01.08.2014 - Manufacturing in China has shown the results worse than expected

The price of euro yesterday continued to consolidate below the level of 1.34. Strengthening of the dollar after positive data on GDP growth continues to support the demand for dollar. Yesterday the course of trading of the euro was affected by the data on inflation in the euro area, which in July fell to 0.4%, against the previous figure of 0.5%. The largest price decrease was recorded for energy, the value of which fell by 1.0%. The positive news was the data on unemployment in the euro area, which fell by 0.1% to 11.5%, but still remains at a high level. Today, we expect increased volatility due to the release of data on the labor market, personal spending and income of consumers (12:30 GMT) and the index of consumer confidence in the United States (13:55 GMT). On Monday, the report will be published on an index of investor confidence and the producer price index in the euro area. We expect a further fall in the price of the euro against the American dollar.

The price of the British pound yesterday accelerated decline but at the moment corrected upwards in anticipation of the release of data on manufacturing PMI in the UK (08:30 GMT) and statistics on the labor market in the United States (12:30 GMT). Yesterday, the reason for the price drop was the strengthening of the American currency, as well as reducing the growth rate of housing prices up to 0.1% in July, which is 0.5% worse than the forecast. On Monday, we should pay attention to the data on the construction PMI. Today the price decline of the pound may continue, but at the end of the day, we can see the fixation of positions before the weekend. Despite this, the medium-term outlook remains positive.

The fall of the yen has stopped. On the one hand the statistics on manufacturing PMI showed a decline of the indicator in July by 0.3 to 50.5, on the other hand, the demand for yen is supported by a tense geopolitical situation in the world. In case of positive data on the labor market in the United States, we can see the continuation of the devaluation of the yen. Medium-term outlook also remains negative due to the tightening of monetary policy in the United States and its weakening in Japan.

The price of the Australian dollar today showed an increase after data on the growth of the manufacturing PMI to 50.7 in July, against 48.9 in June, indicating a tendency change and growth in the economy. Increase in prices of the Australian currency ceased after the same indicator was released in China, which showed a decline by 0.3 in July, versus 52.0 in the previous month. Further price movement will depend on the data on the labor market in the United States. We maintain a medium-term negative outlook for the Australian dollar with the objectives of 0.92 and 0.89.

The price of New Zealand dollar has stopped the downward movement and now is consolidating around the level of 0.85. Possible continuation of upward correction was stopped by weak data on the manufacturing sector in China, which is the main trade partner of the country. Increase in volatility is expected today after the release of data on unemployment in the United States. Obviously the potential of descending movement of the New Zealand dollar has dropped significantly and in the near future, we may see an upward correction. To determine the movement of prices in the medium term, we need additional signals.

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