UK to commence Brexit plan that might hurt economy
UK will be commencing a Brexit procedure that might impact the economy. US durable goods and home sales saw improvements. US Fed officials reported weak job data and inflation rate, therefore a rate hike should not be implemented soon.
Germany kept its strong growth pace while the European Central Bank president Mario Draghi emphasised supportive stimulus to aid recovery.
US orders for core durable goods, excluding transport equipment, rose 0.1 per cent after two months of negative growth. The Conference Board of consumer confidence rose to 118.9 in June, higher than the revised 117.6 reported in May.
US pending home sales contracted 0.8 per cent in May, an improvement from minus 1.7 per cent recorded in the previous month. Fed central banker Neel Kashkari pointed out that slow growth in jobs and low inflation are dampening economy recovery, hence a rate hike should not be rushed.
US jobless claims for the week ended June 25 stagnated at 244,000, matching forecast. The final GDP for the first quarter (1Q) expanded 1.4 per cent on a quarterly comparison. Consumer spending rose 0.1 per cent in May, matching forecast but at a very slow growth pace.
Japan’s retail sales rose two per cent in May, below 3.2 per cent growth in the previous month. Household spending declined 0.1 per cent in May on a yearly basis but was still the best data recorded since February last year.
Japan’s unemployment jumped to 3.1 per cent, the worst recorded in five months. Consumer prices in Tokyo city stayed flat in June, indicating little change.
German Ifo business survey on manufacturers to retailers, showed a historical high at 115.1 in June compared with 114.6 recorded in the previous month. German preliminary consumer prices rose 0.2 per cent in June, recovering from a negative figure posted in May. Consumer climate rose to 10.6 this month, better than forecast.
ECB president Draghi commented that there is a broader recovery in the region’s economic growth. But he pointed out that a stimulus must remain to support the pace.
The government of Brussels warned that the Brexit plan would deliver a blow to European Union’s common budget. Hence, there will be a new budget in light of UK’s withdrawal, while new financial needs for EU’s countries should be clearly stated.
The Bank of England (BoE) reported that the net lending to consumers rose by 5.3 billion pounds in May, the highest since March 2016. New mortgage approvals totalled to 65,000 in May, matching forecast.
British current account deficit widened to 16.9 billion pounds in May, lower than 12.1 billion pounds recorded last month. Final GDP grew 0.2 per cent in the quarter ended March, matching expectations.
Technical forecast
US dollar/Japanese yen rose last week, in line with our expectations of the contingent trend. This week, we reckoned the support could sit on the 111.70 level while a continual rise might reach up to 113.50 as the yen weakens. Abandon your long-term view if it falls below 111.50.
Euro/US dollar rose from strong demand after Draghi’s comment. Market might ascend further this week while sitting on 1.1350 support.
Out target are at 1.16 to 1.1650 based on an expected short squeezing market before profittaking emerges. Short traders are advised to control risk efficiently to prevent accumulating losses.
British pound/US dollar has also shown strong increase. The simultaneous ascension in dollar, euro and pound could put a lid on gold prices. This week, we foresee the pound could encounter resistance at 1.3050 area and begin to track a correction. Range is more likely to trade from 1.2850 to 1.3050 region.