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U.K. Property Weakens after BREXIT

A guest post written by DAR Wong

Currency Market Observations – 29 August 2016

Fundamental Outlook

The U.S. Federal Reserve (FED) Yellen expresses optimism in rate hike before year-end during Jackson Hole symposium. Japan may implement deeper into negative rates if economy falls further. U.K. property begins in weakness after BEXIT takes effect.

The U.S. new home sales rose 654,000 in July and so far is best number for this year, after revised at 582,000 gains in June. Existing home sales grew 5.39 million in July and lower than 5.57 million.

The U.S. jobless claims for the week ended 20 August was at 261,000 and matched forecast. Core durable goods, excluding transport equipment, advanced 1.5 percent in July and best since January, after contracted 0.4 percent.

A report on preliminary estimate for American GDP in Q2 grew 1.1 percent and matched forecast. In Jackson Hole meeting held on weekend, FED chair Yellen voiced optimism in imminent rate hike while watching recovery in payrolls and inflation recovery.

Bank of Japan’s Kuroda says he will not rule out for deeper negatives rates, to stimulate more lending from banks. Tokyo core consumer prices contracted 0.4 percent in August from a year ago and worse than forecast.

German Ifo business survey shows 106.2 index in August, worst in past 6 months and after 108.3 in July. Markit reports the German manufacturing index for August steadies at 53.6 index. German consumer climate index rose 10.02 in August and in line with expectation.

Eurozone’s manufacturing stands at 51.8 in August while another report on services index rose to 53.1, both in line with forecast.

U.K. mortgage approvals for July dropped to 37,700 and lowest in this year, after 39,800 in June. Effect of BREXIT has begun to stave property investors away from U.K. estates.

U.K. releases second estimate for GDP in Q2 at 0.6 percent gains and unchanged from first estimate. Another report on prelim business investment on quarterly basis ended June hiked 0.5 percent after a revised 0.6 percent contraction in March.

Technical Forecast

USD/JPY spiked up on Friday night after FED Yellen favored rate hike. This week, we reckon the trend may advance to 103.00 for quick pull-up sentiment. However, sinking below 100.00 benchmarks in case of fundamental changes could trigger new down trend if the bulls are countered.

EUR/USD has shown temporary bearish trend on Friday close. This week, the trend is more likely to trade lower inside the range of 1.1050 – 1.1350 regions. Dollar will be affected by the opinions of U.S. policymakers after Jackson Hole meeting. Trade cautiously with risk control.

GBP/USD topped off 1.3270 last week as Dollar recovered. This week, we forecast the trend will be supported at 1.2950 levels and trade in tight range beneath 1.3270 resistances. The market will probably swing for 1-2 weeks before we see a breakout for trend confirmation.

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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