BoE reiterates confidence in preparations for the Brexit

Fundamental outlook

THE Bank of England (BoE) reiterated its confidence its preparations against the impact of the Brexit. US building permit and existing home sales recorded a decline. China maintained that its GDP growth is still on track.

US building permit rose 1.24 million in September, lower than the revised 1.24 million gains recorded in August. Housing starts expanded within limit of 1.2 million, missing forecast.

US existing home sales declined for sixth month in September, expanding 5.15 million. American jobless claims for the week ended October 13 was at 210,000, an improvement from the previous week’s 215,000.

China’s consumer prices rose 2.5 per cent in September on a yearly basis. Producer prices grew 3.6 per cent from a year ago. Both matched forecast.

China’s retail sales grew 9.2 per cent in September compared with a year ago, beating forecast. Industrial production declined 5.8 per cent on a yearly basis compared with 6.1 per cent recorded in August. China’s GDP for the third quarter (3Q) grew 6.5 per cent, the worst recorded since financial crisis in 2008.

German ZEW economic sentiment declined to minus 24.7 in October, missing expectations. Eurozone consumer prices rose 2.1 per cent in September compared with a year ago. Core prices expanded 0.9 per cent on a yearly basis. Both matched expectations.

British average earnings on quarterly basis ended August grew 2.7 per cent, beating consensus’ expectations and the best recorded in seven consecutive quarters. Unemployment remained at four per cent.

British consumer prices rose 2.4 per cent in September on a yearly basis, the lowest recorded in three months. Producer prices stayed strong at 1.3 per cent, higher than 1.2 per cent recorded in August. Retail prices index climbed 3.3 per cent, missing expectations.

BoE’s Governor Mark Carney says UK’s banking system is prepared to handle a much worse outcome from Brexit than will likely to happen. Technical forecast US dollar/Japanese yen bounced off the 111.50 ground last week as we expected. This week, we reckon the trend will continue to consolidate from 111.50 to 113.50 in a sideways movement.

Traders will also adjust their positions in mixed trading until the trend shows a clear direction by moving beyond the aforementioned range.

Euro/US dollar traded lower as the dollar rose last week. Technically, the support at 1.1450 looks firm and will likely recover this week. A narrow range is expected from 1.1450 to 1.16. Risk control is advised once the prices step beyond the aforementioned range.

British pound/US dollar declined in the same trend as the euro last week. This week, the pound will likely trade in small recovery as traders speculate in mixed trading.

We forecast the range will move from 1.3 to 1.325 as the market is still uncertain of forthcoming trend. Carney’s comments might help to support the pound in the short-term.

DAR Wong is a professional in the financial industry based in Singapore with 29 years of global trading experiences. The expression is solely his own. You may reach him at dar@pwforex.com.