20.11.2014 - Data from China resulted in a fall of the Australian dollar
The price of euro yesterday showed a strong increase in volatility after the publication of minutes of the previous meeting of the Fed. In the protocols was noted that in the medium term, growth will be slightly lower due to the strengthening of the dollar and problems in China, Japan and the European Union. In addition, it was noted that the rate of inflation may decline in the near future due to the fall in oil prices, and the labor market is improving steadily in 2017 and will reach the natural rate of unemployment. The number of housing starts decreased to 1.01 million, against the forecast of 1.03 million, while the number of permits issued for construction of houses has increased to 1.08 million, 0.04 million above expectations. Today we should pay attention to the manufacturing and service PMI in the Eurozone (09:00 GMT). In the US, will be published the data on the consumer price index (13:30 GMT) and the index of leading economic indicators (15:00 GMT). We maintain a medium-term negative outlook for the euro.
The price of the British pound after reaching of the session lows started growing against the background of voting of the Monetary Policy Committee of the Bank of England by results of which 2 versus 7 members voted for a rate hike. It is worth noting that in the Bank of England are concerned about a possible rise of inflation above the target level, which leads to an earlier increase in interest rates, which is expected in the second half of 2015. Today trading dynamics will depend on the data on retail sales (09:30 GMT) and the balance of the production orders in the UK (11:00 GMT). Current downtrend is likely to continue in the near future.
The price of the Japanese yen continued to decline amid expectations of victory of Prime Minister Shinzo Abe on elections, after which the program of economic stimulation will be expanded. Dynamics of trading failed to change the data on the growth of exports, which showed an increase to 9.6% in October, and reached the highest level since 2008. Country's trade deficit in October was 0.98 trillion yen which is 0.4 trillion better than expected. The manufacturing PMI in November fell to 52.1, which is 0.6 worse than the forecast. We expect a further decline in the yen against the dollar and maintain a medium-term negative outlook.
The price of the Australian dollar continued to fall against the background of deteriorating performance of Chinese industry, which is of key importance for Australia. Thus, the manufacturing PMI in November fell to 50.0, against 50.4 in October. A PMI reading above 50 indicates expansion, while below 50 contraction. Given the low prices of exports of Australia and the risks associated with the crisis in the construction sector in China, we maintain a medium-term negative outlook and recommend holding short positions.
The New Zealand dollar continues to fall on weak data on industry in China, and also in connection with low prices for dairy products, which is a key export item of the country. In addition, it is worth noting a decrease of producer price index which in Q3 fell by 1.1%. Analysts forecasted the growth rate of 0.2%. The resumption of price growth today is unlikely. The course of trading will be affected by the data from the US. We forecast a drop in prices of the New Zealand currency in the medium term and recommend holding short positions.