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CMC Markets:Time for GBP Pullback, Gold Remains Boosted

2007年07月19日 22:10 来源: CMC Markets 【字体:


  US weekly jobless claims continue lower, showing a 8K drop to 201K, with  the 4-week moving average slowing dropping  to 312K. We expect the data to extend moderate selling in sterling and yen vs the dollar.

  Renewed talk of an imminent Chinese rate hike after China's Q2 GDP grew of 11.9% -- the highest in 12 years, surpassing all forecasts. June CPI inflation jumped to a 3-year high of 4.4% y/y from May's 3.4%, well over the central bank's 3.0% target. Unlike in March and April when global markets appetite exhibited rising sensitivity to a further slide in Chinese equities emerging from higher interest rates, markets today have kept such risks at bay on the reasoning that China's stock market capitalization is no more than 1% of the nation's economy, thus having a minimal impact on China's economy and the rest of the world. Nonetheless, the role of global market contagion must not be ignored in the event that a market sell-off occurs simultaneously with renewed sub-prime revelations in the US.

  At 10 am EST, Fed Chairman Bernanke will give the same testimony to US Senate as he did yesterday to the House, but the range of questions could differ as he may be prodded more on future interest rates and inflation. Yesterday's release of June inflation figures showed no change from the May report with headline and core CPI at 2.7% and 2.2% y/y respectively, highlighting lingering upside price risks on the headline level.

  Also at 10 am EST, is the US index of leading economic indicators expected to have fallen 0.1% in June from a 0.3% rise in July.

  At noon is the July survey from the Philadelphia Fed expected to have eased to 15 after the June figure jumped to 18 from May's 4.2. Markets will closely watch the employment and new orders indices, which fell to 5.6 from 12.9 and rose to 18.3 from 8.7 respectively.

  The 2 pm release of the minutes from month's FOMC meeting should shed more light on the Committee's decision to downgrade core inflation to “stabilize” from “elevated” in the FOMC policy statement, despite deeming upside risks from high resource utilization and rising energy prices.

  USDJPY regains 122 despite China overheating, eyes 122.30

  USDJPY has proven to counter any downward pressure emerging from the possibility of a Chinese rate hike as early as Friday, which may result into market nervousness and trigger yen-boosting appetite plays. Lehman Brothers' denial that its earnings were affected by losses in sub-prime driven losses helped instill some stability in the currency. The pair was also boosted by an unexpected 0.3% decline in May All industry index -- the first drop in 2 months—and a 0.1% in the services sector index.

  We do not foresee any notable declines in USDJPY beyond the usual 121.70 support, which should leave the anticipated range intact at 121.85-90-122.20. Only unexpectedly strong US figures are seen propping the pair above the 122.20 figure. Absent any new rumors or revelations is seen triggering gains to 122.20. Key resistance stands at 122.45.

  Euro regains fresh all tine highs as rhetoric gains importance

  The euro stabilized at our projected support of 1.3750s before slowly regaining its $1.3830 record high after a spokesman said French president Sarkozy has not demanded an end to the independence of the European Central Bank. Mr. Sarkozy has been a vocal in demanding measures to explore ways for collaboration between Euro politicians and the ECB on matters of the currency.

  One of the elements that may lead to a possible retreat in the euro's rally could emerge from a change in rhetoric by Eurozone politicians and ECB officials warning of future rapid moves in the currency, rather than expressing displeasure at recent moves. EU economic and monetary affairs commissioner Almunia said today thr rising euro has yet to impact EU balance of trade but future strength is a concern and must closely watch for future euro appreciation.

  The 2-hour chart shows minor support at 1.3805, backed by a longer trend line support at 1.3780, holding since June 28.  Stability at this point is seen reviving the rally, targeting 1.3830, where options barriers are said to be present. Key barrier follows at 1.3865-70.

  Sterling cools on retail sales, eyes $2.0430

  Cable dropped below the $2.05 figure after UK retail sales slowed to a 0.2% rise in June from 0.4%, figure, below the expected 0.3%. With yesterday's release of the Bank of England minutes at showing a contentious 6-3 vote for the 25-bp rate hike, sterling is expected to become more vulnerable to short-term selling on doubts that the BoE may need to remain on hold before considering further tightening.

  We expect cable to approach the 2.0450 and stabilize at the 2.0430 trend support holding since Jul 6. Key foundation stands at $2.04. A decision from the PBOC to raise rates on Friday may tackle risk appetite and drag high yielding currencies such as sterling.

  This outlook leads us to consider bearish positions in GBPCAD (2.15460) and GBPJPY (249.45). (Ashraf Laidi/CMC Markets)  
  

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