Daily Insights Report 01/03/27

• 31 Mar 2017

1 Mar 2017

The US economy grew at an annual rate of 1.9% in the last quarter. This is slower from the 3.5% in the previous quarter. However, this new result does match the estimates. Lower investment by businesses and state agencies was enough to offset the growth coming from household expenditure. The Dollar also climbed in value, as markets further believe a US interest rate increase. The odds for an increase of the interest rate are now believed to be above 70%.

Federal Reserve Bank of New York head William Dudley and Federal Bank of San Francisco President John Williams have both suggested that the interest rate will rise. Meetings of members of the Federal Reserve will come to an end by the end of this week as the Fed Chair Janet Yellen will speak in Chicago on Friday.

– The AUD rose 0.1% after showing positive GDP growth. The country’s GDP grew by 1.1% in the fourth quarter, higher than the estimates of 0.8%. This shows that the savings rate has changed as people spend more and save less.

– Recent gains of the Japanese Yen were short-lived as the Dollar strengthened. The Yen was trading at 112.87 per Dollar.

Commodities

– Gold fell for a third consecutive day. It fell by 0.3% and reached $1,244.55 an ounce. In the month of February, gold gained 3.1%.

– Brent crude was 0.2% higher at $56.5 a barrel. Similarly, West Texas Intermediate (WTI) crude was down 0.1% to reach $54 a barrel. Crude oil last month gained 2.3%

Euro (EUR)

Italy GDP (Q4)

Italy’s economy continued to grow in the final quarter of last year. Most of the support for Italy’s GDP did not come from domestic demand – but from exports which gave it a push. A weaker Euro and a recovery in the US have improved the trade surplus for Italy. However, an adjustment of the banking sector that may come in the future as a result of political turbulence and the UK’s departure from the EU gives some uncertainty about the future of Italy’s GDP.

United States Dollar (USD)

Personal Income and Spending (January)

Forecast for this data is an increase of 0.3% in personal income and an increase of 0.3% in spending. While the hourly wages have risen, they have not grown as much as the market has predicted. Labor markets will need to continue to improve to get personal income growth above 4%, which is a target.

Construction Spending (January)

The forecast for construction spending is an increase of 0.8%. Stronger growth is expected since there was a slight decline in the month of December. Housing starts showed an increase of 6% year-over-year in the most recent quarter after showing much slower growth in the middle of last year. Private commercial construction is also growing which will help construction spending grow in the coming months.

Vehicle Sales

Vehicles sales are likely to see only a small change in the month of February from January at 17.69 million. December saw an 11-year high likely due to optimism and oil prices. The vehicle market in the US is likely to stay stable if not grow this year. The most recent gains will limit how much growth is actually attainable.

Technical Analysis

EURCHF

Looking at the 1-hour chart of the EURCHF pair, there may be a trading position that could be profitable. This pair may bounce from the 1.0635 area, which has been providing support since late January. Stochastic data shows that the currency is near the oversold territory, but may already be rebounding back to normal levels. If a position is set up, it could be aiming for around 1.0680.