EUR / USD, GBP / USD.
As we noted on Monday, the market events continue to evolve without surprises.
Market expectations for the Federal Funds Futures sharply went up, with an average rate of 1.22% in December versus 1.20% earlier.
In the United Kingdom, inflation indicators were slightly weaker than expected. The basic and general CPI remained at the same levels at 2.4% y/y and 2.6% y/y. While the retail price index, on the contrary, rose to 3.6% y/y, while maintaining the previous level of 3.5% YoY. Housing prices also fell showing a weaker than expected results at 4.9% y/y versus 4.3% y/y, the previous indicator was revised from 4.7% to 5.0% y/y.
In Germany, GDP for the 2nd quarter came in at 0.6% against expectations of 0.7%. As a result, the British pound lost 94 points while 44 points for the euro.
The minutes of the FOMC meeting will be published this evening.In the UK, the unemployment rate is possible to remain unchanged at 4.5%, while the number of July applications for unemployment benefits is expected to be around 3.7 thousand against 5.9 thousand in June. The average wage level, taking into account the premiums, is expected to grow by 1.8%, as in June. In the euro area, the second GDP estimate for the 2nd quarter is expected to remain unchanged at 0.6% (2.1% y/y).
We are waiting for further reduction of the euro to 1.1640 down to 1.1560. The British pound is expected in the range of 1.2735 / 55.
AUD / USD
The Australian dollar began to decline yesterday after the minutes from the last meeting of the RBA came out. As we expected, the Central Bank once again "kicked" on the national currency, noting the negative consequences caused by its high rate as prices declined during the year which reflected partially on the appreciation of the exchange rate. A high exchange rate led the members of the Committee to an "erroneous" estimate of economic growth. The protocol mentioned for the third time the adverse effect of high rate of the Australian dollar. But, of course, the dollar does not affect the fact that car sales in Australia declined by 2.0% in July and in the 2nd quarter, the salary growth slowed down from 0.6% to 0.5% (1.9% yoy). The Australian dollar rebounded to the opening on July 18, when, ironically, the RBA made an optimistic statement about the outlook of the economy. The Australian dollar jumped more than 100 points after the speculative growth of European currencies.
Commodities become cheaper on the back of growth of the US dollar. Iron ore lost 1.25%, while copper is 0.6% and grain crops is about 0.3%. We expect that the AUD/USD will enter the range of 0.7710 / 30.