Fundamental outlook
THE European Banking Authority conducted a stress test on 48 banks. All 48 banks passed its stress test. US payroll increased amid stronger consumer confidence. UK manufacturing slowed by uncertainties in the Brexit deal.
US personal spending grew 0.4 per cent in October, matching forecast. The Conference Board of consumer confidence rose 137.9 in October, higher than forecast, compared with 135.3 recorded during the previous month.
The US ISM manufacturing index grew 57.7 in October, the lowest in six months. American payroll rose to 250,000 in October after revised gains of 118,000 during the previous month. Unemployment rate stayed at 3.7 per cent.
China reported that the manufacturing index expanded 50.2 in October while services index grew at 53.9, both below forecast.
The ongoing trade war has caused the Chinese yuan to weaken with US dollar to yuan testing 6.96 last week, making a double-top formation. On Friday, US dollar-Chinese yuan closed at 6.89 after the yuan recovered moderately.
The eurozone GDP for the third quarter (3Q) grew 0.2 per cent on a quarterly basis, missing forecast. German consumer prices expanded 0.2 per cent, lower than 0.4 per cent gains in September.
The eurozone consumer prices rose 2.2 per cent in October from a year ago, while core prices expanded 1.1 per cent on an annual basis. Both were below consensus’ expectations. Unemployment rate remained high at 8.1 per cent, unchanged from September.
The European Banking Authority released a report on 48 European banks which were put on a stress test. All banks under its stress test passed but Barclays Bank scored the lowest. However, the European Central Bank commented that large banks are more resilient now in case of a recurring crisis and adverse market environment.
UK authority reported that net lending to individuals in October was at 4.3 billion pounds, the highest in three months, surpassing expectations. The construction index remained robust in October at 53.2, the best recorded in three months.
Markit reported that UK’s manufacturing index expanded at 51.1, the slowest pace in more than two years. The Bank of England retained its monetary policy while maintained the asset purchase facility at 435 billion pounds. Governor Mark Carney said the British economy is closed to a “maximum Brexit uncertainty” as the Brexit dateline looms closer.
Technical forecast
US dollar/Japanese yen closed at 113.16 on higher demand as the dollar strengthened last week. This week, the trend is supported at 111.80 region and probably could advance higher to 113.80 level. Focus will be on the dollar trend over the mid-term election tomorrow (November 6).
Euro/US dollar rebounded from 1.13 last week after forming a double-bottom. This week, a lot of uncertainties are overshadowing the market while we forecast the initial range could be contained from 1.13 to 1.15. The trend might eventually break in either directions after mid-week based on the outcome of the dollar.
British pound/US dollar bounced off 1.27 last week and jumped higher to 1.30. This week, we expect a sideways trend to occur in the market with mixed sentiments. Fundamentally, we reckoned the market’s attention will be on the aforementioned foreign exchange pairs while the pound will be left aside for a while.
Dar Wong is a professional in the financial industry based in Singapore with 29 years of global trading experiences. The expression is solely his own. You may reach him at [email protected]