Brexit weighs on UK’s economic progress
Fundamental outlook UK’s inflation and retail demand declined as the commencement of Brexit looms. US’ economy retains growth pace as housing data hints a possible inflation. China’s growth also remained intact, reporting a 6.8 per cent first quarter (1Q) gross domestic product (GDP) growth.
US retail sales rose 0.6 per cent in March, above forecast and the highest in four months. Core retail sales, excluding automobiles, grew 0.2 per cent. Industrial production including utilities and mines rose 0.5 per cent in March.
US building permits rose 1.35 million in March on an annualised rate. Housing starts expanded 1.32 million, exceeding forecast. US jobless claims for the week ended April 14 steadied at 232,000.
US’ government issued new sanctions which include a sevenyear ban on Chinese smartphone maker ZTE, after the phone maker was caught shipping goods to Iran illegally. It was fined US$1.2 billion last year.
Mike Pompeo, US Secretary of State, travelled to North Korea during the Easter weekend and met Kim Jong Un, paving grounds for Trump- Kim talk soon. North Korea says it has suspended nuclear and longrange missile testings.
China’s 1Q GDP grew 6.8 per cent. Industrial production rose six per cent in March on a yearly basis, below the previous month’s 7.2 per cent growth.
German ZEW sentiment that measures institutional investors’ confidence slid to minus 8.2 in April, entering the negative zone for the first time since July 2016. Final consumer prices in the eurozone rose 1.6 per cent from a year ago.
UK average earnings on quarterly seasons ended February grew 2.8 per cent. Claimant counts rose 11,600 in March, lower than the revised 15,100 recorded in February and also below forecast. Employment rate was almost unchanged at 4.2 per cent.
British consumer prices grew 2.5 per cent in March on a yearly basis, the lowest in 12 months. Producer prices slid 0.1 per cent on a monthly comparison while retail price index grew 3.3 per cent in March, both missing expectations. Retail sales dropped 1.2 per cent in March, the worst recorded in three months. Technical forecast US dollar/Japanese ye traded slightly firmer last week but was unable to pierce above 108 resistance. This week, the trend may encounter strong selling pressure at 108.30 before turning downwards. We reckoned the downside target lies at 106.50 area in case the bears engulf market. Abandon your short-view if the aforementioned resistance is violated.
Euro/US dollar has been trading from 1.22 to 1.2450 for the last two months. The market is trending sideways due to the inactivity of the dollar movement. This week, we retain our view unless the trend begins to break out of its sideways consolidation phase.
British pound/US dollar fizzled out from 1.4377 after forming a double-top formation on the day-chart. This week, we predict the resistance will emerge at 1.4120 if there is a retracement. The market is prone to declining while support lies at 1.3820 level.
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.