27.10.2014 - Stress tests supported the euro
The price of euro continues to recover after the publication of the stress test results, which showed that 25 of the 123 banks that have been tested have to increase capital. 10 banks have 10 days to file a plan to increase capital, and the remaining problem banks have already undertaken the necessary measures. Investors this week will not rush with action before the Fed statement on monetary policy. Thus, probably on Wednesday will announce on the completion of a program of quantitative easing, and may indicate thetiming of rising interest rates. Today the course of trading will be affected by the data on the index of business sentiment in Germany in October, the money supply in the Eurozone (09:00 GMT), the service PMI in the United States (13:45 GMT). Given the liquidity injections by the ECB and the Fed's tightening of monetary policy, we maintain a medium-term negative outlook for the euro.
The British pound extended gains after the publication of data on GDP growth in the third quarter, which slowed to 0.7%, which is 0.2% less than in the previous quarter, but coincides with the forecasts of analysts. Meanwhile, the British Pound has been supported by the growth of the euro on notification of readiness of the European banking system to withstand crises. Today the course of trading will be affected by the data on the balance of retail sales in the UK in October (11:00 GMT). Given the steady growth of the British economy and the reduction of unemployment, we maintain a positive medium-term outlook for the pound.
The Japanese yen strengthened and stabilized due to the weakening of the US dollar, which is caused by the expectation of publication the Fed's decision on monetary policy, which will be published on Wednesday. Tonight will be released the statistics on retail sales in Japan. Analysts have begun to point to the negative impact of the devaluation of the yen on the real purchasing power of consumers, but at the same time point out the positive effect for exporters. The Bank of Japan may take additional measures to support economic growth, which has suffered from increased sales tax in April. We expect a continuation of the devaluation of the yen in the medium term.
The price of the Australian dollar continues to consolidate near the level of 0.88. At the moment, investors are trying to assess the future prospects of price movements amid a number of factors. Thus, on the one hand the strengthening of the US dollar ended but on the other quotes on the Australian currency continue to be under the pressure of lower prices for iron ore and other export commodities, slowing growth in China, which according to analysts will grow in 2015 by 7.3%. We expect a continuation of the downward movement of prices in the medium term, but the reduction potential is limited.
The price of the New Zealand dollar corrected upwards after the publication of data on the trade balance of the country whose deficit has increased again. Despite this, the price drop was limited due to the significant part of the investment goods such as airplanes in the import of the country. Investors are in no hurry to build-up positions before the publication of decision of the RBNZ interest rate and future monetary policy of the country. We expect further downward movement of and maintain a medium-term negative outlook.