Mid-Day Report

Dollar Trying to Regain Momentum, Canadian and Sterling Leading the Way Down


Dollar is trying to regain momentum against most major currencies entering into US session, except versus Euro and Swiss Franc USD/CAD takes the earlier today by breaking last week's high. GBP/USD follows closely by taking out last week's low. Meanwhile Euro is so far trading firm against others. In particular, EUR/GBP is also resuming last week's rally and breaches 0.9050. Commodity currencies are trading generally soft today. In other markets, gold continues to hover in tight range between 1260/5. WTI crude oil's sideway consolidation extends and dips below 49 handle. Oil will take some more time to consolidate before having another attempt on 50 handle.

Eurozone Sentix dipped to 27.7

Eurozone Sentix investor confidence dropped to 27.7 in August, down from 28.3, but beat expectation of 27.6. Meanwhile, expectations gauge dropped to 16.0, down from 19.8. Sentix noted in the statement "it is become increasingly clear that the economic momentum has passed its high point." And "expectations are falling around the globe, led by the United States where they dropped for a fifth straight time". Also, "German 'model student' has also dropped sharply, with the scandal surrounding the automotive industry killing the economic mood."

UK PM May denied GBP 36b divorce bill

In UK, it's reported that it's prepared to pay GBP 36b to EU to settle the so-called "divorce bill". But Prime Minister Theresa May's spokesman James Slack denied it and told reporters "I don't recognize the figure". Brexit Secretary David Davis also said that the sum was "news to me". Meanwhile, an EU official also declined to comment on the "rumor". The financial settlement is a key issue to solve before Brexit negotiation could move on to the next stage. Little progress has been made so far and it's doubtful whether talks on post Brexit trade agreement could behind in October. The third round of talks will be held in the week of August 28.

Also released from Europe, German industrial production dropped -1.1% mom in June, versus expectation of 0.2% mom rise. Swiss Foreign currency reserves rose to CHF 714b in July. Swiss CPI dropped -0.3% mom rose 0.3% yoy in July, in line with consensus. UK Halifax house prices rose 0.4% mom in July.

New Zealand inflation expectation eased

New Zealand Dollar trades notably lower today as RBNZ's survey showed inflation expectation eased. The survey showed that respondents expect 1.77% annual inflation in 1 year and 2.09% in 2 years. That's much lower than the survey result three months ago, at 1.92% in 1 year and 2.17% in 2 years. For growth, firms expected GDP to grow 2.7% in 1 year and 2.64% in 2 years, comparing to prior 2.81% and 2.58% respectively.

The data comes just head of RBNZ meeting this week on August 9, which is a major focus of the week. RBNZ is widely expected to stand pat and keep OCR unchanged at 1.75%. The central bank will likely maintain a dovish tone and keep its own forecast that rates would be on hold until September 2019.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2983; (P) 1.3073; (R1) 1.3124; More...

GBP/USD's fall from 1.3267 continues today and intraday bias remains on the downside for 1.2932 support. Price actions from 1.1946 are viewed as a corrective pattern, no change is this view. Such correction could have completed at 1.3267 already. Break of 1.2932 will affirm this bearish case and target 1.2588 key near term support for confirmation. On the upside, however, above 1.3111 minor resistance will turn bias back to the upside for 1.3267 instead.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern that is still in progress. While further upside is expected, larger outlook remains bearish as long as 1.3444 key resistance holds. Down trend from 1.7190 (2014 high) is expected to resume later after the correction completes. And break of 1.2588 will indicate that such down trend is resuming.

GBP/USD 4 Hours Chart

GBP/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
3:00 NZD RBNZ 2-Year Inflation Expectation Q3 2.10% 1.90% 2.20%
5:00 JPY Leading Index Jun P 106.3 106.2 104.6
6:00 EUR German Industrial Production M/M Jun -1.10% 0.20% 1.20%
7:00 CHF Foreign Currency Reserves Jul 714B 693B 694B
7:15 CHF CPI M/M Jul -0.30% -0.30% -0.10%
7:15 CHF CPI Y/Y Jul 0.30% 0.30% 0.20%
7:30 GBP Halifax Plc House Prices M/M Jul 0.40% 0.30% -1.00% -0.90%
8:30 EUR Eurozone Sentix Investor Confidence Aug 27.7 27.6 28.3