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IMF Lowers Growth Forecast in Europe

A guest post written by DAR Wong

Currency Market Observations – 12 November 2018

Fundamental Outlook

The US midterm election has revealed the challenge to be faced by President Trump as Democrats regain power in Government House. American economy stays on inflation pace. International Monetary Fund lowers growth outlook in Europe due to much uncertainty in market turbulence. UK stagnates in growth after GDP does not exceed expectation.

The US ISM services index rose 60.3 in October and remained on growing pace. The jobless claims report at 214,000 in the week ended 3 November and matched forecast.

America producer prices rose 0.6 percent in October while core prices climbed 0.5 percent. Both reports were above forecast and signal inflation in US economy.

After the US midterm election, the outcome has split the power of Congress with Democrats regaining the majority power in the House of Representatives while Senators seats still controlled by Republicans. Market analysts reckon President Trump will face more challenge in implementing new policies for the remaining term as voting majority will be leaned on Democrats.

China’s trade surplus expanded USD34 billion in October and higher than previous month, maintaining strong growth in import /export trades.

China producer prices rose 3.3 percent in October from a year ago, slower than 3.6 percent annualized gains in previous month. Another report on consumer prices expanded 2.5 percent from a year ago, matching the forecast.

Japan’s bank lending to consumers and businesses grew 2.2 percent in October from a year ago. Another report on core machinery order fell 18.3 percent in September on monthly comparison and worse in 4-1/2-year record. The current account surplus grew JPY1.33 trillion in September and declined for sixth consecutive month.

International Monetary Fund (IMF) downgrades the growth outlook for European economy in 2018 and 2019 due to external turbulences like US-China trade war and uncertainty in BREXIT deal.

Markit reports the UK services index grew 52.2 in October and slowest in 7-month record. Preliminary GDP rose 0.6 percent in Q3 season and matched forecast. Another report on manufacturing production gained 0.2 percent in October and at highest record in past 3 months.

Technical Forecast

USD/JPY marched higher last week as Dollar appreciated. This week, there is a possibility to test the recent top at 113.50 level before winding down. Support is temporarily seen at 113.30 area and tight range is expected to occur for a while in market due to Dollar stagnates.

EUR/USD reversed down after last mid-week from 1.1500 area. Technically, support seems to be resilient at 1.1300 area with a potential triple bottom formation. This week, we reckon a tough market trend will prevail as it may break lower than aforementioned support, otherwise reverse into a tight consolidation capped below 1.1500 level.

GBP/USD has been suppressed thrice on day-chart below the EMA200 line. This week, we forecast the trend will be contained from 1.2950 – 1.3130 region while making a consolidation. We foresee the market will progress into a bear trend on long-term after the end of this temporary sideways pattern.

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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