The Central Bank Chief’s comments on the lack of wage growth potentially causing a problem had markets selling Sterling very sharply and equity traders reading into it as a sign of low interest rates being around for longer than previously thought. Other comments that drew our attention were when Mr Carney told his audience that the Bank of England had been very clear and consistent in their message and that markets should be pleased to know where they stand with the BoE.
In Germany it’s quite the opposite story in their bond market. Last week ten year bond yields fell below 1% for the first time in the history of them being issued, as fears over a slowing European economy and escalating tensions with Russia forced investors into the super safe government backed investment. The move is likely to pull other European government debt down with it as investors prepare for Europe to head into deflation and a 1% yield, though fairly tragic, becomes an acceptable yield.
Meanwhile Italy’s finance minister believes the ECB are getting ready to do more to combat low inflation.Whether he has an inside line to his countryman, Mario Draghi, at the ECB remains to be seen but something needs to be done.
Other damaging comment over the state of Europe came from ratings agency Moody’s, who called France’s failure to meet its deficit targets a credit negative for France and the wider Eurozone. Whether they’ll cut France this quarter remains to be seen, but even if they don’t, the failure to reach such targets is a further nail in Francois Hollande’s coffin.
Moody’s also said that Japan’s collapse in GDP output last quarter complicates their views on Abenomics – their massive stimulus plan. Previously ratings agencies were able to turn a blind eye on the mammoth quantitative easing programme because it was boosting output and bringing inflation with it. The sharp fall in GDP could lead them to view the country, now even more indebted, very dimly indeed.
In geo-political news. Ukraine have officially recognised Moscow’s shipment of aid as humanitarian supplies. On Friday there were reports of Ukraine destroying some of the convoy, but it doesn’t seem like that was the case and the acceptance of the convoy will hopefully let some steam out of the situation for the time being.
In Gaza, the ceasefire is due to end tonight and as yet there is no deal on the table at talks in Cairo, with both sides still talking very tough on their demands.
Looking ahead to this week; data is light on the ground, though key releases include UK inflation numbers tomorrow and then Bank of England and Federal Reserve meeting minutes on Wednesday. Thursday to Saturday sees the annual gathering of global central bankers in the US, which could lead to some market moving press releases. We’ll be watching the British Pound today to see if it regains a small handle on the Mark Carney interview, meanwhile stock market futures indicate a mixed start to the week’s trading. It’s likely that this week will be very light on trading volumes, as plenty of people are enjoying their summer holidays (so if this email has disturbed your break, apologies)
Short-term FX Signals
EUR/USD 4-hour: Consolidating
Invest Diva likes: Long positions above 1.339 with targets @ 1.344 & 1.347 in extension.
If pair goes nuts: Below 1.336 look for further downside with 1.333 & 1.315 as targets.
What’s up on the forex dance floor: The pair is trapped in the triangle pattern and teasing its upper boundary. The RSI is over the neutrality area.
Supports and resistances:
1.347
1.344
1.339 pivot point
1.333
1.315
USD/JPY 4-hour: Moving up
Invest Diva likes: Long positions above 102.53 with targets @ 102.72 & 103.10 in extension.
If pair goes nuts: Below 102.53 look for further downside with 102.23 & 102.10 as targets.
What’s up on the forex dance floor: The pair keeps dancing above the Ichimoku cloud and below the key resistance of 75% Fibonacci level at 102.72.
Supports and resistances:
103.10
102.72
102.53 pivot point
102.23
102.10
AUD/USD 4-hour: Moving up
Invest Diva likes: Long positions above 0.9326 with targets @ 0.9354 & 0.9381 in extension.
If pair goes nuts: Below 0.9305 look for further downside with 0.9294 & 0.9240 as targets.
What’s up on the forex dance floor: The pair is dancing under the uptrend and above the Ichimoku cloud.
Supports and resistances:
0.9381
0.9354
0.9326 pivot point
0.9294
0.9240
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