BoE holds policy unchanged

Fundamental outlook US faced challenges in lifting its inflation. Japan’s Kumamoto Prefecture was hit by an earthquake recently which affected investors’ confidence. China gross domestic product (GDP) grew marginally, supported by stimulus. The Bank of England (BoE) retained its policy.

US retail sales dropped 0.3 per cent in March after household cut back on purchases and spending. Core retail sales, excluding automobiles, rose 0.2 per cent after it was revised on par with the previous month.

US producer prices slid 0.1 per cent against positive forecast after it dropped 0.2 per cent in February. Consumer prices barely rose 0.1 per cent in March, undermining slow growth in recovery. Core prices were also up 0.1 per cent after it gained 0.3 per cent in February.

Weekly claims for US jobless benefits ended April 9 fell to 153,000, lesser than the revised 266,000 in the previous week. Traders predict zero chance of a rate hike in April by Federal Reserve.

China consumer prices rose 2.3 per cent in March from a year ago. In another report, producer prices slid 4.3 per cent on an annualised rate but it was still better than the previous month’s 4.9 per cent, indicating a looming slowdown in manufacturing sector.

China trade balance grew in line with median forecast at US$29.9 billion compared to US$32.6 billion surplus made in February. The GDP rose 6.7 per cent in the first quarter (1Q) compared to 6.8 per cent gains recorded in the previous quarter ended December.

Industrial output including mines and utilities grew 6.8 per cent in March from a year ago, the highest since last June. Analysts believe the stimulus implemented for past months in devaluing currency and cutting bank ratio have taken effect in supporting growth.

Last Thursday, the southern area of Japan was been hit by a 6.4 magnitude earthquake. Traders are concerned of the financial markets while Finance Minister Taro Aso has expressed concerns on the rising yen which would slow down the growth of inflation.

Industrial production for the eurozone including utilities and mines declined 0.8 per cent in February after it was revised to 1.9 per cent gains in January. Consumer prices stayed unchanged in March on an annualised basis. Core prices, excluding fresh food and energies, grew one per cent from a year ago.

Trade surplus in the eurozone grew 20.2 billion euros in February, lesser than the revised 22.8 billion euros in January. Policymakers in the central bank stressed on no intention to devalue the euro despite negative rate induced into market.

UK consumer prices climbed 0.5 per cent in March on an annualised rate, the highest since December 2014. Retail Prices measured for basic consumption by household jumped to 1.6 per cent from a year ago after it rose 1.3 per cent in February. The BoE has kept base rates unchanged at a historical low of 0.5 per cent while all nine committee members voted for no rate hike. Technical forecast US dollar/Japanese yen recovered from below 108 levels last week but fell short of 110 targets after the earthquake disaster. This week, we reckoned that the trend might head to either directions, depending on fundamentals. The range is expected to move from 108 to 110 regions. Breaking beyond the aforementioned range would indicate new direction.

Euro/US dollar has encountered selling pressure above 1.14 levels. This week, we predict the market might trade from 1.415 to 1.135 ranges while prone to slide after it pulls up earlier during the week. Risk control needs to be reinforced if it pierces above 1.14 levels.

British pound/US dollar also exhibited bearish sentiment on a technical outlook. Threats of Brexit has instigated traders to short pound after every pull-up. This week, we reckoned strong resistance would emerge at 1.425 to 1.43 regions. Sliding back to 1.4 is highly possible if the aforementioned resistance could be well safeguarded.

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 27 years of trading experience in global Derivatives & FX markets. He can be reached at dar@pwforex.com.