Pound dropped on Thursday amid hawkish statements from the Bank of England. The committee members unanimously voted at the meeting yesterday to keep the interest rate unchanged at 0.10%, but said that in the coming years, the policy may be gradually tightened as inflation will most likely reach 4.0%. Regarding bond purchases, the total volume will remain at £ 895 billion, with £ 20 billion accounting for corporate bonds and £ 875 billion for government bonds. But MPC member Michael Saunders spoke in favor of cutting the volume to £ 830 billion, arguing that the economy is now recovering at a strong pace, so excessive stimulation is not needed anymore. He said continuing the current pace risks overheating in the future. In any case, the first rate hike will most likely occur at the beginning of 2023 or, perhaps, a little earlier. Then,
On a different note, a report on consumer prices was released yesterday, which indicated that a 4% rise could be seen in the index in the fourth quarter. This is 1.5% higher than the projection last May. Despite that, inflation is expected to turn down and return to around 2%.
As for GDP, analysts expect a 5% increase in the second quarter and a 3% increase in the third quarter.
Going back to pound, a lot depends on 1.3950 today because climbing above it will result in a further increase towards 1.4000 and 1.4060. Meanwhile, a decline below 1.3875 will lead to a deeper plunge to 1.3800 and 1.3740.
EUR / USD
US published a report on jobless claims yesterday, outlining a 14,000 decrease in applications, so the total is now 385,000. At the same time, the less volatile four-week moving average also fell to 394,000, which is 250 lower than the previous week's revised average.
Unfortunately, the recent outbreak due to the delta strain could significantly affect the next data for the labor market, unless there are no new restrictions related to the pandemic.
Today, the US Department of Labor will publish another report on the employment situation for July, where analysts expect to see a 870,000 rise in employment. The unemployment rate, meanwhile, is projected to fall from 5.9% to 5.7%. This report will certainly lead to a surge in market volatility.
In that regard, a lot depends on 1.1830-1.1855 today because a break above it will result in an increase towards 1.1870 and 1.1900. Meanwhile, a decline below the range will lead to a drop to 1.1800 and 1.1770.
Another important report that markets should pay attention to is the data on US trade deficit, which widened more than expected in June. The Department of Commerce said it reached a new all-time high of $ 75.7 billion due to the strong economic growth and limited demand from overseas. Imports reportedly rose by 2.1% to $ 283.4 billion, while exports increased by 0.6% to $ 207.7 billion. The ministry said the deficit will decrease only when trade flows move from imports to exports, and when domestic consumption slows down.
