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Daily economic digest from Forex.ee

31 October 2017, 12:41

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Daily economic digest from Forex.ee

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Tuesday, October 31^st

The EUR/USD pair lost its yesterday’s recovery trend and now is trying to consolidate its positions in the region of 1.1640, as investors remain in anticipation of flash EU CPI and GDP figures. However, mildly bearish dynamics of the US dollar continues to dominate the market, as speculations regarding who will be the next Fed Chair are still at full steam. Adding to this, reduced demand for risky assets, especially in light of downbeat Chinese data, upcoming Fed meeting and crucial data from the US labor market, also supports the euro somewhat on Tuesday. Besides the data from the Eurozone, today investors will also pay attention to the CB consumer confidence report, which will bring additional trading opportunities to investors during the NA session.

The dollar/yen pair trades without clear direction on Tuesday, keeping its positions in the vicinity of 113.00, having barely reacted on the BoJ monetary policy decision. Earlier today, the BoJ held the meeting, where the regulator decided to keep interest rate at its current level of -0.1%, while revising the GDP forecasts higher and the inflation forecasts lower. Adding to this, during the accompanying press conference BoJ Governor H.Kuroda noted that Bank’s monetary policy stance also remains unchanged and it would continue to apply strong easing measures to the economy until inflation hits the target level of 2%. Markets took this outcome of the BoJ meeting neutrally, since everything said before is not a surprise and was widely expected. On the other hand, weaker positions of the US dollar and better demand for safety are lending some support to the yen at the first half of this week that could negatively affect the pair. On the data front, today only the US CB consumer confidence report will be able to attract investors’ attention, so the US dollar dynamics and risk-off sentiments will continue to navigate the pair during this session.

The GBP/USD pair extends its yesterday’s bullish theme, having finally broken through its resistance of 1.3200, which is the highest point since the last Thursday. The pair continues to recover from its multi-month lows, touched last week at 1.3070 spot, mainly due to a slight decline in the US dollar and increased hopes that the BoE will increase interest rate at its meeting on Thursday. Recent positive British data increased the probability that the BoE will make hawkish move, however, the final decision we will see later this week. On the other hand, renewed risk-off sentiments, triggered by weaker-then-expected Chinese PMIs, are limiting pair’s further recovery. Today we have only the US CB consumer confidence report scheduled in the economic calendar, so risk-off trend and expectations of important events will determine pair’s further direction.

The NZD/USD pair remains the biggest loser of this Asia, having failed to keep its yesterday recovered positions and slipped to the region of its 5-month lows, marked last week at 0.6819 spot. The reason for overnight retreat were fresh headlines from the NZ political area, saying that new NZ PM J.Ardern intends to ban on foreign house purchases that was once again negatively perceived by markets. Meanwhile, looming concerns over what to expect from new New Zealand government’s reforms, especially concerning the RNZB, also add some negative pressure on the Kiwi. Adding to this, lowered demand for higher-yielding assets, additionally boosted by downbeat Chinese manufacturing and services PMI reports, also contributes to pair’s recent retreat. However, the pair managed to perform attempt to recover part of its overnight retreat, as subdued dynamics of the US dollar is limiting pair’s downside trend. Looking ahead, today all traders’ attention will remain focused on the US CB consumer confidence report, while important data from the NZ labor market will also help the pair to form its near-term trajectory.

The main events of the day:

Prelim. EU CPI – 12.00 (GMT +2)

Canada GDP – 14.30 (GMT +2)

US CB Consumer Confidence – 16.00 (GMT +2)

BoC Governor S.Poloz’s Speech – 21.30 (GMT +2)

NZ Employment Change – 23.45 (GMT +2)

Support and resistance levels for the major currency pairs:

EURUSD S. 1.1569 R. 1.1699

USDJPY S. 112.53 R. 114.15

GBPUSD S. 1.3074 R. 1.3280

USDCHF S. 0.9901 R. 1.0017

AUDUSD S. 0.7642 R. 0.7714