Of the euro area
The growth of industrial production in the euro zone rose in August by 1.4% compared to July, to an annual growth rate of 3.8%, and the highest rate of growth over the past nine years. Strong data has been provided by the market. Currently, the focus is on the ECB meeting, on 26 October, which could announce changes in monetary policy.
The ECB’s leadership is trying to turn off the upward trend in investor sentiment. Mario Draghi said on Friday that inflation in the euro area is still too low, despite the acceleration in economic growth. As Draghi said at a meeting in Washington, d.c., the rate of inflation towards the ECB’s target level of just under 2% «is not yet enough convincing,» which means that «the substantial monetary accommodation» is still necessary. ECB Vice-President Vitor Constancio, said about the same thing — inflation expectations have «never materialized» and the approach of the inflation near to the target level «has become a real challenge.»
The ECB precise orientation — not be based on excessive expectations, and the bank will do everything possible to prevent the strengthening of the euro. Formally, a low inflation gives the right to the bank to postpone the exit of the stimulus program and the euro, as a result, loses the engine of growth.
On Tuesday, inflation data will be released in September, and they will be, in large part, to clarify the expectations on the future of the euro. Up to now, while the rise of 1.1870 seems too attractive for the sale, the real goal is still the drop of the EURUSD to 1.16.
The lack of new macroeconomic forces that may solicit a response on the book is only sensitive to the situation around of «brexit». The estimates on the market are simple: if the negotiations are successful, and both parties see an opportunity to close a deal, then it is a favourable factor for the book and he begins to climb. And, on the contrary, none of the delays or difficulties create problems for the book, which, in the period of uncertainty that loses value because of the increased risk.
At the present time, the expectations are not in favour of the pound sterling. President of the european Commission Jean-Claude Juncker said that the process will take more time than expected, and Angela Merkel, the spokesman of the German Chancellor, said that it was too early to discuss all of the conditions for Britain’s withdrawal from the EU.
These comments neutralized the declaration of the EU’s chief negotiator for brexit, Michel Barnier, who a day earlier announced the possibility of granting the united KINGDOM a transitional period of two years. Of course, the EU leadership does not intend to give up, and the book, therefore, was under pressure both against the euro and against the dollar.
On Tuesday, a report on inflation for the month of September will be published. It is expected that inflation will continue to rise, it is a favourable factor for the book. Also on Tuesday, three members of the BOE will address the parliament, the markets carefully check whether they have changed their position before the November meeting.
Currently, the market estimates the probability of a 0.25% rate increase on November 2 at 60%; this is the main reason for the strengthening of the pound sterling in recent weeks. However, in the long term, the dollar drive is likely to be intercepted, the growth of the GBPUSD pair to 1.3330 will be used for the sale and the book has the opportunity to decline in the coming week to 1.30.
On Friday, Oil has steadily increased for a number of reasons. The first is the growth of China’s oil imports of nine million barrels per day, which significantly reduces the concerns about a possible slowdown of the Chinese economy.
The second reason is the growth of geopolitical risks. The US President, Trump announced the possibility of «at any time terminate the agreement with Iran, which threatens the stability of the exports of Iran, which, in the context of the nuclear deal», the increase in the production of 3.8 million barrels per day. The re-evaluation of the geopolitical risks, is able to give of the oil of serious bullish momentum.