BOE GOVERNOR CARNEY TO REMAIN UNTIL 2020 TO STEER BREXIT

The euro fell against the United States dollar even as a survey by ZEW found that analysts in Germany were upbeat about the economy. The data for September increased by 3.1 points to reach minus 10.6 points. This was higher than the expected minus 14. The indicator fell to -24.7 in July, which was the lowest level since 2014. It reflected the pessimism the analysts felt about the current trade environment. Still, according to the Centre for European Economic Research, the data is below the 22.9 long-term average. In addition, the German ZEW current conditions rose to 76.0, which was higher than the expected 72. This data provides a summary of the net percentage of positive and negative responses about the economic growth in the next six months.

Financial Times today wrote an in-depth article about the rising fear of isolation among the Chinese officials. This was after the US convened a panel of senior officials from the EU and Japan a week ago. The panel was aimed at ‘combating unfair trade practices by third-party countries. According to the article, Chinese officials fear that such a panel will empower the three parties to work in unison to oppose its practices. The officials believe that the country can cope with a full-scale trade war with the US. In recent years, China has wooed European leaders, including at the World Economic Forum. Last year, the EU and China signed a large deal after the US abandoned an earlier planned FTA deal with the EU.

The sterling was little moved today even as the country reported exciting jobs numbers. The unemployment rate remained at 4.0% in July while the employment change rose by 3.0K, which was lower than the expected 27K. The claimant count change rose by 8.7K, which was better than the expected 10.0K while the average earnings index plus bonus rose by 2.6%. This was higher than the 2.4% traders were expecting. These numbers reinforced BOE’s opinion that the tightening labour market was giving workers more bargaining power. However, the current wage growth is still below historical standards. Factoring inflation, the total pay rose by just 0.2%.

BOE Governor, Mark Carney will continue to serve until 2020. He was expected to retire next year. The announcement was made by Philip Hammond, the UK chancellor. He said that changing the person in 2019 could expose the country to risks as it leaves the EU. In last week’s testimony to parliament, Carney indicated that he will be open to extending his tenure.

EUR/USD

The EUR/USD pair rose in the Asian-Pacific session and then fell during the European session. Initially, it rose to an intraday high of 1.1643 and is now trading at 1.1573. Still, the current price is above the yesterday’s intraday low of 1.1525. The current price is along the 38.2% Fibonacci Retracement level. It is also below the 50-day EMA and slightly above the middle Bollinger Band. As traders wait for the interest rates decision by the ECB, the pair is likely to continue the current volatility levels.

GBP/USD

The GBP/USD pair was little moved today even after better-than-expected jobs numbers. It is now trading at 1.2995, which is in line with the 50% Fibonacci Retracement level. The price is above the 50 and 25 EMA and along the important support. As traders wait for the BOE decision on Thursday, the pair is likely to see some volatility.

AUD/USD

The Australian dollar reached the lowest level in 29 months today. It is now trading at the 0.7095 level, which is close to the intraday low of 0.7088. At this point, the question is whether the downward trend will continue or whether it is the right time to buy the Aussie. In the long-term, buying the Aussie at these levels will make sense. However, in the short term, the downward trend will continue as traders wait for the monetary policy direction from the Fed. The RSI on the hourly chart is at 32 while the Moving Average of Oscillator is below the neutral level.