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Federal Reserve Increase Interest Rate

  • DAR Wong
  • 20 March 2017

Fundamental Outlook   The U.S. Federal Reserve hikes interest rates while Bank of Japan and Bank of England maintains unchanged. Netherland’s Prime Minister Rutte wins election and continues his reign on government amid public cheers. Euro currency recovers after the voting outcome.

American producer prices rose 0.3 percent in February and above forecast. Another report on core prices, excluding food and energy, also gained 0.3 percent. Consumer prices rose 0.1 percent in February versus 0.6 percent gains in previous month. Core prices, excluding food and energy, expanded 0.2 percent and matched forecast.

Federal Reserve increases overnight fed fund rate by 25 basis points and bring the borrowing cost to 0.75 – 1.0 percent. Precious metals and Dow Jones markets rose after the announcement as investors interpreted the prices have built into the hike by preceded decline over past 2 weeks.

The U.S. unemployment claims for the week ended 11 March steadied at 241,000 without much changes. Building permits expanded 1.21 million in February and lower than 1.29 million in previous month. Another report on housing starts jumped to 1.29 million and highest in past 4 months.

China industrial production on January-February kicked off high note by rising 6.3 percent on annual basis. Retail sales expanded 9.5 percent and versus 10.9 percent gains in December.

Japan’s core machinery orders shrank 3.2 percent in January after it gained 6.7 percent in previous month. Producer prices rose 1.0 percent from a year ago in February and matched forecast.

Bank of Japan maintains monetary policy unchanged after U.S. FED hiked interest rates. Policymakers hold on to JPY80 trillion of bonds holding on annual pace to keep a loose monetary liquidity in market.   

German ZEW economic sentiment on institutional businesses reports 12.8 percent growth in March and higher than 10.4 percent gains in last month. Industrial production on Eurozone, including mines and utilities, rose 0.9 percent in January.

Netherland’s center-right Prime Minister Mark Rutte chalks a glorious victory over anti-Islam and anti-EU Geert Wilders in the national election. The turnout of 81 percent voters records the highest in 30 years and confirms the favor of liberalism while rejecting the proposal of anti-immigrant path by Wilders and his promise to "de-Islamicise" the Netherlands and quit the European Union.

U.K. claimant counts for jobless benefits improved in February by dropping 11,300 against a positive expectation. Average earnings over 3 months ended January gained 2.2 percent and lower than previous month. Unemployment rate shows better number at 4.7 percent in January. Crude inventories shrank 200,000 barrels last week and better than forecast that indicate probable increment.

The Bank of England (BOE) holds interest rates at the record low level of 0.25 percent and maintained asset purchases at £435 billion. However, the imminent trigger of Article 50 to execute an impending exit from European Union (EU) as well as breakaway from Scotland would likely cause an impact to England’s economy.   

 

Technical Forecast   USD/JPY dipped after rate hike against expectation. Market trend has fallen from 115.00 to 112.50 region before weekend. This week, we reckon the trend will be supported at 111.80 bottom but with small demand only, Topside is temporarily resisted at 114.00 level.

EUR/USD advanced from 1.0620 to 1.0780 region after FED hike. Technically, we forecast the trend will trade form 1.0670 – 1.0800 range while moving in sideways consolidation. Piercing above aforementioned resistance will initiate new unexpected bullish demand. Risk control is advised.

GBP/USD has recovered due to weaker Dollar sentiment last week. However, the market is still in an uncertain range of sideways movements entrapped inside 1.2150 – 1.2550 region. Trade well and stay cautious of the swinging range. Observe the BREXIT news that might lead a new breakthrough in either direction.

 

Disclaimer: This article is written for general information only. No liability by the writer, publisher or any third party involved in the distribution of this work.

DAR Wong is a registered fund manager in Singapore with 28 years of global trading experiences. You may reach him at dar@pwforex.com


About the Author
DAR Wong (Singapore)
An international speaker with 27 years of trading experience in the global financial markets, DAR is a Market Master and author of “Living Daylight in Stock Market: Monetizing Your Profits in 8 Days”.

DAR Wong is an active market trader, registered fund manager, educator and author.He began his career in 1989 as an institutional Futures trader with Bank of America. DAR Wong specializes in trading global derivatives and financial markets. He has 26 years of experience accumulated through tenure with Bankers Trust, Barclays Bank, Citigroup (Smith Barney Shearson Inc) and as an independent trader.

DAR is the author of “8 Ways to Invest in China’s Emerging Market” and contributes frequently to regional media, including financial TV/Radio programmes, newspapers and magazines for professional traders and active investors.

He is a popular and sought after international speaker who has presented to financial professionals and investors throughout the region including Singapore, Malaysia, Indonesia, Thailand, Hong Kong, China, Cambodia, Myanmar, Philippines, Sri Lanka, India, South Korea, Laos, Vietnam, United Kingdom and Middle East (UAE).

DAR is registered with NASD (now known as FINRA) series 3 and 5 as approved by National Futures Association (NFA) of USA and holds a current portfolio as Fund Strategist and Advisor with Dektos Investment registered with Monetary Authority of Singapore.

DAR is profiled as “One of the most successful traders – Market Masters” in Brent Penfold’s bestselling book “The Universal Principles of Successful Trading “. In January 2015, DAR was honored with Outstanding Award for International Financial Market Analysis granted by ASEAN Commerce (Thailand).

DAR is the author of "8 Waysto Invest in China's Emerging Market" and contributes frequently to regional media, including financial TV/Radio programmes, newspapers and magazines for professional tradersand active investors.1

He is a popular and sought after international speaker who has presented to financialprofessionals and inverstors throughout the region including Singapore, Malaysia, Indonesia, Thailand, Hong Kong, China,Cambodia, Myanmar, Philippines, Sri Lanka, India, South Korea, Laos, Vietnam, United Kingdom and Middle East(UAE).2


Year
2003 - Set up ASPRI to provide hedging advisory for corporate clients and training for financial professionals
2009 - Released first book “8 Ways to Invest in China’s Emerging Market”
2010 - Profiled as “one of the most successful traders – Market Masters” in Brent Penfold’s bestselling book “The Universal Principles of Successful Trading” along with Larry Williams, Andrea Unger, Michael Cook, and Daryl Guppy etc
2011 - Received “Spirit of Enterprise”awarded by Singapore Management University in Singapore
2012 - Honored with Individual Diamond Career (Thailand) awardedby Royal Privy Council of Kingdom of Thailand
2013 - Appointed Vice Chairman of ASEAN-China Commerce Association and led a delegationtothe annual China-Asean Expo in Guangxi Province, China
2014 - Fund Manager cum Director in Dektos Investment Corporation registered with Monetary Authority of Singapore
2015 - Released new book “Living Daylight in Stock Market - Monetizing Your Profits in 8 Days” in January
2015 - Honored with Outstanding Award in International Financial Market Analysis awarded by ASEAN Commerce (Thailand)
2016 - Honored with Medal of Integrity by Royal Councilin Palace of Palembng, Indonesia

References

1.TV programs on ChannelNewsAsia (Singapore);Radio on 95.8 Capital (Singapore); Newspapers such as The Borneo Post (Malaysia), 资汇报 (Malaysia); Regional financial magazines such as The Analyst (India), 东盟商界(ASEAN, China), 资本杂志 (Malaysia).

2.Spoke at events for CME Group, Euronext LIFFE, Tokyo Commodity Exchange, Singapore Exchange, Korea Exchange, Bursa Malaysia, Thailand Futures Exchange, Jakarta Futures Exchange, Indonesia Commodity and Derivatives Exchange, Tokyo Commodity Exchange, Interactive Brokers, Xinhu Futures, Hangzhou Money Fair, China (Shenzhen) International Finance Expo, China (Guangzhou) International Finance Expo, Euromoney, CIMB, Maybank, RHB, UOB Bank, Asia Trader & Investor Convention, Global Rubber Conference, International Rubber Conference, Malaysia Rubber Board, International Rubber Research and Development Board,Malaysia Ministry of Agriculture, Rubber Industry Smallholders Development Authority, Vietnam Rubber Association, Cambodian Rubber Association, Bureau of Agriculture Research Philippines, Myanmar Rubber Planters & Producers Association etc.