05.08.2014 - Market volatility remains low

The price of euro yesterday continued a gradual decline amid investors' attempts to determine further price movement. Mood of traders has improved due to the message on providing the problem Portuguese bank Banco Espirito Santo with 6,6 bln. euro of financial assistance. On the other hand the index of investor confidence in the euro area fell to 2.7 in August, against 10.1 in July. Reason for the decline of the index has become sanctions against Russia, which have a negative impact on the economic performance of the euro area. Today, trade dynamics will depend on retail sales in the euro area (09:00 GMT), non-manufacturing PMI and factory orders in the United States (14:00 GMT). We expect low volatility today and maintain a medium-term negative outlook for the euro.

The price of the British pound yesterday corrected upwards after a strong decline in the previous week. In addition to technical factors, the British currency was supported by strong data on the construction PMI that has shown growth in the sector for 15 consecutive month and was 62.4, compared with an expected 62.1. Today the course of trading will be affected by the news on service PMI (08:30 GMT) and data from the United States. Investors accumulate long positions and wait for statement of the Bank of England on Thursday. We maintain our positive medium-term outlook and expect continued growth today.

The Japanese yen continues to trade at the same levels, despite the weak statistics of the United States and the growth of the monetary base in Japan to 42.7% in July, against 42.6% in June. Increase in volatility is expected tomorrow after the release of data on the index of leading economic indicators in Japan. On the other hand the demand for the Japanese yen weakened due to the fact that investors have got used to geopolitical risks. We expect continued devaluation of the yen in the medium term.

The Australian dollar yesterday continued a gradual increase, which was supported by data on retail sales growth by 0,6%, which is 2 times better than expected. Also today, was released the data on the trade balance of the country, deficit of which in June fell to 1.68 billion, against the forecast of 2.0 billion. The main attention of investors today will be turned to the statement made by the head of the Reserve Bank of Australia on monetary policy, in which again may hint at overvalued currency. We look forward to the resumption of the downward movement and maintain a medium-term negative outlook for the Australian dollar.

The price of the New Zealand dollar continues to rise gradually after steady reduction in the past weeks. Investors realize that despite the statements of the Reserve Bank of New Zealand, macroeconomic indicators are not strong enough. The potential for further reduction is limited and in the near future we will see a lower price volatility, but tonight the activity of traders can grow significantly after the publication of data on the labor market in New Zealand (22:45 GMT). We are waiting for new signals to determine future price movements.

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