Although economic growth is likely to be stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year.
We expect the pattern of demand in the UK economy to rebalance towards international trade in response to strengthening global growth and weaker sterling and away from domestic demand.
If the economy continues to expand at this pace and inflation remains elevated, there is a case for the Bank of England to gradually raise the policy rate to stop the economy from overheating.
Consistent with that view, our latest forecast for the UK is conditioned on a 25 basis points increase in Bank Rate every six months such that the policy rate reaches 2 per cent in 2021.
Friday, November 10, 2017
UK - GDP output expanded by 0.5% in the three months to October
"Our monthly estimates of GDP suggest that output expanded by 0.5 per cent in the three months to October, slightly stronger than the official out turn for the third quarter of 2017 which was 0.4 per cent," the National Institue of Economic and Social Research of the UK announced on Friday.
United States Michigan Consumer Sentiment Index
United States Michigan Consumer Sentiment Index below forecasts (100.7) in November: Actual (97.8)
USD/CAD directionless below 1.27 amid a lack of fundamental drivers
- USD/CAD remains confined in a 20-pip range as the week draws to a close.
- WTI stays in consolidation channel above the $57 mark.
- DXY on track to end the week lower.
Greenback struggles to recover Thursday's losses
The US Dollar Index, which dropped sharply on Thursday amid the news of the highly-anticipated corporate tax cut possibly being delayed until 2019, failed to make a meaningful recovery on Friday as investors are waiting on fresh developments on that matter. As of writing, the index was at 94.36, down only 0.06% on the day.
On the other hand, crude oil prices, a conventional driver of the commodity-sensitive loonie's price action, are consolidating their weekly gains with the barrel of West Texas Intermediate treading water a little above the $57 mark. Despite today's inactivity, the barrel of WTI is looking to close the fifth week in a row with gains as investors continue to price the heightened expectations of the OPEC/non-OPEC output cut agreement being extended to the end of 2018. OPEC is going to meet in Vienna on November 30th to decide whether or not to do that.
Technical levels to consider
The RSI indicator on the daily graph sits on the 50 mark, supporting the view of a short-term neutral outlook. On the downside, supports could be seen at 1.2620 (Oct. 24 low) ahead of 1.2525 (100-DMA) and 1.2460 (Oct. 18 low). On the flip side, resistances are located at 1.2740 (20-DMA), 1.2800 (psychological level) and 1.2915 (Oct. 27 high).
Gold remains on track for its first weekly rise in a month
• Gold set to end with gains of over 1.0% for the week.
• USD weakness/safe-haven demand remains supportive.
• Surging US bond yields, the only factor capping gains.
Gold struggled to gain any follow through traction on Friday and traded with a mild negative bias through the early NA session.
Currently hovering around the $1284 region, still within striking distance of 3-week highs touched overnight, surging US Treasury bond yields seems to be the only factor prompting some profit taking around the non-yielding commodity.
Meanwhile, persistent US Dollar selling bias, led by the latest disappointment over the US tax reforms plan, was seen lending some support to dollar-denominated commodities - like gold.
This coupled with weaker trading sentiment around equity markets remained supportive of the precious metal's safe-haven appeal and helped limit deeper losses.
A relatively thin US economic docket, highlighting the release of Prelim UoM Consumer Sentiment Index, is unlikely to trigger any meaningful moves.
Nevertheless, the yellow metal remains on track to snap three consecutive weeks of losing streak and end the week on a strong note, with gains of over 1.0%.
Technical levels to watch
Immediate downside support remains near the $1281-80 zone, below which the metal is likely to accelerate the slide towards $1275 level en-route $1269 strong horizontal support.
On the upside, momentum above the $1287-88 region now seems to pave the way for an extension of the commodity's up-move towards $1295 level ahead of the $1300 handle.
• USD weakness/safe-haven demand remains supportive.
• Surging US bond yields, the only factor capping gains.
Gold struggled to gain any follow through traction on Friday and traded with a mild negative bias through the early NA session.
Currently hovering around the $1284 region, still within striking distance of 3-week highs touched overnight, surging US Treasury bond yields seems to be the only factor prompting some profit taking around the non-yielding commodity.
Meanwhile, persistent US Dollar selling bias, led by the latest disappointment over the US tax reforms plan, was seen lending some support to dollar-denominated commodities - like gold.
This coupled with weaker trading sentiment around equity markets remained supportive of the precious metal's safe-haven appeal and helped limit deeper losses.
A relatively thin US economic docket, highlighting the release of Prelim UoM Consumer Sentiment Index, is unlikely to trigger any meaningful moves.
Nevertheless, the yellow metal remains on track to snap three consecutive weeks of losing streak and end the week on a strong note, with gains of over 1.0%.
Technical levels to watch
Immediate downside support remains near the $1281-80 zone, below which the metal is likely to accelerate the slide towards $1275 level en-route $1269 strong horizontal support.
On the upside, momentum above the $1287-88 region now seems to pave the way for an extension of the commodity's up-move towards $1295 level ahead of the $1300 handle.
WTI steady above $57.00
- WTI remains sidelined near recent 2017 tops.
- Crude oil cautious on Iran-Saudi Arabia.
- Baker Hughes’s report next on tap.
WTI focused on data
Prices for the WTI are now alternating gains with losses while keeping the trade close to recent YTD tops in levels just below the critical $58.00 limestone.
As usual, optimism over the potential extension of the OPEC output cut deal beyond March 2018 is sustaining the rally. Traders expect the cartel to decide on the matter at the meeting on November 30.
Also collaborating with the upside, rising effervescence between Iran and Saudi Arabia has sparked fresh concerns over potential supply disruptions.
Looking ahead, driller Baker Hughes will publish its weekly report on US oil rig count (prev. -8 to 729 active oil rigs).
WTI significant levels
At the moment the barrel of WTI is down 0.05% at $57.14 and a breach of $56.41 (low Nov.8) would aim for $55.86 (10-day sma) and finally $55.83 (23.6% Fibo of $45.58-$57.69). On the upside, the immediate resistance aligns at $57.91 (2017 high Nov.8) seconded by $62.58 (2015 high May 6) and finally $77.83 (high Nov.21 2014).
Thursday, November 09, 2017
US Dollar pares initial losses, back near 94.80
- DXY found support in the 94.55/50 band.
- US 10-year yields rebounded beyond 2.34%.
- Attention remains on US tax reform.
US Dollar focused on US politics
The index seems to have found some dip-buyers around session lows in the boundaries of the 94.50 area, managing to rebound on the back of a better performance in yields of the US 10-year benchmark.
In fact, yields clinched daily tops above the 2.34% level earlier in the session, around 3 bps higher than daily lows.
In the meantime, the buck remains under pressure in light of headlines coming from the US political scenario, where the Republicans-led tax reform plan should take centre stage later in the NA session.
In the US data space, initial claims rose higher than expected on a weekly basis, although they managed to drag the 4-week average to levels last seen in 1973. Further data saw wholesale inventories expanding at a monthly 0.3% in September, matching estimates.
US Dollar relevant levels
As of writing the index is losing 0.27% at 94.63 and a breakdown of 94.41 (low Nov.3) would open the door to 94.15 (21-day sma) and finally 94.03 (23.6% Fibo of the 2017 drop). On the upside, the immediate resistance aligns at 95.15 (high Nov.7) seconded by 95.90 (38.2% Fibo of the 2017 drop) and then 96.63 (200-day sma).
GBP/USD - fade the up ticks
“Grounds for softness reside in the mounting political problems for PM May, with events undermining her authority just as the government restarts Brexit talks. EU forecasts suggest that UK economic growth will slow in 2018 (to 1.3%, from 1.8% this year), even if the UK’s trade relationship with the EU remains unchanged”.
“Sterling looks a little heavy on the session and remains prone to more softness. We note that the market remains capped under key resistance in the 1.32 area and while immediate downside risks were not realized following yesterday’s minor double top formation, the pound has struggled to recover. Intraday price action is bearish and the pound continues to flirt with major, weekly support around 1.3095. Look to fade GBP rallies”.
“Sterling looks a little heavy on the session and remains prone to more softness. We note that the market remains capped under key resistance in the 1.32 area and while immediate downside risks were not realized following yesterday’s minor double top formation, the pound has struggled to recover. Intraday price action is bearish and the pound continues to flirt with major, weekly support around 1.3095. Look to fade GBP rallies”.
EUR/USD off highs, retreats to 1.1600
- Spot fades the spike to tops above 1.1640.
- DXY met dip-buyers near 94.50.
- US 10-year yields climb to tops beyond 2.34%.
EUR/USD offered on US data, ECB-speak
Spot gave away part of the daily gains after US initial claims rose to 239K WoW, taking at the same time the 4-week average to 231.25K, the lowest level since 1973.
In addition, ECB’s board member Y.Mersch noted that there are very timid signs of inflation pressures building up in the region, weighing on EUR sentiment.
On the USD-side, the US Dollar Index (DXY) seems to have found some decent support in the mid-94.00s for the time being, rebounding in tandem with the better tone in yields of the US-10 year note.
Later in the NA session, wholesale inventories will close the calendar ahead of tomorrow’s flash gauge of the consumer sentiment for the month of November.
EUR/USD levels to watch
At the moment, the pair is up 0.09% at 1.1605 and a breakout of 1.1692 (high Nov.3) would target 1.1706 (21-day sma) en route to 1.1736 (38.2% Fibo of the 2014-2017 drop). On the flip side, the next support emerges at 1.1555 (low Nov.7) seconded by 1.1448 (high Jun.30) and finally 1.1280 (200-day sma). On the upside, Furthermore, FXStreet’s Technical Confluences Indicator (TCI) is noting an important resistance zone in the vicinity of 1.1620, where sit a pivot point, the 5-day sma, recent highs and a Fibo retracement.
USD/JPY bounces off lows
• USD rebounds despite weaker weekly jobless claims.
• Pickup in US bond yields lending some support.
• Risk-off mood might cap any meaningful up-move.
• US tax bill legislation remains in focus.
The greenback selling pressure seems to have abated, with the USD/JPY pair rebounding around 25-pips from 1-1/2 week lows touched in the past hour.
A modest US Dollar rebound, despite a larger than expected jump in the US weekly jobless claims, seems to have prompted some short-covering move during the early NA session. Adding to this, a goodish pickup in the US Treasury bond yields extended additional support to the pair's tepid recovery bounce from the 113.25 support area.
• US: Weekly initial claims was 239,000, an increase of 10,000 from previous week
However, the prevalent risk-off environment, as depicted by a sea of red across global equity markets, continues to underpin the Japanese Yen's safe-haven appeal. This coupled with increasing nervousness, ahead of the long-awaited US tax reforms announcement might now contribute towards keeping a lid on any meaningful recovery for the major.
The Senate Republicans are expected to unveil their tax bill today, and a substantial difference from the proposal put forth by House Republicans could further deteriorate the already weaker sentiment around the greenback and continue exerting downward pressure on the major.
Technical outlook
Valeria Bednarik, American Chief Analyst at FXStreet writes: "The pair bounced modestly from the mentioned low but retains the negative bias short-term, as in the 4 hours chart, the price broke again below its 100 SMA, extending its decline further, while technical indicators remain within negative territory, with strong downward slopes. Below the 113.20 level, the decline could extend down to 112.90, while beyond this last a steeper slide should be expected for the upcoming days."
• Pickup in US bond yields lending some support.
• Risk-off mood might cap any meaningful up-move.
• US tax bill legislation remains in focus.
The greenback selling pressure seems to have abated, with the USD/JPY pair rebounding around 25-pips from 1-1/2 week lows touched in the past hour.
A modest US Dollar rebound, despite a larger than expected jump in the US weekly jobless claims, seems to have prompted some short-covering move during the early NA session. Adding to this, a goodish pickup in the US Treasury bond yields extended additional support to the pair's tepid recovery bounce from the 113.25 support area.
• US: Weekly initial claims was 239,000, an increase of 10,000 from previous week
However, the prevalent risk-off environment, as depicted by a sea of red across global equity markets, continues to underpin the Japanese Yen's safe-haven appeal. This coupled with increasing nervousness, ahead of the long-awaited US tax reforms announcement might now contribute towards keeping a lid on any meaningful recovery for the major.
The Senate Republicans are expected to unveil their tax bill today, and a substantial difference from the proposal put forth by House Republicans could further deteriorate the already weaker sentiment around the greenback and continue exerting downward pressure on the major.
Technical outlook
Valeria Bednarik, American Chief Analyst at FXStreet writes: "The pair bounced modestly from the mentioned low but retains the negative bias short-term, as in the 4 hours chart, the price broke again below its 100 SMA, extending its decline further, while technical indicators remain within negative territory, with strong downward slopes. Below the 113.20 level, the decline could extend down to 112.90, while beyond this last a steeper slide should be expected for the upcoming days."
Wednesday, November 08, 2017
EM countries finally trend up, China becomes more stable
"Global economic growth will be maintained through 2018, underpinned by solid underlying growth in advanced economies and a broadening recovery in emerging markets," Moody's Investors Service noted in its global macroeconomic outlook report for 2018-2019.
Moody's expects above-trend global GDP growth of 3.2% in 2018 and 3.1% in 2019, similar to 2017 and up from 2.5% growth in 2016.
Unlike in recent years, Moody's expects growth to be more broad-based and sustainable in the year ahead.
Growth in G20 advanced economies is expected to be stable, with growth of approximately 2.0% in 2017, 2018 and 2019, compared with 1.5% in 2016.
We are seeing growth broadening globally, with emerging market countries finally trending up and China becoming more stable.
Moody's expects that emerging market countries will grow at a rate of 5.4% in 2018, exceeding the forecasted 2017 growth rate of 5.0%.
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