Too much volatility brings too many opportunities
The British pound got stronger yesterday after the release of MPC Official Bank Rate Votes, and MPC Asset Purchase Facility Votes which remained unchanged. The MPC officials seem to be concerned that the inflation rate might follow a rising trend. A rise towards their target would force them to start rising the interest rate. On these speculations, investors start buying the GBP. EURGBP dropped and stabilized at 0.8000, GBPUSD remained in the 1.56 – 1.57 price range and GBPJPY touched 186.00, a six year high.
Euro managed to keep its position against the US Dollar, being also sustained by the good ZEW Economic Sentiment from Tuesday and by yesterday’s spike in the Current Account (30B).
EURUSD is trading near 1.2550, local resistance, after yesterday’s US fundamental updates. Building Permits surprised with a value above expectations, 1.08M, while Housing Starts were in line with the forecasts. The real estate sector in the US is still on an uptrend, however from what its current trend we can see it is losing momentum.
One of the most anticipated event was the FOMC meeting minutes yesterday as the US Fed announced ending of the asset purchase program at the end of October and is now waiting for the inflation rate hikes, which is below the Committee’s target for the 29th month in a row. The main three points from yesterday’s minutes were:
- Ebola – they are worrying about a possible spread of Ebola;
- Falling Oil prices – even though it is a net positive for the US economy, a sustained drop in prices will have negative effects on oil drilling;
- Reverse Repo – Fed has announced last month some tweaks to its overnight reverse repo, which is expected to play an important role in the eventual tightening of monetary policy.
Meanwhile Kiwi fell against its main counterparts after the New Zealand PPI output was released, lower by 1.5% and the Core PPI lower by 1.1%. EURNZD is targeting the 1.6000 levels and NZDUSD fell again under 0.7900.
June 2014 Chinese HSBC Flash Manufacturing Index which was released above 50, indicated optimism in the Chinese economy. This morning it was released at 50.0, lower than expectations (50.2), which could be read as the Chinese industrial sector will see a slowdown for the upcoming months.
Today we are expecting a medium volatility in the market. Starting with 08:00 am GMT Flash Manufacturing and Flash Services PMIs announcements for France, Germany and Euro Area. At 9:30 am GMT we will have the UK Retail Sales and CBI Industrial Order Expectations. In the second part of the day a storm of economic indicators from US will start flowing starting from 1:30 am GMT. CPI, continued with the Core CPI, Unemployment Claims, Flash Manufacturing PMI and closing the day with the Philly Fed Manufacturing Index Majority of the investors are still positive about the American economy. Meanwhile most of the focus is expected to be on the Philly Fed Manufacturing Index as it gives a clear picture of the economy’s current manufacturing levels.