Sterling wavers as UK data shows return to growth
The British pound was little changed today as investors reacted to the economic data released. According to the Office of National Statistics (ONS), the country’s economy contracted by 20.4% in the second quarter after dropping by 2.2% in the first quarter. The decline was better than the 20.5% that analysts were expecting. The economy contracted by 21.7% on an annualised basis. But there are signs that the economy is recovering. Data from the ONS showed that construction output increased by 23.5% in June while industrial and manufacturing production increased by 9.3% and 11%, respectively. The numbers came a day after the ONS released mixed jobs numbers.
The New Zealand dollar declined slightly as traders reacted to the RBNZ interest rate decision. The central bank left the interest rate unchanged at 0.25%, as most analysts were expecting. It also decided to increase its large scale asset purchases to NZ$100 billion. In the monetary policy statement, the bank praised the government for how it dealt with the pandemic. But it also warned that the country’s economy could take time to recover fully because of some sectors like tourism and hospitality. As a result, it said that measures like negative rates and more QE are in play.
The euro rose against the US dollar even after Eurostat released weak industrial production data. According to the statistics bureau, the industrial production in the Eurozone rose by 9.1% on a month-on-month basis. This was lower than the 10.0% that analysts were expecting and the previous increase of 12.3%. The production declined by 12.3% on an annualised basis, which was better than the previous decline of 20.4%. Other data by the Italian statistics office showed that the country’s consumer inflation declined by 0.2% in July while the Harmonised CPI declined by 0.7%. Meanwhile, inflation data in the United States saw the headline CPI rise by 1%% while the core CPI increased by 0.5%.
The EUR/USD pair is trading at 1.1768, which is slightly above the day’s low of 1.1714. On the four-hour chart, the price has formed an equidistance channel that is shown in red. It is also between the 50-day and 100-day exponential moving averages. Also, the Average True Range (ATR), which is a good measure of volatility has been in a downward trend. Therefore, the pair is likely to continue rising as bulls target the upper side of the channel at 1.1910.
The NZD/USD pair declined today as investors reacted to the RBNZ interest rate decision. The pair is trading at 0.6554, which is slightly above the intraday low of 0.6523. On the four-hour chart, the price is below the short and medium-term moving averages. The signal and main lines of the MACD have dropped to the lowest level since May this year. By dropping below the important support of 0.6577, it means that bears have prevailed, which means that the price is likely to continue falling as bears test the support at 0.6500.
The USD/JPY pair rose today ahead of a $34 billion US treasuries. The pair is trading at 106.85, which is close to the highest level since July 24. On the four-hour chart, the price has moved above the 50-day and 100-day EMAs while the RSI has climbed to the highest level since June. It is also slightly below the 50% Fibonacci retracement level. Therefore, the pair is likely to continue rising as bulls aim for the next resistance at 107.00.