The rates continue within an uptrend. At the same time, in the second half of the year, a protracted price correction began as a result of the weakening of the pound and an increase in the demand for safe assets. In October there were hopes that this period is over. The pound began to recover actively: a rally started, which eventually lasted 13 trading days in a row, but this momentum was lost, and the pound began falling as quickly as it had been growing before.
This week, the reason for the fall of the pound was the disappointing results of the meeting of the Bank of England, which left the rate unchanged. Investors were confident in a rate hike because a number of officials, including the head of the Bank of England, were in favor of it. Nevertheless, we saw the continuation of the old stimulating monetary policy. At the same time, inflation continues rising both in the UK and in the EU, which puts pressure on the pound. Against this background, the report on the growth of the business activity index, as well as the growth in mortgage lending, which indicates the growing attractiveness of investment in the United Kingdom, was ignored on the foreign exchange market.
Meanwhile, the Japanese yen received additional support after the publication of the China business activity index, which turned out to be below the forecasts and remains in the alarming zone below 50 pips. On the contrary, in Japan business activity in the manufacturing sector increased to 53.2 pips. The household expenditure index, which is important for Japan, also turned out to be significantly higher than the forecasts. So in general, we can say that this week turned out to be more positive for the JPY. Will this positive trend continue in the future and is it worth waiting for a trend reversal in the near future?
Most technical analysis tools indicate the efficiency of the deals in favor of the JPY. Next week new data on inflation and the trade balance in China will be published. But of course, the focus will be on the report on Britain's GDP in the third quarter, as well as industrial production volumes. So, next week will be full of various macroeconomic reports. In the current situation, we consider as the most effective the deals to BUY, believing in the potential of the pound, and next week there will be a chance for the pound to continue its recovery on the way to the maximum reached in October.
