21.08.2014 - Minutes of the Fed have strengthened the dollar
The price of euro yesterday continued negative trend of the previous days on the background of the negative sentiment, which was caused by the deterioration of macroeconomic indicators in the euro area and the positive data on the housing market in the United States. The main event of the day was the publication of the minutes of the previous meeting of the Fed in which there were hints on the possibility of an earlier rise in interest rates and was marked the weakness of the labor market recovery. Today will be published statistics on the Eurozone’s PMI in the manufacturing sector and the service sector (08:00 GMT) on the labor market in the United States (12:30 GMT), the index of consumer confidence in the euro area, and existing home sales on the US market (14:00 GMT). We maintain a medium-term negative outlook for the euro and recommend holding short positions.
The price of the British pound yesterday corrected upwards against the publication of the results of the vote on the interest rates of the Bank of England. Thus, two of nine members of the council voted for a rate hike this month, but the majority believes that the economy remains vulnerable and favored retaining the current settings of monetary policy. The situation changed after the publication of minutes of the Fed meeting in the United States which hinted at the possibility of an earlier rise in interest rates. Today, trade dynamics will depend on the data on retail sales in the UK (08:30 GMT). Downward movement in the near future is likely to continue on the background of strengthening of the dollar, but the market needs a correction.
Japanese yen accelerated decline after the publication of minutes of the Fed meeting, which has led to strengthening of the American currency. Today in Japan, was published a report on the manufacturing PMI, which showed growth of the indicator to 52.4 in August, against 50.5 in July. Demand for the yen continues to be influenced by geopolitical news. Accelerated drop in prices is also due the closing of short positions by traders. We expect further devaluation of the yen in the medium term.
The price of the Australian dollar also fell against the strengthening of the American currency. The price bounced upwards after the release of data on the index of leading economic indicators in Australia, which in June rose by 0.4%, compared with growth of 0.2% in May. China's manufacturing PMI, which fell in August to 50.3, against 51.7 in July also upset the investors. In the medium term quotes will probably continue to fall due to weak macroeconomic indicators and the statement by the RBA on the significant potential of falling Australian dollar.
The New Zealand dollar continued to fall against the strengthening of the American currency and due to lower prices for dairy products, which is a key export group of the country. The slowdown in the industry of the main trading partner of the country - China also continues to put pressure on the quotations of the New Zealand currency. We expect a continuation of the current negative trends in the near future.