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Eurozone
A strong employment report, along with speeches by FOMC members and the ripe technical reasons provoked a recovery of the dollar against most of its competitors, but there is still no certainty that the euro is ready to give its leadership to the dollar.
The Sentix economic index in August for the eurozone was 27.7p This is somewhat lower than the 28.3p a month earlier, but still indicates a steady growth. Investors' expectations have been growing for the eighth month in a row and have reached 40p, which is the highest since November 2007.
The Sentix index is often seen by investors as an advance indicator. Since it is slightly earlier than similar studies from Ifo or Markit, it predicts market reversals. At the current period, the release contains a specific warning. Despite the fact that the expectations are at the 10-year peak, the index for Germany once again declined, the second time since February, and signs of a slowdown appeared. Germany is the engine of the entire European economy, its slowdown will inevitably have an impact on all intra-European processes.
Meanwhile the euro is supported by a number of geopolitical factors. After North Korea warned Washington about a possible attack of the US military base on the island of Guam, the demand for gold and the Japanese yen increased briskly, as well as the franc and euro, which in the current situation can be considered as defensive assets, also rose in a second echelon.
The momentum for the euro is slowing, but it is still too early to predict a confident turnaround. Markets will be waiting for tomorrow's report on US inflation, and the absence of significant macroeconomic factors will contribute to the flight into the lateral range.
United Kingdom
Today, the Office of National Statistics will publish data on industrial production and the trade balance in June. Weak data from the previous month played a role in the pound's lost growth momentum, and players need new data to reassess prospects. The forecast is conditionally positive. It is expected that the industry will show symbolic growth, and good data will be able to support the pound.
The NIESR will also publish its forecast for GDP growth. Its assessment has a significant impact on market expectations, as it is priced in by the Bank of England in the development of monetary policy. At the moment, the economy of Britain looks affected by the Brexit referendum, as its growth slowed down relative to other G10 countries, and general weakness serves as a deterrent for the Bank of England. The fall of the pound last week was provoked largely by this factor, and the need for decisive action to curb inflation was limited by weak economic growth.
Political uncertainty also has a negative influence on the pound. Negotiations on Brexit are slow, and the first phase will not be completed in October, as it was assumed recently. Because of the weak results of the parliamentary elections, the position of Theresa May seems unconvincing, and the divided cabinet complicates the negotiations, since it does not in any way give a clear understanding the results the United Kingdom wants to achieve. The key question at the moment is whether Britain is ready to compromise and pay for its exit. The situation is aggravated by the probability of May being overthrown from her post at the Conservative Party's conference in October.
Pound positions look weak, and there are few reasons for the resumption of the upward trend. The pound may fall by the end of the week below 1.29.
Oil and ruble
Oil prices almost did not react to the report of the US Department of Energy on reserves, which was slightly worse than expected. OPEC countries did not provide new information to players, which led to the stabilization of prices at just above $52/bbl. A startling factor is the decline in China's oil imports, which may indicate a slowdown in China's economy, but so far this scenario is preliminary and does not deny the impact on long-term forecasts.
In the absence of significant drivers, the Russian ruble continues to trade in a narrow range of about 60 rubles per dollar.
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