United States Inflation Rate

The trend has been improving over the course of twelve months although more recently has been falling from the high’s of June and July of almost three percent.

The consensus forecasts the inflation to rise again following on from five releases of month on month stagnation.

United States Inflation Rate
US Annual Inflation

Fundamental and Geopolitical Analysis

Recent comments from the central bank…

…supporting strong labor market conditions and a sustained return to 2 percent inflation.

  • Other than the mid term elections last week there are no geopolitical events of concern.
  • Interest rates remained on hold at last weeks FOMC meeting.

Sentiment Analysis

  • Dollar has gained strength following the interest rate decision and coming out of a lull in the run up to mid term elections.

 


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United States Non Farm Payrolls

The trend is rising over a twelve month period, held steady for a six month period and could be considered to have declined over a three month period.

United States Non Farm Payrolls

With a consensus of 180 thousand, nothing changes too much from a trend view.

Technical Analysis

 Chart Trend Direction Trend Break Zone 
 Day Up 111.40
Four Hour  Down 112.70
Thirty Minutes  Up 111.70
  • Low risk entry at  111.85
  • High risk entry at N/A

Fundamental and Geopolitical Analysis

“The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”

  • Stock market sustained losses in previous week but set to recover

Sentiment Analysis

  • Traders direction mixed but it appears more are opn the sidelines than invested so a rally could be expected.

Order

Buying up the dollar from low risk entry makes sense fundamentally in the run up to Non Farm Payroll release.

TRADE APPROVED


Image credits: Aron Van de Pol

Euro Area Inflation Rate

Euro inflation has a rising trend although the last 12 months have been tumultuous.

Euro Area Inflation Rate
Trading Economics

The release is expected at 2.1 percent / 2.2 percent so a buy from trend lows is suitable.

Technical Analysis

 Chart Trend Direction Trend Break Zone 
 Day Down 120.60
Four Hour  Not set Not set
Thirty Minutes  Not set Not set

 

  • Low risk entry at: waiting on Four Hour and Thirty Minute trends to set
  • High risk entry at: 127.40

Fundamental and Geopolitical Analysis

“The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.”

  • If inflation continues to heat up, interest rate hike will be brought forward
  • Italian borrowing costs are causing the budget to breach fiscal rules
  • EU economic forecasts are due on Monday

Sentiment Analysis

  • Traders are uneasy regarding Italy’s fiscal situation
  • Italian unemployment rate is closing in on 10%, release due Wednesday
  • The sentiment is not favorable of a purchase

Order

Fundamentally, a buy from 127.40 makes sense but while the Italian situation has dovish sentiment it is not a good time to enter.

TRADE DENIED


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United Kingdom Interest Rate

The interest rates have increased over the last year and further rate hikes are expected.

This meeting is forecast to be a rate hold event however during Bank of England Governor Mark Carney’s speech look for signs of a hike during the December meeting of the Monetary Policy Committee.

Technical Analysis

Chart Trend Direction

Trend Break Zone

Day Up 142.20
Four Hour Down 145.40
Thirty Minutes Up 142.75
  • Low risk entry at  143.45
  • High risk entry at 142.90

Fundamental and Geopolitical Analysis

The focus of the Bank of England is to maintain 2 percent inflation.

  • Inflation is at 2.4 percent indicating further hikes necessary
  • Political uncertainty over decision to leave EU continues to hinder the pound
  • No events of interest in run up to Interest Rate decision

Sentiment Analysis

  • Bearish sentiment since May met with 1922 Committee on Tuesday
  • News reports the meeting was warm and may have softened the critics

Order

I am satisfied that the analysis indicates it is a suitable time to order.

Image credits: Aron Van de Pol

GBP is still showing a forecast of an interest rate hike next week and with GBPJPY testing 144.00 it is a prime time to enter the market.

Economic Indicators are light up to the meeting so no barriers there.

Central Bank Statement Highlights

In the MPC’s most recent economic projections, set out in the August Inflation Report, GDP was expected to grow by around 1¾% per year on average over the forecast period, conditioned on the gently rising path of Bank Rate implied by market yields at that time.
The contribution of external cost pressures, which has accounted for above-target inflation since the beginning of 2017, was projected to ease over the forecast period. Taking these influences together, and conditioned on the gently rising path of Bank Rate, CPI inflation remained slightly above 2% through most of the forecast period, reaching the target in the third year.

The MPC want inflation at 2% so all releases regarding inflation are to be watched.
GDP is another to watch and in particular if any deviation from the 1% growth expectations.