EUR/GBP: Short In Good Shape

EUR/GBP: Mixed Jobs Data From UK

• British Office for National Statistics said the number of unemployed fell 2k in the three months to March, but the unemployment rate held steady at 5.1%. The number of people in work rose by 44k, taking the employment rate to a record high of 74.2%.
• Workers' total earnings including bonuses rose by an annual 2.0%, up from 1.9% in the three months to February. The reading was above the market expectations of 1.7%. The ONS said the timing of bonuses this year had affected the rise in total earnings. Excluding bonuses, earnings rose by 2.1% year-on-year in the three months to March, down from 2.2% and against expectations for a 2.3% rise. Wages largely lagged the broader economic recovery in recent years, but the Bank of England is watching for signs of stronger pay growth as it considers when to raise rates from their record low.
• The GBP hit a two-and-a-half-week high against the EUR on Wednesday after a poll showed the "In" campaign clearly in the lead ahead of the June 23 referendum on Britain's European Union membership. The new Ipsos-Mori poll, commissioned by London's Evening Standard newspaper, found 55% of those surveyed supported staying in the EU, while 37% wanted to leave. Other polls in recent days have given mixed signals but most point towards a vote to remain in the EU.
• Mixed data showing the employment rate in Britain at a record high but earnings excluding bonuses growing more slowly than expected nudged the pound down a little against a broadly stronger USD, but it stayed up against the EUR. The EUR did not get any support from macroeconomic data. Eurostat confirmed its flash estimate of headline inflation in the Eurozone at -0.2% in April and of core inflation at 0.7%.
• We stay EUR/GBP short. Technical analysis suggests a further drop is likely. Tenkan and kijun lines are negative aligned for now, highlighting the bearish bias.

USD/JPY: Japan Economy Expanded Much Faster Than Expected

• Japan’s economy expanded by an annualised 1.7% in January-March, much more than a median market forecast for a 0.2% increase and rebounding from a 1.7% contraction in the previous quarter. The economy expanded at the fastest pace in a year in the first quarter.
• However, taking into account the effects of the extra day from the leap year, which pushed up the quarter-on-quarter growth rate by 0.3 percentage point, growth is not as strong as the headline number shows.
• Private consumption rose 0.5%, as households boosted spending on televisions, food and beverage, and recreation, the data showed. But the rebound failed to make up for a 0.8% drop the previous quarter.
• With private consumption making only a feeble recovery from last quarter's slump, the data keeps alive market expectations that Prime Minister Shinzo Abe will delay a scheduled sales tax hike next year. Following the data, Koichi Hamada, an emeritus professor of economics at Yale University and key economic adviser to Abe, reiterated his opposition to the planned tax hike, which he told lawmakers would cause "quite a confusion". Abe raised the sales tax to 8% from 5% in 2014, which tipped the economy into recession. That led Abe to delay a second tax hike to 10% by 18 months.
• The Japanese government's annual economic growth strategy calls for measures to boost consumption on the assumption it will go ahead with a sales tax hike scheduled for next year, a draft presented at a government panel showed on Wednesday. The document, however, may do little to temper speculation that the government will delay the tax increase scheduled for April 2017. Abe said there was no change to his plan to proceed with the tax increase, unless Japan is hit by a huge earthquake or a shock of the scale of the collapse of Lehman Brothers in 2008. But he acknowledged that private consumption was weaker than expected since it was hit by the first tax hike in 2014.
• We expect the JPY to stay weaker in the coming days. The USD/JPY is testing an important resistance level at 109.47, which is 61.8% retrace of the 105.55-111.19 fall. A close above this level may fuel stronger rise.

Source: Growth Aces - Forex And Precious Metals Trading Signals