20.01.2016 - Low inflation in New Zealand may force the RBNZ to lower interest rates

Currency trading and the euro. The price of euro resumed its rise against the US dollar amid falling oil prices. Statistics from China showed a slowdown in GDP growth and industry, but also led to speculation about stimulus measures from the authorities. Basic consumer price index in the euro area remained at 0.9%. Index of business sentiment the euro area in January fell to 22.7, against 33.9 in December. Today we expect a strong price movement after the publication of the report on the Consumer Price Index in the US (13:30 GMT). In addition, the course of trading will affect the data on the labor market in the country (13:30 GMT). Our medium-term outlook for the euro remains negative, despite a likely continuation of the current growth today.

Currency trading and the British pound. The price of the British pound continued to fall after Bank of England’s Governor Mark Carney said that now is not the time to raise interest rates and that the UK economy is more vulnerable than the US economy. It is worth noting that the core consumer price index in December rose to 1.4% that is 0.2% more than in the previous month. Today, a strong influence on the course of trading will have news on the labor market in the UK. Our medium-term outlook remains negative, but in the near future we may see a correction after a strong price reduction.

Currency trading and the Japanese yen. The price of the Japanese yen after the correction yesterday, continued to strengthen against the backdrop of increased demand for defensive assets amid falling oil prices. Low oil prices cannot allow the stabilization of the US stock market, which will keep the interest to the yen as a safe asset. Tomorrow, on the dynamics of trading can influence data on the index of business activity in Japan. Our medium-term outlook for the Japanese currency remains negative despite the possible continuation of the current decline in the coming days.

Currency trading and the Australian dollar. The price of the Australian dollar continued to fall against the background of the further deterioration of the situation on the commodity markets, which traditionally has a negative impact on investor sentiment with respect to the Australian dollar. In addition, today was published weak data on consumer confidence in Australia, which in January fell to -3.5%, against -0.8% previously. The slowdown in GDP and industry in China continues to put pressure on the Australian dollar. We expect a price drop in the coming days, and keep the medium-term negative outlook.

Currency trading and the New Zealand dollar. The price of the New Zealand dollar showed a strong decline after the publication of the report on inflation in the country. Thus, the index of consumer prices in New Zealand amounted to -0.5% in the 4th quarter against 0.3% in the previous quarter. Inflation for the year fell to 0.1%, against 0.4% previously. This fact stimulates the Reserve Bank of New Zealand to lower interest rates to spur inflation. In addition, the negative impact on the dynamics of the currency have a drop in commodity markets, as well as risks associated with China. We recommend holding short positions and maintain the medium-term negative outlook.

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