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Britain Grows Faster than Pre-Crisis Peak

A guest post written by DAR Wong

Currency Market Observations – 28 July 2014

Fundamental Outlook

The US jobless claims continue to slide while housing market poises for recovery. Japan suffers trade balance due to export contraction and stagnant inflation growth. In Europe, UK economy strives to expand in optimism and has surpassed the pre-crisis peak in 2008. However, International Monetary Fund (IMF) cuts back on it global growth estimate for the year 2014.

The US consumer prices increased 0.3 percent in June after 0.4 percent gains in prior month. Excluding fresh food and energies, core data was up 0.1 percent. Existing houses climbed to 8-month highs by 2.6 percent gains to a 5.04 million annual rate in June.

American jobless claims slid 19,000 to a seasonally adjusted 284,000 for the week ended 19 July, making lowest record for past 8-1/2 weeks. On contrary, new home sales dropped 8.1 percent to a seasonally adjusted annual rate of 406,000 units after revised figure at 442,000 annual rates in May.

Another separate report on US order for durable goods in June increased 0.7 percent Core durable goods, excluding transportation, gained 0.8 percent and showed improvement in equipment demand.

Japan’s trade deficit was larger than economists forecast after exports unexpectedly fell in June. Trade balance contracted JPY822.2 billion (USD8.1 billion) and worse than forecast. Exports shrank 2 percent from a year earlier, while imports rose 8.4 percent.

Core consumer prices for Tokyo grew 2.8 percent in July at annual rates while national core consumer prices were at 3.3 annual rates, both in-line with expectation. Policymakers have reiterated many times to refrain from injecting new stimuli and wane market confidence.

German manufacturing PMI was at 51.9 for July after the previous month has been revised to 51.8 reading. Another separate data on services PMI was at 54.4 and above forecast. German Ifo business climate for July dropped to 108.0 from prior month 109.7 and signaled slowdown in manufacturing and wholesale sectors, coinciding with manufacturing PMI released earlier.

UK retail sale in June including fuel was up 0.1 percent from May but up 3.6 percent from a year ago. The Office of National Statistics (ONS) reports UK economy grew 0.8 percent in Q2 after gaining 0.8 percent in Q1. Growth has surpassed the pre-crisis peak in 2008 and analysts believe Britain will continue to move into expansion till year end.

International Monetary Fund (IMF) has downgraded its global growth forecast for 2014, citing the global economy will likely expand 3.4 percent this year, a cut of 0.3 percentage points from April’s estimate.

Technical Forecast

USD/JPY basically threads inside the range from 101.00 to 103.00 regions. The reluctance of injecting more monetary stimuli by central bank officials has strengthen the Yen and pushed market close to 101.00 levels. Technically, we reckon the trend to be trapped in this narrow range until it breaks out of it from fundamental changes. We foresee there may be a down move coming soon if market could not reverse higher than 102.00 resistances.

EUR/USD has gradually moved into 1.3400 regions as we predicted last week. The market might drop into 1.3350 – 1.3400 support areas in coming week before rebounding up. Technically, the market could face short-covering very soon due to profit-taking. Topside recovery may reach 1.3600 levels and also function as resistance regions.

GBP/USD has been inching lower last week till it close at 1.6964 on Friday. This week, market will be difficult to forecast as either way will be possible for the trend movements. The resistance lies at 1.7050 regions and needs to be violated if the uptrend resurges. On contrary, breaking below 1.6920 supports may drill further down to 1.6800 targets.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is an approved fund manager in Singapore with 25 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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