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The UK Increases in Public Borrowing

A guest post written by DAR Wong

Currency Market Observations – 28 September 2015

Fundamental Outlook

The U.S existing homes decline while new homes sales surges to 7-year high. FED Yellen reiterates of rate hike around year-end seasons. Japan slides in stagnated inflation and trigger wider domestic demand for stimulus. Prime Minister confirms the new goals to be rolled out soon. U.K. increases in public borrowing and may be signal of slowdown.

The U.S. existing homes sales rose 5.31 million in August and below median forecast, making first decline in past 4 months. Core durable goods, excluding transport equipment, remained unchanged in August after rose 0.4 percent in July.

Unemployment claims stayed at 267,000 for the week ended 19 September and held steady for past 3 weeks below 280,000 claims. New home sales rose 552,000 in August making 7-year high record, after the previous month was revised at 522,000 claims.

The U.S. economy expanded more than forecast in Q2 at 3.7 percent from March to June. Consumer spending, which accounts for more than two thirds of U.S. economic activity, was revised up to a 3.6 percent growth pace from the 3.1 percent rate reported in August.

FED Chair Janet Yellen against speaks in University of Massachusetts that rate hike will come sometimes around year-end but still depending on the progress of economic data.

Japan’s core consumer prices drop to minus 0.1 percent in September after it remained unchanged in August. Core prices in Tokyo also slides to minus 0.2 percent from on year basis. Consumer prices decline first time for the past 3 years and market expects more stimulus action from Bank of Japan.

Last week, Prime Minister Shinzo Abe said government has plan to target 3 new goals in order to achieve 20 percent increase in economic expansion. Yen slight receded and USD/JPY climbed to above 120.00 levels and reversed Japanese stocks from intra week lows.

German producer prices slid 0.5 percent in August after remained unchanged in July. Flash manufacturing grew little in September at 52.5 after revised growth at 53.3 reported in August. Another report on Ifo business climate that marks the commercial confidence grows to 108.5 in September from a year ago and better than forecast.

U.K. net borrowing in public sectors among government agencies increased in August to GBP11.3 billion and highest since February this year. British Bankers Association reports the mortgages approvals that make up 65 percent of mortgage lending in the country, poise flat at 46,700 in August and almost unchanged from July.

Technical Forecast

USD/JPY stays in neutral zone after reversing from the bearish signal predicted last week. Remarks of Shinzo Abe has changed the market sentiment. This week, we reckon sideways range will move from 119.00 – 121.00 regions. Traders wish to see real implement of fundamental stimulus by Bank of Japan before the prices could break beyond this range.

EUR/USD has been trading sideways as we predicted. This week, we foresee similar band will constrict the trend from 1.1100 – 1.1400 ranges until the direction takes either way. No clue for the headways now until we anticipate the strength breaks out of aforementioned range. Sizable price extension is expected once breakout initiates.

GBP/USD has been weak last week and declined to 1.5150 regions. This will be the support for coming week while we expect rebound. Range may take another margin dip at 1.5100 before recovering at 1.5400 regions. Risk control is necessary for picking bottoms.

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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