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U.K. Commence BREXIT That Might Hurt Economy

A guest post written by DAR Wong

Currency Market Observations – 3 July 2017

Fundamental Outlook

The U.S. core durable goods and home sales improve. FED official comments job data and inflation are still weak and should not rush into rate hike. Germany keeps in strong growth pace while European Central Bank President Draghi emphasizes on supportive stimulus to aid recovery. U.K. commences BREXIT procedure that may drive an impact to economy.

The U.S. orders for core durable goods, excluding transport equipment, rose 0.1 percent after submerged into negative zone for past 2 months. Conference Board of consumer confidence rises to 118.9 in June and higher than revised 117.6 in May.

The U.S. pending home sales contracted 0.8 percent in May and improved from minus 1.7 percent in previous month. FED central banker Kashkari comments slow growth in jobs and low inflation are dampening economy recovery, hence should not rush into rate hike.

American jobless claims for the week ended 25 June stagnated at 244,000 and matched forecast. Final GDP for Q1 expanded 1.4 percent on quarterly comparison. Another separate report on consumer spending rose 0.1 percent in May, matching forecast but very at slow growth pace.

Japan’s retail sales rose 2.0 percent in May on a year ago and below 3.2 percent growth in previous month. Household spending declined 0.1 percent in May on year basis but still showing best data since February last year.

Another report on Japan’s unemployment jumped to 3.1 percent and worst in past 5 months. Consumer prices in Tokyo city stays flat in June and shows little change.

German Ifo business survey report covering from manufacturers to retailers, shows historical high at 115.1 in June versus 114.6 in previous month. German preliminary consumer prices rose 0.2 percent in June and recovers from negative figure posted in May. Another report on consumer climate rises to 10.6 this month and better than forecast.

European Central Bank President Draghi comments of broader recovery in economic growth, but stimulus must remain to support the pace.

Government of Brussels warns that BREXIT will deliver a blow to European Union’s common budget. Hence, the gap of new budget arising from U.K. withdrawal and new financial needs of member country should be clearly acknowledged.

Bank of England reports the net lending to consumers rose by GBP5.3 billion in May and highest since March 2016. New mortgage approvals totaled 65,000 in May and matched forecast.

British current account deficit widened to GBP16.9 billion in May and worse than GBP12.1 billion last month. Final GDP grew 0.2 percent in the quarter ended March and matched expectation.

Technical Forecast

USD/JPY rose last week as the contingent trend predicted by us. This week, we reckon the support will sit on 111.70 and the continual rise may reach up to 113.50 as Yen weakens. Falling below 111.50 needs to abandon your long view.

EUR/USD rose in strong demand after Draghi’s comment. Market may ascend further this week while sitting on 1.1350 support. Out target aims at 1.1600 – 1.1650 for short squeezing market before profit-taking emerges. Short traders need to control your risk efficiently to prevent accumulating loss.

GBP/USD also has been behaving strong in rising. The simultaneous ascension in Dollar, Euro and Pound will put a lid on Gold prices as flight to quality. This week, we foresee the Pound will encounter resistance at 1.3050 area and begins to correct. Range is more likely to trade from 1.2850 – 1.3050 region.

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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