Stress Tests Shows All European Banks Passed
- 5 November 2018
Fundamental Outlook The U.S. adds higher payroll amid stronger consumer confidence. European Banking Authority conducts stress test and all 48 banks have passed. U.K. manufacturing slows amid rising uncertainty in BREXIT deal.
The U.S. personal spending grew 0.4 percent in October and matched forecast. Conference Board of consumer confidence rose 137.9 in October and higher than forecast, compared to 135.3 in prior month.
The U.S. ISM manufacturing index grew 57.7 in October and lowest in 6-month record. American payroll added 250,000 in October and better than forecast, after revised gains of 118,000 in previous month. Unemployment rate stays unchanged at 3.7 percent.
China reports the manufacturing index expanded 50.2 in October while services index grew at 53.9, both below forecast.
Trade war has caused the Chinese Yuan to weaken with USD/CNY testing 6.96 last week, making a double-top formation. On Friday, USD/CNY closed at 6.89 after Yuan recovered moderately.
Eurozone GDP for Q3 season grew 0.2 percent on quarterly base and missed forecast. German consumer prices expanded 0.2 percent and lower than 0.4 percent gains in September.
Eurozone consumer prices rose 2.2 percent in October from a year ago, while core prices expanded 1.1 percent on annual basis. Both are below consensus. Unemployment rate remains high at 8.1 percent and unchanged from September.
European Banking Authority (EBA) releases a report after 48 European banks were put on a stress test. All passed but Barclays Bank scores the lowest among all. However, European Central Bank comments that large banks are more resilient now in case of recurring crisis and facing adverse market environment.
U.K. authority reports net lending to individuals in October at GBP4.3 billion and highest in 3 months record, surpassed expectation. Construction index remains robust in October at 53.2 and best record in 3 months.
Markit reports U.K. manufacturing index expanded at 51.1 and slowest pace in more than 2 years. Bank of England remains unchanged in monetary policy while maintains asset purchase facility at GBP435 billion. Governor Carney says British economy is closed to a maximum uncertainty as BREXIT looms around the corner.
Technical Forecast USD/JPY closed at 113.16 on higher demand as Dollar strengthened last week. This week, the trend is supported at 111.80 region and probably will advance higher to 113.80 level. Focus will be staked on Dollar trend over the mid-term election on this Tuesday.
EUR/USD bounced off 1.1300 level last week after forming a double-bottom. This week, much uncertainty is overshadowing the market while we forecast the initial range will be contained from 1.1300 – 1.1500 region. Eventually, the trend may break in either direction after mid-week based on the outcome of Dollar trend.
GBP/USD has bounced off 1.2700 last week and jumped high at 1.3000 region. This week, we expect sideways trend to occur in market with mixed sentiment. Fundamentally, we reckon the market attention will focus more on the above 2 market pairs while Pound will be left aside for a while.
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DAR Wong is a professional in financial industry based in Singapore with 29 years of global trading experiences. The expression is solely at his own. You may reach him at firstname.lastname@example.org