19.05.2016 - Minutes of the Fed supported the US dollar
Currency trading and the euro. The price of euro continued to fall against the US dollar after the publication of the previous Fed meeting minutes, which has led to an increase in the probability of the Fed raising interest rates in June. Thus, the majority of members of the US Federal Open Market Committee were in favor of monetary tightening in the United States in case of further improving macroeconomic data in the country. It is worth noting that earlier this week, was published the data on the growth of consumer inflation by 0.4% in April, and this dynamics is likely to continue, given the rise in oil prices. On the other hand, the consumer price index in the euro area fell by 0.2% for the year, which can lead to increased stimulus measures by the ECB. Today, the dynamics of trading will affect the publication of the minutes of the previous meeting of the ECB (11:30 GMT), as well as the speech of the deputy chairman of the Fed Stanley Fischer (13:15 GMT). According to our forecasts, the euro will continue to fall in the medium term.
Currency trading and the British pound. The price of the British pound rose yesterday after were published the results of voter survey on the UK’s exit from the EU. Thus, 55% support the preservation of the country within the EU, against 37% in favor of its exit. Also yesterday, was released the data on the country's labor market, according to which the unemployment rate was 5.1% and the number of unemployed decreased by 2.4 thousand, while the average wage index growth accelerated to 2.1% vs. predicted 1.7%. Today, the dynamics of trading will depend on the news on retail sales in the UK. According to our forecasts, the British pound will rise after the referendum on 23 June but we do not exclude the fall in the coming weeks.
Currency trading and the Japanese yen. The price of the Japanese yen today continued its decline against the strengthening of the US dollar due to increased probability of the Fed raising interest rates in June, after yesterday's publication of the previous Fed meeting minutes. At the same time, support for the yen was the news about the increase in the volume of orders for engineering products in Japan except the vessels and municipal equipment, by 5.5% against the expected decline of 1.9%. In case of a fall on the stock markets, the demand for defensive assets like the yen rise, but in the medium term, we expect the fall of the yen against the dollar amid divergence of monetary policy of the Fed and the Bank of Japan.
Currency trading and the Australian dollar. The price of the Australian dollar showed a decrease against the strengthening of the US dollar, as well as the publication of statistics on the labor market in the country. Thus, the unemployment rate was 5.7%, which is 0.1% better than expected, but employment increased by 10.8 million, against expected growth of 12.1 thousand. The strong influence of the Australian currency in the near future will have a price of commodities that can be reduced in the coming weeks. We maintain our medium-term negative outlook, but in the near we future may see a slight correction.
Currency trading and the New Zealand dollar. The price of the New Zealand dollar has continued to fall and came close to local minima due to the strengthening of the US dollar, as well as the weakening of the Australian dollar, which traditionally has a strong impact on the New Zealand dollar. Low inflation in the country may lead to a further reduction of the Reserve Bank of New Zealand interest rates. In the near future we can see the price correction, but the medium-term outlook remains negative.