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US FED Hike Rates by 25 BP Again

A guest post written by DAR Wong

Currency Market Observations – 19 June 2017

Fundamental Outlook

The U.S. Federal Reserve raises interest by 25 basis points for the second time this year. Bank of Japan and Bank of England remains unchanged in monetary policy. China maintains growth while in U.K. sees a decline in average earning among the citizens.

The U.S. producer prices stayed flat in May on monthly comparison. Core prices, excluding food and energy, gained 0.3 percent. Another separate report on consumer prices shrank 0.1 percent in May while core prices, excluding food and energy, also rose only 0.1 percent. Both data were below forecast.

American core retail prices, exclude automobiles, shrank 0.3 percent and worst in past 10 months. Weekly claims for jobless benefits dropped to 237,000 in the week ended 10 June and lower than 245,000 in previous week.

Industrial production was flat in May and lowest in past 3 months. American building permits expanded 1.17 million in May and lowest in past 9 months.

FED Yellen raises 25 basis points in fed fund rate and brings it to 1.0 – 1.25 percent, matched market forecast. Yellen reiterates that inflation may be slow but will advance towards year-end.

China’s industrial production in May matched consensus by gaining 6.5 percent on annual basis. Fixed asset investment on non-rural facilities rose 8.6 percent from a year ago and maintained growth.

Japan’s core machinery orders, excluding ships and utilities, shrank 3.1 percent in April after positive gains in previous month. Producer prices rose 2.1 percent in May from a year and kept up with the pace.

Bank of Japan stays unchanged in its monetary policy. Overnight deposit rates with central bank remains at negative 0.1 percent while annual monetary expansion at JPY80 trillion.

German ZEW sentiment expands at 18.6 in June and lowest in 3 months’ record. European Central Bank President Draghi says the stimulus may extend till early 2019 for support the recovery.

U.K. consumer prices rose 2.9 percent on annual basis in May and highest since June 2013. Retail prices also charted 5-year high at 3.7 percent growth in May from a year ago.

In U.K., average earning index on quarterly basis ended in April rose 2.1 percent, worst in 12-month record. Monthly claimant counts for jobless benefits rose 7,300 in May, least jump in 6 past months after 22,000 filings in April. Unemployment stays at 4.6 percent.

U.K. retail sales swung down to minus 1.2 percent in May and below forecast. The Bank of England holds monetary policy unchanged with overnight lending rate at 0.25 percent; asset purchase program at GBP435 billion.

Technical Forecast

USD/JPY bounced from 109.00 bottom last week and settled around 110.60 before weekend. Technically, the market is prone to weakness while resisted at 111.50 region. This week, the trend may decline again but constricted from 109.00 – 111.50 range.

EUR/USD has revealed a toppish patter on day-chart. The trend is currently capped under 1.1250 while prone to test 1.1120 support. We reckon the trend will thread sideways inside this range until it breaks into either new directional headway. Risk control is advised in case of adversity against your position.

GBP/USD is uncertain of its directional trend while hovering around 1.2800 area. The market is likely to poise from 1.2650 – 1.2850 range until a new breakout is seen. Technically, we foresee a likelihood in either direction until U.K. new government begins the negotiation of BREXIT with European Union before end June.

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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