Another U.S. Rate Hike before Year-End
- 25 September 2017
Fundamental Outlook The U.S. building permit and housing starts reveals inflation growth in coming months. FED chair Yellen reaffirms another rate hike before year-end. European Central Bank reassures of inflation recovery in adjusting stimulus program. Bank of England negotiates to pay lower exit fee to European Union with a proposed agenda.
The U.S. building permit rose 1.30 million in August and highest record in more than 2 years. Housing starts grew 1.18 million from July and remained in good growth. Current account deficits narrowed to USD123 billion in the second quarter ended June.
American existing home sales was down for 3 consecutive months in August at 5.35 million. Another report on weekly claims reduced to 259,000 in the week ended 16 September and lowest in 3 weeks.
The U.S. FED Yellen announces trimming of USD4.5 trillion balance sheet to begin in October. Meanwhile, no rate hike has been implemented though FED chair affirms one more hike will come before year-end. Forecast of inflation has been reduced to 1.5 percent this year from previous 1.7 percent.
In United Nation general assembly, President Trump warns seriously of bringing destruction to North Korea if America is left to defend itself or allied nations with no other choice. North Korea leader Kim rebukes Trump’s speech by saying the retaliation of destruction will go beyond Trump’s expectation.
Bank of Japan remains monetary policy unchanged while asset purchase program lasted for past 3 years has failed to drive up inflation to 2.0 percent.
German ZEW sentiment that measures institutional investors’ confidence rises to 17.0 index in September and better than forecast. German manufacturing index hits a 6-year high at 60.6 in September.
Eurozone consumer prices rose 1.5 percent in August on year comparison while core prices grew 1.2 percent on year. European Central Bank President Draghi expresses optimism in inflation recovery and open to calibration to stimulus program over year-end instead of just tapering.
The U.K. retail sales rose 1.0 percent in August and best record in 4 months, after previous month was revised at 0.6 percent gains. Public sector net borrowing reduced GBP5.1 billion in August and lower than forecast in improvement.
Bank of England Governor Mark Carney says BREXIT has pushed up the inflation in U.K. economy. Policymakers foresee the rock-bottom interest rate has ended and credit tightening will occur in coming months. British Government negotiates to pay EUR24 billion to European Union for retaining a single market access after exit.
Technical Forecast USD/JPY turned down on Friday after topped 112.70 last week. Market could be moving into consolidation with prone to some correction in coming week. Range is expected from 110.50 – 112.50 region with more selling activity. Abandon your short-view should the trend pierce above 112.70 level.
EUR/USD has seen strong bear factor above 1.2000 level recently. This week, the trend might persist in threading sideways for consolidation from 118.00 – 120.00 range as Dollar strength varies. Market trend may swing in uncertain volatility due to fundamental news based on North Korea tension and German election.
GBP/USD has been suppressed recently above 1.3600 resistances. The trend will be heading into profit-taking as traders await for further observation on BEREXIT effects. We reckon the range will move from 1.3250 – 1.3600 region with prone to bearish trend. Beware of breaking above 1.3600 level again that may reverse the market sentiment.
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DAR Wong is a registered fund manager in Singapore with 28 years of global trading experiences. You may reach him at email@example.com