EUR / USD, GBP / USD
Monday was inspired by the American stock market as it gained more than one percent in reducing the political tensions with North Korea and also weakened the hurricane Irma that dropped to the 1st category. After this, the dollar and commodities were pulled up. Even the strong growth in Italy's industrial production could not be maintained in July, despite the + 0.1% showed by the indicator, but the forecast was -0.5% and the previous growth was 1.1%, which shows that slow pace of growth continues.
The euro fell by 83 points and the British pound by 30 points. The reason for a more restrained decline in the pound was the optimistic expectations for inflation today. The base CPI for August is expected to increase from 2.4% YoY to 2.5% YoY, the total CPI could increase from 2.6% YoY to 2.8% YoY. The forecast for retail prices shows an increase from 3.6% YoY to 3.7% YoY. The producer price index during the opening is expected to grow by 1.2% a month and the output index by 0.2%. This evening, the British Parliament adopted the "Bill of the EU", which is the law on the abolition of European jurisdiction in the UK. The consecutive termination of the powers of the European Court and the actions of EU laws is envisaged.
According to the unissued data from the euro area, the US optimism index in small business for the month of August is expected to came in with a slight decrease to 105.0 against 105.2 before. The number of open vacancies in the labor market for July is further expected with a slight decrease to 5.960 million from 6.163 million, but given that the previous value recorded in the history of observations since 2001, the expected figure is quite strong.
So, the British pound still has the potential to test the upper limit of the range 1.3160-1.3150. And considering the positive expectations for work and wages (2.3% growth for 3 months) for tomorrow, together with the BOE meeting on Thursday, then the risk of an increase may reach 1.3320.
USD / JPY
On Monday, investors bought the resold yen as best as they could. The pair gained additional 155 points. The reason for such activity was certainly because of the absence of aggressive actions by North Korea during its national holiday. Yesterday, the Japanese stock index Nikkei 225 obtained 0.53%, and it has increased by 0.94% for this day. Basic orders in mechanical engineering for July increased by 8.0% against the forecast of 4.4%. Although, on an annualized basis, there was a drop from -5.2% YoY to -7.5% YoY. The tertiary index of business activity in the services sector added 0.1%. The yen returned to the stable range of the second half of August (108.70-110.00).
Tomorrow, the positive trend of Japanese macroeconomic indicators may continue. The BSI index of business conditions of major manufacturers for the third quarter is expected to increase from -2.9 to -2.8. The price index for corporate goods in August is expected to grow by 0.1%, at an annual rate of 3.0% YoY against 2.6% YoY in July.
As of this moment, the yen has only one risk to decline which is the weakening of the dollar against European currencies. We still have to be patient and look at the current political developments. We assume the trade of the yen in the range of 108.70-110.00. Negative scenario assumes a price reset in the range of 108.05 / 25.
