24.10.2014 - Ebola virus in the United States may increase the demand for defensive assets
The price of euro halted decline yesterday on positive data on service and production PMI of the euro area, which unexpectedly rose to 52.4 and 50.7 respectively. In addition, investors reacted positively to the news on reduced unemployment in Spain to 23.7% in the second quarter, which is 0.4% better than the forecast of analysts. Unemployment is a key concern for the EU economy. Number of jobless claims totaled 283 thousand, against the previous figure 266 thousand. Today, the course of trading may be affected by the data on the index of consumer confidence in Germany (06:00 GMT) and new home sales in the United States (14:00 GMT). We maintain a medium-term negative outlook for the euro and recommend holding short positions.
The price of the British pound stopped the decline after reaching 1.6000. Negative for investors yesterday was the data on the UK retail sales for the first time in 4 months showed a decline and fell by 0.3% in September, against a growth of 0.4% in August. At the same time, the balance of industrial orders fell to -6, which is 2 times worse than expected. Today will be published preliminary data on GDP growth in the 3rd quarter (8:30 GMT). We expect renewed price growth in the near future due to the low potential for further falls. Our medium-term outlook remains positive.
The Japanese Yen yesterday continued to decline, despite the growth of the manufacturing PMI to 52.8, which is 0.7 better than the forecast of analysts. Strengthening of the dollar after the publication of data on the labor market also contributed to the devaluation of the Japanese yen. At the moment, quotes corrected on the background of increase in demand for the yen as a defensive asset due to fixing of the first case of disease of Ebola virus in the United States. We expect further decline of the yen due to loose monetary policy of the Bank of Japan and the possibility of launching additional measures to stimulate the economy, which has suffered from increased sales tax in April. We maintain a medium-term negative outlook for the Japanese yen.
The price of the Australian dollar continued a gradual decline against the background of strong data on the labor market and production in the United States. It is worth noting that after a significant reduction the price continues to consolidate within the sideway trend. The rise in prices in the near future is possible only in the form of correction due to weak data on the country's economy and low prices for export commodities. Today, the price of the Australian dollar was supported by data on the growth of leading economic indicators in China by 0.9% in September, compared to 0.7% in the previous period. We maintain a medium-term negative outlook for the Australian dollar and recommend holding short positions.
The price of the New Zealand dollar continued to decline after the publication of data on the trade balance of the country. Thus, in September, the trade deficit of the country rose up to 1350 million, compared with an expected 620 million. More restrained reaction of the market is due to a significant part of investment goods such as airplanes in the import of the country. The greatest decline in exports was recorded in the dairy and woodworking industry of the country. Given the negative dynamics of the balance of payments and the policy of the Reserve Bank of New Zealand aimed at reducing the price of the currency, we maintain a medium-term negative outlook for the New Zealand dollar.