EUR AND GBP LITTLE MOVED AS TRADERS EYE ECB AND BOE
International markets were mixed today as traders’ worries of trade war continued. The Asian markets ended the day lower as the Hong Kong’s Hang Seng index remained in the bear territory. Yesterday, IMF Managing Director warned that the escalating trade war posed a big threat to the emerging, frontier, and developed markets. The European stocks rose today with the DAX and Stoxx gaining by 0.25% and 0.30% respectively. US futures pointed to a flat open as traders waited for the Apple’s event launching the new iPhones.
The sterling was little moved today even as a group of Brexit-supporting lawmakers met to deliberate about forcing Theresa May out of her job. The lawmakers argue that the Chequers deal being advocated by May and her cabinet was against the will of the people. Her leadership position was weakened when her party lost the majority in the snap election she called a year ago. Perhaps, the reason for the little movement in the sterling was the perception that the leaders will not win the support for the ouster bid. Also, it could be because traders are waiting for the decision by the BOE tomorrow.
The euro was little moved against the US dollar as traders waited for the outcome of tomorrow’s ECB decision. While an interest rates decision is not expected, traders will focus on the accompanying ECB statement. Specifically, they will look for clarity regarding the proposed month for a rate hike. In past meetings, officials have hinted at raising rates ‘through summer’. Meanwhile, EU’s factory output declined in August, which was mostly caused by Germany and Italy. The output fell by 0.8% MoM and 0.1% YoY. These numbers missed the analysts’ forecast of a 0.5% MoM decline and a 1.0% YoY increase.
In the United States, data from the Labour department showed that the Producer Price Index fell unexpectedly in August. The PPI, which measures the change in the price of goods sold by manufacturers fell by -0.1%. This was lower than the expected gain of 0.2%. This was the first negative reading of the data since December last year when it declined by -0.1%. On an annualized basis, the PPI rose by 2.8%, which was lower than the expected 3.2%.
The EUR/USD pair is now trading at 1.1590, which is also along the middle Bollinger Band level. In the past few days, the pair has been forming a symmetrical triangle pattern. With the triangle’s apex approaching, the pair is likely to see an upward or downward breakout depending on the monetary policy statement from the ECB tomorrow. A hawkish ECB will take the pair to above 1.1700 while a dovish ECB will take it to 1.1500 or below.
The GBP/USD pair was little moved today as traders waited for the BOE decision. It is now trading at 1.3010, which is also along the 50% Fibonacci Retracement line and along the 50-EMA. The pair has recently formed a symmetrical triangle pattern, which could break out tomorrow after the big decision by the BOE. A hawkish BOE will probably take the pair to the 1.3070 level while a dovish BOE will take it to 1.2900.
The USD/CHF pair was little moved today and is currently trading at 0.9727. This is close to the important resistance the pair has been in the past few days as shown below. The level is also along the 28 and 50-day Exponential Moving Average (SMA). If the horizontal support and resistance pattern holds, the pair is likely to continue moving lower to the 0.96500 support level.