Greece extends deadline to work out austerity
Fundamental outlook US inflation stayed weak while the Federal Open Market Committee (FOMC) minutes showed policymakers favouring near zero interest rates. Greece won an extended time to work out its debt repayment and has boosted equity prices. UK inflation had improved with shrinking jobless claims while policymakers retained its policy in support of growth.
US factory output climbed 0.2 per cent while housing started to drop but rose to 1.07 million in January from a year ago, compared to a revised 1.09 million in the previous annualised data. Producer prices slid 0.8 per cent in January after falling 0.2 per cent in December due to falling crude prices.
FOMC minutes released showed that near zero rates will be maintained for a while since unemployment and low crude prices have slowed inflation growth.
The Dow average benchmarks advanced 121.09 points to yearrecord high closing at 18,140.44 on Friday after Greece has been granted an extension for its bailout package.
US jobless claims declined to 283,000 in the week ended February14.TheFederalReserveBank of Philadelphia reported that the manufacturing index dropped to 5.2 in February after 6.3 reading in the previous month.
Japan has officially exit its recession after the government reported in its preliminary report that the country’s annual inflation grew 2.3 per cent in the final quarter. The quarterly comparison gained 0.6 per cent after dropping 0.5 per cent in the previous quarter ended September.
In a separate report, Japan’s exports rose 17 per cent in January from a year earlier. Imports fell nine per cent, leaving a deficit of 1.2 trillion yen (US$9.9 billion), narrowing last January’s record shortfall of 2.8 trillion yen. Policymakers retained its policy and target to maintain low yen to support recovery.
German ZEW economic sentiment showed that investors’ confidence advanced to 53 reading after 48.4 in January.
Markit reported that the German manufacturing index stayed at 50.9 in February, unchanged from the revised data in January. As the second largest economy among the 19-nation region, French manufacturing index fell to 47.7 from the previous 49.2 in January.
Current account in the eurozone, measuring the imports versus exports activities, grew 17.8 billion euros in December against the 19.9 billion euros in the previous month. Euro currency has been poised for recovery by maintaining above 1.13 levels for weeks.
Greece and the eurozone creditors have reached a new deal to extend Greece’s bailout for four months until end of June. The lead time should give Greece’s government room to work out a new austerity plan to repay its sovereign debts. Investors bet the US Federal Reserve and major central banks will keep interest rates low to boost recovery for a few months.
UK consumer prices rose 0.3 per cent in January from a year ago while core prices, excluding food and energy, gained 1.4 per cent from a year.
The unemployed claims fell by 38,600inJanuaryaftershowingrevised 35,800 counts in the previous month. Policymakers have voted foranunchangedmonetarypolicy with asset purchase programme retained at 375 billion pounds.
UK retail sales in January fell 0.3 per cent after rising 0.2 per cent in December. In a separate report, the public sector net borrowing was reduced by 9.4 billion pounds from a revised data of 9.9 billion pounds increase in December.
Technical forecast US dollar/Japanese yen were poised for weaker yen while market held firm above 118 supports. This week, we reckoned that there is a possibility for bulls to climb above 120 benchmarks to initiate new buying interest. Falling back beneath 118 supports will indicate temporary abandonment of long views in case of new fundamental influences.
Euro/US dollar closed at 1.138 on Friday although the market has tried to stay firm. On a weekly chart, the technical outlook is still uncertain and thread from 1.13 to 1.145 ranges in a tight consolidation.
This week, we forecast that the trend has to break beyond either side to lead a new direction. This will depend on the outcome of the euro economic data or the dollar influence.
British pound/US dollar stayed firm as we predicted last week. Moving forward, the trend might consolidate sideways from 1.53 to 1.55 ranges this week but piercing above 1.55 will advance to 1.56 targets. Control your risk efficiently in case of drawdown below 1.53 supports.
Disclaimer: This article was written for general information only. No liability by the writer or newspapers. Dar Wong is a registered fund manager in Singapore with 26 years of trading experience in global Derivatives & FX markets. He can be reached at dar@pwforex.com.