Forex Signals US Session Brief, July 30 – Risk Assets Extend the Decline as Sentiment Turns Negative Again on Weak Forecasts
Skerdian Meta • 3 min read
The main event for this week is the FED meting which will take place tomorrow in the evening. They are widely expected to cut interest rates by 25 bps, but traders are uncertain whether the FED will deliver just one rate cut tomorrow and end it there, of if they will enter an easing cycle. Hence the uncertainty in the forex market this week. Besides the FED, the Bank of England (BOE) will also hold its meeting on Thursday, although the central bank bonanza started with the Bank of Japan (BOJ) meeting today in the Asian session.
The BOJ left rates unchanged at 0.10%, but forecasts were pretty gloomy. Governor Kuroda sounded quite pessimistic on inflation, growth and the future of the global economy. He also mentioned more easing if things get worse.
In France, consumer spending turned negative again in June while Q2 GDP missed expectations, coming at a mere 0.2%. The consumer confidence remained in negative territory in the Eurozone, which points to an uncertain future for the Eurozone economy. Bayer and Lufthansa reported weak forecasts too, so everything looks bleak today. As a result, the sentiment has turned negative again in financial markets, with stock markets sliding lower together with commodity currencies, while safe havens such as the JPY are attracting some decent bids.
The European Session
- French GDP and Consumer Spending – Economic growth has slowed considerably in the Eurozone and in France. In Q1 French GDP grew by 0.3% and it was expected to remain unchanged in Q2. But, it missed expectations, with growth falling to 0.2%. Consumer spending was negative at the beginning of this year but it turned positive in the last two months. Although, they were revised lower to 0.3%, while June was expected to show a 0.1% increase in spending. But, it missed expectations, showing a 0.1% decline in spending in France during last month. The French economy seems to be taking another downturn.
- BOJ Meeting – The meeting from the Bank of Japan took place in the Asian session, but there was no change in the monetary policy. Governor Kuroda came out later holding a press conference. He tried to calm the nerves saying that Japan’s economy is expanding moderately. But, inflation remains weak despite tight labour market, risks for the economy and inflation are tilted towards the downside and risks from overseas’ economies are high. It will take time to hit 2% inflation target. He added that the BOJ won’t hesitate to add easing if price momentum is lost. They will take action to prevent risks from materializing.
- EU Keeps its Position Unchanged for Brexit – The Sun reported this morning, citing sources from the European Commission. It said in the report that the Boris Johnson is trying to build pressure on the EU by delaying Brexit until the last few weeks to get concessions in the European Council meeting in October. It continued as follows: “It’ll be about where are we heading with the Brits, where do we stand with the implementation of contingency measures. If we’re really in the deal making business this is not a thing you invent on a small piece of paper on the corner of a table at 3am. You don’t do a deal by simply arriving on the 17th after having had a kind of general exchange about what they think in Britain now.”
- Eurozone Final Consumer Confidence – The final reading for the consumer confidence remained at -6.6 points in the Eurozone. Economic confidence came to 102.7 points against 102.6 expected, down from 103.3 points in June. So now this indicator is at the lowest level since 2016. Business climate indicator came at -0.12 points vs 0.08 expected, industrial confidence declined further to -7.4 points against -7.0 expected, while services confidence remained unchanged at 10.6 points as expected.
- Overall Economic Situation in China Is Still OK for the Politburo – China’s Politburo commented after their work meeting earlier today. President Xi Jinping said that economic situation is good overall, but the economy faces increasing downward pressure. They will take measures to expand domestic demand and to stabilize investment in the manufacturing sector, employment, investment and foreign trade and also to make fiscal policy more effective. They won’t resort to using property/real estate as short-term stimulus measures, but will try to boost consumption with more reform-linked measures.
Trades in Sight
- The trend is bearish
- There have been no pullbacks higher
- The 20 SMA is pushing the price down
The 20 SMA is providing resistance for GBP/USD
GBP/USD has turned extremely dovish now that the EU is not changing its position regarding Brexit and the Irish backstop, after the new Prime Minister has been appointed. Last week the bearish trend picked up pace and today this pair has lost nearly 200 pips already. The 20 SMA is pushing the price down on the 15 minute chart, which means that the trend is really strong even on this time-frame chart.
There are no events scheduled for the US session today, so we closed this forex brief a bit short. The USD has resumed the uptrend of the last two weeks again and is grinding higher against major currencies. Although, I don’t expect much action today due to the fundamental events that are scheduled for the week ahead.