EUR / USD, GBP / USD
Yesterday, September 21, the US released positive statistics but counter-dollar currencies were brought against the news. The weekly report on the number of applications for unemployment benefits fell sharply from 282 thousand to 259 thousand, which is associated with the labor market expansion in eliminating the consequences of hurricanes "Harvey" and "Irma". For the same reason, the business activity index in the manufacturing sector of Philadelphia for September increased from 18.9 to 23.8 against the expected decline to 17.3. The index of leading economic indicators in August rose from 0.4% against expectations of 0.3%. Either way, the pessimism on the Forex spread of the stock market, as explained by Reuters, is due to the anticipation of a December rate hike, showing a 0.30% decline on S&P 500. If this is the case, the yields on US government bonds would not fall across the entire range of securities and gold would not decrease by 0.77%.
The British pound gained 88 points for the day, while the public sector borrowings came in at slightly less than expected 5.1 billion pounds against 6.5 billion, along with the expected speech of Theresa May with the concept of "Brexit". Specifically, the UK intends to pay the 20 billion pounds for the penalty of EU only against the required 60 billion, and afterward, in the event of the trade agreements preservation or direct access to the EU market.
It is believed that the reorientation of investors to buy the dollar happened this Wednesday, and only accumulated extraordinary growth forbid the market to conduct a sudden reversal. Today, investors can push business activity in the euro area for September. In the manufacturing sector, PMI is expected to decrease from 57.4 to 57.2, while services sector shows unchanged forecast at 54.7.
There will be federal elections on German parliament scheduled on Sunday. The party under Angela Merkel confidently leads the poll with 36%. The euro is predicted grow slightly on Monday. However, this is also a convenient time for the repositioning of large investors. The ECB President Mario Draghi will have his speech in Ireland at the Jubilee event, but the monetary policy will not be part of the talk. The technical range of the euro is moving quite wide between 1.1820-1.1990 levels. In the end, we wait for the price in the target range at 1.1745 / 75.
The speech of Theresa May in Italy about the relationship with the EU is scheduled for 9:00 London time. On Monday, a new stage of negotiations will begin. The trading range for the pound is 1.3560-1.3700. We are expecting a decline at 1.3380-1.3400.
USD / JPY
On Thursday, the Bank of Japan held a meeting at which the regulator, as expected, kept its monetary policy, and there is no indication of possible changes in the future. The Japanese yen did not react to this neutral news. In general, the pair continued to grow on the overall strengthening of the dollar. But today in the Asian session, the yen loses 70 points after yesterday's decline in the US stock market. The Japanese stock index Nikkei 225 loses 0.33% today, Chinese China A50 by -0.30%, South Korean Kospi SEU is at -0.67%. Also this morning, DPRK Foreign Minister Ri Su-Yong announced the country's intention to conduct another hydrogen bomb test, but this time in the Pacific Ocean.
Yesterday, the S&P Global Ratings downgraded China's long-term credit rating from AA- to A + and short-term credit rating from A1 + to A1 due to a strong build-up of public debt.
On Monday, Japan will release the business activity indicator in the manufacturing sector, the forecast for it has not yet been published, but on Friday, September 29th, a very positive data are expected on a wide range of indicators. Industrial production is expected to increase from 4.7% YoY to 5.3% YoY, retail trade growth increase from 1.9% YoY to 2.5% YoY, while the base CPI grew from 0.5% YoY to 0.7% YoY, and the construction of new homes increased from 0.9% YoY against -2.3% YoY from a month earlier.
Thus, the current decline can be regarded as temporary and we expect growth to 113.40 after the completion of the correction. In fact, the North Korean hydrogen bomb has not yet been tested, and we doubt that such a test outside North Korea will take place at all, for the war will be inevitable.
