EUR / USD, GBP / USD
The decline in the single European currency and the Britsh sterling pound began yesterday during the closing of the Asian session which shows the currently planned actions of the largest players in the market. Since the opening of the London session, the fall of the counter dollar currencies has received new impetus. The third impulse came in the together with the publication of minutes from the last ECB meeting. The minutes of meeting kept a significant place for the substantial growth of the euro this summer. It was further mentioned that the economy needs another stimulation. It is difficult to provide more clear direction for investors. There are no any worries about the euro's growth in the earlier 2000s, while the euro was able to gain more than a thousand points and its price was even higher than the current levels.
In the US session, the Federal Reserve representatives, Patrick Harker and John Williams, spoke out in favor for a rate hike in December. The fourth impulse is that they are not allowed to ask and without them everything was clear. The expected weighted average rate of federal funds futures on December was already at 1.2625%. The US trade balance for August came in better than forecast, showing -42.4 billion dollars against -42.7 billion. The volume of factory orders in August increased by 1.2% against expectations of 1.0%.
Thus, the markets are ready for a meeting on US labor data. It appears that the U.S dollar can recover with any data, which gives an equally easy explanation about the dollar growth relative to both positive and dull indicators. In particular, there is also a direct reason which is the increase of average hourly wage in September expected at 0.3%. The figures are fairly high for the entire post-crisis period and the increase of more than 0.3% occurred 12 times only since 2008.
The British pound had special reasons for the decline. About 30 members of the parliament from the Conservative Party prepared a letter to Theresa May calling for resignation. According to the regulations, the re-election of the party leader can be initiated by 48 parliamentarians, and The Telegraph believes that the required votes can be accumulated in mid-December. For this reason, the Bank of England may delay the increase of rates.
The speeches of Harker and Williams might be the answer to Donald Trump's consideration of nominations to Janet Yellen for the next chairman of the Central Bank. Indirectly, this confirms our assumptions about the preservation of agreements for Yellen's second term.
Hence, the forecast for new jobs in the non-agricultural sector is expected at 75-90 thousand against 156 thousand in August. The unemployment rate is expected to remain unchanged at 4.4%. In the evening, FOMC members Raphael Bostic, William Dudley, Robert Kaplan, and James Bullard made an action to continue the proposal regarding the tightening of monetary policy in the near future.
We are expecting for a further fall in the euro to 1.1580 level, then to the 1.1485 mark. The pound sterling is expected to decrease up to 1.3010, 1.2960, 1.2910.
USD / JPY
Since the beginning of the week, the yen is having a difficult time to escape from the 70-point range due to the extensive discussion about the prospects of the current Prime Minister Shinzo Abe prior the early elections on October 22. Despite the optimistic outlook on Abe's positions, his rating boosted political tensions in North Korea. Earlier this week, the American stock market gained 1.44%, and the Japanese markets are also growing by 1.39%. Macroeconomic indicators are positive. Today, the average wage for August showed an increase of 0.9% against expectations of 0.5%. The index of Japan's leading economic indicators for August will be published later at 6:00 PM London time. The forecast expects an increase from 105.2% to 107.2%. Obviously, the yen has no reason to fall in the current environment. It still awaits for the release of US labor data and the dollar to continue to grow. In fact, the growth of the dollar against the yen is considered optimistic for Japanese investors and politicians.
We are expecting for the Japanese yen to increase by 114.40 and higher in the range of 115.50-116.10.
