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Chinese monetary policy announcement spells good news for forex markets

Tuesday’s forex market was dominated by news that China may re-consider its current monetary policy stance.

A business newspaper owned by the government-operated Xinhua News Agency claimed that while China was planning to persist with its current overall monetary policy, it would look at ways in which it could promote deleveraging in the face of ongoing problems – like the imposition of billions of dollars’ worth of US tariffs.

While the exact details of the plans are unclear, they represent a shift in Chinese monetary policy thinking.

However, despite the announcement, the yuan only managed to consolidate at around 6.8 per US dollar, which represents just a marginal rise.

There was plenty of action in the European forex market yesterday, too.

The Euro found itself restricted to the 1.1655 to 1.1715 range on Tuesday after it faced a variety of problems.

This was in part the result of a disappointing set of PMI, or Purchasing Managers’ Index, which measures management confidence levels in a variety of industries, figures for the whole Eurozone market. Despite the figures for Germany as an individual country being positive, the overall statistics were a little less upbeat.

Despite European manufacturing PMI levels hitting 55.1, over and above the 54.6 level which was expected, the service sector statistics dragged down performance. They came in at 54.4 compared to the 55.0 expected, compared to a prior level of 55.2.

The European Union managed to dominate other aspects of the forex markets yesterday thanks to ongoing debates around Brexit in the United Kingdom.

Dominic Raab, who British Prime Minister Theresa May appointed as Brexit Secretary following the resignation of the previous incumbent during a highly charged period of political drama, made comments yesterday predicting that it might be tough to come to a deal by the time the UK leaves next March.

The news came on the same day that May announced her office would be taking personal control over the ongoing Brexit negotiation process from Raab’s department.

However, the impact of these political developments were outweighed by a fresh prediction from BOEWATCH that the Bank of England will push up interest rates by a significant amount.

This led to the pound letting go of its other troubles and achieving double top resistance of 1.3140/50.

Looking ahead to the rest of the week and into next week, there are plenty of events marked on the calendar for forex traders to watch out for.

Thursday sees a range of major European data releases on the cards, including a consumer confidence survey release in Germany which will be of particular interest to traders following the relatively positive PMI data from the country that came out earlier this week.

Also, Thursday will be the release date of a French consumer confidence dataset from July, while Italy will reveal both consumer and business confidence data as well.

Across the Atlantic, Friday will see a release of the Gross Domestic Product Price Index for the second quarter of 2018 in the USA.

Into the next week, Monday will see the release of data on British mortgage approval rates and consumer credit, while in the USA there will be pending home sales information released in the afternoon.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.


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