The beginning of the week has been a slow one this time with trading volume at low levels as we are treading mid-August and traders are on their holiday period. The economic calendar was virtually empty of any fresh news so there was little to trade on the back of hence the major instruments we monitor had little to show for.
The general sentiment revolves around Asia and especially China with worries that the slowdown that we’re seeing there might affect the way the major money markets will react. There have been voices calling for the Fed to take a step back from pulling the trigger on raising rates on this coming cycle as analysts believe that with Europe showing no progress and Asian markets taking a dive lower this might not be a good timing.
Traders will focus on the UK today as the release of the UK inflation levels is the most important report on the docket and even though there’s low trading volume we could see an important reaction from the Pound to the report. Should the levels hold steady or show an improvement on the core element of prices’ growth then the Pound could get a boost higher. The reasoning behind this is that signs of positive growth could drive more members of the BoE committee to call for an earlier rise of interests’ rate.
Yesterday the Cable traded lower making its way below the 1.5600 level but this could be temporary if the inflation report ticks higher. The UK currency has been trading in a volatile manner during the past couple of weeks so we could be in for another reversal today that could drive the currency rate higher towards its previous highs.
The Euroextended its losses yesterday dropping below the 1.1080 lows of last week but the lack of momentum worries us as the Single currency seems oversold. Technically the bias for the Euro points lower with the 1.1000 area coming into focus but the lack of support behind this decline and fundamental doubts on whether the Fed will move forward during the coming couple of months but jeopardize this downtrend.
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