EUR and GBP: Eurozone data did not support the euro, while the British pound continued to grow after the labor market report
The euro is trading in a narrow side channel, as traders are waiting for the reaction of European leaders to the decision of Italy, whose government has today passed a budget for 2019 to parliament for approval. I spoke about it in more detail in this morning review.
Eurozone Fundamental Data
Eurozone data released in the morning did not lead to significant changes in the market.
According to the report of the European Central Bank, in the first eight months of this year, the Eurozone foreign trade surplus decreased to 129.6 billion euros from 140.4 billion euros in the same period of 2017. As noted by the Central Bank, the main factor behind the decline was the decline in demand from Asia.
As for the surplus in August of this year, it grew due to a good increase in exports, while imports remained unchanged. Thus, the trade surplus rose to 16.6 billion euros from 12.6 billion euros in July. Exports recovered by 1.2%, while imports remained unchanged. Without taking into account the correction, the surplus was at the level of 11 billion euros against 15.3 billion euros in August 2017.
As we can see from the report, the aggravation of trade relations with the US does not seriously affect the data. However, most likely, the experts will continue to closely monitor this indicator, which to some extent will be an indicator of further growth in the eurozone economy.
Weak data on economic expectations from ZEW Research Institute did not allow buyers of risky assets to go beyond the large resistance levels in the first half of the day.
According to the report, the lower estimate of the index of economic expectations was due to disagreements related to Brexit between EU representatives and the UK, as well as due to the escalation of the trade conflict between the US and China.
According to the data, the index in October fell to -24.7 points from -10.6 points in September. Economists had expected the figure to be -12.0 points.
As for the technical picture of the EUR / USD pair, further uncertainty in the market has already led to a decrease in volatility and a sideways channel. Currently, the lower limit is the area of 1.1535, while the upward potential of the trading instrument is limited to resistances of 1.1605, going beyond which will open the way to new weekly highs of 1.1650 and 1.1700.
The British pound continued its growth after the publication of the report, in which it was stated that the UK wage growth during the summer period was quite high, which would create certain signs of inflationary pressure and lead to a further increase in interest rates by the Bank of England.
According to the report of the National Bureau of Statistics of the United Kingdom, the average hourly earnings from June to August of this year increased by 3.1%.
During the reporting period, unemployment remained at 4%, while the number of employed was 32.4 million.
Today in the first half of the day, data on consumer inflation in China were also released, which in September of this year increased due to the rise in prices for food products, as well as for energy carriers.
According to a report by the National Bureau of Statistics, China’s CPI in September 2018 increased by 2.5% compared with September 2017. Food prices rose by 3.6% compared with September last year, while transport fuel prices jumped 20.8% from the same period last year. Economists had expected the CPI to rise by 2.6%.
Let me remind you that the inflation target of the Chinese government is around 3%.