EUR/usd
Commonly the opinions of markets and economists coincide. Eventually, the latter give their recommendations to traders, who thereafter shape the market. But sometimes it is different and now is just the case. On drawing near the fomc's conference, economists feel more and more eager to announce the parameters of new purchases. Yet, many believe that these large-scale purchases won't take place in September. We've already mentioned that the current situation is not as bad as it was during the previous 2 launches of QE. It would be more correct to say that there exist many threats to the further growth, which in fact may fade away. Anyway, the extension of the Fed's balance sheet is certain to have pernicious consequences. The latter include increase in the energy cost, which will significantly expand the US trade deficit, decline of bond yields and growth of stock prices, which will make the dollar similar to the yen in 2000s in the role of a funding currency. From the technical viewpoint, the securities market is rather overbought, so it won't be easy to find enough strength for the rally now. The European exchanges currently have a bit better potential (with an exception of DAX, which almost completely is repeating the performance of S&P 500). Yesterday EUR/USD crossed the level of 1.29 for the first time since May. The currency is already 80 pips above its 200-day MA, which gives a signal for further purchases. Anyway, we still believe that there is a great chance that the pair will perform a retracement tonight. Late in October last year the pair held a few days above its long-term MA, but then reversed in a swift movement and kept declining for more than two months. Probably, this time it will be different, nevertheless a retracement seems to be really necessary now.
GBP/USD
Yesterday's employment statistics for Britain came up to the liking of the markets. This time we can observe the situation opposite to that in America. The unemployment growth from 8.0% to 8.1% was caused not by the job cut, but by the increase in labour force. The labour market actually grew by 236K over the three months to July and by 183K three months before that. Thus, overall the employment increased by more than 400K. Yet, it is surprising why production is not growing. From January till July the industrial production gained 1 % and manufacturing activity increased just by 0.5%. The BoE also takes these tendencies into account. Yesterday Ben Broadbent pointed out that earlier the GDP decline by 3% would have led to the drop of employment by 8%, but now, on the contrary, over the recent 5 years the employment has been growing. Anyway, he added that the bank should focus less on the production and pay more attention to the dynamics of employment, as it predicts the economic trends better. Quite true. The Fed is of the same opinion.
USD/CAD
The canadian dollar is very expensive. Its growth was especially fast over the first days of September, when USD/CAD performed an almost sheer drop. Three months ago the pair was trading above 1.04 and now it's fluctuating around 0.9770. Anyway, over the last two days we've seen some consolidation in the pair which may further develop into a full-fledged reversal. The performance of USD/CAD often serves as a good indicator of traders' mood. Just look, though declining against most major currencies, the dollar is consolidating against gold, oil and the Loonie.
EUR/CHF
A few days before today's quarterly conference of SNB the newsfeeds spoke about the growth of EUR/CHF as a result of speculations on the expectations that the lower limit of the franc's peg to the euro would be raised. It hasn't happened today and the after-meeting commentaries haven't differed from what we heard before. The three-month Libor rate was kept unchanged at 0.0–0.25% and it was also decided to preserve the peg further by means of unlimited currency purchases. Though now the bank has more hope that it won't be necessary, as the euro is in greater demand and the capital again starts to flow to the euro zone, including the corporate sector, which is seen by the increased activity in the corporate debt market. The pair is trading near 1.21 and will hardly fall down from there in the near future.
