After the last Mark Carney's speech, the ideas of increasing British rates got a new impulse. Investors, who have been waiting for bullish market in pound, moved their expectations from August of the previous year, at least, to the month of May. The transfer of the date caused redistribution of investment funds from euro to pound and EUR/GBP pair dropped to its 7-year minimum, practically ingoring a strong option barrier at 0.7. The FRS winding path to rate increase forces to a new assessment of what has been going on in Britain. Attention should be paid not to the date of the first increase but rather to the speed of increase. If the historical average rate of the bank of England is 4.5%, then 2.5% by next summer it will be even slower than required. So, we will have to wait until Europe slightly calms down from Greek series and let's have a close look at MPC November and February meetings. Bulls ignore weak statistics on unemployment levels (5.6%) as market noise, and trading in pound is recommended: purchases GBP/JPY(1.34) and GBP/CHF (1.52-1.53) and sales EUR/GBP with the target of 0.67.
We rarely pay attention to Canadian dollar; however, last week, it made active speculators happy: at the beginning of the year, the regulator already made interventions into the rates in the midst of drastic decline of oil prices, and this time, history repeated itself, however, with complements. This step does not look positive today. The Canadian economy is pressurized by its neighbors: by American real estate market and weak GDP. The current decision to reduce the rate was influenced by weak national results for the 1st quarter and bad prediction for the nearest months (GDP decline for the 2nd quarter by another 0.5% and growth by 1.8% for the 3rd are expected). If that does not materialize, we will need to get ready for another rate reduction - however, not earlier than this October. On the forward market, speculatively large shorts in USD/CAD pair increase the danger of periodoc downfalls, therefore, it is recommended to close open longs partially in case of upward movement and open new only in case of mid-term adjustment to 1.2970/1.2930/1.2900. The growing trend has not been abandoned yet; however, it is strongly dependent on oil prices.
Dollar consolidated at 3-month minimum against all basic currencies. That puts pressure on American inflation (modest growth in June by 0.1% y/y) along with weak salary dynamics. Consumer prices continue to serve as a restraining factor for FRS. The raw materials market is expecting the Congress's difficult decision regrading approval of agreement with Iran. Yellen's speech does not eliminate expectations regarding rates during this year; however, the European crisis in the package with the Asian stock crisis, as well as the dynamics of American inflation may give FRS a multitude of variants for justification of further delay of any important decisions.