Bank of England Holds Policy Unchanged
- 15 May 2017
Fundamental Outlook The U.S. shows slightly better consumer prices and retail prices also bounces back. China reports better consumer prices and trade surplus. French election has ended with support leaning on Macron as President-elect. Bank of England holds policy unchanged.
The U.S. weekly inventories on crude storage reduced by 5.2 million barrels and beat forecast, giving a boost in oil price recovery at USD47 /barrel. Unemployment claims for the week ended 6 May was 236,000 and matched forecast. Producer prices rose 0.5 percent in April compared to minus 0.1 percent and at 10-month high.
American consumer prices rose 0.2 percent in April. Excluding food and energy, core prices up 0.1 percent and better than previous month. Another set of data on retail prices rose 0.4 percent. Core retail prices, excluding automobile sales, expanded 0.3 percent.
China’s consumer prices rose 1.2 percent in April from a year ago, and also at highest in past 3 months. Another report on producer prices expanded 6.4 percent and below median forecast. Another data on trade surplus soared higher in April with USD38.1 billion, continually better than previous month.
In France, Emmanuel Macron won the French election as President-elect over Marine Le Pen. His policy has gained the support of voters to stay in European Union and implement economic reforms to cut government spending and deficits.
German industrial production including utilities and mines contracted 0.4 percent in March after revised 1.8 percent gains in previous month. Trade surplus expanded EUR19.6 billion and below forecast.
German GDP grew 0.6 percent in Q1 and matched forecast. Final consumer prices remain flat in April and matched forecast.
U.K. Halifax HPI contracted 0.1 percent in April and stayed sluggish. Manufacturing contracted 0.6 percent in March and worse than expectation.
Bank of England holds the key rates unchanged at 0.25 percent and bonds purchase program at GBP435 billion. Mark Carney says Britain will bear the risk of economic slowdown while facing the headwinds of BREXIT. The rising inflation will add pressure to household spending amid slowdown in GDP growth.
Technical Forecast USD/JPY topped off 114.30 recently with slight correction. This week, we reckon the trend will be supported at 111.50 area in case of drawdown. Sentiment is prone to be slightly bearish while trading from 111.50 – 114.30 range. Piercing above 114.30 may initiate a new uptrend.
EUR/USD made a recovery on Friday and closed at 1.0920 level. This week, we predict a possibility to see sideways consolidation with resistance emerging at 1.1000 level. Range should be supported at 1.0830 in case of drawdown amid price swings.
GBP/USD has failed to conquer 1.3000 in recent rise and begin to make correction. Technically, the range is supported at 1.2750 area and tend to narrow down inside this range while searching for new direction. This week, we expect mixed sentiment to emerge in market and only breakaway from the target range 1.2750 – 1.3000 will see new directional momentum.
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DAR Wong is a registered fund manager in Singapore with 27 years of global trading experiences. You may reach him at firstname.lastname@example.org