ECB to hold rates steady; EUR/USD may not enjoy lasting gains
UK jobs & GDP data may be not be strong enough to push GBP/USD above key barrier
US CPI inflation to strengthen but will USD/JPY resume uptrend?
ECB rate decision –> EUR/USD
ECB policymakers will analyze a dull dataset before announcing their next policy decision on Thursday at 12:15 GMT.
On the one hand, inflation has not diminished enough to meet the central bank’s 2.0% symmetrical target despite interest rates standing at historic highs. On the other hand, the euro area economy is already near a cliff edge, making investors wonder whether growth jitters are serious enough to force a pause in the tightening campaign this month.
A priority to fight inflation could justify another 25bps rate hike this month, but given the gloomy economic outlook, the central bank might provide dovish forward guidance, helping the euro to rise, albeit temporarily. Technically, the exponential moving averages (EMAs) could surrender the price within the 1.0800 zone if that turns out to be the case.
Futures markets expect steady rates with a 60% probability.
UK data –> GBP/USD
Turning to the UK, the economic calendar could be pivotal for next week’s monetary policy decision. Jobs data and monthly GDP figures could shed some light on whether there is a need for another rate hike ahead of next week’s CPI inflation data.
Surprisingly, the British economy has been more resilient than the eurozone despite interest rates having reached Fed’s highs. Investors are confident that the central bank will continue to increase interest rates by 25bps next week because inflation is still significantly higher than the BoE’s 2.0% target.
The three-month GDP average could inch up in July, but the monthly and yearly gauges may show worsening conditions on Wednesday. A day earlier, the employment report may reveal a negligible increase in the unemployment rate to 4.3%, but that would be the third rise in a row and above pre-pandemic levels. Wage growth readings might be a key piece of information as well.
Hence, a rate hike might be a tough debate next week, while the already diminished rate hike expectations could face less backing.
In the meantime, pound/dollar might seek some recovery above 1.2625, though there is tough resistance around that area.
US CPI inflation –> USD/JPY
In the US, the focus will be on the CPI inflation readings for August. The Fed chief Jay Powell avoided any directional signals during the Jackson hole symposium in August. Hence, the data will take center stage as investors try to figure out whether interest rates could stay stable this month and perhaps for longer.
According to forecasts, consumer prices extended July’s pickup to 3.6% y/y, but excluding energy and food items, growth was smaller at 4.3% y/y versus 4.7% previously.
Following a rebound in the latest ISM business PMI figures, the US dollar could easily give in to emerging hawkish voices if CPI data surprise to the upside. Yet, if the core measure stays near recent lows, dollar/yen may find hard to mark new higher highs above the new ceiling of 147.70.
ECB to hold rates steady; EUR/USD may not enjoy lasting gains
UK jobs & GDP data may be not be strong enough to push GBP/USD above key barrier
US CPI inflation to strengthen but will USD/JPY resume uptrend?
ECB rate decision –> EUR/USD
ECB policymakers will analyze a dull dataset before announcing their next policy decision on Thursday at 12:15 GMT.
On the one hand, inflation has not diminished enough to meet the central bank’s 2.0% symmetrical target despite interest rates standing at historic highs. On the other hand, the euro area economy is already near a cliff edge, making investors wonder whether growth jitters are serious enough to force a pause in the tightening campaign this month.
A priority to fight inflation could justify another 25bps rate hike this month, but given the gloomy economic outlook, the central bank might provide dovish forward guidance, helping the euro to rise, albeit temporarily. Technically, the exponential moving averages (EMAs) could surrender the price within the 1.0800 zone if that turns out to be the case.
Futures markets expect steady rates with a 60% probability.
UK data –> GBP/USD
Turning to the UK, the economic calendar could be pivotal for next week’s monetary policy decision. Jobs data and monthly GDP figures could shed some light on whether there is a need for another rate hike ahead of next week’s CPI inflation data.
Surprisingly, the British economy has been more resilient than the eurozone despite interest rates having reached Fed’s highs. Investors are confident that the central bank will continue to increase interest rates by 25bps next week because inflation is still significantly higher than the BoE’s 2.0% target.
The three-month GDP average could inch up in July, but the monthly and yearly gauges may show worsening conditions on Wednesday. A day earlier, the employment report may reveal a negligible increase in the unemployment rate to 4.3%, but that would be the third rise in a row and above pre-pandemic levels. Wage growth readings might be a key piece of information as well.
Hence, a rate hike might be a tough debate next week, while the already diminished rate hike expectations could face less backing.
In the meantime, pound/dollar might seek some recovery above 1.2625, though there is tough resistance around that area.
US CPI inflation –> USD/JPY
In the US, the focus will be on the CPI inflation readings for August. The Fed chief Jay Powell avoided any directional signals during the Jackson hole symposium in August. Hence, the data will take center stage as investors try to figure out whether interest rates could stay stable this month and perhaps for longer.
According to forecasts, consumer prices extended July’s pickup to 3.6% y/y, but excluding energy and food items, growth was smaller at 4.3% y/y versus 4.7% previously.
Following a rebound in the latest ISM business PMI figures, the US dollar could easily give in to emerging hawkish voices if CPI data surprise to the upside. Yet, if the core measure stays near recent lows, dollar/yen may find hard to mark new higher highs above the new ceiling of 147.70.
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