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UK Regains Momentum in Growth

A guest post written by DAR Wong

Currency Market Observations – 16 June 2014

Fundamental Outlook

The US job market steadies in reducing weekly claims. Overall inflation is still below target benchmarks of policymakers after producer prices decline unexpectedly. China maintains momentum in growth at steady inflation measure. UK shows stronger economic recovery amid expectation of rate hike before year end.

The US posted USD130 billion budget deficit in May and the smallest shortfall for the first 8 months of a fiscal year since 2008. Better job employment has helped in pulling the deficit narrower.

Weekly jobless claims among Americans climbed by 4,000 in the week ended June 7 to 317,000. The data holds below the year-long average level and signals progressing growth in job markets. However, retail sales rose 0.3 percent in May while core retail sales climbed 0.1 percent, both below consensus.

The US factory gate prices dropped unexpectedly in May. Producer price index was down 0.2 percent while core prices were minus 0.1 percent, suggesting slow demand for inflation.

China shows strong consumer prices at 2.5 percent from a year ago in May. Another separate report on industrial production grew 8.8 percent in same month from a year ago and matches consensus.

Japan’s growth measured by Gross Domestic Product grew an annualized 6.7 percent in the first 3 months of the year, higher then preliminary estimate. Current account surplus rose JPY187.4 billion (USD1.83 billion) in April but smaller than estimate.

Japan’s Prime Minister Shinzo Abe aims to cut corporate taxes in 2015, targeting to ensure growth in corporations with higher profit margin. Government also works towards maintaining sustainable finances for businesses to enhance survivals.

UK manufacturing production rose 0.4 percent in April, making fifth consecutive increase and gaining at longest streak since 2010. Jobless rate dropped to 6.6 percent in the 3 months through April from 6.8 percent in the first quarter. Claimant counts for jobless benefits were down 27,400 in May and better than expectation.

Pound reversed higher after mid last week with better economic data. Market analysts expect the Bank of England (BOE) might hike interest rate faster than most expected, probably before this year-end.

Technical Forecast

USD/JPY moved in very tight range from 101.60 – 102.80 regions last week. This week, we expect similar range bound sentiment unless the trend could extend beyond either extreme of the aforementioned range. Literally, we reckon the market will be constricted within 101.00 – 103.00 regions.

EUR/USD has come down to our expected support at 1.3500 regions as outlined last week. Technically speaking, the market will either trade from 1.3450 – 1.3600 ranges or jump higher into the 1.3600 – 1.3750 ranges upon recovery. This week, we reckon the trend will climb into the high range regions above 1.3600 after mid week.

GBP/USD reversed up to above 1.6900 levels after stronger British economic data were released last week. The market is sitting on 1.6800 supports now and might ascend above 1.7000 benchmarks in coming week. Breaking above 1.7000 levels might aim higher at 1.7120 due to market short squeeze!

Dar Wong

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

DAR Wong is an approved fund manager in Singapore with 25 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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