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U.K. Conservative Party Fails to Secure as Government

A guest post written by DAR Wong

Currency Market Observations – 12 June 2017

Fundamental Outlook

The U.S. is facing ordeal as President Trump faces the investigation on his supposed collusion to Russians. European Central Bank is ready to extend stimulus as the package will end in December. U.K. election results in hung parliament after the Conservatives fail to secure majority seats.

The U.S. ISM services index for May expanded to 56.9 and matched forecast. Markit reports the services index rose to 53.8 in May and lower than previous month 54.0. American jobless claims reduced to 245,000 in the week ended 3 June and lower than revised 255,000 in previous week.

The testimony given by ex-FBI director James Comey in the investigation against President Trump might pinpoint Trump’s obstruction to justice. According to Comey, he was asked to halt investigation on Flynn that might be linked to collusion with the Russian operatives during the election seasons.

China’s trade surplus grew USD40.8 billion in May, under expectation but still higher than previous month. Consumer prices matched the expectation by expanded 1.5 percent in May from a year ago. Another report on producer prices eased to 5.5 percent gains on annual basis and lowest in past 5 months.

Japan’s leading indicators grew 104.5% in April and matched forecast. Another report on final GDP in Q1 grew 0.3 percent, under consensus and lower than 0.5 percent in the previous quarter. The current account surplus expanded JPY1.81 trillion in April and better than prior month.

Eurozone’s GDP growth for Q1 ended March was revised at 0.6 percent and matched forecast. German trade surplus grew EUR19.8 billion in April.

European Central Bank holds the monetary policy unchanged. President Mario Draghi says rate cut for future is not in consideration but policymakers are ready to extend the stimulus. Central Bank has made inflation forecast at 1.5 percent growth in 2017, falling short from the 2 percent benchmark.

U.K. manufacturing production rose 0.2 percent in April and below forecast, after it showed minus 0.6 percent contraction in March. Trade deficits from import /export activities narrowed to GBP10.4 billion and better than expectation.

U.K. General Election has completed with a hung-parliament. Conservative Party fails to secure more than 50 percent of the 650 seats that would deter it to form a new government. The Conservative Party led by Theresa May wins 318 seats while Labor Party secures 261 seats among other minority winners. Instead of electing a new Prime Minister after forming a new coalition parliament, Theresa May is seeking permission from the Queen to lead the government by continuing her existing role.

Technical Forecast

USD/JPY has gained supported at 109.00 and closed at 110.30 region for the weekend. The trend will continue to behave resilient in short-covering for the coming week. Range is expected to escalate higher from 109.50 – 112.00 region in near future. Abandon your long-view in case the trend plunges below 109.00 level.

EUR/USD topped off recent high at 1.1280 after countering strong resisting force. We expect the trend to begin consolidation by threading sideways from 1.1080 – 1.1280 range in coming week. Probability of bearish sentiment is higher as market favors a weaker Euro for economic recovery.

GBP/USD has fallen for 2 days before weekend as U.K. election shows jittery. Technically, we reckon the range will be constricted from 1.2600 – 1.3000 region this week for consolidation while investors observe the progress in post-election. Breaking in either direction is possible but unpredictable at the moment. Hence, risk control is recommended to safeguard your position.

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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