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Inflation Seen in Global Large Economies

A guest post written by DAR Wong

Currency Market Observations – 20 February 2017

Fundamental Outlook

The U.S. reveals inflation signal in consumer and producer prices while Federal Reserve (FED) chair hints imminent rate hike. China also reports better inflation on annualized rate. U.K. shows higher consumer prices amid dropping claimant counts. British earnings stabilize with unemployment unchanged.

The U.S. producer prices rose 0.6 percent in January on monthly basis and twice the forecast, showing highest record in past 7 months. Federal Reserve (FED) Yellen comments that rate hike should be timed ahead instead of delaying too long. The U.S. overnight lending rates has been maintained at near to zero for 7 years and have raised twice since then.

The U.S. mortgage delinquencies for final quarter on home loans was reported at 4.80 percent and higher the Q3 at 4.52 percent. Consumer prices grew 0.6 percent in January while core prices gained 0.3 percent, both were higher than forecast on monthly basis.

Similarly, American retail sales rose 0.4 percent while core retail sales, excluding automobiles, jumped 0.8 percent, both also show better performance and valid grounds for policymakers to hike rate in near future. Weekly claims for jobless benefits rose lesser than forecast at 239,000 for the week ended 11 February.

American monthly report on building permits rose to 1-year high at 1.29 million in during. Housing starts fell to 1.25 million from 1.28 million in December.

China’s consumer prices rose 2.5 percent in steady pace in January from a year ago. Another report on producer prices also jumped 6.9 percent on annualized rate after it gained 5.5 percent in December.

Japan’s prelim GDP for Q4 grew 0.2 percent but fell short of 0.3 percent forecast. The state visit of Prime Minister Shinzo Abe to U.S. meeting trump last week has won an increment of approval rating to 62 percent from Japan’s citizens.

Eurozone GDP grew 0.4 percent in Q4 but below forecast. Industrial production contracted 1.6 percent in December after 1.5 percent growth in previous month. Eurozone trade surplus for December rose EUR24.5 billion and higher than EUR22.2 billion in previous month.

British consumer prices rose 1.9 percent in January on annualized rates and consecutive higher for third month. Another report on retail price index also gained 2.6 percent from a year ago. The producer prices on monthly basis grew 1.7 percent and lower than 2.7 percent in December.

U.K. average earning index on 3-month basis ended in December expanded 2.6 percent and below forecast. Claimant count for jobless benefits dropped 42,400 in January and better than median forecast. Unemployment rate stays unchanged at 4.8 percent. A separate report on retail sales contracted 0.3 percent in January after previous month has been revised to minus 2.1 percent.

Technical Forecast

USD/JPY almost hit 115.00 tops last week and followed through a correction. This week, market trend will be uncertain while waiting for fundamental direction. Range is expected from 111.50 – 114.00 region but breaking in either way is possible for leading into new direction.

EUR/USD trade sideways last week in our prediction. This week, we reckon the trend will trade lower within 1.0480 – 1.0680 range from technical appearance. However, beware of unforeseen changes in case the bulls re-charge and pierce above 1.0680 resistance.

GBP/USD trades in tight range and movement has been constricted as we predicted. This week, our opinion remains unchanged by mapping the range from 1.2350 – 1.2600 region. No clue for guessing the directional trend since we are waiting for U.K. to announce more BREXIT procedures towards end of Q1.

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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