US saw strong growth, payrolls rise 223,000
Fundamental outlook
US recorded higher payrolls in May while its gross domestic product (GDP) registered strong growth. There’s a high chance another rate hike would be announced after the upcoming Federal Open Market Committee (FOMC) meeting. The eurozone consumer prices grew while Italy’s sovereign debt declined after the political risks emerged. UK’s manufacturing saw an increase, with higher lending to consumers.
US Conference Board of Consumer Confidence grew 128 in May, matching forecast. Prelim GDP grew 2.2 per cent for the quarter ended March.
US jobless claims for the week ended May 26 slid to 221,000, better than forecast. Consumer spending rose 0.6 per cent in April, the best recorded in five months. The ISM manufacturing index grew 58.7 in May, the highest in three months.
On Friday, US non-farm payroll added 223,000 jobs in May, a significant rise from forecast, giving signals of a possible rate hike mid-June. Unemployment rate fell to an 18-year low at 3.8 per cent.
President Donald Trump’s administration says the government will release a list of Chinese imported goods that will be imposed a 25 per cent tariff before June 15. These imported goods are worth US$50 billion.
China’s Government reported that the manufacturing index remained strong at 51.9 in May while services index rose 54.9, both showing steadfast growth pace. Caixin manufacturing index grew to 51.1 in May.
German retail sales rose 2.3 per cent in April, positive growth for the first time in five months. The prelim consumer prices grew 0.5 per cent in May, the best recorded in three months.
Eurozone flash estimate for consumer prices rose 1.6 per cent in May from a year ago. Core prices grew 1.1 per cent on an annual basis. Both were above forecast and higher than the previous month.
The political crisis in Italy might lead the country to another election on July 29. This development could as well as the country’s national debt of US$ 2.4 trillion, which is higher than Greece’s debt, have taken a toll on investors’ confidence in Italy.
UK net lending to consumer borrowers rose 5.7 billion pounds in April, better than the revised 4.4 billion pounds recorded in the previous month. Markit reported that the UK manufacturing index was at 54.4 in May, higher than 53.9 recorded in April. Technical forecast
US dollar/Japanese yen rebound from the support level at 108 and remained strong last week. The trend will likely trade from 108.50 to 110.50 in the coming week amid a possible sideways trend. We reckoned that traders will consolidate their positions for a while before deciding a new directional trend.
Euro/ US dollar reversed dec lines after hitting a 1.1509 bottom last week. Market has been dropping for seven weeks amid the rising strength in dollar and it might continue to trade higher. This week, we foresee the trend will trade from 1.1550 to 1.1850 in mixed sentiment. Short- covering is expected for some profit-taking.
British pound/US dollar saw its decline slowing down but it was still suppressed at 1.3450 level. The trend is currently uncertain as the both currencies could struggle from 1.32 to 1.3450 this week. Breaking beneath 1.32 support will lead to a possible slide to 1.3050 before real bargain-hunting emerges.
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DAR Wong is a registered fund manager in Singapore with 29 years of global trading experiences. You may reach him at dar@pwforex.com