Daily Insights Report 30/03/17

• 31 Mar 2017

30 Mar 2017

Contracts to buy previously owned homes in the US went up by 2.6% year-over-year in February, which is the biggest gain since April last year. Compared to January, sales jumped 5.5%. Looking closer at the data, there is optimism for sustained growth in this market because the data shows that housing contracts have increased in all the four major regions.

– The British Pound was has been trading slightly higher as of this morning, and gained 0.1% after losing 1.0% yesterday. It lost this percent because the UK commenced the formal proceedings for leaving the EU.

– The Dollar index which measures the USD against a basket of currencies was up 0.1% to reach 100.07. It is the first time this index has settled above 100 in almost two weeks.

– The Japanese Yen was 0.3% weaker against the Dollar and reached 111.37 per Dollar – the worst performer among the major currencies.

Commodities

– Bullish data on US crude inventories pushed oil prices more than 2% higher on Wednesday. Brent crude was trading at $52.42 while West Texas Intermediate (WTI) crude was seen to be slightly lower at $49.49 per barrel

– Gold was down 0.4% and reached $1,248.70 per ounce.

United States Dollar (USD)

GDP (Q4)

The forecast for this data is 2.0%. Though the overall GDP growth fell in the fourth quarter, output still found some support from strong consumer spending. That may not be the case in the quarter ending now after January’s data showed a decline in consumer spending by 0.3%. This has been the largest single drop in consumer spending since 2009. Even though GDP may disappoint in the coming data releases, healthy gains seen in industrial production and higher fiscal spending may keep economic progress growing in the long term.

Japanese Yen (JPY)

Consumer Price Index (February)

The expectation for the increase in CPI in Japan for the month of February is 0.2%. This is an increase from the previous month where it grew 0.1%. Inflation likely accelerated in this month whilst energy prices were rising. Japan’s core consumer prices exclude fresh food, but not oil – which may skew the data slightly. We can expect that the rebound in commodity prices will drive Japan’s inflation higher this year. Domestic demand on the other hand may not rise in the same fashion. This is because prices will remain below the Bank of Japan’s target of 2.0%. These reasons combined make it unlikely for Japan to provide more fiscal stimulus this year.

Employment Situation (February)

Japan’s unemployment rate likely remained unchanged for the month of February at 3.0%. The jobless rate has since turned since various sectors have seen gains in employment. Another piece of data suggests that the labor market of Japan is strengthening – the jobs-to-application ratio. This ratio remains high, which means that demand for labor remains strong. This trend will likely continue in the coming months, as there is now a higher demand for part-time workers compared to full-time roles. A tight labor market is unlikely to incite companies to spend more.

Household Expenditures Survey (February)

Japan’s nominal workers’ household consumption likely rose 0.3% in February after having fallen 1.7% in January. The economic cycle in Japan is slightly above the trend for household expenditures, though it may fall in the coming months. With fuel and food prices to be low, core inflation remains quite strong. Rising inflation pressures are unlikely to encourage households to increase spending.

Industrial Production (February)

Japan’s industrial production likely increased to 2.1% month-over-month, after seeing a decline of 0.8% in January. Production likely fell in January because of the Lunar New Year holidays – so a strong February is due to make up for the slack. Overall, the production has risen due to the Yen’s recent depreciation which has increased demand for manufacturing exports. This will likely continue into at least the summer of this year.

Technical Analysis

USDCAD

Looking at the 1-hour chart of this currency pair, we can see a rising channel showing support for the currency pair. The pair is struggling to pass through the 1.3330 level. The struggle has been seen since the past month. Entering a trading position with this currency pair may be enticing target of 1.34 is set.