Caution Remains in All Forex Markets

On the Forex market, the Euro Dollar pair finished balanced Tuesday night despite good American economic indicators. Traders showed themselves to be cautious about the resurgence of geopolitical concerns with possible new sanctions against Russia, and pending the upcoming meeting of the European Central Bank (ECB), scheduled for Thursday.

The ISM manufacturing index released Tuesday by the Institute for Supply Management came out up to 59.0 in August against 57.1 the previous month. The index is at its highest level since April 2011 Accelerating the growth of the American manufacturing sector is good news since economists expected a stabilization of activity for this period.

Wednesday morning, the euro rebounded towards $ 1.3150 (high of $ 1.3156) with good news on the geopolitical front. A statement issued by the Ukrainian presidency, Vladimir Putin and Poroshenko agreed on a cease-fire permanent in eastern Ukraine. Information confirmed by the Kremlin.

An event that overshadowed publications generally disappointing indicators in the euro zone (greater than expected retail sales in the euro zone and PMI services in Spain and Italy declines).

Around 12:00, the euro was trading around 1.3135 against $.

In terms of macroeconomic publications Wednesday, traders should be aware of the interest rate decision from the Bank of Canada (BoC) and Industrial orders in the United States at 16:00 and the Fed Beige Book at 20:00.

Non Farm Payrolls Flush Out The Euro

The euro bounced softly against the greenback at noon on the foreign exchange market after collapsing from 1.60% yesterday after the sensational announcement of the ECB. Up 0.17% to 1.2958 dollar this afternoon, she always gives up 1.7% on the week and remains close to its lowest levels in over a year.

Against the yen, the euro remains neutral (+ 0.17% to 136.28), after losing 1.2% yesterday, and he gets 0.21% against the sterling at 0.7944. However, nothing can be reported against the Swiss franc (0% to 1.2063 this afternoon after – 0.02% yesterday).

Yesterday in fact, the ECB announced a further reduction in policy rates, the main of them falling to a new record low (0.05%). But above all, face a degraded environment and low inflation in the euro zone, the central bank for the first time announced the launch next month of private fixed income assets buyback programs, a kind of QE to the European .

Societe Generale traders remind that these operations will be detailed at the beginning of October. Certainly, from a macroeconomic point of view, the question is still permitted, they add: ‘skepticism about the impact of this decision is inevitable ”

Indeed, “the cost of money is not the only or even the main factor coming into play in the dynamics of credit in Europe. Risk aversion, banking reform and fiscal austerity are far more important to recovery than the ECB policy obstacles, “said Societe Generale.

However, it seems clear that the expansion of the size of the ECB balance sheet that looks should lead to a significant weakening of the euro. This is all besides the Atlantic, the Fed, she is likely to end soon with its own EQ. Credit Suisse is also a return of $ 1.20 to the euro.

Statistically, European traders learned this morning that industrial production rose more than expected in Germany in July: it is in fact increased by 1.9%, while economists had forecast an increase of less than 0.5%.

Recalling also the positive surprise in industrial orders, Natixis believes this publication ‘suggests a clear rebound in GDP growth in the third quarter, after a contraction of 0.2% of the German economy in the second.

This afternoon on the American side, the report on American employment, for which the consensus is 230,000 nonfarm jobs creations and lower the unemployment rate to 6.1% will watch it.

‘The report on American employment could serve as an effective catalyst knowing that the latest leading indicators point to solid numbers and operators have tended to leave the greenback recently’ judge does one at IG.

Rebound in GBP Depends On Data

Growing dissension within the Bank of England (BoE) should continue to support the predictions surrounding interest rates as the central bank believes that the excess capacity in the UK economy declines; we may see an even deeper in the ditch next meeting, on September 4, if the fundamental developments in the region surrounding improving prospects for growth and inflation.

The relaxation of price pressures and the ongoing improvement in the labor market could lead to a better than expected result in sales; a net increase in household spending could trigger a significant rebound in GBP / USD, since it would increase the pressure pushing the BoE to normalize its monetary policy sooner than expected.

However, wage growth, muted, and continued weakness in the real economy could affect private consumption, and a bad result would be likely to fuel a further decline in the pound, as operators would review downwards their paris for an early rate rise.

Euro Unchanged at High Noon

At midday on the currency markets, the euro remained static against the greenback at 1.3377 dollars, a few hours before the traditional meeting monthly Governing Council of the ECB, led by its president Mario Draghi.

The euro clawed 0.11% against the yen to 136.86 but remained neutral against sterling and the Swiss franc.

After the Bank of England, the European Central Bank will report just now on its monetary policy. No changes are expected.

‘Soothing words, this is all what the doctor may prescribe Draghi to Europe, say analysts ironically exchange of a large Parisian bank, summarizing the majority sentiment in the square.

Indeed, “with the rise of the Russian-Ukrainian malaise and signs of tensions observed on bond funds peripheral countries, risk aversion seems to be accelerating in the region, ‘said a market strategist.

In addition to the press conference from Mario Draghi, operators will follow in early afternoon registration for unemployment benefits in the United States, expected down slightly to 300,000 last week.

In the interim, it should be noted that industrial production rose less than expected in Germany in June: it grew by only 0.3% from one month to the next, while economists had forecast a rise of the order of 1.2%.

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