EUR/USD, GBP/USD
As expected, the market did not take noteworthy action ahead of the Bank of England meeting and the Friday release of the US Department of Labor report. The euro in the short term reached the upper resistance range of 1.1780-1.1875. However, this is due to thin market trading at that time. Yesterday, Federal Open Market Committee member John Williams made a speech and once again explained obvious things to investors: the Fed's balance sheet reduction, the plan concerning rates will be raised in December and will continue to rise due to a natural slowdown of the economy to 1.5% per year. The fed fulfilled the mandate by exceeding the target of full-employment. Loretta Mester also spoke, she confirmed the assumption on employment. However, she looked more optimistically at the prospects for the economy. That is, the Fed is ready to hike rates at any pace of the economy in the long term. Quite diplomatic statements ahead of the Bank of England meeting.
The decision on monetary policy will be announced at 11:00 London time. At 11:30 London time, Mark Carney will make an announcement. We believe that due to the decline in PMI business indices, mixed and contradictory data on retail sales amid a drop in consumer sentiment and a decrease in consumer inflation (-0.4%), a fall in production orders (and this is a potential decline in industrial production), the Bank of England will be "dovish". Also, earlier, Central Bank officials suggested looking at the Brexit negotiation process before adjusting monetary policy.
Yesterday, data on jobs in the private sector of the US showed a 178,000 increase in the previous month, the forecast was 187,000, but the June figure was revised upwards by 33,000 upwards (191,000). Therefore, there are grounds for a good non-farm payrolls report (forecast at 181,000). At the same time, weekly applications for unemployment benefits are expected today to fall from 244,000 to 242,000. Business activity in the non-manufacturing sector (ISM Non-Manufacturing PMI) for July may fall from 57.4 to 56.9, but factory orders for June are projected to grow by 2.9%.
Thus, we are waiting for a deep correction to the British pound to 1.3050 and, possibly, further towards the range of 1.2935/70. The euro is likely to decline to 1.1650.
USD/JPY
The Japanese yen is making a second attempt at growth after falling from 114.40 since July. Such initial attempt was made on July 24-25, and now the task of the yen is to consolidate the 111th figure. Yesterday, the index of consumer confidence in Japan for July rose from 43.3 to 43.8. On Friday, the average wage for June is expected to grow by 0.5% -0.6% y/y. However, the yen is being prevented from reaching an important level (111.00). Despite yesterday's gains in the US market (with the Dow Jones set a historic record of 22034), indices on Asian markets are declining - long positions are closing before the release of the US labor market report: Nikkei 225 -0.24%, S&P/ASX200 -0.34% , Shanghai Composite -0.24%.
Today, Japanese Prime Minister Shinzo Abe will reshuffle the Cabinet. He plans to replace nearly half of all the ministers. This is probably done to raise interest in the ruling party and a new impetus for the development of Abenomics. Traditionally, the reshuffle in the Cabinet of Ministers of Japan causes positive morale, albeit short-term ones.
China, in all likelihood, could be affected by the transgression of its opportunities in trade with the United States. President Trump is considering the possibility of imposing unilateral restrictions on trade with China because of China's aggressive trade policy and its "insufficient" pressure on the DPRK. If some restrictions are accepted, the yen will also experience difficulties.
We are waiting for the yen at 111.70 ,mainly due to US labor data, and will continue to 112.75.