July 19, 2016

FXNet Fundamental Analysis on 2016/7/19

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This article is originally referred from FXNet Market News.

Most stock markets turned negative Tuesday on profit-taking following a week-long rally but Tokyo headed for a sixth-straight gain as a weak yen boosted exporters. The upbeat outlook has fed a surge on Wall Street that has seen the Dow and S&P 500 rack up multiple record closes. The rally for most markets looks set to come to a halt in Asia as investors cash in. Hong Kong, which has climbed the previous six days, slipped 0.78%, while Shanghai eased 0.7% and Sydney dipped 0.4%. However, Tokyo — which was closed Monday for a holiday — added 0.59% as exporters were lifted by the weaker yen.

In FX Space the Kiwi dropped heavily as the RBNZ announced proposed changes to housing investment restrictions as the Central Bank battles with a deflationary environment and the market expects rate cuts to come. The Aussie also came under pressure with the release of the latest RBA minutes. Although they provided no hint of easing in August, it did read downbeat on certain sectors of the economy. The employment growth was described as having “moderated”, while the housing market was also described as mixed. Moreover, weaker oil prices as well as lower Asian equities, further added to the bearish pressure on the Aussie. Cable fell from above 1.3260 early, down toward 1.3200, USD/JPY pulled back from just above 106.25, losing 50 or so points while the Euro traded sideways.

Gold remained little changed despite the negative risk sentiment, sitting around the $1320 handle while pressure remained on oil prices after they settled down more than 1% on Monday after rising stockpiles and refined fuel intensified fears of another major supply glut. Brent trades lower at $46.82 a barrel and WTI  slips to $45.07.

So to the day ahead and first up we have UK CPI (0930 BST) Stronger wage growth accompanied by the pickup in household spending may ultimately stoke higher inflation in the U.K and signs of faster price growth may spark a bullish reaction in the sterling as market participants scale back bets for a meaningful easing package. However, waning business sentiment paired with signs of a cooling housing market may drag on price growth, and a dismal CPI report may weigh on the pound as it fuels speculation for additional monetary support. Today’s forecast is expected to come in at 0.4%.

German ZEW Economic Sentiment (1000 BST) Today’s update on sentiment via Germany’s financial quarter could provide a reality check for the central bank. Recent data has been uneven, although signs of an upswing appear to be in progress. The index tracking current conditions ticked higher in June, rising to the highest reading since January. The expectations benchmark also bounced higher, reaching a 10-month high. However the crowd’s expecting a modest reversal in today’s July report. The current conditions index is on track to ease to 52.0, according to forecast. A deeper reversal is projected for the expectations data, which is on track to tumble to 9.5, a sharp drop from June.

US Housing Starts (1330 BST) Confidence in the home building industry ticked lower in July – the first decline in five months – but the unexpected slide still leaves sentiment close to the highest level of the year. Economists are expecting more upbeat news by way of today’s June report on residential housing construction predicting starts rising to 1.170 million units in seasonally adjusted terms.

Original Source: FXNet Market News

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