Contrary to expectations, none of the yesterday’s events, including disclosure of some insights about the new tax reform, created an impulse strong enough to force the pair to make a breakout from the rectangle pattern.

Moreover, expectations of the upcoming release of information about the state of the American labour market led to formation of a minor symmetrical triangle pattern.

After making a breakout from the falling wedge formation, the yellow metal was expected to continue the surge at least until the clash with 200-hour SMA. However, a plunge in Euro amid the ECB meeting led to downfall of the exchange rate. As a result, it has finally slipped below the weekly S1 located at the 1,269.58 mark.

This year the Euro zone economy expanded at a strong pace. Do you expect the ECB to start tapering anytime soon or not?

We do expect the October announcement to reveal that the ECB is extending its QE program into the next year, however, at a slower pace, which the ECB itself does not describe as tapering. We would call it a rescaling or recalibration. But overall we do think that conditions are met for asset purchases to be slowed and eventually terminated by the end of the next year.

Some analysts suggested that the strong Euro had a little impact on trade between the EU and the major economies. Do you agree with the statement?

The British Pound had a very challenging trading session yesterday. Due to comments made by the EU Chief Negotiator Michel Barnier about a "deadlock" in Brexit negotiations the Sterling lost 116 basis points against the Greenback just in couple of hours. Despite a release of better than expected US Core PPI data, traders managed to return the pair to the pre-fall 1.3250 level.

In the first half of this trading session the currency rate is expected to test a resistance near the 1.3290 mark. However, whether the cable will manage to soar and bypass the 1.3300 level or fall back to the 200-hour SMA near 1.3192 will depend on release of data about the US CPI and retail sales, which, in turn, will have major implications on decision about the need of another interest rate hike this year.

In first half of the day the pair continued to move, as expected. However, a speech delivered by Governor Powell created a favourable impulse for the buck and elevated it against the Yen by 0.36% just in couple of hours.

The fact that the pair did fall below the 112.40 level and made a rebound additionally confirms that it is moving in a medium-term ascending triangle.

Latest reports revealed that the Consumer Price Index for July remained at about the same level it was seen back in June, when it was reported to have increased 1.2% y/y/. Is it reasonable to expect a higher inflation in the next quarter?

Yes, we do see inflation in Canada grinding higher in the next 3-6 months, though it is going to be a slow track up to the bank’s 2% target. Some of the weaknesses has occurred due to temporary factors that are likely going to reverse to some extent in the nearest future. At this point, we continue to believe that the economy is operating at a relatively high level and that the growth will create modest inflation pressure.

In result of combination of technical factors and fundamental events, the currency pair made a turn around and broke though the bottom boundary of a previously dominant ascending channel.

From technical point of view, the rate encountered a resistance level formed by the monthly R2 at 112.54 and the upper boundary of a long-term falling wedge.

Analysts warned that UK’s economy will most likely downgrade this year. In your opinion, how long will it take for the UK economy to stabilise?

I would suggest that it depends on exactly what we mean by stabilise; in my opinion, growth is rather to be stable for the next few quarters, but it will still hold at a relatively low level. If we look at the GDP growth in the second quarter, it was 0.3%, slightly higher than in the first quarter. My current view is that the GDP will probably hold at the same level during the H2 of this year and in 2018 as well. Growth will be relatively stable, but again, stable at a relatively low level.
If you ask me when do we think that growth will be turned to a certain trend rate of growth, which is probably closer to 0.5% a quarter, then we do not think that this is likely to happen anytime soon; maybe in the H2 of 2018 at the earliest.