US withdraws from Paris Climate Treaty
Fundamental Outlook
TUS President Donald Trump pulled out from Paris Climate Treaty, sparking unhappiness from eurozone partners. American payroll failed to meet with forecasts and revealed growth pacing before expectation. The Chinese yuan surged after overnight borrowing rate hikes. Pound fell after survey showed that Prime Minister Theresa May might not manage well on Brexit procedures.
The US personal spending rose 0.4 per cent in April, marking its highest in the past four months. The Conference Board of consumer confidence expanded 117.9 in May and below expectation.
Another separate report on US pending home sales contracted 1.3 per cent in April and below median forecast. ISM manufacturing index rose 54.9 in May and matched forecast. Weekly claims for the week ended May 27 was 248,000 – higher than consensus.
American non-farm payroll grew 138,000 in May but failed to meet forecast, after sliding from revised 174,000 in previous month. Unemployment rate stays at 4.3 per cent.
Trump announceed US’ withdrawal from Paris Climate Treaty after saying the unfair agreement will take away jobs from US economy. He proposed to re-negotiate for new terms but has been rejected by leaders from Germany, France and Italy.
China’s manufacturing index rose 51.2 and maintained steady growth in May. Another report on Caixin’s manufacturing index rose 49.6 in May and at 11-month low record.
Following the re-balance of mid-point by the People’s Bank of China for yuan value at 6.8633 against the US dollar, Chinese yuan surged on Wednesday after overnight borrowing cost increased in Hong Kong.
Japan’s consumer spending contracted 1.4 per cent in April on an annual basis. Retail sales increased 3.2 per cent from a year ago and best record in the last two years. Unemployment rate remained at 2.8 per cent in April on low side.
Japan’s housing starts grew 1.9 per cent in April from a year ago and significantly higher from previous month 0.2 per cent. Another report on prelim industrial production including mines and utilities rose and highest since March 2016.
Japan’s final manufacturing index expanded 53.1 in May and maintained good growth rate. Capital spending by businesses rose 4.5 per cent ended at 1Q compared to similar period in last year.
In eurozone, consumer prices gained 1.4 per cent while core prices rose 0.9 per cent, both on annualized rate but below median forecast. Unemployment rate among the 19 countries stayed high at 9.3 per cent in April.
Marki t rep or te d the manufacturing index for May expanded 56.7, matching its forecast. Construction index grew 56.0 in May and highest since December 2015. Middle last week, the pound fell after poll shows Theresa May who leads Conservative Party may lose majority seats in the forthcoming election. Technical Forecast
US dollar/Japanese yen dropped on Friday after US payroll released at lower gains. This week, we target an initial range trading from 109.70 to 111.70 but prone to slide further. Breaking beneath the first support 109.70 will probably head lower to 108.00 region.
Euro/US dollar traded in our predicted range last week but protruded on Friday with sign of further ascension. This week, we reckon the trend will climb higher with base support laid at 1.1200 area. Reaching for 1.1400 high is possible if Dollar weakens further. Abandon your long-view if the trend sinks below 1.1200 level.
Pound/ US dollar has been supported at 1.2770 area that sits on EMA200 line. This week, the trend is set to move from 1.2770 – 1.3070 initially while waiting to break in either direction. Stay alert towards the weekend as UK will hold its General Election on 8 June ( London time) that will affect Pound value.
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 28 years of trading experience in global Derivatives & FX markets. He can be reached at dar@ pwforex.com.