06.10.2014 - The US dollar has strengthened greatly on Friday
The price of euro accelerated decline on Friday after the release of positive statistics on the labor market in the United States. Thus, the dollar strengthened against reduction of unemployment by 0.2% in September to 5.9%. The number of jobs in September rose to 248 thousand, against the expected growth to 216 thousand. Data from Eurozone was mixed. So, on the one hand the service PMI fell to 52.4, which is 0.4 worse than the forecast, but on the other - retail sales unexpectedly raised by 1.2% in August, against the expected growth of only 0.1%. Today we should pay attention to the statistics on industrial orders in Germany (06:00 GMT), the retail PMI (08:10 GMT) and the index of investor confidence in the Eurozone (08:30 GMT). Taking into account that the target level of 1.25 was reached, we expect the price correction in the near future, but keep medium-term negative outlook with the target at 1.22.
The British pound fell sharply on Friday amid strengthening of the dollar after the publication of data on the labor market in the United States. In addition, data on the UK service PMI showed a decline to 58.7, which is 0.4 worse than analysts' forecasts. Today, we expect a low price volatility and correction. Tomorrow will be an increase in volatility caused by the statistics on industrial production in the UK, and on Thursday will be published a statement of the Bank of England. We expect a further reduction in the price of the British pound, but in the coming days may see an upward correction. Growth resumed amid speculations on raising interest rates.
The Japanese yen fell sharply against the US Dollar amid its strengthening against other major currencies. The reason for the decline was the positive data on employment and the labor market of the world's largest economy. Tomorrow we can expect increased volatility due to the application of the Bank of Japan on monetary policy, as well as the publication of data on the index of leading economic indicators for August. Investors expect from the Bank of Japan further steps to support the economy because of the deterioration of the data after the rise of the sales tax to 8% in April this year. Our medium-term view on the yen remains negative and we expect a further decline in the medium term.
The price of the Australian dollar stopped falling near the level of the previous local maximum. The sharp decline in the price of the Australian currency was due to the strengthening of the dollar. Today we can see the price fixing after a strong decline. Tomorrow is expected the increase of volatility on the decision of the Reserve Bank of Australia and its statement on monetary policy. We predict that the RBA traditionally will note the need for further reduction of the price of the Australian dollar and maintain a medium-term negative outlook.
The New Zealand dollar has stabilized around the level of the nearest minimum of 0.7760 and probably will stop the downward movement. The reasons for the downward momentum of the national currency of the country are strengthening of the dollar and weak data on the trade balance of the country, deficit of which in recent months was caused by the decrease in prices for export products of the country. It is worth recalling that agricultural products and raw materials are the main export product groups in New Zealand. We maintain a medium-term negative outlook and recommend holding short positions on the New Zealand dollar.