11.10.2016 - The probability of the Fed raising interest rates is rising
Currency trading and the euro. The price of euro showed decline amid rising probability of the Fed raising interest rates in December, which exceeded 70%. Fed representative Charles Evans said that in spite of the weaker-than-expected statistics on the US labor market and low inflation, the tightening of monetary policy at the Federal Reserve may be the right decision. The expectations of the normalization of monetary policy in the United States have traditionally supported the US dollar. Today, the dynamics of trading will affect the data on the index of business sentiment from the Eurozone ZEW (09:00 GMT) and the index of optimism in the US small business (10:00 GMT). We forecast a drop in euro prices in the near future and medium term.
Currency trading and the British pound. The price of the British pound shows a decrease due to negative expectations of the country's exit from the EU, a process of which should start before the end of March 2017. It is worth mentioning that earlier, French President Francois Hollande said about the need to conduct tough negotiations with the United Kingdom on this issue. Investors are waiting for the statement of the Bank of England on Thursday, which could lead to increased volatility. According to our estimates, the British currency price will continue to decline in the near future and medium term, and in addition to the effect of Brexit, momentum may increase due to the growth of the US dollar.
Currency trading and the Japanese yen. The price of the Japanese Yen continued its decline against the US dollar, despite the publication of strong statistics on the balance of payments of the country, whose surplus rose to 1.98 trillion yen in August against the forecast of 1.58 trillion yen. Tomorrow will be released important reports on the volume of new domestic orders for engineering products and orders for machinery equipment. The growth of the yen may resume in case of a fall on the stock markets, causing the demand for defensive assets. Our medium-term outlook remains negative and we expect further reduction in prices amid increasing divergence in the monetary policy of the Fed and the Bank of Japan.
Currency trading and the Australian dollar. The price of the Australian dollar fell against the US dollar, despite the positive dynamics of oil prices, which supports other commodity assets. Sentiment in the Australian business community in September remained at around 6, and tomorrow we should pay attention to the statistics on the index of consumer confidence in Australia. The main influence on the dynamics of the Australian dollar in the near future will have a change in the US dollar price. We maintain our medium-term negative outlook in the near future may continue to fall against fixing positions after a strong growth in previous months.
Currency trading and the New Zealand dollar. The price of the New Zealand dollar continued to decline after changed the local uptrend to negative. In addition, the pressure on the local currency dynamics have low prices for dairy products, the strengthening of the US dollar and weak statistics on the trade balance of the country. Low inflation leads to the saving of the probability of monetary policy easing in the country, which is also negative for the New Zealand dollar. The probability of falling in the near future has increased and we maintain a medium-term negative outlook.