17.03.2014 - Market movement will depend on geopolitics

Major U.S. indexes ended the last trading session of the week with decline. Investors chose not to open long positions ahead of the referendum in Crimea. In addition, the index of U.S. consumer confidence fell to 79.9, compared with an expected 81.9. In Eurozone on Friday was released the data on the growth of the employment rate by 0.1% in Q4 2013, but the figure could not significantly improve the mood of traders. Another negative factor for the market is the slowing growth of industry in China.

On this background the quotes have reached the level of 1.39, and continue to consolidate there. The course of trading today will be affected by data on consumer price inflation in the Eurozone (10:00 GMT) and industrial production in the U.S. (13:15 GMT). The focus of the markets will be on the further steps of the Russian Federation concerning the Crimea and the sanctions that the West will apply in this case. On this background, we expect an increased volatility over the next week. Growth of price of euro may continue to levels 1,40-1,42, but despite this, we maintain a long-term negative outlook.

January 31 of USD Performance

The quotes of the British pound continue to move above the level of 1.66. In its quarterly report, the Bank of England emphasized the downside risk due to lower foreign income. In addition, investors were disappointed by the growth of the UK trade deficit to 9.8 billion in January, compared with 7.7 billion in December. Central news this week will be the publication of data on unemployment in the UK on Wednesday. We keep medium and long term positive outlook for the British pound.

The Japanese yen continued to strengthen in response to growing demand for defensive assets among investors. Possibility of imposing sanctions against the Russian Federation, has forced traders to reconsider their investment strategies. Further price movement of USD/JPY will depend on the level of geopolitical tensions. We expect renewed growth of price of the pair in the medium and long term, after the stabilization of the situation.

New car sales in Australia rose in February by 0.1% but fell by 3.5% yoy. On the background of contradictory data, the price of the Australian dollar continues to trade near the 0.9050 level. Investors are awaiting the publication of minutes of the previous meeting of the Reserve Bank of Australia (Tuesday), the index of leading economic indicators (Wednesday) and quarterly bulletin of the RBA (Thursday). The weak data on the growth of industry in China, which is the main consumer of Australian exports, continues to put pressure on AUD/USD. We maintain a long-term negative outlook for the Australian dollar.

The price of the New Zealand dollar continues to consolidate around the level of 0.8550. The consumer confidence index rose to 121.7 that is 1.6 better than the previous figure, but the dynamics of prices iis not changed. The growth of volatility is expected this week on Tuesday night, after the release of data on the balance of payments of New Zealand. We expect continuation of growth of NZD/USD in the medium term.

The price of the American benchmark Light Sweet crude oil has corrected and reached 99.00 dollars per barrel. The International Energy Agency raised its forecast for growth in global oil demand in 2014 by 100,000 barrels a day - to 92.7 million barrels, or 1.4 million barrels per day higher than in 2013. Oil price growth is possible in case of sanctions against Russia. In case of a stable situation, we expect a further decline in oil prices with target near 92 dollars per barrel.

The price of gold reached a six-month high on weak data on the Chinese economy and the situation in Crimea. Drop on the stock market and rising tensions in the world, significantly increase the attractiveness of defensive assets like gold. We expect continued growth in the medium and long term, but the probability of price correction of 15-20 dollars this week is quite high. Additional driver for the increase in prices may become a weakening of the U.S. dollar.

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