02.10.2014 - Dynamics of trade of the euro will depend on the speech of Mario Draghi
The price of euro stopped falling after the next strong level of 1.26. Negative for investors was the news on the euro zone manufacturing PMI, which fell in September to 50.3, which is 0.2 worse than analysts' expectations. It is worth noting that a similar rate in Germany fell to 49.9, while in France rose to 48.8, indicating the decline in the sector. The reason for the start of the euro price correction in the second half of the day were weak data from the United States, where the manufacturing PMI in September unexpectedly fell to 56.6 compared with an expected 58.6, while construction spending fell by 0.8% in August, despite expectations of rise by 0.5%. Today, in the focus will be a press conference of Mario Draghi at which he will announce the decision of the ECB on the monetary policy (12:30 GMT). We maintain a medium-term negative outlook for the euro and recommend holding short positions with targets at 1.25 and 1.22.
The price of the British pound has stabilized after a decline on weak data on the manufacturing PMI in the UK, which fell to its lowest level since April 2013 and was 51.6, which is 1.0 worse than the forecast. The weakening of the dollar resulted in upward correction of the British pound. The reasons for the deterioration in the production in the UK have become weaker demand in the country and in the Eurozone. Today, the focus will be on the data on construction PMI (08:30 GMT). The weakness of the euro area economy continues to put pressure on the pound quotations, but despite that, according to our estimates, the British pound will rise in the medium term.
The price the Japanese yen greatly strengthened today in connection with the correction and the weakening of the American currency. It is worth noting that the reason for the decline was the tightening of monetary policy and the Federal Reserve weakening of growth rate in China. Despite this growth in demand for the yen as a defensive asset increased in connection with the pro-democracy protests in Hong Kong, where the number of demonstrators reaches 200 thousand people. Today it became known that the growth rate of the monetary base in Japan in September fell to 35.3%, which is 3.6% less than the forecast. Despite the correction, we expect a further weakening of the Japanese yen in the medium term.
The price of the Australian dollar started to correct upwards due to the weakening dollar and the release of statistics in the country. Thus, the positive news for investors became an increase in the number of permits for new construction in August by 3.0%, with an expected growth of 1.1%. At the same time in August, the trade deficit narrowed to 0.7 billion, against 1.08 billion in the previous period. Despite the corrective movement, we expect continued downward movement of prices in the medium term due to the weak statistics from China and low prices for export commodities. Our medium-term view remains negative.
The price of the New Zealand dollar, after a long consolidation started to correct sharply upwards against the strengthening of the Australian currency and the weakening dollar. Today in China is a day off, but tomorrow will be published important data on the non-productive PMI in the country. Corrective movement of the New Zealand currency may continue in the near future, but in the medium term, prices will probably fall due to objective reasons such as the growth of the trade deficit and low prices for exports of the country.