20.03.2014 - The Fed's decision has strengthened the dollar
Major U.S. stock indexes fell sharply after a speech by Fed chief Janet Yellen. Mrs. Yellen said that interest rates may be raised in 2015, the volume of purchases of assets shrink to $ 55 billion per month, inflation will reach the target level of 2.0% in 2015, and the weather had a negative impact on economic growth in the 1st quarter. Also yesterday was published the data on the U.S. current account deficit, which fell to 81 billion, against the forecast 88 billion.
On the background of statements by Fed chairman the quotes of euro fell sharply and stopped to decrease above 1.3810. Today, the price will probably be corrected. The course of trading today will be affected by data on the number of unemployment claims in the U.S. (12:30 GMT), the manufacturing index of Philadelphia, existing home sales and the index of leading economic indicators. We maintain a long-term negative outlook for the euro.
After a speech by Fed chief, the price of the British pound fell sharply. Data on the labor market in the UK did not disappoint investors, as the unemployment rate remained at 7.2%, while the number of unemployed decreased by 34.6 thousand against the forecast 23.3 thousand. Today an upward correction is possible. Despite yesterday's events, we maintain a long-term positive outlook for the pound.
The price of the Japanese yen rose sharply after the statement of the Federal Reserve and reached a strong level of 102.70. Reduction of the quantitative easing in the U.S., together with ultra soft monetary policy of the Bank of Japan give reasons to expect further growth of the USD/JPY. Another positive factor should be the reduction of geopolitical tensions. Despite this the growth in demand for the yen as a defensive asset may resume soon after the decision on sanctions against the Russian Federation. Today might be a slight correction, after which we expect continued growth. We maintain our medium-and long-term positive outlook for the pair.
The price of the Australian dollar broke through the inclined support line and sharply decreased. When falling, the price reached 0.90. Today at 23:00 GMT, will be published data on the index of leading economic indicators in Australia. We expect that the decline may slow down around the level of 0.90, but keep a long-term and medium-term negative outlook for the Australian dollar.
The price of the New Zealand dollar fell against the strengthening dollar. Another negative factor for the NZD/USD, was the message that within the 4th quarter of 2013 GDP grew by 0.9%, which is 0.1% worse than the forecast and 0.3% less than in Q3. After consolidating above 0.85, the price may continue a downward movement.
Oil prices have risen, despite the strengthening of the dollar. This fact is explained by the decrease in gasoline inventories by 1.5 million barrels and distillates by 3.1 million barrels. In addition, the usage levels of refining capacity fell to 85.6%, against 86.0% last week, which is associated with the switching to summer fuel production. We maintain a negative outlook on the price of Light Sweet crude oil.
Against the strengthening of the U.S. dollar and the statements on the reduction of quantitative easing, the price of gold reached a strong level of $ 1,330 per troy ounce. An additional factor that reduces the interest in defensive assets, is the fall of tension around the Crimea. We expect an upward correction of gold prices, after which decline can resume. We maintain medium and long term positive outlook for gold in connection with the risk of falling on the stock markets, which will lead to increased demand for defensive assets like gold.