14.04.2014 - Instability in Ukraine again puts pressure on markets

Major U.S. stock indexes closed the last trading session of the week lower, despite the rebound in prices for shares of biotech companies. The reason for the sales was a report of JPMorgan, which disappointed investors and dragged the markets down. In addition, on Friday was published the data on consumer confidence, which rose to 82.6 against the forecast of increase to 81.2. Producer price index in March rose by 0.5% vs. forecasted 0.1%. We expect further correction on American stock markets.

The price of euro started to correct after reaching 1.39. The growth of quotations has stopped, despite the news that the Fitch Ratings agency changed the outlook on the sovereign ratings of Portugal, that is at “BB +”, to "positive" from "negative." Also on Friday, was released the data on consumer inflation in Germany, which was in line with forecasts and the previous rate and amounted 0.3%. We expect price correction of euro and maintain long-term negative outlook. Today the course of trading may be influenced by data on industrial production in the Eurozone (09:00 GMT), retail sales (12:30 GMT) and business inventories in the U.S. (14:00 GMT).

The price of the British pound continues to correct after a strong growth. The reasons for the decline was weak data on the UK housing market, where the volume of construction fell by 2.8% in February compared with a rise of 2.1% in January. In addition, the index of leading economic indicators rose in February by only 0.4% compared with growth of 0.6% in the previous period. This week we should pay attention to the data on inflation (Tuesday) and unemployment (Wednesday). We expect further correction of pound, but keep a long-term positive outlook.

The price of USD/JPY continues to consolidate around 101.50. Decline has stopped, despite a number of positive factors for the yen and it indicates the strength of bulls. Loose monetary policy of the Bank of Japan aimed on the growth of the monetary base by 60-70 trillion. per year and increase of inflation rate to 2.0%, together with a reduction of quantitative easing in the U.S. according to our estimates should lead to a resumption of growth of a pair. We keep medium and long term positive outlook for the USD/JPY.

After a strong growth the price of the Australian dollar also continues to correct. The reason for optimism during the previous weeks was the statement of the Reserve Bank of Australia on refusal from further reduction of interest rates, increase in iron ore prices and speculations concerning stimulation of the Chinese economy, which is the main trading partner of Australia. At the same time, the monetary policy of the RBA remains quite soft. We expect that the price will continue to decline in the medium term. Tomorrow the course of trading may be affected by the release of minutes of the previous meeting of the Reserve Bank of Australia.

The price of the New Zealand dollar continues to consolidate below 0.8700. To determine the further movement the market needs new incentives. This week in the spotlight will be data on consumer price inflation (Tuesday) and statistics from China on GDP growth in the 1st quarter, industrial production and retail sales (Friday). Price of the currency may begin to decline in the near future, but we maintain a medium-term positive outlook for the New Zealand dollar.

Oil prices continued to rise on positive data on the U.S. economy growth. The reason for today's price increase was the rise of tensions over the situation in Ukraine, where in the eastern regions continues anti-terrorist operation in which was already recorded the first killed people. We anticipate stabilization of the situation and save the negative long-term outlook for oil prices, due to revision of oil consumption in the world by the International Energy Agency and the future growth of exports from Libya and Iran.

The price of gold continues to rise amid instability in eastern Ukraine and falling stock markets. Investment funds backed by gold do not show the growth of gold reserves and the physical demand in Asia remains weak. Despite this, we expect growth of quotations of gold due to falling stock markets and geopolitical tensions. The strengthening U.S. dollar may hinder the growth of gold prices.

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