Bank of England May Hike Rates Faster than Expected
- 12 February 2018
Fundamental Outlook The U.S. economy continues to signal inflation growth while Dow markets fall. China shows a fall in trade surplus while other economic indicators stagnate. Bank of England hints rate hike may come faster than expected.
The U.S. services index rose 59.9 in January and highest in past months. Jobless claims reduced to 220,000 in the week ended 3 February. Dow Jones performs the worst week in last 2 years after the market moved into correction from 26,616, top.
China’s Caixin services index grew 54.7 in January, matched the best record for more than 5-1/2 year. Another report on trade surplus grew USD20.3 billion in January and below forecast, after USD54.7 billion gains in previous month.
China’s consumer prices rose 1.5 percent in January on year basis while producer prices grew 4.3 percent from a year ago, both matched the forecast.
Markit in London reports the services index rose 53.0 in January and slid from 54.2 in previous month. British Halifax home price index slid 0.6 percent in January after previous month was revised at 0.3 percent gains.
Bank of England comments rate hike may come faster than expected and larger than market’s consensus. Manufacturing production rose 0.3 percent in December and after the previous month was revised to 0.2 percent gains.
British Prime Minister Theresa May visited China in early February and secured deals worth more than GBP9.3 billion (USD13.26 billion), after Chinese President Xi Jinping pledged to upgrade their "golden era" in relations.
Technical Forecast USD/JPY traded in a mild bearish trend last week. This week, the market is resisted at 109.60 area and prone to decline further as Dollar turns week. Support is identified at 107.50 region in case of drawdown towards weekend.
EUR/USD traded in small range before weekend as Dollar slowed down in rise. This week, we reckon the trend may reverse up if the 1.2150 support stays unbroken. Mixed sentiment is expected as the range is contained from 1.2150 to 1.2400 region.
GBP/USD slid last week after Thursday. The trend has failed to recover despite Bank of England reiterates rate hike may come faster this year. This week, we foresee the trend will be sideways with support rising at 1.3750 area. Resistance is expected to emerge at 1.33950 level while the market trades in mixed sentiment.
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DAR Wong is a registered fund manager in Singapore with 27 years of global trading experiences. You may reach him at firstname.lastname@example.org