Bulls on the euro fix profit

Eurozone

Traders continue to record profits on the euro, as they could not form a new idea for its growth following the ECB's reluctance to give the market guidance on the timing of the curtailment of the asset buy-back program.

Industrial production rose by 0.1% in the eurozone for the month of July. The result coincided with the forecast of experts. On an annualized basis, the growth was 3.2%, which is higher than 2.8% a month earlier.

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The euro zone economy continues to grow at a moderate pace, and the ECB will focus on not hindering this growth. As ECB Vice-President Vitor Constancio said on Tuesday, the regulator will promote the growth of inflation in the euro area to the target of 2% by maintaining the current monetary policy.

The focus of attention shifted to the meetings of the Central Bank of Switzerland and England, which will take place today. In anticipation of new data, trades will go to the lateral range, since there are no objective reasons for a full-fledged turn.

United Kingdom

Before the meeting of the Bank of England, which was previously considered a checkpoint, there was an unexpectedly good macroeconomic statistics that added enthusiasm to the bulls, refuting all forecasts and assumptions.

Consumer inflation in August rose by 2.9% year-on-year after a 2.6% increase in the previous month, exceeding the forecast of 2.8%. Core inflation (CPI) rose to 2.7%, and this is the highest since 2011.

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These data will have an impact on the position of the Bank of England, which just recently pointed out that inflation is not growing strongly against the backdrop of the collapse of the pound after Brexit. At the previous meeting, only two of the eight Cabinet members voted for an immediate rate hike. Despite this, the current level was already close to 3%, that is, the deviation from the target set by the Bank of England was 0.9%. Recall that if the deviation of inflation from the target is 1%, the head of the Bank of England, Mark Carney will be forced to write to the Minister of Finance to state his views on methods to return control over prices.

The growth of inflation forced the market to wait for the report on employment, which was published on Wednesday. Some of the indicators supported the pound. Unemployment fell to 4.3%, which is the lowest level for 42 years. The number of employees has increased at the fastest rate since 2015. However, the key indicator is the growth rate of the average wage. It did not show positive dynamics, completely leveling expectations from inflation.

Weak wage growth was a surprise for the market. The pound rolled back from the 12-month high that was reached in the evening. The probability of seeing the Bank of England's more aggressive stance fell noticeably. Given the growth of positive news from the US, we can expect that the pound has already formed a local peak and will return to the support level of 1.2750 for testing the lower boundary of the rising channel.

Oil and ruble

A number of positive news supported oil prices. The International Energy Agency published on Wednesday a report that reflects the decline in world oil reserves for the first time in 4 months, and the forecast for daily growth in consumption in 2017 increased from 1.5 million to 1.6 million barrels. The day before, a similar report from OPEC also showed a decline in production for the first time since April. The decrease was 79 thousand barrels per day, mainly at the expense of Libya, Venezuela, Gabon and Iraq.

The market is actively speculating about prolonging the OPEC + agreement. Nigeria will be ready to join the agreement in March 2018 while Kuwait's energy minister also expressed readiness to consider the issue of extending the agreement after March.

Oil is in an upward trend and, most likely, will attempt to test the annual maximum. The Russian ruble, despite the support of oil, is weakening for a week in a row in anticipation of the meeting of the Bank of Russia on Friday against the backdrop of profit taking. Experts expect the rate to decrease by 0.5%. If the forecasts are confirmed, the ruble will be able to return to the upward trend.

The material has been provided by InstaForex Company - www.instaforex.com