08.08.2014 - Geopolitical risk support the demand for yen
The price of euro yesterday continued to decline on a background of statistics on industrial production in Germany, which grew in June by 0.3%, with an expected growth of 1.7% and the growth of the trade deficit of France to 5.4 billion which is 0.4 billion, more than predicted indicator. The main event of the day was the speech of Mario Draghi who stated on keeping interest rate at 0.15%, continuing the economic recovery of the Eurozone at a moderate pace. According to the head of the ECB, inflation remains at a minimal level, unemployment is still high. The ECB will not change the parameters of monetary policy before will become clear the impact of actions adopted in June. Geopolitical risk currently is difficult to assess. Today the course of trading will be affected by the data on the trade balance of Germany (06:00 GMT) and wholesale inventories in the United States (14:00 GMT). We look forward to continuing the downward movement and maintain a medium-term negative outlook.
The price of the British pound continued to decline gradually as the Bank of England announced on keeping interest rate at 0.50% and the volume of asset purchases of 375 billion pounds. In addition, the dollar strengthened due to the decrease in the number of initial unemployment claims up to 289 thousand. Today, we expect increased volatility due to the release of data on the trade balance and the UK construction sector (08:30 GMT). Despite the current downward trend, we expect the resumption of growth and maintain a medium-term positive outlook.
The price of the Japanese yen continued to rise amid growing demand due to geopolitical confrontation between the West and Russia, and concerns about the invasion of Russia into Ukraine, as well as news on the resolution of the President of the United States of air strikes in Iraq. On Monday, we should pay attention to the indicators of consumer confidence and the tertiary index of business activity in the services sector in Japan. Geopolitical risk support the demand for yen and it will continue to strengthen, despite the growth of the dollar in the case of the maintenance of the current concerns about the situation in the world. Despite this, we maintain a medium-term negative outlook for the yen.
The price of the Australian dollar continued its decline against the dollar strengthening, as well as in connection with negative statistics on the labor market in Australia, which was published yesterday. We recall that investors have negatively perceived increase in the national unemployment rate by 0,4% to 6.4%. Positive data on China's trade balance, the surplus of which increased in July to 47.3 billion, against the forecast of 26.0 billion, was not able to stop the decline of the Australian currency. We recommend holding short positions and maintain a medium-term negative outlook with a 0.92 the objectives and 0.89.
The price of the New Zealand dollar continued to decline following the Australian currency, despite the positive data on China's trade surplus, which is the main trading partner of the country. Despite the statement by the Reserve Bank of New Zealand on currency overvaluation, we expect that in the near future the price drop will stop, and then we will need new signals to determine the further movement.