Dollar is getting some support from solid data in early US session. Headline retail sales rose much more than expected by 2.7% in August, with ex-auto sales also rose strongly by 1.1%. Empire state manufacturing index rose to two year high of 18.9 in September and beat expectation of 14. PPI rose 1.7% mom in August with core PPI up 0.2% mom. On the other hand, Yen is mildly lower on anticipation of positive start in US stocks.
Sterling was knocked down by comments from BoE Governor King during the European session. In his testimony to Treasury Committee, King said that he's considering cutting reserve deposit rates as a useful supplement to monetary policy. Sterling was lifted by better than expected housing and inflation data earlier today but reversed after King's comment. EUR/GBP soared through 0.8837 resistance to resume recent rally.
Data from UK were solid but provided little support to the pound. RICS house price balance showed the first positive reading of 10.7% since July 2007, meaning that respondents to the survey who said price rose in August out-numbered those who reported decline by nearly 10.7%. DCLG house price index also dropped less than expected by -8.3% yoy in July. Headline CPI rose 0.4% mom, 1.6% yoy in August, above expectation of 0.3% mom, 1.4% yoy. Core CPI was unchanged at 1.8% yoy versus expectation of a drop to 1.6%.
Also released today, Germany ZEW investor confidence rose to three year high of 57.7 in September but fell short of expectation of 59.9. On the other hand, Eurozone ZEW rose much more than expected to 59.6. Euro remains range bound against dollar and yen.
RBA minutes released overnight said the committee members were conscious of the need to balance the task of controlling inflation over the medium term with that of supporting economic recovery considering relative high underlying inflation and substantially stronger than expected economic activity. The balance was best struck by leaving the cash rate unchanged for the time being. Global economy is expected to be on a sustained, if modest, recovery path, though it was still too soon to be confident of this assessment. After all, the minutes hinted that RBA is no rush to start tightening again.
EUR/GBP Mid-Day Outlook
Daily Pivots: (S1) 0.8727; (P) 0.8742; (R1) 0.8762; More.
EUR/GBP rises strongly after brief pull back and the break of 0.8837 resistance confirms that whole rise form 0.8454 has resumed. Intraday bias is now on the upside and further rise should be seen to 38.2% retracement of 0.9799 to 0.8399 at 0.8934 first. Break will target 61.8% retracement at 0.9264 next. On the downside, below 0.8827 minor support will turn intraday outlook neutral first. But pull back should be contained above 0.8722 support and bring rally resumption.
In the bigger picture, as discussed before, correction from 0.9799 has likely completed with three waves down to 0.8399 already. Sustained trading above medium term falling trend line resistance will affirm this case and bring strong rally which should send EUR/GBP through 0.9799 high eventually. On the downside, below 0.8652 will suggest that rise from 0.8454, as well as that from 0.8399 has completed. The corrective structure will in turn argue that another low below 0.8399 would be seen before EUR/GBP bottoms out. Nevertheless, even in such case, downside should be contained above 0.8186/8234 key cluster support zone (38.2% retracement of 0.5680 to 0.9799 at 0.8223) to complete the correction.