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In a speech in South Africa today, BoE Chief Economist Huw Pill underscored the importance of seeing "the job through" to ensure a "lasting and sustainable return of inflation to the 2% target," highlighting the critical balance the bank must strike as it's now in the territory of restrictive policy.

Pill acknowledged the perils of "doing too much," and "inflicting unnecessary damage on employment and growth".

Nevertheless, the present emphasis, he noted, is on maintaining "sufficiently restrictive" policy for "sufficiently long" to assure a sustainable return to the inflation target, echoing the language used in the MPC's last statement.

Daily Pivots: (S1) 184.88; (P) 185.47; (R1) 186.66; More...

Intraday bias in GBP/JPY stays neutral as range trading continues. Price actions from 186.75 are viewed as a corrective pattern. Another fall could still be seen and break of 183.35 will turn bias to the downside for 55 D EMA (now at 181.57). Nevertheless, firm break of 186.75 will resume larger up trend.

In the bigger picture, up trend from 123.94 (2020 low) is in progress. Next target is 195.86 (2015 high). This will remain the favored case as long as 176.29 support holds, even in case of deeper pull back.

Daily Pivots: (S1) 158.95; (P) 159.36; (R1) 160.17; More....

EUR/JPY's breach of 159.47 argues that larger up trend is resuming. But intraday bias is turned neutral again with the retreat from 159.75. For now, further rally is in favor as long as 156.85 support holds. Above 159.75 will extend the rise from 163.06 projection level. Nevertheless, break of 156.85 will turn bias back to the downside for 55 D EMA (now at 156.20) and possibly below.

In the bigger picture, rise from 114.42 (2020 low) is in progress. Next target is 100% projection of 124.37 to 148.38 from 139.05 at 163.06. Sustained break there will pave the way to retest long term resistance at 169.96. This will remain the favored case as long as 151.39 support holds, even in case of deep pull back.

Daily Pivots: (S1) 0.8578; (P) 0.8594; (R1) 0.8603; More...

Intraday bias in EUR/GBP is turned neutral again with current retreat. Overall, while further rally could be seen, near term outlook will stay bearish with 0.8667 resistance intact. On the downside, below 0.8559 minors support will turn bias to the downside for retesting 0.8491 low first. Firm break there will resume larger down trend.

In the bigger picture, the down trend from 0.9267 (2022 high) is seen as part of the long term range pattern from 0.9499 (2020 high). Further decline is in favor as long as 0.8667 resistance holds. Break of 0.8502 will resume the fall towards 0.8201 (2022 low).

Daily Pivots: (S1) 1.6794; (P) 1.6834; (R1) 1.6909; More...

Intraday bias in EUR/AUD remains neutral for the moment. Further rise is mildly in favor as long as 1.6737 support holds. On the upside, break of 1.7062 resistance will resume larger up trend to 1.7377 projection level next. However, firm break of 1.6737 will bring deeper pull back to 1.6601 resistance turned support instead.

In the bigger picture, the rise from 1.4281 (2022 low) is in progress. Next target is 100% projection of 1.5254 to 1.6785 from 1.5846 at 1.7377. For now, outlook will stay bullish as long as 1.5846 support holds, even in case of another pull back.

Daily Pivots: (S1) 0.9562; (P) 0.9580; (R1) 0.9614; More...

EUR/CHF failed to sustain above 0.9599 resistance after breaching it briefly. Intraday bias remains neutral first. On the downside, firm break of 0.9513 will resume larger down trend from 1.0095, towards 0.9407 low. Nevertheless, firm break of 0.9599 will bring stronger rise to 0.9646 resistance next.

In the bigger picture, medium term outlook is staying bearish as the pair is capped well below falling 55 W EMA (now at 0.9829). Down trend from 1.2004 (2018 high) is in favor to continue. Sustained break of 0.9407 will target 61.8% projection of 1.1149 to 0.9407 from 1.0095 at 0.9018. For now, this will remain the favored case as long as 0.9670 support turned resistance holds, in case of strong rebound.

Market picture

The crypto market is cooling after a surge in buying on the 29th, losing 0.8% over the past 24 hours to $1.085 trillion, but still almost 4% higher than before the jump. Crypto Fear and Greed Index has returned to neutral territory after a week and a half of wandering in “Fear”.

Bitcoin briefly dipped to $27K on Wednesday, about half of its initial jump from $26K to $28K and back below its 200-day and 200-week averages, despite the increased traction of risk in traditional markets. From the looks of it, the decisive trend battle won’t come until Friday evening at the earliest, with consolidation around current levels all the way through.

XRP has performed worse than the cryptocurrency market over the past few days, having erased almost all gains of its latest leap. On a weekly timeframe, long-term support appears to have been taken over by the 200-week average (now $0.516). A fortnight ago, the sell-off stopped at the 50-week average ($0.457). Both curves are well above the multi-year uptrend line, which now runs through $0.39. This dynamic could attract more speculators soon, with an upside potential of $0.60 or even $0.80.

News Background

According to Raul Pal, founder of Real Vision, ongoing Bitcoin consolidation could well end with a powerful spike. According to him, BTC is growing exponentially after periods of low volatility.

Bloomberg Intelligence suggests that stablecoins will be more popular than BTC in the short term.

Company X, formerly known as Twitter, has obtained the necessary licence to provide cryptocurrency payment and trading services in the US. This is a positive sign for the future of crypto on the platform.

BlackRock has invested over $400 million in the shares of four mining companies, making it one of the largest lobbyists for the Bitcoin industry in the US.

During the SEC’s case against Binance, the regulator filed a sealed motion containing 35 exhibits, a statement from the agency’s trial counsel and a proposed order. The commission did not want the data submitted to the court to be made public, a rare occurrence according to legal experts.

The US Congress has proposed firing the head of the SEC following a court ruling that found Grayscale’s refusal to create a bitcoin ETF illegal.

• New Zealand business confidence rises
• ADP Employment Change falls to 177,000

The New Zealand dollar is almost flat on Thursday, trading at 0.5958 in Europe.

New Zealand Business Confidence improves again

New Zealand’s ANZ Business Confidence index accelerated for a fourth straight month in August. The index improved to -3.7, up from -13.1 in July. Business Confidence has been in negative territory for 26 consecutive months, but the August print was the highest since June 2021. The consensus estimate stood at -1.9 and the New Zealand dollar didn’t react. If the upswing continues, we should see a positive reading in the next month or two, which would be a milestone and likely give a boost to the New Zealand dollar.

The business confidence report noted that inflation expectations dipped very slightly, from 5.14% to 5.06%. This is clearly incompatible with a 2% inflation target but the key question is whether the Reserve Bank of New Zealand will pause for a third straight time in October, in the hope that the benchmark rate of 5.50% will further cool the economy and push inflation lower.

The RBNZ doesn’t meet until October 4^th, with only one tier-1 event prior to the meeting, which is GDP on September 20th. The central bank will also be keeping a close eye on events in China, where the economy has been deteriorating. On Thursday, China’s Manufacturing PMI rose in July to 49.7, up from 49.3 in June, but this marked a fifth straight contraction.

In the US, the markets await the non-farm payrolls release on Friday. The ADP employment report fell sharply to 177,000, down from an upwardly revised 371,000 and shy of the estimate of 195,000. The ADP release isn’t a reliable precursor to nonfarm payrolls but still attracts attention as investors hunt for clues ahead of the nonfarm payrolls release. The markets are expecting nonfarm payrolls to fall to 170,000 in August, compared to 187,000 in July.

NZD/USD Technical

• There is support at 0.5927 and 0.5866
• 0.5968 is a weak resistance line. Above, there is resistance at 0.6029

ECB Executive Board member Isabel Schnabel said in a speech that despite decline in headline inflation, largely due to unwinding of previous supply-side shocks, "underlying price pressures remain stubbornly high," with domestic factors now becoming the main drivers of inflation.

Given this backdrop, Schnabel emphasized the necessity of maintaining "sufficiently restrictive monetary policy" to steer inflation back to target. She advocated for a data-dependent approach, stating that the bank will continually assess whether current policy is effective in ensuring "a sustained and timely return of inflation to our 2% target."

To guide this assessment, Schnabel pointed to the need for a comprehensive risk analysis that looks beyond baseline inflation forecasts. This approach accounts for an "exceptionally large degree of uncertainty" in medium-term inflation projections, with risks on both the upside and downside.

Upside risks include stronger-than-expected growth in unit labor costs, firmer corporate pricing power, and the potential for new adverse supply-side shocks. Conversely, downside risks include possibility that impact of current monetary policy may become more pronounced over the medium term.

Notably, Schnabel also raised the issue of real risk-free rates, which have declined recently as investors reassess their expectations for economic growth and inflation. She warned that this decline could potentially "counteract" the ECB's efforts to control inflation effectively.

Full speech of ECB Schnabel here.

In a set of prepared remarks, Atlanta Fed President Raphael Bostic noted emphasizing that the current restrictive stance is appropriate. He urged for a cautious and patient approach, warning against the potential for "unnecessary economic pain" if the Fed tightens policy too aggressively.

Importantly, Bostic clarified that his endorsement for a patient approach should not be interpreted as support for easing monetary policy in the near term. He stated, "that does not mean I am for easing policy any time soon."

He argued that Fed must remain "resolute" in keeping policy tight until it is clear that inflation is moving towards the 2% target within a reasonable time frame. "I believe policy is already restrictive enough to get us there," he added.

Full remarks of Fed Bostic here.