18.10.2016 - Volatility will rise after report on inflation in US
Currency trading and the euro. The price of euro showed growth against the background of US dollar correction before today's publication of an important report on the consumer price index in the US (12:30 GMT). Rising inflation will indicate the approach to the Fed's objectives and will be the reason for the growth of the likelihood of higher interest rates in December. It should be noted that the pressure on the dollar yesterday had the data on the volume of industrial production in the US, which rose by 0.1% against the expected 0.3% in September. The focus of investors in the near future will on the expected timing of increase in US interest rates. Our medium-term outlook remains negative and we look forward to the resumption of the negative dynamics in the near future.
Currency trading and the British pound. The price of the British pound corrected upwards against the weakening US dollar. Today, the focus will be on inflation data in the UK (08:30 GMT), which will restrain the growth of the Bank of England from further easing of monetary policy. The British currency is still under the pressure of expected negative consequences from the exit from the EU. After a strong decrease in the previous weeks, we can see the price correction, but the medium-term negative outlook remains unchanged.
Currency trading and the Japanese yen. The price of the Japanese yen strengthened due to the US dollar's decline. Investors are closely watching the rhetoric of officials from the Federal Reserve and the Bank of Japan. Probability of bigger divergence in monetary policy of Japan and the United States has increased recently, which is negatively displayed on the price of the Japanese yen. The focus this week will be on data from the US, but we also should pay attention to the block of statistics from China, which will affect the demand for defensive assets like the yen. In case of the stock markets fall, interest in the yen will rise again, but overall, we maintain a negative view for the medium-term.
Currency trading and the Australian dollar. The price of the Australian dollar showed an increase due to the correction of the US dollar. In addition, the head of the Reserve Bank of Australia Philip Lowe said about the possibility of further reduction in interest rates in the country in the case of inflation deceleration. The central bank is concerned about the low inflation expectations. Support for the local currency was the news about the increase in sales of new cars by 2.5% in September. Tomorrow we expect a rise in volatility after the publication of statistics on the growth of GDP and industrial production in China, which traditionally have a strong impact on the Australian currency. Our medium-term outlook remains negative.
Currency trading and the New Zealand dollar. The price of the New Zealand dollar rose sharply after was published the report on the index of consumer prices in New Zealand in the 3rd quarter. Thus, the figure fell to 0.2%, against 0.4% in the previous quarter, but was better than the forecast of zero inflation. On the one hand, inflation remains low, which allows the Reserve Bank of New Zealand to continue to lower interest rates, but on the other hand the forecasts of the central bank concerning the resumption of the inflation growth have become more real. Our medium-term outlook for the New Zealand dollar is negative and we are waiting for the resumption of decline in the near future.