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British Pound Extends Losses

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Dear Traders,

The pound sterling dropped like a stone, breaking easily through $1.4230 after Bank of England governor Mark Carney said that “now is not yet the time to raise interest rates”. He highlighted global economic risks weighing on inflation and said that inflation “will likely remain very low for longer”. His comments dashed investors’ hopes for an early rate hike and sent the pound sharply lower toward its next target at 1.41.

Ahead of Carney’s speech an unexpectedly uptick in core consumer price index has driven GBP to a weekly high at 1.4340, which now marks a faraway resistance for the currency pair. We will now turn our focus to the next lower barrier at 1.41. A sustained break below that level could push sterling towards 1.4050 and 1.40, important price levels where the cable may gain some ground. However, upward movements could currently be limited until 1.42 and 1.4235.

Today we will focus on the next important economic report from U.K. which will be labor market data, due at 9:30 GMT, here in particular Average Weekly Earnings. Wages are forecast to show a decline, which could put further pressure on the currency.

The EUR/USD marked a current support at 1.0859 from where it started a relief rally toward its resistance area at 1.0985. In case of a renewed test of this resistance it should be interesting whether the euro will be able to break above 1.10, pointing towards a higher target at 1.1035. However, the current upward momentum could be deceptive ahead the European Central Bank meeting tomorrow. ECB president Mario Draghi may deliver a more dovish than-expected message to talk down the euro. Euro traders should prefer to turn their focus to a downside break of 1.0830 and 1.08 rather than an upside break of 1.0985.

We have some interesting U.S. data scheduled for release today. U.S. Consumer Prices are due at 13:30 GMT along with the release of U.S. Building Permits. If CPI figures surprise to the upside, the greenback could trade higher against its major peers. 

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GBP’s Sell-Off: Only A Steep Correction?

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Dear Traders,

The biggest story yesterday was the sharp sell-off in the British pound. The cable was crushed as UK inflation unexpectedly dropped below zero. Consumer prices fell 0.1 percent in September, which was even worse than economist’s forecast of stagnation. The decline will reinforce the view that the Bank of England is far away from raising interest rates in the near future. Interestingly, the pound already weakened before inflation data was due for release. Traders have therefore reason to believe, that there was a leak and that some market participants were already aware of the weak CPI report.

Today’s focus shifts to the U.K. Labor Market report, scheduled for release at 8:30 GMT. Economists predict that wage growth accelerated in August, which could incite sterling bulls to buy GBP towards 1.54 again. A strong labor market report would have the potential to turn yesterday’s decline into a sharp correction of the recent uptrend.

The EUR/USD has nothing new to report. The German ZEW survey came in even weaker than anticipated, but the euro was unaffected by the deterioration in investor sentiment. The currency remained trading within its narrow range between 1.1410 and 1.1345.

The most important piece of U.S. data will be today’s Retail Sales report, due for release at 12:30 GMT. If data disappoints, we could see a sharp sell-off in the U.S. dollar, pushing its major peers towards fresh highs. Independently of the outcome, this report should have a significant impact on the greenback.

Furthermore, the Federal Reserve releases the Beige Book at 18:00 GMT.

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Is China’s Devaluation good or bad for the U.S. Dollar?

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Dear Traders,

The euro rallied as Greece reached an initial agreement with creditors on the terms of a third bailout. Euro-bulls were able to gain a nice profit until the current resistance around 1.1080.

The U.S. dollar got no major support from China’s Yuan devaluation.

While China’s move to devalue the currency by 1.9 percent raises doubts on the health of the world’s second-largest economy and generally leads to safe-haven flows into the U.S. dollar, the currency move could also pose a challenge for the Federal Reserve. One of the major concerns for the Fed is a strong U.S. dollar, which is holding inflation low. In a currency environment of an easier money path where other central banks are going to ease monetary policy in order to boost exports, it could be hard for the Fed to justify an interest rate hike this year. This fueled speculation the Fed’s actions could be pushed into 2016. With this in mind, the U.S. dollar could be vulnerable to further weakness in the near-term.

The British Pound traded sideways, accompanied by a slight downward tendency. The U.K. labor market report is due for release today at 8:30 GMT. Average Weekly Earnings are forecast to show a decline which could pose further downward momentum for the pound sterling.

The only piece of eurozone data today will be Industrial Production scheduled for release at 9:00 GMT.

Daily Forex signals:

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2015 Maimar-FX.

www.maimar.co