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Yesterday the British pound was in the limelight. It closed the day dropping 72 points. The first impulse to the decline was the Bank of China’s announcement about record volumes of bad debts in the Chinese banks. Against our assumption about pessimistic outlook of the Bank of England policymakers, despite the “temporary difficulties” they issued the forecast on the further growth of the residential property prices and increase of the industrial production. The committee members have defined that the strength of the pound sterling rate reflects the growth of the economic data, however strange it might be. The investors acted adequately, they started selling the pound. Virtually, the reports did not contain any information and their publication was a cause to close the buys, which proves the speculative nature of the preceding growth.
The additional prove to it is the rise of the rate of the Canadian dollar, which did not react to the spectacular growth of the pound and the euro on Tuesday. The Canadian dollar has already tried direct sells against the US dollar. Industrial metals have been sold and the stock indices were dropping.
Today at 12:00 UTC+4 data on PMI Manufacturing in October in the Eurozone is published. PMI Manufacturing is expected to be 51.4 vs. 51.1 in September; PMI Services is forecast to be 52.3 vs. 52.2. At 14:00 UTC+4 data on CBI Industrial Order Expectations in the UK in October is revealed, forecast 10 vs. 9 in September. We suppose that strong data will be a proper background to close the buys on the euro and continue selling the pound sterling.
At 16:30 UTC+4 data on US Initial Jobless Claims is published, forecast 343K vs. 353K. As well data on New Home Sales in the US in September is expected to be positive, forecast 427K vs. 421K in August. Strong data on the US will contribute to the strength of the US dollar.
We expect the Canadian dollar will rise to the following targets 1.0420, the highs of May 29 and October 10), 1.0470, the lows of July 4 and 27 and 28 August), and 1.0560, the high of September 2 and 3.
USD/JPY.
We assumed that there would be the rise of the US dollar against the yen, however it was hindered by the People’s Bank of China, which announced the growth of non-performing loans. The Asian investors started to buy the yen against the dollar as safe-haven asset. At the moment it is impossible to depict the reaction of the PBC; it depends on the volume of the non-performing loans. The debts of the major Chinese banks have been cancelled for a long period of time. Probably, the investors’ reaction will be extremely cautious. The situation will be clear in the near future, until then it is off the market.
Published today PMI Manufacturing (HSBC) in China in October was 50.9 vs. 50.5 in September. The investors have sped up… This morning strong data on Trade Balance in New Zealand in September was issued, -199 million NZ dollars vs. forecast for -730 million NZ dollars and -1234 million NZ dollars in August, which supports indirectly the yen.
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