16.12.2014 - Industry in China showed weak data
The price of euro yesterday showed a strong increase in volatility but ended the trading session near the previous close levels. The course of trading was influenced by the collapse of the Russian ruble as well as news from Greece where continues the political crisis due to the presidential election that may take place this week. In case of victory of representative of opposition party, Greece can come out of the euro area. It is worth noting the sudden drop in the index of business activity in the manufacturing sector of New York in December to -3.6, compared with an expected increase to 12.1. At the same time, industrial production in the US in November rose by 1.3%, which is 0.5% better than expected. Today we should pay attention to the production and service PMI in the Eurozone (09:00 GMT) and the trade balance in the Eurozone. Particular attention should be paid to the statistics of the construction market in the US (1330 GMT). Our medium-term outlook remains negative.
The price of the British pound yesterday corrected down against the strengthening of the US dollar, as well as due to the fall in house prices in the UK in December by 3.3%, against a decline of 1.7% in November. The balance of production orders in December rose to 5, which is 2 better than expected and the previous figure. Today is expected the increase of volatility in connection with the statement of the Bank of England on monetary policy and the publication of the results of stress tests of British banks (07:00 GMT). In addition, the course of trading will be affected by the data on inflation (09:30 GMT). We recommend to wait for a signal to open positions on the British currency.
The price of yen strengthened amid growing fears of investors about the future growth prospects of world financial markets, as well as due to concerns about the situation in Russia, where as a result of the collapse of the ruble quotations, the central bank was forced to raise interest rates from 10.5% to 17.0%. Weak data on industry in China is also increasing demand for defensive assets. Japan's manufacturing PMI in December was 52.1, which is 0.2 worse than the forecast. Increase in volatility is expected tomorrow after the publication of statements by the US Federal Reserve on monetary policy, where we can see hints on an earlier rise in interest rates of the Fed. Our medium-term outlook for the yen remains positive, but may be revised in the near future.
The price of the Australian dollar fell after the publication of minutes of the previous meeting of the Reserve Bank of Australia on monetary policy in which it was decided to leave the interest rate unchanged at 2.5%, and save the parameters of monetary policy, which should help to restore growth in the economy. It should be noted the negative impact of data on industry in China, where manufacturing PMI from HSBC Bank fell to 49.5 in December, up 0.5 worse than the previous figure. We recommend holding short positions and maintain a medium-term negative outlook.
The price of the New Zealand dollar continued to decline due to the overall negative trend and weak data on industry in China, which is the main trading partner of the country. New Zealand's currency is still under the pressure of low export prices and trade deficits. Tonight (21:45 GMT), will be published statistics on the balance of payments of New Zealand, and tomorrow will be released the data on GDP for the 3rd quarter. We expect a downward price trend in the medium term and recommend holding short positions.