22.09.2016 - The dollar weakened after the Fed’s statement
Currency trading and the euro. The price of euro showed an increase after the Fed issued a statement on monetary policy. Thus, it has left interest rates at 0.25-0.50% in the US, but noted the possibility of raising them till the end of the year. To make a decision to tighten monetary policy the Federal Open Market Committee needs more time for monitoring of economic indicators. The labor market is showing strong results and unemployment of the Fed is estimated 4.8% this year and 4.6% next year. Given the lack of consensus among the members of the Federal Open Market Committee, the price of the dollar has weakened. Today, the dynamics of trading will affect the data on the index of consumer confidence in the euro area, as well as existing home sales in the US (14:00 GMT). We should also pay attention to the speech of ECB Chairman Mario Draghi (13:00 GMT). We maintain our medium-term negative outlook for the euro.
Currency trading and the British pound. The price of the British pound showed an increase amid the weakening of the US dollar after the Fed's statement on monetary policy. In addition, support for the British currency was the data on the net borrowing of the public sector in the UK that in August totaled 10.1 billion compared to the forecast of 10.5 billion. Today, the focus will be on the statement of the Committee on Financial Policy of the Bank of England which will probably point to a more positive-than-expected statistics in the country, which reduces the likelihood of a further reduction in interest rates in the UK. This fact will be positive for the pound, but the medium-term negative outlook remains unchanged.
Currency trading and the Japanese yen. The price of the Japanese yen strengthened yesterday after the Bank of Japan decided not to reduce the key interest rate and left it at -0.10%. Additional support for the Japanese currency had a statement of the US Federal Reserve, which has led to a weakening of the US dollar. Today in Japan is the day off and the dynamics of trading will affect the news from the US. It is worth noting that the economic data remains weak in the country, which together with loose monetary policy will lead to a weakening of price in the medium term. Further strengthening of prices is limited due to the possible use of foreign exchange intervention in the market. Our medium-term outlook for the Japanese yen remains negative.
Currency trading and the Australian dollar. The price of the Australian dollar showed growth against the background of the US dollar decline and the positive statistics on the commodity markets. In addition, a positive impact on the dynamics of the Australian currency had a statement of the Reserve Bank of Australia, where noted the rise in prices on the housing market, improvement in the labor market and the imminent completion of the negative dynamics on commodities market. According to the RBA, the current level of interest rates correspond to the target inflation rate and stimulates the growth of employment and GDP. Our medium-term outlook for the Australian currency remains negative, despite the current upward momentum.
Currency trading and the New Zealand dollar. The price of the New Zealand dollar rose amid falling US dollar, as well as due to the statement of the Reserve Bank of New Zealand on monetary policy. Thus, according to estimates of the central bank of the country, the New Zealand dollar needs to fall, GDP growth is supported by emigration, construction and tourism, and inflation in the third quarter may fall and rise in the fourth quarter. According to our estimates, the probability of resumption of the negative dynamics in the near future remains high and we maintain a medium-term negative outlook.