03.11.2014 - The yen fell to a minimum of 7 years
The price of euro continued to decline amid expectations of the ECB statement on Thursday in which according to our estimates will not be announced new measures to stimulate the economy, but will be announced the results of before running programs. The strengthening of the US dollar occurred against the strong data on manufacturing PMI of Chicago which rose to 66.2, which is 6.0 better than analysts' forecasts, as well as the consumer confidence index, which rose in October by 0.5 to 86.9. Today trading dynamics will depend on the statistics on the manufacturing PMI for October in the Eurozone (09:00 GMT) and the US (15:00 GMT). We should also pay attention to the statistics on construction spending in the US (15:00 GMT). Given the fact that the euro reached a two-year low and continues to decline, we maintain a medium-term negative outlook with the objectives of 1.22 and 1.20.
The price of the British pound remained virtually unchanged over the past few days, despite the strengthening of the US dollar against the background of positive data. The reason for the stability of the British currency was strong support level of about 1.60, near which the price is currently consolidating. The potential for further reduction of the British pound is limited by strong indicators on GDP growth and the unemployment rate of the country, which is steadily declining. Today it is worth paying attention to the data on the manufacturing PMI for October in the UK (09:30 GMT) and similar rates in the US and the Eurozone. Rising volatility is expected this week on Thursday after the publication of data on industrial production and statements of the Bank of England on monetary policy. We maintain a positive medium-term outlook for the British pound.
The Japanese yen continued a strong decline following a statement of the Bank of Japan on increase of the target volume of purchases of government securities to 80 trillion yen. The reason for such a move was the desire to accelerate the achievement of the inflation target of 2.0%, and the decision of the state pension fund of Japan to raise purchases of Japanese stocks to 25%, against 12% earlier and to reduce the amount of government securities from 60% to 40%. Today in Japan is the day off. We forecast that the yen will continue to fall in the medium term.
The Australian dollar fell sharply today, despite the growth of the country's manufacturing PMI to 49.4, against 46.5 in the previous period. It is worth noting that the index below 50.0 indicates contraction of the sector. Negative for investors was the data on reduction of building permits by 11.0% in September. It is worth noting that China's manufacturing PMI, which is the main trading partner of Australia remained at 50.4, indicating a weak growth in the sector. Tomorrow is expected the increase in volatility after the publication of data on retail sales, trade balance of Australia and the statement Reserve Bank of Australia on monetary policy. We maintain a medium-term negative outlook and recommend holding short positions.
The New Zealand dollar continued to decline after reduction of the Australian dollar against the background of weak data on the housing market in the country, and also because of the low rates of growth in the industry in China and the strengthening of the US dollar. Tomorrow night will be published data on the labor market in the country, which will lead to an increase in volatility. It is worth noting that at this point there is no reason for the negative trend in prices caused by weak data on the trade balance of the country. We maintain a medium-term negative outlook on the New Zealand currency and recommend holding short positions.