Sterling gets some support in mid-week

Posted 10 October, 2018

The sterling has posted gains against the US dollar in the mid-week. At present, the sterling-to-US dollar exchange rate stands at $1.3183. The UK posted sluggish reports today. According to the released data, industrial production rose by 0.2% m-o-m in August (0.4% upturn in July). The processing sector recorded a 0.2% decline, while the previous forecasts covered a 0.1% upturn. Construction sector plunged by 0.7% m-o-m against the anticipated weakening by 0.4% m-o-m.

Meanwhile, industrial production posted positive results year-on-year – the figures added 1.3% over the period under review, with similar results recorded in the processing industry.

The UK GDP hardly changed in August, though it was expected that the rate would gain 0.1% m-o-m.

According to the recent reports, the Labour Party, in particular, 30-40 members, can vote for the Brexit deal, which could lend good support to UK's Prime minister Theresa May. Specifically, Theresa May has reportedly managed to win the backing of 315 MPs. However, some from this list can stand against the deal due to intraparty clashes (this is about the officials that are in May's party but disagree with her Brexit plan). Nevertheless, the main deal breaker for Theresa May is said to be internal political conflicts rather than the stance of EU negotiators.

Previous forecast

11 October, 2018 17:26

← US Federal Reserve expected to keep following upward policy

Risk demand has kept falling on Thursday. The market is facing sell-offs on all fronts. The global stock indices, oil, US dollar and US Treasuries have dropped today. Specifically, the charts show that the Shanghai composite index slumped by 5.22%, followed by Nikkei – 3.89 % down. It seems that the market experiences massive selloffs rather than traditional risk aversion. The observed situation can be probably connected with increasing inflation in the USA. Inflation fueled by stable economic upturn will make US Fed revise the interest rate. Moreover, Donald Trump hardly supports the market making aggressive statements saying the US Fed is responsible for that stock market downturn.

US Federal Reserve expected to keep following upward policy

Next forecast

09 October, 2018 18:22

Yuan very close to threshold →

The players were getting rid of Chinese stocks at the start of the week indicating stronger concerns in the market. Market fears were fueled by a recent increase of interest rate by US Federal Reserve, greenback's hikes, slower economic activity and US-China tensions, with extra pessimism coming from the PBOC which downgraded reserve requirements for banks as a way to maintain credit. This reflects the need for tougher steps to avoid a collapse. As of today, China's stock market improved somewhat, and now the players keep track of the Chinese yuan. The US dollar-to-yuan rate attempted to break the 6.93 handle again, whereas the price fixing was at 6.898. Thus, now the next point is the period when the rate touches a psychological level at 7. In the USA, the White House may probably define Beijing's move as a deliberate yuan downgrading by 9% over the past 6 months to get a jump in the war. At present, traders may monitor the changes of US Treasuries, especially on the yesterday's day off due to the Columbus Day celebration.

Yuan very close to threshold
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