On Tuesday, the British pound sagged to fresh one-month minimums against the major American currency, after the issue of gloomy British manufacturing data contributed to worries regarding the actual strength of the British economy.
The currency pair GBP/USD grasped 1.2968 during European morning trade, the pair’s lowest reading since July 11. However, the given pair subsequently consolidated at 1.2978, dropping 0.47%.
Cable was about to find support at 1.2848, the minimum of July 11 as well as resistance at 1.3178, the peak of August 5.
The British Office for National Statistics told manufacturing production slumped by 0.3% in June, somewhat worse than expectations for a 0.2% dip and following a sag of 0.6% a month earlier, that was revised down from an initial 0.5% slump.
On an annualized basis, in June manufacturing production edged up 0.9%, worse than forecasts for a 1.3% leap.
The report also revealed that in June, industrial production went up by 0.1%, in line with forecasts. In June, year-on-year, industrial production soared by 1.6%, matching forecasts.
Aussie drops after weak NAB polls
The Australian dollar sagged during Asia trade after downbeat business surveys from National Australia Bank as well as consumer and producer prices data from China, suggesting mild pressure on prices although unlikely enough to spur any monetary policy action.
The currency pair AUD/USD was worth 0.7639, demonstrating a 0.16% tumble, while USD/JPY traded at 102.51, rising 0.06%.
In Australia, NAB business confidence was at plus-4 for July, compared to a previous outcome of plus-6, along with the NAB business poll that reached plus-8, versus a previous reading of plus-12.
China posted CPI for July with a 0.2% revenue in July, a faster tempo than the 0.1% revenue observed month-on-month as well as an annual level of 1.7%, just a bit below a 1.8% pace observed year-on-year. Meanwhile, PPI figures from China disclosed a dip of 1.7%, less than the drop of 2.0% year-on-year expected. The data came after weaker than expected imports the previous month in China posted on Monday and hit sentiment on demand prospects.
Ending the regular policy meeting on 04th of August, Bank of England (BoE) announced lower interest rates from 0.5% to 0.25%. This decision was adopted by all 9 members of Monetary Policy Committee (MPC) and this is the first time this agency changed interest rates since March 2009. Along with lower interest rates, BoE announced a program of pumping large-scale money into the economy.
Also during this meeting, BoE cut the forecast for UK economic growth strongly since beginning this prediction in 1993. Accordingly, BoE cut its forecast for UK economic growth in 2017 to 0.8 % from 2.3% given in May. The forecast growth this year is unchanged at 2% by GDP of the first half of the year increased sharply over the previous forecast. BOE also forecasts that the unemployment rate would rise to 5.4% in the following year and 5.6% in 2018.
The interest rates cut of BoE has been predicted by the analyst, however, restarting the asset purchase program makes the market unexpected. The pound has depreciated 1.5% against the dollar after BoE's statement. At a press conference later, Governor Mark Carney said MPC launched these measures because the economic outlook has changed dramatically.
Governor Mark Carney also said the majority of MPC members supported adding a further cut of interest rates as well as the further implementation of other measures to stimulate if the data shows that the economy deteriorated. However, many analysts believe that BoE is likely to wait for several months to assess the impact of current measures for the economy before continuing other actions, and the market does not expect the next strong decline of GBP.
The attention of the market today focuses on employment report announced by US Labor Department. Analysts forecast, in July, US economy added only 180,000 new jobs after creating an additional 287,000 jobs in June and the unemployment rate fell from 4.9% to 4.8%. US dollar will be supported if job growth will be at around 200,000 and the unemployment rate and wage growth will be positive as expected. In the case of disappointing jobs data, the dollar will be under pressure big discount.
GBP/USD SELL: 1.3180; TARGET: 1.3020; STOP-LOSS: 1.3240
EconomyVN - on 4th of August, Bank of England (BoE) announced to cut interest rates from 0.5% to 0.25% - it is the first time in 7 years.
Interest rates cut is one of the measures of England to deal with the aftermath of Brexit. So specifically what are package solutions?
Besides cutting interest rates by 25 points%, Bank of England has announced a series of programs to add liquidity support for banks as lending 100 billion pounds, spending 60 billion pounds to buy government bonds and 10 billion pounds to buy corporate bonds.
In a press conference immediately after this action, Governor Mark Carney has made the clearer explanations of the BoE decision. Mr. Carney started with placebo sentence that the UK is fully capable of dealing with the economic changes following the aftermath of Brexit while confirming cutting interest rates and pumping money of Bank of England is the move actively ahead of the situation. But with a series of economic data in recent days as production activities, services and construction are simultaneously reporting the results down, while services - the important position of British economy plummeted, everyone understands that economy is under pressure more clearly from Brexit.
Does Bank of England cut interest rates to negative?
The period of the difficult economy certainly just begins, BoE can do something when their intervention is also close to limit. The members of UK Monetary Policy Committee are unified that they will not bring interest rates to lower 0.
In today's speech, the Governor of the Bank of England is not confident about the prospects of the economy, he said growth will fall very sharply, unemployment will increase and Bank of England will continue to intervene, most likely early next year.
Chain of information shows that the more likely Bank of England will take interest rates to 0.1% in the beginning of next year and just cut to that level, with pumping money, and quantitative easing program. UK Treasury in the short term will also announce fiscal adjustments, the more likely the tax reduction to stimulate consumption and lending activities. The solutions to steer the economy in general have been put on the table, but even so, market predicts UK economic growth in 2017 will be still down 0.8% and the possibility of a recession in the next 18 months is still high as 50%.
The focus of the market today is the result of the periodic policy meetings of Reserve Bank of Australia (RBA). At the July meeting, RBA kept rates at 1.75% and suggested the possibility of easing further monetary policy. Since that meeting, the Australian economy showed mixed signals with expanding manufacturing activity and increasing inflation. Meanwhile, consumer confidence declined and unemployment rose. According to a Reuters survey, only 60% of analysts predict that the RBA will cut interest rates from 1.75% to 1.5%. In the case of interest rate cut, exchange rate AUD/USD will drop quickly about 0.7450. Conversely, if policymakers delay monetary easing, rates will rise again above the level 0.76.
One other communications market is waiting today to Prime Minister Shinzo Abe of Japan will announce detailed fiscal stimulus package which was announced last week with a large scale over 28 trillion yen. Last week, Yen rose sharply as the Bank of Japan (BOJ) almost didn't significantly change in the monetary policy meeting in July, contrary to the expectations of the major market for a large-scale monetary stimulus as Japanese government determined to revive the economy, which was always bleak in this country. Analysts forecast USD/JPY may fall to threshold 100 if the market does not receive significant support from the information relating to the fiscal stimulus package of Prime Minister Abe.
Notable evolution yesterday was the strongest fall of the CAD when crude oil prices plunged in the first session of the week and WTI oil price sometimes is below 40 USD/barrel for the first time since April 2016. Oil prices began to plummet since early July due to the oversupply of gasoline and refined petroleum products along with signs of rebounding US crude production. Now, National Oil Company Saudi Arabia (Saudi Aramco) lowers oil price strongestly in years, have raised the question of whether oversupply, which made oil prices plunge in 2 years, extends in the coming months.
Tomorrow, August 3rd, Bank of England (BoE) will announce quarterly economic report and results of the periodic policy meeting. Up to 95% of analysts surveyed predicted that BoE will cut rates from 0.5% to 0.25%. Besides, many analysts also said that the BoE is likely to start again the bond purchase program which was suspended since 2012. British Pound is expected to weaken before the meeting of the BOE and after the agency announces the change in monetary policy.
GBP/USD: SELL: 1.3120, TARGET: 1.3100, STOP-LOSS: 1.3270
On Monday, the Japanese yen kept going down during Asia trade with trade data unveiling better than expected figures, although exports and imports dipped notably ahead of a week expected to bring the BOJ’s and Fed’ comment on monetary policy.
The currency pair USD/JPY traded at 106.45, showing a 0.30% surge, while AUD/USD was worth 0.7470,going up 0.07%. As for GBP/USD, this currency pair was worth 1.3127, rising 0.13%.
In Japan, the adjusted trade balance kicked in at a surplus of approximately ¥33 billion, which is better than the ¥24 billion observed and imports slumped 18.8%, less than the 19.7% dip expected and exports sank 7.4%, less than the 11.6% tumble observed.
The US dollar index, normally gauging the greenback’s strength against key six currencies, gained 0.09%, trading at 97.50.
Ahead this week, market participants will look to Wednesday’s highly-anticipated Fed monetary policy statement for fresh guidance regarding the pace of interest rate lifts over the next several months as well as a monetary policy announcement from the BOJ on Friday, amid surging expectations for further stimulus.
EconomyVN News (internet)
On Friday, the British pound edged lower, after the release of gloomy economic posts from Great Britain contributed to worries over the outlook for the UK’s growth following the country’s intention to break up with the European Union.
The currency pair GBP/USD achieved 1.3173 during European morning trade, the session minimum and the pair managed to consolidate at 1.3175, losing 0.42%.
Cable was about to gain support at 1.3061, which is the minimum of July 20 as well as resistance at 1.3313, the peak of July 18.
Research group Markit informed in July its flash British manufacturing purchasing managers’ index edged down to 49.1 from June’s outcome of 52.1. Financial experts had expected the index to sink to 47.8 this month.
At the same time, in July the British services PMI sagged to 47.4 from June’s result of 52.3, compared to expectations for a 48.9 drop.
The data contributed to fears over a slowdown in Great Britain’s growth as traders keep assessing the economic effects of the Brexit vote.
Figures from the UK national statistics agency announced yesterday showed that consumer price index (CPI) of UK in June rose 0.5% compared with the same period last year, higher than the increase forecast of 0.4% and the rise of 0.3% in the previous month. Core inflation, excluding energy and food prices, rose from 1.3% to 1.4% over the same period last year.
Positive inflation data did not bring more support to Pound after the International Monetary Fund (IMF) sharply lowered its growth forecast for the UK economy. According to the IMF, Brexit would make the growth of UK fell by nearly 1% in 2017 from the forecast of 2.2% to 1.3%. The agency also stressed that increasing instability following the referendum in the UK forecasts domestic demand weakened significantly. British Pound was under pressure after credit rating agency Moody's warned the UK's economic growth will slow significantly in the short term. Prospects for growth in the medium term will continue to weaken if UK doesn't reach a trade agreement with EU in the case of this country officially out of the coalition.
EUR/USD fell back yesterday 1.10 threshold after the economic sentiment index by ZEW's survey of the German economic prospects in the next 6 months dropped from 19.2 points to minus 6.8, lower than the forecast of analysts at 8.2. Indicators on the Eurozone also fell from 20.2 to minus 14.7 over the forecast of 12.3. ZEW survey showed investors and economists are pessimistic about the prospects of Eurozone after Brexit.
The market's attention focus on the results of the meeting of the European Central Bank (ECB) launched tomorrow. Analysts predict ECB will not have any change of policy in this session. However, ECB President Mario Draghi might open the possibility of economic stimulus in the near future if the area economic outlook deteriorated due to the influence of Brexit.
The commodity currencies dropped sharply in yesterday's trading session. Canadian Dollar CAD weakened when oil prices on world markets continue to decrease to the 4-month low. Meanwhile, the possibility of cutting interest rates of Reserve Bank of Australia (RBA) in August was up to 60% after the minutes of the July meeting of this agency announced yesterday that the AUD strength is difficult for rebalancing economy and it emphasized that inflation expectations remain below the targets, this suggests the possibility of easing further monetary policy in the near future.
AUD/USD: SELL: 0.7520 TARGET: 0.7440; STOP-LOSS: 0.7560
British Pound rose again in the trading session of the early week after policy maker at Bank of England (BOE) Martin Weale said that they need to wait for the assessment of the economic impact before deciding whether to rate cut or not. After BOE took no action last week, any doubts of the members of BOE on the need to easing monetary policy given push Pound higher.
However, many analysts believe that sterling is in brief recovery period and the clearance-sale of the currency will soon return. A series of important statistics of the British economy published this week include the inflation data, employment, retail sales and PMI index is forecast to show the weakness of the British economy and convince BOE on the necessity of easing interest rate policy. Britain's weak data published this week could be the beginning of a sharp decline of Pound.
Turkey has arrested thousands of soldiers after the coup failed yesterday 15th of July and the government claimed to have control of the whole situation. This move has helped to allay fears of new instability after the economic and political issues in Europe, this prompted investors to return to riskier currencies and escape Japanese yen as safe haven assets, so it pushed USD/JPY back to threshold 106 after falling last week.
Aside from the economic data of UK, the market's attention this week was focused on the PMI of Eurozone and the results of the meeting of European Central Bank (ECB). Analysts predict ECB will not make any policy changes in this session. However, ECB President Mario Draghi might open to a stimulus in the near future if Eurozone economic prospects deteriorate due to the influence of Brexit. Any signals of easing policy given will create downward pressure on Euro.
GBP/USD: SELL: 1.3280; TARGET: 1.3130; STOP-LOSS: 1.3360
USD was noted soaring against other major currencies during last week trading session following the positive data of U.S. economy, it strengthens reviews of the world's biggest economy of steady growth in the second quarter. In July 15th session end, Dollar Index measuring the strength of greenback versus a basket of currencies rose 0.7 percent to 96.60 points.
Report of the US Department of Commerce published Friday said U.S. retail sales in June rose 0.6%, 2016, significantly higher than 0.1% anticipated by analysts and recorded the third consecutive increase. Other statistic showed that U.S. industrial output rose 0.6% in June, recorded the strongest increase in 11 months. Besides, the consumer price index (CPI) in June rose 0.2%, same as the increase in May, this showed inflation tends to go up.
The positive statistics of U.S. economy boost investor back to the expectation that Fed will increase interest rates in the remaining months of this year. However, analysts believe that Fed will continue expressing caution at the meeting on June 26-27th. The Agency will await the evaluation of the impact of UK leaving the European Union (EU) for the prospects of the U.S. economy before giving the signal to adjust policy interest rates.
The coup in Turkey on Friday evening July 15th has created momentum for gold prices to go up in last week session. However, demand for haven assets diminished after the coup ended in defeat to push gold prices falling back in the first session of this week. Analysts suppose that the gold price this week will likely continue under pressure by the upward uptrend of USD.
Notable economic information this week is the PMI index of the euro area and the results of the meeting of the European Central Bank (ECB). Analysts predicted the ECB would not make any policy changes would in this session. However, ECB Chairman Mario Draghi will open the possibility for economic stimulus in the coming period if the Eurozone economic prospects deteriorate due to the influence of Brexit.
Though British pound fell during the session Friday but it had a recovery from the 31-year low after the Bank of England (BoE) kept interest rates at 0.5%, against forecasts of interest rate cuts. Employment data and retail sales of June announced this week as prediction will put pressure to GBP to drop again.
GOLD: SELL 1338; TARGET: 1322; STOP-LOSS: 1346