- Weak Chinese GDP and industrial production data influenced market sentiment in the Asian session.
- The jump in inflation in New Zealand for the 3rd quarter supported the New Zealander.
- Christine Lagarde of the ECB insists that "inflation is largely temporary."
- The minutes of the October meeting of the RBA confirms that the inflation target of 2-3% will not be achieved until 2024.
- Industrial production in the US unexpectedly dropped in September.
- The euro broke through the resistance at 1.1625.
- The SP500 index renewed its maximum at 4483.40.
On Monday, October 18, at the end of the day, the euro rate increased by 0.08% to 1.1610. In the Asian session, the euro / dollar fell to 1.1572 amid rising yields on 10-year bonds. Market sentiment was affected by China's weak Q3 GDP and September industrial production data. The reports disappointed investors, reducing the demand for risky assets.
In the European session, the euro received support from the recovery of the euro / pound cross pair. During the New York session, the growth of quotations accelerated. The dollar came under pressure after the publication of weak data on industrial production in the United States. Industrial production in the US in September unexpectedly fell by 1.3% against the forecast of + 0.2%. In addition, the August figure was revised 0.1% from 0.4% growth. On an annualized basis, the indicator decreased from 5.66% to 4.6%.
Investors also drew attention to a decrease in the utilization of industrial capacities in the United States. In September, it fell to 75.2% from the revised August level of 76.2%.
On weak statistics, the yield on 10-year bonds fell to 1.577% per annum. Major currencies immediately turned up. The euro recovered to 1.1623. The dollar index fell to 93.86.
Scheduled statistics (GMT +3):
- At 13:00, Catherine Mann, member of the Monetary Policy Committee of the Bank of England, will speak.
- At 14:10, Speech by ECB Board Member Elderson.
- At 15:00, speech by Panetta, Member of the ECB Board.
- At 15:05, the Governor of the Bank of England Andrew Bailey will deliver a speech.
- At 15:30, the US will provide data on the number of building permits issued in September.
- At 15:30, in the United States will be released a report with data on the construction of new homes for September
- At 18:00, San Francisco FRB President Mary Daly will deliver a speech.
- At 20:15, FOMC member Michelle Bowman will speak.
- At 21:50, Atlanta Fed President Rafael Bostic will deliver a speech.
- At 22:00, FOMC member Christopher Waller will give a speech.
Current situation:
At the time of writing this review, major currencies are trading in positive territory. The New Zealander and the Australian show the maximum profitability. Their growth indicates an increase in risk appetite.
The growth of quotations was caused by several factors:
- Growth of Asian indices following the American ones. The SP500 returns to all-time highs on strong Q3 financials.
- A rebound upward in Chinese indices, despite the critical situation with Evergrande. China Evergrande Group's negotiations to sell a 51% stake in its Evergrande Property Services Group to Hopson Development Holdings have been put on hold.
- Boris Johnson promised to find a solution to the Northern Ireland Brexit Protocol.
- Decline in the yield on 10-year bonds.
Today there are many speakers from central banks. FOMC representatives urge the Central Bank to start winding down QE in November amid rising inflation. ECB representatives believe that inflation is temporary and it is too early to tighten monetary policy. E. Bailey said on Sunday that they are starting to consider a rate hike. You don't even know what else they can surprise the markets with.
Technical analysis:
Buyers passed the resistance zone 1.1625-1.1640. They opened their way to the level of 1.1690 (135 gr.). On the clock, the new resistance is the level of 1.1665 (the upper line of the channel and 112 degrees). An upward correction may last until the end of the month. If the EUR/GBP cross continues to grow at yesterday's pace, then nothing prevents from taking the 1.1690 level by the close of the day.
Summary: on Monday, the euro started the week with a decline and closed with growth on the background of a weak report on industrial production in the US. The rally in the major currencies continued in the Asian session on Tuesday. The euro recovered to 1.1655. Buyers have a time window for an increase in the rate ahead of the FOMC meeting, which will take place on November 2-3. The nearest target is 1.1690.