18.10.201708:01 Forex Analysis & Reviews: Bank of England backs up

EUR / USD, GBP / USD

As mentioned in the previous forecast, the head of the Bank of England tried to cheer the markets on Tuesday but resulted to an opposite event. During Mario Draghi's speech at the Treasury, he did not mention anything about plans to tighten monetary policy. According to the regulations, the head of the Central Bank is obliged to report by writing to the Minister of Finance the event about the 3% inflation that happened yesterday, as the consumer price index in September came in at 3.0%. The CPI gained 3% in April 2012. Instead of giving some explanations for further actions of the Central Bank, Mark Carney announced his plan to write such letter. Representatives of the Bank of England, Dave Ramsden and Silvana Tenreyro, triggered the thought of investors in voicing their doubts in the November rate hike. Retail prices in England remained at 3.9% YoY against expectations of growth to 4.0% YoY, while house prices rose from 4.5% YoY to 5.0% YoY, with expectations of 5.4% YoY.

Optimistic forecasts for the euro area have not yet been confirmed. Italy's trade balance for August fell from 6.56 billion euros to 2.77 billion with an expectation for a decline to 4.23 billion euros. The European ZEW Sentiment Index in the business circles fell from 31.7 to 26.7 with expectations for growth to 34.2.

Before the end of the week, the British pound may no longer have support in the near future. Today, employment data suggests an increasing unemployment rate. On August, the average salary for a three-month period is expected to remain unchanged at 2.1%. Tomorrow, it is possible that retail sales will decline by 0.1% in September, while the increase in government borrowings from 5.1 billion pounds to 5.7 billion pounds is anticipated on Friday.

An interesting event from the euro will be the speech of Mario Draghi at the conference of "Structural reforms in the euro area" at 9:10 London time.

We are expecting for the euro at 1.1720, then on 1.1670. Pound sterling is expecting in the range of 1.3095-1.3120, with a further decline to 1.3010.

USD / JPY

In the first half of the week, the Japanese yen did not try to hit the technical level of 112.50. Another deterrent is the passing congress of the Chinese Communist Party.

This morning, the representative of the Bank of Japan, Makoto, Sakurai, shared the plan of the regulator to continue the "powerful weakening" against the backdrop of rising inflation and the stabilization of the yen's rate. In other words, the Bank of Japan is not satisfied with the long stay of the yen within the range of 111-113.

American stock indices continue to set the historic level and the Nikkei 225 adds 0.17% today. Yields on Japanese government bonds moved up.

The trade balance indicators for September will be published tomorrow. In consideration of seasonal fluctuations, the balance can be reduced from 0.37 trillion yen to 0.32 trillion yen, the total balance is expected to increase from 113 billion yen to 560 billion yen.We expect the yen to rise to 113.30 and higher to 114.40.