Eurozone
The core inflation in the euro zone rose in October to 1.1%, which was significantly higher than the September 0.9%, inflation, in general, rose from 2.1% to 2.2%. The growth was largely due to the weakness of the indicator a year ago, in general, inflationary pressure in the eurozone remains limited, however, the positive dynamics are likely to continue, primarily due to higher growth rates of the average wage in the region.
Current trends that have a direct impact on inflation, especially in the two main economies of the eurozone, France, and Germany, continue to be unconvincing. For example, retail sales in Germany in September declined by 2.6% instead of expected growth and in France, the consumer spending fell by 1.7%, so higher inflation data should not be overestimated, they are unlikely to have any impact on the ECB's position. The net purchase of assets will be completed by the end of 2018. The rate forecasts may become more cautious. The euro is unlikely to get a chance for corrective growth based on inflation data.
It should also be noted that the day before, the euro received another hole in the form of weaker-than-expected GDP growth rates in the 3rd quarter. Growth slowed from 0.4% to 0.2%, according to a preliminary estimate by Eurostat. France looks better than others, but its growth is below expectations. In Italy, things are moving towards a recession. There are no data for Germany yet, but the Bundesbank has already warned that one should not expect any good numbers. Accordingly, the likelihood that eurozone GDP will be able to reach annual growth rates of 2% has noticeably decreased.
The ECB is in a difficult situation. It is impossible to refuse to complete the asset repurchase program, as this may cause an overreaction of the markets, but you will have to think about other incentive methods. Investors understand this, but because the euro will continue to be under pressure.
Until the end of the week, important macroeconomic data from the eurozone will not be received. A new strong factor that can change the mood will not appear. Under these conditions, only the weakness of the dollar can provoke corrective growth to 1.1430, more likely is the re-testing of support for 1.13, followed by a departure below this level.
Great Britain
Pound noticeably improved its position after rumors began to circulate in the markets about an agreement between the Theresa May government and the European Union on the rules for the work of British financial companies after Brexit. According to them, companies will retain access to the EU markets, which in the current conditions should be perceived as an unconditionally positive signal for the pound.
The pound has rekindled after the news, as current macroeconomic data still looks weak. The growth rates of consumer lending declined in September, the CBI reported on extremely low levels of retail sales, RBK reduced the price index to negative values, Gfk indicates that there are no positive changes in the consumer confidence index.
Today, the Bank of England will hold a regular meeting, at which it is expected that the current monetary policy will remain unchanged. This meeting is considered to be a passing one, since it is not accompanied by the publication of updated forecasts (quarterly report on inflation) and Mark Carney's press conference, and the regulator does not have sufficient grounds for any changes yet.
A pound in the wake of a positive is able to win back part of the fall of the last weeks. The immediate goal is 1.2920. In the case of a successful passage, it will be possible to count on the return of GBP / USD to the trading range established in September. EUR / GBP looks more promising, which has good chances to continue moving south and get to the support of 0.8765.
The material has been provided by InstaForex Company - www.instaforex.com