25.09.2014 - Data on the housing market in the United States have strengthened the dollar
The price of euro continued to fall due to a number of factors. Thus, the ECB President Mario Draghi reaffirmed the willingness to use nontraditional methods to deal with deflationary risks, but interest rates will no longer be declining. In addition, the sentiment in the business circles of Germany deteriorated and the index fell to 104.7, compared with an expected 105.9. Strengthening of the dollar yesterday was due to strong data on the housing market in the United States, where the number of new home sales rose to the highest level since May 2008 and totaled 504 thousand, against analysts' forecasts 432 thousand. Today we should pay attention to the statistics on the M3 money supply in the Eurozone (08:00 GMT), data on the labor market and durable goods orders (12:30 GMT). We maintain a medium-term negative outlook for the euro and recommend holding short positions.
The British pound yesterday corrected downwards due to the sharp strengthening of the dollar after the publication of strong data on the housing market in the United States. Yesterday in the UK has not been published an important macro and today it is worth paying attention to the data on the balance of retail sales in the country. According to our estimates, the British currency is currently undervalued after investors were selling the pound ahead of the referendum on Scottish independence. We maintain a medium-term positive outlook for the pound and recommend holding long positions.
The price of the Japanese yen resumed its decline due to the strengthening US dollar. Moreover, the manufacturing PMI in the country in September fell to 51.7 against 52.5. The third largest economy in the world is under the pressure of worsening macroeconomic indicators in the country, which was caused by an increase in the sales tax in April this year from 5% to 8%. Investors expect that due to the weak figures the Bank of Japan may take additional measures to stimulate the economy. Tomorrow is expected the increase of volatility in connection with the publication of data on the consumer price index in Japan. We maintain a medium-term negative outlook for the yen.
The price of the Australian dollar after yesterday's correction resumed the decline after the positive statistics on the housing market in the United States. The speech of the Reserve Bank of Australia has not been able to change the mood of investors. We recall that the macro-economic indicators in the country indicate the slow pace of recovery, but the economy is under the pressure of low iron ore prices, which have reached their lowest levels since 2009. We expect continued downward trend of the Australian dollar, but note the decline of a fall potential. The medium-term outlook remains negative.
The price of the New Zealand dollar fell sharply today after the publication of the statement by the Reserve Bank of New Zealand Gram Wheeler which noted the unreasonably high cost of the national currency. So, the price for dairy products, which is a key export commodity for the country fell by 45% in February of this year, the New Zealand dollar quotations remained almost at the same level as in February. Despite the fact that the trade deficit was lower than expected, the currency still has significant potential for reduction. We recommend holding short positions on the New Zealand dollar and maintain a medium-term negative outlook.