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Bank of England Holds Monetary Policy Unchanged

A guest post written by DAR Wong

Currency Market Observations – 14 December 2015

Fundamental Outlook

The U.S jobless claims rise to 3-months high while retail sales stay flat. Producer prices reverse higher against expectation ahead of final Federal Open Market Committee (FOMC) meeting for this year. China persists in export decline while manufacturing cost slides again. Bank of England holds benchmark rates unchanged amid maintaining bond purchase at GBP375 billion.

The U.S. jobless claims rose again in the week ended 5 December at 282,000 and highest in past 3 months. American retail sales maintained 0.2 percent gains in November. Core retail prices, excluding automobile sales, grew 0.4 percent and above forecast.

Another data on producer prices climbed 0.3 percent versus minus 0.4 percent in October, suggesting increasing cost in manufacturing. Traders are watching the outcome of FOMC meeting in next week for interest rate adjustment.

China’s exports fell 6.8 percent from a year ago, dropping for a fifthmonth, while imports fell 8.7 percent over the same period. Trade surplus narrowed to CNY343 billion (USD54.1 billion) from the record high of CNY393 billion (USD61.6 billion)in October.

Another separate report on China’s consumer inflation climbed 1.5 percent in November from a year ago while producer prices slid 5.9 percent. Above data shows consumer demand is higher than median forecast but demand slow in declining manufacturing cost.

Japan’s current surplus grew JPY1.49 trillion in October and above previous month JPY780 billion gains. Final GDP report for Q2 expanded 0.3 percent and better than forecast. Another report on core machinery orders surprised market with 10.7 percent gains in October against negative forecast, making highest record since March 2014.

German industrial production including mines and utilities rose 0.2 percent in October after it dropped 1.1 percent in previous month. Trade surplus grew EUR20.8 billion in October and higher than previous month at revised EUR19.2 billion.

U.K. manufacturing production makes surprise decline by 0.4 percent after it made revised 0.9 percent gains in September. Another separate on industrial production, including mines and utilities, grew 0.1 percent in October.

Last week, Bank of England held central meeting with unchanged policy at 0.5 percent benchmark rates while maintaining asset purchase program at GBP375 billion. All 9 members voted against increasing rates.

Technical Forecast

USD/JPY slides as we predicted last week. The market is prone to fall further on coming week as we foresee the trend will drive down to 119.00 regions. Currently, resistance will emerge at 122.50 levels in case of reversal but the outcome of trend direction will largely depend on U.S. FOMC in coming week. Picking short entry with risk control may give better winning probability.

EUR/USD hits 1.1050 resistances for time being and takes a breather. This week, we reckon piercing above 1.1050 levels will climb higher to 1.1200 areas if Dollar Index weakens further. In case of a dip down, the trend will possibly be supported at 1.0800 regions. Many short sellers will be in frenzy for short-covering if the trend rises fast after middle this week.

GBP/USD has been sitting on 1.5020 supports while it closed at 1.5220 regions before weekend. Technically, the trend carries potential to ascend to 1.5400 in coming week in-line with Euro surge. However, beware of unexpected drawdown in case of U.S. interest rate movements that will affect Dollar strength. Abandon your long-view if it drives below 1.5000 levels.

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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