The highlight of the week was the Bank of England’s (BoE) interest rate decision at its latest monetary policy meeting. The central bank kept the interest rate and the asset purchase facility unchanged in line with market expectations, but remained cautious and expressed concerns over the outcome of a possible Brexit at EU’s upcoming referendum.
The BoE kept the key interest rate steady at 0.5% and the quantitative programme unchanged at £375.00bn. Moreover, the central bank mentioned that if Britain votes to leave the European Union (EU), the pound could slide and unemployment would probably rise in the economy. Further, the BoE Governor, Mark Carney warned that risks of a vote to leave the EU “could possibly lead to a technical recession in the UK”. Further, in its quarterly inflation report, the central bank slashed the growth forecast for the current year to 2.0% from 2.2% in February, highlighting that uncertainty over the referendum is weighing on the economy.
The greenback ended on a stronger footing, after economic data indicated that US retail sales in the US advanced in April, registering its biggest increase in a year, as purchases in automobiles and other range of goods increased, indicating signs of regained momentum in the US economy. Moreover, the consumer confidence surged in May, recording its highest level since June 2015, as Americans saw some positive prospects for the US economy. Additionally, the business inventories rebounded strongly in March, posting its highest gain in 9 months. Further, producer prices rose modestly in April, indicating slight chances of a firming inflation across the economy.
In other economic news, the number of applicants filing for the new unemployment benefits in the US increased during last week, marking its rise for the fourteenth week.
The Euro ended the week lower against the USD, despite Germany, economic growth advancing sharply in the first quarter of 2016, driven by strong domestic demand and a brisk construction activity. Moreover, Eurozone’s economy expanded in the first three months of 2016, but slightly missed expectations, yet posted robust growth during a time of global uncertainty, suggesting that economic growth is picking up pace in the economy. Meanwhile, industrial production in the Euro-zone dropped in March, as a fall was seen in output of non-durable and durable consumer goods, capital goods and intermediate goods. Elsewhere, Germany’s consumer prices eased in April, fueling expectations of additional monetary easing by the ECB to reach its inflation target.
EURUSD
The EUR traded 0.84% lower against the USD last week, with the pair closing at 1.1309, despite Germany’s preliminary gross domestic product expanding more-than-estimates on a quarterly basis in the first three months of 2016. Moreover, Eurozone’s economic growth advanced but marginally missed market expectations in 1Q 2016. Further, the region’s Sentix investor confidence index edged up in May, indicating confidence in the investors about the Euro-economy. Meanwhile, Euro-zone’s industrial production dropped more-than-estimated on a monthly basis in March. In other economic news, in Germany, consumer prices dropped on a monthly basis, in line-with market expectations in April. Moreover, the nation’s industrial production dropped on a monthly basis in March, indicating that the ECB would need to keep adding stimulus to revive inflation. Meanwhile, German trade surplus widened sharply in March, as exports dropped in March, while imports surged in the same month. Additionally, German factory orders rebounded sharply in March, marking its best reading since June 2015. The pair traded at a high of 1.1447 and a low of 1.1283 during the previous week. The pair is expected to find its first support at 1.1246 and first resistance at 1.1410. The second support is expected at 1.1182 and second resistance at 1.1510. This week, investors would focus on the Eurozone’s consumer price index, trade and current account balance and construction output, for further cues. Moreover, the ECB’s account of monetary policy meeting will be keenly watched by investors’.
GBPUSD
The GBP weakened against the USD last week, closing 0.46% lower at 1.4365. Last week, the Bank of England kept the benchmark interest rate unchanged at 0.5% and the asset purchase facility steady at £375.00 billion. The central bank also warned about the economic risks if the UK votes to leave the European Union. In other economic news, the NIESR estimated that UK’s gross domestic product grew 0.3% in the three months to April, but the growth slowed compared to the first three months of 2016. Moreover, the nation’s manufacturing output contracted on an annual basis in March, recording its biggest drop in nearly three years, while industrial production fell less-than-expected on a yearly basis in March. Meanwhile, on a monthly basis, manufacturing and industrial output rose advanced at a smaller than expected pace in March. Further, the nation’s trade deficit in the UK rose to an eight year high in March. The pair traded at a high of 1.4531 and a low of 1.4341 during the previous week. The pair is expected to find its first support at 1.4294 and first resistance at 1.4484. The second support is expected at 1.4222 and second resistance at 1.4602. Looking ahead, investors will look forward to UK’s ILO unemployment rate and claimant count rate for further direction. Moreover, UK’s consumer price index, retail sales, the CB leading economic and produce price indices will generate a lot of market attention.
USDJPY
Last week, the USD traded 1.41% higher against the JPY and closed at 108.63. On the data front, Japan’s consumer confidence eased less-than expected in April. Moreover, the CB leading index advanced more-than-expected in March, while the coincident index rose in line-with market expectations in the same month. Moreover, the nation posted its largest current account surplus in over nine years, helped by an improving trade balance and cheaper energy imports. Separately, the minutes of Bank of Japan’s monetary policy meeting indicated that few policymakers agreed that the country’s economy was recovering, but some warned of a sharp weakening of consumer sentiment and a slowdown in consumer inflation. Moreover, the central bank warned of the number of downside risks, as the exports remained sluggish, while the domestic demand is expected to continue edging upwards. Further, a summary of opinions from the BoJ indicated that policymakers stressed the need for further stimulus measures, for achieving the required price target. However, the central bank’s view behind keeping rates unchanged was to examine the impact of negative rates on the economy. The USD hit a high of 109.56 and a low of 107.23 against the JPY in the previous week. Immediate downside, the first support level is seen at 107.39, followed by 106.14, while on the upside, the first resistance level situated in 109.72, followed by 110.80. Moving ahead, market participants look forward to Japan’s gross domestic product, industrial production and machinery orders all scheduled for release this week. Moreover, the minutes from Bank of Japan’s monetary policy meeting will be on investors’ radar.
USDCHF
During the previous week, the USD traded 0.29% higher against the CHF and ended at 0.9755. On the data front, Switzerland’s unemployment rate advanced in April, showing signs of trouble in the country’s labor market. Meanwhile the consumer price index rose on a monthly basis in April. The USD hit a high of 0.9775 and a low of 0.9664 against the CHF in the previous week. The pair is expected to witness its first support at 0.9688 and second support at 0.9620, while the first resistance is expected at 0.9799 and second resistance at 0.9842. Going forward, investors this week would monitor Switzerland’s producer and import prices for further cues.
USDCAD
Last week, the USD traded 0.24% higher against the CAD and closed at 1.294. On the economic front, Canada’s housing starts eased in April, slowing to its lowest level in three months. Meanwhile, housing prices rose in March, indicating robust housing markets in the major cities in the nation. The pair traded at a high of 1.3015 and a low of 1.2772 during the previous week. The pair is expected to witness its first support at 1.2803 and second support at 1.2666, while the first resistance is expected at 1.3046 and second resistance at 1.3152. Moving ahead, market participants would concentrate on Canada’s consumer price index and along with retail sales, wholesale sales and manufacturing shipments for further direction in the CAD. Traders will also eye the BoC’s review report for more cues.
AUDUSD
The AUD weakened against the USD last week, closing 1.31% lower at 0.7271. On the economic front, Australia’s Westpac consumer confidence surged in May, recording its highest increase in nearly six hours. Meanwhile, approval for the new home loans in Australia eased less than expected in March. The AUD hit a high of 0.7402 and a low of 0.7254 against the USD in the previous week. The pair is expected to find its first support at 0.7216 and first resistance at 0.7364. The second support is expected at 0.7161 and second resistance at 0.7457. Moving ahead, market participants will keep a close watch on RBA’s meeting minutes, unemployment rate and the Westpac consumer confidence index scheduled for the week.
Gold
Gold declined last week, closing 1.21% lower at USD1273.45 per ounce, as the greenback strengthened, following the release of stronger than expected US retail sales and consumer sentiment data, reduced the demand for the safe-haven asset. The yellow metal witnessed a high of USD1289.50 per ounce and a low of USD1258.30 per ounce in the previous week. Immediate downside, the first support level is seen at USD1258.57 per ounce, followed by USD1242.83 per ounce, while on the upside, the first resistance level situated in USD1289.77 per ounce, followed by USD1305.23 per ounce.
Crude Oil
Last week, crude oil strengthened 3.47% to close at USD46.21 per barrel, as the wildfires in Canada dented the nation’s oil production and the attacks on the oil infrastructure in Nigeria, eased concerns over the oversupplied oil markets. Moreover, the US Energy Department (EIA) reported that crude oil inventories in the US fell surprisingly by 3.41mn bls last week, while the American Petroleum Institute (API) reported that crude oil inventories advanced more-than-expected by 3.45mn bls to 543.10mn bls last week. Separately, the Organization of Petroleum Exporting Countries (OPEC) stated that its output climbed to its highest levels since 2008, indicating that that the oil markets would remain oversupplied. The commodity traded at a high of USD47.02 per barrel and a low of USD43.03 per barrel in the previous week. Crude oil is expected to witness its first support at USD43.93 per barrel and second support at USD41.48 per barrel, while the first resistance is expected at USD47.92 per barrel and second resistance at USD49.46 per barrel.
Good trades.
