05.11.2015 - The probability of the Fed raising interest rates is rising
Currency trading and the euro. The price of euro fell yesterday after the release of strong statistics and statements by Fed chief Janet Yellen on a possible increase in interest rates if macroeconomic indicators will meet expectations. A strong incentive for a stronger dollar also has become data on a non-production PMI in October, which rose to 59.1, compared with an expected decline to 56.6. Today, the dynamics of trading will affect the European Commission economic forecasts and statistics on retail sales in the Eurozone (10:00 GMT), as well as the number of initial applications for unemployment insurance in the US (13:30 GMT). Our medium-term outlook remains negative and we are waiting for Friday's report on the US labor market, which strongly influence the dynamics of trade in the near future.
Currency trading and the British pound. The price of the British pound fell against the strengthening of the US dollar, despite strong data on service PMI in the UK that increased to 54.9, which is 0.5 better than expected. Today, the central event of the day will be the publication of the quarterly report of the Bank of England on inflation and the minutes of meetings of the Bank of England (12:00 GMT). Investors will hold back waiting for the important report on the US labor market statistics and trade balance and industrial production of Great Britain. Our medium-term outlook remains negative,
Currency trading and the Japanese yen. The price of the Japanese yen declined due to increased probability of the Fed raising interest rates in December and the possible easing of monetary policy in Japan. The minutes of the previous meeting of the Bank of Japan noted uncertainty about the future growth of the Chinese economy. Following the recent decline of the yen, quotes will probably stabilize in anticipation of statistics on unemployment in the US tomorrow. Our medium-term outlook for the yen is a negative.
Currency trading and the Australian dollar. The price of the Australian dollar continued to fall after the speech of the head of the Reserve Bank of Australia Glen Stevens on the possibility of further reduction in interest rates if necessary. Previously, the growth of quotations of the national currency of Australia was supported by the RBA rhetoric that points to an improved outlook for economic growth. Tomorrow will be published the RBA’s report on monetary policy, but strong price movement is expected after the release of data on the US labor market. We expect falling prices in the medium term and recommend holding short positions.
Currency trading and the New Zealand dollar. The price of the New Zealand dollar has accelerated the fall yesterday due to the strengthening of the US dollar and today after stabilization is likely to consolidate around current levels or show a slight drop. Activity of investors will be deterred by the expectation of a report on the US labor market, which will be released tomorrow. The weak performance of the labor market and inflation in New Zealand stimulates RBNZ to lower interest rates, which will be negatively displayed on the New Zealand dollar in the medium term. We do not exclude correction of price, but recommend to keep short positions.