10.10.2014 - Demand for the yen continues to rise

The price of euro resumed its decline yesterday against the publication of data on the drop in exports in Europe's largest economy - Germany by 5.8% and imports by 1.3%, which had a negative impact on investor sentiment. In addition, Mario Draghi reiterated the readiness to stimulate the economy of the Eurozone, but noted that the problems in the region are not cyclical, but structural and called for reforms. At the same time, was published the forecast for GDP growth in the euro area, which has been reduced to 1.3% in 2014 and 1.2% in 2015, versus previous expectations of growth by 1.9% and 2.0%. Today we should pay attention to data on industrial production in France (6:45 GMT) and Italy (08:00 GMT). We maintain a medium-term negative outlook and recommend holding short positions.

The price of the British pound fell following the euro after the statement of the Head of the ECB on incentive programs in the region and the need for reforms. In addition, the dollar strengthened after the decline the day before and on the background of positive data on the labor market of the country, where the number of new unemployment claims fell to 287 thousand, which is 4 thousand better than expected. The Bank of England left monetary policy settings unchanged. The rate of regulator is 0.50%, the lowest level in 320 years. Today is worth paying attention to the trade balance and the data on the construction sector of the country (08:30 GMT), and the index of leading economic indicators for August (09:00 GMT). We expect a further decline in prices in the near future, but keep medium-term positive outlook for the pound.

The Japanese Yen continues a gradual increase on the background of deteriorating mood of investors' expectations regarding future growth on global stock markets. Fear of reducing of stock indexes increases the demand for defensive assets as the yen. On Monday, we expect low activity in connection with a banking holiday in Japan and the United States. Today is worth paying attention to the data on the index of consumer confidence in Japan (05:00 GMT). Given the gradual strengthening of the dollar and the expectation of further monetary easing in Japan, we maintain a medium-term negative outlook for the yen.

The price of the Australian dollar resumed a downward movement after rising amid weakening of the American dollar and the conflicting data on the labor market in Australia, where unemployment has risen by 0.1% to 6.1%, but the number of people with full-time employment rose by 21.6 thousand. Today have been published data on lending for purchases of new homes, which fell by 0.9%. Economic growth in Australia remains weak due to low prices for export commodities like iron ore and reduced demand from China. We maintain a medium-term negative outlook for the Australian dollar and recommend holding short positions.

The New Zealand dollar began to fall in price against the dollar strengthening after yesterday's correction, as well as in connection with a reduction of the Australian currency. Price dynamics of the New Zealand dollar remains negative due to weak data on the trade balance of the country and the risks associated with slowing growth in China. Reserve Bank of New Zealand continues to point to the need to reduce the New Zealand dollar and is intervening in order to reduce the exchange rate. We expect continued reduction of the downward movement in the medium term and maintain a medium-term negative outlook.

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