19.11.2014 - Traders are waiting for the Fed meeting minutes
The price of euro yesterday showed strong growth on a background of positive data on the growth of the index of business confidence in Germany to 11.5, compared with an expected 0.9 and in the euro area - up to 11.0, against the expected 4.3. It is also worth noting the increase in the index of producer prices in the US by 0.2%, which is 0.3% better than the forecast. The indicator showed positive trend despite the drop in oil prices. The central event of the week will be the publication of minutes of the previous meeting of the Fed (19:00 GMT) and data on the housing market in the US (13:30 GMT). In the euro area, special attention should be paid to the balance of payments statistics in the region (09:00 GMT). We forecast a decline in euro prices in the medium term and recommend holding short positions.
The price of the British pound after a minor correction yesterday, resumed the downward movement. Consumer inflation in the UK unexpectedly rose in October to 1.3%, against 1.2% in September. At the same time, the producer price index showed a decline by 0.3%, which is 0.1% less than analysts' forecasts. Today the growth of volatility is possible on the background of voting of the Monetary Policy Committee, where some members probably will be for monetary tightening and rising consumer inflation will be another argument in favor of raising the interest rates of the Bank of England. Growth of volatility is also expected in connection with the news from the US. We expect a further decline of the British pound quotations.
The Japanese yen continued to decline, and updated the local minimum and now is trading near seven-year low. It is worth noting that the Bank of Japan kept its monetary policy settings unchanged. It is also worth noting, that investors continue to assess the impact of the postponement of raising the sales tax for 18 months and negative data on GDP decrease of the third largest economy in the world by 1.6% compared with the same period of the last year. Tomorrow is expected the increase of volatility after the publication of statistics on the trade balance of the country in October and manufacturing PMI. We recommend holding short positions on yen and maintain a medium-term negative outlook.
The price of the Australian dollar drops on negative data on the housing market in China, where once again was registered a decline in housing prices by 0.8%. Although, the index of leading economic indicators remained unchanged in September, against a fall of 0.1% in August. It is worth noting that after the strong growth investors decided to fix long positions that accelerated the downward momentum. It is worth recalling that the national currency of Australia continues to be under the pressure of lower prices for iron ore and other export products, as well as statements of the Reserve Bank of Australia regarding the Australian dollar overvaluation. We maintain a medium-term negative outlook for the Australian dollar and recommend holding short positions.
The New Zealand dollar began to decline sharply after strong growth in the previous week. The reasons for the downward momentum were the fall of the Australian dollar and the decline in the price of dried milk, which is one of the main export commodities of the country at the last auction GlobalDairyTrade. Today will be published statistics on producer price index for Q3 (21:45 GMT), which will lead to increased price volatility. We expect a further drop in prices of the New Zealand dollar and recommend holding short positions.