July 15, 2016

FXNet Fundamental Analysis on 15/07/2016 - Asian shares extended gains to eight-month highs

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This article is originally referred from FxNet Fundamental Analysis.

Asian shares extended gains to eight-month highs on Friday, on track for a solid weekly rise, as better-than-expected economic data from China lifted risk sentiment that was already buoyant after record highs on Wall Street. China’s economy grew 6.7% in the second quarter from a year earlier, steady from the first quarter and slightly better than expected as the government stepped up efforts to stabilize growth in the world’s second-largest economy. Industrial output and retail sales also beat forecasts, which helped alleviate fears of slowing momentum, though fixed-asset investment growth slipped and missed market expectations. The Nikkei is up +0.9%, Hang Seng +0.35%, Sydney +0.4% and Shanghai trades flat.

IN FX space sterling rose to $1.3440, after the Bank of England on Thursday surprised many investors by leaving interest rates unchanged instead of cutting to reduce the economic impact of Britain’s vote last month to leave the European Union. The dollar jumped to 106.20 yen, having dipped as low as 105.05 earlier in the session following news of an attack in France which has killed more than 70 people and injured scores more as crowds gathered to celebrate Bastille day. The Aussie and Kiwi also traded higher on the back of the positive data from China. Gold looks once again to test session highs of $1336.70 having dipped lower following the improved sentiment while Oil prices gave up some of yesterday’s gains as the week draws to a close. Brent sits at $47.08 a barrel, while WTI fell to $45.30.

So to the day ahead and this morning brings Euro zone June Consumer Price Index (1000 BST). The harmonised index of consumer prices is expected to show an increase of 0.1% from a year ago. Inflation remains stubbornly low, and even the core inflation rate is stuck to 0.9%. Persistently low inflation has been the ECB’s headache for a long time, and unfortunately the rate has not reacted to the central bank’s asset purchase programs. Even the higher oil price has not helped.

US June Retail Sales (1330 BST). Retail sales are expected to post a very small monthly gain of 0.1%. The biggest drag in May and June is be the sluggish auto sales which have been flat in the second quarter. Excluding autos, retail sales are expected to have increased 0.4% in June, after 0.4% gain in May. Retail sales excluding autos and gasoline were up 4.5% in May from year ago.

US June Industrial Production (1315). The auto sector’s stagnation has also split over to industrial production data – in May, production fell 0.4%, but is expected to increase by 0.4% in June. Also capacity utilization rate is expected to climb from 74.9% to 75.1%. The survey data has been positive, suggesting production is set to increase from here. The ISM manufacturing index continued increasing in June for the fourth straight month and was clearly above the boom-bust 50 level at 53.2.

Original Source: FxNet Fundamental Analysis

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