13.05.2014 - The pound is gradually strengthening
The price of euro continues to consolidate above the support level at 1.3750. After a sharp decline traders need time to decide on further movement. Low volatility of the pair yesterday was explained by the absence of important macro. Today the course of trading can be influenced by the index of business sentiment in Eurozone (09:00 GMT), retail sales in April (12:30 GMT) and business inventories in March the United States (14:00 GMT). Due to the expectation of introducing new measures to fight the low inflation in the next month, we expect further reduction of euro and save medium-term and long-term negative outlook.
The price of the British pound has strengthened slightly yesterday amid expectations of publication of a quarterly report of the Bank of England on inflation, which will be released on Wednesday. Confederation of British Industry has revised GDP growth forecast upwards, but noted the possibility of slower investment activity before the elections that will be held early next year. Considering the stable development of the British economy, we reserve the medium and long term positive outlook for the pound with the target at 1.70.
The Japanese yen yesterday continued to cheapen on the negative statistics on the growth of balance of payments deficit to 0.78 trillion in March, compared with an expected 0.54 trillion. Besides, the economy watchers sentiment in Japan fell to 41.6 against the forecast of 45.2. This decrease was due to the increased sales tax from 5% to 8% in April. Today was released data on the growth of the monetary base in April by 3.2% which has met the forecasts of analysts. Considering loose monetary policy of the Bank of Japan and the reduction of quantitative easing in the U.S., we maintain a long-term positive outlook for the USD/JPY.
The price of the Australian dollar continues to consolidate around the level of 0.9350. Traders are awaiting the release of data on industrial production and retail sales in China (5:30 GMT). Let us recall that China is a major trading partner of the country. Considering the weakness of the iron ore market and the slowdown of the Chinese economy and taking into account loose monetary policy of the Reserve Bank of Australia, we keep medium-term negative outlook for the pair.
The price of the New Zealand dollar, after a strong decline in the previous week continues to consolidate around the level of 0.8630. Let us recall that the head of the Reserve Bank of New Zealand declared readiness to deal with the high rate of the national currency at lower prices for export products. Today we should pay attention to the report of the Reserve Bank of New Zealand on financial stability (21:00 GMT) and the speech of the head of the Central Bank (21:05 GMT). We need new signals to determine the further movement.