Yahoo Finance The EUR/USD Consolidates but Down Trend Remain Intact
The EUR/USD bounced slightly on Tuesday but the trend for a lower exchange rate remains intact. U.S. yields edged lower, easing pressure on the currency pair despite a jump in the U.S. Philly Fed services index. U.S. chain store sales fell in the latest week, while the ECB is focused on Italy.
Technicals
The EUR/USD attempted to rebounded but ran into resistance near the 10-day moving average at 1.1841. Support on the currency pair is seen near the December lows at 1.1725. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold territory. The fast stochastic is printing a reading of 16, below the oversold trigger level of 20, which could foreshadow a correction. The MACD (moving average convergence divergence) index generated a crossover buy signal which reflects accelerating positive momentum.
U.S. May Philly Fed’s non-manufacturing sector jumped
U.S. May Philly Fed’s non-manufacturing sector jumped 13.5 points to 39.5 after dipping 1.6 points to 26.0 in April. This month’s level is the highest since the 46.6 from June 2015. The components were mixed with full time employment halved to 7.7 from 15.8, while part-time employment rose to 11.4 from 8.7. New orders tripled to 36.2 versus 12.5. Also prices paid increased to 33.8 compare to 26.0, with prices received climbing to 22.6 versus 12.1. The 6-month index rose 8.6 points to 50.1. This report is consistent with most of the Q2 data are showing a solid pick up in growth from Q1. Indeed, the Q2 headline index is averaging 32.8 versus Q1’s 29.7.
U.S. chain store sales fell
U.S. chain store sales fell 0.6% in the week ended May 19, after falling 0.8% in the prior week. But, on a 12-month basis, the weekly sales pace was unchanged at 4.1% year over year, continuing the recent strength. Also, Q1 sales are coming in around a 2.8% year over year clip, versus a 0.2% year over year increase in the same period last year, according to the report.
ECB’s Liikanen said that news from Italy not very encouraging
He was quizzed by lawmakers in Helsinki on Italy’s policy plans Liikanen declined to comment on specific ideas, but said “all the news” coming from Italy recently “isn’t sounding very encouraging”. On ECB policy Liikanen highlighted the exceptional degree of uncertainty related to monetary policy transmission adding that for the time being bringing inflation back to target depends on an expansionary policy. Likkanen also repeated the official ECB guidance that rates will remain low for an extended period of time after the end of net asset purchases.
The UK’s May CBI industrial trends survey was softer than expected
The UK’s May CBI industrial trends survey was softer than expected, with the headline total orders balance falling to a -3 balance, declining +4 in the month prior. The median forecast had been for a +2 outcome. Softening in both domestic and global growth was blamed on the evident losing of steam in the manufacturing sector, with output at its weakness in the three months to May since the three months figure for April 2016, although export order books were still reported to be buoyant.
Vlieghe Predicts More Rate Hikes than Expected
BoE Monetary Policy Committee members have been testifying before parliament, the most attention-grabbing remarks from which have been from member Vlieghe, who predicted in written remarks that the repo rate could be hiked by up to six times over the next three years, envisaging one or two 25 bp hikes per year. The remarks are notable for: 1, because Vlieghe has been voting to keep the repo rate unchanged in recent meetings; and, 2, because the BoE’s May Inflation Report assumes just under three 25 bp rate increases over the three-year forecast period. He applied the familiar Brexit caveat, however, emphasizing that there is “significant uncertainty” in his forecast, partly due to Brexit-related uncertainty. BoE Governor Carney, meanwhile, was pressured to justify why he voted for not change in May after signaling a May rate hike only February. Carney said he wanted to wait for more data to come in after “temporary, idiosyncratic factors” slowed Q1 economic activity. He also said that households and businesses understands the BoE position for “limited and gradual” rate hikes. Sterling and UK yields rose on Vlieghe’s remarks.
UK government net borrowing came in below forecasts
UK government net borrowing came in below forecasts in April data, which marks the first month of the near fiscal year, at GBP 7.8 billion in the headline ex-public sector banks figure, below the median forecast for GBP 8.5 billion. Borrowing for the full 2017-18 financial year came in at GBP 40.5 billion, which is the lowest net borrowing since the financial year ending March 2007.
This article was originally posted on FX Empire
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