EURGBP: Profit Taken At 0.8450, Looking To Sell Again

EUR/GBP: Sterling Jumped As UK Manufacturing Rebounds

  • The GBP/USD hit a one-month high and traded above 1.3200 today, after data showing the British manufacturing sector staged one of its sharpest rebounds on record in August.
  • British manufacturing PMI, a closely watched gauge of factory activity, jumped to a 10-month high of 53.3 in August, recovering from the three-year low it hit in July after Britain’s June 23 vote to leave the European Union.
  • Sterling has performed reasonably well in the past few weeks, helped by better-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following the shock Brexit vote.
  • Surveys this week showing improved consumer confidence and a rise in British house prices in August have added to signs the economy is holding up well.
  • We think that a series of strong macroeconomic data will be enough to stop the BoE from further monetary easing. The Bank of England cut interest rates and restarted bond purchases in August and announce further easing. In our opinion this action was a sign of panic after Britain’s vote to exit the European Union and was not justified from the macroeconomic point of view.
  • Our EUR/GBP short was closed with profit at 0.8450 today. We are looking to sell EUR/GBP again at 0.8540.

AUD/USD Supported By Improvement In Australian Business Investment Plans

  • Australia’s economic data proved a mixed bag but there were enough signs of improvement in business investment to keep the AUD underpinned.
  • Thursday’s data from the Australian Bureau of Statistics reported investment fell 5.4% in the second quarter. Yet spending on equipment, plant and machinery rose 2.8%, with the non-mining sector driving the growth. New investment in manufacturing climbed 13% even as mining ped 16%.
  • A slump in business investment subtracted no less than 1.9 percentage points from GDP in the year to March. Without that drag, Australia’s economy would have expanded at a breakneck pace of 5%.
  • Figures due next week are generally expected to show the economy grew around 0.4% qoq last quarter, from the first quarter when it rose a surprisingly brisk 1.1% qoq.
  • The economy is also likely to get some support from planned infrastructure investments by Australia’s state governments, helping fill the chasm left by the mining sector.
  • Firms upgraded their plans for the 2016/17 financial year in a promising sign of a long-awaited pick-up outside of mining.
  • The lift in planned investment will give some comfort to the Reserve Bank of Australia, which is counting on a stronger pick up in the broader economy after cutting its cash rates twice this year to a record low 1.5%.
  • A recovery in investment would be welcome, given continued weakness in the country’s retail sector. Retail sales disappointed with a flat result for July, but a strong rise in home prices boded well for household wealth.
  • The market is split on whether the Reserve Bank of Australia will cut rates again this year, with futures implying a 50-50 chance of a move by December. We do not expect further monetary easing.
  • The Australian dollar edged higher today as investors focused on the positives in domestic economic data, though its medium-term direction remained at the mercy of a looming U.S. jobs report.


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Source: – Daily Forex Signals Service

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