18.12.2014 - The dollar rose after the Fed statement
The price of euro fell sharply after the Fed statement on monetary policy and a press conference of the head of the Federal Reserve Janet Yellen. So, Mrs. Yellen said that interest rates will not be raised during the next two meetings. At the same time, it was noted that the regulator can make decisions not only during formal meetings with the subsequent press conference. In addition, a representative of the ECB announced the readiness of the regulator to take action to deal with low inflation. Given this situation, we expect further strengthening of the dollar and the decline of the euro. Today, it is worth paying attention to the data on the business confidence index in Germany (09:00 GMT), the US labor market (13:30 GMT) and service PMI in the US (14:45 GMT). We recommend holding short positions on the euro and maintain a medium-term negative outlook.
The price of the British pound showed a strong decline after the Fed statement on monetary policy, which has led to the expectation of an earlier increase in interest rates by the Fed. This fact was not able to neutralize the positive from the data on the labor market in the country. Thus, the unemployment rate remained at 6.0%, which is 0.1% worse than the forecast, but wage growth accelerated to 1.4%, which is 0.1% better than expected and the number of unemployed fell by 26.9 thousand, compared with an expected 19.8 thousand. Today, the course of trading will be affected by data on retail sales and a report of the Bank of England on credit market of the country (09:30 GMT). We expect price correction of the British pound today.
The Japanese yen weakened after the Fed statement on monetary policy. Now investors expect an earlier rise in interest rates, which may occur as early as April. This situation leads to a strengthening of the dollar and the yen quotes reduction against the US currency. The fall of the yen may slow down in case of further growth in demand for defensive assets, which has led to the strengthening of the price before. Tomorrow we expect a rise in volatility after the statement of the Bank of Japan on monetary policy. We should also pay attention to the data on the index of business activity in Japan. We recommend to wait for the signals to open new positions.
The price of the Australian dollar continued to decline in a downtrend after the Fed statement on monetary policy. Strengthening of the dollar continues to put pressure on the quotes of the national currency of Australia. Today was published quarterly bulletin of the Reserve Bank of Australia in which emphasized the negative impact of slowing growth in China and the decline in investment in the mining sector. We expect a further drop in prices of the Australian currency to the psychologically important mark of 0.80. Our medium-term outlook remains negative.
The price of the New Zealand dollar fell against the strengthening of the US currency. Drop in prices has stopped after the release of data on GDP growth in Q3 by 1.0% compared with an expected 0.7%. Domestic demand continues to support growth in the country despite the fall in export prices. At the moment, we see no reason for change of the negative trend despite the improvement of data on GDP growth. We predict that the price in the coming days will continue to consolidate near current levels.