10.04.2014 - The dollar has fallen after the release of the Fed meeting minutes
Major U.S. stock indexes ended the trading session with growth due to positive beginning of the corporate earnings season and publication of minutes of the previous meeting of Federal Open Market Committee the of U.S. Federal Reserve. The minutes noted that inflation will return to the target level of 2% in the next few years, the housing market continues to recover and business activity is expected to increase in because to the warming. Wholesale inventories rose in February by 0.5%as it was expected. We recall that rising inventories indicates weak demand and is a risk for economic growth.
The price of euro rose on trade balance data in Germany, which grew by 15.7 billion in February, against the forecast of 18.0 billion. In addition, support for the bulls was provided by the minutes of the Federal Open Market Committee meeting in which was pointed the intention of long-term retention of interest rates at current levels and the target inflation rate at around 2.0%. After strong growth, we expect a correction after which the price can extend an upward movement. Despite this, we maintain a long-term negative outlook for the euro.
Today the course of trading may be effected by data on industrial production in France (6:45 GMT) and Italy (08:00 GMT), the ECB monthly bulletin (08:00 GMT) and labor market data in the U.S. (12:30 GMT).
The British pound continued the upward movement against decrease in trade deficit of the country in February by 0.4 billion to 9.1 billion. In addition, the main growth driver was the weakening of the U.S. dollar after the release of minutes of the meeting at the Fed. The focus of investors today will be on the statement of the Bank of England on monetary policy (11:00 GMT, in which will be announced decisions on interest rates and the volume of asset purchases. After strong growth, we expect a slight correction and maintain a long-term positive outlook for the British pound.
Despite the weakening of the U.S. dollar the quotations of USD/JPY continue to consolidate around the level of 102.00. Decrease of a pair was limited by current levels due to overselling and negative data on reduction of domestic orders for machinery by 8.8% in February, against growth by 13.4% in January. In addition, the volume of lending in March fell by 0.1% to 2.1% per annum. Stopping the price reduction indicates the strength of bulls. Therefore, we expect the resumption of growth in the near future and maintain medium and long-term positive outlook for the pair.
The price of the Australian dollar has overcome the strong resistance level at 0.94, but so far failed to gain a foothold above it. The overbought price of the instrument did not give the opportunity to use fully the weakening of the U.S. dollar, growth in employment by 18.1 thousand against the forecast of 7.3 thousand, and a decline in the unemployment rate by 0.3% to 5.8% in March. The positive for the Australian dollar also became the data from China, where the trade surplus in March was 7.7 billion against the forecast of deficit at 0.9 billion, although exports and imports have fallen in the country. We expect price correction of the pair soon, but anticipate continued growth in the medium term.
The price of the New Zealand dollar is at three-year highs. The reason for the growth was positive data on China's trade surplus, which is the main trading partner, as well as the strengthening of the Australian dollar against the background of positive data on the labor market in the country. In addition, the manufacturing PMI in New Zealand in March rose to 58.4, against 56.5 in February. We maintain a positive medium-term outlook for the pair.
The price of U.S. benchmark Light Sweet crude oil continued growth amid falling gasoline inventories by 5.2 million barrels. At the same time, oil inventories rose by 4.03 million barrels. In addition, the bulls were supported by the tense situation in Ukraine. U.S. Department of Energy announced that during this year and next year, the oil production in the U.S. will grow a little slower than expected, and oil consumption will increase slightly. In the long term future increases in oil supplies from Iran, Iraq and Libya continues to put pressure on quotes.
The price of gold fixed above psychological mark and continued to rise after the publication of minutes of meeting of the Federal Open Market Committee. Demand for defensive assets also increased due to rising tensions in Ukraine. Demand for physical gold in the Asian markets rose slightly, but investment funds are not in a hurry to build positions. We maintain our positive outlook for gold in the medium and long term.