EUR/GBP Losing Upside Momentum, BoC in Focus Next

Market Overview | Written by ActionForex.com | Dec 09 08 11:24 GMT |

Sterling is mildly softer against Euro after worse than expected industrial production and manufacturing data released from UK. However, upside momentum is seen diminishing with bearish divergence condition in 4 hours MACD and RSI. Recent rally could be limited by 61.8% projection of 0.7808 to 0.8660 from 0.8234 at 0.8761 and bring correction. Break of 0.8578 will be the first indication that rise from 0.7693 has completed it's five wave sequent. In other words, a short term top is at least formed and deeper correction should then be seen to retest 0.8234 support. UK's manufacturing production dropped -1.4% mom, almost 3 times as much as economists expected and the worst contraction since 1980, with over 70% of the manufacturing categories plummeted. Year-over-year rate deteriorated to -4.9% versus expectation of -3.2%. Also taking account into utilities, mining and oil extraction, industrial production also fell more-than-expected by -1.7% and -5.2% on monthly and annual basis, respectively. Other data from US saw trade deficit of -7.75B pound, wider than consensus. DCLG house prices plunged 7.4% YoY(consensus: -6.5%, Sep: -5.1%) in October, indicating a sharper deterioration in the nation's house price than economists forecast. Released overnight, November BRC retail sales dropped 2.6%, consistent with market expectation. RICS house prices balance fell 76%, better than consensus of -83% and the revised 81%, in November. Though the pace of the decline has been slowed down, sales plunged to a record low as financial crisis and recession have depressed demand for property. From Eurozone, ZEW economic confidence posted improvement in Germany as well as the 15-nation Eurozone in December. In Germany, the index rose to -45.2 from a reading of -53.5 in November, better than consensus expectations of -55.0. In Eurozone, the gauge rose to -46.1 in December from -54 last month. The figure is also above consensus of -59. Germany, trade surplus surprisingly widened to 16.4B euro (consensus: 14B euro) in October from 13.7B euro in September. On monthly basis, decline in imports (-3.5%) was higher than that in exports (-0.5%). Current account surplus for the month rose to 15B euro, better than market expectation buy worse than revised 15.4B euro in September. Released earlier, Swiss unemployment rate rose from 2.6% to 2.7% in Nov as expected. Japan's finalized 3Q GDP came in at an annualized -1.8% (preliminary: -0.4%; 2Q: -0.5%), showing the nation is deeper in recession. On quarterly basis, 3Q GDP declined 0.5%, still more severe than initial figure of -0.2% and 2Q's -0.1%. Contraction in exports and capital spending is going to affect economic growth in the 4th quarter and early 2009. Leading indicators dropped to 85 as expected in Oct. Machine tools orders dropped by -62.6% in Nov. Australia November NAB business confidence dropped to -30 (October: -29), the lowest point since the gauge began in 1989. Moreover, the business conditions index fell 6 months to -17, a level back not seen since 1992. In US session, Bank of Canada is expected to reduce interest rate by 50 bp to 1.75%. On the central bank's statement on Oct 21, it's already stated further easing will be required to attain a 2% inflation target in medium term. Later in mid-November, the BoC Governor said that there's downside risk of the Monetary Policy Report released in the previous month. In November, over 70K jobs were lost and PMI fell to 40.2, the lowest level since the gauge began. Building permits sank 15.75% in October. Tight credit market, sliding house prices and surging unemployment rate made bigger rate cuts possible. Also to be released, US pending home sales in October should fall 3% after dropping 4.6% a month ago. Economic Indicators Update GMT Ccy Events Actual Consensus Previous Revised 23:50 JPY Japan GDP annualised Q3 F -1.80% -0.90% -0.40% 23:50 JPY Japan GDP Q/Q Q3 F -0.50% -0.20% -0.10% 23:50 JPY Japan GDP deflator Y/Y Q3 F -1.60% -1.60% -1.60% 0:01 GBP U.K. BRC retail sales Dec -2.60% -2.20% 0:01 GBP U.K. RICS house prices balance Dec -76.00% -83.00% -81.80% -81.00% 0:30 AUD Australia NAB business confidence Nov -30 N/A -29 5:00 JPY Japan Leading indicators Oct 85 85 89.4 89.2 6:00 JPY Japan Machine tools orders Y/Y Nov -62.20% N/A -40.00% 6:45 CHF Swiss Unemployment rate Nov 2.70% 2.70% 2.60% 7:00 EUR Germany Trade balance (euro) Oct 16.4B 14.0B 13.7B 7:00 EUR Germany Export M/M Oct -0.50% -0.90% 0.70% 7:00 EUR Germany Import M/M Oct -3.50% -2.70% 0.90% 7:00 EUR Germany Current account Oct 15.0B 14.0B 15.0B 15.4B 9:30 GBP U.K. Trade balance (gbp) Oct -7.75B -7.5B -7.48B -7.36B 9:30 GBP U.K. DCLG house prices Y/Y Oct -7.40% -6.50% -5.10% 9:30 GBP U.K. Industrial prod'n M/M Oct -1.70% -0.50% -0.20% -0.30% 9:30 GBP U.K. Industrial prod'n Y/Y Oct -5.20% -3.20% -2.20% -2.90% 9:30 GBP U.K. Manufacturing prod'n M/M Oct -1.40% -0.60% -0.80% -0.90% 9:30 GBP U.K. Manufacturing prod'n Y/Y Oct -4.90% -3.20% -2.30% -3.10% 10:00 EUR Eurozone ZEW Economic Sentiment Dec -46.1 -59 -54 10:00 EUR Germany ZEW Economic Sentiment Dec -45.2 -55 -53.5 14:00 CAD BOC rate decision Dec 1.75% 2.25% 15:00 USD U.S. Pending home sales Oct N/A 89.2M 15:00 USD U.S. Pending home sales M/M Oct -3.00% -4.60%