29.10.2014 - Markets are waiting for the Fed statement
The price of euro rose due to lower dollar amid weak data on durable goods orders, which fell by 1.3% against the expected growth of 0.4%. The fall of the dollar was partly offset after the publication of data on consumer confidence index, which unexpectedly rose to 94.5, versus the expected 87.4. Today, the focus of investors will be on the Fed's statement on monetary policy (18:00 GMT). Investors will expect a hint about the timing of interest rate increases, also at this meeting the Fed probably will decide to complete the program of quantitative easing. Despite a slight strengthening of the euro, we keep medium-term negative outlook and recommend holding short positions.
The British pound strengthened yesterday against the weakening US dollar and the statement by the Deputy Governor of the Bank of England Minouche Shafik on the better prospects for reducing unemployment in the country, and also pointed to the first signs of price pressure, which is the basis for raising interest rates. Today, investors will be watching the data on mortgage lending (09:30 GMT), and the Fed's monetary policy. We expect further growth of the British pound in the medium term and maintain a positive outlook.
The Japanese yen continued its gradual decline, despite the weakening of the US dollar. Investors are still mulling the statements of the Bank of Japan Haruhiko Kuroda on achieving the inflation target of 2% in 2015, which will require new injections of liquidity. Demand for the yen was supported by the data on industrial production, which in September rose 2.7% against expectations of 2.3%. On Friday is expected the increase of volatility in relation to the statement of the Bank of Japan, as well as the publication of important macroeconomic data. We keep negative medium-term outlook for the yen.
The Australian dollar has shown the price growth on weak US data. In addition, investors reacted positively to the statistics on the growth of industrial production in Japan. The focus of investors today will be the news on future plans of the Fed on monetary policy in the US. The Australian economy depends on the export prices and tomorrow's US GDP data may affect investor sentiment and point to the future growth prospects of the world's largest economy, which will affect commodity prices. We keep a medium-term negative outlook for the Australian dollar.
The New Zealand dollar showed continued growth and a gradual increase in price due to the weaker US dollar position, as well as by positive data on the index of business confidence in New Zealand in September, which rose to 26.6, against the previous figure of 13.4. The strong increase in volatility is expected tonight (20:00 GMT), after the statement of the Reserve Bank of New Zealand on monetary policy and interest rate decisions. We keep a medium-term negative outlook, but assume the possibility of changing the trend after the RBNZ statement.