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Bank of England Holds Policy Unchanged

A guest post written by DAR Wong

Currency Market Observations – 18 April 2016

Fundamental Outlook

The U.S. faces challenge in lifting inflation. Japan is hit by earthquake and wanes investors’ confidence. China grows marginally in GDP data after supported by stimulus. Bank of England remains policy unchanged.

The U.S. retail sales dropped 0.3 percent in March after household cut back on purchases and spending compared to the data remained unchanged in February. Core retail sales, excluding automobiles, rose 0.2 percent after it was revised at par in previous month.

American producer prices slid 0.1 percent against a positive forecast after it dropped 0.2 percent in February. Consumer prices barely rose 0.1 percent in March, undermining slow growth in recovery. Core prices also up 0.1 percent after it gained 0.3 percent in February.

Weekly claims for American jobless benefits ended 9 April fell to 153,000 and lesser than revised 266,000 in prior week. Traders predict zero chance of rate hike in April by Federal Reserve.

China consumer prices rose 2.3 percent in March from a year ago. Another report on producer prices slid 4.3 percent on annualized rates but better than prior month at 4.9 percent, indicating a slowdown still looms in manufacturing sector.

China trade balance grew in line with median forecast at USD29.9 billion compared to USD32.6 billion surplus made in February. The Gross Domestic Product rose 6.7 percent in Q1 compared to 6.8 percent gains in the previous quarter ended December.

Industrial output including mines and utilities grew 6.8 percent in March from a year and highest since last June. Analysts perceive the stimulus implemented for past months in devaluing currency and cutting bank ratio have taken effect in supporting growth amid slowdown.

Last Thursday, southern Japan has been hit by 6.4 magnitude earthquake. Traders are concerned of the financial markets being dumped while Finance Minister Taro Aso expresses concern on rising Yen that will slow down the growth of inflation.

Industrial production for Eurozone including utilities and mines declined 0.8 percent in February after it was revised with 1.9 percent gains in January. Consumer prices stayed unchanged in March on annualized bases. Core prices, excluding fresh food and energies, grew 1.0 percent from a year ago.

Trade surplus in Eurozone grew EUR20.2 billion in February and lesser than revised EUR22.8 billion in January. Policymaker from central bank stresses on no intention to devalue Euro despite negative rate in induced into market.

U.K. consumer prices climbed 0.5 percent in March on annualized rates, highest since December 2014. Retail Prices measured for basic consumption by household jumped to 1.6 percent from a year ago after it rose 1.3 percent in February. Bank of England keeps base rates unchanged at historical low 0.5 percent while all 9 committee members voted for no rate hike.

Technical Forecast

USD/JPY recovered from below 108.00 levels last week but fell short of 110.00 targets after earthquake erupted. This week, we reckon the trend may head into either direction while depending on fundamentals. Range is expected to move from 108.00 – 110.00 regions. Breaking beyond the aforementioned range will indicate new direction.

EUR/USD has encountered much selling pressure above 1.1400 levels. This week, we predict the market might trade from 1.4150 – 1.1350 ranges while prone to slide after it pulls up in early week. Risk control needs to be reinforced if it pierces above 1.1400 levels.

GBP/USD also exhibits bearish sentiment on technical outlook. Threats of Brexit issue has instigated traders to short Pound after every pull-up. This week, we reckon strong resistance will emerge at 1.4250 – 1.4300 regions. Sliding back to 1.4000 is highly possible if the aforementioned resistance can be safeguard well.

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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