Daily Insights Report 19/04/17

• 19 Apr 2017

US Industrial Production climbed 0.5% in March. The rise of 0.5% month-over-month in March 2017, came after a 0.1% gain in February which matched the market expectations. Utilities output jumped 8.6%, which is the largest gain on record, while manufacturing activity fell 0.4%, as auto production contracted.

– GBP was the leader in yesterday’s trading session as it leapt to a six-month high against the Dollar. This came after Theresa May unexpectedly called a general election. A sudden increase in the value took the GBP to $1.2904. This is the highest level seen since early October. While it settled at $1.2835, it still showed a 2.2% increase for the day. The GBP was also stronger against the EUR, by a modest 1.3%. The decision of Theresa May will prolong UK political uncertainty as it will take longer to settle. Looking further at this decision, it means that Theresa May will have a chance to negotiate a Brexit deal along the lines of what she wishes for, rather than having to appease to the members of her own party. She is now in a position to neutralize them as a threat.

Commodities

– Energy stocks came down as a result of what happened to oil prices. Brent oil settled 0.9% lower to reach a one-week low level of $54.89 per barrel. West Texas Intermediate (WTI) crude oil on the other hand was down 0.1% to reach $52.58.

– Because of geopolitical tensions and some disappointing corporate earnings, the price of gold, US T-Bills and the JPY all moved slightly higher. These securities are collectively understood as assets that will appreciate in times of other markets facing difficulties. Gold was seen to rise $6 to reach $1,290 an ounce.

Australian Dollar (AUD)

Employment Situation (March)

The forecast for unemployment in Australia is likely to remain at 5.9% for a second consecutive month. This is the highest rate that has been seen since January 2016, as employment growth falls behind an increasing labor market. The volatility of the job data makes it difficult to understand what is really happening in the labor market. However, the record high unemployment in February combined with disappointing fulltime employment numbers suggests that there is plenty of slack in the job market. This is hurting wage growth and shrinking spending.

Euro (EUR)

France – Consumer Price Index (March)

France’s annual EU-harmonized consumer prices likely rose 1.1% in March, down slightly from February, though it added 0.5% on a month-ago basis. The annual number decelerated due to lower prices of manufactured products, while prices of services remained strong. Annual prices of tobacco added close to 3% in March and energy prices rose nearly 10%. Core inflation also remains in positive territory. We should see inflation strengthen in the months ahead, supported by stronger demand-pull and cost-push inflation. It is likely that the country will reach the ECB’s target level of inflation within half a year.

Technical Analysis

GBPCAD

Due to the recent decision affecting the Pound, it may be an interesting time to return to this currency pair. Looking at the daily chart of this currency pair, we can see a breakout that is now formed and the stochastic indicator is moving towards the overbought territory. The conservative way to proceed would be to wait for a possible pullback and retest the 1.67 area. However, another strategy which would seem more aggressive would be to enter a long position with the assumption that the GBP will continue to strengthen.