Fundamental Analysis

Higher Inflation in UK May Force Bank of England to Raise Rates

Typography

The euro keeps falling against the US dollar due to increased interest in risky assets. Greenback bulls were supported by positive data from the NFIB small business index that improved to 105.3 in August against an expected decline to 104.8. At the same time, JOLTS Job openings report shows that the number of open vacancies in America in July grew to 6.17 million versus an anticipated decline to 5.96 million. Overall we are seeing positive tendencies from the labour market, which is likely to lead to wage growth and as a result to more consumer spending which remains the basis of economic expansion in the US.

Strong data from the UK pushed the GBP/USD price to the 1-year maximum. Traders reacted positively to the report on consumer price growth in August to 2.9% that is by 0.1% more than forecasted and higher than July's 2.6% rise in inflation. Sterling bulls were buoyed by the news as it increases the probability of hawkish rhetoric by Bank of England officials that will vote on interest rates on Thursday. Volatility for the pair is likely to remain high tomorrow on the background of British labour market data release.

The Australian dollar today was under pressure following the decline in the NAB business confidence index that in August dropped to 5 against 12 in July. Lower prices for commodities also have a negative impact on traders' sentiment. A slight spike in volatility is possible after the release of the Westpac report on Australia's consumer sentiment tomorrow at 00:30 GMT.

EUR/USD

The EUR/USD quotes were able to break through the inclined support line and overcoming the 1.1925 mark may become a confirmation for a sell signal with potential targets at 1.1825 and 1.1750. On the other hand, in case of the price crossing the SMA100 in the 15-minute chart, we may see growth resume with immediate goals at 1.2000 and 1.2070.

GBP/USD

The British pound demonstrated confident growth within the ascending channel and the recent break through the resistance at 1.3250 may result in a continued increase to the next target price at 1.3400. A change in trend is possible after leaving the limits of the channel and breaking through support at 1.3150. The MACD signal line is falling and that may be a signal for a continued downward correction to the lower limit of the channel.

AUD/USD

The AUD/USD resumed its decline after the recent rebound from the psychologically important 0.8000 mark. In case of breaking through this support line, the closest targets will be located at 0.7950 and 0.7870. In this case the stop should be set above the local maximum at 0.8050. It's not likely that we will see growth resuming today.

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