Euro, pound, oil,: waiting for the driver
Exports and imports in the Euro area declined slightly in September, while the trade balance still confident in surplus, what is the evidence of steady recovery of the economies of the Eurozone.
Retail sales rose in September by 0.7%, year on year growth was 3.7%, and if you compare the consumer activity in the U.S., the chances of the Eurozone to achieve the first objectives of inflation is considered at least as good.
The ECB on last meeting outlined the timing of the tapering of its asset-purchase program, but at a rate once again postponed indefinitely. Such a selective transition to the normalization of monetary policy is intended, apparently, to bring down the increased demand for euros. In other words, the ECB policy is aimed at the withdrawal of surplus capital from the Eurozone, which will have a similar effect with the traditional measures to cooling of the business climate.
Today, the Euro may experience periods of volatility, as expected performances from the five members of the Board of governors – ker, Constancio, Mersch, Weidmann and Lautenschlaeger. They will hardly be able to evade the estimates of the current monetary policy, however, if we consider the prospects for the Euro in the long-term projections, the reasons to return to a growth trajectory quite a bit. Possible correction to 1.1750 will be used for sales.
Today the NIESR will release the next estimate of GDP growth. The Bank of England in its November inflation report noted that growth prospects of the economy increasingly depends on how quickly able to increase productivity. In recent years there has been a slowdown in the performance, moreover the situation is aggravated by the uncertainty associated with the Brexit, so expect GDP growth in the current environment is not necessary. However, the Bank of England raised its forecast for GDP growth to 0.4%.
Friday’s report will be published on industrial production and trade balance for September. Expectations are neutral, and publication is unlikely to have a significant impact on investor sentiment.
The pound is influenced by multidirectional factors. On the one hand, rising raw material prices and equity markets supported the pound, on the other hand, the rate increase may be a hasty step, because the high inflation is largely due to rising prices of imports due to the weakness of the pound than the increase in real consumer spending, the pace of wage growth remains weak. Tightening financial conditions could have a negative impact on the economy and will not affect the inflation pressure.
Pound looks uncertain, and given the small-scale mining operations driver at the rate of decline may continue. Support 1.3030 looks weak and could be overcome in the short term, more important goal – at least August 1.2770.
Oil and the ruble
On Wednesday, OPEC raised its forecast for global oil demand by 2022 to 102.3 million barrels./day supporting the trend of rising oil prices. A number of circumstances continues to play in favour of the bulls, along with the arrests of a group of princes and senior officials in Saudi Arabia, and oil prices remain above 2-year highs.
At the same time to seek new drivers of growth is becoming increasingly difficult, the RSI on the weekly chart has entered the oversold territory for the first time since 2011, and the likelihood of at least corrective decline has increased markedly.
However, to reduce the need to have a reason, which is the market can not find. The expected slowdown in China is not because the predicted growth of energy consumption in China remains high. Possible correction is unlikely to be deep or prolonged, the bullish factors will continue to dominate, and the barrier of $ 65./Barr. will be overcome, probably in the next couple of weeks.
The ruble has tested the resistance 59.50, however, the fundamental reasons for the weakening of the Russian currency remains limited. A major factor in the decline of the ruble remains the growth expectations for the us dollar strengthening, that is a global trend.
Friday, November 10, will take place the meeting of Vladimir Putin and Donald trump. The results of the meeting can influence quotations in any way, but because the rest of the week, the uncertainty will hinder the players to withdraw the ruble from the formed trading range.
The material has been provided by InstaForex company — www.instaforex.com