UK housing prices recover while eurozone steers away from deflation
Fundamental outlook
US economy showed slight inflation with better consumer sentiment outlook. Japan stayed vibrant and on track to recovery while the eurozone has also pulled out of its deflation doldrums. UK housing prices had accelerated and consumers’ confidence has resurged.
US wholesale inventories grew 0.3 per cent in September after gaining 0.6 per cent in the previous month. Retail sales rose 0.3 per cent in October. Core retail sales, excluding auto sales, climbed 0.3 per cent after a revised minus 0.2 per cent in September.
Weekly jobless claims in US was at 290,000 in the week ended November 8. Job openings dropped to 4.74 million from 4.85 million in August.
Thomson Reuters/University of Michigan preliminary sentiment index increased to 89.4 in October, making it the third straight month of positive increase, above median forecast. Dollar strengthened late Friday after reacting to growing inflation outlook.
Japan’s revised industrial output rose 2.9 per cent in September after rising 2.7 per cent in the previous month. Yen continued to weaken after Bank of Japan expanded the monetary base two weeks ago. Traders are keeping an eye on Japan’s treasuries as US bonds fall.
Germany final inflation measured by monthly consumer prices grew by minus 0.3 per cent in October, unchanged from the previous month. In a separate data, Germany, the largest economy in the eurozone rose 0.1 per cent in three months through September.
In the same quarter, France’s economic growth reported that its Gross Domestic Product (GDP) jumped 0.3 percent, the most more than a year.
Sentiment of deflation temporary relieved in eurozone last week as both largest economies in grew in the third quarter (3Q).
On the whole 18 bloc of countries, GDP grew 0.2 per cent in 3Q after gaining 0.2 per cent in the previous quarter ended in June. The final core consumer prices rose 0.7 per cent in October from a year ago, matching median forecast.
UK monthly claimant counts for October reduced by 20,400 cases against 18,400 in the previous month, but still worst than median forecast. Unemployment rate remained unchanged at six per cent in September.
The British housing prices accelerated in October as housing values rose. Acadata and LSL Property services broadcast the average value of a home in England and Wales rose 0.7 per cent to 277,390 pounds (US$436,500), compared with a 0.3 per cent gain in September.
Technical forecast US dollar/Japanese yen settled above 116 levels on Friday while yen reaches seven-year low. This week, we reckoned supports will lie at S1 - 115 and S2 -114 while uptrend might surge further. The topside targets are identified at 118 and 120 levels if the bulls could clear them progressively.
Euro/US dollar showed consolidation while some short-covering has appeared. This week, we expect the range might reach 1.26 to 1.263 areas before new selling pressure emerges. Beware of breaking below 1.24 supports as this might lead the bears downwards to test 1.225 levels.
British pound/US dollar dipped into southern trend as demand contracted. This week, we foresee the market might face resilient sellers if it recovers to 1.57 to 1.575 regions. However, continuous dip down at 1.55 is likely to occur as strengthening pound might deter housing recovery.