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Pound Rises to 10-Month High amid Growth

A guest post written by DAR Wong

Currency Market Observations – 02 December 2013

Fundamental Outlook

The U.S. economy shows uneven performance with decline in consumer confidence but a rise in building permits. Japan’s inflation gains in-line with expectation while jobless rate records at 4 percent. U.K. increases growth in Q3 and home lending grants have surged to 6-year high record. Central bank official says they will end the housing incentives and start focusing on issuing corporate loans.

The U.S. pending home sales slid 0.6 percent unexpectedly in October after followed 4.6 percent decline in prior month. However, building permits rose to highest levels in past 5 years with October data surged 6.2 percent to 1.03 million annualized rates. Conference Board’s index that measures consumer confidence fell to 70.4 in November from previously revised 72.4 figures.

The U.S. orders for durable goods dropped 2 percent in October after a 4.1 percent gain in September. Jobless claims in the week ended 23 November unexpectedly declined by 10,000 to 316,000, the fewest in two months. Analysts are skeptical of better job markets as more people could give up filing for benefits.

Japan core inflation for October rose 0.9 percent after prior month 0.7 percent gains, but still far from central bank’s target. Unemployment for same month remained unchanged at 4 percent. Yen slid to the weakest level in almost 6 months versus the Dollar as greenback continues to rise as counterbalance to strengthening European currencies.

Germany annual inflation rate rose to 1.6 percent from 1.2 percent in October. On the other hand, the inflation in euro-area gained at annual rate 0.9 percent from 0.7 percent in October, still less than half the target of central bank.

Another report on Eurozone economic confidence rose to 27-month high with the index increased to 98.5 from 97.7 in October. Unemployment unexpectedly fell to 12.1 percent in October from 12.2 percent a month earlier.

The U.K. growth measured by Gross Domestic Products (GDP) increased 0.8 percent in Q3. Business investment rose 1.4 percent, while exports dropped 2.4 percent. Bank of England (BOE) Governor Mark Carney says there is plenty of vacancy in labor markets and officials will not rush to raise interest rates even if unemployment drops to 7 percent.

BOE’s Financial Policy Committee announces it will end incentives for housing mortgage program and focus instead on issuing corporate loans. Mortgage approvals rose to highest record in 6 years after 67,701 mortgages were granted in October. It is time for switching the spearhead in expanding more corporate lending program to aid commercial recovery.

Technical Forecast

USD/JPY has surged to 102.50 regions due to strong rising Dollar. Technically, we reckon the trend may climb to 104.00 levels before turning down. The surge will be supported by counterbalancing the weakening Dollar against Pound and Euro. Currently, the support has been identified at 101.50 levels.

EUR/USD is on bullish trend. This week, we foresee the market may ascend further at 1.3720 regions before liquidation emerges. In case the market begins to drawdown, the immediate support will rest S1 – 1.3550 and S2 – 1.3470 levels. The fundamental of Eurozone is bullish and we predict the trend will be pretty firm for a while.

GBP/USD broke 10-month high at 1.6381 on Friday. The market is running on a bullish streak with immediate support identified at 1.6200 levels. This week, we foresee the trend may climb higher to reach 1.6450 regions in the wake of additional strong economic data. Meanwhile, continue to observe the services PMI in coming week that might lift the Pound higher.

Dar Wong

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

Wong is the founder and Principal Consultant of PWForex.com and holds a professional qualification in NASD series 3 and 5 approved by National Futures Association (USA).

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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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