24.03.2014 - China's manufacturing sector weakened again

The last trading session of the week ended with lowering of major U.S. stock indexes. Lack of important macro in the U.S. has led to fixing of positions before the weekend. We expect continued growth of broad S&P500 index in the medium term, but keep a long-term negative outlook.

At the same time the quotes of euro continued to rise gradually on Friday. Data on balance of payments had a positive but limited impact on price of EUR/USD. Thus, the balance of payments surplus in the euro area in January has grown to 25.3 billion against the previous figure of 20.0 billion. At the same time, the consumer confidence index in March was 3 points better than expected and made -9.

The report concerning the reduction of manufacturing PMI in China to 48.1, compared with an expected 48.7 has become a negative factor for the mood of traders. Besides today the course of trading will be affected by data on the service PMI in Eurozone (09:00 GMT) and the manufacturing PMI of the Eurozone (09:00 GMT) and the U.S. (13:45 GMT) . On this background, we maintain a long-term negative outlook for the euro.

Despite our predictions, the quotes of the British pound continued downward movement. Among the reasons for the decline were a stronger dollar and an increase in net public sector borrowings to 7.5 billion in February, which is 0.3 billion less than the forecast. We are reviewing midterm positive outlook for the pound, but keep a long-term positive outlook on the pair. Today, we expect low volatility due to the lack of important macro.

The price of USD/JPY continues to consolidate around the level of 102.50. At the end of the fiscal year into Japan are forwarded the cash flows of overseas offices of Japanese corporations, which is one of the factors that limit the growth of the pair. The central news of the week will be the release of data on unemployment and inflation in Japan (Friday). We recall that the target level of consumer price inflation is 2.0%, and in order to achieve it, the Bank of Japan will maintain ultra-soft monetary policy. We keep medium and long term positive outlook for the USD/JPY.

The price of the Australian dollar continues to move in the area 0,9050-0,9100. Reduction of the national currency was caused by weak data on industrial production in China, which is a major importer of Australian goods. At the same time, low iron ore prices and monetary policy of the Reserve Bank of Australia continue to put pressure on the Australian dollar quotations. We see no reasons for the growth of the Australian dollar above 0.9130 and keep medium-term and long-term negative outlook.

The price of the New Zealand dollar continues to consolidate around the level of 0.8540. Growth of quotations is constrained by weak data on industrial production in China. The central news of this week will be the publication of data on country's trade balance (Wednesday). To determine the future direction of the price the new signals are needed.

Prices for Light Sweet crude oil continue to move near the psychological level of $ 100 per barrel. The support for quotes of oil remains Russia's policy on the annexing of Crimea. Further development concerning sanctions against Russia will depend on the outcome of a meeting of G-7. From a fundamental point of view industry slowdown in China, record oil production in the United States, as well as the future drop in demand for fuel in North America due to warming continues to put pressure on the oil prices. We maintain a long-term negative outlook for oil.

Fall in gold prices has stopped, after a strong decline on the background of statements of the head of FED about another reduction of its asset purchasing program, possible earlier rate increase, and reducing tensions around the situation in Crimea. At the same time investors fear the fall on stock markets and besides that the geopolitical situation may escalate at any time. After a significant correction, we expect the resumption of growth and keep medium and long term positive outlook.

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