The pound has been hit hard last week, but it is too early to refer it to the losers. In tandem with the euro it depreciated to 0.7075 pence after the impressive growth the previous week. In tandem with the US dollar, currency fell to 1.5505.“>
Traders Expect Upward Retracing of GBP
In tandem with the euro, British pound has experienced the deepest weekly decline since May of this year, as a report on retail sales for June recorded a sudden drop in consumer activity, dispelled investors’ optimism about the state of the economy and its readiness to raise rates. However, it is expected that next week’s GDP report will show faster growth in the second quarter, in which case the forecasts for interest rates again will change to more aggressive.
Last week, we used in trading currency pairs with the British pound 5 times, including 4 times – GBPJPY pair, 1 time – EURGBP. We traded US dollar more often – 7 times over the last week we bought options on currency pairs with this currency. Moreover, in contrast to the pound, where our forecasts relative to the direction of movement of the currency was broadly neutral, for the US dollar we bought 5 binary options in favor and only two – against. But central place in our trade the Japanese yen occupied. Totally, we opened 13 positions in the Japanese currency pairs including 7 – in favor of the currency and 6 – against.
AUD Is the Weakest Among Majors
AUDUSD on Friday updated 6-year low, testing 0.7260 mark – the lowest since May 2009. Sentiment remains negative and the closing price of the trading week was very low even comparing with market expert forecasts. Many bank analysts urgently downward already revised their projections for the Australian currency. Market urgently includes in price the likelihood of a rate cut by the Reserve Bank of Australia by 0.25% in September.
The dynamics of the New Zealand dollar is hardly positive, and experts believe that potential of its fall against the US dollar and the yen is not yet exhausted and Put binary options on these currency pairs look attractive. Situation on the commodity markets acts in favor of this, in the near future we should not expect significant improvement of the situation – stock market crash in China continues and the economic situation looks increasingly bleak. The course of events does not bode well for the Australian currency, but a significant easing by RBNZ has included in New Zealand dollar rate already, however the market underestimates potential of rate cut.
US Dollar Increased Moderately Before Important News Release
Traders have busy week ahead. Season of income report publication in the United States is in full swing, but this time, there are a couple of major events in the calendar, including a meeting of the Federal Reserve System and the report on GDP in the United States. Events in Greece and the negotiations on the program of assistance will again be the object of attention.
It is expected that Greece and its international creditors continue to discuss the program of assistance with the amount of 86 billion euros – the third in the current crisis. On Friday, there were first problems: Athens obstruct the negotiators that, as a result, have been forced to postpone their visit to the Greek capital. In particular, the Greeks limited list of people with whom representatives of the creditors can talk, as well as topics they can talk. However, Economy Minister of Greece George Statakis believes that negotiations are not threatened and they can be completed by mid-August – Athens needed to get money at this time, to pay 3.2 bln euro bonds to ECB.
Federal Open Market Committee on Tuesday begins its two-day meeting on monetary policy, accordingly, the decision will be announced on Wednesday. It is expected that accompanying statement will focus on improving the economic performance of the United States. It is unlikely that Fed will provide clearer signals about the possibility of a rate hike in September, as the Committee is tied to incoming macroeconomic data, prefer to wait until the publication of the GDP for the second quarter and the employment report for July and August.
Expectations for US GDP report
On Thursday, the market is waiting for preliminary data on US GDP for the second quarter. Economists believe that over the past three months, the US economy grew by 2.5% after a decrease by 0.2% in the first quarter. The report will also include the revised annual values that form the historical trend. Adjustments expected related to seasonal factors, they can raise the performance in the first quarter, when the influence of such factors has been particularly significant, but the values in the following quarters, respectively, may be reduced. This adds some uncertainty to GDP forecast in the second quarter.
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