Daily Insights Report 31/03/2017

• 3 Apr 2017

31 March  2017

The US economy advanced an at annual rate of 2.1% for Q4, higher than the 1.9% which was estimated, but still lower than what was seen in Q3 of last year (3.5%). Consumer spending and inventories increased faster than expected, at the same time that net trade reduced growth. In 2016, the GDP expanded 1.6%, which is the slowest rate of growth seen since 2011.

Special attention is being paid to China’s financial markets. The mainland’s equity benchmark (the Shanghai Composite), fell for the fourth day in a row, and settled at its lowest level since February 17. The technology focused benchmark (Shenzhen Composite) lost 2% for its worst finish since February 21. This mainly comes after worries in the housing market. Property market related stocks were under pressure after a government think-tank urged the authorities to guard against excessive speculation in the real estate sector.

– The GBP showed to have strength as it gained 0.3% against the USD to reach $1.2469, after having touched $1.2525. The Pound was also 1.1% stronger against the Euro at EUR1.1671, which is a four-week high.

– The Dollar was generally higher as the Dollar index was up 0.5% to reach 100.52. The Euro was down against the USD at $1.0680, whilst the Dollar strengthened against the Yen to reach 111.74.

– The EUR came under pressure yesterday after the latest German inflation data. Based on the results of six regional states in Germany, headline inflation came in at 1.6% per year from 2.2% seen in February.

Commodities

– US energy stocks enjoyed gains after the West Texas Intermediate (WTI) crude oil went up past $50 for the first time since March 10. It was up 1.6% to reach $50.32, while Brent settled with a 1.0% gain to reach $52.96. Crude prices saw their prices gain as reports showing OPEC’s decision to extend the deal to reduce output from member nations.

– With the Dollar showing signs of modest gains, and the simultaneous rise in US bond yields, this has led to the price of gold falling slightly. The metal lost $8 and was trading at $1,243 an ounce.

Euro (EUR)

France – Household Consumption Survey (February)

French household expenditures likely rose to 0.2% month-over-month in February after adding 0.6% month-over-month in the previous month. Still-low oil prices as well as low prices on most goods with an improving labor market have helped the country move forward. Retail PMI fell to 51.7 in February and 53.1 in the previous month – while employment increased. An increase in the number of promotional offers also must have contributed to an increase in household consumption. Still, French households are often seen as prudent and their savings rate remains relatively high at 15%.

United States Dollar (USD)

Personal Income and Spending (February)

It is expected that personal income will rise 0.4% and Spending will rise 0.2%. Personal income is projected to rise at 0.4% for the second straight month, which is due to the rising wage growth. Annual income growth touched 4% in January for the first time in over a year, because of increased labor market tightness. Further spending would be required to keep real spending ahead of inflation.

University of Michigan Consumer Sentiment (March)

A forecast for 98.0 is expected as the final reading for March’s Michigan survey. Sentiment in March is likely to continue to display a strong bounce after the election. The sub-index reading on the assessment of current economic conditions reached the highest level in 17 years, which was first seen in the preliminary survey. This shows that many consumers will help continue the economy moving forward in the future.

Technical Analysis

USDCHF

This week, the USDCHF currency pair had broken a rising channel support that had not been broken since the middle of last year. The USDCHF is now currently around the 0.9850 level. Two points worth noting about the direction of this pair include the bullish divergence that can be seen in the stochastic chart, and the 200-day SMA currently below the trading price. It may be feasible to enter a long trading position on this currency pair aiming for the target of 1.0150.