Sterling tumbled last night as the Bank of England remained firmly in the dovish camp.
The central bank kept its monetary policy unchanged as expected, but it also lowered its growth forecasts for the next two years. To many people’s surprise, the central bank cut its GDP projections for 2017 to 1.7% from 1.9%, and forecast lower expectations for 2018. The wage growth forecast was also trimmed. GBP/USD fell from its eleven-month high to the 1.314 area, and GBP/EUR dived to the 1.106 area against the backdrop of a strong euro.
The weaker currency led to a surge in the FTSE 100 index, which outperformed its European peers last night. The central bank’s dovish statement wiped out trader’s fear of a rate hike for the time being.
Technically, GBP/EUR remains in a strong bearish trend, with its 10-Day Simple moving average and SuperTrend (10,2) both heading south. Momentum indicators MACD and RSI both indicate that a bearish sentiment prevails. Its immediate support level could be found at the 1.100 area.
The US nonfarm payroll will dominate market sentiment tonight, particularly in USD and stock markets. The consensus forecasts some 183k new jobs to be created in the month of July, a lower revision from the previous month’s figure of 222k. A higher figure indicates more employment and thus inflationary pressure, which will increase the likelihood of a December rate hike. A strong employment number also suggests faster economic growth and spending in the future, therefore is likely to send the US dollar higher. A lower figure, however, will likely do the reverse.
Singapore earnings highlight:
DBS Group (H1):
- Overall: in line with estimates
- H1 Net profit up 4% yoy to S$2.35 billion – a record level
- Broad-based loan growth and higher fee income offset lower net interest margin and weaker trading performance
- Q2 net profit jumped 8% to S$1.14 billion
- Non-performing loan rate edged up to 1.5% from 1.4% largely due to heightened credit costs in the oil and gas sector
- Declared 10% increase in interim dividend to 33 cents
Sembcorp Industry (Q2):
- Overall: miss estimates
- Revenue increased by 23% YOY to S$2.3 billion due to contribution from the utility segment
- Marine segment remains weak due to lower contribution from its rig building and offshore platform projects
- Earnings Per Share (EPS) shrank to 2.54 cents from 4.29 cents a year ago
- Trimmed its interim dividend by 25% due to lower earnings
Hongkong Land (H1):
- Overall: beat estimates
- Net profit increased 32% YOY, mainly due to higher positive returns from investment property portfolio
- Earnings per share jumped to US $0.22, higher than consensus forecast of US $0.16
- Unchanged interim dividend of US$0.06 per share
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