Fundamental outlook
THE European Central Bank (ECB) has retained its monetary stance but investors are worried about the region’s economic prospects as the central bank dials back its monetary stimulus pledge. The US payroll grew beyond forecast, signalling a possible rate hike soon. China regained its consumer inflation growth.
The US ISM services index grew 59.5 in February, maintaining its good growth. Trade deficits widened to US$56.6 billion in January, worse than the previous month, but also the highest in 10 years.
US jobless claims for the week ended March 3 increased to 231,000, higher than the previous week. On Friday, non-farm payroll grew 313,000 in February, much higher than median forecast, raising consensus’ expectations of a rate hike. However, hourly wages rose 0.1 per cent, missing forecast.
China Caixin’s services index rose to 54.2 in February, matching forecast. Trade surplus expanded 225 billion yuan (circa US$33.7 billion) in February, a significant increase from 136 billion yuan in January.
China’s consumer prices rose 2.9 per cent in February, the highest seen since 2013. Producer prices grew 3.7 per cent, matching forecast.
Japan’s leading indicators, comprising 11 economic indicators, grew 104.8 per cent in January, the slowest pace in eight months. The Bank of Japan retained its monetary policy with short-term interest rate at minus 0.1 per cent, while guiding 10Y-JGB yield at a zero per cent.
ECB maintained the interest rate at zero and it continued its asset purchase of 30 billion euros monthly until September. However, market investors are wary as ECB president Mario Draghi has not indicated a possibility of extending its asset purchase programme.
Markit reported that UK’s services index expanded at 54.5 in February, the best record in four months and exceeding forecast. Manufacturing production rose 0.1 per cent in February, the lowest in three months. Trade deficits were at its low in January at 12.3 billion pounds, following a minus 11.8 billion pounds recorded in December.
Technical forecast
US dollar/Japanese yen made a slight rebound last week after hitting 105.35 bottom. This week, we foresee the trend will consolidate sideways from 106 to 107.50 range without a clear headway. Risk control is advised in case the trend moves beyond the aforementioned range.
Euro/US dollar resisted at 1.2450 area last week. Technically, we reckoned the trend is still unclear as the fundamental forces behind both currencies are still unclear. This week, the trend could be contained from 1.22 to 1.2450 range while trading in mixed sentiments.
British pound/US dollar saw a gradual bearish pattern on the day-chart. The market will likely fall soon if the trend cannot move above 1.3930 this week. The downside support is expected at 1.37. Driving beneath here will initiate a new downward trend. Observe the Brexit updates and social politics in UK which are slowly waning investors’ confidence.
Disclaimer: This article is written for general information only. No liability by the writer, publisher or any third party involved in the distribution of this work. Dar Wong is a registered fund manager in Singapore with 29 years of global trading experiences. You may reach him at [email protected].