U.S. Consumer Confidence At 16 Year Highs, Pound In Focus For U.K. Inflation, ASX200 Testing Key Resistance 5,800

The U.S. dollar declined with treasury yields on Friday despite a better than anticipated reading of consumer sentiment as investors continued to unwind speculative positions of a more hawkish Fed. The University of Michigan consumer confidence survey (MoM Mar) rose to 97.6 from a previous reading of 96.3 and estimates for 97.0. A measure of the current conditions rose to the highest levels since 2000 highlighting that the key driver of the U.S. economy, household consumption, is likely to remain solid.

This week the market will focus on a number of speeches by Federal Reserve officials including Chicago’s Charles Evans on Tuesday & Friday, Chair Janet Yellen on Thursday, both Dallas’ Robert Kaplan and Minneapolis’ Neel Kashkari on Friday and New York’s Dudley on Saturday.

The week ahead is also filled with key data for the U.K. as PM Theresa May looks to trigger Brexit negotiations by the end of the month. On Tuesday data is released for inflation, retail, producer and housing prices along with the government’s public finances while on Thursday retail sales data will be released. Since July 2016 core consumer prices have risen from 1.3% year-on-year to 1.6% in January, with producer input costs rising 20% thanks to 17% decline in the British Pound. While inflation is tipped to rise to just under 3% by the end of this year, this will largely depend on movements in the currency.

The first chart below shows the Pound against the U.S. dollar which has remained within a well-defined trading range over the past five months. Should the currency remain relatively stable towards the end of 2017 we will begin to see the rebasing effect keeping further upside in inflation capped. That is in line with the Bank of England’s thinking and given the temporary nature of these effects are unlikely to look to increase rates before the end of 2017.

Locally the ASX200 finished higher on Friday, up +0.24% at 5,799.65 and this morning we can expect a softer start to trade with ASX SPI200 futures down -13 points on Friday. The second chart below shows the benchmark which is now test the key resistance zone between 5,800 and 5,827 for a third time. Over the past three months selling pressure has remained constant around the 5,800 level while a series of higher lows over the same period signals buyers are becoming increasingly more eager as they buy the dips. From a technical point of view this is an encouraging sign and we now look for a break above this region to open up further gains towards the 6,000 level. If you’re interested in trading global markets and still need practice, click here to open a free $100,000 Rivkin Trader account. 

Data releases:

·         RBA’s Ellis Speaks In Canberra 12:40pm AEDT

·         German Producer Prices (MoM & YoY Feb) 6:00pm AEDT

·         Chicago Fed Evans Speaks On The Economy And Policy 4:10am AEDT

Chart 1 – GBP/USD

Chart 2 – ASX200 Index

Source: Rivkin, RivkinTrader

To view the Rivkin economic calendar and Local Markets matrix, members can click here.

This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via james.woods@rivkin.com.au or by phoning +612 8302 3631.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.