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Bank of England Raises Rates after a Decade

A guest post written by DAR Wong

Currency Market Observations – 6 November 2017

Fundamental Outlook

The U.S. economy adds more jobs while Trump’s tax -reform is reviewed for implementation. Bank of Japan remains unchanged in monetary policy. Bank of England raises 25 basis points in a decade in-lieu of expecting inflation.

The U.S. consumer spending grew 1.0 percent in September and best record in 18 months’ record. Conference Board of consumer confidence climbed higher to 125.9 in October.

The U.S. ISM manufacturing index dropped to 58.7 in October from 60.8 in previous month. Jobless claims declined to 229,000 for the week ended 28 October. The monthly payroll added 261,000 jobs in October and the unemployment rate was 4.1 percent showing passable benchmark from the storm-weakened September.

President Trump has picked Jerome Powell as the next FED Chair in coming February. Trump administration has released the tax-reform bill by cutting the corporate tax to 20 percent. Currently, the tax plan is under review and some conservative Republicans estimate the federal deficit will be boosted by USD1.5 trillion in 10 years after the front-end advantage is digested.

China’s manufacturing index lowered to 51.6 in October versus 52.4 in September. Another report on services index poised steady at 54.3 before October ended.

China’s Caixin manufacturing index remained unchanged at 51.0 in October, showing strong soon of growth above 50.0 benchmark. Another report by Caixin services index rose 51.2 in October and better than prior month.

After Prime Minister Abe has won the election, Bank of Japan remains unchanged in monetary policy. Short-term rate stays at minus 0.1 percent while 10-year Government Bond yield remains at zero level. Inflation in the country stays elusive from 2.0 percent target while core prices gained 0.8 percent in September.

In Eurozone, consumer prices in October rose 1.4 percent from a year ago while core prices grew 0.9 percent on annual basis. GDP for Q3 seasons expanded 0.6 percent and beat forecast.

Markit in London reports U.K. manufacturing expanded to 56.3 in October in resilient growth. Construction index rose to 50.8 in October. Services index in U.K. expanded 55.6 and best record in past 6 months.

Bank of England raises interest rate for the first time in a decade by 0.25 percent, bring the benchmark rate to 0.5 percent. Policymakers foresee strong growth in inflation and will stay at 3 percent for the whole fiscal year.

Technical Forecast

USD/JPY closed on Friday at the topside of resistance by sitting at 114.00 region. This week, we reckon the trend will charge higher to 115.50 if it could stand above 113.50 without breaking. In case of sliding beneath 113.50, the trend may return to 112.50 support. In general view, the Dollar seems to be edging up while traders expect the Euro to slide further as an inverse factor.

EUR/USD shows bearish pattern on day-chart after it closed at 1.1608 on Friday. This week, we foresee strong resistance lies at 1.1650 in case of pull up retracement. However, the probability of market trend sliding is prone to test 1.1400 region. The separatism in Spain and uncertainty after stimulus after December wane some confidence in Euro traders.

GBP/USD dropped after last Thursday’s rate hike as traders expect the market has built in for higher rates. This week, we foresee the trend may sink lower to throw long traders out of market by reaching down to 1.2850 – 1.2900 region. Market is seen with heavy resistance for the time being at 1.3200 in case of recovery.

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

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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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