Currency trading and the euro. The price of euro showed decline against the US dollar amid weak statistics on GDP growth in the euro area, which totaled 0.5% in the 1st quarter that is 0.1% less than the previous estimates. In addition, retail sales were surprisingly strong in the United States. Thus, the index in April rose by 1.3%, against an expected decline of 0.3%. It is worth noting that retail sales are one of the key macroeconomic indicators in the US and its improvement leads to an increase in the probability of more soon Fed raising interest rates. Today, in Germany and France is the day off and the dynamics of trading will affect the data on the manufacturing PMI of New York (12:30 GMT). Our medium-term outlook for the euro remains negative.
Currency trading and the British pound. The price of the British pound is falling against the background of strengthening the dollar after the release of strong data on retail sales in April. On the other hand, the volume of production in the UK construction sector fell by 3.6%, against an expected decline of 2.8%. Tomorrow, on the dynamics of trading will affect the data on the inflation in the country. Speculation regarding the UK’s exit from the EU are likely to worsen in the coming weeks, which will lead to a drop of the pound. Despite this, we expect saving of the country within the EU, which will lead to an increase in the price of the British currency. We forecast a drop in prices in the coming weeks.
Currency trading and the Japanese yen. The price of the Japanese yen price slightly strengthened against the background of weak statistics from China, which has increased investors' concerns about growth prospects in the world's second largest economy. As a result, the interest in defensive assets as the yen rose. On the other hand it should be noted the speculations about possible intervention or other measures by the Bank of Japan to deal with the strengthening of the yen. Today, it is worth paying attention to the volume of orders for engineering equipment in Japan for April (06:00 GMT). In addition, tomorrow will be released the news on industrial production in Japan. We maintain our medium-term negative outlook on the yen, despite a possible strengthening in case of a fall on the stock markets of the world.
Currency trading and the Australian dollar. The price of the Australian dollar continues to decline due to lower commodity prices, the recent decline in interest rates of the Reserve Bank of Australia, as well as the publication of weak statistics in China, which has traditionally had a strong influence on the movement of the Australian dollar. Thus, the growth of industrial production in China in April compared with the same period last year totaled 6.0% vs. expected 6.5% and 6.8% in the previous month. Tomorrow will be published the minutes of the previous meeting of the RBA, which may lead to increased volatility. We forecast a drop in the Australian dollar in the medium term, but do not exclude the correction in the near future.
Currency trading and the New Zealand dollar. The price of the New Zealand dollar fell following the Australian currency, as well as on the background of the publication of weak statistics on industry and retail sales in China. Given the low inflation in the country and the recent easing of monetary policy in Australia, we can see a continuation of the negative dynamics of the New Zealand currency against the background of the expected reduction in interest rates and the RBNZ weak data on the trade balance of the country. Our medium-term outlook for the New Zealand dollar remains negative.