Forex Markets Turning into Profit Taking Consolidations

The forex markets are turning into profit taking consolidation mode as the half year end approaches. News from Eurozone are generally positive but the common currency pares back some of this week’s sharp gain against Dollar and Yen. One the other hand, Canadian Dollar is still working hard to break through 1.3 handle against Dollar, following the rebound in oil prices. The Loonie is set to end June as the strongest one, followed by Aussie and than Kiwi. While Sterling surges this week on hawkish BoE turn, it’s yet to recover the post UK election lost and would end as the third weakest one for the month, following Dollar and then Yen.

St Louis Fed Bullard: Fed can afford to wait and see

St Louis Fed President James Bullard said today that "the Fed can afford to wait and see what comes out of the political process". He acknowledged that some of US President Donald Trump’s policies can provide growth but emphasized that "they’ve got to get them through Congress". Meanwhile, he noted that "the data has not been that great considering that we got going on this three hike process in December, March and June". And added that "you’d like to make a move like that on the back of pretty strong data for the U.S. economy but the consumption number was not that great."

Released in US session, US personal income rose 0.4% in May, above expectation of 0.3%. Personal spending rose 0.1%, in line with consensus. Headline PCE slowed to 1.4% yoy, below expectation of 1.5% yoy. Core PCE slowed to 1.4% yoy, meeting expectation. From Canada, GDP rose 0.2% mom in April, same as forecast. IPPI dropped -0.2% mom in May while RMPI dropped -1.8% mom.

ECB Lautenschlaeger: Should prepare for stimulus exit

ECB Governing Council member Sabine Lautenschlaeger said today that "although inflation is not yet on a stable path towards our objective, all the conditions are in place. And it’s "just a question of time and patience" for ECB to remove policy accommodations. She urged that "this is why monetary policy should already be making preparations of a return to normal stance. And it should adapt its communications accordingly".

In Eurozone, headline CPI flash slowed to 1.3% yoy in June, down from 1.4% yoy but beat expectation of 1.2% yoy. Core CPI, however, jumped to 1.2% yoy, up from 0.9% yoy, and beat expectation of 1.0% yoy. German Retail sales rose 0.5% mom in May, above expectation of 0.3% mom. German unemployment rose 7k in June, worse than expectation of -10k fall. Unemployment rate was unchanged at 5.7%.

Also from Europe,UK GDP growth was finalized at 2.0% oy in Q1, unrevised. Index of services rose 0.2% 3mo3m in April. UK Gfk consumer sentiment dropped to -10 in June. Swiss KOF leading indicator rose to 105.5 in June.

BoJ JGB buying hit lowest since 2014

In Japan, BoJ bought only JPY 24.4T of JGBs in the three months to June, down from JPY 27.1T in the previous quarter. That’s also the smallest amount since July-September quarter of 2014, when BoJ bought JPY 19.0%. Formally, BoJ is still aiming to buy JPY 80T of assets annually. But the figure may changed based on its "yield curve control" framework.

Released from Japan, national CPI core rose to 0.4% yoy in May, up from 0.3% yoy and met expectations. But that’s still way off BoJ’s 2% target. Tokyo CPI core, on the other hand, dropped to 0.0% yoy in June, down from 0.1% yoy and missed expectation of 0.2% yoy. Also from Japan, unemployment rate rose to 3.1% in May, household spending dropped -0.1% yoy, industrial production dropped -3.3% mom, housing starts dropped -0.3% yoy.

Staying in Asia pacific, New Zealand building permits rose 7.0% mom in May. China official PMI manufacturing rose to 51.7 in June. Non-manufacturing PMI rose to 54.9.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2947; (P) 1.2978; (R1) 1.3036; More…

A temporary top is in place at 1.3029 as GBP/USD lost upside moment, with 4 hour MACD crossed below signal line. Intraday bias is turned neutral for some consolidations. Downside of retreat should be contained by 1.2849 support to bring another rally. Above 1.3029 will target 1.3047 resistance first. Break of 1.3047 will target 61.8% projection of 1.2108 to 1.3047 from 1.2588 at 1.3168.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern. Pull back from 1.3047 has completed after failing to sustain below 1.2614 resistance turned support. It argues that the corrective pattern from 1.1946 is still in progress for another high above 1.3047. But still, outlook remains bearish as long as 1.3444 key resistance holds. Larger down trend from 1.7190 is expected to resume later after the correction completes.

Economic Indicators Update