A natural surprise for the Bank of England

EUR/USD, GBP/USD

Unfortunately, we misunderstood the tone of the Bank of England regarding the prospects for inflation and monetary policy. To maintain the current rate of 0.25% the voting ratio should be seven votes to two, but some economists assumed that the ratio would rise to six to three. The Committee issued a statement advising for the tightening monetary conditions "in the coming months," as inflation would exceed the target level of 2% "in the next three years." Remarkably, the Committee did not indicate the reason for inflation, making it clear that it was increasing as the economy developed amid the decline in wage growth. Moreover, it left out the price factor for raw materials as noted in previous meetings, although Mark Carney himself noted that the price increase is due to the appreciation of the pound. On the same day, ECB's chief economist Peter Praet said that Europe's inflation is unstable and is supported mainly by ultra-soft policy. The Bank of England appeared to be preparing for a "safety cushion" in the case of a hard "Brexit", which makes us more closely monitor the progress of the negotiations. Either he or the Fed will be hurried up in raising rates prior the looming world crisis after the possible reverse reduction.

According to the US, the released data seems upbeat. The basic CPI remained at 1.7% YoY in August against the forecast of 1.6% YoY decline, while the total CPI rose from 1.7% YoY to 1.9% YoY, and the monthly increase was 0.4% against expectations of 0.3%. The number of initial applications for unemployment benefits fell from 298K to 284K while waiting for an increase to 300K. Yesterday, Euro showed an increase of 34 points.

The US retail sales in August will be released today. The growth forecast is 0.1%, the base retail sales index is expected to grow by 0.5%. Industrial production for August estimate is expected to grow by 0.1% and the capacity utilization came in at 76.8% against 76.7% in July. Moreover, inventories of companies are expected to grow by 0.2%. With the expected weakening of interrogatory indices show that New York's business activity index in the manufacturing sector in September may fall from 25.2 to 18.2, while the consumer confidence index from the University of Michigan in September is expected to decline from 95.1 compared to 96.8 previously. Amid the significance of positive changes, it is not enough to stop the rally of the British pound. We are waiting for the price to reach the 1.3460 level.

According to the euro area, the trade balance for July will be published with the forecast of 20.1 billion euros against 22.3 billion in June. The probability of the Fed rate hike in December, set by futures for federal funds that rose sharply to 46%. The weighted average expected rate for December is 1.22% against 1.19% on Monday. We are waiting for the euro at 1.1770.

AUD / USD

On Thursday, the Australian data came out better than expected. But the growth of the Australian currency was muffled by weak performance from China. The number of jobs in Australia for the month of August increased by 54.2 thousand against the expectation of 15.0 thousand, and for the previous month the indicator was revised to increase from 27.9 thousand to 29.2 thousand. Full-time employment increased by 40.1 thousand people. The share of the economically active population increased from 65.1% at once to 65.3%, because of which the unemployment rate remained at the previous value of 5.6%. In China, however, the industrial production declined from 6.4% YoY to 6.0% YoY.

This morning, North Korea launched another missile towards the direction of Japan, which fell 2000 km from Hokkaido. Japan said that the missile flew through the Japanese islands, and intended to hold an emergency meeting with the UN Security Council. As a result, the Australian S&P / ASX 200 index is down by 0.86%, the South Korean Kospi SEU is losing 0.33%, while the Japanese Nikkei 225 is growing by 0.09%.