Weekly Outlook: Hong Kong Consumer Prices May Inflate Further Restrictive Measures

After bids came in heavy at the 7.7780 figure, further orders were tripped to push the emerging major through the 7.7840 figure where momentum seems to be waning ahead of likely resistance just below the 7.7860 level.  Fundamentally speaking, the technical picture may be coinciding with positive data, bolstering a retracement in the short term for the HKD bull as two key reports are expected to take the underlying currency for a retest of the previous support.  First up will be the unemployment rate for the month of August.  Currently standing at 4.9 percent, the pace of unemployment is expected to stand at just below 5 percent as the economy continues to purport further growth potential.  No other example can be best witnessed as the equity benchmark which is now up 15 percent for the year in comparison to the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US based Dow Jones Industrial Average.  For the year, the US benchmark is higher by 8 percent heading into the fourth quarter.  Subsequent to the unemployment report will be the countrys composite consumer price index.  Expected to rise to 2.4 percent by the consensus, the print will likely to be tied to the surprise retail sales figures that were posted in the week prior.  For the record, retail sales figures vaulted 7.1 percent higher for the month.  Although not likely to move the monetary authority to action as the currency is widely pegged, the figure may spark some alterations of reserve requirements at the banking level in order to contain any rampant inflationary pressures.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Comparatively, last week, there was plenty for the HKD bear as industrial production figures were to the downside in the Hong Kong economy.  With no expectations, consensus figures were still pitting the figure to match the previous quarters 7 percent jump in overall productivity.  However, likely reflective of a slight pullback on temporarily waning demand, the report declined, to rise only by 5.3 percent.  Producer prices were also surprising as the quarterly insight rose 2.5 percent.  However, the previous figure was vulnerable to a revision as the consensus revised the figure down to 2 percent from a 2.1 percent print.  Separately bolstering weakness seemed to be further evidence of Asian currency weakness heading into the G7 conference.  With the topic of Asian currencies not even touched upon during the weekend convention, traders sided with a stronger dollar as the world continues to wait for a more flexible answer from Beijing.

Economic Releases for September 18 September 22