Pound strengthens slightly ahead of financial releases

The pound strengthened slightly yesterday against the USD and the common currency, ahead of UK’s employment data for June and the GDP rate for Q2. Pound traders could keep a close eye on the release of UK’s employment data, which are expected to show a deterioration of the UK employment market. It’s characteristic that the rather good employment data so far may have been substantially supported by the UK governments furlough program, which artificially kept unemployment at rather low levels so far. However UK’s finance minister Sunak stated that the program is not sustainable in the long run last week, while a Bloomberg article stated that one in three U.K. employers plans to cut jobs in this quarter, increasing worries further. It should be noted that uncertainty is high for the pound given that also UK’s GDP growth rate, which is due out tomorrow is expected to decline deep into the negatives for Q2, mirroring the adverse effect of the lockdown measures on the UK economy. Also the uncertainty of the Brexit negotiations in the fall could weigh on the GBP. We expect financial releases to have the initiative for the pound’s direction in the next two days and should there be no surprises we could see the pound weakening somewhat. GBP/USD maintained a sideways movement yesterday and during today’s Asian session, topped slightly the 1.3085 (S1) resistance line, turned to support for the time being. Technically the we see the pair maintaining its rangebound motion, yet financial releases in the next few days could create volatility for he pair and alter its current direction. Should the pair come under the selling interest of the market, we could see it breaking the 1.3085 (S1) support line and aim for the 1.3015 (S2) support level.

RBNZ’s interest rate decision

On Wednesday, during the Asian session, we get from New Zealand, RBNZ’s interest rate decision and the bank is widely expected to remain on hold, keeping rates unchanged at +0.25% as NZD OIS imply a probability of 97.70% for such a scenario. If the rate remains unchanged, the market’s attention could turn to the accompanying statement and Governor Orr’s press conference (03:00,GMT). The recent employment data for Q2, sent some mixed signals for New Zealand’s economy as the unemployment rate dropped, which was quite positive, while the job growth rate slowed which was a bit worrisome, also note that the CPI rate for Q2 slowed down considerably reaching +1.5% yoy. Given the bank’s dual mandate to watch over both, unemployment and inflation, we could see the bank choosing to adopt a dovish tone, supportive for New Zealand’s economy and we would not be surprised to see the bank acting proactively by raising its QE program. We tend to see risks tilted to the bearish side for the Kiwi from the event, unless the bank decides to include a hint of optimism in its statement. NZD/USD dropped slightly yesterday yet during today’s Asian session spiked as it bounced on the 0.6580 (S1) support line. We tend to maintain a bias for a sideways motion yet RBNZ’s interest rate decision could substantially affect the pair’s direction. Should the bulls be in charge of NZD/USD’s direction, we could see the pair breaking the 0.6665 (R1) resistance line and aim for the 0.6755 (R2) level. Should the bears take over, we could see NZD/USD breaking the 0.6580 (S1) support line and aim for the 0.6500 (S2) level.

Other economic highlights today and early tomorrow

Today in the European session, we highlight UK’s employment data for June and Germany’s ZEW indicators for August. In the American session, we get Canada’s house starts for July, the US PPI rates also for July and just before the Asian session starts, we get the API crude oil inventories figure for the past week. During tomorrow’s Asian session, we besides RBNZ’s interest rate decision, we also note Australia’s wage price index for Q2. As for speakers, please note that Richmond Fed President Barkin and San Francisco Fed President Daly are scheduled to speak today.

GBP/USD 4時間チャート