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Silver Prices Under Pressure

Daily Analysis - 29/03/2017

Bulls Still in Control Despite Overnight Dip in Prices

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Silver prices are down in early Wednesday trade after comments from US Federal Reserve Vice Chairman Stanley Fischer pointed to the high likelihood of two more rate hikes before the end of 2017. However, bulls remain in control as the precious metal continues to trade above the key support around $18.010.

Robust US Data Erodes Safe-Haven Demand


Silver fell on Wednesday in the face of technical selling and stronger than expected US economic data that increased expectations of further interest rate hikes this year, supporting the dollar in the process. The dollar reversed from a four-month low against a basket of major currencies on Wednesday as solid data boosted expectations for more rate increases this year.

Reinforcing those expectations was the US CB Consumer Confidence index, which hit 125.6 in March, handily surpassing projections of a reading of 114.0. The March reading marked the highest level the index has reached since December of 2000. Silver was also hurt by comments from US Federal Reserve Vice Chairman Stanley Fischer who stated that two more increases in the US overnight interest rate during 2017 seemed just "about right." Silver is currently perched just above the $18.070-mark.

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Japanese Retail Activity Disappoints


Retail sales in Japan grew less than expected in February, signalling that domestic spending is struggling to gain traction while inflation may remain below target for the foreseeable future. Retail sales rose 0.10% last month from a year ago, as improved car sales more than offset weaker spending on food.

However, the figure missed forecasts of a 0.70% increase by a wide margin. On a month-on-month basis, sales edged 0.20% higher, also below projections of a 0.30% growth. The recent recovery in the Japanese economy has been fuelled by strengthening exports. Nevertheless, wage growth continues to remain tepid, limiting any significant upside in domestic private consumption. Government data on the jobs market and household spending will be released Friday, and should give a better picture of how the economy fared last month. USDJPY is gaining in early Wednesday trade, and was last seen around 111.200.

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Article 50 and Scottish Referendum Sink Pound


With more questions than answers following the move by UK Prime Minister Theresa May on Tuesday to officially trigger the beginning of 2-years of exit negotiations with the EU, the Pound has found itself under renewed pressure.  The main issues still clouding the outlook remains the status of visa holders and trade, however, there are other lingering distractions such as the EU’s insistence that the UK put up €60 billion worth of guarantees and settlements to move forward.

Apart from the EU, another Scottish vote held yesterday approved a second independence referendum to be held within the next two years.  Nonetheless, it still requires the support of the current UK Government to be legally binding, which may complicate exit talks even further.  After tumbling on Tuesday, the GBPUSD pair remains under pressure ahead of the European open.

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Sweden Retail Sales Jump


Retail sales in Sweden surged 2.70% year-over-year in February, following the upwardly revised 2.70% gain a month earlier while beating economists’ forecasts of a 2.40% increase. On a monthly basis, sales were up 0.20% compared to an upwardly revised 1.70% improvement in January. Sales of durable goods, which grew 4.80%, were the biggest contributor to last month’s better than expected data.

Consumer goods sales decelerated to 0.30% growth, slightly below the 0.50% print reported in January. However, analysts are warning that the first couple of month’s data must be interpreted with caution, as they have traditionally been weak.  USDSEK has been trying to mount a comeback after dropping to a two-month low of 8.7600 last week, with the pair currently hovering around 8.8400.

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