​The British Pound Becomes a Leader by Growth (Weekly Review)

2018-11-06
The past week was full of important events, including meetings of the Bank of Japan and the Bank of England, as well as the publication of data on consumer inflation in Eurozone and data on the US labor market. Both central banks, as expected, put no changes to their monetary policy, so other factors influenced the dynamics of the Japanese yen and the British pound, namely the dynamics of stock indices and news regarding the negotiations of the UK and the European Union on the procedure for termination of its membership in the EU.

The return of risk appetite from investors led to a rebound of stock indices from the correction lows, along with the Japanese yen being sold, and a number of its competitors, in particular the US dollar, winning back losses incurred when paired with the JPY. All the above was facilitated by the news of the telephone conversation held by the leaders of the United States and PRC, which gave hope for an early resolution of the trade conflict. However, market participants soon tied Trump’s ‘towardness’ with the upcoming US elections, and sellers again showed themselves in the stock markets. The differential in interest rates remains a weighty argument in favor of buying USD/JPY, so the pair’s recessions can still be used for buying.

Falling of the British pound was halted by the progress in the UK negotiations with the EU. In liquidation of long positions, it soared against the USD above the psychological level of 1.3000, and at this stage is trying to gain a foothold above it, which will significantly improve its technical prospects. On the growth, bears may try to take over the initiative, but “soft” Brexit and the prospects for by the Bank of England to raise the interest rate will help maintain demand upon downturns. Of course, any negative on Brexit can trigger a fresh wave of GBP sales.

Schedule for this week:

Monday, November 5
09:30 GMT – United Kingdom. Markit Services Purchasing Managers Index (PMI);
13:10 GMT – Canada. Bank of Canada Governor Poloz Speaks;
14:45 GMT – USA. Markit Composite Purchasing Managers Index (PMI);
14:45 GMT – USA. Markit Services Purchasing Managers Index (PMI);
15:00 GMT – USA. ISM Services Purchasing Managers Index (PMI).

Tuesday, November 6
03:30 GMT – Australia. Reserve Bank of Australia (RBA) Interest Rate Decision;
03:30 GMT – Australia. Reserve Bank of Australia (RBA) Rate Statement;
08:00 GMT – Germany. Markit Composite Purchasing Managers Index (PMI);
08:00 GMT – Germany. Markit Services Purchasing Managers Index (PMI);
09:00 GMT – Eurozone. Markit Composite Manufacturing Purchasing Managers Index (PMI);;
09:00 GMT – Eurozone. Markit Services Purchasing Managers Index (PMI);
09:00 GMT – Eurozone. Markit Manufacturing Purchasing Managers Index (PMI);
12:00 GMT – Eurozone. Member of the Executive Board of the European Central Bank Sabine Lautenschläger Speaks.
USA.  Midterm elections.
13:55 GMT – USA. Redbook Index.

Wednesday, November 7
21:30 GMT – Australia. AIG Construction Index;
21:45 GMT – New Zealand. Participation Rate;
21:45 GMT - New Zealand. Unemployment Rate;
21:45 GMT - New Zealand. Employment Change;

05:00 GMT – Japan. Leading Index;
05:00 GMT - Japan. Coincident Indicator;
07:00 GMT – Germany. Industrial Production;
08:00 GMT – Eurozone. ECB Meeting;
10:00 GMT – Eurozone. Retail Sales;
15:00 GMT – Canada. Ivey Purchasing Managers Index (PMI);
20:00 GMT - New Zealand. The Reserve Bank of New Zealand (RBNZ) Interest Rate Decision;
20:00 GMT - New Zealand. The Reserve Bank of New Zealand (RBNZ) Rate Statement;
20:00 GMT - New Zealand. The Reserve Bank of New Zealand (RBNZ) Interest Rate Decision.


Thursday, November 8
02:00 GMT – PRC. Trade Balance;
02:00 GMT – PRC. Import/Export;
13:15 GMT – Canada. Housing Starts;
19:00 GMT – USA. US Fed Interest Rate Decision;
19:00 GMT – USA. Federal Open Market Committee (FOMC) Statement.


Friday, November 9
00:30 GMT – Australia. Reserve Bank of Australia Monetary Policy Statement;
00:30 GMT – Australia. Invest Housing Finance;
01:30 GMT – PRC. Producer Price Index (PPI);
01:30 GMT – PRC. Consumer Price Index (CPI);
09:30 GMT – United Kingdom. Gross Domestic Product (GDP);
09:30 GMT – United Kingdom. Manufacturing Production;
09:30 GMT - United Kingdom.  Industrial Production;
13:30 GMT – USA. Producer Price Index (PPI);
15:00 GMT – USA. Michigan Consumer Sentiment Index.

Author: Anthony Porter, IAFT Analyst

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