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Bank of England Keeps Policy Unchanged

A guest post written by DAR Wong

Currency Market Observations – 16 May 2016

Fundamental Outlook

The U.S. economy contradicts in slower demand for inventories while retail sales rise. Job market tightens as claims increase. China reports higher trade surplus but inflation stagnates. Bank of England remains unchanged in interest rate policy amid holding to asset purchase program.

The U.S. wholesale inventories rose 0.1 percent in March after and higher than revised minus 0.6 percent in February, signaling low demand in markets. Weekly crude inventories ended 7 May was slashed by 3.4 million reserves and spiked up oil prices.

American jobless claims rose to 294,000 in the week ended 7 May and highest in past 12 months, rising concerns of slowdown in job markets. Retail sales rose 1.3 percent at 10-month high after it reversed from minus 0.3 percent decline in March. Core retails sales, excluding automobiles, up 0.8 percent and best since last June, signaling confidence in general demand.

Producer prices gained 0.2 percent after it slid 0.1 percent in March. Slight recovery in inflation is seen in U.S. economy. Market traders are keeping alert on the June FOMC for rate decision before expecting next market movement.

China’s trade surplus for April charted at CNY298 billion and higher than forecast. Consumer prices on yearly basis recorded 2.3 percent in April and match median forecast. Producer prices shrank 3.4 percent from a year ago and better than previous month 4.3 percent contraction.

Greece erupts in street riot after government implements new cut in spending in order to win new bailout package from European Union in June. Fear of debt crisis begins to trigger alertness in European arket.

German preliminary GDP rose 0.7 percent in Q1 and double the previous quarter at 0.3 percent gains. However, final consumer prices dropped 0.4 percent in April after it slid 0.2 percent in March.

U.K. manufacturing production rose 0.1 percent in March after previous month was revised to minus 0.9 percent. As global attention is staked on Brexit issue, Prime Minister warns of serious economic damage should the national referendum vote for Brexit on 23 June.

Bank of England remains status-quo in interest rates and all 9 members voted for no rate hike. Asset purchase program stays unchanged at GBP375 billion.

Technical Forecast

USD/JPY met 109.50 resistances last week. Technically, we shall observe the trend for breaking up this week if the bulls might possible reach 111.00 – 111.50 regions. Failure to pierce above 109.50 will reverse the market sentiment and re-test 107.50 levels.

EUR/USD has been trading weak as it closed at 1.1309 for the weekend. This week, the trend is prone to decline if Dollar strengthens for short-term recovery. Support is identified at 1.1200 that might cause sideways consolidation if the prices trade here. Upside resistances will emerge at 1.1450 regions in case of upward retracement.

GBP/USD closed with bearish pattern on Friday at 1.4350 regions. This week, we foresee the resistance will emerge at 1.4400 and prone to drive the trend lower at 1.4120 levels. Trade with caution as we expect some swings to occur in Pound due to the consistent debate of Brexit until June.

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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