01.10.2014 - Inflation in the euro area continued to decline
The price of euro continued to decline due to the publication of data in the euro area and the United States. Thus, the unemployment rate in the euro area remained at 11.5% in August. Reason for the decline was the statistics on the consumer price index, which fell to a five-year low and totaled to 0.3% in September, against 0.4% in August. On this background increased the likelihood of additional actions of the ECB to deal with deflationary risks. Weaker-than-expected data on consumer confidence in the United States, which fell to 86.0, compared with an expected 92.2 and slowing of growth in house prices in 20 major cities in the United States to 6.7% in July, against the forecast of 7,5%, could not lead to an increase of euro. Today we should pay attention to the data on the manufacturing PMI in Eurozone (08:00 GMT) the USA (14:00 GMT), statistics on the construction expenditures in the United States (14:00 GMT) and the labor market (12:15 GMT). We maintain a medium-term negative outlook for the euro.
The British pound continued to fall, despite the indicators of GDP growth in the second quarter by 0.9%, compared with an expected increase of 0.8%. The report stated that the growth in 2014 is expected to reach about 3.5%, which is the maximum value in 10 years. The reason for the fall, which compensated the positive statistics on GDP has been increasing balance of payments deficit in the second quarter to 23.1 billion against the expected reduction to 16.9 billion. Today, the course of trading may be affected by the data on the country's manufacturing PMI (08:30 GMT). Downside potential is minimal and we expect the resumption of upward price movements in the medium term.
The Japanese yen continued its gradual decline amid ambiguous statistics on Tankan manufacturing index, which rose to 13 in the 3rd quarter, compared with an expected reduction of to 10. The services Tankan index fell to 13, which is 4 worse prognosis. Demand for the yen is supported by protests in Hong Kong and the military actions in Iraq, Syria and Ukraine. Waiting for new stimulus from the Bank of Japan and Federal Reserve policy tightening lead to further devaluation of the Japanese yen. We maintain a medium-term negative outlook for the yen.
The Australian dollar continues to fall. The reason for the continuing devaluation has become weak macroeconomic data. Thus, retail sales in August rose by only 0.1%, compared with an expected growth of 0.4%. At the same time the country's manufacturing PMI fell to 46.5 in September, against 47.3 in August. Value below 50.0 indicates a slowdown in the sector. Considering these factors and the low prices for export goods such as iron ore, gold and other commodities, we keep the medium-term negative outlook and recommend holding short positions on the Australian dollar.
The New Zealand dollar has stabilized around the level of 0.78 and continues to consolidate around this mark. Reason for the decline remains weak data on the trade balance of the country, as well as the policy of the Reserve Bank of New Zealand aimed at weakening national currency due to the low prices for export products. The main risk to the New Zealand economy is the slowdown in China, which is a major trading partner of the country. We maintain a medium-term negative outlook for the New Zealand currency.