Daily Commentary | 13/09/2018
ECB Interest Rate Decision
ECB is to release its interest rate decision today (11:45, GMT) and is widely expected to remain on hold at 0.0%. Currently, EUR OIS imply a probability of 98.93% for the bank to stand pat. Analysts, expect that the bank will maintain its current policy regarding interest rates and its QE program, however some have noticed that a possibility exists for ECB to lower its forecast regarding growth somewhat. Should the dovish elements prevail in the accompanying statement and the following press conference (12:30,GMT), we could see the EUR weakening.
BoE Interest Rate Decision
BoE is also expected to release its interest rate decision today (11:00, GMT) and is widely expected to remain on hold at 0.75%. Currently GBP OIS imply a probability of 98.94% for the bank to maintain its current rate level. With Mark Carney at the head of the bank well until 2020 and rather sound financial data (except the GDP%), the main worries of the bank may stem from the ongoing Brexit negotiations. Should the hawkish elements outweigh the dovish ones in the accompanying statement, we could see the GBP strengthening.
GBP/USD moved in a sideways manner yesterday with some bullish tendencies distancing itself somewhat from the 1.3020 (S1) support line. The pair could continue to trade in a sideways manner with some bullish tendencies today, however it might prove sensitive to the BoE interest rate decision. Should the pair come under selling interest we could see it breaking the 1.3020 (S1) support line and aim if not breach the 1.2960 (S2) support barrier. Should on the other hand, the market favour the pair’s long positions we could see the pair breaking the 1.3080 (R1) resistance line and aim for the 1.3150 (R2) resistance hurdle.
Central Bank of Turkey (CBT) Interest Rate Decision
The most interesting rate decision today is expected to be the one from CBT (11:00, GMT). The bank is expected to hike rates by 425 basis points reaching +22.0% from current level of +17.75%, as per a Reuter’s poll. Main reason behind the rate hike would be the acceleration of the CPI rate which has reached the level of +17.90% yoy, but also the recent weakening of the Turkish Lira. We see the case for the bank to hike rates at the prementioned level as the market seems to be seeking drastic measures from the CBT. Anything less, could tumble the Lira substantially.
USD/TRY moved in a sideways manner yesterday, between the 6.5000 (R1) resistance line and the 6.2000 (S1) support line. The pair’s course is expected to be influenced by CBT’s interest rate decision later today. Should the market be satisfied by the decision, the bears could take over and the pair could break the 6.200 (S1) support line and aim if not break the 5.9250 (S2) support level. Should the bulls be in the driver’s seat, we could see the pair breaking the 6.5000 (R1) resistance line, the 6.7500 (R2) resistance level and aim for the 7.0200 (R3) resistance area. Please note, that depending the decision, volatility for the pair could prove to be substantial today.
In today’s other economic highlights:
In the European session we get the final releases for the HICP rates of Germany and France for August, while in the American session we get the US headline and core CPI rates for August. As for speakers, please note that Atlanta Fed president Raphael Bostic speaks. Also please be advised, that as Apple unveiled the new series of three i-Phones, its share may have increased volatility in today’s American session.
• Support: 6.2000 (S1), 5.9250 (S2), 5.6750 (S3)
• Resistance: 6.5000 (R1), 6.7500 (R2), 7.0200 (R3)
• Support: 1.3020 (S1), 1.2960 (S2), 1.2895 (S3)
• Resistance: 1.3080 (R1), 1.3150 (R2), 1.3215 (R3)