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Bank of England Holds Rate Unchanged

A guest post written by DAR Wong

Currency Market Observations – 14 September 2015

Fundamental Outlook

The U.S. jobless claims stay consistent amid mild increment in consumer demands. Japan slows down in machinery orders and analysts expect more stimuli to propel growth. Bank of England holds rate unchanged but warns of global stagnated economy. Investors keep alert for U.S. FOMC meeting in coming week.

The U.S. weekly claims for jobless benefits stayed consistent at 275,000 in the week ended 5 September. Wholesale inventories dropped 0.1 percent in July and picked up by more demands, while compared to higher reading at revised 0.7 percent gains during June.

American producer prices remained unchanged in August versus an expected decline of 0.1 percent. Core prices rose 0.3 percent after the impact of avian flu virus outbreak since early this year still lingers. Investors remain alert for the FED meeting on this coming Wednesday for possible rate adjustment as widely speculated in market.

Japan’s growth in Q2 shrank lesser than median forecast. The Gross Domestic Product (GDP) that measures overall economic progress contracted an annualized 1.2 percent in the period from April-June, less than the initial estimate of a 1.6 percent contraction. Current surplus grew JPY1.32 trillion in July and better than expected.

Another separate report that measures Japan’s consumer confidence rose to 41.7 in August and better than forecast. The preliminary machinery tool orders contracted 16.5 percent in August on year basis and indicated lethargy in manufacturing sectors. Core machinery orders also slid 3.6 percent against positive forecast. Producer prices dropped 3.6 percent in July and worse than prior month on year comparison.

German final consumer prices stayed unchanged in August while wholesale prices slid 0.8 percent against positive forecast. Leading economy in Eurozone indicates a slowdown in manufacturing demands that worry investor.

U.K. manufacturing declined 0.8 percent in July after it rose 0.2 percent in previous month. Trade deficits widened to GBP11.1 billion in July from revised GBP8.5 billion in June. Construction slumped to 0.1 percent in July from positive 0.9 percent gains in previous month.

In last week meeting, Bank of England (BoE) held benchmark rates unchanged at 0.25 percent at 6-1/2 year record low. Asset purchase program remains at GBP375 billion. Central bank governor Mark Carney warns of slowing world trades, exposures of U.K. banks to emerging banks and impact of China’s slowdown has yet fully revealed.

Technical Forecast

USD/JPY bounced off 118.50 lows and hovers in firmness around 120.50 areas. This week, we foresee the range will be restricted to 118.50 – 121.50 regions but trend seems vulnerable to decline from the topside after mid-week. There is a possibility to see decline in this market trend if Japan fails to jerk up some stimulus in maintaining weak Yen.

EUR/USD has climbed up from recent bottoms 1.1087 in gradual recovery. Technically, we predict the trend will progress in firm sentiment and return to 1.1500 tops this week. However, the prices should not break below 1.1200 supports lest the sentiment changes into bear direction.

GBP/USD has recovered about 300 pips from recent low at 1.5151 levels. This week, we reckon the trend will be capped at 1.5600 resistances if it advances further. Immediate support is laid at 1.5250 areas, which will be ambushed by bargain-hunters. Trade with risk management to control target losses.

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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