09.05.2014 - The ECB intends to fight deflation

Major U.S. indexes have slightly changed by the results of yesterday's trading session. The greatest support for the market was provided by the growth of stocks of the technology sector, as well as the positive statistics on the labor market in the United States. Thus, the number of initial claims for unemployment benefits dropped to 319 thousand, against the forecast of 326 thousand. Today the course of trading may be affected by the data on wholesale inventories and the number of open vacancies on the U.S. labor market (14:00 GMT). The corporate reporting season in the U.S. will be over soon and will be less drivers for growth. We maintain a long-term negative outlook on the U.S. market.

The price of euro after a sharp rise yesterday dropped significantly on the background of speech of the head of the ECB, Mario Draghi, who announced its readiness for the introduction of additional measures to fight deflation in June. He also noted the slow pace of economic recovery, the need to fight low inflation amid strengthening of the euro and the possible negative impact of geopolitical risks for the euro area. Today the course of trading will be affected by data on trade balance of Germany (06:00 GMT). We expect further downward price movement of euro and forecast that price will not get back to the levels of the nearest local maximums over the coming months.

On Monday, we should pay attention to the results of the G-7 meeting, on which again will be talking about the sanctions against Russia, as well as the report on the b

The price of the British pound continued downward movement on the background of the fact that the monetary policy of the Bank of England remained unchanged, while the house price index fell in April by 0.2% vs. expected growth by 0,8%. In addition, the reason for the decline was the strengthening of the U.S. dollar. Today, we expect increased volatility after the release of data on the trade balance and industrial production in the UK (8:30 GMT). We maintain a long-term positive outlook and expect the resumption of growth of the pound.

The price of the Japanese yen continued to grow, despite the strengthening of the U.S. dollar amid positive data on the labor market. The course of trading today will be affected by data on the index of leading economic indicators in Japan, and on Monday we should pay attention to the data on the balance of payments of Japan. Increased demand for the yen is explained by high level of geopolitical tensions, which increases interest in defensive assets such as the yen. We expect the resumption of growth of USD/JPY, after stabilization of the situation in Ukraine and maintain medium and long term positive outlook.

The price of the Australian dollar corrected after the strong growth caused by positive data on the labor market, that was published yesterday. The reason for the decline was the release of minutes of the meeting of the Reserve Bank of Australia, which included the inflation and GDP growth at 3.0%, and also indicated the resumption in the housing market and a slowdown in the mining sector, which is the key one to country's economy. We look forward to continuing the downward movement and maintain a medium-term negative outlook for the Australian dollar.

The price of the New Zealand dollar slowed the decline after the growth in volatility this week. We expect stabilization of the market and an upward price correction. Further price movement will depend on the situation on the food market - a key export commodity group of the country. We expect the price correction in the near future.

The price of Light sweet crude oil rose on data on the growth of oil imports by more than 20% in China, compared to the same period last year. We recall that China is the second largest oil consumer in the world after the United States. In addition, the Libyan rebels claimed on the further blocking of ports in Libya that support high oil prices. Despite the appeal of Vladimir Putin to the separatists in eastern Ukraine to postpone the referendum on the independence of the region, the situation is quite tense and conflict escalation is expected this weekend. We maintain a long-term negative outlook, but do not exclude the price increase on rising geopolitical tensions in the world.

The price of gold continues to consolidate around the mark of 1290 dollars per troy ounce. Investors decided not to be active before the weekend in the expectation of new clashes in Ukraine. In the long term, the support for gold prices could have a softening of monetary policy of the ECB, as well as a decrease on the stock markets. We expect the resumption of growth of price of gold and maintain medium and long term positive outlook.

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