The BoE retains monetary policy
Fundamental outlook THE Bank of England (BoE) retained the monetary policy as Britain’s earnings and claims for benefits stayed on course. The US inflation fell, capping the dollar. China’s consumer prices rose.
American inflation reflected by producer prices slid 0.1 per cent in August, its first drop in eight months. Core prices also dropped 0.1 per cent. Both missed forecast. Consumer prices grew 0.2 per cent in August while core prices, excluding food and energies, gained 0.1 per cent.
US retail sales gained 0.1 per cent, the lowest growth in six months. Core data, excluding automobile sales, climbed 0.3 per cent in August. The Dollar Index (USDX) fell below 95 level before the weekend.
China’s consumer prices rose 2.3 per cent in August from a year ago, the highest in six months. Producer prices grew 4.1 per cent on a yearly basis, matching forecast.
China’s fixed asset investment grew 5.3 per cent in August on a yearly basis. Industrial production, including utilities and mines, rose 6.1 per cent, matching forecast.
German ZEW report on institutional investors dropped to minus 10.6 in August, an improvement from the previous month’s minus 13.7 reading. The eurozone industrial production declined 0.8 per cent in July, missing expectation.
British monthly GDP report rose 0.3 per cent in July. Manufacturing production slid 0.2 per cent in July, falling short of forecast.
British average earnings for three months ending July climbed 2.6 per cent, the best recorded in four months. Claimant counts for jobless benefits rose 8,700 in August compared with a revised 10,200 cases in July. Unemployment rate stayed low at four per cent.
The BoE retained its monetary policy. Benchmark rate stayed at 0.75 per cent while the bond purchase programme was at 435 billion pounds. Technical forecast US dollar/Japanese yen edged higher while trading within our expected range. The market settled at 112 on Friday amid mild bullish sentiment. This week, we foresee the trend will thread from 111 to 113.50 region with the possibility of a slowdown in its ascension. Beware of falling beneath the aforementioned support lest a new selling trend prevails.
Euro/US dollar also traded in mild but firm sentiments last week. The market is resisted at 1.1770 level. There is still an insignificant catalyst to determine the trend of the market and therefore, support remains at 1.15. We presume the market forces have to break beyond aforementioned range in order to lead to a new direction.
British pound/US dollar stagnated on Friday after the central bank held rate unchanged. The market is resisted at 1.3170 area and it will likely consolidate in the coming week. Technically, we reckon the support lies at 1.30 and will constrict the movement in a narrow range for a while. Traders are still wary of the uncertainties surrounding US’ rate hike which is expected by the end of the month.
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 29 years of global trading experiences. You may reach him at dar@pwforex.com