US prelim GDP misses expectations

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Fundamental outlook  

US prelim gross domestic product (GDP) for the first quarter (1Q) missed expectations as the government passes short-term bill to avert government shutdown. The Bank of Japan (BoJ) and the European Central Bank (ECB) both retained their monetary policy. France’s election progress lifted the European stock market ahead of final vote on May 7.

The US Conference Board of consumer confidence expanded at 120.3 in April after last month’s revised124.9. New home sales rose 621,000 in March. This is the first time new home sales rose above 600,000 in the past seven months.

US Crude inventories narrowed down by 3.6 million barrels in reserve storage last week, above forecast. Durable goods order expanded at 0.7 per cent in March, the lowest recorded in the past three months. Core data, excluding transport equipment, contracted 0.2 per cent from a revised 0.5 per cent gains in February.

US weekly jobless benefits rose 257,000 for the week ended April 22, the highest in four weeks’ average. Pending homes sales shrank 0.8 per cent in March compared with 5.5 per cent growth in February.

US’ advanced GDP for 1Q grew 0.7 per cent, below median forecast.

Japan’s all industries activity covering sales and services by businesses rose 0.7 per cent in February. Housing spending shrank 1.3 per cent in March from a year ago, below expectations.

Core consumer prices in Tokyo city contracted 0.1 per cent in April on an annual basis but it was still the best recorded in two years. Unemployment rate was steady at 2.8 per cent.

BoJ maintained its monetary policy but raised the GDP forecast to 1.6 per cent in the fiscal year 2017 to 2018. On the other hand, policymakers tuned down their expectations of consumer prices to 1.4 per cent.

German ifo business climate was at 112.9 in April against revised 112.4 in March, making it the best recorded in six years. German retail sales grew 0.1 per cent in March, matching forecast, after gaining at a revised 1.1 per cent in the previous month.

The first round of the French election ended with Emmanuel Macron and Marine Le Pen advancing to the final Presidential run-off on May 7. European stocks cheered in optimism and the favour is leaning slightly towards Macron.

ECB held its benchmark interest rate at zero per cent last Thursday as President Mario Draghi suggested downside risk to the bloc’s economy had diminished and its economic growth recovery has picked up its pace.

Prelim GDP for UK grew 0.3 per cent in 1Q, matching forecast. Mortgage approvals for the last month expanded 41,100 against the revised 42,200 in February.

 

Technical forecast  

US dollar/Japanese yen climbed higher after a short-covering, with higher forecasts from policymakers. This week, we forecast the trend would swing sideways from 110.50 to 112.50 region. It is also poised to balance around the EMA200 averaging line.

Euro/US dollar resisted at 1.095 area, slowing its ascension. This week, we expect a correction would likely occur and it is proned to drive down to 1.075 support. However, risk control is advised in case of breaking above the 1.095 level which might go higher to test the 1.115 area.

British pound/US dollar gradually built up in strength while sitting on the 1.275 support. It closed in the 1.295 region on Friday, and we believe the market has room to go higher to 1.315 this week, provided that the aforementioned support is not violated. Short traders need control risk if the bulls step into the market.

 

Disclaimer: This article was written for general information only. No liability by the writer or newspapers. DarWong is a registered fund manager in Singapore with 28 years of trading experience in global Derivatives & FX markets. He can be reached at [email protected].