All three central banks may take a pause in September
September 8, 2023 4:22 pm
Next week, the news background will be much more interesting than this week. First, the ECB meeting will take place. Second, the US inflation report will be released, affecting the Fed’s rate decision the following week. And, in fact, in a week, the Bank of England and the Fed will hold their meetings. Currently, both pairs construct the initial waves of a descending trend segment. However, these waves have already taken on a fairly prolonged form, so the second upward wave construction may begin soon. If all three central banks leave interest rates unchanged, it will unlikely be a favorable backdrop for the euro and the pound. However, the wave pattern is currently the top priority.
Rumors about the ECB have been circulating for quite some time. It all started a couple of months ago when some members of the Governing Council stated that further rate hikes were no longer as necessary as before. ECB policymakers are concerned about the state of the European economy. They are willing to wait until 2025 for inflation to fall to the target level, but they are not ready to see a recession. This marked the beginning of rising market expectations regarding the end of the tightening process. Just earlier this week, Christine Lagarde did not answer the September rate decision question. If the ECB had adhered to its previous tightening stance, there would have been no problem answering this question. The ECB will not raise rates in September.
Bank of England: This week, Huw Pill stated that the best decision would be to keep the rate at its peak for a long time rather than continue to raise it and then lower it urgently. Pill believes that a higher rate will shock the markets and the economy, and further lowering it will not save the situation, as it will be “too late” for many companies and market participants. Consequently, one can assume that the British regulator will also leave the rate unchanged.
Fed: Dallas Fed President Lorie Logan said today that it would be better to skip tightening in September. A few meetings ago, the Fed shifted to raising rates every other meeting. Since the rate was raised at the last meeting, there should be a pause in September. The inflation report next week may cast doubt on this, as the market expects another acceleration. However, for now, the Fed will also leave the rate unchanged.
Based on the conducted analysis, the construction of the upward wave set is complete. The targets around 1.0500-1.0600 are quite realistic. Therefore, I recommend selling the pair with targets around 1.0636 and 1.0483. A successful attempt to break through the 1.0788 level indicates the market’s readiness to continue selling, and we can now expect the achievement of the targets mentioned above, which I have been talking about for several weeks and months.
The wave pattern of the pound/dollar pair suggests a decline within the descending trend segment. Completing the current descending wave is risky if it is wave d rather than 1. In this case, the construction of wave 5 may begin from current levels. But we are currently witnessing the construction of the first wave of the new segment. At most, buyers can expect the construction of wave 2 or b. An unsuccessful attempt to break through the 1.2444 level, which corresponds to 100.0% on the Fibonacci scale, may indicate the market’s readiness to build an upward wave.
The material has been provided by InstaForex Company – www.instaforex.com
Next week, the news background will be much more interesting than this week. First, the ECB meeting will take place. Second, the US inflation report will be released, affecting the Fed’s rate decision the following week. And, in fact, in a week, the Bank of England and the Fed will hold their meetings. Currently, both pairs construct the initial waves of a descending trend segment. However, these waves have already taken on a fairly prolonged form, so the second upward wave construction may begin soon. If all three central banks leave interest rates unchanged, it will unlikely be a favorable backdrop for the euro and the pound. However, the wave pattern is currently the top priority.
Rumors about the ECB have been circulating for quite some time. It all started a couple of months ago when some members of the Governing Council stated that further rate hikes were no longer as necessary as before. ECB policymakers are concerned about the state of the European economy. They are willing to wait until 2025 for inflation to fall to the target level, but they are not ready to see a recession. This marked the beginning of rising market expectations regarding the end of the tightening process. Just earlier this week, Christine Lagarde did not answer the September rate decision question. If the ECB had adhered to its previous tightening stance, there would have been no problem answering this question. The ECB will not raise rates in September.
Bank of England: This week, Huw Pill stated that the best decision would be to keep the rate at its peak for a long time rather than continue to raise it and then lower it urgently. Pill believes that a higher rate will shock the markets and the economy, and further lowering it will not save the situation, as it will be “too late” for many companies and market participants. Consequently, one can assume that the British regulator will also leave the rate unchanged.
Fed: Dallas Fed President Lorie Logan said today that it would be better to skip tightening in September. A few meetings ago, the Fed shifted to raising rates every other meeting. Since the rate was raised at the last meeting, there should be a pause in September. The inflation report next week may cast doubt on this, as the market expects another acceleration. However, for now, the Fed will also leave the rate unchanged.
Based on the conducted analysis, the construction of the upward wave set is complete. The targets around 1.0500-1.0600 are quite realistic. Therefore, I recommend selling the pair with targets around 1.0636 and 1.0483. A successful attempt to break through the 1.0788 level indicates the market’s readiness to continue selling, and we can now expect the achievement of the targets mentioned above, which I have been talking about for several weeks and months.
The wave pattern of the pound/dollar pair suggests a decline within the descending trend segment. Completing the current descending wave is risky if it is wave d rather than 1. In this case, the construction of wave 5 may begin from current levels. But we are currently witnessing the construction of the first wave of the new segment. At most, buyers can expect the construction of wave 2 or b. An unsuccessful attempt to break through the 1.2444 level, which corresponds to 100.0% on the Fibonacci scale, may indicate the market’s readiness to build an upward wave.
The material has been provided by InstaForex Company – www.instaforex.com
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