable entry.

EUR/USD closed above 1.1400 resistances and will probably climb higher in coming week. The market remains bullish and carries much potential to reach up at 1.1650 this week. Support will emerge at 1.1350 – 1.1400 regions but breaking below due to unforeseen circumstances will indicate the beginning of reversal drawdown.

GBP/USD closed on Friday with a mild fatigue sign after fell off recent 1.5815 highs. Technically, we reckon strong support at 1.5550 regions in case of drawdown correction in coming week. However, the chances of moving up to test 1.5900 tops is pretty large before the whole uptrend completes.

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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